ZYDUS LIFESCIENCES LIMITED (FORMERLY KNOWN AS CADILA HEALTHCARE LTD.),AHMEDABAD vs. THE DCIT, CIRCLE-1(1)(1), AHMEDABAD

Zydus Lifesciences Ltd. (i) The Additional बनाम/ (Formerly Known as /Joint/Deputy/ Assistant Vs. Cadila Healthcare Ltd.), Commissioner of Income 4th Floor, D wing, Zydus Tax, Corporate Park, Scheme National e-Assessment No.63, Survey No. 536, Centre, Delhi Khoraj (Gandhinagar), Nr. (ii) DCIT, Circle – Vaishnodevi Circle, S.G. 1(1)(1), Highway, Ahmedabad Ahmedabad. �थायी लेखा सं./जीआइआर सं./PAN/GIR No.:AAACC 6253 G (Appellant) .. (Respondent) : Shri Mukesh Patel & Shri Jigar अपीलाथ� ओर से /Appellant by Patel, A.Rs. : Ms. Saumya Pandey Jain, ��थ� की ओर से/Respondent by Sr.D.R. Date of Hearing 12/03/2024 30/05/2024 Date of Pronouncement O R D E R

PER Ms. MADHUMITA ROY - JM:

4. Specific questionnaires were also issued from time-to-time and duly served upon the assessee alongwith notice under Section 142(1) of the Act, the details whereupon were duly filed by the assessee through electronic media on e-proceeding. The assessee had shown total turnover of Rs.65,54,16,69,939/-, on which, net profit before tax has been declared at Rs.24,33,45,21,094/-. The assessee has shown income from house property, capital gain and other sources. During the course of assessment proceeding, it was noticed that the assessee had entered into international transaction as well specified domestic transaction. Further that, it was noticed that transfer pricing adjustment of Rs.39,94,66,330/- in assessee’s (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 4 – own case was made in A.Y.2013-14 and the said adjustment was made above Rs.10 Crores, the appeal whereof was pending. In that view of the matter, a reference under Section 92CA of the Act was made to the TPO upon prior approval of Pr.CIT-1, Ahmedabad for determination of Arm’s Length Price of international transaction and of specified transactions in the light of Clause (b) of para 3.3 of the CBDT Instruction No. 3/2016.

5. Thereafter, the Addl.CIT, TPO, Ahmedabad by and under the order dated 01.11.2019 issued under Section 92CA(3) of the Act passed the order; worked out upward adjustment of Rs.89,20,39,641/- including the following adjustment which was duly served upon the assessee.

Corporate Guarantee adjustment Rs.17,29,73,532/-, Interest on Convertible loans Rs.8,78,43,328/- Reimbursement of expenses Rs.10,63,95,565/- International transactions of sale with Rs.49,62,01,570/- Zydus USA Benchmarking of margins Rs. 60,08,488/- purchase of fixed assets Rs.7,64,781/- Segmental profitability of AE Rs.1,67,22,377/- Sale of shares of ZAHL Rs.51, 30,000/- 6. The same was added to the total income of the assessee.

7. The draft order under Section 144C of the Act was passed in this case by the ACIT, Circle-1(1)(2) on 12.12.2019. The Ld. AO proposed the following addition:

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 5 – A. Income from House Property [as per Return of Income] Rs. 10,34,525/- B. Business Income [as per Return of income] Rs. 14,81,24,50,439/-

