Assessment Orders Quashed as Verification Remands

Assessment Orders Quashed as Verification Remands and Conclusive Directions Both Missed Respective Limitation Periods

Issue

Whether the final assessment orders passed by the Assessing Officer to give effect to an ITAT remand order were barred by limitation, based on whether the specific directions required fresh verification of records under Section 153(3) or simple modification under Section 153(5).

Facts

The assessee-company was involved in transfer pricing disputes concerning two international transactions for Assessment Years 2014-15 and 2015-16:
1. Determination of Arm’s Length Price (ALP) regarding advances made to Associated Enterprises (AEs).
2. Pricing of corporate guarantee commissions.
In the first round of appeals, the Tribunal issued an order dated April 12, 2022, splitting its directives into two categories:
- For the advances issue: It remanded the matter back to the Assessing Officer (AO)/Transfer Pricing Officer (TPO) to factually verify the assessee’s evidence of equity investments and restrict any adjustments solely to working capital advances.
- For the corporate guarantee commission: It conclusively determined and fixed the ALP rate at 0.5% on the guarantee amount actually utilized, leaving no room for fresh appreciation of facts.
The Assessing Officer passed the consequential final assessment orders on December 6, 2024, stating that they were executed in pursuance of the Tribunal’s directions.
The assessee challenged these orders, arguing they were passed beyond the statutory time limits prescribed for giving effect to appellate orders.

Decision

Held, yes: When an appellate order requires the lower authority to conduct an exercise of factual verification of records, the limitation period provided under Section 153(3) is attracted. Conversely, when the higher forum conclusively lays down the principles or numbers, leaving the lower authority to merely apply them without fresh adjudication, the shorter limitation period under Section 153(5) applies.
Held, yes: In this case, the ALP issue on advances was a verification remand falling under Section 153(3), while the corporate guarantee commission issue was a conclusive determination falling under Section 153(5).
Held, yes: Because the Assessing Officer passed both final assessment orders well beyond the respective statutory limitation periods computed from the end of the financial year in which the Tribunal’s order was received, the orders are completely invalid and are quashed as barred by limitation [In favour of assessee].

Key Takeaways

Dual Track Limitations under Section 153: Time limits for giving effect to appellate orders are binary. “Verification remands” (requiring factual examination) get the benefit of a longer window under Section 153(3), whereas “conclusive directions” (requiring mere mathematical calculation or application of fixed principles) must be passed swiftly within the strict, shorter timeline of Section 153(5).
Vulnerability of Mixed Orders: If an AO passes a single composite order giving effect to a mixed remand beyond the Section 153(5) timeline but within Section 153(3), the portion containing the conclusive directions will fail the limitation test. If the entire order overshoots both deadlines, the entire assessment is void ab initio.
Strict Statutory Deadlines: Limitation provisions are absolute. Even if the revenue authority has a meritorious case on merits, a procedural delay in passing the consequential order within the timelines of Section 153 completely extinguishes the validity of the tax demands.

IN THE ITAT HYDERABAD BENCH ‘B’

Vivimed Labs Ltd.

ACIT^*

VIJAY PAL RAO, Vice President
and Manjunatha G., Accountant Member

IT Appeal Nos.181, 182 and 183 (Hyd.) of 2025
[Assessment years 2014-2015, 2015-2016 and 2018-2019]

APRIL 30, 2026

P. Murali Mohan Rao, CA for the Appellant. Dr. Narendra Kumar Naik, CIT-DR for the Respondent.

ORDER

Vijay Pal Rao, Vice President.- These three appeals by the Assessee are directed against the three Orders of the Assessing Officer all dated 06.12.2024 passed in pursuance to the Orders of this Tribunal dated 12.04.2022 for the assessment years 20142015 and 2015-2016 and dated 30.01.2023 for the assessment year 2018-2019, respectively.

