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TMI Blog2023 (7) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 is not hit by the provisions of Sec. 40(a)(ii) and same is allowable as deduction u/s 37(1) - HELD THAT:- We find that Finance Act 2022 introduced explanation to Section 40(a)(ii) of the Act and clarify that education cess is included in the term tax and retrospectively amended the provisions of Sec. 40(a)(ii) w.e.f 01.04.2005. In view of the amendment made by Finance Act 2022 as referred supra we don t find any merit in the ground of appeal of the assessee as it is categorically laid down in the explanation 3 to Section 40(a)(ii) that education cess is included in the term tax as per the provision of Sec. 40(a)(ii) w.e.f 01.04.2005. Decided against assessee. Dividend distribution tax ought to be taxed at the rate prescribed under the respective DTAA - HELD THAT:- In view of the decision of Total Oil India Pvt. Ltd. [ 2023 (4) TMI 988 - ITAT MUMBAI (SB) ] we don t find any reason to interfere in the decision of assessing officer, therefore, these ground of appeal of the assessee stand dismissed. - Shri Amit Shukla, Judicial Member And Shri Amarjit Singh, Accountant Member For the Appellant : Nishant Thakkar/ Hiten Chande/Ms. Jasmin Amalsadvala. For the Respondent : Azhar Zai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le selecting comparables companies 7. Erred in applying the accept reject criteria/ filters in an arbitrary, subjective, inconsistent and erroneous manner for the purpose of selection of comparables. 8. Erred in applying a filter of rejecting companies following a financial year other than April to March. 9. Erred in applying a filter of rejecting companies having turnover of less than 35 times more 9 than 35 times of ASOL's turnover in the IT services segment. 10. Erred in applying a threshold of 75% for the export earnings filter as against a threshold of 25% of revenues applied by the Appellant. 11. Erred in modifying the method for computing related party transactions filter for selection of comparables for the IT services segment. Rejection of comparable companies 12. Erred in accepting Infosys Limited as comparable for benchmarking the IT services transaction disregarding the fact that the company is functionally different from Appellant, as it owns significant intangibles, diversified nature of activities, presence of the Infosys' brand etc. 13. Erred in accepting Larsen Toubro Infotech Limited as comparable for benchmarking the IT services transaction disregarding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alternate comparable agreement submitted by the Appellant (on a without prejudice bases) which was only for Licensing of trademark and brand' with an average royalty rate of 5%. 22. Without prejudice to the contention that CUP method is the most appropriate method for benchmarking the royalty transaction, erred in rejecting the alternate analysis using TNMM that was submitted by the Appellant for benchmarking the royalty transaction. Proportionate adjustment 23. Without prejudice to the contention that the royalty transaction was found to be at arm's length even under the alternate TNMM analysis, even if an adjustment is to be made using the TNMM, the adjustment should be restricted to the proportion of the international transaction (e. royalty) to the total costs of the segment. B. Non-Transfer Pricing grounds Non-grant of deduction of education cess paid on income tax liability 24. Erred in rejecting the additional claim filed for claiming deduction of education cess paid on the income tax liability for the subject AY. 25. Erred in not allowing deduction of education cess paid by the Appellant on its income tax lability for the subject AY while computing the assessed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous computation of book profit under Section 115JB of the Act 34. Erred in considering book profits of the Appellant at Rs,3065,27,83,818 for computation purpose instead of Rs. 2885,14,76.396 as mentioned in the assessment order and as also reported by Appellant in return of income without giving any reason for the same whatsoever Erroneous levy of interest under Section 115P 2344, 234B and 232C of the Act 35. Erred in levying interest under Section 115P of the Act amounting to Rs. 265,78,94,400 36. Erred in levying interest under Section 234A Section 234B and Section 234C of the Act. Initiation of penalty proceedings 37. Erred in initiating penalty proceedings under Section 271(IXC) of the Act. Each of the above grounds of appeal is without prejudice to and independent of one another. The Appellant craves leave to add, alter, amend or delete the above grounds of appeal at or before the time of hearing of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal according to law. 2. Fact in brief is that return of income declaring total income at Rs. 16,60,87,450/- was filed on 30.11.2016. The same was subject to scrutiny assessment and notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed the order on 01.11.2019. The DRP has partly allowed the other objections filed by the assessee. 5. During the course of appellate proceeding before us, at the outset the ld. Counsel contested the ground no. 3 of appeal of the assessee that the transfer pricing order passed u/s 92CA(3A) of the Act on 01.11.2019 was time barred. In this regard, the ld. Counsel has placed reliance on the decision of Hon ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. Vs. JCIT (433 ITR 028) (Mad), Dow Agroscience Pvt. Ltd. (ITA No. 1234/Mum/2021 and assessee s own case for A.Y. 2015-16 (ITA No. 8008/Mum/2019) wherein it has been held that the order passed by the TPO on 1st November 2019 is barred by the period of limitation provided under section 93CA (3A) of the Act. 6. Heard both the side and perused the material on record with regard to the limited issue of validity of order passed by the TPO u/s 92CA(3) of the Act and the subsequent proceedings arises therefrom. During the course of appellate proceedings the ld. Counsel has filed computation of period of limitation as under: We have perused the relevant provisions of Sec. 92CA(3A) which is reproduced as under: Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 am of 1-1-2020. However, this would mean that an order of assessment can be passed at 12 am on 1-1-2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31-12-2019. The period of 21 months therefore, expires on 31-12-2019 that must stand excluded since section 92CA(3A) states 'before 60 days prior to the date on which the period of limitation referred to section 153 expires'. Excluding 31-12-2019, the period of 60 days would expire on 1-11-2019 and the transfer pricing orders thus ought to have been passed on 31-10-2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31-10-2019. The impugned orders are thus, held to be barred by limitation . 