L & T Thales Technology Services Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 1663/CHNY/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3944 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D N KAR
• Keywords: Transfer pricing; Opportunity of being heard; Period of limitation; Procedural lapse; Time period of passing order
• Section: 92C; 92D

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO. 1663/MDS/2015 / ASSESSMENT YEAR : 2008-2009. L & T THALES TECHNOLOGY SERVICES PRIVATE LIMITED, (FORMERLY KNOWN AS THALES SOFTWARE INDIA PVT LTD) RR TOWER, 8 TH FLOOR, SIDCO INDUSTRIAL ESTATE, GUINDY, CHENNAI 600 032. [PAN AACCT 4657M] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 4(1) CHENNAI 600 034. ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI. SHARATH RAO, C.A. /RESPONDENT BY : SHRI. D.N. KAR, CIT, DR /DATE OF HEARING : 07-11-2016 ! /DATE OF PRONOUNCEMENT : 23-11-2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST A N ORDER DATED 26.02.2015 PASSED BY THE LD. ASSESSING OFFICE R PURSUANT TO THE LD. TPO RECOMMENDATION GIVING EFFECT TO THE DIRECT IONS DATED 12.03.2014 OF LD. DISPUTE RESOLUTION PANEL (HEREI N REFERRED AS THE DRP). ITA NO. 1663/2015. :- 2 -: 2. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITT ED THAT THE IMPUGNED ORDER DATED WAS TIME BARRED AND BEYOND TIME MENTIONED U/S.144C(13) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). 3. RECAPITULATING THE EVENTS LEADING TO THIS APPEAL, L D. AUTHORISED REPRESENTATIVE SUBMITTED THAT ORIGINAL A SSESSMENT ORDER DATED 31.10.2012 OF THE LD. ASSESSING OFFICER PURSU ANT TO LD. DRP DIRECTIONS DATED 18.05.2012 WAS A SUBJECT MATTER OF APPEAL BEFORE TRIBUNAL. AS PER LD. AUTHORISED REPRESENTATIVE, THE TRIBUNAL VIDE ITS ORDER DATED 22.05.2013 IN ITA NO.2325/MDS/2012 HAD SETASIDE THE DIRECTIONS OF THE LD. DRP AND RESTORED THE MATTER B ACK TO THEM FOR PASSING A SPEAKING ORDER. AS PER LD. AUTHORISED RE PRESENTATIVE THERE WAS CLEAR DIRECTION ISSUED BY THE TRIBUNAL TO THE LD. ASSESSING OFFICER FOR PASSING AN ORDER U/S.144C(13) OF THE ACT, AFTER RECEIVING THE DIRECTIONS OF THE LD. DRP. CONTENTION OF THE LD. A UTHORISED REPRESENTATIVE WAS THAT DIRECTIONS PASSED BY LD. DR P, PURSUANT TO THE TRIBUNAL ORDER MENTIONED (SUPRA) WAS RECEIVED IN TH E OFFICE OF THE ASSESSING OFFICER IN THE MONTH OF MARCH, 2014. ACC ORDING TO HIM, BY VIRTUE OF SEC. 144C(13) OF THE ACT, LD. ASSESSING O FFICER WAS BOUND TO COMPLETE THE ASSESSMENT BEFORE THE END OF APRIL, 20 14. HOWEVER, ACCORDING TO HIM, THE ORDER WAS PASSED BY THE LD. A SSESSING OFFICER ON 26.02.2015. ARGUMENT OF THE LD. AUTHORISED REPRESE NTATIVE WAS THAT ITA NO. 1663/2015. :- 3 -: SUCH ORDER WAS CLEARLY BARRED BY LIMITATION AND THE REFORE REQUIRED TO BE SQUASHED. 4. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE PROCEEDINGS AROSE FROM A TRIBUNAL ORDER AND HE NCE SEC. 144C(13) OF THE ACT DID NOT APPLY. RELYING ON SEC. 153(2A) OF THE ACT. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE W AS NO TIME LIMIT FOR PASSING AN ORDER PURSUANT TO THE DIRECTION OF T HE TRIBUNAL. ACCORDING TO LD. DEPARTMENTAL REPRESENTATIVE, THE L D. DRP ORDER PURSUANT TO THE DIRECTION OF TRIBUNAL WAS PASSED O N 12.03.2014. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE THE DIREC TIONS ISSUED BY THE LD. DRP IN THE SAID ORDER WAS TO THE LD. TPO AND NO T TO THE LD. ASSESSING OFFICER. ACCORDING TO HIM, LD. TPO HAD P URSUANT TO THE DIRECTIONS OF THE LD. DRP PASSED A GIVING EFFECT OR DER ON 10.02.2015. AS SOON AS THE LD. ASSESSING OFFICER RECEIVED THE O RDER OF THE LD. TPO HE HAD PASSED FINAL ASSESSMENT ORDER. ACCORDING TO LD. DEPARTMENTAL REPRESENTATIVE, LAW NEVER REQUIRED A PERSON TO DO W HAT IS IMPOSSIBLE. LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THE DI RECTIONS OF LD. DRP WAS EXCLUSIVELY FOR LD. TPO AND SEC. 144C(13) OF TH E ACT HAD NO APPLICATION. IN ANSWER TO THE QUERY FROM THE BENCH, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE DIRECTIONS OF LD . DRP THOUGH GIVEN TO LD. TPO, HAD TO BE CONSTRUED AS GIVEN TO LD. ASS ESSING OFFICER AND AT BEST IT WOULD ONLY BE A PROCEDURAL LAPSE WHICH WAS CURABLE. ACCORDING ITA NO. 1663/2015. :- 4 -: TO HIM, ASSESSEES GROUND THAT THE ORDER OF THE LD. ASSESSING OFFICER WAS TIME BARRED NEEDED TO BE REJECTED. 5. AD LIBITUM REPLY OF THE LD. AUTHORISED REPRESENTAT IVE WAS THAT SEC. 144C(13) OF THE ACT WAS A COMPLETE CODE BY ITSELF AND SEC. 153 OF THE ACT HAD NO APPLICATION IN CONSTRUING THE TIME LIMITS. RELIANCE WAS PLACED ON THE DECISION OF THE COCHIN B ENCH OF THE TRIBUNAL IN THE CASE OF M/S. ENVESTNET ASSET MANAGEMENT (INDIA) PVT LTD VS. ACIT, (2015) 67 SOT 217 (URO) . IN ANY CASE, ACCORDING TO HIM, LD. TPO COULD FOR ALL PURPOSE BE CONSIDERED AN ASSESSING OFFICER AS WELL BY VIRTUE OF EXPLANATION TO SEC. 92CA OF THE ACT. RELYING ON EXPLANATORY NOTE TO FINANCE BILL, 2008, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT SEC. 144C OF THE ACT PROPOSED AN ALTERNATIVE DISPUTE MECHANISM. ACCORDING TO HIM, R EVENUE CANNOT RELY ON SEC.153 OF THE ACT FOR EXTENDING PERIOD OF LIMIT ATION SET OUT IN SEC. 144C(13) OF THE ACT. AS PER THE LD. AUTHORISED REP RESENTATIVE, ORDER DATED 26.02.2015 OF THE LD. ASSESSING OFFICER WAS F AR BEYOND THE LIMITATION PERIOD MENTIONED UNDER THE SAID SUB-SECT ION HAD TO BE QUASHED. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IN THE FIRST ROUN D OF PROCEEDINGS BEFORE THIS TRIBUNAL, IT WAS NOTED BY THIS TRIBUNAL THAT LD. DRP HAD SUMMARILY REJECTED THE GROUNDS TAKEN BY THE ASSESSE E, WITHOUT GIVING ITA NO. 1663/2015. :- 5 -: DETAILS AND REASONS. THEREAFTER, RELYING ON THE D ECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF EVALUESERVE CO (P) LTD VS. ITO (2012) 134 ITD 546 IT WAS HELD AS