Add: Additions / disallowances as discussed above 1. Transfer pricing Rs. 89,20,39,641 (as per Para No. 3.1) 2. Product Registration Expenses (-) Rs. 20,08,34,851 depreciation on the above (as per Para No. 4.7) 3. Trade Mark Registration fee & Rs. 14,14,36,698 Patent Fee (as per Para No. 5.6) 4. Research & Development Rs. 109,74,61,000 (as per Para No. 6.7) 5. Disallowance u/s. 14A Rs. 8,05,91,640 Rs. 2,41,23,63,830/- of the Act (as per Para No. 8.5) Assessed Business Income Rs.17,22,48,14,269/- C. Capital Gain – [as per Return of income] Rs. 11,37,32,825/- D. Income from other sources [as per Return of income] Rs. 80,07,21,966/- Assessed Income Rs.18,14,03,03,585/- Brought forward losses of Rs. 2,41,44,65,028, Rs. NIL for A.Y. 2013-14 Adjusted fully by the Dept. while passing order for A.Y. 2015-16 Gross Total Income Rs.18,14,03,03,585/- (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 6 – Chapter VI-A Rs. 2,39,90,500/- Total Income Rs.18,11,63,13,085 /- Rounded off Rs. 18,11,63,13,090/- U/s. 288A MAT Calculation u/s. 115JB: Book profit as per Return of Income Rs. 2003,62,62,535 Add: Disallowance u/s 14A –as discussed Rs. 8,07,84,146 above Book Profit u/s. 115JB Rs. 2011,70,46,681 Tax @ 18.5% Rs. 372,16,53,636

8. The assessee filed its objection before the Hon’ble DRP-2, Mumbai against the said draft order issued under Section 144C of the Act dated 12.12.2019. The Hon’ble Dispute Resolution Panel- 2, Mumbai passed order under Section 144C(5) of the Act dated 19.03.2021 issuing certain directions to the Ld. AO on very many issues. Subject to the same, the total income of the assessee has been computed as follows: 19. Subject to the above discussion, the total income of the assessee is computed as under:- A. Income from House Property [as per Return of Income] Rs. 10,34,525/- B. Business Income [as per Return of income] Rs.14,81,24,50,439/- Add: Additions / disallowances as discussed above (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 7 – 1. Transfer pricing adjustment on account Rs. 10,29,60,436/- of corporate guarantee (as per Para No. 11) 2. TP adjustments on account of interest Rs. 8,78,43,328/- convertible loans (as per Para No. 12) 3. TP adjustments on account of reimbursement Rs 10,63,95,565/- of expenses ( as per Para No. 13) 4. TP adjustments on account of international Rs. 49,62,01,570/- transactions of sale with Zydus USA ( as per para no. 14)

5. TP adjustments on account of benchmarking of Rs. 60,08,488/- margins ( as per Para No. 15)

6. TP adjustments on account of purchase of Rs. 7,64,781/ fixed assets ( as per Para no. 16) 7. TP adjustments on account of segmental Rs. 1,67,22,377/ profitability of AE ( as per para no. 17)

8. TP adjustments on account of sale of Rs. 51,30,000/- shares of ZAHL (as per para no. 18)

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 8 – 9. Product Registration Expenses (-) Rs. 20,08,34,851 depreciation on the above (as per Para No.7)

10. Trade Mark Registration fee & Rs. 14,14,36,698 Patent Fee (as per Para No. 8)

11. Research & Development Rs. 109,74,61,000 (as per Para No. 9)

12.Disallowance u/s. 14A of the Act Rs.8,05,91,640/- Rs.234,23,50,734/- (as per Para No. 10)

Assessed Business Income Rs. 17,15,48,01,173/- C. Capital Gain – [as per Return of income] Rs. 11,37,32,825/-

D. Income from other sources [as per Return of income] Rs. 80,07,21,966/- Assessed Income Rs. 18,07,02,90,489/-

Brought forward losses of Rs. 2,41,44,65,028/- Rs. Nil for A.Y. 2013-14 Adjusted fully by the Dept. while passing order for A.Y. 2015-16 Gross Total Income Rs. 18,07,02,90,489/- Chapter VI-A Rs. 2,39,90,500/- (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 9 –

Total Income Rs. 18,04,62,99,989 /- Rounded off Rs. 18,04,62,99,990 /- U/s. 288A MAT Calculation u/s. 115JB: Book profit as per Rs. 2003,62,62,535 Return of Income Add: Disallowance u/s 14A – Rs. 8,07,84,146 as discussed Book Profit u/s. 115JB Rs. 2011,70,46,681 Tax @ 18.5% Rs. 372,16,53,636