7. Further the decision of division bench of the Hon ble Madras High Court in the case of DCIT Vs. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute or paraphrase of general application. Attention should be confined to what is necessary for deciding the particular case. This principle is too well settled and reference to a few decisions of this Court would suffice. (See : Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests [1990 Supp SCC 785 : AIR 1990 SC 1747] , Union of India v. Deoki Nandan Aggarwal [1992 Supp (1) SCC 323 : 1992 SCC (L S) 248 : (1992) 19 ATC 219 : AIR 1992 SC 96] , Institute of Chartered Accountants of India v. Price Waterhouse [(1997) 6 SCC 312] and Harbhajan Singh v. Press Council of India [(2002) 3 SCC 722 : JT (2002) 3 SC 21] .) 29. The language employed is simple. 31-12-2019 is the last date for the assessing officer to pass his order under section 153. The TPO has to pass order before 60 days prior to the last date. The 60 days is to be calculated excluding the last date because of the use of the words prior to and the TPO has to pass order before the 60th day. In the present case, the word before used before 60 days would indicate that an order has to be passed before 1-11-2019 i.e. on or before 31-10-2019 as rightly held by the Learned Judge. 30. Even considering for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idance of the Assessing Officer after considering various details provided in Clauses (A) to (G) thereof. Subsection (13) of section 144C of the Act provides that upon receipt of directions issued under sub-section (5) of section 144C of the Act, the Assessing Officer shall in conformity with the directions complete the assessment proceedings. It goes without saying that if no objections are filed by the Assessee either before the DRP or the assessing officer to the determination by the TPO, section 92CA(4) would come into operation. Therefore, it is very clear that once a reference is made, it would have an impact on the assessment unless a decision on merits is taken by DRP rejecting or varying the determination by the TPO. 33. It would only be apropos to note that as per proviso to section 92CA (3A), if the time limit for the TPO to pass an order is less than 60 days, then the remaining period shall be extended to 60 days. This implies that not only is the time frame mandatory, but also that the TPO has to pass an order within 60 days. 34. Further, the extension in the proviso referred above, also automatically extends the period of assessment to 60 days as per the second provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 144C and 153 and is hence mandatory. What is also not to be forgotten, considering the scheme of the Act, the inter-relatability and inter-dependency of the provisions to conclude the assessment, is the consequence or the effect that follows, if an order is not passed in time. When an order is passed in time, the procedures under 144C and 92CA(4) are to be followed. When the determination is not in time, it cannot be relied upon by the assessing officer while concluding the assessment proceedings. 39. Upon consideration of the judgments and the scheme of the Act, we are of the opinion that the word may used therein has to be construed as shall and the time period fixed therein has to be scrupulously followed. The word may is used there to imply that an order can be passed any day before 60 days and it is not that the order must be made on the day before the 60th day. The impact of the proviso to the subsection clarifies the mandatory nature of the time schedule. The word may cannot be interpreted to say that the legislature never wanted the authority to pass an order within 60 days and it gave a discretion. Therefore, the learned Judge rightly held the orders impugned in the wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6: Allowability of education cess of Rs. 21,97,33,221/- u/s 37(1) of the Act: 10. The assessee has paid education cess (2% cess for primary education and 1% cess for secondary education and higher education) of Rs. 21,97,33,221/- of its income tax liability on the returned income. The assessee claimed that Hon ble jurisdictional High Court in the case of Sesa Goa Limited Vs. JCIT (117 taxmanman.com 96) held that the education cess paid by the assessee under Finance Act 2004 is not hit by the provisions of Sec. 40(a)(ii) of the Act and same is allowable as deduction u/s 37(1) of the Act. 11. In this regard, we find that Finance Act 2022 introduced explanation to Section 40(a)(ii) of the Act and clarify that education cess is included in the term tax and retrospectively amended the provisions of Sec. 40(a)(ii) w.e.f 01.04.2005. 12. During the course of appellate proceedings before us the ld. Counsel submitted in his submission that amendment made by the Finance Act is a substantial amendment must be held to be applicable from assessment year 2023-24 as it is the cardinal principal of law that any amendment made is ordinarily prospective in nature. In this regard, the assessee has ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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