JAGUAR LAND ROVER INDIA LTD.,MUMBAI vs. ADDL/JT./DY/CIT/ASSTT/ITO, NATIONAL E-ASSESSMENT CENTRE, DELHI

assessee- M/s. Jaguar Land Rover India Ltd. Firstly, has challenged transfer pricing adjustment amounting to Rs.99,90,30,469/- on account of advertisement, marketing and promotion expenses. Secondly, treating the domestic purchase of vehicles from M/s. Tata Motors Ltd., as an international transaction. Thirdly, adjustment on the distribution segment for the purchase of CBU’s, spare parts and accessories from Jaguar Land Rover Limited, UK; and Lastly, assessee has also challenged disallowance u/s.40a(ia) of Rs.1,89,33,194/-. Besides this also assessee has also raised a legal ground that the TPO order has been passed beyond the period of limitation stipulated u/s.92CA(3A) of the Act and therefore, the whole transfer pricing adjustment is bad in law and also the Corporate tax addition deserves to be quashed because final assessment order is barred by limitation.

The assessee preferred objections before the ld. DRP and finally the ld. DRP issued directions to the ld. AO and accordingly, TP adjustment was reduced to Rs. 99,90,30,469/- and disallowance u/s.40(a)(ia) of Rs. 1,89,33,194/- and accordingly, the income assessed was at Rs.51,99,90,056/-.

Before us ld. Counsel for the assessee, Mr. J.D. Mistry submitted that here in this case the transfer pricing order u/s. 92CA(3) was passed on 01/11/2019, whereas the last date of passing the order was 31/12/2019 and therefore, in view of the decision of the Madras High Court in the case of Pfizer Healthcare India Ltd. reported in (2021)124 taxmann.com 536 and DCIT vs. Saint Gobain India Pvt. Ltd. reported in (2022) 137 taxmann.com 215, the final assessment order is barred by limitation. He further relied upon various judgments of this Tribunal for which a separate compilation was filed before us. He further submitted that once the ld. TPO order is barred by limitation, then assessee is no longer an eligible assessee and therefore, there was no requirement for passing draft assessment order and accordingly, final assessment order should have been passed on or before 31/12/2019 whereas here in this case final assessment order has been passed on 23/04/2021. Therefore, not only the whole transfer pricing adjustment but also disallowance u/s. 40(a)(ia) made on corporate tax deserves to be quashed as the final assessment order itself is barred by limitation. In support following computation of period of limitation has been provided before us.

Before us, ld. DR submitted that the department has filed written submission in many cases which for the sake of ready reference are elaborated hereunder:- i. It is submitted that the legislature uses different words such as "from", "to", "before", "after", "prior", "within", "not later than", "not thereafter", "not less than", "at least" for computation of days. The principle of excluding the date of starting day and the inclusion of ending day are provided in sec. 12 of the Limitation Act and in sec. 9 of the General Clauses Act and a provision cannot be interpreted ignoring the same. ii. 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. In the case on hand, the date of the order dated 30-1-2015 was taken as starting point of limitation and 60 days was computed from 30- 1-2015 and rightly the same has to be excluded and the last day 31-3-2015 has to be included and thus the order 30-1- 2015 in rightly passed as per sec. 92CA(3A). iii. When the period is marked by terminus a quo and terminus ad quem, the canon of interpretation envisaged and section 9 of the General Clauses Act, 1897 require to exclude the first day and wo include the last day iv. Sec. 92CA(3A) expressly provides for counting the last day 1 31-3-2015 and therefore for counting the 60 days the last day has to be taken into account and thus the order passed by the TPO dated 30-1- 2015 is well within the time: v. When the word "to" is specifically incorporated in sec. 92CA(3A), any other interpretation excluding the last day would be against the plain language of the statute and the intent of the legislature. vi. The section 92CA(3A) states that "an order u/s.92CA(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 expires" The section refers that an order may be made at any time before 60 M/s. Jaguar Land Rover India Ltd.

