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Accenture Solutions Private Limited appealed against the order of the Additional/Joint/Deputy/Assistant Commissioner of Income Tax, which included significant adjustments to the company's reported income for the assessment year 2016-17. The adjustments were primarily based on transfer pricing assessments and other tax-related claims. The Tribunal examined various grounds of appeal, including the timeliness of the Transfer Pricing Officer's order, the segmentation of IT and BPO services for transfer pricing purposes, and the treatment of education cess and dividend distribution tax. The Tribunal's decision highlighted procedural adherence in tax assessments and the interpretation of statutory provisions concerning transfer pricing and international tax treaties.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 130123 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-07-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
K
Next Hearing Date
21-05-2023
Assessment Year
2016-2017
Appeal Filed On
24-06-2021
Judgement Text
P a g e | 1 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.1255/Mum/2021 (A.Y. 2016-17) Accenture Solutions Private Limited (‘ASOL’) Plant 3, Godrej & Boyce Complex, Phirojshah Nagar, Vikhroli West, Off L.B.S Marg, Mumbai – 400079 Vs. Additional/Joint/Deputy/ Assistant Commissioner of Income Tax/Income- tax Officer, National Facelless Assessment Centre, Delhi The DCIT, Circle 14(1)(1) स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACH3235M Appellant .. Respondent Appellant by : Nishant Thakkar/ Hiten Chande/ Ms. Jasmin Amalsadvala Respondent by : Azhar Zain Vayal Parambath Date of Hearing 22.05.2023 Date of Pronouncement 13.07.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the AO (national Assessment Centre) Mumbai- 2, dated 18.03.2021 for A.Y. 2016-17 as per the direction of the DRP issued u/s 144C (5) of the Act. The assessee has raised the following grounds before us: “On the facts and circumstances of the case and in law, the Learned AO Transfer Pricing Officer (TPO), based on the directions of the Hon'ble DRP has: General Ground 1. Erred in assessing the total income of the Appellant at Rs.2888,33,73,016 against a total income of Rs.2179,39,30,620 as reported by the Appellant in its revised return of income and determining a demand of Rs.2186,98,55,847 payable by the Appellant. P a g e | 2 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO A Transfer Pricing grounds 2 Erred in making a reference of the Appellant's case to the learned TPO under Section 92CA(1) of the Act, without satisfying any of the conditions laid down in clauses (a) to (d) of Section 92C(3) of the Act based on the information/documents available with him; 3. Erred in law and facts, by passing the transfer pricing (TP) order on 01 November 2019, which is beyond the time limit for completion of proceedings under Section 92CA(3A) of the Act. thus making the TP order invalid and unsustainable in law. Further, the learned AO has erred in passing a draft assessment order incorporating an invalid adjustment proposed in the TP order. Separate segmental margins 4. Erred in law and facts, in upholding that the international transactions of the Appellant of rendering IT and BPO services under the Delivery Centre Agreement (DCA) are two distinct transactions (i.e rendering of IT services and rendering of BPO services) which should be benchmarked separately. Provision of IT services 5. Without prejudice to Ground No. 4 above, the learned TPO has erred in determining the arm's length range to be 20.61% (35 percentile) to 24.07% (65 percentile) with a median of 22.34% for the IT services provided under the DCA. Economic Analysis 6. Erred, in law and facts, in not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Rules for determination of arm's length price for rendering of IT services under DCA and making modifications to this analysts in a subjective arbitrary and inconsistent manner. Accept Reject criteria adopted while 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. P a g e | 3 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 13. Erred in accepting Larsen & Toubro Infotech Limited as comparable for benchmarking the IT services transaction disregarding the fact that the company is functionally different from Appellant as it is involved in trading of goods, enjoys brand presence etc. 14. Erred in accepting Mindtree Limited as comparable for benchmarking the IT services transaction disregarding the fact that the company is functionally different from Appellant as it in engaged in varied activities like agile, analytics and information management, business process management, infrastructure management, product engineering, etc, and does not report separate segmental information for software development services in its the financial statements and company has significant R&D expenses. 15. Erred in accepting Persistent Systems as comparable for benchmarking the IT services transaction disregarding the fact the company has significant related party transactions, is functionally different as it is engaged in development and sale of software products and does not provide separate segmental information for software development services. Adjustment required to be made to arm's length margin 16. Erred in not allowing Appellant the benefit of working capital adjustment which is required to be undertaken to account for the difference in working capital levels between the comparable companies and the Appellant. 17. Erred in not allowing Appellant the benefit of the risk adjustment to account for the difference between the risks taken on by the Appellant and the risks taken on by the comparable companies. Transactions of royalty payment 18. Erred in rejecting the economic analysis undertaken by the Appellant using CUP method for benchmarking the royalty payment to AE, and instead determining the arm's length price to be 1% of revenues on an ad hoc basis without using any of the methods prescribed under Section 92C of the Act read with Rule 1088 of the Income Tax Rules, 1962. 