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Facts
The cross-appeals for AY 2011-12 primarily concern whether the Transfer Pricing Officer's (TPO) order under Section 92CA(3) of the Income Tax Act was time-barred. The assessee contended that the TPO order, passed on 30.01.2015, exceeded the prescribed deadline of 29.01.2015 (or 28.01.2015 as per the High Court), thereby rendering the entire Transfer Pricing adjustment invalid.
Held
The Tribunal, relying on various High Court precedents, affirmed that the 60-day time limit for passing a TPO order under Section 92CA(3) is mandatory. Since the TPO order in this case was passed on 30.01.2015, beyond the prescribed time limit of 28.01.2015, it was deemed time-barred, and consequently, the entire Transfer Pricing adjustment was quashed and deleted.
Key Issues
Whether a Transfer Pricing Officer's order passed beyond the statutory time limit under Section 92CA(3) of the Income Tax Act is valid and whether the consequent Transfer Pricing adjustment can be sustained.
Sections Cited
143(3), 144C, 153, 153B, 92CA, 92CA(3), 92CA(3A), 92CA(4), 92C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President 1. These cross appeals are filed for the assessment year 2011-12 by the DCIT, Circle 3(1)(2), Ahmedabad [the ld. AO] in IQVIA RDS (India) Private Ltd. [formerly Quintiles Research (India) Private Ltd.] (the assessee) in against the assessment order passed u/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 [the Act] by the ld. AO dated 22.2.2016 pursuant to the directions of the ld. Dispute Resolution Panel-2, Bengaluru [ld. DRP].
The assessee challenges the assessment order being barred by limitation. On merits, the assessee and the ld. AO both are in appeal before us.
The brief facts of the case pointed out before us is that the assessment year involved is 2011-12, the period of limitation for passing the assessment order as per section 153 of the Act is 2 years from the end of the assessment year. The above period is further extended by 12 months as there is a reference made u/s. 92CA of the Act, thus the assessment proceedings should have been completed on or before 31.3.2015. Thus the period of limitation expires on 30.3.2015. The TP order u/s. 92CA(3) of the Act is required to be passed on or before 60 days from the date of limitation. Thus as the 60 days period expires on 30.1.2015 being 2 days of January, 28 days of February & 30 days of the month of March, 2015, thus the limitation expires on 30th January, 2015 and therefore the TP order u/s. 92CA(3) is required to be passed on 29.1.2015. However, in the impugned case, the TP order has been passed on 30.1.2015. Thus, the order passed by the ld. TPO is beyond the period of limitation and thus the whole assessment of the ALP of the international transaction deserves to be quashed. In this case, the total adjustment made by the ld. TPO after the settlement of US & UK MACP Mutual Agreement Procedure [MAP] remains of Rs.54,56,230.
The ld. AR vehemently supported the above ground stating that as the TP order is barred by limitation, the issue is squarely covered in favour of the assessee by the Hon’ble Madras High Court decision in the case of Pfizer Healthcare India Pvt. Ltd. v. JCIT, 433 ITR 28 and DCIT v. Saint Gobain India (P) Ltd., 446 ITR 636. He further relied on the decision of the Hon’ble Karnataka High Court in the case of PCIT v. Tata Power Solar Systems Ltd. [2024] 166 taxmann.com 16 (Karn) dated 12.8.2024. He submits that in that case also, the assessment year involved is AY 2011-12 and the orders are also passed in similar manner. He therefore submitted that the issue is squarely covered in favour of the assessee.
5. The ld. DR vehemently submitted that the order is not time barred. His arguments are as under:-
1. “1. The sole bone of contention left in the instant case is whether the Transfer Pricing Order made by the Transfer Pricing Officer ('TPO') dated 30.01.2015 for Assessment Year 2011-12 ('A.Y 2011-12') was barred by limitation within the meaning of Section 92CA(3A) of the Income Tax Act, 1961 (hereinafter 'IT Act' or 'Act' for brevity). To look at the issue, the provisions of Section 92CA(3A) of the I.T Act are reproduced below for ready reference: *["(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.] (Emphasis supplied) *Inserted by the Finance Act 2007 w.e.f 1-06-2007 2. A number of issues emanate from the above section. Firstly, the time limitation for the TP orders i.e when does the time limitation under Section 153 'expire'. Secondly, interpretation of the word 'may' used in the section i.e whether it should be construed as order 'may' be made or 'shall' be made. Thirdly, what is the meaning of the word 'made' itself i.e whether the TP order is to be 'made, 'passed' or 'served'. These will be subsequently discussed. However, what is essential is to understand the context in which the words in the section have been used. And what better way to understand the context than by perusing the Memorandum to the Finance Bill, 2007 vide which section 92CA (3A) was introduced in the statute.
3. Before delving upon the Memorandum, it is important to know the position in the Statute before the amendment was brought about in Finance Act, 2007. Prior to 1st June 2007, there was no separate time limitation in the Act for the TPO. The time limitation for making the TP order coincided with the time limitation of the Assessing Officer (`AO') under Section 153. This resulted in a situation where there was no extra time available to the AO for completing the assessments where reference to the TPO was made. Having realized this lacuna in the statute, the legislature brought an amendment to the Act vide Finance Bill, 2007. The Memorandum to the Finance Bill 2007 explaining the provisions in the Bill, stipulated extension of time limitation for making assessment where a reference is made to the TPO. Relevant extracts from the Memorandum to the Finance Bill, 2007 explaining the legislative intent behind the amendments, are reproduced below for ready reference: "Extension of Time limitation for making assessment where a reference is made to the Transfer Pricing Officer Under the existing provisions of the Income-tax Act, there is no extra time available to the Assessing Officer for competing the assessment or reassessment in cases where a reference is made by him under sub- section 92CA to the Transfer Pricing Officer for determination of the Arm's length price of an international transaction. Since, the time limit for selection of cases for scrutiny is one year from the end of the month in which the return was filed, references to Transfer Pricing Officers are made mostly after one year of filing of the return. Thus, Transfer Pricing Officers are not getting adequate time to make a meaningful audit of transfer price in cases referred to them. With a view that the Transfer Pricing Officers as well as the Assessing Officers get sufficient time to make the audit of transfer price and the assessment in cases involving international transactions,it has been proposed to revise the time limits specified in sections 153 and 153B for making the assessment or reassessment in cases where a reference has been made to the Transfer Pricing Officer. The revised time limits in such cases shall be the time limits specified under the aforesaid sections, as increased by twelve months. It is further proposed to provide that the Transfer Pricing Officer shall determine the Arm's length price at least two months before the expiry of new statutory time limit for making the assessment or reassessment. Under the existing provisions of sub-section (4) of section 92CA, it has been provided that on receipt of the order under sub-section (3) of said section, the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C having
regard to the Arm's length price determined under sub- section (3) by the Transfer Pricing Officer. It has been proposed to amend said sub-section (4) of section 92CA so as to provide that, on receipt of the order under subsection (3) of section 92CA, the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the Arm's length price determined under sub-section (3) of section 92CA by the Transfer Pricing Officer. These amendments will take effect from 1st June, 2007 and shall also be applicable in cases where a reference to the Transfer Pricing Officer was made prior to 1.7.2007 but the Transfer Pricing Officer did not pass the order under sub- section (3) of section 92CA before the said date. [Clauses 25,39 and 40]" (emphasis supplied) 4. Two points clearly stand out from the above excerpt showing the legislative intent for the proposed amendment: First is that the TPO shall determine the Arm's Length Price at least 2 months before the expiry of the new time limit for making assessment and secondly, on receipt of the TPO's order, the AO shall proceed to compute the total income of the assessee in conformity with the Arm's length Price ('ALP'). The first point envisages that the TPO will also have a limitation of 60 days before the time limitation for the assessment expires. And the second point showcases that the AO shall finalise the assessment order in conformity with the ALP, which essentially means, the AO cannot make any variations from the TPO's computation of ALP. 4.1 Dealing with first issue of limitation of 60 days, the legislative intent is clear that at least 60 days should be left with the AO to pass the assessment order after the TPO's order which means if the assessment order is getting time barred by 31st March, the TPO should pass the TP order by 30th January, which will leave the AO with atleast 60 days to pass the assessment order (viz. 31 days of March + 28 days of February + 1 day of January, assuming a non-leap year). Without prejudice to this calculation, and taking into account the second issue above of the assessment order being in conformity with the ALP, it is noteworthy that the day of 30th January is also available with the AO to pass the order because if the AO has no other issues to deal with apart from the TP issues, he can very well pass the assessment order the very same day he receives the TP order i.e in this case on 30th January itself. Therefore, if that is the case, the total number of days available with the AO to pass the assessment order would be 61 days (by including 30th January also as discussed above).
Now, coming back to the issue of use of words 'may', 'made' and 'expires' in the Act, it is noteworthy that even though the statute says that the TP order 'may' be made, yet essentially it means 'shall' be made so that the TPO follows the prescribed time limitations lest the legislative intent would be defeated. Speaking with respect to order to be 'made', the Act doesn't provide for order to be 'passed' or 'served'. So, does that imply that the TPO should not pass the order and just 'make' it and sit on it? It seems obvious that this is again not the intention of the legislature and the TPO is expected to make and pass the order. Then, what about the phrase used in the section 'period of limitation....expires'? When does the limitation expire under section 153? For the case at hand, is it 31st March 2015? It is my humble submission that the time limitation expires means that the AO will not be able to make or pass an order on that date. However, it is a known fact that the assessment order can be passed on 31st March. Therefore, the limitation is not 'expiring' on 31st March. Does it then mean that the limitation expires on 1St April. No, because any order passed after midnight of 31st March would be barred by limitation. Therefore, it is in the context of the situation, legislative intent and the entirety of facts that the issue in hand needs to be looked at. As submitted earlier, the legislative intent is to give atleast 60 days for the AO to make the assessment order and if the AO can pass assessment order on 31st March, the TPO can pass the TP order latest by 30th January because after this date (i.e after 30th January), the AO will have at least 60 days to make the assessment order.
Without prejudice to the above submissions, as explained in the Memorandum to the budget of 2007-08, the AO should have at least 2 months or 60 days with him to pass the assessment order. If assessee's contention is to be accepted (i.e if 29th January is the time barring for the TPO's order), then the number of days remaining with the AO would be — : a. 30th and 31st January (2 days) b. February (28 days) c. March (31 days) Total : 61 days Now, as can be seen, extension of time limitation for making assessment cannot be 61 days and the legislature wouldn't have visualized or intended to give to the AO 61 days for passing the assessment order.
7. It is further submitted that, without prejudice to all of the above contentions, it is noteworthy that there are certain circumstantial provisions in the Act wherein the AO has been given an extended time limit of 60 days for making the assessment. For instance in Explanation 1 to Section 153, the second proviso mentions as: "...provided further that where the period available to the TPO is extended to 60 days in accordance with the proviso to sub-section 3A of section 92CA and the period of limitation available to the A.O for making an order of assessment is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly." So, as can be seen, in the above circumstances also, the Act stipulates to extend the time limit available with the AO for making an assessment order by 60 days.
Further, it is submitted that, the Hon'ble Karnataka High Court, in Pr. Commissioner of Income Tax vs M/S Tata Power Solar Systems Limited in ITA 527 of 2022 dated 12/08/2024, has NOT got into the merits of the case and didn't admit Revenue's appeal on the time-barring issue stating that it is a matter of fact, which is to be decided by the Tribunal and no substantial question of law arises. However, as stated above, the facts of the case and the position in law is clear that the time-barring date for the TPO's order is 30th January and not 29th January as claimed by the assessee. Without prejudice, it can also be argued that the time barring date for the TPO is 31st January since atleast 2 months (words used in the Memorandum) are available to the AO for making assessment after passing of the TPOs order.
Furthermore, very importantly, it is also humbly submitted that the TPO order does not incur any liability or adverse effect on the assessee since it is not enforceable by itself. It has no legs to stand on unless the AO passes the assessment order incorporating the variations made in the ALP, if any, by the TPO. No tax demand can be enforced merely by passing the TP order. The TPO's order is neither the final assessment order nor is the TPO's order appealable. So, no prejudice is caused to the assessee on passing of the TP order. Further, it is beyond doubt that the assessment order passed by the AO was well within the time limitations. Therefore, the matter needs to be seen in this context as well.
10. To conclude, the contention of legislative intent, as mentioned in the Memorandum Explaining the Provisions in the Finance Bill, 2007, and as discussed in the forgoing paras, has not been adjudicated in the Judicial forums so far.
11. Hence it is prayed that the TPO's order is not barred by limitation u/s 92CA(3A) of the Act and therefore the ground of the assessee in this regard may kindly be dismissed.”
6. The Hon’ble jurisdictional High Court in Principal Commissioner of Income-tax vs. Tata Power Solar Systems Ltd. [2024] 166 taxmann.com 16 (Karnataka) [12-08-2024] has decided this issue as under :-
“9. The question that arose for adjudication before the Tribunal fell on a narrow compass, inasmuch as it was the contention of the assessee that the order passed under Section 92CA(3) of the Act was beyond the time prescribed under law and hence, was liable to be quashed. While considering the said contention the Tribunal referred to Section 92CA(3A) and noticed that the period of limitation was 60 days prior to the expiry of limitation as per Section 153(1) of the Act. Further, the Tribunal noticed the time limit as prescribed under Section 153(1) of the Act for passing an order under Section 143(3) of the Act and held that the order under Section 143(3) of the Act for the AY 2011-12 should have been passed by 31.3.2015. Hence, the date on which the order under Section 92CA(3) of the Act was to be passed was on or before 28.1.2015. Hence, the order Section 92CA(3) of the Act having been passed on 30.1.2015, the Tribunal accepted the contention put forth by the assessee and passed the impugned order.
10. It is further forthcoming that before the Tribunal the contention of the revenue was that the delay was a curable defect and that although the order was passed on 28.1.2015, the same was dated as 30.1.2015. While noticing the said contention the Tribunal by relying on the judgment of the Madras High in the case of M/s.Pfizer Healthcare India Private Ltd.,7 and also by noticing that the contention put forth by the revenue that the order was passed on 28.1.2015, but dated 30.1.2015 is not an irregularity of procedure rejected the said contention.
It is relevant to note that the learned Single Judge of the Madras High Court in the case of M/s.Pfizer Healthcare India Private
Ltd.,(upra)7 has held that the period of 60 days stipulated for passing an order of Transfer Pricing is mandatory. The said judgment has been upheld by the Division Bench of the Madras High Court in the case of Saint Gobain India Private Ltd.,(supra) wherein it has been held that the time schedule is mandatory in nature. The relevant portion of the judgment in the case of Saint Gobain India Private Ltd.,(supra)8 is extracted herein below for ready reference:
"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 07.09.2020, 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.
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 sub-section 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. "
(emphasis supplied)
It is clear from the aforementioned that the question that arose for consideration before the Tribunal was a factual one as to whether the order under Section 92CA(3) was passed beyond the prescribed time limit and the Tribunal having recorded a finding of fact that the order passed under Section 92CA(3) of the Act ought to have been passed on or before 28.1.2015 and the same having been passed on 30.1.2015, is barred by limitation, no substantial question of law arises for consideration in the present appeals and the said appeals are dismissed at the stage of admission itself as being devoid of merit.
Hence, respectfully following the same, we also hold that the TP order passed by the ld. TPO is beyond the time limit prescribed and therefore same deserves to be quashed. As the order of the ld. TPO is time barred, the whole TP adjustment deserves to be deleted. In view of the above facts, we allow the grounds raised by the assessee at sl.No.1.
8. As there are no other issues pressed before us, the appeal of the assessee is partly allowed.
9. In view of the above facts, the departmental appeal against the direction of the ld. DRP does not survive and hence dismissed.
In the result, the appeal by the assessee is partly allowed and the departmental appeal is dismissed.
Pronounced in the open court on this 10th day of December, 2025.