Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 130323 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 year(s) 11 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-04-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
J
Next Hearing Date
09-04-2023
Assessment Year
2009-2010
Appeal Filed On
12-05-2015
Judgement Text
P a g e | 1 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.2860/Mum/2015 (A.Y.2009-10) Tata AIA Life Insurance Company Limited 14 th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel Mumbai -400 013 Vs. The Assistant Commissioner of Income Tax-2(3), 5 th Floor, Room No. 552, Aaykar Bhavan, M.K. Road, Mumbai – 400 020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCT3784C Appellant .. Respondent ITA No.2713/Mum/2015 (A.Y.2009-10) DCIT-2(3)(1) R. No. 552, 5 th Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400 020 Vs. M/s Tata AIA Life Insurance Co. Limited ( E a r l i e r k n o w n a s T a t a A I G L i f e I n s u r a n c e C o . L t d . ) Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400013 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABCT3784C Appellant .. Respondent Appellant by : Percy Pardiwala & Jasmin Amalsadvala Respondent by : Biswanath Das Date of Hearing 10.04.2023 Date of Pronouncement 27.04.2023 P a g e | 2 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 आदेश / O R D E R Per Amarjit Singh (AM): Both these cross appeals filed by the assesse and the revenue and arise from the common order therefore for the sake of convenience both these appeals adjudicated together by this common order. ITA No. 2860/Mum/2022 “1. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals) 58 Hon'ble CIT(A)']/Additional Commissioner of Income Tax, Circle - 2(3), Mumbai (AO)/ Deputy Commissioner of Income Tax, Transfer Pricing 11(8), Mumbai (TPO) erred in applying transfer pricing (TP) provisions to transactions undertaken by the Appellant (a life insurance company) and making a TP adjustment to the Appellant's reported taxable surplus, when the Act does not provide for such a mechanism as section 44 of the Income- tax Act, 1961 (the Act) overrides the provisions of section 28-438 of the Act. 2. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A)/AO / TPO erred in re-computing the arm's length price as NIL in respect of the international transactions pertaining to allocation of global e-mail charges, blackberry services and Internet and other network charges. This resulted in a transfer pricing adjustment of INR 8,67,68,740. The Appellant prays that the book value of the said transaction be held to be the arm's length and that the aforesaid adjustment be deleted. 3. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) / AO /TPO erred in re-computing the arm's length price of the international transaction with respect to allocation of costs for system maintenance and support services. This resulted in a transfer pricing adjustment of INR 26, 90,709 The Appellant therefore prays that the above adjustment be deleted. 4. On the facts and circumstances of the case, and in law, the Hon'ble CIT(A) / AO erred in confirming the surplus as calculated in Form 1 of the Insurance Regulatory and Development Act, 1999 instead of the surplus in the actuarial report as per the Insurance Act 1938, to be the income of the Appellant in terms of section 44 of, read with Rule 2 in the First Schedule to, the Act. 5. On the facts and circumstance of the case, and in law, the Hon'ble CTT(A) erred in not adjudicating the ground No 6 raised before him on the tax rate of 12.5% applicable to life insurance companies. 6. On the facts and circumstance of the case, and in law, the Hon'ble CIT(A) erred in not allowing the set off of brought forward losses available to the Appellant P a g e | 3 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 7. On the facts and circumstances of the case, and in law, the Hon'ble CIT(A) erred in not allowing deduction towards the amount of transfer from linked fund from the surplus disclosed in Form 1. 8. On the facts and the circumstances of the case, and in law, the Hon'ble CIT(A) erred in not adjudicating the ground no. 11 raised before him regarding the exemption claimed by the Appellant under section 10(34) of the Act towards dividend income of INR 1,27,69,632. 9. On the facts and the circumstances of the case, and in law, the Hon'ble CIT(A) ought to have directed the ACIT to drop the penalty proceedings. The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of appeal at or before the hearing of the appeal.” 2. Fact in brief is that return of income declaring loss of Rs.5,34,92,04,468/- was filed on 11.09.2009. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 23.08.2010. The assessee company is a joint venture between Tata Sons Ltd. with 74% stake and American International Group (Inc) with 26% stake. The assessee is engaged in providing an array of life insurance product and solutions to individuals, business and corporations. During the year under consideration the assessee has reported the international transaction with its associated enterprise in Form 3CEB, therefore, the A.O referred the international transaction entered by the assesse u/s 92CA(1) to the transfer pricing officer vide order u/s 92CA(3) dated 30.01.2013. The TPO has made arm’s length adjustment of Rs.8,94,59,449/- as under: S. No. Nature of transaction Amount of adjustment 1. Allocation of costs for system maintenance & support services by China AE Rs.26,90,709/- 2. Allocation of costs for global e-mail charges by AIG Global Services Inc; AE Rs.7,62,42,044/- 3. Allocation of costs for blackberry services by AIG Global Services Inc. Rs.3,25,196/- 4. Allocation of costs for internet services and network services by AIG global Services Inc. Rs.1,02,01,500 Total adjustments Rs.8,94,59,449/- P a g e | 4 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 Accordingly, the AO has added the arm’s length adjustment of Rs.8,94,59,449/- to the total income of the assessee. 