M/S. WIPRO GE HEALTHCARE PVT LTD vs. DEPUTY COMMISSIONER OF INCOME TAX
What did the High Court hold?
The High Court held that the AO erred by not following the mandatory procedure of issuing a draft assessment order after the remand from the ITAT. The impugned order was quashed.
What were the facts?
The petitioner challenged an assessment order for AY 2009-10. The ITAT had previously remanded certain issues back to the Assessing Officer (AO) and Transfer Pricing Officer (TPO) for fresh consideration.
What were the issues?
Whether a fresh draft assessment order is required after a limited remand by the ITAT. Whether the AO correctly followed the procedure prescribed under Section 144C after the remand.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF FEBRUARY, 2020
BEFORE
THE HON’BLE MR. JUSTICE KRISHNA S.DIXIT
WRIT PETITION NO.17125 OF 2018 (T-IT)
BETWEEN: M/S. WIPRO GE HEALTHCARE PVT LTD., NO.4, KADUGODI INDUSTRIAL AREA, WHITEFIELD, BANGALORE-560067. REPRESENTED BY ITS AUTHORIZED SIGNATORY SHRI KEDAR KULKARNI.
... PETITIONER (BY SMT. S R ANURADHA, ADVOCATE)
AND:
DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(2), BENGALURU – 560 001.
GOVERNMENT OF INDIA, MINISTRY OF FINANCE, INCOME TAX DEPARTMENT, 7TH FLOOR, INCOME TAX OFFICE, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU -560 001. REP BY ITS SECRETARY. ... RESPONDENTS (BY SRI. K V ARAVIND, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 12.03.2018 FOR A/Y 2009-10 PASSED BY R-1 VIDE ANNEX-A.
THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN B GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:
2 ORDER Petitioner being a Corporate Assessee is knocking at the doors of Writ Court for assailing the Assessment Order dated 12.03.2018, made by the first respondent at Annexure-A for the Assessment Year 2009-10 whereupon the demand for payment of tax so assessed, has been raised.
After service of notice, respondents having entered appearance through their Panel Counsel resist the writ petition making submission in justification of the impugned order; it is also submitted that the petitioner has got an alternate remedy of appeal and therefore, it should be relegated thereto. 3. Having heard the learned counsel for the parties and having perused the petition papers, this Court grants reprieve to the petitioner for the following reasons: a) the return of income filed by the petitioner for the Assessment Year 2009-10 was selected for scrutiny by issue of Notice under Section 143(2) of the Income Tax Act, 1961; since the value of international transactions of the petitioner exceeded the prescribed limit, a reference was made to TPO for determining the arm’s length price of the subject international
3 transactions entered with the associated enterprises of the petitioner; the TPO passed an order u/s 92CA on 29.01.2013 determining the ALP adjustment that was added to the returned Income along with the allowance u/s 10A; accordingly, the draft Assessment Order having been made on 04.03.2013 was objected to by the petitioner; the Dispute Resolution Panel issued directions u/s 144C (5) of the Act on 10.10.2013 which resulted into the Assessing Officer making a final Assessment vide order dated 29.11.2013;
b) the Revenue went in appeal to the Income Tax Appellate Tribunal which partly allowed the appeal vide order dated 06.10.2017; paragraphs 7 & 8 of the said order being relevant for adjudication read as under: “7. Being aggrieved, the revenue is in appeal before us. Ground Nos.1,6 and 7 are general in nature and do not require any adjudication. Ground No.2 challenges the direction of the Hon’ble DRP in directing the AO to carry out working capital adjustment as per actual working without putting any artificial cap. The TPO has put an artificial limit on working capital adjustment. The law is quite settled to the extend that there should not be any artificial cap on working capital adjustment. The benefit of working capital adjustment should be granted based on the actual working as per methodology adopted for working out working capital adjustment. It requires to be ensured that same methodology is adopted in respect of both tested party as well as comparable entities.
4 Nothing is discernible from the material on record on this aspect of the issue. Therefore, we remit this issue back to the file of the AO/TPO to compute working capital adjustment on the above lines an grant the adjustment without any cap. 8. Third ground of appeal challenges the direction of the Hon’ble DRP to include FCS Software Solutions and Thinksoft Global Services Ltd., we find from record that TPO excluded these companies on the ground that working capital adjustment in both the cases was more than 4%. Though, this cannot be a valid reason for exclusion of the entities for the purpose of comparability but there is no finding by the TPO that these companies pass through all the filters applied by the TPO. Hence, we remand this issue back to the file of the TPO/AO to examine whether these two comparables pass through all the filters applied by the TPO if so to include the same in the list of comparable.”
c) the reasoning contained in subject paragraphs of the ITAT order makes it apparent that there was a limited remand of the matter for judicious consideration afresh and therefore, the mandatory procedure prescribed u/s 144C of the Act to the extent of such remand ought to have been followed; there is force in the contention of the Assessee that ordinarily, a remand results into reconsideration of the matter regardless of its scope, and therefore, there ought to have been a draft order to which the Assessee would have responded; there may be exceptions to this general rule as rightly illustrated by the Panel Counsel for the Revenue is
5 true, but case of the petitioner does not fit into that inasmuch as, the remand order expects a judicious determination by a fresh look, certain fixed factors/parameters notwithstanding; there cannot be a mechanical exercise in a case of remand of this nature;
d) the contention vehemently advanced by the Panel Counsel for the Revenue that there is no scope for judicious determination after the remand, is bit difficult to accept inasmuch as, the remand order specifically directs the Assessment Officer to carryout Working Capital adjustment disregarding the artificial cap; this apart, the ITAT has directed re-examination as to whether the two comparables ie., FCS Software Solutions and Thinksoft Global Services Limited pass through all the filters applied by the TPO; this can not be done mechanically; thus, there is a remand which warrants judicious determination of the matter remanded;
e) the impugned order dated 12.03.2018 has been structured on a wrong legal premise that there is no need for judicious determination of the matter as per the procedure prescribed u/s 144C(1) of the Act, when it is otherwise, as
6 already discussed in the paragraphs supra; this apart, what prejudice would have been caused to the Revenue had the mandatory procedure prescribed under this provision was otherwise adhered to, is not forthcoming; the procedure prescribed is intended to meet out a fair treatment to the Assessee; even this aspect has not been adverted to by the answering respondent; thus, there is an error of great magnitude warranting indulgence of Writ Court for setting the same right; and,
f) the contention of the Revenue that the petitioner has got an alternate remedy of appeal and therefore, it should be relegated thereto does not much impress this Court; the argument of alternate remedy does not bar the writ jurisdiction of the Court when the impugned order has a demonstrable error of law on it’s face resulting into prejudice to the Assessee; nothing is stated as to how the Revenue would be affected by the invocation of writ jurisdiction by the Assessee when full opportunity is given to both the sides; added to this, what difference an appeal would have made to the matter is also not forthcoming.
In the above circumstances, this writ petition is allowed; a Writ of Certiorari issues quashing the impugned order and the consequential demands; the matter is remitted to the first respondent for consideration afresh, in accordance with law after hearing the petitioner or its agent.
All contentions of the parties are kept open.
No costs.
Sd/-
JUDGE
Bsv
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