CAPGEMINI TECHNOLOGY SERVICES INDIA LIMITED (SUCCESSOR TO CAPGEMINI INDIA PRIVATE LIMITED,AIROLI, NAVI MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEALS)- 55, MUMBAI

We have considered the rival submission on admission of Ground No. 16 & 17 raised as additional grounds. On perusal of the aforesaid additional grounds we find that the same can be adjudicated on the basis of facts already on record and would not require inquiring into new facts. Thus, in view of the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT: 229 ITR 383, the Additional Ground Nos. 16 and 17 are admitted. Since the Ground No.16 & 17 raised by the Appellant go to the root of the matter, we proceed to first adjudicate the same.

The application of Section 10 of the General Clauses Act is fortified by legal precedents and principles cited in the following case laws: i. Sambasiva Chari v. Ramasami Reddi: Establishes the general principle that a party prevented from performing an act by circumstances beyond their control can do so at the first subsequent opportunity. ii. Hossein Ally v. Donzelle,: Reinforces the principle "lex non cogit ad impossibilia" (the law does not compel a 8 man to do the impossible) and "Actus Curiae Neminem Gravabit" (the act of court shall prejudice no man).

Considering these legal principles and the specific circumstances of the case, it is asserted that Saturday/Sunday should not be presumed as working days like any other regular working day. The fact that officers 9 worked on a Sunday due to the cut-off date for assessment does not transform the holiday into a standard working day.

In conclusion, the benefit granted under the General Clauses Act should not be deprived of the Revenue. The Transfer Pricing Order passed on 31.01.2016 is in compliance with the legal provisions and principles discussed.”

We have given thoughtful consideration to the rival submissions and perused the material on record. We find that the Hon’ble Madras High Court has, in the case of Pfizer Healthcare India Private Ltd Vs. Joint Commissioner of Income Tax: (2021) 433 ITR 28 (Madras), held 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”. (Emphasis Supplied)

On perusal of above it can be seen that the Hon’ble Madras High court had held that the date on which period of limitation specified in Section 153 of the Act expires must be excluded for the purpose of determining the last date for passing order by TPO 10 since Section 92CA(3A) uses the expression 'before 60 days prior to the date on which the period of limitation referred to section 153 expires'.

We note that in appeal before the Division Bench of the Hon’ble Madras High Court, in the case of DCIT vs. Saint Gobain India Pvt. Ltd.: 444 ITR 636 (Madras), the Revenue had made submission identical to those made before us and supported by Letter, dated 05/12/2023, filed by the Learned Departmental Representative during the course of appellate proceedings. However, the aforesaid submissions were rejected by the Division of the Hon’ble Madras High Court and it has been held as under:

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 before 31-10-2019 as orders are to be passed before the 60th day. Therefore, either way the contention of the Revenue is a fallacy and has no legs to stand. Mandatory or Directory 11 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.

Let us now examine the relevant procedures relating to Transfer Pricing. After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-section (1) of section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under section 92CA (3) of the Act. As per section 92CA(3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Sub- section (5) of section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is empowered to issue such direction as it thinks fit for the guidance of the Assessing Officer after considering various details provided in Clauses (A) to (G) thereof. Sub-section (13) of section 144C of the Act provides that upon receipt of directions issued under sub-section (5) of section 144C of the Act, the Assessing Officer shall in conformity with the directions complete the assessment proceedings. It goes without saying that if no objections are filed by the Assessee either before the DRP or the assessing officer to the determination by the TPO, section 92CA(4) would come into operation. Therefore, it is very clear that once a reference is made, it would have an impact on the assessment unless a decision on merits is taken by DRP rejecting or varying the determination by the TPO.

It would only be apropos to note that as per proviso to section 92CA (3A), if the time limit for the TPO to pass an order is less than 60 days, then the remaining period shall be extended to 60 days. This implies that not only is the time frame mandatory, but also that the TPO has to pass an order within 60 days.

Further, the extension in the proviso referred above, also 12 automatically extends the period of assessment to 60 days as per the second proviso to section 153.

Also, but for the reference to the TPO, the time limit for completing the assessment would only be 21 months from the end of the assessment year. It is only if a reference is pending, the department gets another 12 months. Once reference is made and after availing the benefit of the extended period to pass orders, the department cannot claim that the time limits are not mandatory. Hence, the contention raised in this regard is rejected.

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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 7-9-2020, 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 subsection 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 13 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)

In the present case, the time limit for passing order under Section computed 92CA(3) of the Act per the above judgments of the Hon’ble Madras High Court can be computed as under: S.No. Particulars Relevant date/period Assessment Year involved 2012-13 1. Period of limitation for making an order of 31.03.2016 assessment as per section 153 of the Income- tax Act, 1961 [“the Act”] – 3 years from the end of the Assessment Year 4. Date prior to the date on which period of 30.03.2016 limitation expired (stated in Sr. No. 3 above) 5. Sixty Day Period 30 days -March 29 days -February 1 day -January 6. Transfer Pricing Order u/s 92CA(3) of the Act 30.01.2016 should have been passed on/or before 7. Transfer Pricing Order u/s 92CA(3) actually 31.01.2016 passed on 11. On perusal of the above it can be seen that the time limit for passing the order under Section 92CA(3) of the Act, computed as per the above judgments of the Hon’ble Madras High Court expired on 30/01/2016. Since the order under section 92CA(3) of the Act has been passed 31/01/2016, i.e., after the expiry of the period of limitation, it has been contended on behalf of the Appellant/Assessee that the aforesaid order passed by the TPO should be set aside as being barred by limitation. In this regard, it has been contended by the Revenue that 30/01/2016 and 31/01/2016 were holidays. Therefore, the period of limitation got extended till next working day [i.e. Monday - 01/02/2016] by virtue of Clause 10 of the Clause 10 of the General Clauses Act, 1897 [for short ‘the General Clauses Act’]. It was submitted that since the order was passed by the TPO on 31/01/2016, the same was within limitation. In response, the Authorised 14 Representative for the Appellant vehemently opposed the aforesaid contention of the Revenue. Having given thoughtful consideration to the rival submission, we do not find any merit in the aforesaid contention of the Revenue. A perusal of Clause 10 of the General Clauses Act [reproduced herein below], would show that Clause 10 does not extend the period on limitation. It provides that in a case where any act is directed to be done within a prescribed period and the office is closed on the last day of the said period, then such work done on the next day afterwards on which office is open would be taken having been done in due time. “10. Computation of time (1) Where, by any Central Act or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open” (Emphasis Supplied)

In the facts of the present case, as per the above judgments of the Hon’ble Madras High Court the prescribed period was to expire on Saturday (30/01/2016) and the next day afterwards on which the office of the Transfer Pricing Officer was to open was Monday (01/02/2016). Whereas, the order was passed by the Transfer Pricing Officer on Sunday (31/01/2016). Thus, the requirements of Clause 10 of the General Clauses Act, 1897 are not fulfilled in the present case. Further, in case Sunday is considered as the day on which office of the Transfer Pricing Officer/Assessing Officer are considered to be open, then we do not see any reason why Saturday should also not be considered as the day on which office of the Transfer Pricing Officer/Assessing Officer was open. We note that the Appellant has placed on record order sheet noting dated 30/01/2016 as 15 well as approval letter dated 31/01/2016, to show that the office of the Transfer Pricing Officer/Assessing Officer was open. Thus, in either case, in our view, Clause 10 of the General Clauses Act does not advance the case of the Revenue.

In view of the above, we hold that the time limit for passing the order under Section 92CA(3) of the Act, computed as per the above judgments of the Hon’ble Madras High Court, expired on 30/01/2016. Since the order under section 92CA(3) of the Act has been passed 31/01/2016, i.e., after the expiry of the period of limitation, the same is set aside as being barred by limitation.

The next issue that arises for consideration is whether the Final Assessment Order passed on 19/05/2016 is barred by limitation and bad in law. In the case of Atos India Pvt. Ltd. Vs Deputy Commission of Income Tax: [2023] 103 ITR(T) 296 (Mumbai - Trib.)[23-02-2023] it has been held by the Tribunal as under:

We find that section 153(1) of the Act, as it stood applicable 16 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.

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.

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:

Thus taking into the provisions of law and the judgment referred to above, we hold that the final assessment order passed on 31 January 2017 is beyond the prescribed period of limitation under section 153 of the Act expiring on 31 March 2016, thus, barred by limitation and is hereby quashed.“ (Emphasis Supplied)

In the above decision, the Tribunal has held that the time limit 17 for passing the final assessment order for the Assessment Year 2012-13 specified under Section 153 of the Act expired on 31/03/2016, and the final assessment order passed thereafter was barred by limitation. In the present case the Final Assessment Order has been passed on 19/05/2016 and therefore, the same liable to be quashed as being barred by limitation.

In view of the above judicial precedents and keeping in view the facts and circumstances of the present case the Transfer Pricing Order, dated 31/01/2016, and Final Assessment Order, dated 19/05/2016, are quashed as being bad in law. Ground No. 16 & 17 raised by the Appellant is allowed. All the other grounds raised by the Appellant are disposed off as being infructuous.

In result, in terms of paragraph 16 above, the present appeal is allowed.