After considering the aforesaid submissions on the legal issues raised in ground No.1 and also going through the chronology of events and the judgments relied upon by the M/s. Jaguar Land Rover India Ltd. assessee, we find that the last date of passing the order passed by ld. TPO u/s.92CA(3) was 31/10/2019. The period of limitation for passing the assessment order as per Section 143(3) was 31/12/2019 and however, the extension of period of limitation u/s.92CA(3A) to pass the order by the ld. TPO expired on 31/10/2019 i.e. 60 days one day before 31/12/2019.

Sub-section 3A of section 92CA provides a time limit for passing of the order by the TPO u/s.92CA(3) in the following manner:- 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 fresh assessment, as the case may be, expires:" Ergo, the TPO can pass an order u/s 92CA of the Act at any time before 60 days prior to the date on which period of limitation reformed to u/s 153 expires. Thus 60 days have to be counted prior to the date of last d limitation u/s 153.”

The interpretation of Section 92CA(3) r.w.s. 153 has been dealt by the Hon’ble Madras High Court not only in the case of Pfizer Healthcare India Ltd but also in the case of Saint M/s. Jaguar Land Rover India Ltd. Gobain India Pvt. Ltd. (supra) which was rendered for the A.Y.2016-17 only. The relevant observations of the Hon’ble High Court in Saint Gobain India Pvt. Ltd. (supra) eads 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 M/s. Jaguar Land Rover India Ltd.

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.

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 M/s. Jaguar Land Rover India Ltd.

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………………………………………………………………………….. 36………………………………………………………………………….. 37…………………………………………………………………………..

Similar view has been taken by the Co-ordinate Bench in several decisions including in the case of Atos India Pvt. Ltd. vs. DCIT reported in (2023) 103 ITR(T) 296 and Shell India Markets Pvt. Ltd. vs. ACIT (2023) 153 taxmann.com 366. Accordingly, we hold that transfer pricing order itself is barred by limitation. Once the ld. TPO’s order is held to be nullity on the ground that it is barred by limitation, then draft assessment order could not have been passed in the case of the assessee because assessee would no longer treated as eligible assessee. This view has been discussed in detail in the case of Atos India Pvt. Ltd., (supra) and Shell India Markets Pvt. Ltd. (supra). In Atos India Pvt. Ltd the Coordinate Bench has observed and held as under:- “30. Now another issue which crops up, is, whether, once the TPO order is held to be nullity or quashed on the ground of being barred by limitation, then could AO have passed the draft order treating it to be as „eligible assessee‟. Section 144C was brought on the statute as special scheme of assessment and to provide alternative dispute resolution M/s. Jaguar Land Rover India Ltd. scheme to certain categories of „eligible assessee‟. Section 144C provides that the AO has to pass and forward a draft assessment order in the case of „eligible assessee‟ if he proposes to make any variation which is prejudicial to the interest of such assessee, Sub-section 15 has defined „eligible assessee‟ for the purpose of section 144C. The relevant provisions of section 144C(1) and sub section 15 reads as under:- 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee. . . . For the purposes of this section,— (15) "Dispute Resolution Panel" means… (a) "eligible assessee" means,— (b) any person in whose case the variation (i) 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 any non-resident not being a company, or any (ii) foreign company.”

The aforesaid section envisages that, AO in the first instance has to forward a draft of the proposed order of assessment to the "eligible assessee", if he proposes to make any variation which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an "eligible assessee", which means that, for this section to apply a person has to be an "eligible assessee" Here, the draft assessment order is to be forwarded only to an "eligible assessee" and not to every assessee under the Act.

Thus, under the aforesaid provision, the expression "eligible assessee" is followed by an expression "means" and there are two categories referred therein (i) any person in whose case the variation arises as a consequence of TPO‟s order and (ii) any NR or Foreign company. The use of the word "means" indicates that the definition "eligible assessee" for the purposes of Section 144C(15)(b) is a hard and fast definition and can only be applicable in the above two categories. Ostensibly, the expression 'eligible assessee' has a restrictive meaning as it covers only the two types of persons mentioned above.

