Vol. 11 Issue 11.1 November 9, 2015

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Direct Tax Special edition

Key judgements rendered by the Supreme Court

1. Deduction in respect of discounted value of interest on debentures

paid at the time of issuance of the debentures

The Supreme Court (“SC”) in the case of Taparia Tools Ltd.1, reversing the

Bombay High Court‟s judgement, held that the discounted value of interest on

debentures paid at the time of issuance of the debentures is fully deductible

under section 36(1)(iii) of the Income tax Act, 1961 (“IT Act”) in the year of

payment itself, irrespective of it having been amortized over the tenure of the

debentures in the books of accounts. The SC held that under IT Act, revenue

expenditure is deductible in the year in which it is incurred in case of taxpayer

following mercantile basis of accounting, and the treatment of such

expenditure as deferred revenue expenditure in the books of accounts will not

override this position, as also held by it in the case of Kedarnath Jute Mfg.

Co. Ltd.2 The SC clarified that there is no concept of deferred revenue

expenditure under the IT Act, and in the case of Madras Industrial Investment

Corpn Ltd.3, the taxpayer was allowed to claim the discount on issue of

debentures over the tenure of the debentures since the taxpayer preferred

such a treatment.

2. Depreciation in respect of assets temporarily leased out pending

commencement of business

The SC in the case of K.M. Sugar Mills Ltd.4 , reversing the Allahabad High

Court‟s judgement, allowed depreciation on assets (i.e. cylinders), originally

purchased for the taxpayer‟s manufacturing business but temporarily leased

out to third persons pending commencement of the manufacturing business.

The SC held that the purpose of the taxpayer originally purchasing the assets

was irrelevant, and once the income from leasing of the assets is treated as

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“business income”, the depreciation on the assets cannot be denied on the

basis that the assets were originally purchased for the manufacturing

business and not for leasing.

3. Taxation of income from renting of property

The SC in the case of Chennai Properties & Investments Ltd.5 , reversing the

Madras High Court‟s judgement, held that if the business of the taxpayer is to

acquire and let out properties, then the rental income earned from such

properties should be assessable as “business income” and not as “income

from house property”.

4. No choice to the taxpayer of not claiming unabsorbed brought forward

depreciation if depreciation of the current year is claimed

The SC in the case of Seshasayee Paper and Boards Ltd.6 , affirming the

Madras High Court‟s judgement, held that in the matter of priority of set off of

depreciation and investment allowance in computing the “business income” of

the current year, it is not open to the taxpayer to claim the set off of the

depreciation of the current year alone under section 32(1) of the IT Act and,

carry forward the unabsorbed brought forward depreciation of earlier years.

The position would have been different if the taxpayer had not claimed any

depreciation in the current year at all. However, if the depreciation is claimed

in the current year, then the entire depreciation, including the unabsorbed

brought forward depreciation [which partakes the character of depreciation of

the current year by virtue of the fiction created by section 32(2) of the IT Act]

is to be taken into account.

5. Deduction in respect of housing projects under section 80-IB(10) of the

IT Act

The SC in the case of Sarkar Builders.7 , affirming decision of various High

Courts , held that the provisions of section 80-IB(10) of the IT Act, substituted

by the Finance (No. 2) Act, 2004 with effect from April 1, 2005 (especially

clause (d) of the Explanation thereto restricting the commercial area in the

housing project), applied only prospectively to housing projects approved by

the local authorities on or after April 1, 2005 , and could not be applied to

housing projects approved by the local authorities before April 1, 2005. The

SC held that the said clause (d), being in the nature of a restriction on the

maximum commercial area in a housing project, is inextricably linked to the

approval of the housing project, and where a housing project with commercial

area higher than the maximum limit specified in the said clause (d) is

approved prior to the introduction of the said clause(d) [i.e. under the

Tier 2 firm in International Tax Review,

World Transfer Pricing 2016 Guide

2015:

Tier 1 firm in International Tax Review,

World Tax 2015 Guide to World‟s

Leading Tax Firms for the eighth

consecutive year

Tier 2 firm in International Tax Review,

World Transfer Pricing 2015 Guide

2014:

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Review, World Tax 2014 Guide to

World‟s Leading Tax Firms

Tier 2 firm in International Tax

Review, World Transfer Pricing 2014

Guide

Most Active Transaction Advisor for

Private Equity, M&A by Venture

Intelligence

Mukesh Butani, New Delhi

+91 11 3066 3010

mukesh.butani@bmrlegal.in

Rajeev Dimri, New Delhi +91 124 669 5050 rajeev.dimri@bmradvisors.com

Amit Jain

Suchint Majmudar Kaushik Saranjame

Sahiba Tandon Niraj Shah

erstwhile section 80-IB(10) of the IT Act] and completed in accordance with

such approval, the restriction of the maximum commercial area could not be

applied retroactively and deduction under that section could not be denied.

Key judgements relating to tax holiday provisions

6. Deduction under section 10B of the IT Act where part of the activities

were outsourced

The Allahabad High Court in the case of MKU (Armours) Pvt. Ltd.8 , reversing

the Tribunal‟s judgement, held that benefit of section 10B of the IT Act has to

be allowed to the taxpayer even if part of the manufacturing process was

outsourced by the taxpayer. In coming to this decision, the Allahabad High

Court noted that only a part of the manufacturing process was outsourced by

the taxpayer (which was also carried out under the direct control and

supervision of the taxpayer‟s employees), and that a new product came into

existence at the end of the entire manufacturing process.

The Allahabad High Court also held that upon transfer of the undertaking on

a lock, stock and barrel basis, the successor was eligible to claim the

deduction under section 10B of the IT Act in respect of the undertaking for the

unexpired period.

7. Deduction under section 10A of the IT Act where part of the software

development work was sub-contracted to an Associated Enterprise

abroad

The Karnataka High Court in the case of Mphasis Software & Services Pvt.

Ltd.9 , affirming the Tribunal‟s judgement, held that taxpayer who had sub-

contracted part of its “on-site” software development work to an Associated

Enterprise (“AE”) abroad was eligible to claim deduction under section 10A of

the IT Act in respect of the same. The Karnataka High Court noted the

following:

Only a part of the “on-site” work was sub-contracted to the AE.

The Master Service Agreement provides for the AE to work under the

complete control and supervision of the taxpayer.

The software produced by the AE during the “on-site” work is required to

be as per the specifications given by the taxpayer.

The AE has no connection or dealings with the end customers.

The taxpayer provides all the relevant information and inputs to the AE

Gokul Chaudhri, New Delhi

+91 124 669 5040

gokul.chaudhri@bmradvisors.com

Bobby Parikh, Mumbai

+91 22 6135 7010

bobby.parikh@bmradvisors.com

Amit Jain, Pune +91 20 668 19010

amit.jain@bmradvisors.com

on behalf of the end customers.

The AE is only answerable to the taxpayer and not to the end customers.

The proprietorship of the software remains with taxpayer who is solely

responsible for risks and rewards arising out of this sub-contracting

arrangement.

Therefore, the Karnataka High Court regarded the “on-site” work sub-

contracted to the AE as being carried out on behalf of the taxpayer and

overruled the Revenue‟s argument that there was no nexus between the work

carried out by the taxpayer and “on-site” work sub-contracted to the AE, and

upheld the taxpayer‟s deduction claim under section 10A of the IT Act.

8. Deduction under section 10A of the IT Act upon transfer of employees

to a STP Unit

The Pune bench of the Tribunal in the case of iGate Computer Systems Ltd.10

, held that the taxpayer is eligible to claim deduction under section 10A of the

IT Act in respect of its STP Unit even if certain employees of another unit

have been transferred to the STP Unit. The Tribunal held that there was no

formative condition under section 10A of the IT Act relating to any specific

percentage of new employees, and further, since the taxpayer had also met

the criteria laid down in CBDT‟s Circular No. 14 of 2014 relating to the

maximum permissible percentage of transfer of employees in the first year of

commencement of the new STP Unit, it was not a case of splitting up or

reconstruction of an existing business so as to disentitle the STP Unit from

claiming the deduction under that section.