3. During the course of assessment the A.O also observed that in the business of life insurance the profit and gains of any business or insurance as per Sec. 44 of the Income Tax Act shall be computed in accordance with the Rules contained in the first schedule. The A.O has referred rule 2 of first schedule for computing business income of life insurance business which is reproduced as under: “The profits and gains of life insurance business shall be taken to be the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made in accordance with the Insurance Act, 1938 (4 of 1938), in respect of the last inter-valuation period ending before the commencement of the assessment year, so as to exclude from it any surplus or deficit included therein which was made in any earlier inter-valuation period.” In this regard, the A.O has referred actuarial report for the year ended 2009 as per which surplus of Rs.1,95,57,43,000/- was reported. The surplus for the year ended 2008 as per actuarial report was Rs.1,87,34,17,000/-. Therefore, the AO was of the view that profit/income of the assessee for the year should have been Rs.8,23,26,000/- (Rs.1,95,57,43,000/- (-) Rs.1,87,34,17,000/-). On query, the assesse contended that the surplus as per actuarial report cannot be treated as income of the assesse. Since, surplus in actuarial report as per Insurance Act 1938 would not have included shareholders funds transferred to the policy holders account. However, the A.O has not agreed with the submission of the assessee and stated that as per Rule 2 of schedule 1 the income of the assessee in the business of the life insurance would be the surplus shown in the actuarial report as reduced the surplus of the actuarial of the previous year. Therefore, the A.O held that surplus shown in the actuarial report consists of surplus fund is of no help to the assessee as Rule 2 does not provide for any reduction of such funds from the surplus as shown in the actuarial P a g e | 5 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 report. Therefore, the A.O has added the surplus as per actuarial report of Rs.8,23,26,000/- to the total income of the assesse. 4. Aggrieved, the assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee. 5. During the course of appellate proceedings before us the ld. Counsel filed additional ground of appeal as follows: “The assessment order dated 25 April 2013 passed by the learned Assistant Commissioner of Income tax-2(3), Mumbai under section 143(3) read with section 144C(3) of the Income tax Act, 1961 is void and bad in law as it has been passed beyond the period of limitation referred to in section 153 of the Act. The Appellant craves leave to add, alter, vary, omit, substitute or amend the ground of appeal, at any time before or at, 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.” The ld. Counsel has also placed reliance on the following judicial pronouncements i.e (i) Strides Shasum Limited Vs. DCIT, Circle 15(3)(2) vide ITA No. 2877/Mum/2014 dated 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. After referring the aforesaid decision of ITAT Mumbai the ld. Counsel contended that order passed by the Transfer Pricing Officer dated 30.01.2013 and the assessment order dated 26.04.2013 are time barred. The ld. Counsel submitted that additional ground is the legal grounds challenging the validity of the assessment order and the order of TPO on the ground of limitation and no further documentary evidence is required to adjudicate these ground. After considering the decision of Hon’ble Supreme Court of India in the case of National Thermal Power Company Vs. CIT (229 ITR 383) these ground of appeal are admitted and are taken up for adjudication. As per additional ground the order P a g e | 6 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 of the TPO is barred by limitation, therefore, the assessee does not become eligible assessee u/s 144C of the Act, therefore, the draft assessment order dated 18.03.2013 and the final assessment order passed by the A.O on 26.04.2013 were barred by limitation. 6. The ld. Counsel submitted that the order passed by the transfer pricing officer on 30.01.2013 is time barred by 1 day since the impugned order would have been passed on or before 29.01.2013. The ld. Counsel further submitted that as per provisions of Sec. 92CA(3A) of the Act in a case where the reference is made to the TPO, the TPO is required to pass order u/s 92CA(3A) of the Act at any time before 60 days prior to the date on which period of limitation referred to in Sec. 153 for making the assessment order expires. The ld. Counsel also submitted that the period of limitation for making of order of assessment as per Sec. 153 of the Act is two years and where a case is referred u/s 92CA of the Act to the TPO the period of limitation shall be 3 years from the end of the assessment year in which the income was first assessable. He further submitted that in the case of the assessee in accordance with provisions of Sec. 153 of the Act the period of limitation for completion of the assessment as per provisions of Sec. 153 of the Act is 31.03.2013, therefore, the time limit for passing the order u/s 92CA(3A) of the Act is before 60 days prior to the date on which limitation for passing the assessment order is expired. As per the computation shown by the ld. Counsel the order u/s 92CA(3) of the Act ought to be passed on or before 29.01.2013. However, the TPO has passed the same order on 30.01.2013. Therefore, the ld. Counsel vehemently contended that impugned order passed u/s 92CA(3) is time barred by 1 day. The ld. Counsel has placed reliance on the following