Income Tax Appellate Tribunal – Bangalore
Swiss Re Shared Services (India) … vs Dcit, Bangalore on 30 December, 2021 IN THE INCOME TAX APPELLATE TRIBUNAL
‘A’ BENCH : BANGALORE
BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
IT(TP)A No. 290/Bang/2015
Assessment Year : 2010-11
M/s. Swiss Re Global Business
Solution India Pvt. Ltd.
(previously known as Swiss Re
The Deputy
Shared Services India Pvt. Ltd.),
Commissioner of
2nd to 5th Floor, Fairwinds
Income Tax,
Building, Embassy Golf Links
Circle – 6(1)(2),
Business Park, Challaghatta
Vs. Bangalore.
Village, Varthur Hobli,
Bangalore, Karnataka – 560 071.
PAN: AAECS8786L
APPELLANT RESPONDENT
&
IT(TP)A No. 438/Bang/2015
Assessment Year : 2010-11
(By Revenue)
Shri Nageswar Rao,
Assessee by :
Advocate
Shri Sumer Singh
Revenue by :
Meena, CIT DR (OSD)
Date of Hearing : 23-12-2021
Date of Pronouncement : 30 -12-2021
ORDER
PER BENCH
Present appeal is filed by assessee against final assessment order
dated 29.01.2015 passed by the Ld.DCIT, Circle – 6(1)(2),
Bangalore for Assessment Year 2010-11 on following grounds of
appeal.
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“Based on the facts and circumstances of the case and in
law, Swiss Re Shared Services (India) Private Limited
(hereinafter referred to as “Appellant”), respectfully craves
leave to prefer an appeal against the appeal order passed
by the learned Assessing Officer [hereinafter referred to as
the “learned AO”] under section 143(3) read with section
144C(13) of the Income-tax Act, 1961 (“the Act”) on the
following grounds:
That on the facts and circumstances of the case and in
law:
1. The learned AO, based on directions of the Hon’ble DRP,
erred in assessing the total income at Rs. 4,89,94,919/- as
against returned income of Rs. 70,62,944/- computed by
the Appellant;
Grounds of appeal relating to transfer pricing matters
On the facts and in the circumstances of the case and in
law:
2. The learned AO/ Transfer Pricing Officer (‘TPO’) erred in
making an addition of
Rs. 4,18,86,975 to the total income of the Appellant on
account of adjustment in the arm’s length price of the
Information Technology enabled Services (“ITeS”)
transaction entered by the Appellant with its associated
enterprise;
3. The learned AO/ TPO erred, in law and in facts, by not
accepting the economic analysis undertaken by the
Appellant in accordance with the provisions of the Act read
with the Rules, and conducting a fresh economic analysis
for the determination of the ALP in connection with the
impugned international transaction and holding that the
Appellant’s international transaction is not at arm’s length;
4. The learned AO/ TPO erred, in law and in facts, by
determining the arm’s length margin/ price using only FY
2009-10 data which was not available to the Appellant at
the time of complying with the transfer pricing
documentation requirements;
5. The learned AO/ TPO erred in rejecting certain
comparable companies by applying the following
quantitative and qualitative filters:
(a) The learned AO/ TPO erred, in law and in facts, by
rejecting certain comparable companies identified by the
Appellant for having different accounting year (i.e.
