DHL LOGISTICS P. LTD.,MUMBAI vs. NATIONAL E-ASSESSMENT CENTRE, DELHI

(A.Y. 2016-17) DHL Logistics Private Vs. National e-Assessment Limited, 201A, Silver Centre Utopia, Cardinal Gracias Additional/Joint/Deputy/ Road, Chakala, Assistant Commissioner Andheri (East) of Income Tax/Income Mumbai – 400099 Tax Officer, National e- Assessment Centre Delhi स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACM6824H Appellant .. Respondent Appellant by : Madhur Agrawal/Fenil Bhatt/ Darshan Dalal Respondent by : Jayant B Jhaveri Date of Hearing 19.06.2023 Date of Pronouncement 22.06.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the CIT(DRP-1), Mumbai, dated 15.03.2021 for A.Y. 2016-17. The assessee has raised the following grounds before us: “1. On the facts and in the circumstances of the case and in law the order dated

1. November 2019 passed by the Learned Asst. Commissioner of Income-tax (Transfer Pricing)-1(2)(2), Mumbai ('Ld. TPO) under section 92CA of the Act is beyond the time limit prescribed under section 92CA(3A) r.w.s 153 of the Income-tax Act, 1961 (Act), thus making the transfer pricing order and resultant final assessment order dated

30. April 2021 is illegal, bad in law, null and void and liable to be quashed. The following grounds are without prejudice to Ground 1 above.

P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre

2. On the facts and circumstances of the case and in law, the Lat. Dispute Resolution Panel (DRP) erred in upholding the action of the Ld. Assessing Officer CAO)/ 1d TPO in confirming the addition of INR 65,03,77,598/- to the income of the Appellant by holding that its international transactions pertaining to its freight forwarding segment do not satisfy the arm's length principle envisaged under the Act.

3. In doing so, the Ld. AO erred in not reducing the TP adjustment from INR 65,03,77,598/- to INR 172.536.318 pursuant to order dated April 30, 2021 issued by the 1d TPO giving effect to the directions of the Ld. DRP dated March 15, 2021. 4. Further, in doing so, The Ld. DRP/Ld. TPO/LA. AO grossly erred in. 4.1 disregarding the arm's length price (ALP) and the scientific benchmarking process carried out by the Appellant in the Transfer Pricing (TP) documentation maintained by the Appellant in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 (Rules); 4.2 failing to appreciate the economic rationale of using "Operating Profit/ Value Added Expenses" as the Profit Level Indicator (PLI), and instead using "Operating Profit/ Total Cost (OP/TC) as the PLI. 4.3 not allowing the exclusion of pass through costs of the appellant for AY 2016-17 and thereby enhancing the cost base for the purpose of computing the operating margin (OP/TC) of the assessee. 4.4 disregarding all comparable companies selected by the Appellant in its TP documentation. 4.5 including Om Logistics Limited which is a functionally incomparable company in the final set of comparable companies. The Appellant prays that the book value of the international transactions pertaining to the freight forwarding segment of the Appellant should be held to be the arm's length price of the said transactions as per the Appellant's TP documentation, and the addition made on account of the above grounds should be deleted. 5. Charge of interest under section 234A and 2348 of the Act. 5.1 On the facts and circumstances of the case and in law, the learned AO has erred in charging interest under section 234A and 2348 of the Act. It is prayed that the learned AO be directed to delete the interest under section 234A of the Act. 6. Penalty Proceeding under section 274 read with section 271(1)(c) of Income-tax Act 1961 should be dropped.

P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre 6.1 On the facts and in the circumstances of the case and in law, the learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act without appreciating that the Appellant has neither concealed any particulars of its income nor furnished any inaccurate particulars of the income. The Appellant craves leave to alter, amend or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing.”

as follows: Submission on Additional Ground No.

1. (corresponding Ground no.1 of the Form 36)  Additional Ground No.

1. (corresponding Ground no.1 of the Form 36)- Challenging the period of limitation for passing the transfer pricing order by the TPO:  Attention is invited to section 92CAL3A) of the Act which provides for the time limit for passing the transfer pricing order. The same is extracted below “(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 1538 for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires;” (emphasis supplied)

P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre  As can be seen from the above, the TPO can pass an order under section 92CA of the Act at any time before 60 days prior to the due date prescribed under section 153 of the Act for pasting the assessment order.  Section 153 of the Act (as applicable to AY 2016-17) prescribes a time limit of 21 months from the end of the assessment year for completion of assessment. Further, where a reference is made to the TPO for determination of ALP, the time limit is further extended by 12 months. Accordingly, the due date for passing the assessment under in the case of the Appellant for AY 2016-17 was 31 December 2019.  Consequently, in terms of section 92CA(3A) of the Act, the 60 day prior to 31 December 2019 (i.e 60 day from 31 December 2019) falls on 1 November 2019. Accordingly, the due date for the TPO to pass the transfer pricing, order for AY 2016-17 should be at any time before 1 November 2019 i.e, on or before 31 October 2019.  In the present case, the TPO has passed the transfer pricing order on 1 November 2019 i.e, beyond the time limit prescribed under the Act. Hence, the same is barred by limitation in terms of section 92CA(3A) r.ws. 153 of the Act.  In view of the above, the Appellant wishes to raise an additional ground to contest that the transfer pricing order dated 1 November 2019 passed by the TPO for AY 2016-17 is barred by limitation as prescribed under section 92CA(3A) r.ws. 153 of the Act and accordingly, the transfer pricing order ought to be treated as illegal, bad in law, null and void and therefore be quashed.  Thus, based on the above submission the Appellant most humbly submits vide the additional grounds of appeal (corresponding Ground 1 of the Form 36), that the transfer pricing order, draft assessment order and the final assessment order are bad in law, null and void and liable to be quashed. We crave leave of your Honor's to rely upon the following decisions in support of our plea for admission and adjudication of the enclosed additional ground of appeal.”

P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre After referring the aforesaid decision of ITAT Mumbai the ld. Counsel contended that order passed by the Transfer Pricing Officer dated 01.11.2019 and the assessment order dated 30.04.2021 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 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 07.12.2019 and the final assessment order passed by the A.O on 30.04.2021 were barred by limitation.

8. The ld. Counsel submitted that the order passed by the transfer pricing officer on 01.11.2019 is time barred by 1 day since the impugned order would have been passed on or before 31.10.2019 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 31.12.2019, therefore, the time limit for passing the order P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre 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 31.10.2019. However, the TPO has passed the same order on 01.11.2019. 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 reliance the decision of ITAT Mumbai in the cases i.e (i) Strides Shasum Limited Vs. DCIT, Circle 15(3)(2) vide 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. 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.

P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre 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 P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre 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 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”.

P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre

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] and Harbhajan Singh v. Press Council of India [(2002) 3 SCC 722 : JT (2002) 3 SC 21] .)”

P a g e | DHL Logistics Pvt. Ltd. Vs. National E-assessment Centre 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.