9. Ultimately, the assessment order was passed determining the total income of the assessee at Rs.18,04,62,99,990/- under Section 143C(B) r.w.s. 144C(5) of the Act under the normal provision of the IT Act and book profit at Rs.20,11,70,46,681/- under Section 115JB of the Act. Interest is charged under Section 234B, 234C & 234D of the Act as applicable after giving credit for taxes paid by the assessee. Relevant to mention that before the DPO, Panel-2, Mumbai, the assessee on 12.02.2021 by way of additional ground challenged the validity of the TPO’s order being barred by limitation. The case of the assessee before the Hon’ble DRP is this that the TPO’s order dated 1st November, 2019 is beyond the time limit prescribed under Section 92CA(3A) r.w.s. 153(4) of the Act. In this particular case, the time limit for completion of assessment, as reference is made to the TPO is 12 months in addition to the time limit prescribed under Section 153(4) of the (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 10 – Act i.e. on 31.12.2019 and the time limit for passing the TP order is before 60 days prior to the date for completion of assessment order i.e. on 31st October, 2019. The transfer pricing order has been claimed to be invalid as the same was passed on 1st November 2019 after the prescribed date on 31st October, 2019.

10. At the time of hearing of the instant appeal, the Ld. Counsel appearing for the assessee submitted before us that the issue is squarely covered in the case of the assessee in the matter of Zydus Wellness Products Limited vs. DCIT, Mumbai, in for A.Y. 2016-17 by the Mumbai Bench. We further relied upon many other judgments passed by the Co- ordinate Bench and the jurisdictional High Court too. On the other hand the Learned DR though vehemently argued in support of the order passed by the authorities below, has not been able to rely upon any judgment in support of the case of the Revenue claiming the TPO’s order is valid.

12. The transfer pricing order dated 1st November, 2019 passed by the TPO is beyond the time limit prescribed under Section 92CA(3A) r.w.s. 153(4) of the Act i.e. 31st October, 2019 in view of the following facts as tabulated hereunder :

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 11 – Event Particulars Date End of the Assessment 31 March 2017 Year for AY 2016-17 Time limit for 21 months from end of the AY 31 December completion of - Section 153(1) of the Act 2018 assessment where no reference is made to a TPO Time limit for 12 months in addition to the 31 December completion of time limit prescribed under 2019 assessment in case Section 153(1) - Section reference is made to 153(4) of the Act TPO Time limit for issuance Any time before 60 days prior 31 October of TP order under to the due date for completion 2019 Sect/o 92CA(3A) of the of assessment under Section Act 153 of the Act – Section 92CA(3A) of the Act Impugned order barred Learned TPO cannot issue any 1 November by limitation order after 31.10.2019 2019

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 13 – Accordingly, the High Court has quashed the TP Order based on the above ground. The copy of final order is awaited. 10.1.16. We have attached the following for your reference: a. Case status as is reflected on the official e-courts website. (CNR No. TCMAUT2030002019) as Exhibit 1. b. Copy of interim order passed by the Hon'ble Madras High court dated 21 November 2019 as Exhibit 2. 10.1.17. Given the relief provided by the High Court, the Assessee request your Honors to grant appropriate relief and oblige for the objection raised by the Assessee. 10.1.18. In view of the above, since in the case of the Assessee, the learned TPO has passed the order on 01 November 2019, therefore, the TP order was not passed before the period of 60 days prior to the date on which, the period of limitation for passing the assessment under Section 153 of the Act expires. Prayer Based on the above, the Assessee humbly submits that the order passed by the TPO under Section 92CA(3) of the Act dated Ist November 2019 is bad in law, without jurisdiction, barred by limitation and void ab initio. Hence the same is liable to be quashed.”