companies having accounting year other than March 31 or
companies whose financial statements were for a period
other than 12 months);
(b) The Hon’ble DRP erred, in law and in facts, by suo-moto
modifying the related party filter (“RPT”) of ‘less than 25
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percent’ to ‘equal to 0 percent’ and thereby rejecting certain
companies, which otherwise were passing the filter of RPT
< 25 percent, applied and not disputed by both the
Appellant and the AO/TPO;
6. The learned AO/ TPO erred, in law and in facts, by
accepting / rejecting companies based on unreasonable
comparability criteria;
7. The learned AO/TPO have erred, in law and in facts, by
undertaking a negative working capital adjustment;
8. The learned AO/TPO have erred, in law and in facts, by
not granting capacity adjustments to account for
differences in the capacity utilisation of the Appellant vis-
à-vis the comparables,
9. The learned AO/TPO have erred, in law and in facts, by
not granting depreciation adjustments to account for
differences in the rate of depreciation charged by the
Appellant vis-à-vis the comparables;
10. The learned AO/TPO have erred in law and in facts,
by not granting adjustments to account for differences in
the marketing expenditure incurred by the Appellant vis-à-
vis the comparables;
11.The learned AO/TPO erred, in law and in facts, by not
making suitable adjustments on account of differences in
the risk profile of the Appellant vis-à-vis the comparables,
while conducting comparability analysis;
12.The learned AO/TPO erred, in law and in facts, by
computing the arm's length price without giving benefit of
+/- 5 percent under the proviso to section 92C of the Act;
Grounds of appeal relating to general matters
13. The learned AO has erred, in law and in facts, by
levying interest of Rs.24,15,703 and Rs.52,160 under
section 234B & 234C of the Income Tax Act, 1961,
respectively.
14. The learned AO erred, in law and in facts, in initiating
penalty proceedings u/s 271(1)(c) of the Act.
The Appellant submits that each of the above grounds is
independent and without prejudice to one another.
The Appellant craves leave to add, alter, amend, vary, omit
or substitute any of the aforesaid grounds of appeal at any
time before or at the time of hearing of the appeal, so as to
enable the Hon'ble Tribunal to decide on the appeal in
accordance with the law."
The assessee has raised the following additional grounds vide
application dated 12.07.2018, 31.07.2019 and 21.10.2021.
"In addition to the grounds of objections raised in Form
36B before the Hon'ble Tribunal, after ground number 14,
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the Petitioner hereby wishes to introduce ground numbers
15-18 as under:
15. "The learned AO/ TPO and DRP erred in including
Accentia Technologies Ltd., Jeevan Scientific Technology
Ltd., Acropetal Technologies Ltd., in the final set of
comparable companies by applying unreasonable
comparability criteria.
16. The learned DRP, failed to adjudicate on other equally
valid grounds justifying exclusion of the following
companies from final set of comparable companies:
a. Infosys BPO Ltd.,
b. E-clerx Services Ltd.
c. ICRA Online Ltd.
17. The learned AO/ TPO and DRP erred in rejecting
Caliber Point Business Solutions Ltd., Datamatics
Financial Services Ltd., Nittany Outsourcing Services
Private Ltd. (now known as e4e Healthcare Business
Services Private Ltd.) and R Systems International Ltd.,
from the final set of comparable companies by applying
unreasonable comparability criteria.
18. The learned DRP erred in rejecting Jindal Intellicom
Pvt. Ltd. and Microgenetics Systems Ltd. from the final set
of comparable companies by applying unreasonable
comparability criteria."
The Petitioner submits that the above additional grounds
are being raised by way of abundant caution. The
additional grounds raise issues which are fundamental to
the appeal and non-admission and non-adjudication of the
same would result in an incomplete appreciation and
adjudication of the matter. The Petitioner submits that the
failure to raise these grounds at an earlier stage is neither
wilful nor wanton but due to reasons stated above.
No prejudice would be caused to the Respondent by
reason of the above additional grounds being admitted
and adjudicated upon and accordingly the balance of
convenience is in favour of such an order being passed by
this Hon'ble Tribunal. The Petitioner states and submits
that the issues raised in the additional grounds above
arise out of the order of the lower authorities. Reliance is
based on the decisions of the Hon'ble Supreme Court of
India in the case of Jute Corporation of India vs. C.I.T. (187
ITR 688) and National Thermal Power Corporation vs.