Further, considering the express language employed in defining the term „eligible assessee‟ under section 144C(15)(b) and section 144C(1) in forwarding a draft assessment order to such an „eligible assessee‟ only, is plain, clean and unambiguous; the said statute must be interpreted strictly without there being any role of „equity or intendment‟ in such interpretation. 34. In the present case, the assessee is an Indian company and, thus, a resident in India under section 6 of the Act. Thus, the second condition under section 144C (15)(b)(ii) of the Act for qualifying as an „eligible assessee‟ is not applicable. As regards the first condition under section 144C(15)(b)(i) of the Act, the same applies where there is a transfer pricing variation arising as a consequence of the order of the Ld. TPO under section 92CA(3) of the Act. In the instant case, it will be apparent that there is no transfer pricing variation arising as a consequence of the order of the Ld. TPO once the said transfer pricing order is held to be time-barred, non-est and void-ab-inito from the very date of its existence and inception. The entire premise to adopt the special procedure under section 144C of the Act and treat the appellant an „eligible assessee‟ rests on the fact that the order passed under section 92CA(3) of the Act has resulted in transfer pricing variations prejudicial to the interest of the appellant. However, once the transfer pricing order under section 92CA(3) of the Act, per-se, becomes a nullity, there remains no transfer pricing variation arising/ resulting or remaining as a consequence thereto. The effect of passing a null and void transfer pricing order here is that it has to be considered as non-est, meaning thereby, that it entails all the consequences of not having been passed at all and is ignored M/s. Jaguar Land Rover India Ltd.

Accordingly, once the assessee becomes an „ineligible assessee‟, the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, all consequential proceedings on the basis of the said order fail. In the instant case, a reference was made by the Ld. AO to the Ld. TPO as per the provisions of section 92CA(1) of the Act and accordingly the timelines prescribed u/s 153 of the Act remain extended by a year in view of the 3rd proviso of section 153 of the Act. Accordingly, the time limit to complete assessment proceedings u/s 143(3) of the Act in the instant case expired on 31 March 2016. As on the date of passing draft assessment order u/s 144C(1) of the Act i.e. on 29 March 2016, the Ld. AO had already received the order passed by the Ld. TPO dated 31 January 2016, which as discussed above, is time barred, illegal and void ab initio, thereby making the Appellant not an eligible assessee u/s 144C(15) of the Act. In view of the same, the Ld. AO was ostensibly required to pass the final assessment order u/s 143(3) of the Act on that day. Having said that, the draft assessment order passed by the Ld. AO under the provisions of law is also illegal and void ab initio which deserves to be quashed.

It is a well-settled proposition now that a draft order passed in case of an „ineligible assessee‟ vitiates the entire exercise of assessment and all subsequent proceedings are liable to be quashed has been held in the following cases: Honda Cars India Ltd. v. Dy. CIT [2016] 67 (i) taxmann.com 29/240 Taxman 707/382 ITR 88 (Delhi); Pankaj Extrusion Ltd. v. Asstt. CIT [2011] (ii) 10 taxmann.com17/198 Taxman 6 (Guj.) FedEx Express Transportation and Supply Chain (iii) Services (India) (P.) Ltd. v. DCIT [2019] 108 taxmann.com 542 (Mumbai - Trib.)

Similarly, in a reverse case scenario, i.e., where a draft assessment order was required to be passed on an 'eligible assessee' as per section 144C(1) of the Act but the same was not so passed, in the following decisions as well, the entire assessment proceedings have been held to be invalid and liable to be quashed: (i) Vijay Television (P.) Ltd. v. DRP [2014] 46 taxmann.com 100/225 Taxman 35/369 ITR 113 (Madras) affirmed by the Division Bench of the Hon‟ble Madras HC in [2018] 95 taxmann.com 101 (Madras); (ii) International Air Transport Association v. Dy. CIT [2016] 68 taxmann.com 246 (Bombay); (iii) Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2- 2013] (Andhra Pradesh)- Revenue‟s SLP dismissed by the Hon‟ble Apex Court in CC No. 16694/2013 on 27th September 2013