UNDER :- 8. RESPECTFULLY FOLLOWING THE ABOVE CITED ORDER, WE SET ASIDE THE ORDER OF THE DRP AND RESTORE THE MATTER B ACK TO ITS FILE TO PASS A SPEAKING ORDER STATING ALL TH E OBJECTIONS OF THE ASSESSEE AND DISPOSING THEM BY GIVING COGENT REASONS FOR ADJUDICATION OF THE OBJEC TIONS OF THE ASSESSEE. NEEDLESS TO MENTION THAT THE DRP, BEFORE ADJUDICATING THE ISSUES UPON, SHALL ALLOW REASONABLE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. AFTER RECEIVING THE ORDER OF THE DRP, THE ASSESSING OFFICER WILL AGAIN PASS ORDER U/S 144C(13 ) OF THE ACT . TWO THINGS ARE CLEAR FROM THE ABOVE ORDER. ONE IS T HAT TRIBUNAL HAD SETASIDE THE ORDER OF THE LD. DRP AND RESTORED THE MATTER BACK TO ITS FILE FOR DISPOSAL AFRESH. SECOND IS THAT TRIBUNAL HAD DIRECTED THE LD. ASSESSING OFFICER TO PASS AN ORDER U/S.144C(13) OF THE ACT, ONCE HE RECEIVED THE ORDER OF THE LD.DRP. THIS LEADS US TO LD. DRP ORDER PASSED PURSUANT TO THE ABOVE DIRECTION OF THE TRIBUNAL. T HE DIRECTIONS OF THE LD. DRP IN THEIR ORDER DATED 12.03.2014 APPEARS AT PARAGRAPH 8 & 9 AND THIS READ AS UNDER:- 8. ON THE OTHER ISSUES NO FRESH OBJECTIONS HAVE BE EN RAISED BEFORE US. THE DRPS EARLIER ORDER WOULD THEREFORE REMAIN EFFECTIVE ON ALL THE OTHER ISSUES EXCEPT THE ONE ME NTIONED ABOVE WHICH HAD REMAINED TO THE PROPERLY ADJUDICATED BY T HE DRP. TO SUM UP THE DRPS EARLIER ORDER IS MODIFIED TO THAT EXTENT THAT : (A) TPO WOULD COMPUTE MARGINS OF THE COMPARABLES BASED ON THE ANNUAL REPORTS OF THE RESPECTIVE COMPARABLE COM PANY. (B) KALS IS EXCLUDED FROM THE COMPARABLE SET. (C) VJIL BE INCLUDED IN THE COMPARABLE SET. ITA NO. 1663/2015. :- 6 -: 9. THIS ORDER IS PASSED CONSEQUENT TO THE ORDER OF THE HONORABLE TRIBUNAL DISPOSING OFF THE ASSESSEES OBJECTIONS NO T PROPERLY ADJUDICATED IN DRPS EARLIER ORDER. APART FROM THE ABOVE, LD. DRP HAD GIVEN SPECIFIC D IRECTIONS TO LD. TPO IN PARAGRAPHS 3, 4 & 6 OF THE ABOVE ORDER. THUS TH E LD. DRP HAD GIVEN DIRECTIONS ONLY TO LD. TPO AND NOT TO THE LD. ASSE SSING OFFICER. THE TRIBUNAL HAD SET ASIDE THE EARLIER ORDER OF THE LD. DRP AND THEREFORE THE SECOND PROCEEDINGS BEFORE LD. DRP WAS AS GOOD A S A FRESH ONE. SUB-SECTION (5) OF SEC. 144C IS RELEVANT HERE AND I T IS REPRODUCED HEREUNDER:- THE DISPUTE RESOLUTION PANEL SHALL, IN A CASE WHE RE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2), ISSUE SUCH DIRECTIONS, AS IT THINKS FIT, FOR THE GUIDANCE OF T HE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT . A READING OF THE ABOVE SHOW THAT, LD. DRP HAS POWE R TO GIVE DIRECTIONS TO THE ASSESSING OFFICER ONLY. 7. THIS BRINGS US TO THE QUESTION HOW FAR SUB-SECTION (13) OF SEC. 144C OF THE ACT WILL APPLY. SAID SECTION MAND ATES THE ASSESSING OFFICER TO COMPLETE ASSESSMENT WITHIN ONE MONTH FRO M THE END OF THE MONTH IN WHICH DIRECTIONS FROM LD. DRP ARE RECEIVED BY HIM. SUB- SECTION (13) OF SEC. 144C IS REPRODUCED HEREUNDER :- UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SUB- SECTION (5), THE ASSESSING OFFICER SHALL, IN CONFOR MITY WITH THE DIRECTIONS, COMPLETE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SEC. 153 (OR SECTION 153B), THE ASSESSMENT WITHOUT PROVIDING ANY ITA NO. 1663/2015. :- 7 -: FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH SUCH DIRECTION IS RECEIVED . WE CANNOT SAY THAT IN THE INSTANT CASE THE PROCEED INGS HAD REACHED THE STAGE WHERE SEC. 144C(13) OF THE ACT COULD BE A PPLIED. THIS IS BECAUSE, AS MENTIONED BY US AT PARA 6 ABOVE, LD. D RP HAD NEVER ISSUED ANY DIRECTION TO LD. ASSESSING OFFICER UNDER SUB-SECTION (5) OF SEC. 144C OF THE ACT. THAT DIRECTIONS ISSUED BY THE LD. DRP WERE TO THE LD. TPO, IS CLEAR FROM THE NOTINGS OF THE LD. TPO HIMSELF IN HIS ORDER DATED 10.02.2015. RELEVANT PARA OF THE SAID ORDER I S REPRODUCED HEREUNDER:- 1. WE DIRECT THE TPO TO VERIFY THE COMPUTATION OF MARG INS OF THE COMPARABLE COMPANIES AND ADOPT MARGINS AS PE R THE ANNUAL REPORTS OF THE COMPARABLE COMPANIES. 2. THE TPO IS DIRECTED TO EXCLUDE M/S. KALS INFORMATIO N SYSTEMS LIMITED. 3. WE THEREFORE DIRECT THE TPO TO INCLUDE VJIL IN THE FINAL SET OF THE COMPARABLE. 8. COMING TO THE CONTENTION OF THE LD. AUTHORISED REP RESENTATIVE THAT LD. TPO IS HAVING ALL THE POWERS OF AN ASSESSI NG OFFICER AND HENCE DIRECTIONS GIVEN BY DRP TO TPO HAD TO BE CONSTRUED AS GIVEN TO THE LD. ASSESSING OFFICER, IT IS NECESSARY TO HAVE A LOOK A T EXPLANATION TO SEC. 92CA RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATI VE. SAID EXPLANATION IS REPRODUCED HEREUNDER:- ITA NO. 1663/2015. :- 8 -: FOR THE PURPOSES OF THIS SECTION TRANSFER PRICIN G OFFICER MEANS A JOINT COMMISSIONER OR DEPUTY COMMISSIONER OR ASSISTANT COMMISSIONER AUTHORISED BY THE BOARD TO PERFORM ALL OR ANY OF THE FUNCTIONS OF AN ASSESSING OFFICER SPECIFIED IN SECTIONS 92C A ND 92D IN RESPECT OF ANY PERSON OR CLASS OF PERSONS. A READING OF THE ABOVE, IN OUR OPINION CLEARLY INDI CATE THAT LD. TPO IS NOT THE SAME AS ASSESSING OFFICER. NO AUTHORIZATION FR OM THE BOARD HAS BEEN PLACED ON RECORD WHICH EQUATES THAT THE POW ERS VESTED ON TPO AS SIMILAR TO THAT OF AN ASSESSING OFFICER. SECTIO N 92CA OF THE ACT CLEARLY SETS OUT THE POWERS OF TPO. HE HAS TO DETER MINE THE ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANS ACTIONS. HOWEVER, POWER OF MAKING THE ASSESSMENT REMAINS WITH THE ASS ESSING OFFICER ONLY. 9. NOW COMING TO THE ARGUMENT OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT BY VIRTUE OF SUB-SEC. (3) OF S EC. 153 OF THE ACT, NO FETTERS ON TIME CAN BE PLACED ON AN ASSESSING O FFICER FOR PASSING A GIVING EFFECT ORDER BY THE LD. ASSESSING OFFICER. IN OUR OPINION THE ARGUMENT CANNOT BE ACCEPTED, CONSIDERING THE DECISI ON OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF M /S. ENVESTNET ASSET MANAGEMENT (INDIA) PVT LTD (SUPRA). PARA 4.3 & 4.4 OF THIS ORDER IS REPRODUCED HEREUNDER:- 4.3 SECTION 144C(13) READS AS FOLLOWS:- (13) UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SUBSECTION (5), THE ASSESSING OFFICER ITA NO. 1663/2015. :- 9 -: SHALL, IN CONFORMITY WITH THE DIRECTIONS, COMPLETE, NOTWITHSTANDING ANYTHING TO THE TRARY CONTAINED IN SECTION 153 [OR SECTION 153B], THE ASSESSMENT WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH SUCH DIRECTION IS RECEIVED. 4.4 IN VIEW OF SECTION 144C(13), NOTWITHSTANDING AN YTHING CONTAINED IN SECTION 153, THE ASSESSING OFFICER HAS TO PASS ORDER WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH THE DIRECTION OF THE DRP IS RECEIVED. THEREFORE, EV EN THOUGH THE PERIOD OF LIMITATION PROVIDED IN 3RD PROVISO TO SECTION 153(1) EXPIRED ON 31.3.2013. SECTION 144C(13) GIVES EXTENSION OF FURTHER PERIOD OF ONE MONTH FROM THE D ATE OF RECEIPT OF DIRECTION FROM THE DRP. IN VIEW OF THE A BOVE, THE DATE OF RECEIPT OF DIRECTION OF DRP BY THE ASSESSIN G OFFICER BECOMES CRUCIAL. BEFORE US THE ASSESSING OFFICER CL AIMS THAT THE DIRECTION OF DRP WAS INITIALLY SENT TO THE ACIT , CIRCLE 1(1), KOCHI AND THE SAME WAS REDIRECTED. FROM THE ASSESSMENT ORDER IT APPEARS THAT THE ASSESSMENT ORD ER WAS PASSED BY THE ACIT, CIRCLE 1(1), TRIVANDRUM. FROM T HE LETTER OF THE ASSESSING OFFICER DATED 09.07.2014, IT APPEA RS THAT THE DIRECTION OF DRP WAS MIS-SENT TO ACIT, KOCHI. NO MA TERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE DIRECTION O F THE DRP WAS SENT TO ACIT, CIRCLE 1(1), KOCHI, OTHER THAN TH E LETTER OF THE ASSESSING OFFICER. MOREOVER, IT IS ALSO NOT KNO WN WHEN ACTUALLY THE ACIT, CIRCLE 1(1), KOCHI, RECEIVED THE DIRECTION OF THE DRP, AND WHEN IT WAS REDIRECTED. THUS, FOR THE PURPOSE OF A PROCEEDINGS WHICH COME U NDER THE AMBIT SEC.144C OF THE ACT, THERE CAN BE NO APPLICATION OF SEC.153 OF THE ACT. 10 . IN THE CASE BEFORE US, THERE IS NO DIRECTION GIVE N BY THE LD. DRP TO LD. ASSESSING OFFICER BUT THE DIRECTIONS WER E ONLY GIVEN TO THE LD. TPO. THIS HAS IN OUR OPINION RESULTED IN A PR OCEDURAL DEFECT AND NOT A JURISDICTIONAL ERROR THAT COULD INVALIDATE TH E PROCEEDINGS IN TOTO. IT IS ONLY A CURABLE DEFECT AND WHEN THE CURING T AKES PLACE, IT ITA NO. 1663/2015. :- 10 -: PUTS BACK THE PROCEEDINGS TO THE ORIGINAL STAGE. V IZ TO A STAGE WHEN THE CORRECT DIRECTIONS ARE ISSUED BY THE LD. DRP. W E ARE THEREFORE CONSTRAINED TO SETASIDE THE ORDER OF THE LD.DRP AN D REMIT THE CASE BACK TO IT FOR ISSUING PROPER DIRECTIONS IN ACCORDA NCE WITH LAW. NEEDLESS TO SAY THAT ALL OTHER ISSUES ON MERITS RAI SED BY THE ASSESSEE SHALL REMAIN OPEN. . 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 23 RD DAY OF NOVEMBER, 2016, AT CHENNAI SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:23RD NOVEMBER, 2016 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF ITA NO. 1663/2015. :- 11 -: