INMOBI TECHNOLOGY SERVICES PRIVATE LIMITED,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE3(1)(1), BANGALORE

ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeals filed by the assessee arises out of the final assessment order passed by NFAC u/s. 143(3) r.w.s. 144C(13) r.w.s 144B on 01.03.2022 for A.Y. 2017-18 and 28.07.2022 for A.Y. 2018-19.

Page 2 of 86 IT(TP)A Nos. 303 & 839/Bang/2022

Page 3 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 4.1 The Ld.AO noted that the assessee is a part of InMobi Group. He noted that InMobi Group comprises of InMobi Pte. Ltd., Singapore ('InMobi SG') and has its branches and subsidiaries around the world, including the assessee, which is a wholly owned subsidiary of InMobi SG. The InMobi Group is engaged in the business of providing mobile advertising solutions in a targeted manner on mobile apps of partner publishers. It was noted that publishers, typically mobile web sites and application developers, have property which is available for monetization and the InMobi Group monetizes such property by allowing the advertisers to place advertisement on such space.

4.2 The Ld.AO noted that the assessee provides following business development, marketing, sales and professional services to its associated enterprise, InMobi Pte Ltd. ('Inmobi SG' or 'AE'): a. Services in relation to business operations, network operations, and sales operations, publisher operations; b. Services in relation to marketing services; c. Services in relation to testing, implementation / integration and infrastructure support services d. Any other operational and administrative support services; e. Assist InMobi SG in developing company-wide accounting and financial systems; f. Any other business-related support services. As the income earned due to transaction between assessee and AE exceeded Rs. 15 crores, reference was made to the Ld.TPO to verify the ALP of the transactions determined by the assessee.

Page 4 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 4.3 During the course of the transfer pricing proceedings by the Ld.TPO, numerous notices were issued seeking for information. It is submitted that despite the Ld.TPO granting very little time to the assessee to comply with the notices and information called for, the assessee furnished details as requested by the Ld.TPO. Thereafter, on 24.01.2021, the Ld.TPO issued show-cause notice proposing to: a. Recharacterize the international transaction of provision of 'business development, marketing, sales and professional services' as 'software development and R&D' services; b. Modifying the cost-base considered by the assessee to determine the inter-company price for services, to include expenses reimbursed, cost of stock incentive ESOP and cost of travel and other expense; and c. Imputation of notional interest on outstanding receivables.

4.4 In response to the notice issued by the Ld.TPO, submissions were made by the assessee. Subsequently, the Ld.TPO passed the order under section 92CA(3) of the Act on 29.01.2021 without considering assessee's submissions. The Ld.TPO proposed transfer pricing adjustment of Rs. 66,79,12,599/- as follows: Sl. TP adjustment Particulars No. (in Rs.) Recharacterization of the 'business development, marketing, sales and professional services' as 'software development 1 and R&D' services and application of 27,72,52,656 consequential higher mark-up of 27.43% corresponding to such services (based on comparables selected by the TPO)

Page 5 of 86 IT(TP)A Nos. 303 & 839/Bang/2022

Inclusion of ESOP cost in the cost base for 2 computing the arm's length price (inclusive of 17,24,67,710 27.43% mark-up). Inclusion of reimbursement of operating expenses and travel costs in the cost base for 3 7,09,05,886 computing the arm's length price (inclusive of 27.43% mark-up). Considering the outstanding receivables from 4 InMobi SG as a financing transaction that 14,72,86,347 requires an arm's length interest charge TOTAL 66,79,12,599 4.5 The Ld.AO passed draft assessment order dated 12.04.2021 incorporating the above proposed TP adjustments and assessed the income of the assessee.

4.6 Aggrieved by the above orders of the Ld.AO, the assessee filed its objections before the DRP.

4.7 The DRP vide order dated 28.01.2022 upheld the approach of the Ld.TPO of recharacterization of the 'business development, marketing, sales and professional services' as 'software development and R&D' services and inclusion of ESOP costs, travel costs and operating expenses in the operating cost base of the assessee.

4.7.1 With respect to the imputation of interest on outstanding receivables, the DRP directed the Ld.TPO to consider the SBI short term deposit rate instead of the SBI prime lending rate adopted by the Ld.TPO.

Page 6 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 4.8 On receipt of directions issued by the DRP, a reference was made to the Ld. TPO to rework the ALP adjustments and the same were assessed at Rs.59,38,48,607/-. Factoring this, the final assessment order dated 01.03.2022 was passed for AY 2017-18.

Aggrieved by the order of the Ld.AO, the assessee is in appeal before this Tribunal

5.1 The Ld.Sr.Counsel referred to application dated 07.06.2022 filed by the assessee wherein following legal issues are raised by way of additional grounds. “1. The directions issued by the Hon. Dispute Resolution Panel are barred by the statute of limitation as provided in sections 144C(12), 144C(13) read with 144C(5) of the Act and hence, the said directions are illegal. Consequently, the final assessment order passed by the Learned Assessing Officer ('LAO') / National Faceless Assessment Centre is also illegal being barred by the statute of limitation.

2. For the above and other grounds that may be urged at the time of the hearing of the appeal the appeal may be allowed and justice rendered.”

Page 7 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 5.1.1 He also placed reliance on the application dated 25.07.2022 wherein following legal issues are raised by way of additional grounds. “1. The draft assessment order passed by the Learned Assessing Officer ('LAO') / National Faceless Assessment Centre is bad in law since the same is barred by the statute of limitations as contained in section 153 the Income-tax Act, 1961 ('the Act') read with the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 ('TOLA') and numerous notifications issued towards extension of time limit for passing the draft assessment order.

2. For the above and other grounds that may be urged at the time of the hearing of the appeal the appeal may be allowed and justice rendered.” 5.2 The Ld.Sr.Counsel submitted that, for adjudication of these grounds, no new facts needs to be considered. It is also submitted that, the additional grounds raised do not require verification of any new facts. The Ld.Sr.Counsel, thus prayed for the admission of additional grounds so raised by assessee.

5.3 On the contrary, the Ld.CIT.DR though opposed admission of the additional ground, could not bring anything on record which would challenge such a right available to assessee under the Act.

We have perused the submissions advanced by both sides in light of records placed before us.

5.4 We note that, the additional grounds are directly connected with the main issue of proposed transfer pricing additions and no new facts needs to be investigated for adjudicating the same.

Page 8 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Considering the submissions and respectfully following the decisions of Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional grounds raised by the assessee. Accordingly, the additional grounds raised by assessee dated 07.06.2022 and 25.07.2022 stands admitted.

Additional Ground as per Application dated 25/07/2022 6. The Ld.Sr.Counsel first referred to the application dated 25.07.2022 wherein the additional ground raised is challenging the validity of the draft assessment order passed by the Ld.AO/NFAC to be bad in law as it is barred by limitations as contained in section 153 of the act, read with the taxation and other laws (Relaxation of certain provisions) Act 2020.

6.1 The Ld.Sr.Counsel submitted timeline to pass the draft assessment order. He submitted that the draft assessment order ought to have passed u/s. 153(1) r.w.s. 153(4) of the act.

Page 9 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 6.2 The Ld.Sr.Counsel referred to section 3 of TOLA 2020 and submitted that, since passing the draft assessment order u/s. 153(1) r.w.s. 153(4) of the act was due on 31.12.2020 that fell between the COVID period (20.03.2020 to 31.12.2020), TOLA 2020 relaxed the time limit u/s. 153(1) r.w.s. 153(4) of the act. He submitted that the due date to pass the draft assessment order thus stood automatically extended to 31.03.2021. He submitted that, however, in the instant case, the draft assessment order was passed on 12.04.2021 and therefore the draft assessment order has been passed beyond the period of limitation.

6.3 The Ld.Sr.Counsel placed reliance on the notifications issued in respect of TOLA 2020, by CBDT to impress upon this Tribunal that the notifications did not modify the time limit for the actions that were falling during the period from 20.03.2020 to 31.12.2020 u/s. 3(1) of the TOLA, 2020.

6.4 The Ld.Sr.Counsel also placed reliance on following decisions of Hon'ble Supreme Court and Hon'ble Bombay High Court to support the submissions that section 3(1) of TOLA does not ipso facto amend section 153 unlike section 4 of TOLA that amends section 6 of the act.  Shell India Markets Pvt. Ltd. vs. NaFAC reported in (2022) 443 ITR 366 (Bombay)

Page 10 of 86 IT(TP)A Nos. 303 & 839/Bang/2022  Tata Communications Transformation Services Ltd. vs. ACIT reported in [2022] 443 ITR 49 (Bombay)  Sudesh Taneja vs. ITO reported in [2022] 442 ITR 289 (Rajasthan)  Roca Bathroom Products Pvt. Ltd. vs. DRP & Other reported in [2021] 432 ITR 192 (Madras)  Hope Textiles Ltd. vs. UOI reported in [1994] 205 ITR 508(SC)

6.5 The Ld.Sr.Counsel also argued that the decision of the Hon'ble Supreme Court in suo motu Writ Petition (Civil) No. 3 of 2020 does not apply to the instant case for the following reasons: 1) When SC decision pronounced (i.e., 23.03.2020), TOLA was not enacted (i.e., dated 29.09.2020 w.r.e.f. 31.03.2020). Therefore, enactment of TOLA post decision of SC would make it clear that wherever there is a specific enactment, SC decision is not applicable. 2) It is submitted that various Circulars/ Instructions/ Press Release issued by CBDT referred to the limitations as per TOLA 2020 and Notifications issued thereunder: i. Instruction No. 1/2022, dated 11.05.2022; ii. Circular F. No. 225/126/2020/1TA-11, dated 30.09.2020; iii. Press Release, dated 24.04.2021; 3) In the following cases, while holding the proceeding as time barred, the Ld.Sr,Counsel submitted that Hon’ble Courts relied only on TOLA 2020 and did not take any recourse to the decision pf Hon’ble Supreme Court:

Page 11 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 i) Shell India Markets Private Limited v. NaFAC (2022) 443 ITR 366 (Bombay); ii) Sudesh Taneja vs. ITO [2022] 442 ITR 289 (Rajasthan); 6.6 Thus the Ld.Sr. Counsel submitted that, the draft assessment order dated 12.04.2021 is barred by limitation, as the same was not passed on or before 31.03.2021 u/s. 153(1) r.w.s. 153(4) of the IT Act r.w.s. 3(1) of TOLA, 2020. And, since the draft assessment order is barred by limitation and invalid, subsequent proceeding and the Final assessment order dated 01.03.2022 are also invalid.

6.7 This Tribunal considering the submissions of Ld.Sr.Counsel called for a report on this issue from the revenue. The Ld.CIT.DR placed before this Tribunal a report dated 23.01.2023 that reads as under: “3. Ground 1 The draft assessment order is barred by limitation Time line of the orders passed In the instant case the the assessment is for the AY 2017- 18 and a reference was made to the learned TPO under section 92CA(1) of the IT Act . Hence the time lines to pass the order u/s 153(1) r.w.s 153(4) of the IT Act is as per the following table. End of the AY 2017-18 31.03.2018 Expiry of 21 months under section 31.12.2019 153(1) of the IT Act After the reference made u/s 92CA 31.12.2020 (1) of the Act Time barring date as per the Act 31.12.2020 Before the introduction of TOLA 2020

Page 12 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 With the introduction of the TOLA 2020, the related notification of 93/2020 dated 31.12.2020, the time limit got extended to 31.03.2021. The related portion of the said notification is reproduced herewith. In exercise of the powers conferred by sub-section (1) of section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020) (hereinafter referred to the Act) and in supersession of the notification of the Government of India in the Ministry of Finance, (Department of Revenue) No. 88/2020 dated the 29th October, 2020, published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii), vide number S.O. 3906(E), dated the 29th October, 2020, except as respects things done or omitted to be done before such supersession, the Central Government hereby specifies, for the completion or compliance of action referred to in- (A) clause (a) of sub-section (1) of section 3 of the Act, - i. the 30th day of March, 2021 shall be the end date of the period during which the time limit specified in, or prescribed or notified under, the specified Act falls for the completion or compliance of such action as specified under the said sub-section; and (ii) the 31st day of March, 2021 shall be the end date to which the time limit for completion or compliance of such action shall stand extended: [Notification No. 93/2020/F. No. 370142/35/2020-TPL1 Subsequently the said notification was partially modified vide notification No. 10/2021/F. No. 370142/35/2020- TPL]where the dates were further extended to 30.04.2021.The relevant portion of the notifications were reproduced here below. A) where the specified Act is the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) and the completion of any action, as referred to in clause (a) of sub-section (1) of section 3 of the said Act, relates to passing of any order— (a)…….. (b) for assessment or reassessment under the Income-tax Act, and the time limit for completion of such action under section 153 or section 1538 thereof, — (i) expires on the 31st day of March, 2021 due to its extension by the said notification, such time limit shall stand extended to the 30th day of April, 2021;

Page 13 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 (ii) is not covered under (i) and expires on 31st day of March, 2021, such time limit shall stand extended to the 30th day of September, 2021; Hence as per the above notifications, the assessing officer is well within his jurisdiction to pass the order on or before the extended due date i.e 30.04.2021.ln the instant case the draft assessment order u/s 144C(1) is passed on 12.04.2021. Hence the argument of the assesse that the order is time is utterly baseless and perverse argument which needs to be rejected. The copy of the notifications issued is enclosed herewith.”

6.8 The Ld.CIT.DR submitted that Hon’ble Supreme Court vide order dated 10/01/2022 restored its earlier order for the exclusion of period starting from 15/03/2020 till 28/02/2022 for the purposes of computing limitation prescribed under any general or special laws, in respect of all judicial or quasi-judicial proceedings, in light of the spread of the third wave of the Covid- 19 pandemic. She further submitted that, in cases where the limitation period was expiring between 15/03/2020 to 28/02/2022, such actual balance period of limitation remaining, the concerned parties shall be entitled to 90 days of extended limitation period from 1/03/2022. She submitted that if the actual balance period of limitation remaining as on 01/03/2022 is greater than 90 days, that longer period shall apply in such cases. She thus vehemently submitted that the Draft assessment order cannot be held to passed beyond the period of limitation.

We have perused the submissions advanced by both sides in the light of records placed before us.

Page 14 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 6.9 It is necessary to understand the timelines envisaged under the act in section 92CA, 144C and 153 of the act. The first provisions that needs to be considered is the provisions u/s. 92CA, wherein the Ld.AO at the time of assessment, notices international transactions between assessee and the associated enterprises subject to the satisfaction u/s. 92B. The mechanism u/s. 92CA triggers when a reference is made by the Ld.AO under 92CA(1) of the act.

6.10 It is categorically noted that the reference is to be made during the course of assessment proceedings before the expiry of the period to pass an assessment order u/s. 153 of the act which means that there is no express provision u/s. 92CA to state as to when a reference is to be made by the Ld.AO.

6.11 Thereafter, the Ld.TPO upon receipt of reference, calls for necessary documents and computes the arms length price as per section 92C of the act, and an order is passed by the Ld.TPO u/s. 92CA(3) of the act. The legislature vide amendment introduced vide Finance Act, 2007 expressly indicated the timeline within which the Ld.TPO is to pass an order u/s. 92CA(3). The timeline has been introduced by way of sub-section (3A) to section 92CA of the act. At this juncture, we emphasize that the moment a reference is made by the Ld.AO to the transfer pricing officer u/s. 92CA(1),

Page 15 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 the time period to pass an assessment order u/s. 143(3) as per section 153(1) comes to a halt. 6.12 Be that as it may, after the receipt of an order u/s. 92CA(3) by the Ld.AO, as per section 92CA(4), the assessing officer has to pass an order in conformity with the order u/s. 92CA(3). Such was the position upto the introduction of provisions of section 144C by way of Finance Act, 2009.

6.13 The section 144C deals with reference to the Dispute Resolution Panel. The first requirement to make available the provisions of section 144C to the assessee is available in sub- clause (1) of section 144C of the act, which is to forward the draft assessment order wherein there is an addition proposed by the Ld.TPO, which is prejudicial to the interest of an eligible assessee.

6.14 Once the provisions of section 144C get invoked, it is upon the assessee to decide, as to whether, it has to file objection before the DRP against the draft assessment order, or, it has to take the course by filing the appeal before the Ld.CIT(A). In case the assessee seeks to file objections before the DRP, the remaining provisions of section 144C has specified the timeline for the assessee as well as the DRP/Ld.AO, to act upon, thereby making the section to be a complete code in itself, to carry out an assessment in case of an eligible assessee.

Page 16 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 6.15 In this entire process, it is peculiar to note that, nowhere the statute requires a draft assessment order to be passed in a specified period of limitation. There is no mention of specific timeline under 92CA(4) of the act, which is the first step where the assessing officer passes an order in conformity with the order passed by the Ld.TPO u/s. 92CA(3).[the phrase “conformity” was introduced by way of Finance Act, 2007] 6.16 Before us, the Ld.Sr.Counsel vehemently argued that, the draft assessment order is passed beyond the period of limitation. On the contrary, the statute does not define any limitation for a draft assessment order to be passed. This is so because, a draft assessment order cannot be treated as an order under section 143(3), and it does not compute the tax payable by the assessee. The draft assessment order merely indicates the proposed addition/variation in the hands of the assessee which is subject to two stages, at the option of the assessee.

6.17 For Interpreting the provisions of section 144C(1), one need not take any aid of external sources, as the provision is much clearer. It is only when consequence of nullification on failure to comply with a prescribed requirement is provided by the statute, there can be no manner of doubt that such statutory requirement must be interpreted as mandatory. There is no such requirement specified by the legislature to forward the draft assessment order, within a period of limitation and so there is no such consequence provided for nullification on failure to comply with such Page 17 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 prescribed requirement in the statute. The provision, under section 144C(1) as enacted in the Statute, regarding draft assessment order, do not require any further construction, as it is as plain and unambiguous.

6.18 While applying and affirming the rule of literal construction, the Courts have time and again re-iterated that, it is the bounden duty and obligation of the Court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute or to read down the words of a statute, which the Legislature in its wisdom has or has not deliberately incorporated. The applicability of the aforementioned principle in the context of taxing statutes, has been repeatedly affirmed by Hon'ble Supreme Court. We refer to the decision in the case of CIT v. Ajax Products Ltd. reported in (1965) 55 ITR 741, wherein, Hon'ble Supreme Court, citing the observations of Rowlatt J. in Cape Brandy Syndicate v. IRC reported in (1921) 1 KB 64, observed as under: "The rule of construction of a taxing statute has been pithily stated by Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 K.B. 64, 71 thus : "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used".

6.19 To us, therefore, there appears no justification to depart from the normal rule of construction, according to which the intention of the legislature is primarily can be gathered from the words used in the statute. At the cost of repetition, it will be Page 18 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 proper to once again recall the words of Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 (KB) at page 71, that: " ……..in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." We therefore reject at the threshold the argument of the Ld.Sr.Counsel that the draft assessment order has been passed beyond the period of limitation.

6.20 Now, the next question that needs to be considered, is as there is no limitation is prescribed under the statute to pass/forward a draft assessment order, can the Ld.AO forward / pass such draft assessment order and forward the same to the eligible assessee and assessing officer, at any time as he deems fit and proper. On this issue, Hon'ble Delhi Tribunal expressed a view in case of Honda Trading Corporation, Japan vs. DCIT, Intl. Tax, Noida reported in (2015) 61 taxmann.com 233.

6.21 Hon'ble Delhi Tribunal noted that the draft assessment order under such circumstances must be passed within a reasonable time period on receipt of an order by Ld.TPO u/s. 92CA(3) of the act. The relevant observations of Hon'ble Delhi Tribunal are as under: “5.22 Now, we take up an important point raised by the ld. AR that if the time limit for the passing of the final

Page 19 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 assessment order is governed by section 144C, then, the time limit given in section 153 must be inferred for the passing of the draft order because there cannot be two simultaneous time limits for the completion of assessment. It was stated that the presence of time limit for completion of assessment u/s 144C would, in the absence of linking the limit given u/s 153 with the draft order, make the time limit u/s 153 as a redundant piece of legislation. We find that the poser of the ld. AR is definitely important that no provision in the Act can be considered as irrelevant or unnecessary. Every provision carries some significance and has the underlying presumption of its applicability to one situation or the other. Though the question posed by the ld. AR that if the time limit for passing of the final assessment order is contained in section 144C then section 153 cannot cover the same thing once again, is noteworthy, but we find that the inference drawn by him that in such circumstances, the time limit given u/s 153 should be construed as that for passing the draft order, defies all logics. 5.23 At this juncture, we note that Chapter–X containing the provisions relating to the computation of income from international transactions having regard to the ALP was inserted by the Finance Act, 2001 w.e.f. 1.4.2002. On such insertion, it became incumbent upon the AO to determine the ALP of the international transactions. For the A.Y. 2002-03, the time limit for completion of assessment, after determining the ALP, as was earlier applicable also, continued to be governed by section 153(1)(a) which stood at two years from the end of the assessment year. Section 92CA with the caption 'Reference to the Transfer Pricing Officer' was brought into existence by the Finance Act, 2002 w.e.f. 1.6.2002. Under this provision, the onus of computing ALP of the international transactions in certain cases was shifted to the TPO, who was supposed to pass his order under sub-section (3). There was no separate time limit for passing of the order by the TPO. The AO was obliged to pass the assessment order having regard to the ALP, within the overall time limit permitted by section 153, that is, two years from the end of the relevant assessment year. This position continued till the Finance Act, 2007, when sub-section (3A) to section 92CA was inserted w.e.f. 1.6.2007 providing a distinct time limit for the passing of the order by the TPO, being a period of sixty days prior to the date of completion of assessment as per section 153. Simultaneously, the time limit for passing of order u/s 153