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 14 – 15. In order to adjudicate the issue involved in the case in hand, we need to understand the provisions of Section 92CA(3A) of the Act which reads as follows: “Section 92CA(3A) of the Act provides the period of limitation for making a TP order and the same is extracted below for reference: “(3A) Where a reference was made under sub-section (1) before the 1 day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1 day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires." Section 153(1) of the Act provides the period of limitation for completion of the assessment proceedings under the Act. The relevant provisions of Section 153(1) of the Act are extracted hereunder: “(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty one months from the end of the assessment year in which the income was first assessable. (2) ………. (3) ………. (4) Notwithstanding anything contained in sub-sections (1), (2) and (3), where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case maybe, under the said sub-sections (1), (2) and (3) shall be extended by twelve months. Section 153 of the Act does not permit passing any order after the expiry of 33 months from the end of the assessment year i.e. AY 2016-17 in the present case. Therefore, the time limit for completing assessment in the present case under Section 153(1) r.ws 153(4) of the Act expires on 31 December 2019, (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 15 – The time limit for issuing TP order under sub-section (3A) of Section 92CA of the Act falls any time before 60 days prior to the date on which the time limit under Section 153 of the Act expires, i.e. before 60 days prior to 31 December 2019. Based on the above, 60th day, working backwards from 30 December 2019, i.e. 30 days in the month of December and 30 days in the month of November falls on 01 November 2019 In the light of the above, the time limit for issuing the TP order falls at any time before 01 November 2019 i.e., on or before 31 October 2019.”

“28. The word “date” in section 92CA(3A) would indicate 31.12.2019. But the preceding words “prior to” would indicate that for the purpose of calculating the 60 days, 31.12.2019 must be excluded. The usage of the word “prior” is not without significance. It is not open to this court to just consider the word “to” by ignoring “prior”. The word “prior” in the present context, not only denotes the flow of direction, but also actual date from which the period of 60 days is to be calculated. It is settled law that while interpreting a statute, it is not for the courts to treat any word(s) as redundant or superfluous and ignore the same. In this connection, it is pertinent to note the judgment of the Apex Coult in Grasim Industries Ltd. v. Collector of Customs, [(2002) 4 SCC 297 : 2002 SCC Online SC 413], wherein, it was held as follows: “10. No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used. It is said that every statute is an edict of the legislature. The elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the legislature. Where the words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or alternating (sic altering) the statutory provisions. Wherever the language is clear the intention of the legislature is to be gathered from the language used. While doing so, what has been said in the statute as also what has not been said has to be noted. The construction which (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 18 – requires for its support addition or substitution of words or which results in rejection of words has to be avoided. As stated by the Privy Council in Crawford v. Spooner [(1846) 6 Moore PC 1 : 4 MIA 179] “we cannot aid the legislature's defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there”. In case of an ordinary word there should be no attempt to substitute or paraphrase of general application. Attention should be confined to what is necessary for deciding the particular case. This principle is too well settled and reference to a few decisions of this Court would suffice. (See : Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests [1990 Supp SCC 785 : AIR 1990 SC 1747] , Union of India v. Deoki Nandan Aggarwal [1992 Supp (1) SCC 323 : 1992 SCC (L&S) 248 : (1992) 19 ATC 219 : AIR 1992 SC 96] , Institute of Chartered Accountants of India v. Price Waterhouse[(1997) 6 SCC 312] and Harbhajan Singh v. Press Council of India [(2002) 3 SCC 722 : JT (2002) 3 SC 21] .)”

29. The language employed is simple. 31.12.2019 is the last date for the assessing officer to pass his order under Section 153. The TPO has to pass his order before 60 days prior to the last date. The 60 days is to be calculated excluding the last date because of the use of the words “prior to” and the TPO has to pass order before the 60th day. In the present case, the word “before” used before “60 days” would indicate that an order has to be passed before 1/11/2019 i.e on or before 31.10.2019 as rightly held by the Learned Judge.