C.I.T. (229 ITR 383) as well as the full Bench of the Hon'ble
High Court of Bombay in the case of Ahmadabad
Electricity Co. Ltd. (199 ITR 351)."
In the above circumstances the Petitioner prays that this
Hon'ble Tribunal may kindly be pleased to;
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(i) admit and adjudicate the above additional ground, and
(ii) pass any other order that may be required in the
circumstances of the case and render justice."
"In addition to the grounds of objections raised in Form
36B and additional grounds filed earlier before the Hon'ble
Tribunal, after ground number 18, the Petitioner hereby
wishes to introduce ground number 19 as under:
19. The learned AO/TPO has erred in passing an order
u/s 92CA(3) of the Act, without appreciating the fact that,
the order passed is invalid, consequently, all subsequent
proceedings are invalid.
The Petitioner submits that the above additional ground is
being raised by way of abundant caution. The additional
ground raises issues which are fundamental to the appeal.
The Petitioner would like to press on the fact that the appeal
involves adjudication only on the adjustment made u/s
92CA and admission of the ground may lead to the order
passed under the said section being null and void. In this
regard, the Appellant would like to place reliance on the
decisions of the Hon'ble Delhi Tribunal in the case of Honda
Trading Corporation, Japan vs. DCIT (ITA No.
1132/De1/2015) and Asian Honda Motor Co. Ltd. Vs. DCIT
(ITA No. 6143/De1/2015). Non-admission and non-
adjudication of the ground would result in an incomplete
appreciation and adjudication of the matter. The Petitioner
submits that the failure to raise these grounds at an earlier
stage is neither willful nor wanton but due to reasons
stated above."
"In addition to the grounds of objections raised in Form
36B and additional grounds filed earlier before the Hon'ble
Tribunal, after ground number 19, the Petitioner hereby
wishes to introduce ground number 20 as under:
20. The learned AO/TPO has erred in issuing an order u/s
92CA(3) of the Act, after expiry of time limit provided under
Section 153/15313 of the Act, rendering such order void,
bad in law and not enforceable under the act and
consequently, all subsequent proceedings invalid.
The Petitioner submits that the above additional ground is
being raised by way of abundant caution. The additional
ground raises issues which are fundamental to the appeal.
The Petitioner would like to press on the fact that the
appeal involves adjudication only on the adjustment made
u/s 92CA and admission of the ground may lead to the
order passed under the said section being null and void.
In this regard, the Appellant would like to place reliance on
the decisions of the Hon'ble Delhi Tribunal in the case of
Honda Trading Corporation, Japan vs. DCIT (ITA No.
1132/Del/2015) and Asian Honda Motor Co. Ltd. Vs. DCIT
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(ITA No. 6143/Del/2015). Non-admission and non-
adjudication of the ground would result in an incomplete
appreciation and adjudication of the matter. The petitioner
submits that the ground of appeal with respect to this
issue has been raised at earlier stages of litigation and
before the Hon'ble Tribunal as well. The appellant is only
revising the language of previously filed Ground No. 19, for
providing better clarity on the contention."
2. Brief facts of the case are as under:
The issues alleged in additional ground raised in Grounds 19 and
20 is in respect of contesting order passed by the Ld. TPO being
time barred and liable to be quashed.
It is submitted that assessee may be permitted to raise these
additional grounds which goes to the root of the case. The
Ld.Counsel submitted that admission of additional ground nos.
19 & 20 vide application dated 31.07.2019 and 21.10.2021 be
heard first.
Admission of Additional Ground Nos. 19 & 20:
The Ld. Counsel submitted that both these grounds are on the
same issues; regarding the validity of proceedings as order u/s.
92CA(3) was passed after expiry of limitation period. It is
submitted that no new facts needs to be investigated for
adjudicating the issue raised in these grounds. He placed
reliance on the decision of Hon'ble Supreme Court in the case of
NTPC Ltd. vs. CIT reported in 229 ITR 383.
On the contrary, the Ld.CIT.DR objected for admission of
additional grounds.
We have perused the submissions advanced by both sides in the
light of records placed before us.
Since the additional grounds 19 & 20 raised by assessee being a
legal issue goes to the root of the matter, we are of the view that
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it is paramount to take up this issue for adjudication before
addressing the other issues raised by assessee.
Accordingly, we admit the additional grounds 19 & 20 raised by
assessee vide application dated 31.07.2019 and 21.10.2021.
Before us the Ld.Counsel contended that the order passed by the
Ld.TPO is time barred under the provisions of section 153 rws
92CA(3) of the Act and hence it is liable to be quashed. He
referred to the provisions of section 153(1) and submitted that
reference u/s 92CA (3) of the Act was received by the Ld.TPO on
03/07/2012 and therefore date of limitation for passing of the
order by ld. TPO expired on 30/01/2014. Whereas the Ld.TPO
passed order u/s 92CA(3) on 31/01/2014 therefore, the order
passed by the Ld.TPO is barred by the limitation. Ld. Counsel
thus submitted that since the order of the Ld.TPO is barred by
limitation, subsequent proceedings made pursuant to order
u/s.92CA(3) does not survive.
He submitted that on identical facts, this issue has been decided
in following case:
Decision of Hon'ble Delhi Tribunal in case of Honda Trading
Corporation vs. DCIT reported in (2015) 61 taxmann.com 223
M/s. Asian Honda Motor Co. Ltd. vs. DCIT in ITA No.
6143/Del/2015, order dated 18.07.2016
M/s. Pfizer Healthcare India Pvt. Ltd. vs. JCIT in W.P. No.
32699 of 2019, judgment dated 07.09.2020, High Court of
Madras
The Ld.CIT.DR submitted that the order passed by the TPO is not
barred by the limitation and submitted that such illegality is capable of
being cured and it is merely a case of irregularity in assessment
proceedings by the Ld.TPO. The Ld.CIT.DR filed the comments of
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Ld.TPO on additional grounds. For sake of convenience, the same is
reproduced as under:
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The Ld.CIT.DR thus submitted that assuming there is a delay in
passing order u/s. 92CA(3), at best, it would be a curable defect.
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We have perused submissions advanced by both sides in the light
of records placed before us. Firstly we look at the various
provisions which are cited before us.
Section 92CA (3A) of the act reads as under:
"[(3A) Where a reference was made under sub-section (1)
before the 1st day of June, 2007 but the order under sub-
section (3) has not been made by the Transfer Pricing
Officer before the said date, or a reference under sub-
section (1) is made on or after the 1st day of June, 2007,
an order under sub-section (3) may be made at any time
before sixty days prior to the date on which the period of
limitation referred to in section 153, or as the case may be,
in section 153B for making the order of assessment or
reassessment or recomputation or fresh assessment, as
the case may be, expires"
Admittedly the reference to ld TPO was made after 1-6-2007
Therefore the provisions of this section are applicable to the
facts of the case. Accordingly ld. TPO may make order under
this section at any time before 60 days prior to the date of
expiry of limitation as per section 153 (1) of the act.
According to section 153 (1) of the act the time limit for
passing an order u/s 143 (3) was as under :-
Time limit for completion of assessments and
reassessments.
153. 39[(1) No order of assessment shall be made under
section 143 or section 144 at any time after the expiry of--
(a) two years from the end of the assessment year in which
the income was first assessable ; or
(b) one year from the end of the financial year in which a
return or a revised return relating to the assessment year
commencing on the 1st day of April, 1988, or any earlier
assessment year, is filed under sub-section (4) or sub-
section (5) of section 139, whichever is later :]
Provided that in case the assessment year in which the
income was first assessable is the assessment year
commencing [on or after the 1st day of April, 2004 but
before the 1st day of April, 2010], the provisions of clause
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(a) shall have effect as if for the words "two years", the
words "twenty-one months" had been substituted :]
[Provided further that in case the assessment year in
which the income was first assessable is the assessment
year commencing [on or after the 1st day of April, 2005 but
before the 1st day of April, 2009] and during the course of
the proceeding for the assessment of total income, a
reference under sub-section (1) of section 92CA--
(i) was made before the 1st day of June, 2007 but
an order under sub-section (3) of that section has not been
made before such date; or
(ii) is made on or after the 1st day of June, 2007,
the provisions of clause (a) shall, notwithstanding
anything contained in the first proviso, have effect as if for
the words "two years", the words "thirty-three months" had
been substituted:]
42b[Provided also that in case the assessment year in
which the income was first assessable is the assessment
year commencing on the 1st day of April, 2009 or any
subsequent assessment year and during the course of the
proceeding for the assessment of total income, a reference
under sub-section (1) of section 92CA--
(i) is made before the 1st day of July, 2012, but
an order under sub-section (3) of that section has not been
made before such date; or
(ii) is made on or after the 1st day of July, 2012,
the provisions of clause (a) shall, notwithstanding anything
contained in the first proviso, have effect as if for the words
"two years", the words "three years" had been substituted.]
[Extracted from taxmann.com as amended by the Finance
Act 2012]
Therefore accordingly the order u/s 143(3) for AY 2010-11
should have been passed by 31.3.2014.
10. Based on the facts narrated above we hereby tabulate the
relevant dates pertaining to the proceedings before the various
authorities for the impugned AY.
1. Date of filing of return of income - 04.10.2010
2. 143(1) issued on - 14.04.2011
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3. 143(2) issued on - 26.08.2011
4. Reference by the Ld.AO made on - 03.07.2012
5. Time period within which 143(3) is to be passed as per sec. 153(1) -
31.03.2014
6. Date by which order u/s. 92CA(3) was to be passed - 28.01.2014
7. Date of passing the order u/s. 92CA(3) - 31.01.2014
Before us the Ld. Counsel relied on decision of Hon'ble Delhi
Tribunal in case of Honda Trading Corporation Vs. DCIT (supra)
wherein, it was held that the time limit specified u/s 92CA(3A) is
mandatory and not directory and therefore the Ld.TPO is bound
by the time limit for passing of the order u/s 92CA (3) of the Act.
Accordingly, in that case time limit as per section 153(1) of the
Act was up to 7.06.2014 and the Ld.TPO passed his order on
31.05.2014 instead of on or before 08.04.2014, hence order
passed by the Ld.TPO therein was held to be time barred.
Hon'ble Delhi Tribunal further held that in such circumstances
the final assessment order would be same but the addition on
account of transfer pricing adjustment arising from the
determination of the ALP of the international transaction by the
TPO emanating from his time barred order passed u/s. 92CA(3)
is unsustainable. Hon'ble Delhi Bench thus directed for deletion
of addition of on account of transfer pricing adjustment made in
the final assessment order. Hon'ble Delhi Tribunal held as
under:-
" B. Time limit for passing of order by the TPO
6.1. The ld. AR also challenged the passing of the order by
the TPO. It was submitted that the TPO passed order on
31.5.2014, which was time barred and, hence, the same
should be annulled leading to the quashing of the final
assessment order. In the opposition, the ld. DR supported
the Revenues stand.
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6.2. We have heard the rival submissions and perused the
relevant material on record. It has been noticed above that
the provisions of section 92CA requiring the passing of the
order by the TPO determining the ALP of the international
transactions, came into being by the Finance Act, 2002. As
per sub-section (3) of section 92C, the TPO is required to
pass the order determining the ALP of the international
transactions. No time limit was initially given for the
passing of order by the TPO. It is only by the Finance Act,
2007, that sub-section (3A) was inserted providing time
limit for the passing an order by the TPO. No amendment
has been carried out in this provision thereafter. Sub-
section (3A) of section 92CA containing the relevant time
limit for the passing of the order by the TPO, reads as
under : -
'(3A) Where a reference was made under sub- section
(1) before the 1st day of June, 2007 but the order under
sub-section (3) has not been made by the Transfer
Pricing Officer before the said date, or a reference under
sub-section (1) is made on or after the 1st day of June,
2007, an order under sub-section (3) may be made at
any time before sixty days prior to the date on which the
period of limitation referred to in section 153, or as the
case may be, in section 153B for making the order of
assessment or reassessment or recomputation or fresh
assessment, as the case may be, expires..
6.3. It transpires from a reading of the above provision that
where a reference is made to the TPO after 1.6.2007, an
order under sub-section (3) may be made at any time
before 60 days prior to the date on which the period of
limitation referred to in section 153, or, as the case may
be, in section 153B, for making the order of assessment or
re-assessment, etc., expires.
6.4. The ld. DR vehemently contended that the use of the
word `may in this provision for the passing of the order by
the TPO within a period of 60 days of the limitation set out
in section 153 indicates that the adherence to this time
limit is not mandatory. He contended that even if the order
is passed after the period of 60 days from the period of
limitation as given u/s 153, still it would be treated as
having been passed within time. This argument was
countered by the ld. AR.
6.5. There is no doubt that the legislature has used the
word `may in sub-section (3A) of section 92CA. There is
further no doubt that the ambit of the word `may is
different from the word `shall. Whereas, ordinarily the use
of the word `shall signifies mandatory compliance, the
word may signifies directory compliance. But at times, the
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word `may can also be read as `shall and vice versa. In
fact, all depends upon the context and the background of
the provision in which such a word is used.
6.6. Section 127 deals with the power to transfer cases.
Sub-section (1) of this provision provides that : `The
Director General or Chief Commissioner or Commissioner
may, after giving the assessee a reasonable opportunity of
being heard in the matter, wherever it is possible to do so,
and after recording his reasons for doing so, transfer any
case from one or more Assessing Officers subordinate to
him (whether with or without concurrent jurisdiction) to
any other Assessing Officer or Assessing Officers (whether
with or without concurrent jurisdiction) also subordinate to
him. Dispute arose in Sahara Hospitality Ltd. vs. CIT
(2013) 352 ITR 38 (Bom) as to whether or not giving the
assessee a reasonable opportunity of being heard before
the transfer of case by the Chief Commissioner, in the
backdrop of the use of the word `may in the provision, be
considered as mandatory. The Hon'ble Bombay High
Court has held that the word `may in section 127 should
be read as `shall and hence the granting opportunity to
the assessee is mandatory.
6.7. Section 16 of the Wealth-tax Act, 1957 deals with the
assessment of wealth. Section 16A having marginal note of
`Reference to Valuation Officer provides through sub-
section (1) that : `For the purpose of making an assessment
(including an assessment in respect of any assessment
year commencing before the date of coming into force of
this section) under this Act, where under the provisions of
section 7 read with the rules made under this Act or, as the
case may be, the rules in Schedule III, the market value of
any asset is to be taken into account in such assessment,
the Assessing Officer may refer the valuation of any asset
to a Valuation Officer- (a) in a case where the value of the
asset as returned is in accordance with the estimate made
by a registered valuer if the Assessing Officer is of opinion
that the value so returned is less than its fair market value;
(b) in any other case, if the Assessing Officer is of opinion-
(i) that the fair market value or the asset exceeds the value
of the asset as returned by more than such percentage of
the value of the asset as returned or by more than such
amount as may be prescribed in this behalf; or (ii) that
having regard to the nature of the asset and other relevant
circumstances, it is necessary so to do. In Raj Paul Oswal
vs. CWT (1988) 171 ITR 489 (P&H), there arose a quarrel
as to the meaning of the word `may used in section 16A in
the context of making reference to the Valuation Officer.