Page 20 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 in cases where a reference is made to the TPO, was also enhanced to thirty three months. Here, we would like to mention that later on this time limit u/s 153 was enhanced to three years. It means that with the insertion of section 92CA(3A), the time limit for passing of the assessment order continued to be still governed by section 153, though the time limit for passing of the order by the TPO was also set within the overall time limit prescribed u/s 153 for the passing of the assessment order. The provisions of section 144C about 'Reference to the dispute resolution panel', were inserted by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2009. This led to the ushering in the era of passing the draft order. It means that up to the A.Y. 2008-09, when the mechanism of DRP and the passing of draft order was not in place, the final assessment order pursuant to the order of the TPO was required to be passed within the time limit given in section 153. However, when the institution of the DRP and the concept of passing a draft order came into being w.e.f. the A.Y. 2009-10, the time limit for the completion of assessment came to be governed by sub- section (4) or (13) of section 144C. This shows that upon the introduction of section 144C, there emerged two simultaneous time limits for completion of assessments, viz., the one which was already existing as per section 153 and the latest one, which came to be introduced through section 144C. At this stage, it is significant to note one salient feature in the time limits enshrined under sub- sections (4) and (13) of section 144C. Such common thread is that the time limits given in both the sub-sections are 'notwithstanding anything to the contrary contained in section 153 or …'. This transpires that the time limits for completion of assessment as prescribed in sub-sections (4) and (13) of section 144C have been superimposed on the time limit as given under third proviso to section 153(1) for the passing of the assessment order. Effect of the insertion of this non-obstante clause in sub-sections (4) and (13) of section 144C is that the hitherto applicable time limit given in section 153 came to expressly excluded for the purposes of completion of the final assessment order pursuant to the draft order. Under this scenario, as is also instantly prevalent, the time limit for the passing of the final assessment order finds its place under sub-sections (4) or (13) of section 144C. On having covered the time limit for completion of assessment u/s 144C, now it became necessary for the legislature to remove the time limit for completion of assessment as contained in section 153. This could have been possibly done by omitting section Page 21 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 153, which was not possible as this section ab initio contains general time limit for completion of all assessments and reassessments and it is/was never confined only to the orders passed pursuant to the determination of the ALP by the TPO. Then the course open was either to insert a sunset clause in this regard in section 153 itself or add a non-obstante clause in section 144C(4) and (13). The legislature chose the second option and made it unequivocal by mentioning in sub-sections (4) and (13) that the provisions of section 153 shall not apply. There is a reason for not adding a sunset clause in section 153. The reason is that section 92CA mandating the TPO to pass order determining the ALP of international transactions, also contains sub-section (3A), which provides time limit for the passing of the order by the TPO. As per this provision inserted by the Finance Act, 2007 w.e.f. 1.6.2007, the TPO may pass order u/s 92CA(3) 'at any time before sixty days prior to the date on which the period of limitation referred to in section 153,….. for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires'. Since the time limit for passing of the order by the TPO is not direct but is linked with the time limit as per section 153, the legislature did not insert any sunset clause in section 153, which would have otherwise made the provision of sub-section (3A) of section 92CA unworkable without the insertion of a separate corresponding provision giving time limit for the passing of the order by the TPO. This is the answer to the ld. AR's poser that when the time limit for completion of assessment is contained in section 144C, then the provisions of section 153 cannot be read as meaningless except for linking it with draft order. In our considered opinion, it is overt that the time limit u/s 153 is not meaningless as the same has been retained for keeping alive the time limit given to the TPO for passing his order. 5.24 We have noticed above that the term 'draft order' has been statutorily coined u/s 144C(1). It means that the term 'draft order' has been recognized as and is actually different in ambit from the term 'assessment order'. With the insertion of section 144C, which led to the birth of the draft order, the legislature did not substitute the term 'order of assessment' with the term 'draft order' in section 153. If the intention of the legislature had been to substitute the hitherto time limit for passing of the assessment order as the time limit for the passing of draft

Page 22 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 order henceforth, on shifting the time limit for passing of the final assessment order to section 144C(4) or (13), then it would have made necessary changes in section 153 by substituting the term 'draft order' with the term 'order of assessment'. In fact, the term 'draft order' is totally absent in section 153, which indicates that it has been treated as alien to section 153. If we accept the contention of the ld. AR that after the introduction of section 144C, the time limit provided u/s 153 applies only to the draft order, it would amount to re-writing section 153 which falls in the exclusive domain of the Parliament. We are unable to read the term 'draft order' interchangeably with the term 'assessment order' in the context of section 153 or practically for any other purpose. 5.25 Now we take up the next argument of the ld. AR that if the time limit prescribed u/s 153 is considered as relating to the completion of assessment, this will leave no other provision setting out the time-frame for passing of the draft assessment order. He argued that it cannot be contemplated that the legislature has given unlimited time- frame to the AO for passing a draft order. We find that, in fact, no time limit has been prescribed for the passing of the draft order. It is also equally relevant to note that prior to the introduction of sub-section (3A) to section 92CA by the Finance Act, 2007, there was no time limit for the passing of the order by the TPO, though sub-section (3) requiring the passing of order by the TPO, was inserted by the Finance Act, 2002. It means that during the interregnum, though there was a requirement for the passing of order by the TPO, but there was no specific time limit for the passing of such order. The mere fact that no time limit has been prescribed for the passing a draft order, does not and cannot mean that the time limit for the completion of assessment given u/s 153 should be inferred as that for passing a draft order. 5.26. It is a settled legal position that where no time limit is prescribed for passing an order, then such order should be passed within a reasonable time. Section 201 requires the passing of order under sub-section (1) treating a person responsible as an assessee in default in case there is a failure to deduct tax at source or after deduction, there is a failure to pay tax at source. Prior to insertion of sub-section (3) of section 201 by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2010, no time limit was prescribed for the passing of such an order. The Honourable High Courts and the Page 23 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 benches of the tribunal across the country have recognized the position that no time limit has been prescribed for passing an order treating a person responsible as assessee in default. Whereas the Hon'ble Calcutta High Court in British Airways v. CIT [1992] 193 ITR 439/[1991] 54 Taxman 470 has held that since no period of limitation for liability has been statutorily given, even the order passed after 6 years is valid, the Hon'ble Delhi High Court in CIT v. NHK Japan Broadcasting Corpn [2008] 305 ITR 137/172 Taxman 230 has held such order in the absence of the express time limit should be passed within a period of four years. Legislature stepped in by way of insertion of sub-section (3) to section 201 w.e.f. A.Y. 2010-11 providing the time limit for passing of the order deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time within (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) six years from the end of the financial year in which payment is made or credit is given, in any other case. The rationale of this discussion is that the absence of a statutory time limit for passing an order is not an absolutely impossible situation. In a case, where no time limit has been prescribed, then requisite order should be passed within a reasonable time. As there is no time limit prescribed for the passing of the draft order, such order is also required to be passed within a reasonable time. Coming back to the facts of the instant case, we find that the information from the Japanese Competent authority was received by the DIT on 24.1.2014. By no standard, the passing of the draft order on 11.7.2014, that is, within a period of less than six months from the date of such receipt of information, can be construed as having been passed in an unreasonable time. As such, we jettison the view canvassed by the ld. AR that the time limit given u/s 153 should be read as relevant for the passing of draft order.” 6.22 In the present facts of the case, the Ld.TPO passed the order u/s. 92CA on 29.01.2021, based on which the draft assessment order was passed on 12.04.2021. Considering the fact that the relevant period was within the COVID period and all the limitations was even otherwise suspended by Hon'ble

Page 24 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Supreme Court vide order dated 23.03.2020 & 10.01.2022 from 24.03.2020 to 31.05.2022. As there is no limitation prescribed in the statute to pass the draft assessment order and considering the fact that the draft assessment order in the present case is passed within less than 2 ½ months that falls within the COVID period as specified by Hon'ble Supreme Court, it cannot be said that the draft assessment order has been passed beyond a reasonable time period. We therefore do not find any reason to appreciate the arguments raised by the Ld.Sr.Counsel on legal issue raised vide application dated 25.07.2022. Accordingly, the legal issue raised by the assessee vide application dated 25.07.2022 stands dismissed.

Page 25 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 7.1 The Ld.Sr.Counsel submitted that, the draft assessment order was forwarded to the assessee on 12.04.2021 and therefore the time limit to issue DRP directions as per section 144C(12) r.w.s. 144C(5) of the act should be on or before 31.01.2022. There is no doubt that, the DRP directions were signed by all the PCITs on 28.01.2022 and a DIN was generated for the directions by the Secretariat of DRP 29.01.2022. However, the Ld.Sr.Counsel argued that NFAC received the DRP directions electronically on 01.02.2022 and the jurisdictional assessing officer received the directions from NFAC electronically on 02.02.2022. The Ld.Sr.Counsel thus submitted that, the Assessing Officer, at para 6 in page 2 of the Final Assessment Order dated 01.03.2022 admits to the date of receipt of DRP direction as under: “6…………… The Hon'ble DRP-1, Bangalore, vide its order F.No.67/DRP-1/BNG/2021-22 dated 28/01/2022 issued directions to the TPO on certain issues of the TP order, and the same was received in this office on 01/02/2022......."

7.2 The Ld.Sr.Counsel submitted that, combined reading of sub- sections (2), (5) and (12) of section 144C shows that in case any objections are filed by the assessee with the DRP, in respect of variations proposed in the Draft Order, the DRP shall issue such directions, as it thinks fit, for the guidance of the Assessing Officer and such directions should be issued within 9 months from the end of the month in which the draft order has been forwarded by the Assessing Officer to the eligible assessee.

Page 26 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 7.3 The Ld.Sr.Counsel thus argued that the DRP direction in the present case are to be issued on or before 31.01.2022 but the DRP directions were issued to the assessing officer for completion of assessment proceedings on 02.02.2022, that falls beyond the period of limitation prescribed u/s. 144C(12) of the act. He thus submitted that, as the time-limit for issuing directions under section 144C(5) r.w.s 144C(12) expired on 31.01.2022 the directions cannot be issued after 31.01.2022. He further submitted that, the provisions of section 144C of the Act are mandatory. In this regard, we rely on the following decisions:  Zuari Cement Ltd. vs. Asst. CIT [W.P. No. 5557 of 2012, dated 21-2-2013]. SLP filed by the Revenue is dismissed in ACIT vs. Zuari Cement [SLP CC No. 16694 of 2013, dated 29.07.2013];  Control Risk India Pvt. Limited vs. DCIT WP (C) 5722/2017 & C.M. No. 23860/2017 (Delhi); SLP dismissed in Dy. CIT v. Control Risk India (P.) Ltd. [SLP No. 7090 of 2018];  Cisco Systems Capital (India) Pvt. Ltd., [TS-576-HC- 2021(KAR)-TP];  Vijay Television (P.) Ltd. vs. DRP, Chennai [2014] 369 ITR 113 (Madras) [Paras 33 & 34]; affirmed in writ appeal in [2018] 407 ITR 642 (Madras); 7.4 He submitted that the various time limits provided in section 144C are always construed strictly by the courts, irrespective of whether time limit applies to assessee or to revenue. For example, as provisions of section 144C do not provide for Page 27 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 condonation of delay in filing of objections before DRP, in the following cases, it is held that assessee cannot file DRP objections belatedly:  DCIT vs. Saint Gobain India P. Ltd. (2022) 444 ITR 636 (Mad.) Para 38 - inter-se timelines are critical C  Inno Estates (P.) Ltd. v. DRP-2 [2018] 96 taxmann.com 646 (Madras); (218) 406 ITR 553 (Madras);  Lam Research (India) Private Limited [TS-431-ITAT- 2021(Bang)-TP;  Yokogawa India Limited TS-124-1TAT-2021(Bang)-TP;  TDK Electronics AG v. ACIT [2020] 116 taxmann.com 986 (Pune - Trib.); 7.5 The Ld.Sr.Counsel submitted that section 144C is self contained code by itself. In this regard, we rely on the following decisions:  Roca Bathroom Products Private Limited v. DRP & Other [2021] 432 ITR 192 (Madras) affirmed in DRP v. Roca Bathroom Products Private Limited Writ Appeal Nos. 1517, 1519, 1609, 1610 and 1854 of 2021 and CMP. Nos.9656, 9658, 10022, 10023 and 11720 of 2021, dt., 09.06.2022 (Mad. HC);  Religare Capital Market TS-1004-ITAT-2019(DEL)-TP]; 7.6 In the instant case, the Ld.Sr.Counsel submitted that, the assessment for the impugned AY 2017-18 is conducted through National Faceless Assessment Centre (NaFAC) in faceless manner. He thus submitted that, the provisions of section 144B of the IT Act, which do not have “non obstante clause”, are Page 28 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 applicable for the same. Hence, it is submitted that, section 144B overrides Sections 282, 282A, Rule 127, 127A. He submitted that the mandate of section 144B(1)(xxix) is that the DRP has to issue its directions to NaFAC. The Ld.Sr.Counsel admitted that, any communication with NaFAC will have to be essentially in the electronic mode as per section 144B(5)/(6), and that there is no scope for communication with NaFAC physically / manually. He submitted that, the DRP therefore has to issue its directions to NaFAC electronically. He relied on following decisions in support:  FCI OEN Connectors Ltd., 268 Taxman 107 (Kerala): Where the assessee has not opted for e-proceeding, service has to be made in manual mode only.  Ram Prasad Sharma (2021) 84 GST 697 (MP): Service of GST notice of demand has to be only uploading on website. Service by email is not permissible.