32. Let us now examine the relevant procedures relating to Transfer Pricing. After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-Section (1) of Section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under Section 92CA (3) of the Act. As per Section 92CA (3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under Section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Sub-Section (5) of Section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is empowered to issue such direction as it thinks fit for the guidance of the Assessing Officer after considering various details WA No. 1120 of 2021 etc., batch provided in Clauses (A) to (G) thereof. Sub-Section (13) of Section 144C of the Act provides that upon receipt of directions issued under sub-section (5) of Section (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 20 – 144C of the Act, the Assessing Officer shall in conformity with the directions complete the assessment proceedings. It goes without saying that if no objections are filed by the Assessee either before the DRP or the assessing officer to the determination by the TPO, section 92CA(4) would come into operation. Therefore, it is very clear that once a reference is made, it would have an impact on the assessment unless a decision on merits is taken by DRP rejecting or varying the determination by the TPO.

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

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

36. As rightly pointed out by Mr.Ajay Vohra, learned senior counsel for the respondents in WA.Nos.1148 and 1149/2021, the word “may” has to be sometimes read as “shall” and vice versa depending upon the context in which it is used, the consequences of the performance or failure on the overall scheme and object of the provisions would have to be considered while determining whether it is mandatory or directory.

37. At this juncture, it is noteworthy to mention the commentary of Justice G.P.Singh on the interpretation of statutes, Principles of Statutory Interpretation (1st Edn., (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 21 – Lexis Nexis 2015), which is quoted below for ready reference: “The intention of the legislature thus assimilates two aspects: In one aspect it carries the concept of “meaning” i.e. what the words mean and in another aspect, it conveys the concept of “purpose and object” or the “reason and spirit” pervading through the statute. The process of construction, therefore, combines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the “cardinal principle of construction”.

39. Upon consideration of the judgments and the scheme of the Act, we are of the opinion that the word “may” used therein has to be construed as “shall” and the time period fixed therein has to be scrupulously followed. The word (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 22 – “may” is used there to imply that an order can be passed any day before 60 days and it is not that the order must be made on the day before the 60th day. The impact of the proviso to the sub-section clarifies the mandatory nature of the time schedule. The word “may” cannot be interpreted to say that the legislature never wanted the authority to pass an order within 60 days and it gave a discretion. Therefore, the learned Judge rightly held the orders impugned in the writ petitions as barred by limitation, as the Board, in the Central Action Plan, has specified 31.10.2019 as the date on which orders are to be passed by the TPO, reiterating the time limit to be mandatory. V. Conclusion.

40. Ergo, we find no reasons to interfere with the order of the Learned Judge, which is impugned herein and accordingly, dismiss these intra-court appeals, but without costs. Consequently, connected miscellaneous petitions are closed.”

“2. The Department contends that since the Transfer Pricing Officer namely, the second respondent herein has passed the order on 01.11.2019, the said order is within the period of limitation prescribed under Section 92 CA(3A) of the Income Tax Act. However, the same is disputed by the petitioner, who would contend that sixty days period expired on 31.10.2019 and therefore, the impugned order of the (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 23 – Transfer Pricing Officer, the second respondent herein is barred by limitation.

3. The very same issue was raised in a batch of writ petitions, filed by various other assessees and the said writ petitions were allowed holding that the order of the Transfer Pricing Officer is barred by limitation. Aggrieved by the same, the Department preferred Writ Appeals in W.A. Nos.1120 of 2021 etc. batch before the Division Bench of this Court. By common judgment dated 31.03.2022 in the said Writ Appeals, after giving due consideration to the very same contentions that have been raised by the Department in this writ petition, the Division Bench, accepting the findings of the learned Single Judge, confirmed the same by holding that the last date for the Transfer Pricing Officer to pass the order was on 31.10.2019 and since the order was passed on 01.11.2019, the said order is barred by limitation.

