VIVIMED LABS LIMITED,HYDERABAD vs. ACIT, CENTRAL CIRCLE - 3(4), HYDERABAD

आदेश / ORDER

PER VIJAY PAL RAO, VICE PRESIDENT:

This appeal filed by the Assessee is directed against the assessment order dated 13.12.2023 passed u/sec.143(3) r.w.s.144C(13) of the Income Tax Act [in short "the Act"], 1961 for the assessment year 2011-2012 in pursuant to the Order of this Tribunal dated 17.12.2020 in ITA.No.21/Hyd./2016 whereby the issue of TP adjustment was remanded to the record of the Assessing Officer/TPO with a direction to consider the evidence filed by the assessee.

1) The order passed by the AO under section 143(3) r.w.s 144C (13) dated 13-12-2023 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant. 2) The Ld. AO failed to appreciate that the assessment is barred by limitation under section 153 of the Act, as the order has been passed beyond the prescribed period as specified under act. 3) The Ld. AO erred in law and on the fact that the Final assessment order was passed beyond the prescribed time limit as per the section 153 of the Income tax Act and consequently, the said order is barred by limitation and liable to be quashed. 4) The Learned Assessing Officer erred both in law and on facts in passing the impugned Final order beyond the period of 30 days prescribed under section 144C of the Act, hence, the order is bad in law and void ab initio. 5) The Ld. AO erred in upholding the unearned interest amount of Rs.3,18,73,275/-, by applying high rate of interest at 12.25 percent p.a without considering the facts of the case. 6) The Ld. AO ought to have appreciated that the amount of Rs.252.05 million and Rs.8.14 million has been invested by the assessee in its AE as a matter of furtherance of its business interests as a shareholder. 7) The Ld. AO ought to have appreciated that the amount which was invested in the subsidiary by the assessee company is only for the purpose of business expediency and administrative convenience. 8) The Ld. AO ought to have considered that the assessee has submitted the supporting documents and information to substantiate the investments made in its AEs. 9) The appellant may, add OR alter OR amend OR modify OR substitute OR delete and / OR rescind all OR any of the grounds of appeal at any time before OR at the time of hearing of the appeal.”

the extended period as provided under sub-sec.(4) of sec.153

of the Act is applicable. The learned DR also furnished a

summary table to demonstrate the limitation dates as under:

Stage Statutory Due Date Actual Date Status Provision Assessment -- Extended [Post ITAT S.153(3) 31.03.2022 Below set-aside] Assessment -- Extended [post TPO S.153(4) 31.03.2023 limit applies reference] TPO Order S.92CA(3) On/before 29.10.2021 Within time 30.01.2023 Draft S.144C(1) On/before 14.03.2023 Within time Assessment 31.03.2023 Order Objections S.144C(2)(b) Within 30 31.03.2023 Within time before DRP days of draft order DRP S.144C(12) On/before 08.12.2023 Within time Directions 31.12.2023 Final On/before 12.12.2023 Within time. Assessment S.144C(13) 31.01.2024 Order

4.1. He therefore, pleaded that the assessee's appeal against the final Asst. Order dated 13.02.2023 passed u/s. 143(3) r.w.s 144C(13) challenging at the order passed was beyond the time limits prescribed u/s 153 of the I.T. Act, 1961 and also the Asst. Order was passed beyond the period prescribed u/s. 144C of the IT Act, 1961 may be dismissed in the light of the Finance Act, 2026 as amended retrospectively.

“5.4. Having regard to the rival contentions and the material placed on record, we find that the assessee, not only in its T.P. documentation, but also in its reply to notice of the TPO, has clearly stated that these are working capital advances, though at para 2.5 of its submissions before the TPO, assessee had stated that it had invested in its sister concerns. However, neither the TPO nor the DRP have gone into this aspect, nor has the assessee filed any evidence in this context before the authorities below. The board resolutions and the evidence that assessee has been allotted equity shares in the subsequent year were never put before the authorities below. In view of these facts, we deem it fit and proper to set aside the issue to the file of AO/TPO with a direction to consider the evidence filed by assessee to the effect that assessee had invested money in equity shares of its subsidiaries and has not given working capital advances and if it is found that these transactions were in fact investments in equity shares of the subsidiaries, then no T.P. adjustment shall be made. However, if it is found that the funds transferred by the assessee to its subsidiaries during the year were working capital advances, which were later decided to be treated as investments, then the T.P. adjustment already made by the AO shall be revived and the assessment shall be completed accordingly.”

5.1. Therefore, the Tribunal has remanded this issue to the Assessing Officer/TPO to consider whether the amount in question is working capital advance given by the assessee to its subsidiary or is an investment in the equity shares of the subsidiary after examining the Board resolution and other evidences regarding the allotment of equity shares in the subsequent year. Further, the Tribunal has specifically directed the authorities below that if it is found that these transactions were in fact investment in the equity shares of the subsidiary then, no TP adjustment shall be made. Therefore, the Tribunal has laid down the principle and guidelines for deciding this issue by the TPO/Assessing Officer and therefore, it is not a case of de novo assessment/ re-assessment. The limitation provided u/secs.153(3) and 153(5) reckons from the end of the month in which the Order of the Tribunal is received by the PCIT/CCIT as the case may be and expires 12 months and 3 months respectively from that date. In the case in hand, since the Tribunal has directed the TPO/Assessing Officer to verify the evidence regarding the allotment of shares therefore, in our considered view, the limitation provided under sub-sec.(3) of sec.153 read with proviso is applicable. In the case in hand, the Order was passed by the Tribunal on 17.12.2020 and therefore, the limitation would reckon from 01.01.2021 and as per sub- sec.(3) of sec.153 it would expire on 31.12.2021 whereas the impugned order was passed by the Assessing Officer on 13.12.2023 which is beyond the period of limitation provided u/sec.153(3) of the Act. The contentions raised by the learned DR will not help the case of the Revenue because it is not a case of fresh assessment or initial assessment proceedings whereby the provisions of sec.144C would apply. Accordingly, we do not find any substance or merit in the contention of the learned DR that the limitation provided u/sec.144C would apply for passing the Order. It is pertinent to note that in the case in hand even the Draft Assessment Order passed by the Assessing Officer on 14.03.2023 is barred by limitation. An identical issue has been considered by this Tribunal in assessee’s own case for the assessment years 2014-2015, 2015-2016 and 2018-2019 in ITA.Nos.181 to 183/Hyd./2025 and vide Order dated 30.04.2026 in Para nos.7 to 12 held as under:

“7. We have considered the rival submissions as well as the relevant material on record. In the first round of appeals the Tribunal vide Order dated 12.04.2022 in ITA.Nos.186 to 189/Hyd./2021 has remanded the two issues of TP adjustment in Para nos.2 to 6 as under:

“2. We advert to the various identical issues in the assessee’s instant four appeals. It’s first substantive grievance common in all these four assessment years is that the learned lower authorities have erred in law and on facts in making Arm’s Length Price “ALP” adjustment of Rs.18,31,62,550/-, Rs.10,50,45,151/- Rs.16,41,02,540/-; and Rs.2,01,88,555/-; assessment year wise; respectively pertaining to advances made to associated enterprises. We note with the able assistance coming from both the sides that the assessee’s case all along has been that its corresponding advances to the overseas Associated Enterprises “AEs” had been made for the purpose of equity investments followed by allotment of corporate stake therein than loans simplicitor. Learned counsel further submits that the assessee has also filed copies of corresponding share allotments before the learned lower authorities. We note that this has been very much a recurring issue between the parties wherein the learned co-ordinate bench’s earlier order involving assessee’s appeal ITA No.212/Hyd/2016 for A.Y. 2011- 12 has restored the matter back to the Transfer Pricing Officer “TPO” as follows :

“5. As regards ground no.3, the brief facts are that during the transfer pricing proceedings, in the T.P. documentation of assessee, the AO found that the assessee had stated that it had provided working capital advance of Rs.252.06 million to Vivimed Hong Kong and also of Rs.8.41 millions to Vivimed, US i.e. total amount outstanding was Rs.26,01,90,000/- and it was stated that the advance is for administrative convenience and there was no interest accrued during the year and hence determination of ALP is not warranted. AO noticed that assessee had not charged interest from it’s A.E. though interest @ 6% was charged from Vivimed Hongkong in the earlier year, and also that there is no interest charged in this year. Therefore, he proposed to charge interest on the outstanding balances and the taxpayer was issued a letter accordingly. After considering the assessee’s submissions at length, the AO held that the interest is chargeable on the interest free advances given by the assessee to its subsidiaries towards working capital advances. Thus, he charged 12.25% on the working capital advances as rate of interest and brought it to tax.

5.1. Further, he also treated corporate guarantee as an international transaction and proposed addition by charging corporate credit at 2% of the corporate guarantee given by assessee. In accordance with these findings of the TPO, the final assessment order was passed and the assessee has filed second appeal before the Tribunal.

5.2 The Ld. Counsel for the assessee submitted that though TPO has stated that these are working capital advances given to its subsidiaries, they are not advances but are the investments made by assessee in the equity of its subsidiaries and the said companies have also subsequently allotted shares to the assessee. 5.3. Ld. DR, on the other hand, supported the orders of the authorities below and drew our attention to the paper book filed by assessee wherein in its letter addressed to the AO, the assessee had clearly stated and that it had advanced working capital to its sister concerns. Therefore, according to him, the advances were not equity at all. He further submitted that documents filed by assessee towards investment such as board resolutions and evidence of allotment of shares to assessee were never filed before the authorities below nor does the assessment record show that they were on record. Therefore, according to him, these evidences should not be considered at all. 5.4. Having regard to the rival contentions and the material placed on record, we find that the assessee, not only in its T.P. documentation, but also in its reply to notice of the TPO, has clearly stated that these are working capital advances, though at para 2.5 of its submissions before the TPO, assessee had stated that it had invested in its sister concerns. However, neither the TPO nor the DRP have gone into this aspect, nor has the assessee filed any evidence in this context before the authorities below. The board resolutions and the evidence that assessee has been allotted equity shares in the subsequent year were never put before the authorities below. In view of these facts, we deem it fit and proper to set aside the issue to the file of AO/TPO with a direction to consider the evidence filed by assessee to the effect that assessee had invested money in equity shares of its subsidiaries and has not given working capital advances and if it is found that these transactions were in fact investments in equity shares of the subsidiaries, then no T.P. adjustment shall be made. However, if it is found that the funds transferred by the assessee to its subsidiaries during the year were working capital advances, which were later decided to be treated as investments, then the T.P. adjustment already made by the AO shall be revived and the assessment shall be completed accordingly.”

7.1. Thus, as regards the issue of determination of Arms Length Price [in short “ALP”] in respect of international transactions of advances made to the Associated Enterprises [in short “AE”] the Tribunal has remanded the matter to the record of the Assessing Officer/TPO with a direction to consider the evidence filed by the assessee to the effect that the assessee has invested money in equity shares of its subsidiary and has not given working capital advances and consequently, the TP adjustment if any, can be made only in respect of the advances given to the AE for working capital requirements. Thus, this issue was remanded to the Assessing Officer/TPO for verification and examination of the record and hence, the same will fall in the purview of sub-sec.(3) of sec.153 and not under sub-sec.(5) of sec.153 of the Act. Even otherwise, the 2nd proviso to sub-sec.(5) to sec.153 also provides that where the Order, inter alia, u/sec.254 of the Act requires verification of any issue by way of submissions of documents by the assessee or any other person or an opportunity being heard to be provided to the assessee in order to give effect to the said Order passed u/sec.254 of the Act shall be made within the time specified under sub-sec.(3) of sec.153 of the Act. Therefore, the limitation provided in sub-sec.(3) of sec.153 of the Act will be applicable in this case. For ready reference, sub-sec.(3) of sec.153 is reproduced as under:

“(3) Notwithstanding anything contained in sub- sections (1), (1A)) and (2), an order of "fresh assessment [or fresh order under section 92CA, as the case may be] in pursuance of an order under [section 250 or] section 254 or section 263 or section 264, setting aside or cancelling an assessment, [or an order under section 92CA, as the case may be], may be made at any time before the expiry of nine months from the end of the financial year in which the order under [section 250 or] section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be]: Provided that where the order under [section 250 or] section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,] on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted.]” 7.2. A plain reading of sub-sec.(3) with proviso makes it clear that the limitation for passing giving effect Order is 12 months from the end of the financial year in which the Order u/sec.254 is received by the Principal CIT or Chief CIT, as the case may be. In the case in hand, the Order of the Tribunal was passed on 12.04.2022 and therefore, the limitation of 12 months will reckoned from 01.04.2023 and expires on 31.03.2024 whereas the impugned order was passed by the Assessing Officer on 06.12.2024 which is barred by limitation qua this issue.

7.3. The Hon’ble Karnataka High Court in the case of M/s. Wipro Ltd., vs. JCIT (supra) has also analysed these provisions of sec.153 of the Act and laid down a harmonious construction of these provisions as under:

“(iv) It is pertinent to note that section 153(3) [post substitution vide Finance Act, 2016 w.e.f. 1-6-2016] does not use the word 'reassessment' alongside 'fresh assessment'; however, the said word has been used alongside 'fresh assessment' in section 153(5) (post- substitution vide Finance Act, 2016; accordingly, reassessment is not envisaged u/s 153(3); such reassessment can only come u/s 153(2) or section 153(6) which deals with assessment, reassessment or re- computation to give effect to any finding or direction contained in the order of superior authority or court; thus if an order of assessment is set aside in appeal with a direction that a fresh reassessment be made, the same would be covered by section 153(3); One may also note that section 2(40) of the Income-tax Act, 1961, Act defines the term "regular assessment" to mean assessment under sub section 3 of section 143 or section 144; therefore these terminologies have different import in different sections. In the light of this discussion, it is clear that the term "assessment" is used in section 153(1) to mean the entire process of assessment; section 153(2) uses the words, 'assessment', 'reassessment' or 're-computation' but in respect of section 147 which deals with income escaping assessment; section 153(3) uses the term "fresh assessment" in pursuance of the orders passed setting aside or cancelling an assessment; therefore, this term "fresh assessment", though not defined, contemplates a new assessment consequent to the higher authorities cancelling or setting aside the assessment; section 153(5), talks of giving effect to an order passed by the higher authorities, wholly or partly, otherwise than by making a fresh assessment or reassessment. The words "wholly or partly" obviously pertain to giving effect to the order of the higher authorities which would be done by the lower authority either in part or in whole depending on the issues that are settled by the higher authorities. However, such an exercise cannot be done within the time limits specified in section 153(5), where there is a fresh assessment or reassessment and in such cases the longer time limits specified in section 153(3) would apply; a harmonious construction of these provisions would mean as under:

a. That in order to give effect to the order of the superior authorities, either wholly or partly in terms of section 153(5), it should not be a case of reassessment or fresh assessment, which if they are, would otherwise fall into section 153(3); b. That section 153(3), when it uses the term 'fresh assessment', would mean that the entire exercise of assessment is to be done afresh as it is used along with the terminology "setting aside or cancelling" which would mean the whole order of assessment being set at naught and not some issues comprised in the assessment order; when the assessment order is set aside on some issues only and confirmed on other, it is not a case of 'setting aside or cancelling the assessment'. c. That section 153(5) would apply where the assessing officer has to give effect to the order of the higher authorities in whole or in part provided that no fresh assessment 1 u/s.153(3) or a reassessment u/s. 153(2) relating to income escaping assessment, is to be undertaken. d. Therefore, if the orders to be given effect to are to be made by following the principles already laid down by the higher forum, it would not be a case of fresh assessment in terms of section 153(3) or a reassessment in terms of section 153(2); it would simply mean that the orders of the higher forum are to be applied & followed by the assessing officer, it may be borne in mind that longer time limits are provided in section 153 & second proviso to section 153(5) because it may entail doing the entire process once over or where detailed evidences may be required for accomplishing the task; however where a shorter time limit is prescribed u/s. 153(5), the legislative mandate is to subserve the objectives of ensuring timely compliance with the orders of the superior authorities.”

7.4. Thus, it is clear that where the Orders to be given effect to are to be made by following the principles already laid down by the Higher Forum then, the limitation provided u/sec.153(5) will be applicable and where an exercise of verification of record is required then, the limitation provided under sub-sec.(3) of sec.153 is applicable. We do not find any force in the contention of the learned DR that the extended period provided under sub-sec.(4) will be applicable in the case because the issue was set aside and remanded to the record of the Assessing Officer/TPO which falls in the ambit of sub-sec.(3) of sec.153 of the Act and not under sub-sec.(4) of the Act. Even the amendment vide Finance Act, 2022 is also prior to the Orders of this Tribunal.

ITA.No.183/Hyd./2025 – A.Y. 2018-2019:

“8.6. We have heard the rival arguments made by both sides and perused the record. We find the TPO in the instant case has adopted the corporate guarantee commission rate of 1.80% on account of the corporate guarantee provided by the assessee to its AE and accordingly suggested upward adjustment of Rs.1,34,01,000/-. We find the DRP directed the Assessing Officer to reduce such corporate guarantee commission to 1%. We find the Tribunal in assessee’s own case for the immediately preceding 4 AYs has directed the Assessing Officer/TPO to adopt a lumpsum commission rate of .5% by observing as under:

“6. Next comes the issue of quantification of the impugned corporate guarantee commission adjustments. Both parties have quoted a catena of case law wherein various learned co-ordinate benches have adopted different rates. Faced with this situation, we deem it appropriate in these peculiar facts and circumstances that a lumpsum commission rate of 0.5% qua the extent of amount of assessee’s corporate guarantee(s) actually utilized only in all these four assessment years; would be just and proper. This second substantive ground is partly allowed in very terms.” 8.7. Respectfully following the decision of the Tribunal in assessee’s own case in the preceding 4 A.Ys and in absence of any distinguishable features brought to our notice against the order of the Tribunal in assessee’s own case, we direct the Assessing Officer/TPO to adopt the corporate guarantee commission rate of .5% qua the extent of amount of assessee’s corporate guarantee actually utilized. The grounds raised by the assessee on this issue are accordingly allowed for statistical purposes. 9. In Ground of appeal No.3 to 3.1.5 the assessee has challenged the order of the Assessing Officer in making addition of Rs.55,03,931/- on account of interest on outstanding receivables.

9.1. The learned Counsel for the assessee at the outset drew the attention of the Bench to the order of the DRP at Para 2.3.22 wherein it has been held as under: “2.3.22. In view of the above, considering the objections of the assessee, the TPO is directed to impute interest on receivables after netting off payables following credit period mentioned in the intercompany agreement with AEs or as per the invoice period date applying the SBI short term deposit rate”.

9.2. He submitted that since the Assessing Officer in the final order has not followed the directions of the DRP, therefore, he has no objection if the matter is restored to the file of the Assessing Officer with a direction to compute the interest on receivables after netting off payables.

9.3. The learned DR has no objection for the same. 9.4. Since the AO in the instant case has not followed the direction of the ld. DRP, therefore, the grounds on this issue are restored to the file of the Assessing Officer with a direction to follow the directions of the DRP at Para 2.3.22 of its order and make appropriate addition. Needless to say, while deciding the issue the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. While doing so, he shall keep in mind the order of the Tribunal for the preceding years. We hold and direct accordingly. Grounds of appeal No. 3 to 3.1.5 are accordingly allowed for statistical purposes.”

11.1. It is clear that the issue regarding ALP on corporate guarantee commission has been decided by the Tribunal by laying down the principles and rate at 0.5% which is the conclusive finding and therefore, the limitation provided under sub-sec.(5) of sec.153 will be applicable.

5.2. Accordingly, in the facts and circumstances of the case as well as in view of earlier Order of this Tribunal in assessee’s own case, we hold that the Draft Assessment Order passed by the Assessing Officer on 14.03.2023 as well as the Final Assessment Order passed on 13.12.2023 in pursuance to the Order of this Tribunal dated 17.12.2020 is barred by limitation and liable to be set aside. We Order accordingly.

Order pronounced in the open court on 22.07.2026. Sd/- Sd/- MANJUNATHA G. VIJAY PAL RAO ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 22nd July, 2026. VBP Copy to: VIVIMED LABS LIMITED, C/O., P.MURALI & CO., CHARTERED 1 ACCONTANTS, 6-3-655/2/3, SOMAJIGUDA, HYDERABAD- 500082, TELANGANA 2 ACIT, CENTRAL CIRCLE - 3(4), HYDERABAD, TELANGANA 3 THE PR.CIT-(CENTRAL), HYDERABAD. 4 THE D.R., ITAT, HYDERABAD B-BENCH, HYDERABAD. 5 GUARD FILE TRUE COPY VADREVU Digitally signed by VADREVU PRASADA PRASADA RAO ASSISTANT REGISTRAR / Date: 2026.07.22 I.T.A.T., HYDERABAD. RAO 13:12:21 +05'30'