The Tribunal also allowed the taxpayer to set off losses of the STP Unit on

the ground that the provision of section 10A of the IT Act was not in the

nature of an “exemption” and losses of eligible Units could be carried forward

and set off in future years.

9. No deduction under section 10B of the IT Act in respect of a voluntary

Transfer Pricing adjustment

The Mumbai bench of the Tribunal in the case of Agilisys IT Services India

Pvt Ltd. 11

, held that no deduction under section 10B of the IT Act was

allowable to the taxpayer in respect of a voluntary Transfer Pricing

adjustment for the reason that the increased profit was not brought into India

by the taxpayer in foreign exchange. The Tribunal held that the intent of

section 10B of the IT Act allowing a deduction in respect of export profits was

boosting the country‟s exports and earning foreign exchange, and where

these conditions are not satisfied by the taxpayer, the deduction under that

section will not be allowable.

The Tribunal also held that the deduction under section 10B of the IT Act has

to be computed before setting off losses of another unit in line with the

decision of the Bombay High Court in the case of Black & Veatch Consulting

Pvt. Ltd.12

Key judgements in the context of Profits & Gains from Business or Profession

10. section 43B overrides presumptive taxation provisions

The Panaji bench of the Tribunal in the case of Good Luck Kinetic.13

, held

that disallowance under section 43B of the IT Act would apply even in a

situation where the taxpayer income is being assessed under the

presumptive taxation provisions of section 44AF thereof where an amount

equal to 5% of the turnover of the taxpayer is deemed to be the business

income of the taxpayer. The Tribunal noted that while both sections 43B and

44AF were non-obstante provisions, there was a difference in the language of

these two provisions, and the former had precedence over all other

provisions relating to computation of business income including section 44AF

of the IT Act. The Tribunal held that the amount of disallowance under

section 43B will need to be added to the amount computed under section

44AF of the IT Act in computing the business income of the taxpayer.

Key judgements in the context of other provisions of the IT Act

11. Taxability of “gift” in the hands of a company

The Mumbai bench of the Tribunal in the case of KDA Enterprises Pvt Ltd.14

,

held that receipt by the taxpayer from a company of an amount (being

dividend payable by the company to its shareholder companies) tantamount

to a “gift”. The Tribunal noted that a “gift” is typically a capital receipt and not

taxable, except where such a “gift” is received by an individual or a HUF. The

taxpayer being a company, the same was not taxable under section 56 of the

IT Act in its case. The Tribunal also held that the same was not taxable in the

hands of the taxpayer under section 2(22)(e) of the IT Act since there was no

commonality of shareholding between the taxpayer and the shareholder

companies). The Tribunal further held that since the taxpayer had not

credited the amount to its Profit & Loss Account, the same could not be

included in its “book profit” or taxed under section 115JB of the IT Act in line

with the principles emanating from the SC‟s judgement in the case of Apollo

Tyres Ltd.15

In coming to the above decision, the Tribunal examined the

genuineness of the transactions, and noted that “natural love and affection” is

not a necessary ingredient to constitute a valid “gift” and corporate entities

can also be parties to a “gift” transaction as evidenced by section 56(2)(viia)

of the IT Act. The Tribunal noted that in this case, the act of giving and

receiving “gift” was covered under the Memorandum and Articles of the

respective companies.

12. Set off of long term shares loss against gains from sale of land

The Mumbai bench of the Tribunal, in the case of Raptakos Brett & Co. Ltd.16

, held that long term capital losses from sale of listed shares and mutual fund

units, where STT has been paid, can be set off against long term capital

gains arising from sale of land. The Tribunal, relying upon certain

judgements of the SC and High Courts, noted the distinction between a

source of income being altogether exempt from tax (in which case neither the

profits nor the losses from that source enter into the computation of income)

as against only certain streams of income from a particular source of income

being exempt (in which case the losses from that source enter into the

computation of income). The Tribunal noted that in this case, the source of

income, being income from sale of listed shares and mutual fund units, is

taxable in case it is in the nature of short term capital gain/loss. The Tribunal

accordingly held that the exemption contemplated under section 10(38) of the

IT Act only extended to long term capital gains and not long term capital

losses, and such long term capital losses should be considered for set off

against long term capital gains in computing the total income.

13. Cost sharing arrangement and mere reimbursement does not fall with

the ambit of fees for technical services

The Bombay High Court in case of A.P. Moller Maersk.17

, affirming the

Tribunal‟s judgement, held that payment made by Indian agents to the

taxpayer (a foreign shipping company) towards utilization of a global

telecommunication facility does not constitute “fees for technical services”,

on the basis that it was merely a cost sharing arrangement between the

taxpayer and its agents to carry out the business more efficiently where the

taxpayer did not earn any profit, as well as the fact that the provision of the

facility was an automated process and did not involve any human element.

14. Explanation to section 80IB(9) of the IT Act treating all blocks under a

single contract as a single undertaking for the purpose of deduction, is

prospective and not retrospective

The Gujarat High Court in the case of Niko Resources Ltd.18

, on a writ

petition filed by the taxpayer, held that the Explanation to section 80-IB(9) of

the IT Act, introduced by the Finance (No. 2) Act, 2009, treating all blocks

licensed under a single contract under the New Exploration Licensing Policy

as a single “undertaking”, with retrospective effect from April 1, 2000, is

unconstitutional. The Gujarat High Court held that prior to the introduction of

the said Explanation, taxpayer was eligible for the deduction in respect of

each block separately, and the said Explanation took away this vested right

retrospectively. The Gujarat High Court held that the introduction of the said

Explanation was a substantive amendment and not merely clarificatory,

declaratory or curative one, and hence, could not be applied retrospectively.

Key judgements in the context of Reassessment

15. Reassessment notice invalid as the notice was served on the wrong

address

The Delhi High Court in the case of Chetan Gupta.19

, affirming the Tribunal‟s

judgement, held that the reassessment notice served on a wrong address is

invalid, and quashed the reassessment on account of this “jurisdictional”

defect.

16. Reassessment invalid if the issue is dealt with by the DRP

The Delhi High Court in case of Lahmeyer Holding GmbH.20

, in writ

proceedings, held that the DRP proceedings are a part of assessment

proceedings, and issues examined by the DRP cannot be re-agitated by the

Assessing Officer (“AO”) in reassessment proceedings, since it would amount

to “change of opinion” which is not permissible in law.

Transfer Pricing

17. Transaction between Indian Head Office (“HO”) and its foreign Branch

Office (“BO”) - not an international transaction

The taxpayer, Aithent Technologies Pvt Ltd.21

, an Indian company, reported

transactions with its BO in Canada. International transactions were

benchmarked following Transactional Net Margin Method (“TNMM”). During

the course of transfer pricing audit, comparables adopted by taxpayer were

altered and an adjustment of INR 8.61 crores was made by the Transfer

Pricing Officer (“TPO”). The adjustment proposed by TPO was confirmed by

Dispute Resolution Panel (“DRP”). On appeal by taxpayer to Tribunal, it was

observed that taxpayer had reported the transactions between the HO in

India and the BO in Canada as a matter of abundant caution. A transaction

between HO in India and its BO cannot be considered as an 'international

transaction' since there should be two or more separate AEs for a

transaction. The Tribunal, based on principle of mutuality, observed that no

person can transact with self or earn any profit or suffer loss from self. The

Tribunal further ruled that the aggregate accounts of HO in India included

BO‟s operations as well. Accordingly, such income of the HO would be set

off with the equal amount of expense of the BO, thereby leaving no

separately identifiable income on account of this transaction.

18. Cost Plus Method („CPM‟) is the Most Appropriate Method („MAM‟) for

contract manufacturers

The taxpayer, GE Medical Systems India (P.) Ltd.22

, a contract manufacturer

of medical equipment and components, rendered engineering services to its

group companies. The taxpayer adopted CPM as MAM and selected

comparables which were engaged in contract manufacturing of various

products ranging from base metal to auto ancillaries. TPO rejected the

comparables on the ground that the taxpayer being a manufacturer of

medical equipment can only be compared with companies which are

manufacturer of similar products. The taxpayer contended that for CPM

functional comparability is more important than product comparability. If the

comparables were being considered on the basis of products, then the MAM

to determine the Arm‟s Length Price (“ALP”) would be TNMM. The taxpayer

also claimed that such comparables would spend more on advertisement and

marketing resulting in higher margins vis a vis taxpayer. The TPO, rejected

the taxpayer's contention which was confirmed by The Commissioner of

Income Tax (Appeals) (“CIT(A)”) granted adjustment on account of marketing

and selling expenses based on actual expenditure incurred by the

comparable companies as well as working capital adjustment. This resulted

in the „nil‟ adjustment. On appeal to the Tribunal, it was held that as a general

rule CPM would be the MAM in the case of contract manufacturers but that

would be subject to the satisfaction of the parameters laid down in rule 10C

(1) and (2) of the Income-tax Rules, 1962. These parameters include, among

others, degree of comparability between international transaction and

uncontrolled transaction and extent of reliable adjustments. Further, the

Tribunal held that the claim of the taxpayer has to be tested on the basis of

the applicable provisions of law and it cannot be rejected solely on the basis

that it was contrary to the stand which the taxpayer had taken originally.

19. Use of Multiple Year Data upheld on the basis of taxpayer‟s fluctuating

profit margins

The taxpayer, Innodata Isogen India Pvt Ltd.23

, was engaged in provision of

Information Technology Enabled Services (“ITeS”) to its parent company.

The taxpayer‟ revenue model was based on a price per transaction /

transmission which was determined as a percentage of the sale price derived

by the AEs from the sale to the ultimate end customer. Thereby, the

taxpayer‟s revenues are directly linked to the revenues generated by the

AEs. The taxpayer applied TNMM using multiple year data for benchmarking

ITeS. The TPO, however determined the ALP of international transaction

using current year data and consequently made an adjustment. The CIT(A)

deleted the addition made by the TPO. Aggrieved, the Revenue filed an

appeal before the Tribunal. The Tribunal observed that the taxpayer‟s

revenues and margins fluctuated widely on a year to year basis (as it was

dependent on the revenues generated by its AEs), although on a long term

basis it would earn a margin commensurate with its functions and risks. The

Tribunal distinguished taxpayer‟s revenue model from cost plus service

model, which would earn a low and consistent returns on a year on year

basis. As regards multiple year data, the Tribunal held that in taxpayer‟s own

case in Assessment Year 2002-03, the TPO itself used multiple year data

owing to wide variations in profit margins and no cogent reasons were given

by the TPO for not using multiple year data in the instant year. Accordingly,

the Tribunal upheld the order passed by CIT(A).

20. Advertising, Marketing and Promotion (“AMP”) benchmarking with

TNMM possible only after conducting functional analysis of

comparables

The taxpayer, Zimmer India (P.) Ltd.24

, an Indian company was engaged in

the business of importing, marketing and distributing orthopedic implants and

instruments to customers in India. In the course of assessment proceedings,

the TPO observed that taxpayer was a routine distributor exposed to normal

risks and was incurring high AMP expenses owing to brand building for AEs

who were the final beneficiary. The TPO applied bright line test, added a

mark-up of 12.50 percent and made an adjustment. The DRP upheld the

addition made by the TPO. On appeal before the Tribunal, the taxpayer

relied on the High Court‟s ruling in the case of Sony Ericsson Mobile

Communications India Pvt Ltd [2015] 55 taxmann.com 240 (Delhi) and

stated that since its operating margins were higher than that of comparables

under TNMM, no adjustment was warranted. Further, it was submitted by the

taxpayer that the TPO wrongly considered selling expenses as part of AMP.

The Tribunal rejected the taxpayer‟s argument that since AO / TPO had

accepted and adopted TNMM, no separate bifurcation of AMP expenses was

required. The Tribunal held that the TPO had applied the bright line test by

considering routine distributors as comparables, without conducting study

with reference to the functions performed by comparables vis-a-vis functions

performed by taxpayer in regard to its marketing and distribution activities. If

there is difference in the functions between the taxpayer and comparables,

suitable adjustment was to be first made to bring both at same pedestals.

The matter was restored back to the file of the DRP / TPO for carrying out

detailed functional analysis of the comparables. In respect of selling

expenses wrongly considered as AMP by the TPO, the Tribunal in view of the

decision of the High Court in Sony (supra) held that these expenses are

directly attributable to the taxpayer‟s selling activities and thus have to be

excluded from the components selected by the TPO in regard to AMP

expenses.

21. Comparison of AMP functions is sine qua non for determination of ALP

The Delhi bench of Tribunal, in the case of Toshiba India (P) Ltd.25

,

interpreted the Delhi High Court‟s ruling in Sony Ericsson Mobile

Communications India Pvt Ltd (supra) on the issue of determination of ALP of

AMP expenses. The Tribunal clarified that the High Court has allowed the

aggregation of distribution functions with AMP function only for determining

the ALP of these transactions in a bundled manner, wherein suitable

comparables having undertaken similar functions for both distribution and

AMP expenses are to be selected, making it clear that the examination of

„AMP functions‟ with comparables is sine qua non for determination of ALP of

an interwined international transaction i.e. distribution function.

22. Internal TNMM accepted for software development services

The taxpayer M/s Valtech India Systems P. Ltd 26

was engaged in the

business of providing software development services and training to its AEs

as well as to non-AEs. For benchmarking the said international transaction,

the taxpayer applied internal TNMM claiming that it had earned a lower

margin from non-AEs vis-à-vis AEs and hence no adjustment was warranted.

The TPO rejected the analysis, applied external TNMM (set of comparables)

and proposed an adjustment. The DRP agreed with the view of the TPO on

using external TNMM. On appeal, the Tribunal noted that the taxpayer‟s

transactions with non-AEs abroad were more than 25 percent of the total

value of the international transactions and also the taxpayer had

demonstrated that the services rendered to non-AEs are similar to that

provided to AEs. Further, the Tribunal observed that the TPO and the

Tribunal in earlier assessment years had accepted the instant methodology of

the taxpayer for benchmarking purpose. On this basis, the Tribunal accepted

the contention of the taxpayer and remitted the matter to the TPO for making

analysis using internal TNMM.

23. ALP of royalty cannot be determined basis Foreign Investment

Promotion Board (“FIPB”) approval nor can it be clubbed with other

transactions

The taxpayer, A.W. Faber Castell (India.) Pvt Ltd 27

entered into various

international transactions including payment of royalty on account of

utilization of trade mark of parent company. For royalty transaction, taxpayer

applied Comparable Uncontrolled Price (“CUP”) method claiming that it had

paid royalty only after taking approval from the Government of India. The

FIPB had approved the rate of royalty payment up to 8 percent on exports

and 5 percent on domestic sales. Since taxpayer was paying royalty at 3

percent, which was less than the FIPB approved rate, the transaction was

argued to be at ALP. However, the TPO rejected the analysis and

determined the ALP of stated transaction as nil.

The DRP confirmed the action of the TPO. On appeal, the Tribunal held that

the approval from FIPB, „cannot substitute the determination of arm’s length

price under the provisions of the IT Act’, since the approval granted by the

FIPB for payment of royalty is not in context of the ALP under the IT Act.

Further, with respect to taxpayer‟s argument of demonstrating ALP through

clubbing of royalty transaction under TNMM, the Tribunal observed that the

payment of royalty is a separate international transaction and hence cannot

be clubbed with the transactions of purchase and sale of goods and material.

Accordingly, the Tribunal remitted the matter to the TPO for fresh

adjudication.

