S. 144(C)(13) Timeline Mandatory: Bombay HC rules Transfer Pricing Addition Non Est for Delay in DRP Directions Implementation [Read Order]
The Court rejected the Revenue's submission that the timelines are not applicable in remand proceedings, noting that such interpretation would make the entire scheme and mandate of Section 144(C)(13) redundant.
Transfer - pricing - Taxscan
Transfer - pricing - Taxscan
The Bombay High Court has held that the timeline under Section 144(C)(13) of the Income Tax Act, 1961 is mandatory, and failure to complete assessment within this period renders the transfer pricing addition as non est.
Archroma International (India) Private Limited, the Petitioner challenged the inaction of the Income Tax authorities in not giving effect to the directions dated 19th March 2020 issued by the Dispute Resolution Panel ("DRP").
The petitioner had filed its Return of Income for Assessment Year 2010-2011 declaring total income of Rs.78,58,40,928 and claiming a refund of Rs.3,32,90,793. During assessment proceedings, the Transfer Pricing Officer proposed an adjustment of Rs.5,26,86,111 concerning 'Corporate Service Charges'. After multiple rounds of proceedings, including appeals before the Tribunal and DRP, fresh directions were issued by the DRP on 19th March 2020 in remand proceedings.
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The core issue before the Court was whether the transfer pricing addition of Rs.5,26,86,111 should be treated as non est on the ground that the proceedings to give effect to the DRP's directions dated 19th March 2020 are barred by limitation.
Counsel for the Petitioner, Mr. J.D. Mistry, Senior Advocate, submitted that Section 144(C)(13) of the Act imposes a strict timeline requiring the Assessing Officer to complete the assessment within one month from the end of the month in which DRP directions are received. He argued that failure to comply with this mandatory timeline renders the transfer pricing addition as non est.
Per contra, Ms. Sushma Nagaraj, appearing for the Revenue, contended that the timelines under Section 144(C)(13) would not apply in remand proceedings. She submitted that the Assessing Officer was in the process of completing the assessment and that non-compliance with the timeline does not vitiate the proceedings.
The Court analyzed the scheme of Section 144C and observed that the language of Section 144(C)(13) is clear, unambiguous and mandatory. The provision states that "the Assessing Officer shall, in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received."
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The Division Bench of Justices B.P. Colabawalla and Amit S. Jamsandekar held that the Act does not make any distinction between ordinary cases and cases on remand. The provisions of Section 144(C)(13) apply equally to both situations.
The Court rejected the Revenue's submission that the timelines are not applicable in remand proceedings, noting that such interpretation would make the entire scheme and mandate of Section 144(C)(13) redundant.
The Court declared that the proceedings concerning the transfer pricing addition of Rs.5,26,86,111 are barred by limitation and outside the purview of Section 144(C)(13) of the Act. Consequently, the transfer pricing adjustment was treated as non est, and the Respondent was directed to recompute the Petitioner's total income for AY 2010-2011 by excluding the transfer pricing adjustment.
The refund along with statutory interest under Section 244(A) was ordered to be paid to the Petitioner within eight weeks.
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