7.7 The Ld.Sr.Counsel referred to Information Technology Act, 2000 and submitted that, the moment DRP directions are entered into computer resource, as per sub-section 1 of section 13, the dispatch of an electronic record occurs and it goes to outside the control of the originator. He submitted that in the instance case an RTI application was filed by the assessee to ascertain the receipt of the DRP direction by NFAC. A reply dated 25.04.2022. confirmed the receipt of the DRP directions by NFAC on 01.02.2022. The Ld.Sr.Counsel submitted that applying the provisions of section 13(1) for income technology Act, 2000, it to be understood that the DRP directions was issued on 01.02.2022

Page 29 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 which is beyond the period of limitation. The Ld.Sr.Counsel relied on following decisions. Daujee Abhushan Bhandar (P.) Ltd., v. U01 [2022] 136  taxmann.com 246 (Allahabad) [Para 29]. Suman Jeet Agarwal vs. ITO & Others 2022-TIOL-1294-  HC-DEL-IT; 7.8 The Ld.Sr. Counsel thus vehemently argued that the DRP directions is not passed within the time limit provided u/s. 144(C12) and once the deadline is failed to be met with, the DRP ceases to have jurisdiction. He placed reliance on the following decisions in support of this contention. CIT v. V.V. Devassy [2018] 403 ITR 25 (Ker) - even a  day's delay is fatal TDK Electronics AG v. ACIT [2020] 116 taxmann.com 986  (Pune - Trib.) - ITAT 7.9 The Ld.Sr. Counsel submitted that the DRP direction issued on 28.01.2022 therefore cannot be taken as date of issue of direction for two reasons; 1) Such date written in the direction cannot be taken as date of issue on the basis of meaning of the word ‘issue’ 2) When the word ‘issue’ is used in the context of setting a point of limitation of time, it is necessary that such period of limitation is not amenable to alteration by issuing authority by deciding the date of issue.

7.10 He thus submitted that, in case the date of issue is reckoned to 28.01.2022, will frustrate the limitation of time set out in the statute. He emphasised that the time limit specified

Page 30 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 u/s. 144C(12) is categorical and absolute and there is no provision to relax such time limit. It is thus submitted by the Ld.Sr.Counsel that, under such circumstances, the time limit laid down in section 144C(12) for issuing the direction by the DRP is mandatory. And once the directions are not issued within the time limit specified u/s. 144C(12), the directions become time barred and invalid. He also submitted that courts have held that wherever statute stipulates time limit for issue of notice or passing of orders, such notice or orders have to be issued within the stipulated time limit. He thus submitted that if they are either not at all issued or if they are issued after expiry of the time limit stated thereunder, such notice or order shall be invalid in the eyes of law.

7.11 The Ld.Sr.Counsel submitted that, section 292B makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceedings is not sufficient to invalidate an action taken by the competent authority provided that such return of income, assessment, notice, summons or other proceedings in substance and effect is in conformity with or according to the provisions of the act. He submitted that section 292B can be relied upon by the revenue only when there is technical defect or omission and will not come to rescue the department for failure of issuing directions by the DRP within the specified time limit as mandated under 144C(12) of the act.

Page 31 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 He further submitted similarly that section 292BB also will not come to rescue the department in the present circumstances.

7.12 The Ld.Sr.Counsel emphasised that, sec.144C(12) r.w.s 144C(5) mandates that the DRP “shall” issue its directions to the assessing officer for guidance of the assessing officer, so as to enable him to complete the assessment, and that section 144C does not required the directions issued to the assessee. He thus submitted that, if the DRP choses to serve the copy of the assessee, the date of issue of the copy or the service thereof is irrelevant for the purpose of section 144A. The Ld.SR.Counsel placed reliance on the decision of Hon’ble Bombay High Court in case of Shell India Market Pvt. Ltd. vs. ACIT/JCIT/DCIT/AO reported in (2022) 139 taxmann.com 335. In support of this submission, he also referred to Rule 10 and 11 of the Income Tax (Dispute Resolution Panel), Rules 2019 (hereinafter referred to as the DRP rules) to submit that these rules are not in conflict with section 144C.

7.13 The Ld.Sr.Counsel distinguishing the fact in case of Himalaya Drug Company vs. DCIT reported in (2017) 84 taxmann.com 8 and submitted that, the issue of DRP direction to assessee would suffice treating the same to be issued to the assessing officer on the same date, does not hold the file after the subsequent development of law in this regard. He thus submitted that jurisdictional AO was not authorised as on date to pass the final assessment order.

Page 32 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 7.14 He submitted that, a harmonies reading of Rule 10(3) and Rule 11 shows that the directions ought to be issued to the Ld.AO and the directions so issued should thereafter be communicated to the assessee. The Ld.SR.Counsel thus submitted that the requirement of law is that the DRP has to issue his directions to the Ld.AO also within the time limit specified u/. 144C(12) r.w.s 144C(5). He thus submitted that the final assessment order so passed is beyond the period of limitation as per section 144C(13) of the act.

7.15 The Ld.SR.Counsel submitted that for the year under consideration, the assessment is done faceless and therefore the procedure laid down in 144B has to be followed. He submitted that prior to amendment inserted by Finance Act 2022, which came into effect 0104.2022, NaFAC is the assessing officer as per section 144B of the act. He thus submitted that NFACA had jurisdiction over the assessee until the completion of assessment. The Ld.SR.Counsel thus also submitted that communicating the directions u/s. 144C(5) to the jurisdictional AO, is of no relevance or consequence.

She vehemently submitted that the decision in case of Roica vs. DRP and others reported in (2021) 432 ITR 192 and the decision

Page 33 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 of Hon’ble Bombay High Court in case of Self drilling on dappmeyere Ltd. vs. ACIT reported in 153 taxmann.com 162 has been stayed by Hon’ble Supreme Court in an SLP filed by the revenue before Hon’ble Supreme Court. She submitted that Hon’ble Supreme Court has stayed the operation / reliance of these orders.

8.1 The Ld.CIT.DR has filed written submissions on various dates on the issues under consideration along with supportive documents, being the extract and screenshot of order sheet entries from the ITBA portal relating to DRP proceedings. She submitted that the DRP directions were communicated to the assessee as well as the jurisdictional assessing officer on 29.01.2022. She submitted that, the 144C does not mandate that the DRP has to issue the directions and the same must be also served on the NFAC / JAO as the case may be within the period of limitation specified u/s. 144C(12).

8.2 She emphasised that, Rule 10 (3) of the DRP rules requires the panel to issue directions within the specified period. Further she submitted that Rule 11 mandates that after the directions are issued, the panel shall communicate the same to the eligible assessee and to the assessing officer. She vehemently argued that the sequence of communicating the directions to the eligible assessee and to the assessing officer as per Rule 10(B) makes it clear that, the use of the phrase ‘issue’ means it must be signed

Page 34 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 by all the panellists. She emphasised that communication of the directions as per Rule 11 is after the directions are issued.

8.3 She referred to section 144C(12) and submitted that, the intention of the legislature in using the phrase ‘issue’, nowhere indicates that the service also has to be made within the period of limitation as per 144C(12) of the act. She opposed the argument advanced by the Ld.Sr.Counsel by tooth and nail that, though 144C does not require the issue of directions to the assessee, 144C(12) very clearly mentions the directions shall not be issued after 9 months from the end of the month in which the draft order is forwarded to the eligible assessee. She submitted that as per sub-clause (12) there is no requirement of assessing officer to receive the direction within the stipulated period therein. Referring to sub-clause (13) of sec. 144C, the Ld.CIT.DR submitted that, the sub-section talks of completion of the assessment in conformity with the directions of the DRP by the Ld.AO starts only upon receipt of such directions issued under sub-section (5).

8.4 She submitted that, once the directions are issued within the period of limitation as per sub-section(12) of 144C, the assessing officer can complete the assessment only when the directions are communicated to him. Ld.CIT.DR submitted that the meaning attributed by the Ld.Counsel to the phrase ‘issue’ in section 144C(12) to include service to the Ld.AO, is not at all the intention of the legislature as the provisions of sub-section(5),

Page 35 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 (12) and (13) are absolutely unambiguous and very clear. She submitted that the decisions relied by the Ld.Sr.Counsel for the respective propositions are on different facts as compared to the present facts in the case of present assessee.

8.5 On a request by the Bench, the Ld.CIT.DR consolidated various submissions filed by her on various dates of hearing by way of letter dated 26.10.2023, scanned and reproduced as under:

SUBMISSIONS Date of hearing:26.10.2023 May It Please Your Honours, ADDITIONAL GOA FILED BY APPELLANT VIDE LETTER DATED 07.06.2022 - DRP ORDER IS BARRED BY LIMITATION - CONSEQUENTLY FINAL ASSESSMENT ORDER IS BARRED BY LIMITATION - LIABLE TO BE DISMISSED AS FACTUALLY INCORRECT (1) As per I.T.Act, 1961 time limit for DRP to pass order is up to 31.01.2022. (ii) PAGE 93-95 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - FILED ON 20.10.2023 - ITBA - DRP INSTRUCTION No.1 dated 30.12.2016 - Clause 3(h) - DRP PROCEEDINGS ARE "MANUAL TO SYSTEM" i.e. THEY ARE PHYSICAL PROCEEDINGS - Clause 3(h) - DRP to prepare order manually and then upload on system. (iii) PAGE 97-99 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - FILED ON 20.10.2023 -- DRP PROCEEDINGS ARE MANUAL TO SYSTEM i.e. THEY ARE PHYSICAL PROCEEDINGS - The process undertaken by DRP to prepare order manually and then upload on system is explained by Report of DRP Panel-1 in the case of a different another appellant. PAGE 35 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - (iv) FILED ON 20.10.2023 - CASE HISTORY /NOTINGS - SL.No. 8 - DRP generated order on 28.01.2022 (SL.No. 8). PAGE 35 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - (v) FILED ON 20.10.2023 - CASE HISTORY /NOTINGS - SL.No. 9 - Intimation issued to the appellant on 29.01. 2022 (SL.No. 9).

Page 36 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 ( ) Under 144C(5) of the I.T.Act, 1961 DRP IS ONLY REQUIRED TO ISSUE DIRECTIONS TO THE AO. The relevant sub-section is reproduced below (5) The Dispute. Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. ( Emphasis supplied) (i) PAGE 51-77 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - FILED ON 20.10.2023 - INCOME TAX (DISPUTE REOLUTION PANEL) RULES, 2009 DATED 20.11.2009 - REFER CLAUSE 11 ON PAGE 71 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS FILED ON 20.10.2023 - "DIRECTIONS TO BE COMMUNICATED TO PARTIES" - (a) Under Clause 11 of Income Tax (DRP) Rules, 2009 "INTIMATION-IS REQUIRED TO BE SENT TO THE APPELLANT. The relevant clause reads as follows "Directions to be communicated to parties.