ITA.No.181/Hyd./2025 – A.Y. 2014-2015 :

2. The Assessee has raised the following grounds of appeal:

1. “On the facts and circumstances of the case, the Final assessment order (“FAO”) dated 06.12.2024 passed by the Asst. Commissioner 1. of Income Tax and the Ld. TPO order dated 30.01.2024 passed u/s 92CA(3) of the Act by Deputy Commissioner of Income Tax (herein after referred to as ‘TPO’) are bad both in the eye of law and on facts.

2. Invalid Draft Assessment Order as passed after Order giving Effect to Hon’ble ITAT Order has been passed.

2.1. The Ld. AO erred in passing the draft order dated 12.03.2024 by ignoring the fact that order giving effect to the Hon’ble ITAT Order has already been passed on 15.11.2022 on which assessee filed appeal before Hon’ble ITAT. Therefore, the order passed is erroneous and bad-in-law.

2.2. The Ld. AO ought to have appreciated the fact that only one distinct Consequential Order shall be passed on one ITAT Order. Therefore, the consequential draft assessment order passed u/s 144C(1) rws 254 is void and bad in law.

2.3. The Ld. AO erred in passing the consequential order before making TPO reference which leads to violation of provision of the Act. Therefore, the consequential orders will automatically be invalid.

3. The Final assessment order passed u/s 143(3) r.w.s.144C(13) 153A is barred by limitation as per provisions of Sec 153 of the Act.

4. Arm’s Length Price Adjustment of Rs.18,31,62,550/- towards international transaction of Interest on Advances to the AE:

4.1. The Ld. AO ought to have appreciated that the assessee has given advances to its AE for the purpose of equity investment. The money which was invested in the wholly owned subsidiary by the assessee company is raised by equity outside India.

4.2. The AO ought to have appreciated the fact that the advances given for the purpose of equity investment are consequently converted to equity and shares are allotted accordingly.

4.3. The AO erred in re-characterizing the nature of transaction from “advances” to “loan” which is not permissible as per section 145 of the Act.

4.4. The AO ought to have appreciated the fact that the advances were given by the assessee to its AEs as a matter of commercial prudence in furtherance of its business interests as a shareholder.

4.5. The AO ought to have restricted the interest on advances to the extent of advances provided during the year under consideration.

4.6. Without prejudice to the above grounds, the AO erred in not adjudicating the grounds of objection regarding amount of interest at Rs.18,31,62,550/- by applying rate of interest of 14.75% pa. for the whole year on the consolidated amount.

4.7. The Ld AO erred in including the opening balances of the Loans & Advances which has attained finality in the early years for considering the interest which is bad in law.

4.8. The Ld. AO has failed to consider that the current year balances for the year under consideration are only to the tune of Rs.53,48,00,000 and the same has been given for the purpose of the equity investment and share allotment for the same has been made.

4.9. The Ld. AO ought to have appreciated that the Hon’ble ITAT vide their order for the AY 2013-14 had already concluded that the advances given to the A.E’s are for the purpose of equity investment.

4.10. Without prejudice to the above grounds, the AO erred in not adjudicating the grounds of objection regarding the issue of applying the domestic interest rate for computation of Arm’s Length Price of interest on the advances.

4.11. The Ld. AO ought to have appreciated the fact that the equity shares were allotted during the AY 2012-13 & AY 2013-14 and the same were accepted.

5. The AO/TPO erred in making an adjustment of Rs. 1,06,42,500/-guarantee provided to its AEs by charging a fee at 0.5% on the outstanding amount of corporate.

5.1. The AO/TPO erred in not appreciating the fact that the Corporate Guarantee is on account of commercial expediency and it does not have any bearing on the profits/income of the Appellant/AE.

5.2. The AO/TPO ought to have appreciated the fact that the issuance of Corporate Guarantee to banks on behalf of AE does not involve any cost to the assesse.

5.3. The AO/TPO erred in confirming the action of the AO/TPO and in not appreciating the fact that the AE has not received any benefit in the form of lower interest rate by virtue of the corporate guarantee given by the taxpayer.

5.4. The AO/TPO erred by not appreciating the fact that the Credit rating of the AE’s and country of incorporation is much higher than the credit rating of the assessee and country of incorporation; the credit facilities are sanctioned by the banker based on the financial stability and credit rating of the associated enterprise.

5.5. The AO/TPO erred in not appreciating the fact that no comparison can be made between guarantee issued by commercial bank and the corporate guarantee issued by the holding company for the benefit of AE.

5.6. Without prejudice to above, the TPO erred in not following the decision of the Hon’ble ITAT Hyderabad in the case of M/s Aster Private Limited us DCIT wherein the Hon’ble ITAT has directed the TPO to adopt rate of corporate guarantee fee at 0.25%.

6. Appellant may, add or alter or amend or modify or substitute or 6. delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

ITA.No.182/Hyd./2025 – A.Y. 2015-2016 :

3. The Assessee has raised the following grounds of appeal:

1. “On the facts and circumstances of the case, the Final assessment order (FAO) dated 06.12.2024 passed by the Asst. Commissioner 1. of Income Tax and the Ld. TPO order dated 30.01.2024 passed u/s 92CA(3) of the Act by Deputy Commissioner of Income Tax (herein after referred to as ‘TPO) are bad both in the eye of law and on facts.

2. Invalid Draft Assessment Order as passed after Order giving Effect to Hon’ble ITAT Order has been passed.

3. The assessment u/s 148 is barred by limitation as per the provisions of Sec 153 of the Act.

3.1. The Ld. AO ought to have appreciated the fact that the assessment u/s 147 should be completed with in 12 months from the end of the financial year in which notice u/s 148 was issued.

3.2. The Ld. AO ought to have appreciate that the impugned assessment u/s 147 should be completed on or before 31.03.2024 within 12 months from the end of the financial year in which notice u/s 145 dated 07.04.2022 was issued.

3.3. The Ld. AO ought to have appreciated the fact that impugned assessment u/s 147 was barred as on 31.03.2024 and merging the same with the final assessment order dated 06.12.2024 is invalid.

4. The AO has travelled beyond the directions given by the ITAT vide its order in ITA No. 186 to 189/Hyd/2021 dated 12.04.2022.

4.1. The Ld. AO ought to have appreciated that the AO has travelled beyond the directions given by the ITAT vide its order in ITA No.186 to 189/ Hyd/2021 dated 12.04.2022.

4.2. The Ld. AO ought to have appreciated that the proceedings u/s 148 cannot be merged with the set aside proceedings and hence the proceedings are liable to be quashed.

4.3. The Ld AO ought to have appreciated impugned final assessment order dated 06.12.2024 must be confined to the directions of the Hon’ble ITAT and the Ld. AO cannot The Ld. AO ought to have appreciated impugned final make a new addition.

4.4. The Ld. AO ought to have appreciated that the impugned final assessment order dated 06.12.2024 is liable to be quashed as AO has travelled beyond the powers conferred to him.

4.5. The Ld. AO erred in making the addition regarding purchases made to M/s ABN Trade Link Pvt. Ltd. of Rs.5,57,46,727/- treating the same as bogus when such addition is not made in the assessment order.

4.6. The Ld. AO ought to have appreciated that the scope of the proceedings after remand will necessarily have to be determined with reference to the terms of the ITAT order.

5. The Final assessment order passed u/s 143(3) r.w.s.144C(13) 153A is barred by limitation as per provisions of Sec 153 of the Act.

6. Arm’s Length Price Adjustment of Rs.10,50,45,151/- towards international transaction of Interest on Advances to the AE:

6.1. The Ld. AO ought to have appreciated that the assessee has given advances to its AE for the purpose of equity investment. The money which was invested in the wholly owned subsidiary by the assessee company is raised by equity outside India.

6.2. The AO ought to have appreciated the fact that the advances given for the purpose of equity investment are consequently converted to equity and shares are allotted accordingly.