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 24 – 20. We have further considered the judgment passed by the ITAT, Mumbai Benches in the case of M/s. Shell India Markets Pvt. Ltd. vs. ACIT, wherein the similar issue cropped up, were settled in favour of the assessee following the judgment passed by the Hon’ble Madras High Court in the case of Pfizer Healthcare India Pvt. Ltd. (supra). The relevant observation whereof is as follows:

22. Thus, following the principle of ratio laid down by the Hon’ble Madras High Court, the time limit for passing the ld. TPO order in the case of the assessee was 29/01/2015 as noted above which is not in dispute. Since the ld. TPO order has been passed on 30/10/2015 which is clearly barred by limitation by one day by virtue of time limit provided u/s.92CA (3) and consequently, the same has to be treated as bad in law and the same is hereby quashed. Thus, in such a situation, if there is no TPO order, consequently the entire transfer pricing adjustment proposed by the ld. TPO in international transaction becomes non-est and to be quashed and being barred by limitation.

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 25 – “30. Now another issue which crops up, is, whether, once the TPO order is held to be nullity or quashed on the ground of being barred by limitation, then could AO have passed the draft order treating it to be as ‘eligible assessee’. Section 144C was brought on the statute as special scheme of assessment and to provide alternative dispute resolution scheme to certain categories of „eligible assessee‟. Section 144C provides that the AO has to pass and forward a draft assessment order in the case of eligible assessee‟ if he proposes to make any variation which is prejudicial to the interest of such assessee, Sub-section 15 has defined „eligible assessee‟ for the purpose of section 144C. The relevant provisions of section 144C(1) and sub section 15 reads as under:- 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee. . . . (15) For the purposes of this section,— (a) "Dispute Resolution Panel" means… (b) "eligible assessee" means,— (i) any person in whose case the variation referred to in sub- section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company.”

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 27 – 35. Accordingly, once the assessee becomes an „ineligible assessee‟, the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, all consequential proceedings on the basis of the said order fail. In the instant case, a reference was made by the Ld. AO to the Ld. TPO as per the provisions of section 92CA(1) of the Act and accordingly the timelines prescribed u/s 153 of the Act remain extended by a year in view of the 3rd proviso of section 153 of the Act. Accordingly, the time limit to complete assessment proceedings u/s 143(3) of the Act in the instant case expired on 31 March 2016. As on the date of passing draft assessment order u/s 144C(1) of the Act i.e. on 29 March 2016, the Ld. AO had already received the order passed by the Ld. TPO dated 31 January 2016, which as discussed above, is time barred, illegal and void ab initio, thereby making the Appellant not an eligible assessee u/s 144C(15) of the Act. In view of the same, the Ld. AO was ostensibly required to pass the final assessment order u/s 143(3) of the Act on that day. Having said that, the draft assessment order passed by the Ld. AO under the provisions of law is also illegal and void ab initio which deserves to be quashed.

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 31 – 46. Thus taking into the provisions of law and the judgment referred to above, we hold that the final assessment order passed on 31 January 2017 is beyond the prescribed period of limitation under section 153 of the Act expiring on 31 March 2016, thus, barred by limitation and is hereby quashed.

reveal that the assessee has challenged validity of the assessment order passed u/s 143(3) r.w.s. 144(13) of the Act and the validity of the order passed by TPO u/s.92CA(3) of the Act. The issue raised by the assessee in the aforesaid additional grounds goes to the root of validity of assessment. It is no more resintegra that the assessee can raise legal ground at any stage, even during the appellate proceedings, if the facts are already on record. No fresh documentary evidence is required to be adduced for adjudicating aforementioned additional grounds. Hence, the additional ground No.40 & 41 are admitted for adjudication on merits.

24. The assessee has furnished a table giving relevant dates for calculating limitation for passing order u/s. 92CA(3) of the Act. The same is reproduced herein below: Particulars Ground No.41 Validity of Order passed under section 92CA(3) of the Act Calculation of due date for passing transfer pricing order under section 92CA(3) Asst. Order due date as per section 31 March 2013 153 of the Act for AY 2009-10 Transfer Pricing Order due date: Number of Days in 30 March 2013 (At least sixty days before the Number of Days in 28 period of limitation referred to in February 2013 section 153 of the Act) Number of days in 2 January 2013 Total Number of 60 days (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 32 – Deadline for passing TP Order for 29 January 2013 AY 2009 10 Date of TP order passed for A.Y 30 January 2013 2009-10 Delay 1 Day Delay in passing TP Order 25. The assessee has determined the period of limitation for passing the order by TPO in accordance with method elucidated by the Hon'ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. vs. JCIT (supra). Since, the issue raised in the present appeal is similar to the one adjudicated by us in the case of M/s. Mondelez India Foods Private Limited in A.Y.2010-11, the findings given therein would mutatis mutandis apply to the present appeal by the assessee. Consequently, ground No.40 and 41 raised in the appeal are allowed for parity of reasons.

26. The grounds/other additional grounds raised

in the appeal have become academic, hence, they are left upon for adjudication if the need arises.

27. In the result, appeal by assessee is allowed.

28. The appeal by the Revenue has become infructuous as the order passed under section 92CA(3)of the Act is held bad in law. Once bedrock for passing the assessment order is eroded the entire proceedings, arising therefrom are vitiated. Consequently, appeal of the Revenue is dismissed.

29. In the result, appeal of the assessee is allowed and that of Revenue is dismissed.

25. Accordingly, following the aforesaid decisions, we quashed the final assessment order being barred by period of limitation u/s.92CA (3). Once we have quashed the assessment order then, all the grounds raised by the Revenue as well as the assessee become infructuous.”

22. The assessee before us relied upon another judgement passed by Mumbai benches in the case of Atos India Private Limited on the same issue which was decided in favour of the assessee.

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 33 – However since the ratio of the said judgement has already been relied upon by the Mumbai benches in the case of M/s Shell India markets Private Limited (supra), observation where of has already been narrated hereinabove, the same is not reiterated.

9. On the other hand, the learned Departmental Representative submitted that the orders passed by the lower authorities are within the time limit prescribed under the Act and therefore are validly passed.

11. We find that while interpreting the provisions of section 92CA(3A) of the Act, the Hon’ble Madras High Court in Pfizer Healthcare India Private Ltd (supra), observed as under:- “30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 a m of 1-1- 2020. However, this would mean that an order of assessment can be passed at 12 a m on 1-1-2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31-12-2019. The period of 21 months therefore, expires on 31-12-2019 that must stand excluded since section 92CA(3A) states 'before 60 days prior to the date on which the period of limitation referred to section 153 expires'. Excluding 31-12-2019, the period of 60 days would expire on 1-11- 2019 and the transfer pricing orders thus ought to have been passed on 31-10-2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31-10-2019. The impugned orders are thus, held to be barred by limitation.”

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 36 –

13. We find that the coordinate bench of the Tribunal in Mondelez India Foods (P.) Ltd. v. Addl. CIT [IT Appeal No. 1492 (Mum.) of 2015, dated 14/11/2023, held that once the order of the TPO is beyond the period of limitation and thus is not a valid order, there is no “eligible assessee” in terms of the definition provided in sub-section (15) to section 144C of the Act. Further, it was held that if there is no eligible assessee, no reference to DRP could have been made. Therefore, in view of the above, in the present case, the assessee does not qualify to be an “eligible assessee” as per section 144C(15)(b) of the Act. Thus, the AO erred in assuming the jurisdiction under section 144C(1) of the Act for passing the draft assessment order on 30/12/2019. Accordingly, the time limit for completing the assessment in the present case, as per section 153 of the Act, expired on 31/12/2019, after including the extended time period provided under section 153(4) as well as section 92CD(5)(b) of the Act as noted above. However, in the present case, the impugned final assessment order was passed by the AO on 06/04/2021, and therefore the same is also barred by limitation and is void ab initio. 14. Accordingly, the impugned final assessment order passed on 06/04/2021, is quashed and the additional grounds raised by the assessee are allowed. As we have quashed the impugned order for this short reason, we see no need to deal with other issues raised by the assessee in the present appeal. Those aspects of the matter, as of now, are rendered academic and infructuous.”

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 37 – 24. Apart from that the appellant relied upon the judgement passed by the Mumbai benches in assessee’s own case, in Zydus Wellness Products Ltd versus DCIT, Mumbai in for Assessment Year 2016-17 a copy whereof has also been submitted before us by the Learned AR.

25 It appears that while dealing with the issue the judgement passed by the Hon’ble Madras High Court in the case of Pfizer healthcare India Private Limited. (supra) was duly considered by the Mumbai Benches. The relevant observation whereof is as follows: “………In the present case, undisputedly the order was signed by the Transfer pricing Officer on 01/11/2019, hence, the date of the order is the date on which the competent authority signed the order and not the date mentioned in the cause title of the order. Therefore, to ascertain as to whether the order has been passed within the period of limitation as mandated by the Act, the same has to be examined with reference to date of order i.e. 01/11/2019.

5. The time limit for completion of the assessment has been specified in section 153 of the Act. As per the provisions of sub-section (1) to section 153 of the Act, no assessment order shall be made u/s.143(3) or 144 of the Act at any time after the expiry of 21 months from the end of the assessment order in which the income was first assessable. Sub-section (4) to section 153 of the Act extends the period of limitation for passing the assessment order by 12 months, where reference u/s.92CA(1) of the Act is made to the TPO. Section 92CA(3A) of the Act specifies time limit for passing an order by the TPO, where a reference is made u/s.92CA(1) of the Act. Sub-section (3A) to section 92CA mandates that order under sub-section (3) may be made at any time before 60 days prior to the date on which the period of limitation referred to in section 153 for making the order of assessment or reassessment as the case may be, expires. The Hon'ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. (supra) has explained the manner of (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 38 – computation of limitation for passing of the order u/s. 92CA(3) of the Act. The relevant extract of the observations by the Hon’ble High Court reads as under: “30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 a m of 1-1-2020. However, this would mean that an order of assessment can be passed at 12 a m on 1-1-2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31-12-2019. The period of 21 months therefore, expires on 31-12- 2019 that must stand excluded since section 92CA(3A) states 'before 60 days prior to the date on which the period of limitation referred to section 153 expires'. Excluding 31-122019, the period of 60 days would expire on 1-11-2019 and the transfer pricing orders thus ought to have been passed on 31-10-2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31-10- 2019. The impugned orders are thus, held to be barred by limitation.”

(Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 39 – held that the order passed by the TPO on 01/11/2019 is beyond the limitation period prescribed under the Act, hence, bad in law.

8. Thus, in light of the provisions of section 92CA(3A) r.w.s. 153 of the Act as explained by the Hon’ble Madras High Court and consistently followed by various Benches of the Tribunal, we have no hesitation in holding that the order passed by the TPO in the present case is barred by limitation.

10. As we have decided the jurisdictional issue in favour of the assessee, the other grounds raised

by the assessee challenging additions on merit have become academic, hence, not deliberated upon.”

26. After careful reading of the above judgement it appears that the issue in regard to the maintainability of the Transfer Pricing Officer’s order dated 01.11.2019 has been decided in favour of the assessee holding the same barred by limitation since the said order was passed beyond the time-limit prescribed under Section 92CA(3A) of the Act read with Section 153 of the Act. The impugned order therein was found to have been passed violating the mandates prescribed under 92CA(3A) of the Act after expiry of 60 days to the date on which the period of limitation is referred in Section 153 of the Act for making the order of assessment and, thus, held invalid. In that view of the matter the Assessing Officer was also not made available with the extended period of limitation for passing of the assessment order in terms of provisions of Section 153(4) of the Act. The final assessment order passed in the (Zydus Lifesciences Ltd. vs. DCIT) A.Y.– 2016-17 - 40 – said matter dated 30.06.2021 was, therefore, also found to be time barred and thus quashed.

This Order pronounced on 30th /05/2024

Sd/- Sd/- (WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 30/05/2024 S. K. SINHA* True Copy आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,