11. The panel shall, after the directions are issued, communicate the same to the eligible assessee and to the Assessing Officer." ( Emphasis supplied) (b) PAGE 13 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - FILED ON 20.10.2023 - "ELECTRONICALLY GENERATED INTIMATION LETTER" dated 29.01.2022 issued to the appellant with DIN No. ITBA/DRP/S/91/2021 -22/1039197935(1). "ELECTRONICALLY GENERATED INTIMATION LETTER" dated 29.01.2022 mentions in the body of the letter s "A DIFFERENT DIN No. IISUED" for Order u/s 144C(5) dated 28.01.2022, UPLOADED BY THE DRP ON THE ITBA SYSTEM - ITBA/MP/M/144C(5)/2021-22/1039197813(1). The DIN No. of Order u/s 144C(5) dated 28 01 2022 ITSELF INDICATES THAT THIS DIN BELONGS TO ORDER u/s 144C(5). "ELECTRONICALLY GENERATED INTIMATION LETTER" dated 29.01.2022 reads as follows : "This is to inform you that Order u/s 144C(5) dated 28/01/2022 is having Document No. (DIN) ITBA/DRP/M/144C(5)/2021-22/1039197813(1) This is a system generated document and does notrequire any signature." ( Emphasis supplied)

Page 37 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 (viii) In view of the detailed evidence FILED ON 20.10.2023 IN CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - and explained above, whereby it is clearly established that the DRP order was uploaded on 28.01.2022 on the ITBA system with Document No.(DIN)ITBA/DRP/M/144C(5)/2021-22/1039197813(1) and "INTIMATION LETTER" dated 29.01.2022 was issued to the appellant with DIN No. ITBA/DRP/S/91/2021-22/1039197935(1), the ADDITIONAL GOA FILED BY APPELLANT VIDE LETTER DATED 07.06.2022 THAT DRP ORDER IS BARRED BY LIMITATION MAY PLEASE BE DISMISSED, THE SAME BEING FACTUALLY INCORRECT. II. ADDITIONAL GOA FILED BY APPELLANT VIDE LETTER DATED 07.06.2022 - FINAL ASSESSMENT ORDER IS BARRED BY LIMITATION AS DRP ORDER IS BARRED BY LIMITATION - LIABLE TO BE DISMISSED AS FACTUALLY INCORRECT PAGE 33 OF CONSOLIDATION OF 4 WRITTEN (i) SUBMISSIONS - FILED ON 20.10.2023 - NO DIRECT INTERFACE BETWEEN DRP AND NAFAC - Para 3.2 and 3.2.2 of the letter of DRP-1, Bengaluru dated 12.07.2023, PAGE 43 OF CONSOLIDATION OF 4 WRITTEN (ii) SUBMISSIONS - FILED ON 20.10.2023 - NO DIRECT INTERFACE BETWEEN DRP AND NAFAC - DRP UPLOADS ORDER ON "COMMON FUNCTIONS HOME PAGE" OF ITBA. PAGE 49 OF CONSOLIDATION OF 4 WRITTEN (iii) SUBMISSIONS FILED ON 20.10.2023 - Acknowledgement of NaFAC of having received DRP order on 01.02.2022. PAGE 85-90 OF CONSOLIDATION OF 4 WRITTEN (iv) SUBMISSIONS - FILED ON 20.10.2023 - Email dated 20.07.2023 from ADIT(ITBA) 0/o CIT(ITBA), Directorate of Income Tax (Systems) sending proof of Case History Noting of ITBA giving proof of DRP order received by NFAC on 01.02.2022 (row No. 94). (v) PAGE 4 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - FILED ON 20.10.2023 - Para 4 of the letter of JCIT,3(1)(1)(05D), Bengaluru dated 23.01,2023 - DRP directions received by NAFAC on 01.02.2023. As per section 144C(13), the AO is required to pass order ONE MONTH AFTER THE END OF THE MONTH IN WHICH DRP DIRECTION IS RECEIVED. DRP directions were received by AO in the month of February, 2022. The AO gets time of 1 month after the month in which the DRP directions were received. Accordingly, AO had time up to Page 38 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 31.03.2022. Whereas, AO passed order on 01.03.2022, much ahead of the due date. (vi) PAGE 101-104 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - FILED ON 20.10.2023 - Even otherwise, this issue is covered in FAVOUR OF REVENUE in the Decision of BANGALORE ITAT in the case of HIMALAYA DRUG Co. [2017] 84taxmann.com 8 (Beng-Trib.) - NOT CHALLENGED BEFORE HIGH COURT. 50 IS A FINAL LAW DECLARED. In view of the detailed evidence FILED ON 20.10.2023 IN (vii) CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - and explained above, whereby it is clearly established that the AO passed order much ahead of the due date as prescribed under section 144C(13) of the I.T.Act,1961, the ADDITIONAL GOA FILED BY APPELLANT VIDE LETTER DATED 07.06.2022 THAT FINAL ASSESSMENT ORDER IS BARRED BY LIMITATION AS DRP ORDER IS BARRED BY LIMITATION MAY PLEASE BE DISMISSED, THE SAME BEING FACTUALLY INCORRECT.

III. ADDITIONAL GOA FILED BY APPELLANT VIDE LETTER DATED 2 5 . 0 7 . 2 0 2 2 - D R A F T A S S E S S M E N T O R D E R I S B A R R E D B Y L I M I T A T I O N - L I A B L E T O B E D I S M I S S E D A S F A C T U A L L Y INCORRECT (I) PAGE 3-10 OF CONSOLIDATION OF 4 WRITTEN SUBMISSIONS FILED ON 20.10.2023 - Kindly refer to Page 4 of the report of the AO dated 23.01.2023. The time limitation cis per Notification No. 10/2021/F.No.370142/35/2020-TPL dated 27.02.2021 ( kindly refer to pages 9-10) under Clause (A)(b)(i) the due date is extended to 30.04.2021. The draft assessment order u/s 144C(1) is passed on 12.04.2021, which is within the extended due date as per Notification No. 10/2021/F.No.370142/35/2020-TPL dated 27.02.2021 ( kindly refer to pages 9-10). (ii) In view of the detailed evidence FILED ON 20.10.2023 IN CONSOLIDATION OF 4 WRITTEN SUBMISSIONS - and explained above, whereby it is clearly established that the draft assessment order u/s 144C(1) is passed on 12.04.2021, which is within the extended due date as per Notification No. 10/2021/F.No.370142/35/2020- TPL dated 27.02.2021, the ADDITIONAL GOA FILED BY APPELLANT VIDE LETTER DATED 25.07.2022 THAT THE DRAFT ASSESSMENT ORDER IS BARRED BY LIMITATION MAY PLEASE BE DISMISSED, THE SAME BEING FACTUALLY INCORRECT .

Page 39 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 IV. OUTSTANDING RECEIVABLES - GOA Nos. 20-24 During the course of hearing the Ld.AR requested for netting off of receivable Vs payables. However, netting off is not permitted under the I.T. Act as Outstanding receivables are considered as "separate international transactions" which are to be "separately benchmarked". This issue is covered in FAVOUR OF REVENUE BY THE JURISDICTIONAL HIGH COURT in the case of DCIT Vs AMD India Pvt. Ltd. In dated 31.08.2018 (TS-993-HC- 2018-Kar-TP) WHICH HAS BEEN RELIED UPON in the decision of BANGALORE ITAT in the case of M/s Thought Focus Information Technologies Pvt. Ltd. Vs ACIT, IT(TP)A No.742/B/2022(A.Y.2018- 19) dated 11.01.2023, (copy enclosed) Submitted 9. We have perused the submissions advanced by both sides in light of records placed before us.

9.1 The proposition advanced by the Ld.Counsel on the legal issue raised in the additional ground vide application dated 07.06.2022 is two fold:  That the DRP Direction dated 28/01/2022 is not issued to the jurisdictional AO within the period of limitation as per sub clause (12) of section 144C. He submitted that as per the Ld.AO in the impugned order, the DRP direction was received by him on 01/02/2022, and therefore the said direction was issued beyond the period of limitation. He relied on various provisions of section 144B along with section 13 of the Information Technology Act,200. He has also placed reliance of various decisions that has been reproduced herein above. As a consequence the impugned Final assessment order passed on 01/03/2022 is also barred by limitation.  That the final assessment order should have been passed by the NFAC who had the jurisdiction over the assessee pursuant

Page 40 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 to faceless procedure laid down u/s. 144B that was applicable to the assessee during the year under consideration.

9.2 At this juncture it is necessary to understand the intention of the legislature in using the phrase ‘issue’ in sub clause (5), (6) (7) and (12) of section 144C along with Rule 10(3) and Rule 11 of the Income tax (Dispute Resolution Panel) Rules 2009, (hereinafter referred to as DRP Rules). Reference to dispute resolution panel. 144C. (1)……. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:— (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),— (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. ….…….

Page 41 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.

9.3 Further, a combined reading of sub-sections (2), (5) and (12) of section 144C shows that, in case objections are filed by the assessee with the DRP, in respect of variations proposed in the draft order, the DRP shall issue such directions, as it thinks fit, for the guidance of the AO, and such directions should be not be issued beyond 9 months from the end of the month in which the draft order was received by the eligible assessee.

9.3.1 Rule 10 of the Income-tax DRP Rules, provides that " (1) On the date fixed for hearing or on any other date to which the hearing may be adjourned, if the eligible assessee or his authorized representative do not appear, or when they appear, upon hearing the objections, the panel may, within the specified time, issue such directions as it deems proper. (2) While hearing the objections, the panel shall not be confined to the grounds set forth in the objections but shall have the power to consider any matter or grounds arising out of the proceedings. (3) On the conclusion of the hearing, the panel shall issue directions within the specified period". These provisions are restricted to the directions of the DRP on the objections raised before the DRP.

9.3.2 Rule 11 of the DRP Rules reads as under:

Page 42 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 “The panel shall after the directions issued, communicate the same to the eligible assessee and to the assessing officer”

9.4 All the above provisions under section 144C as well as Rule 10/11 of DRP Rules emphasise on “issue” of DRP direction. The Ld.Sr.Counsel contends that, the phrase “issue” in these provision means that the DRP direction must also be served on the NaFAC/AO within the limitation period specified under sub clause 12 of section 144C of the Act.

9.5 For understanding the difference between the phrases ‘issue’ and ‘service’, we refer to section 148 and section 149 of the Act. Section 148 requires the service of notice before making assessment/reassessment/re-computation u/s.147. Whereas, section 149 requires issuance of notice before the expiry of the period of limitation for initiating proceedings. Noticing this distinction, the courts have always held that, what is needed u/s.149 is that notice must be issued by the Assessing Officer before the expiry of the period of limitation provided u/s.149. However, it may be served on the assessee even after the expiry of the period u/s.149, but before the assessment/reassessment/recomputation u/s.147. Similarly Notice u/s. 143(2) must be issued and served within limitation as mandated by the said provision. 9.6. The words of statute are to be first understood in the natural, ordinary or popular sense and phrases and sentences

Page 43 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 are to be construed according to their grammatical meaning, unless that leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary.

9.7 At this juncture we also refer to Rule 13, of DRP Rules, that reads s under: Rule 13 After the issue of directions under rule 10, if any mistake or error is apparent in such direction, the panel may, suo motu, or on an application from the eligible assessee or the Assessing Officer, rectify such mistake or error, and also direct the Assessing Officer to modify the assessment order accordingly. (emphasis supplied) 9.7.1 On careful consideration of submissions by the Ld.Sr.Counsel and analysis of implication in Rule 13, we find that, Rule 13 permits rectification of mistakes in the DRP direction as it specifically provides that "After the issue of directions under Rule 10, if any mistake or error is apparent in such direction, the panel may, suo moto,……..”

9.7.2 It does not provide any time frame within which such rectification of mistake is to be suo moto carried out. The time limits for rectification of mistakes in sections 154 would not come into play, as, strictly speaking, the Dispute Resolution Panel is not covered by the expression "income tax authority referred to in section 116 of the Act. If one is to proceed on the basis that suo moto rectification of mistake apparent on record is also to be Page 44 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 carried out within the time limit prescribed under section 144 C(12), will result in a glaring incongruity, in the sense that the directions issued by the DRP on the last day will in effect have not a single day for suo moto rectification of mistakes.

9.8 Justice (Retd.) G.P. Singh in his celebrated treatise on the 'Principles of Statutory Interpretation' [Fourteenth edition, Revised by Justice A.K.Patnail, Former Judge, Supreme Court Of India] at 91, noted that: "The words of a statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construes according to their grammatical meaning, unless that leads to some absurdity or unless there is something in the context, or in the object of the statute to suggest the contrary…………"

9.8.1 In other words, Courts while interpreting a legal provision ought to assign primacy to the plain, natural, grammatical, ordinary or popular meaning of the words, used by the Legislature as applied to the legal subject-matter, unless such a construction leads to absurdity of consequence, unworkability of the statute, or is patently contrary to the legislative intent and policy. The rule of literal construction, often regarded as a 'Cardinal Rule of Statutory Interpretation' is the bedrock principle for interpretation, especially for taxing and penal statutes. 9.8.2 While applying and affirming the rule of literal construction, the Courts have time and again re-iterated that, it is the bounden duty and obligation of the Court to interpret the Page 45 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 statute as it is. It is contrary to all rules of construction to read words into a statute or to read down the words of a statute, which the Legislature in its wisdom has or has not deliberately incorporated. Therefore it is not possible to appreciate the argument of the Ld.Sr.Counsel that, the word ‘issue’ in sub clause 12 of 144C is used in the context of setting a point of limitation of time to even serve the DRP direction and that such period of limitation is not amenable to alteration by the issuing authority by deciding the date of issue. The decisions relied by the Ld.Sr.Counsel referred to herein above are therefore distinguishable on facts and does not come to assist the assessee in any manner whatsoever.

9.9 Now coming to provisions under section 144B of the Act, as it stood during the relevant period. We refer to sub clause (1) (xxix) to (xxxii) that reads as under: “(xxix) where the eligible assessee files his objections with the Dispute Resolution Panel, the National Faceless Assessment Centre shall upon receipt of the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, forward such directions to the concerned assessment unit; (xxx) the assessment unit shall in conformity of the directions issued by the Dispute Resolution panel under sub-section (5) of section 144C, prepare a draft assessment order in accordance with sub-section (13) of section 144C and send a copy of such order to the National Faceless Assessment Centre; (xxxi) the National Faceless Assessment Centre shall, upon receipt of draft assessment order referred to in clause (xxx), finalise the assessment within the time allowed under sub-section (13) of section 144C and serve a copy of Page 46 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; (xxxii) The National Faceless Assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act.” 9.9.1 It is the argument of the Ld.Sr.Counsel that the final assessment order is passed by the jurisdictional AO instead of NaFAC under section 144B of the Act. Hon’ble Karnataka High Court in case of Adersh Developers vs.DCIT, reported in (2024) 158 taxman.com 81 dealt with the issue challenging assumption of jurisdiction by an authority. Before the Hon’ble Court, the assessee therein had challanged the jurisdiction of the assessing officer who issued Notice under secetion 143(2), thereby questioned the validity of the assessment order passed thereon in the Faceless assessment regime. While deciding the issue Hon’ble Court dealt with two aspect:  One is regarding the the point when the assessee is supposed to challenge the validity of jurisdiction of an authority as per section 124 of the Act.  The other is regarding the implementation of Faceless Assessment Scheme 2019 and the subsequent Act.

9.9.2 We refer to to following para of the decision by Hon’ble Karnataka High Court in case of Adersh Developers vs.DCIT(supra). Hon’ble Court considered similar argument raised

Page 47 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 by the assessee before us in Writ Petition. The Hon’ble Court after considering the arguments, held as under: “9.2 The CBDT, with introduction of the Faceless Assessment Scheme [as e- Assessment Scheme] in the year 2019, has issued Notification dated 13-8- 2020 classifying the assessment cases in two classes viz., [a] the assessments in the matters of Central Charge and International Tax Charge and [b] the scrutiny assessment otherwise with the stipulation that all the assessment orders shall be passed by the National e- Assessment Centre through the Faceless Assessment Scheme except in cases assigned to Central Charge and International Tax Charge. The CBDT has further stipulated that any assessment which is not in conformity with the afore shall be treated as non-est. The CBDT, even after the incorporation of the National Faceless Assessment Scheme under section 144B in the IT Act, has issued orders under section 119 of the IT Act on 31-3- 2021 specifying that all assessment proceedings pending as on 31-3-2021 and the assessment proceedings initiated on or after 1-4-2021 [other than those in Central charges and International Taxation charges] shall be completed under section 144B of the IT Act. 9.3 The CBDT, which had issued order dated 13-8-2020 in exercise of its powers under section 119[2] of the IT Act, classifying Central Charges and International Taxation Charges as separate classes when Faceless Assessment Scheme, 2019 was in vogue, has not issued a similar order with the introduction of National Faceless Assessment Scheme with the insertion of the Section 144B of the IT Act. This order dated 13-8-2020 cannot continue with the introduction of the later Scheme, and the order dated 31-3-2021, issued under section 119[1] of the Act, which is essentially an internal communication, cannot be effective, and as such, the arrangement under the previous Scheme ceased to operate. 9.4 The Parliament's intent in stipulating that the concerned Assessing Officer or the Prescribed Income-tax Authority, as the case may be, shall issue notice under section 143[2] of the IT Act is to enable separate commencement of assessment proceedings in different classes of cases. Therefore, the CBDT, both with the notification of the Faceless Assessment Scheme 2019 and incorporation of the National Faceless Assessment Scheme incorporated into the Act under section 144B, has issued orders/notifications treating assessment under Central Charge and International Taxation Charge as separate classes of cases and excluding them from faceless assessment. In which event, the notice under section 143[2] of the IT Act in the cases of Central Charge [and International Taxation Page 48 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Charge] will have to be issued by the concerned Assessing Officer and in the other cases there will have to be faceless assessment with the prescribed authority issuing such notices. 9.5 The settled law is that it must be presumed that every word in a statute is deliberately and consciously incorporated by the legislature and has to be given effect accordingly. If the expression 'the assessing officer or the prescribed authority as the case may be' is not accordingly read, the Parliament's intent in enabling different classes of cases with the stipulation that the assessing officer or the prescribed authority, as the case may be, shall issue notice under section 143[2] of the IT Act will be ignored doing violence to the statutory provision despite the settled proposition.

10. Sri N. Venkataraman submits at the outset that the petition must be dismissed on the ground of maintainability because the petitioner cannot call in question the Assessing Officer's jurisdiction to pass the impugned Assessment Order dated 20-9-2022 [Annexure - A1] when the petitioner, upon receipt of Notice dated 29-6-2021 under section 143[2] of the IT Act, has filed reply to such notice and to different notices issued thereafter under section 142[1] of the IT Act leading to the culmination of the assessment proceedings with the assessment order dated 20-9-2022 [Annexure-A1].

12. Sri N. Venkataraman submits that going by the history of the law, it is self-evident that, post 1-6-2016, either the concerned Assessing Officer or the Prescribed Income-tax Authority can issue notice under section 143[2] of the IT Act, and insofar as the history of the law, the learned Additional Solicitor General submits that the history must be seen in four phases and elaborates thus. THE FIRST PHASE: This phase is prior to 31-5-2016 i.e., before the amendment of Section 143[2] with effect from 1-6-2016. During this phase, the notice under section 143[2]

Page 49 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 of the IT Act could be issued only by the concerned Assessing Officer and the Assessing Officer alone could complete the assessment. THE SECOND PHASE: This phase is with the amendment of Section 143[2] of the IT Act with effect from 1-6-2016. In this phase the notice under section 143[2] of the IT Act could be issued either by the concerned Assessing Officer or the Prescribed Income-tax Authority but the assessment must only be completed by the Assessing Officer. Though this arrangement was put in place with the amendment to Section 143[2] of the IT Act, it was not given effect to. THE THIRD PHASE: The third phase is when Sections 143 [3A] to [3C] are inserted with effect from 1-4-2018 vide the Finance Act of 2018. These amendments empowered the Central Government to make a Scheme through notification in the Official Gazette to impart greater efficiency, transparency and accountability in assessment by ♦ eliminating the interface between the Assessing Officer and the Assessee by using technology to the extent feasible; ♦ optimizing utilization of resources through economies of scale and functional specialization; and ♦ introducing a team-based assessment with dynamic jurisdiction.

The Central Government has issued notifications notifying e-Assessment Scheme. This Scheme was in place only for a short period between 1-4-2018 and 31-3-2021 except in cases falling under section 144[3] of the IT Act. THE FOURTH PHASE The fourth phase is with the introduction of faceless assessment into the IT Act by the Taxation and Other Laws [Relaxation and Amendment of Certain Provisions] Act, 2020 with effect from 1-4-2021. With this amendment, Section 144B is brought into the IT Act stipulating that, notwithstanding anything to the contrary contained in any other provisions of the IT Act, the assessment under section 143[3] or under section 144 shall be made in the faceless manner. The golden rule in this phase is for faceless assessment with the Prescribed Income-tax Authority issuing notice under section 143[2] of the IT Act subject to exception in the cases of Central Charges and International Taxation Charges. In these cases of exception notice under section 143[2] of the IT Act must be issued by the Prescribed Income-tax Authority and served by National e-Assessment Centre and Page 50 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 subsequently,directlydisplayed to the concerned jurisdictional Assessing Officer for carrying out further assessment proceedings.

13. Sri N. Venkataraman canvasses that the CBDT, in consonance with this evolving change, has issued notifications under section 143[2] of the IT Act authorizing the Additional Commissioner/Deputy Commissioner of Income-tax [National E-Assessment Centre] to act as the Prescribed Income-tax Authority for the purposes of this Section. The CBDT has issued the first notification on 25-9-2020, and this is continued by the subsequent notification dated 31-3- 2021. The CBDT has also notified Computer Assisted Scrutiny Selection [CASS, 2020] on 17-5-2021 stipulating that the Prescribed Income-tax Authority shall issue notice under section 143[2] of the IT Act, such notice shall be served by National e-Assessment Centre and subsequently the cases shall be assigned to a specific Assessment Unit in a Regional e- Assessment Centre through an automated allocation system for the purposes of e-Assessment. Insofar as the cases relating to Central and International Taxation Charges, the instructions under CASS, 2020 are that the Prescribed Income-tax Authority shall issue notices and the cases subsequently directly displayed to the concerned jurisdictional Assessing Officer for carrying out further assessment proceedings. Sri N. Venkataraman submits that these instructions are continued under CASS, 2021 dated 13-10-2021.

14. Sri N. Venkataraman emphasizes that the CBDT's Notification dated 13- 8-2020, though issued when the Faceless Assessment Scheme, 2019 was in force, will continue to be effective providing for assessment in cases of Central and International Taxation Charges through the jurisdictional Assessing Officer after the notices are issued by the Prescribed Income-tax Authority, and the operation of this notification, which carves out an exception to the golden rule of assessment through the Faceless Scheme after issuance of notice by the 'Prescribed Income-tax Authority', does not cease to operate with the repeal of the Faceless Assessment Scheme, 2019 with the enactment of Taxation and Other Laws [Relaxation and Amendment of Certain Provisions] Act, 2020 introducing Section 144B. The learned Additional Solicitor General, to support this contention relies upon Section 24 of the General Clauses Act, 1897 and the decision of the Hon'ble Supreme Court in Fibre Boards (P.) Ltd. v. CIT[2015] 10 SCC 333/[2015] 62 taxmann.com 135/376 ITR 596.