What culminates from the aforesaid two sets of parallel decisions is that the provisions of section 144C of the Act are specific and provides for a special code which must be strictly followed since it impacts the rights of an assessee substantively, i.e., the ability to accept or object a draft order proposition, file objections before the Dispute Resolution Panel and ensure a speedy disposal thereof. Any lapse in treating an assessee as „eligible assessee‟ where it is otherwise not one and vice-versa results in fatality, since it becomes a jurisdictional defect and goes on to the roots in deciding the validity of the entire assessment proceedings against the revenue. In this context, on the issue of passing a correct assessment order in first instance (either a draft or a final one), the findings of the Hon’ble Madras High Court in case of ACIT v. Vijay Television (P.) Ltd [2018] 95 taxmann.com 101 (Madras) are extremely critical which reads as follows:

Further, in case of Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2-2013] (Andhra Pradesh), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order "without jurisdiction, null and void and unenforceable." In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013.

The various judgments which have been cited before us that 144C(1) will not apply and there is no variation in the return of income which cannot be disputed. Thus in our view, Ld. AO to acquire a legal and valid jurisdiction for the purpose of forwarding a draft assessment order at the first instance under section 144C(1) of the Act, it is necessary that the assessee must be an ‘eligible assessee’ within the restrictive and strict four corners of how the said expression has been defined under section 144C(15)(b) of the Act. Here, once it is held that there is no legal or valid transfer pricing order under section 92CA(3) of the Act, there remains no variation arising as a consequence thereto and the case of the assessee, being an Indian company, falls outside the definition of „eligible assessee‟ as defined under section 144C(15)(b) of the Act. Thus, the Ld. AO cannot be said to acquire a „legal or a valid‟ jurisdiction under section 144C(1) r.w.s. 144C(15)(b) of the Act to pass or forward a draft assessment order to the appellant who is otherwise an „ineligible assessee‟. The action of the Ld. AO in passing the impugned draft assessment order in instant case results in non-compliance of section 144C of the Act which vitiates the entire assessment exercise.

The issue being fairly settled and the intent of legislature in strictly interpreting the provision of section 144C of the Act being repeatedly held so, the act of the Ld. AO in proceeding to pass a draft assessment order on the basis of an order by the Ld. TPO which is barred by limitation and thus bad in law/ non-est, results in an incurable illegality which is liable to be held as null and void, and thus, consequentially holding the final assessment order to be bad in law as well.

Thus, despite the fact that the reference made to the Ld. TPO is valid, in absence of a legally valid transfer pricing order and a valid draft assessment order, the Ld. AO cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act and pass the consequential final assessment order. The decisions of the Hon‟ble jurisdictional High Court in case of International Air Transport Association (supra) and Dimension Data Asia Pacific PTE Ltd. (supra) forties appellant‟s contentions and the irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act and creates/ envisages special rights upon the „eligible assessee‟. If such an order is passed on an assessee who is not an 'eligible assessee' as defined in section 144C(15)(b)(i) of the Act, then it would render the entire proceedings pursuant to such order null and void. 43. We find that section 153(1) of the Act, as it stood applicable for the AY 2012-13, provided a time limit of 3 years from the end of AY 2012-13 for completion of assessment under section 143(3) of the Act, i.e., on or before 31 March 2016. 44. In such a case if the Ld. AO invokes the provisions of section 144C of the Act and passes the final assessment order after 31 January 2016 i.e. beyond the period of limitation as stated above, such final assessment order u/s 143(3) r.w.s 144C of the Act is liable to be quashed as being barred by limitation. 45. In a recent decision of the Hon'ble Madras High Court in case of Virtusa Consulting Services Put. Ltd [TS-474- HC-2022(MAD)] dated 9 June 2022, it has been held in context of period of limitation under section 153 of the Act as under: