ARM EMBEDDED TECHNOLOGIES PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BANGALORE

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ITTPA 971/BANG/2022Status: DisposedITAT Bangalore20 February 2023AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the final assessment order was indeed barred by limitation. The DRP's directions were passed on 24.01.2022. According to Section 144C(13) of the Act, the final assessment order should have been passed within one month from the end of the month in which the directions were received, which would be 28.02.2022. Since the impugned final assessment order was passed on 05.08.2022, it was beyond the prescribed time limit. The Tribunal found that the judicial pronouncements cited by the assessee categorically held that the final assessment order must be passed in compliance with the time frame stipulated under Section 144C(13). Consequently, the Tribunal concluded that the impugned final assessment order is bad in law and barred by limitation. As the final assessment order was quashed on this ground, the other grounds on merits were not adjudicated and were left open. The appeal was partly allowed.

What were the facts?

The assessee, M/s. Arm Embedded Technologies P. Ltd., is engaged in contract software development and market supporting services. For Assessment Year 2017-18, it filed a return declaring a total income of Rs.46,61,80,560/-. The assessment was referred to the Transfer Pricing Officer (TPO) who proposed adjustments totaling Rs.30,70,67,525/-. The Assessing Officer (AO) passed a draft assessment order incorporating these adjustments. The assessee filed objections before the Dispute Resolution Panel (DRP), which provided partial relief. The TPO passed an order giving effect to the DRP's directions on 23.02.2022, resulting in aggregate Transfer Pricing adjustments of Rs.4,71,77,760/-. The final assessment order was passed by the AO on 05.08.2022. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the final assessment order passed on 05.08.2022 is barred by limitation under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, rendering it void ab initio. Assessee's contention: The DRP's directions were passed on 24.01.2022. As per Section 144C(13), the final assessment order should have been passed within one month from the end of the month in which the directions were received, i.e., by 28.02.2022. Therefore, the order passed on 05.08.2022 is time-barred. The assessee relied on the decisions in Altran Technologies India Pvt. Ltd. vs. DCIT, IPG DXTRA India Pvt. Ltd. vs. DCIT, and Dentsply India (P) Ltd. vs. TIO. Revenue's contention: The Revenue was unable to controvert the assessee's assertions regarding the limitation period.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 92CA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENGALURU “A” BENCH, BENGALURU

Before: Shri Chandra Poojari & Shri George George K.

For Appellant: Smt. Tanmayee Rajkumar, Advocate
For Respondent: Dr. Sankar Ganesh K., Addl CIT-DR
Hearing: 20.02.2023Pronounced: 20.02.2023

IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU “A” BENCH, BENGALURU Before Shri Chandra Poojari, Accountant Member and Shri George George K., Judicial Member IT(TP)A No. 971/Bang/2022 (Assessment Year: 2017-18)

M/s. Arm Embedded Technologies P. Ltd. vs DCIT, Circle - 1(1)(1) Bagmane World Technolgy Center Bangalore SEZ, Citrine Block, 5th Floor Marathalli Outer Ring Road Doddanekkundi Villae Mahadevpura, Bengaluru 560048 PAN – AAECA1582E (Appellant) (Respondent) Assessee by: Smt. Tanmayee Rajkumar, Advocate Revenue by: Dr. Sankar Ganesh K., Addl CIT-DR Date of hearing: 20.02.2023 Date of pronouncement: 20.02.2023 O R D E R Per: George George K., J.M. This appeal at the instance of the assessee is directed against the final assessment order dated 05.08.2022 passed under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act). The relevant assessment year is 2017-18.

2.

Brief facts of the case are as under: - The assessee is engaged in providing contract software development services (SDW) and Market supporting services (MSS) to its Associated Enterprises (AEs). For AY 2017-18 return of income was filed declaring total income of Rs.46,61,80,560/-. The assessment was selected for scrutiny and notice under Section 143(2) of the Act was issued on 10.08.2018. During the

2 IT(TP)A No. 971/Bang/2022 M/s. Arm Embedded Technologies P. Ltd. course of assessment proceedings the matter was referred to the Transfer Pricing Officer (TPO) to determine the arm's length price (ALP) of the international transaction undertaken by the assessee with its AEs. The TPO passed an order under Section 92CA of the Act on 24.01.2021 determining TP adjustment of Rs.28,29,17,525/- in respect of service segment, adjustment of Rs.24,50,000/- in respect of MSS segment and an adjustment of Rs.2,16,63,214/- being notional interest in respect of delayed receivables. Pursuant to the receipt of TPO’s order under Section 92CA of the Act, the AO passed draft assessment order on 13.04.2021 incorporating the aforesaid TP adjustments.

3.

Aggrieved by the draft assessment order assessee filed objections before the DRP. The DRP, vide its directions dated 24.01.22, disposed off the objections of the assessee by granting partial relief to the assessee. Pursuant to the directions of the DRP, order giving effect was passed by the TPO on 23.02.2022 wherein the TP adjustment for SWD segment was reduced to Nil, the TP adjustment for MSS segment was enhanced to Rs.25,11,585/- and TP adjustment on account of interest on outstanding receivables was also enhanced to Rs.4,46,66,131/-. Subsequent to DRP’s directions the impugned final assessment order dated 05.08.2022 was passed by incorporating the aggregate TP adjustments of Rs.4,71,77,760/-.

4.

Aggrieved by the final assessment order the assessee has preferred this appeal before the Tribunal. The assessee filed 15 grounds of appeal. We notice that the assessee has filed a legal ground, namely ground No. 2 which reads as under: - “2. On the facts and in the circumstances of the case and in law, the final assessment order passed beyond the time period prescribed under Section 143(3) r.w.s. 144C(13) of the Act and is therefore not in conformity with the provisions of the Act and hence, bad in law and void-ab-initio and is liable to be quashed.”

3 IT(TP)A No. 971/Bang/2022 M/s. Arm Embedded Technologies P. Ltd. 5. Vide the above ground the assessee challenges the validity of the final assessment order as time barred. The learned A.R. submitted that the DRP’s directions in this case was passed on 24.01.2022 and were communicated to the assessee on 24.01.2022 by an upload of ITBA system and subsequently vide email on 03.02.2022. It was stated that being the case in terms of Section 144C(13) of the Act, the final assessment order ought to have been passed on 28.02.2022 (i.e. one month from the end of the month in which the directions were received). Therefore the impugned order passed on 05.08.2022 is barred by limitation. In this context the learned A.R. relied on the following orders of the Tribunal: - i) Altran Technologies India Pvt. Ltd. vs. DCIT (order dated 05.12.2022 passed by Bangalore Bench of the Tribunal in IT(TP)A No. 967/Bang/2022) ii) IPG DXTRA India Pvt. Ltd. vs. DCIT (order dated 19.12.2022 passed by the Bangalore Bench of the Tribunal in IT(TP)A No. 967/Bang/2022) iii) Dentsply India (P) Ltd. vs. TIO (order dated 24.05.2019 passed by the Delhi Bench of the Tribunal in ITA NO. 4387/Del/2010). 6. The learned D.R. was unable to controvert the assertions of the learned A.R.

7.

We have heard the rival contentions and perused the material on record. The DRP’s directions in the instant case were passed on 24.01.2022. Therefore, the final assessment order ought to have been passed on 28.02.2022 as per the terms of Section 144C(13) of the Act. Hence, the impugned final assessment order passed on 05.08.2022 is barred by limitation. In the judicial pronouncements cited by the learned A.R. it has been categorically held that the final assessment order needs to be passed in compliance with the time frame under Section 144C(13) of the Act. Therefore, the impugned final assessment order is bad in law and barred by limitation. Since the final

4 IT(TP)A No. 971/Bang/2022 M/s. Arm Embedded Technologies P. Ltd. assessment order has been quashed, the other grounds on merits are not adjudicated and are left open. Ordered accordingly.

8.

In the result, the appeal filed by the assessee is partly allowed. Dictated and pronounced in the open Court on 20th February, 2023.

Sd/- Sd/- (Chandra Poojari) (George George K.) Accountant Member Judicial Member Bengaluru, Dated: 20th February, 2023 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -DRP 4. The CIT - 5. The DR, ITAT, Bengaluru 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.

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