24. Insignificant sales made to Non-AE cannot be regarded as evidence for

internal CUP

The taxpayer, Vijaydimon Diamond (India) Pvt Ltd 28

undertook various

international transactions in the nature of purchase and sale of diamond/gold

with its AEs. For benchmarking purposes, taxpayer claimed that low end

jewellery was sold to AEs as well as to non-AEs and on this basis applied

internal CUP as MAM. Further, it was submitted that percentage of value

addition made by taxpayer with AEs was lower than that with non AEs and

hence transactions were at ALP. However, the TPO rejected CUP method

and applied TNMM by selecting certain comparables. This action of the TPO

was further upheld by the CIT(A). Aggrieved, the taxpayer filed an appeal

before the Tribunal. The Tribunal observed that the taxpayer‟s sales

transaction with the AE comprised 99.41 percent of the total sales whereas

the sales to non-AE were merely 0.59 percent. Thereby, non AE sale was

negligible in comparison to the sale transaction with the AEs. Further, the

Tribunal observed that the sales made to non-AEs were not free from

influence of purchase transaction from AEs. Held, that CUP was

inappropriate and TNMM was the MAM.

25. Time limit for passing the order where reference is made to the TPO

The Delhi bench of Tribunal, in the case of Honda Trading Corporation.29

, in

connection with the time limit available for passing the order, wherever

reference to the TPO is made, has held that the term `draft order‟ is actually

different in ambit from the term `assessment order‟ and no time limit has been

prescribed for the passing of the draft order. As there is no time limit

prescribed for the passing of the draft order, such order is required to be

passed within a reasonable time. The time limit for passing of the final

assessment order pursuant to the order of the TPO, is contained in section

144C(4) and (13) of the ITA and the time limit given under section 153 of the

IT Act has no relation whatsoever with the passing of the draft order. The

Tribunal holds final assessment order valid, since draft order (post TPO's

order) was passed by AO within reasonable time, however holds that TPO's

order was time-barred. The Tribunal also brings to notice an incoherence in

the provisions, namely that section 153 of the IT Act shall continue to govern

time limit for passing TPO order but AO‟s draft order to be passed

independent of the time limit given under section 153 of the IT Act, and thus

recommends passing a suitable legislative amendment to rectify the same.

------------------------------------------------------------------------------------------------------- 1 (2015) 55 taxmann.com 361 (SC) 2 (1971) 82 ITR 363 (SC) 3 (1997) 225 ITR 802 (SC) 4 TS-159-SC-2015 5 (2015) 56 taxmann.com 456 (SC) 6 TS-282-SC-2015 7 (2015) 57 taxmann.com 313 (SC) 8 TS-213-HC-2015 (ALL) 9 TS-497-HC-2015 (KAR) 10 TS-317-ITAT-2015 (PUN) 11 (2015) 58 taxmann.com 284 (Mumbai Tribunal) 12 (2012) 20 taxmann.com 727 (Bombay HC) 13 (2015) 58 taxmann.com 267 (Panaji Tribunal) 14 (2015) 57 taxmann.com 284 (Mumbai Tribunal) 15 (2002) 122 taxman 562 (SC) 16 TS-326-ITAT-2015 (Mumbai Tribunal)

17[2015] 59 taxmann.com 105 (Bombay HC) 18(2015) 55 taxmann.com 455 (Gujarat HC) 19TS-524-HC-2015 (DEL) 20TS-283-HC-2015 (DEL)

21[2015] 59 taxmann.com 452 (Delhi Tribunal) 22[2015] 61 taxmann.com 109 (Bangalore Tribunal) 23(ITA No . 1528/Del/2011) (Delhi Tribunal) dated June 30, 2015 24[2015] 60 taxmann.com 170 (Delhi Tribunal) 25[2015] 59 taxmann.com 169 (Delhi Tribunal) 26(ITA No 22/BANG/2014) (Bangalore Tribunal) dated September 11, 2015 27(ITA No 577/MUM/2015) (Mumbai Tribunal) dated August 05, 2015 28(ITA No 5182/MUM/2013) (Mumbai Tribunal) dated August 05, 2015 29[2015] 61 taxmann.com 233 (Delhi Tribunal)

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responsibility for loss arising to any person acting or refraining from acting as a result of any material contained in this newsletter will be

accepted by BMR Advisors. It is recommended that professional advice be sought based on the specific facts and circumstances. This

newsletter does not substitute the need to refer to the original pronouncements.

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