16. Sri A. Shankar further submits that the embargo under section 124[3] of the IT Act is to call in question the jurisdiction of the Assessing Officer as defined under section 2[7A] of the IT Act unlike in the present case where the petitioner, without questioning the jurisdiction of the Assessing Officer, is contending that the assessment proceedings could not have been continued with the notice under section 143[2] of the IT Act being issued by the Prescribed Income-tax Authority. Sri A. Shankar, relying upon the decision of the High Court of Gujarat in CIT v. Ramesh D. Patel [2014] 42 taxmann.com 540/225 Taxman 411/326 ITR 492, also submits that in any event the embargo under section 124[3] of the IT Act will be only when an assessee proposes to question the Assessing Officer's territorial jurisdiction.

17. Sri A. Shankar and Sri N. Venkataraman, are heard on the question framed for hearing, but as they have dilated on the question of maintainability of the petition, this Court will have to consider the following two questions:

[a] Whether the Additional Commissioner of Income-tax NaFAC-1(1)(2) could have assumed jurisdiction in respect of the petitioner's case which belongs to Central Charge for issuance of notice under section 143(2) of the Income-tax Act, 1961; and if the aforesaid officer could not have so assumed jurisdiction, whether the proceedings must fail for want of due notice under Section 143(2) of the Income-tax Act, 1961. [b] Whether the petitioner can invoke this Court's jurisdiction under Article 226 of the Constitution of India to call in question the Assessment Order dated 20-9-2022 [Annexure- A1] on the ground that the Prescribed Income-tax Authority who has issued the notice under section 143[2] of the IT Act could not have assumed jurisdiction to issue such notice despite the fact that:

♦ the petitioner, upon receipt of such notice, has participated in the assessment proceedings without demur with these proceedings culminating with the impugned Assessment Order dated 20-9-2022 [Annexure -

Page 52 of 86 IT(TP)A Nos. 303 & 839/Bang/2022

A1], and ♦ the petitioner has filed statutory appeal as against this assessment order 20-9-2022 [Annexure A1], apart from seeking rectification under section 154 of the IT Act and when it is extended the advantage of certain interim orders against the demand computed after the assessment order.

In this regard this Court must refer to the provisions of Section 143 [3A] of the IT Act, which are inserted along with sections 143[3B] and 143[3C] by the Finance Act, 2018 with effect from 1-4-2018.

Post Amendment Prior to Amendment

(2) Where a return has been "(2) Where a return has been furnished under section 139, or in furnished under section 139, or in response to a notice under sub- response to a notice under sub- section (1) of section 142, section (1) of section 142, the Assessing Officer or the the Assessing Officer shall,- prescribed income-tax au thority, as the case may be, if, considers it (i) where he has reason to believe

Page 53 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 necessary or expedient to ensure that any claim of loss, exemption, that the assessee has not deduction, allowance or relief understated the income or has not made in the return is inadmissible, computed excessive loss or has not serve on the assessee a notice under-paid the tax in any manner, specifying particulars of such shall serve on the assessee a notice claim of loss, exemption, requiring him, on a date to be deduction, allowance or relief and specified therein, either to attend the require him, on a date to be office of the Assessing Officer or to specified therein to produce, or produce, or cause to be produced cause to be produced, any before the Assessing Officer any evidence or particulars specified evidence on which the assessee may therein or on which the assessee rely in support of the return: may rely, in support of such claim: Provided that no notice under this Provided that no notice under this sub-section shall be served on the clause shall be served on the assessee after the expiry of six assessee on or after the 1st day of months from the end of the financial June, 2003; year in which the return is furnished.] (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished."

Page 55 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Crucially, the CBDT, given the scope of the Scheme delineated in paragraph 3 of the Scheme, can specify inter alia the class of cases for assessment under the Scheme.

Page 57 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 30. The efficacy of the Communication dated 17-5-2021 to continue the arrangement that prevailed when Faceless Assessment Scheme, 2019, is called in question by the petitioner essentially on the ground that the CBDT order dated 13-8-2020 stands lapsed with the introduction of the National Faceless Assessment Scheme and the Communication dated 17-5- 2021 cannot be relied upon to sustain the same arrangement when the provisions of section 143[2] of the IT Act, recognizing the possibilities of the different classification of classes of income/cases, stipulate that the Assessing officer or the Prescribed Income-tax Authority, as the case may be, shall serve notice for the purposes of Section 143 [3] of the IT Act.

2. This order shall come into force with effect from the 1st day of April, 2021."

9.9.3. From the above arguments of the parties before the Hon’ble Court, and the observation of Hon’ble High Court we are of the view that though in the year 2019, the concept of E- assessment and in 2020, the concept of Faceless Assessment were introduced, yet the Jurisdictional Assessing Officer continues to exercise concurrent jurisdiction with Faceless Assessing Officer. In fact, pursuant to exercise of power under section 120(5) of the Act which empowers CBDT to confer concurrent jurisdiction on two or Page 63 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 more Assessing Officers for proper management of the work, the CBDT has vide Notification No. 64/2020 dated 13/08/2020 conferred power upon the Income-tax Authorities of the National e-Assessment Centre to exercise the power and function of assessment "concurrently" while the original jurisdiction continues with the Jurisdictional Assessing Officer. 9.9.4. The relevant portion of the said Notification is reproduced herein below:— S.O. 2756(E).-In pursuance of the powers conferred by sub- sections (1), (2) and (5) of section 120 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the said Act), the Central Board of Direct Taxes hereby directs that the Income- tax Authorities of the National e-Assessment Centre (hereinafter referred to as the NeAC) specified in Column (2) of the Schedule below, having its headquarters at the place mentioned in column (3) of the said Schedule, shall exercise the powers and functions of Assessing Officer concurrently, to facilitate the conduct of Faceless Assessment proceedings)... (emphasis supplied)

9.9.5. It is also noted that in the E- assessment and Faceless Assessment Scheme, once a case is selected for scrutiny, for the limited purpose of passing assessment order for a particular assessment year, the case is assigned to National e-Assessment Centre and after assessment, the electronic records of the case are to be transferred back to the Jurisdictional Assessing Officer. Further, the e-assessment Scheme, 2019 and Faceless Assessment Scheme issued vide two Notifications each dated 12/09/2019 and 13/08/2020, under section 143(3A) and Page 64 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Section 143(3B) of the Act, clearly stipulate that the provision of section 127 of the Act shall apply subject to exceptions, modifications and adaptations as stipulated therein. In other words, if the Faceless Assessment Scheme has not modified section 127 of the Act, the powers under the said Section would continue to apply to all cases in an unmodified manner.

9.9.6. We rely on Clause (xxi) of the Notifications No. 61/2019 and 62/2019 dated 12/09/2019 issued in exercise of powers under sections 143(3A) and 143(3B) of the Act in order to give effect to the E-assessment Scheme authorises the National e- Assessment Centre to transfer the case of the assessee at any stage of the assessment (i.e., only when the assessment proceeding is pending before the National e-Assessment Centre) to the Assessing Officer having jurisdiction over such case, as the scope of power and functions of National e-Assessment Centre is limited to facilitating the conduct of E-assessment. Based on the above we are of the view that the two Notifications dated 12th September, 2019 enlarge and supplement the power of transfer by authorising the National e-Assessment Centre to transfer at any stage of assessment the case of the assessee to the Assessing Officer having jurisdiction over such case i.e., from Faceless Assessing Officer to Jurisdictional Assessing Officer as an Assessing Officer always having concurrent jurisdiction. 9.9.7. It is noted that Notifications dated 13/08/2020, similarly clarifies the position that, "The provisions of …..Section 127 of the Act shall apply to the assessment made

Page 65 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 in accordance the said Scheme subject to the following exceptions, modifications and adaptations….". 9.9.8. Further Clause (2) of the Notifications No. 60 and 61 of 2020 dated 13/08/2020 enable the Principal Chief Commissioner or Principal Director General in charge of National e-Assessment Centre, at any stage of the assessment i.e. during assessment, to send back the case to the Assessing Officer having jurisdiction over such case, with prior approval of the Board. Clause (2) of the Scheme only authorises a transfer back to the Jurisdictional Assessing Officer holding original jurisdiction, which he never loses as it is only the function of assessment that is to be carried out by the Faceless Assessing Officer having concurrent jurisdiction. Consequently, clause (2) of the Scheme only re-transfers the function of assessment to the Jurisdictional Assessing Officer holding concurrent jurisdiction. Further, the said clause confers power of transfer upon Principal Chief Commissioner or Principal Director General of National e-Assessment Centre and not upon any other Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

Page 67 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 10.1 We also note that the DRP secretariat on the same day forwarded the mail to the DCIT (3) (1) (1), annexing the directions. Scanned and placed herewith is the proof of mail sent

Page 68 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 by the DRP secretariat on 29/01/2022.The time mentioned in the mail sent is 6.44.25pm 10.2 From the above, it is clear that though service to the NFAC/JAO, with in limitation prescribed under sub clause 12 of 144C is not mandatory requirement as per the discussion herein above we note that, there is service of the DRP direction to both the assessee as well as the DCIT(3)(1)(1) on 29/01/2022. As we have already rejected the argument of the Ld.Sr.Counsel regarding the DRP direction to leave from the control of the DRP is not mandatory to be done within the limitation period specified in 144C(12), it is necessary to be done in order to comply with the total time period to pass the final assessment order.

Page 69 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 10.3 We thus analyse time under two criteria: (a) The dates as per the service of DRP directions; and (b) The dates as per the receipt of the direction by the Ld.JAO as stated in the Final assessment order.

(a) The dates on which the DRP directions are issued; 28/01/2022 The DRP direction issued as per DRP ITBA Portal 29/01/2022 The DRP directions mailed to the assessee as well as the DCIT(3)(1)(1).

10.3.1 As per 144C(13) the Assessing Officer shall, in conformity with the directions, complete the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. 02/03/2022 Due date to pass the FAO as per the above date is (since February has only had 28 days in 2022) 01/03/2022 FAO is passed 10.3.2 Thus even if section 13 of the information Act 2000 is considered, the Final assessment order is passed within the period of limitation as per section 144C(13) of the ACt.

Page 70 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 (b) The dates as per the receipt of the direction by the Ld.JAO. 28/01/2022 The DRP direction issued as per DRP ITBA Portal 29/01/2022 The DRP directions mailed to the assessee as well as the DCIT(3)(1)(1). 01/02/2022 The Ld.AO acknowledged the receipt of the DRP direction for completing the assessment proceedings 31/03/2022 Due date to pass the FAO 01/03/2022 FAO is passed 10.3.3 Under both the scenario, the final assessment order is passed as per the limitation envisaged in section 144C(13) of the Act and no delay can be attributed in passing of the Final assessment order on 01/03/2022 Assuming even if there is any bit of delay, the same will have to be condoned as per section 3(1) of the TOLA Act and also as per the order dated 23/01/2020 and 10/02/2021 passed by the Hon’ble Supreme Court, restoring its earlier order for the exclusion of period starting from 15/03/2020 till 30/05/2022 for the purposes of computing limitation prescribed under any general or special laws, in respect of all judicial or quasi-judicial proceedings, in light of the spread of the third wave of the Covid- 19 pandemic.