Settling the controversy, the Honble High Court held that
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the word `may' used in section 16A(1)(b), should be read as
`shall'. It held that if the legislative intent had been to
accord total discretion to the WTO to make a reference to
the Valuation Officer or not in cases which were covered by
cls. (a) & (b) of sub-s. (1) of s. 16A of the WT Act, then there
was no necessity of providing the guidelines in cl. (a) or in
sub-cls. (i) and (ii) of cl. (b) of sub-s. (1) of s. 16A. It was,
therefore, held that the legislature by prescribing the
contingencies, in which, by implication, it would not be
necessary to make a reference, also again by necessary
implication be taken to have intended that the reference to
Valuation Officer was must if the given contingencies did
not exist. In this regard, the Honble High Court observed
that : `There is no doubt about the fact that the use of
expression "may" and "shall" to some extent serves an
indicia to the intention of the legislature and helps in
deciding as to whether the given requirement is directory or
mandatory in character, but the use of expression "may" or
"shall" is never considered decisive in that regard. It was
thus held that the moment the estimated value exceeded
the returned value of the asset by more than what is
envisaged by r. 3B, then the WTO had no option, but to
make a reference and he is not to wait for a request from
the assessee to make a reference. Similar view has been
expressed by the Honble Delhi High Court in Sharbati Devi
Jhalani vs. CWT & Ors. (1986) 159 ITR 549 (Del). It is vivid
from the above discussion that the use of word `may or
`shall in a provision is not conclusive of its mandatory or
directory nature. One needs to go through the text of the
provision and the context in which such a word has been
used.
6.8. Reverting to section 92CA, we find that the Finance
Act, 2007 inserted sub-section (3A) carrying the time limit
of sixty days for passing of the order by the TPO before the
expiry of time limit for completion of assessment by the AO
u/s 153. Despite the use of the word `may, the time limit
for passing the order by the TPO is mandatory, as in the
otherwise situation of the TPO having been allowed more
time by implication, say of three months or more, could at
that time have frustrated the provisions of section 153 for
the passing of the assessment order by the AO. Thus we
have no hesitation in holding that the use of the word `may
in sub-section (3A) of section 92CA is to be construed as
`shall, thereby making this time limit as mandatory and not
directory. As such, it is held that the TPO is bound by the
given time limit for passing of his order.
6.9. Having held that the word `may in section 92CA(3A)
should be read as `shall, we once again note that prior to
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the insertion of section 144C by the Finance Act, 2009, the
time limit for completion of assessment was contained in
section 153 and accordingly the time limit for the passing of
the order by the TPO was also set out accordingly in
section 92CA w.r.t. the time limit for the completion of
assessment as per section 153. However, with the
insertion of section 144C, the time limit for the completion
of assessment, or in other words, for passing of the final
assessment order, stood shifted to sub- sections (4) or (13)
of section 144C and got detached from section 153. Along
with this, passing of draft order also became mandatory,
for which we have held above that the same is required to
be passed within a reasonable time and it has got no
relation with the time limit given in section 153. When the
position is such that the draft order has to be passed
independent of the time limit given in section 153, there
appears some logic in not continuing with the time limit for
the passing of the order by the TPO tagged with the time
limit given in section 153. It has led to incoherence in the
provisions. This position can be set right only with a
suitable legislative amendment.
6.10. Having held that the time limit given in sub-section
(3A) of section 92CA is mandatory for the passing of the
order by the TPO, let us find out the time available with the
TPO for the passing of his order. It has been noticed above
that the time limit as per section 153(1) read with the third
proviso and clause (viii) of the Explanation to the section,
comes at 7th June, 2014. Period of 60 days prior to such
time limit coming as per section 153, available with the
TPO for passing his order, comes to an end on 8th April,
2014. As against this, the order was actually passed by
the TPO on 31st May, 2014. Thus, the order passed by the
TPO is patently time barred.
C. Consequences of valid draft order and TPO's time
barred order
7. The ld. AR argued that since the draft order as well as
the order of the TPO were time barred, the final
assessment order passed by the AO was liable to be set
aside. We have held above that the draft order was
passed within time and only the order of the TPO is time-
barred. When an order is passed without jurisdiction or
beyond the permissible time, it is considered as null and
void. The effect of passing a null and void order is that it
is considered as non est, meaning thereby, that it entails
all the consequences of not having been passed at all and
is ignored for all practical purposes. The Honble Madras
High Court in Vijay Television (P.) Ltd. vs. DRP (2014) 369
ITR 113 (Mad) considered a case in which the assessment
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IT(TP)A No. 290 & 438/Bang/2015
order was directly passed without routing through draft
order or DRP. The Honble Court held it to be a noncurable
defect and resultantly the assessment was quashed. It
was held that when there is an omission on the part of the
AO to follow the mandatory procedure prescribed under
the Act, such an omission cannot be termed as a mere
procedural irregularity and it cannot be cured. Extantly,
we are confronted with a situation in which the draft order
has been passed in time but the lapse has come in the
passing of the order by the TPO. The consequence of the
above scenario is that the passing of a valid and properly
timed draft order cannot lead to the setting aside of the
final assessment order. However the passing of the time
barred order by the TPO, which is again a mandatory
procedure prescribed under the Act, would be a non-
curable defect, having the consequence as if it was not
passed. In such circumstances, though the final
assessment order would be saved but the addition on
account of transfer pricing adjustment arising from the
determination of the ALP of the international transactions
by the TPO as emanating from his time barred order,
would be unsustainable. We hold accordingly and direct
the deletion of addition on account of transfer pricing
adjustment made in the final assessment order.
8. In view of our decision on the above legal ground,
there remains no need to deal with the contentions raised
before us on the merits of the addition on account of
transfer pricing adjustment."
In the present facts, the Ld.CIT.DR has in the written submission
mentioned that the order of the Ld.TPO is passed on 29.01.2014 or
30.01.2014 but dated 31.01.2014. Then, the order of the Ld.TPO is
not only irregular, wrong or illegal but is also null and void. Such
action cannot be considered to be of any irregularity in the procedure,
so as to get any kind of protection u/s. 292BB of the Act.
In view of above and following judicial precedent cited before us by the
ld AR being decision of the coordinate bench we hold that the order of
the ld TPO passed on 31.01.2014 is barred by limitation and liable to
be quashed. Therefore, consequently, the proposed addition on
account of transfer pricing adjustment amounting to does not survive.
Accordingly, ground nos. 19 and 20 of the appeal of the assesse is
allowed.
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IT(TP)A No. 290 & 438/Bang/2015
In view of our decision on the above ground we do not find it
necessary to deal with the contention raised before us on the merits of
the addition on account of transfer pricing adjustment as they become
infructuous. In view of this ground nos. 1 to 14 of the appeal are
dismissed as infructuous.
In the result, the appeal filed by the assessee stands allowed on
the legal issue.
The order passed u/s. 92CA has been held to be bad in law and the
addition in respect of international transaction stands quashed. The
appeal filed by the revenue becomes infructuous.
Accordingly, the assessee's appeal is allowed and revenue's appeal
is dismissed.
In the result, the appeal filed by the assessee is allowed and the
appeal of the revenue is dismissed.
Order pronounced in open court on 30th December, 2021.
Sd/- Sd/-
(CHANDRA POOJARI) (BEENA PILLAI)
Accountant Member Judicial Member
Bangalore,
Dated, the 30th December, 2021.
/MS /
Copy to:
1. Appellant 4. CIT(A)
2. Respondent 5. DR, ITAT, Bangalore
3. CIT 6. Guard file
By order
Assistant Registrar,
ITAT, Bangalore
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