judicial pronouncements of Hon’ble Madras High Court i.e Pfizer Healthcare India Pvt. Ltd. Vs. JCOIT, 433 ITR 028 (Mad); DCIT Vs. Saint Gobain India P. Ltd. 137 taxmann.com 215 (Mad) and also placed P a g e | 7 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 reliance the decision of ITAT Mumbai in the cases i.e (i) Strides Shasum Limited Vs. DCIT, Circle 15(3)(2) vide ITA No. 2877/Mum/2014 dated 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. On the other hand, the ld. D.R. has filed the written submission dated 24.01.2013 and submitted that the interpretation by the Hon’ble High Court regarding the time limit in Sec. 92CA (3A) is against the provisions of the General Clauses Act and the settled principles of interpretation of Laws. It is further submitted that as per Sec. 9 of the General Clauses Act in computation of the time limit the day referred to as “from” has to be excluded and the day referred to as ‘to’ has to be included. The ld. D.R also submitted that the period of limitation computed by the assessee in the additional ground is not as per the letter and spirit contained in the act. The ld. D.R also submitted that Sec. 92CA(3A) uses word may only and same cannot be construed as shall and equated to limitation especially when further proceedings are contemplated under the Act such as passing the draft assessment order and for the remedy before the dispute resolution panel and final assessment order. 7. 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: Sr. No. Particulars Relevant Date period Assessment Year 2009-2010 1. Period of Limitation for making an order of assessment as per section 153 of the Act 2 years P a g e | 8 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 2. Extension of period of limitation in case a reference is made u/s 92CA of the At 12 months 3. Date on which reference was made to the Transfer Pricing Officer 17.02.2011 4. Assessment Proceedings should be completed on or before 31.03.2013 5. Date prior to the date on which period of limitation expires (stated in Sr. No. 3 above) 30.03.2013 6. 60 days period expires on: March = 30 days (excluding 31.03.2013) February = 28 days January = 2 days 30.01.2013 7. Transfer Pricing Order u/s 93CA(3) of the Act ought to be passed on or before 29.01.2013 8. Date on which Transfer Pricing Order u/s 92CA(3) is passed 30.01.2013 9. Date on which Final Assessment was passed. 26.04.2013 The relevant provisions of Sec. 92CA(3A) 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 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 P a g e | 9 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 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 on 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 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”. 8. Further the decision of division bench of the Hon’ble Madras High Court in the case of DCIT Vs. Saint Gobain India P. Ltd. as referred supra 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 P a g e | 10 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 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] 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 P a g e | 11 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 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 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. P a g e | 12 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 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 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 30.01.2013 whereas the limitation for passing the said order u/s 92CA(3) expires on 29.01.2013. Therefore, taking into consideration the provision of the Act and decision of Hon’ble Madras P a g e | 13 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 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. 9. 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 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 squirely covered on similar fact and circumstances, therefore, we find merit in the submission of the assessee and allow the additional ground raised by the assesee. No argument were made by the ld. Counsel for the assessee in respect of the original ground of appeal, other additional ground of appeal therefore they are left open for adjudication if the need arises. P a g e | 14 Tata AIA Life Insurance Co. Ltd. Vs. The ACIT-2(3) ITA No.2860 & 2613/Mum/2015 10. In the result, the appeal of the assessee is allowed. ITA No. 2713/Mum/2015 (Revenue) 11. Since, we have allowed the additional ground of appeal of the assesse, therefore, the appeal of the revenue become infructuous and the same require not any adjudication accordingly the same stand dismissed. 12. In the result, the appeal of the assessee is partly allowed and the appeal of the revenue stand dismissed. Order pronounced in the open court on 27.04.2023 Sd/- Sd/- (Amit Shukla) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 27.04.2023 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.
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The case involves Tata AIA Life Insurance Company Limited appealing against the orders of the Assistant Commissioner of Income Tax-2(3) and the Deputy Commissioner of Income Tax, Transfer Pricing 11(8), Mumbai, concerning transfer pricing adjustments and the computation of income under the Income Tax Act. The primary contention was the application of transfer pricing provisions to the appellant's transactions and the subsequent adjustments made by the TPO. The tribunal also addressed procedural issues regarding the timeliness of the TPO's order and the eligibility of the assessee under section 144C of the Act. The tribunal's decision hinged on the interpretation of statutory provisions concerning the timing and procedural requirements for transfer pricing assessments.