Page 71 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Accordingly the additional grounds raised by the assessee vide application dated 07/06 2021 stands dismissed. Arguments raised by the Ld.AR on Merits for AY 2017-18:

11. At the outset it is submitted by the Ld.AR that Ground No.4- 5 are not pressed by the assessee. No arguments were made by the Ld.AR. Accordingly, Ground No.4-5 stands dismissed as not pressed.

12.2 He submitted that, the issuance of summons to former employees can in no manner be considered as an 'expert opinion'. He thus submitted that the assessee should have been provided the opportunity to respond to the statements made by the former employees which form a crucial part of the conclusion

Page 72 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 arrived at by the Ld.TPO. It is submitted that the addition has been made based on the examination of the emoloyees in respect of the issues raised the assessee in Grounds 6-14

Page 73 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 3 Corporate, finance and Admin 65 4 Operations & maintenance 409 Total 692

13.3 He submitted that the designations of the personnel employed with assessee in FY 2016-17 is provided in page 164- 180 of the PB. From perusal of the details of employee listing, it can be inferred that, majority of employees are engaged in managing ad sales operations and management (which are categorized above under 'operations and management'. The Ld.AR submitted that the assessee provided diverse range of functions while providing contract marketing support and contract technical support services to the AE which has not been considered by the Ld.TPO. He submitted that the Ld.TPO focused on the fact that certain personnel of the assessee provide research services and hence, the nature of services rendered by the assessee is purely software R&D in nature. The Ld.AR submitted that the Ld.TPO completely ignored the FAR analysis submitted in the Transfer pricing Study Report.

13.4 He submitted that even if the Ld.TPO had to consider the arrangements as involving provision of software development and R&D services, he ought to have considered the segmental information based only on the software development activity and allocated the overheads accordingly. It is submitted that the workings segregating the activities into sub-activity were Page 74 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 also provided as part of the reply to the show cause notice issued by the Ld.TPO. He referred to page 379 of the paper book in support of this submission. The Ld.AR also submitted that, it has considered mark-up of 13% on the costs of all services, and if the split is made then, differential mark-up would be lower than the mark-up for technical services which should be considered for support services. The Ld.AR that even as part of the remand proceedings before the Ld.TPO, the above submission has not been considered.

13.5 The Ld.AR further submitted without prejudice argument to the above, that the assessee has been providing business development, marketing, sales and professional services to its AE since its inception in 2012. The nature of services were subject matter of consideration by the revenue authorities in preceeding years which was never disputed. He submitted that, TP scrutiny assessment proceedings for AY 2013-14, 2014-15, was completed by accepting the arm's length margin computed by the assessee of the international transactions. It is the submission of the Ld.AR that the Ld.TPO has therefore sought to recharacterize the activities of assessee. He placed reliance is placed on the following decisions in support of the argument.: 1) Sandisk India Device Design Centre Pvt. Ltd (IT (TP) A 288 / Bang / 2021 dated 30.06.2022);

Page 75 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 2) Parametric Technology (India) Private Ltd. (IT(TP)A No. 283 / Bang / 2014 dated 01.12.2021).

14.1 On the contrary, the Ld.CIT.DR submitted that, the assessee has been correctly held to be an R & Service provider as against the SWD service and in respect of comparable selected by the Ld.TPO. She placed reliance on the orders passed by the authorities below.

Page 76 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 15. We have heard both the parties and perused the material on record. It is an admitted fact that in preceding assessment years, the assessee's return was subjected to scrutiny and arms length margin was accepted by the authorities under SWD segment. Admittedly there was no dispute regarding the business profile of the assessee. It is also noted that the services rendered by the assessee for the year under consideration is based on the same agreement dated 05/09/2011 with its Singapore AE and agreement dated 01/04/2012 with US AE. For the year under consideration the assessee was issued SCN to show cause as to why the assessee may not be treated as an entrepreneurial entity. The comparable selected by the assessee was rejected and the comparable selected by the Ld.TPO were into SWD and R & D activities. Accordingly the comparables selected by the Ld.TPO were a full fledged entrepreneur, whereas the assessee characterises itself to be a captive service provider.

15.1 Such re-characterization by the Ld.TPO is based on the examination of the employees of the assessee, who were not subjected to cross examination to assessee. The assessee pleads, that without furnishing copies of the examination report of the employees and without providing cross examination of such employees, the revenue cannot re-characterise assessee because, the principles of natural justice are clearly violated in such case. The FAR of the assessee in respect of the services rendered to the AE’s as per the service agreement needs to be properly verified.

Page 77 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Being so, in our opinion, the ends of justice would be met by directing the Ld.AO to furnish copies of the examination report of such employees who were examined by the Ld.TPO/AO and to have a fresh look on this aspect. With this view of the matter, we set aside the findings of the authorities below on this issue also and restore it to the file of the Ld.AO for considering it afresh after furnishing a copy of the statement of employees who were examined.

15.2 As a consequence, Grounds 6 - 14 deserves to be remanded to the Ld.TPO to carry out de novo verification in respect of the nature of services provided by the assessee to its AE’s, based on the FAR analysis. In the event any material is used against assessee, the same must be put to assessee’s notice and proper opportunity of being heard must be granted to the assessee in accordance with law. Accordingly, Grounds 3, 6-14 stands partly allowed for statistical purposes.

16.2 Without prejudice to the above, it is submitted that even unrelated parties would not seek to consider these costs for mark-up purposes. This is because when the client himself has incurred these costs for the service-provider, it would be against trade practice to charge the client again for these costs, that too with a mark-up. As such, the principles as outlined in para 2.99 of the 2017 OECD Transfer Pricing Guidelines would squarely apply to the facts of the assessee's case to support the exclusion of these expenses from the operating cost base.

Page 79 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 ESOP COSTS NOT TO BE CONSIDERED AS PART OF OPERATING COST BASE FOR MARK-UP 16.3 The Ld.AR submitted that costs in relation to ESOP should not be considered in operating cost for applying the arm's length mark-up. He re-iterated arguments reproduced hereinabove in the immediately preceding paras to submit that, ESOP Costs cannot be considered as a part of operating cost base for mark up.

16.4 He further submitted that the costs considered for mark- up should only relate to costs in relation to value-added activities. But ESOP costs reimbursed relate to expenses payable by the assessee to the AE. As such, these are not costs incurred by the assessee towards any value-added activities. The AE has incurred these costs as part of a group synergy and assessee does not perform any value-addition pertaining to these costs.

16.5 Without prejudice to the above, the Ld.AR submitted that inclusion of ESOP cost in the operating cost base for the assessee would result in comparability issues, specifically when the transfer pricing method adopted is sensitive to employee remuneration'. Hence, the ESOP costs should be normalized. He also submitted that assessee's ESOP costs is approximately 24% of the total costs, whereas for the Page 80 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 comparables selected by the Ld.TPO have negligible ESOP costs as compared to the employee costs He placed reliance on documents in support of the claim in the PB referred to as Annexure 2. He further submitted that, for suitable comparability adjustments, the Ld.TPO should re-classify the ESOP costs as non-operating and/or extraordinary expenses for assessee and the comparable in order to determine arm's length price. In this regard,he relied on Rules 10B(2) and 10E3(3) of the Income-tax Rules, 1962. On the contrary, the Ld.CIT.DR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us.

16.6 On the basis of the submissions advances by the Ld.AR, we note that the AE has incurred these costs as part of a group synergy and assessee does not perform any value-addition, and these costs are reimbursed by the assessee. Further these costs are attributable to the ‘Cost plus mark up segments’ and also get factored while computing the cost base. If that is the situation, once again these cannot be added to the cost base. In our opinion, the submissions made by the Ld.Ar needs verification in accordance with law. We therefore remit these issue to the Ld.AO/TPO for necessary consideration in the light of evidences filed by the assessee. Accordingly grounds 18-19 raised by the assessee stands partly allowed.

Page 81 of 86 IT(TP)A Nos. 303 & 839/Bang/2022

17.2 He further submitted that, only if the cumulative approach (considering the receivable and payable) is adopted would it be meaningful under section 92CA read with Rule 10A(v) (which defines a transaction to include closely linked transactions) to consider the outstanding receivable as an international transaction. Further The Ld.AR submitted that Page 82 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 the Ld.TPO himself has acknowledged in his order such a set- off approach adopted by third parties. However, he has omitted to apply the same to the assessee's facts.

17.3 The Ld.AR submitted that the Ld.TPO proceeded to hold that the SBI PLR rate is to be adopted without any basis. He submitted thT The Ld.TPO also did not substantiate, as to why the SBI PLR rate is to be adopted. He submitted that the SBI PLR rate or any other benchmark rate (such as LIBOR) does not satisfy the parameters as per the CUP method.

17.4 The Ld.AR submitted that for AY 2018-19 in assessee’s own case, in identical facts, the Ld.TPO accepted this position and has not undertaken any adjustment on account of outstanding receivables. On the contrary the Ld.CIT.DR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us.

17.5 Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. vs. DCIT in vide its order dated 15.2.2018 has observed that: "There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the Page 83 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 statistics over a period of time to discern a pattern which would indicate that vis-à-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. vs. DCIT (2017) 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions."

17.6 In our view, the period agreed between the parties are to be first considered. If in case there was no specific terms that is agreed to between the assessee and the AE’s for complying with the payment due to assessee then the Ld.TPO computed interest by taking credit period of 60 days.

17.7 The Ld.AR has argued that alternatively, the outstanding receivables may be netted off against the outstanding receivables between the AE’s and the assessee. We have analysed this preposition of the assessee. We note that, if an invoice is raised during the year and the proceeds are realized within the year, but, beyond the stipulated period of agreement, then, the same will not come within the working capital adjustment because working capital adjustment is made with reference to the opening and closing balances as on 1st April and 31st March

Page 84 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 17.8 Therefore not all the outstanding receivables and payable get subsumed in the working capital working. However, in consistent with various Tribunal decisions across the country, we hold that adoption of interest calculated on outstanding receivables at the rate LIBOR + 300 basis points should be adopted as against SBI SLR rates. This in our considered opinion, would meet the ends of justice for both the sides. The Ld.AO/TPO is directed to consider those outstanding receivables those are received beyond 31at March for the financial year under consideration. Accordingly grounds 20-23 raised by the assessee stands partly allowed. For assessment year 2018-19, following are the issues raised by the assessee: 18. Ground No.4-8 in respect of RECHARACTERISING THE SERVICES PROVIDED BY THE ASSESSEE based on the examination of employees of the assessee. Ground No.11-13 are in respect of INCORRECT SELECTION OF COMPARABLES COMPANIES Similar issue has been considered at length in the preceding paras 15 – 15.2 for AY 2017-18.

18.1 Applying the same ratio mutatis mutandis, we remit the issue to the Ld.AO/TPO with similar directions as given in para 15-15.2 herein above.

Page 85 of 86 IT(TP)A Nos. 303 & 839/Bang/2022 Accordingly grounds 4-8 & 11-13 raised by the assessee stands partly allowed. 19. Ground No. 14-18 are in respect of ESOP COSTS and REIMBURSEMENT OF TRAVEL AND OTHER INCIDENTAL COSTS NOT TO BE CONSIDERED AS PART OF OPERATING COST BASE FOR MARK-UP Similar issue has been considered at length in the preceding paras 16 – 16.5 for AY 2017-18.

19.1 Applying the same ratio mutatis mutandis, we remit the issue to the Ld.AO/TPO with similar directions as given in para 16.6 herein above. Accordingly grounds 4-18 raised by the assessee stands partly allowed. In the result appeals filed by assessee for AY.2017-18 & 2018 – 19 stands partly allowed for statistical purposes Order pronounced in the open court on 11th June, 2024.