19. Erred in allowing royalty payment at an ad hoc rate of 1% only for use of brand name and trademark, disregarding the fact that the royalty paid by Appellant is for the entire portfolio of IP which also includes tools, technology, methodology, etc. 20. Erred in rejecting all the external royalty agreements that were identified by the Appellant as comparables to determine the arm's length price under the CUP method, by giving ad hoc and arbitrary reasons. 21. Without prejudice to the Ground 18 and 19 and 20 above, cred in not accepting the 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 P a g e | 4 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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 income. 26. Erred in not following the decision of the Hon'ble Jurisdictional Bombay High Court which has held that education cess paid on income tax liability should be allowed as deduction; and thereby grossly violating the judicial discipline. Now-grant of refund of excess Dividend Distribution Tax (DDT) paid 27. Erred in rejecting the additional claim filed for DDT refund claim of Rs.294,84,70,521 towards excess DDT paid by the Appellant. 28. Erred in not appreciating that dividend paid by the Appellant to its Mauritius and Dutch shareholders, is liable to tax as per the beneficial tax rate of 5% and 10% under Article 10(2) of the India-Mauritius Tax Treaty and India- Netherlands tax treaty respectively, and thereby. rejecting the refund claim of Rs.294,84,70,521 made by the Appellant with respect to the DDT paid in excess of the beneficial tax rates under the treaties. Non-grant of tax credits pertaining to Accenture Services Private Limited (ASPL), which merged into the Appellant with an appointed date of 1 April 2015 ASPL merged into the Appellant with an appointed date of 1 April 2015. Revised return was filed pursuant to merger of ASPL into the Appellant wherein all income and corresponding TDS, advance tax, MAT credit, DDT pertaining to ASPL was reported by the Appellant. The said merger was also noted by the AO in the draft assessment order dated 26 December 2019. However, still the learned ΛΟ: 29. Erred in not granting credit of taxes deducted at source of Rs.198,94,21,730 claimed by the Appellant in its return of income, appearing under the PAN of ASPL 30. Erred in not granting credit of advance tax of Rs.484,00,00,000 claimed by the Appellant in its return of income, appearing in PAN of ASPL. 31. Erred in not granting credit of MAT of Rs.21,45,86,424 claimed by the Appellant in its return of income, appearing in PAN of ASPL. 32. Erred in not granting credit of DDT of Rs.390,87,36,000 claimed by the Appellant in its return of income, appearing in PAN of ASPL. Non- grant of foreign tax credit for taxes paid in Australia P a g e | 5 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 33. Erred in not granting foreign tax credit of Rs.9,82,43,910 under Section 90 of the Act for taxes paid by Appellant in Australia even though the corresponding income has been considered while computing the taxable income of the Appellant and thereby not following the directions of the Hon'ble DRP in this regard. Erroneous 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 u/s 143(2) of the Act was issued on 09.08.2018. The assessee company is an Indian Company engaged in providing I.T software development, BPO and consulting services. During the course of assessment the assesse operated out of several units located in the Software Technology Park of India (STPI) and Special Economic Zone (SEZ) and claimed a deduction u/s 10AA of the Act in respect of the profits earned from the eligible SEZ units. During the year the assessee has also provided IT service and BPO services to its associated enterprises (AE’s) located in various countries. During the course of assessment proceedings the assessing officer referred the case to the Transfer Pricing Officer u/s 92CA(1) of the Act in order to determine the arm’s length price in relation to international P a g e | 6 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO transactions entered into by the assesse. The TPO vide order u/s 92CA(3) dated 01.11.2019 has made an upward adjustment to the arm’s length price by Rs.18,08,53,54,719/- in relation to the international transactions entered into by the assessee company with its associated enterprises during the financial year 2015-16 relevant to assessment year 2016-17. 3. The AO has also noticed that assessee company has claimed deduction u/s 10AA of the Act amounting to Rs.12,32,20,76,337/- in its return of income in respect of its SEZ units located at Banglore, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida & Pune. The assessing officer has issued the draft assessment order dated 26.12.2019 proposing adjustment of Rs.18,08,53,57,719/- made to the returned income of the assesse. 4. Vide application dated 24.01.2020 the assessee filed its objections against the draft assessment order before the DRP and thereafter filed additional ground of objections vide letter dated 14.07.2020. The assesse has also filed objections before the DRP that the order dated 01.11.2019 passed u/s 92CA(3A) by the Transfer Pricing Officer (TPO) was passed beyond the timeline for completion of proceedings u/s 92CA(3A) of the Act therefore, the TPO order is invalid and unsustainable in law. The DRP vide direction u/s 144C(5) of the Act dated 18.03.2021 has dismissed the objection filed by the assesse on the objection that the order passed u/s 92CA(3A) by the TPO was time barred as 60 days prior to date of which the period of limitation referred to in Sec. 153 of the Act 1961 ended on 30.10.2019 whereas the TPO has 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 assesse that P a g e | 7 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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 assesse’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 1 st 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 92CA (3A) “(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 P a g e | 8 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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:” Section 153(1) “Time limit for completion of assessment and reassessments- (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) (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 xxxxxxxxxxx Provided further xxxxxxxxxx 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 is made, 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.” As per provision of Sec. 92CA(3A) the TPO is required to pass an order u/s 92CA(3) of the Act at any time before 60 days prior to the date on which the period of limitation referred to in Sec. 153 for making the assessment order of assessment or reassessment or re-computation or fresh assessment as the case may be expires. The decision of single bench of Hon’ble High Court of Madras in the case of Pfizer Healthcare Ltd Vs. JCIT as supra is reproduced as under: “30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order 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 P a g e | 9 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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. Saint Gobain India P. Ltd. referred by the ld. Counsel is reproduced as under: “28. The word "date" in section 92CA(3A) would indicate 31-12-2019. But the preceding words "prior to" would indicate that for the purpose of calculating the 60 days, 31-12-2019 must be excluded. The usage of the word "prior" is not without significance. It is not open to this court to just consider the word "to" by ignoring "prior". The word "prior" in the present context, not only denotes the flow of direction, but also actual date from which the period of 60 days is to be calculated. It is settled law that while interpreting a statute, it is not for the courts to treat any word(s) as redundant or superfluous and ignore the same. In this connection, it is pertinent to note the judgment of the Apex Court in Grasim Industries Ltd. v. Collector of Customs 2002 taxmann.com 1803, wherein, it was held as follows : "10. No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used. It is said that every statute is an edict of the legislature. The elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the legislature. Where the words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or alternating (sic altering) the statutory provisions. Wherever the language is clear the intention of the legislature is to be gathered from the language used. While doing so, what has been said in the statute as also what has not been said has to be noted. The construction which requires for its support addition or substitution of words or which results in rejection of words has to be avoided. As stated by the Privy Council in Crawford v. Spooner [(1846) 6 Moore PC 1 : 4 MIA 179] "we cannot aid the legislature's defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there". In case of an ordinary word there should be no attempt to substitute 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] P a g e | 10 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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 purpose of alternate interpretation, the scope of section 9 of the General Clauses Act, it is to be noted that an inverted calculation of the period of limitation takes place here. If the last date is taken to be the first date from which the period of 60 days is to be calculated, reading down the provision with the use of the word "from", which denotes the starting point or period of direction in general parlance, would mean that 60 days "from the last date". Even going by section 9 of the General Clauses Act, when the word "from" is used, then, that date is to be excluded, implying here that 31-12-2019 must be excluded. After excluding 31- 12-2019, if the period of 60 days is calculated, the 60th day would fall on 1-11-2019 and the TPO must have passed the order on or before 31-10-2019 as orders are to be passed before the 60th day. Therefore, either way the contention of the Revenue is a fallacy and has no legs to stand. Mandatory or Directory 31. The next contention that has been raised by the learned senior standing counsel for the appellants is that the usage of the word "may" in section 92CA (3A) indicates that the time fixed is only directory, a guideline, not mandatory and is for the sake of internal proceedings. 32. Let us now examine the relevant procedures relating to Transfer Pricing. After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-section (1) of section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under section 92CA (3) of the Act. As per section 92CA(3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Sub- section (5) of section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is empowered to issue such direction as it thinks fit for the guidance of the Assessing Officer after considering various details provided in Clauses (A) to (G) thereof. Sub- section (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 P a g e | 11 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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 proviso to section 153. 35. Also, but for the reference to the TPO, the time limit for completing the assessment would only be 21 months from the end of the assessment year. It is only if a reference is pending, the department gets another 12 months. Once reference is made and after availing the benefit of the extended period to pass orders, the department cannot claim that the time limits are not mandatory. Hence, the contention raised in this regard is rejected. 36. As rightly pointed out by Mr. Ajay Vohra, learned senior counsel for the respondents in WA. Nos.1148 and 1149/2021, the word "may" has to be sometimes read as "shall" and vice versa depending upon the context in which it is used, the consequences of the performance or failure on the overall scheme and object of the provisions would have to be considered while determining whether it is mandatory or directory. 37. At this juncture, it is noteworthy to mention the commentary of Justice G.P.Singh on the interpretation of statutes, Principles of Statutory Interpretation (1st Edn., Lexis Nexis 2015), which is quoted below for ready reference: ' The intention of the legislature thus assimilates two aspects: In one aspect it carries the concept of "meaning" i.e. what the words mean and in another aspect, it conveys the concept of "purpose and object" or the "reason and spirit" pervading through the statute. The process of construction, therefore, combines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the "cardinal principle of construction".' 38. In case of assessments involving transfer pricing, fixing of time limits at various stages sets forth that the object of the provisions is to facilitate faster assessment involving such determination. In the present case, as rightly held by the learned Judge in paragraphs 22 to 29 of the order dated 7-9-2020, the order of the TPO or the failure to pass an order before 60 days will have an impact in the order to be passed by the Assessing Officer, for which an outer time limit has been prescribed under sections 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 P a g e | 12 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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 writ petitions as barred by limitation, as the Board, in the Central Action Plan, has specified 31-10-2019 as the date on which orders are to be passed by the TPO, reiterating the time limit to be mandatory.” After taking into consideration the material placed on record it is undisputed fact that transfer pricing officer has passed order u/s 92CA(3) on 01.11.2019 whereas the limitation for passing the said order u/s 92CA(3) expires on 31.10.2019 Therefore, taking into consideration the provision of the Act and decision of Hon’ble Madras High Court in the cases referred supra the order u/s 92CA(3) of the Act is time barred by 1 day. Further the ld. Counsel has mentioned the provisions of Sec. 144C(15) of the Act pertaining to the eligible assesse the same is reproduced as under: “(b) “eligible assessee” means – (i) Any person in whose case the variation referred to in sub- section(1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) (ii) any non-resident not being a company, or any foreign company.” After referring the aforesaid provisions the ld. Counsel contended that since the order of the TPO was barred by limitation, therefore, there was no eligible assessee in the case of the assessee in terms of provisions of subsection (15) to Sec. 144C of the Act. 8. In this regard, we find that coordinate bench of the ITAT on the similar issue on identical facts in the cases i.e (i) Strides Shasum Limited Vs. DCIT, Circle 15(3)(2) vide ITA No. 2877/Mum/2014 dated P a g e | 13 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 28.02.2023 (ii) M/s Mondelez India Foods Private Limited Vs. Ad. CIT, Range 5(1) vide ITA Nos. 1492, 1576 & 2340/Mum/2015 dated 14.11.2022 and (iii) M/s Tubacex Prakash India Pvt. Ltd. Vs. The ACIT/JCIT/DCIT/ACIT-national E-assessment Centre, Delhi and DCIT, circle 14(1)(2), dated 24.03.2023 held that the order of the TPO and draft assessment order are barred by limitation, therefore, resulting in assessee not being a eligible assessee u/s 144C(15)(b)(i) of the Act. Consequently, the final assessment was also bad in law. Therefore, since the issue on hand being squarely covered on similar fact and circumstances, therefore, ground no. 3 is allowed. Ground No. 2 & 4 to 23: 9. The ld. Counsel vide letter dated 22.05.2023 had submitted that these ground of appeal have become academic therefore, same was not discussed and left open. Ground No. 24 to 26: Allowability of education cess of Rs.21,97,33,221/- u/s 37(1) of the Act: 10. The assesse 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 assesse 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. P a g e | 14 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO 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 referred decision of Hon’ble Supreme Court in Sedco Forex International Drill Inc. Vs. CIT (2005) 149 taxman.com 352/279 ITR 310 (SC). 13. Heard both the sides and perused the material on record. 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 assesse 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. Therefore, ground of appeal of the assesse from 24 to 26 are dismissed. Ground No. 27 & 28: 14. The assesse has claimed that dividend distribution tax ought to be taxed at the rate prescribed under the respective Double Tax Avoidance Agreement. In view of the decision of special bench of ITAT Mumbai in the case of Total Oil India Pvt. Ltd. (149 taxman.com 332), we don’t find any reason to interfere in the decision of assessing officer, therefore, these ground of appeal of the assessee stand dismissed. Ground 29 to 33 & 35: 15. These grounds of appeal were not pressed therefore the same stand dismissed. Ground No. 34: 16. The assesse submitted that it did not has any tax impact and the same is academic, therefore, this ground of appeal is also dismissed. P a g e | 15 ITA No.1255/Mum/2021 Accenture Solutions Private Limited Vs. Add/Joint/Deputy/ACIT/ITO Ground no. 36: 17. This ground is also not pressed therefore, the same stand dismissed. Ground No. 37: Pertaining to initiate the penalty u/s 271(1)(c) of the Act: 18. This ground of appeal is consequential in nature therefore, the same stand dismissed. 19. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 13.07.2023 Sd/- Sd/- (Amit Shukla) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 13.07.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.