6.3. The AO erred in re-characterising the nature of transaction from “advances” to “loan” which is not permissible as per section 145 of the Act.

6.4. The AO ought to have appreciated the fact that the advances were given by the assessee to its AEs as a matter of commercial prudence in furtherance of its business interests as a shareholder.

7.5. The AO ought to have restricted the interest on advances to the extent of advances provided during the year under consideration.

7.6. Without prejudice to the above grounds, the AO erred in not adjudicating the grounds of objection regarding amount of interest at Rs.10,50,45,151/- by applying rate of interest of 14.75% p.a. for the whole year on the consolidated amount.

7.7. The Ld.AO erred in including the opening balances of the Loans & Advances which has attained finality in the early years for considering the interest which is bad in law.

7.8. The Ld. AO has failed to consider that the current year balances for the year under consideration are only to the tune of Rs.6,98,00,000 and the same has been given for the purpose of the equity investment and share allotment for the same has been made.

7.9. The Ld. AO ought to have appreciated that the Hon’ble ITAT vide their order for the AY 2013-14 had already concluded that the advances given to the A.E’s are for the purpose of equity investment.

7.10. Without prejudice to the above grounds, the AO erred in not adjudicating the grounds of objection regarding the issue of applying the domestic interest rate for computation of Arm’s Length Price of Interest on the advances.

8. The AO/TPO erred in making an adjustment of Rs.1,06,42,500/-by charging a fee at 0.5% on the outstanding amount of corporate guarantee provided to its AEs.

8.1. The AO/IPO erred in not appreciating the fact that the Corporate Guarantee is on account of commercial expediency and it does not have any bearing on the profits/income of the Appellant/AE.

8.2. The AO/TPO ought to have appreciated the fact that the issuance of Corporate Guarantee to banks on behalf of AE does not involve any cost to the assessee.

8.3. The AO/TPO erred in confirming the action of the AO/TPO and in not appreciating the fact that the AE has not received any benefit in the form of lower interest rate by virtue of the corporate guarantee given by the taxpayer.

8.4. The AO/TPO erred by not appreciating the fact that the Credit rating of the AE’s and country of incorporation is much higher than the credit rating of the assessee and country of incorporation, the credit facilities are sanctioned by the banker based on the financial stability and credit rating of the associated enterprise.

8.5. The AO/TPO erred in not appreciating the fact that no comparison can be made between guarantee issued by commercial bank and the corporate guarantee issued by the holding company for the benefit of AE.

8.6. Without prejudice to above, the TPO erred in not following the decision of the Hon’ble ITAT Hyderabad in the case of M/s Aster Private Limited v. DCIT wherein the Hon’ble ITAT has directed the TPO to adopt rate of corporate guarantee fee at 0.25%.

9. Grounds of appeal regarding purchases made to M/s ABN Trade Link Pvt. Ltd. of Rs.5,57,46,727/- treating the same as bogus:

9.1. The Ld. A.O erred by not considering the fact that assessee had not made any bogus purchases/ sales during the year under consideration.

9.2. The Ld. A.O erred in concluding that the assessee failed to prove the genuineness of the aforesaid expenses without considering the facts and circumstances of the case.

9.3. The Ld. AO ought to have appreciated the evidence adduced by the assessee demonstrating the genuineness of the transactions with M/s ABN Trade Link Pvt. Ltd. and M/s Dgains Marketing Consultancy Pvt Ltd.

9.4. The Ld. A.O ought to have appreciated the fact that the assessee has submitted all relevant copies of ledgers of ABN Trade Link Pvt. Ltd., bank statements and Purchase Orders raised on assessee during the year under consideration.

9.5. The Ld. AO erred in estimating the percentage on the alleged bogus purchases without rejecting the books of accounts which is invalid.

9.6. The Ld. AO ought to have appreciated that when the Ld. AO failed to find any discrepancy in sales made to the corresponding purchases, then questioning the purchases as bogus is invalid.

10. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

ITA.No.183/Hyd./2025 – A.Y. 2018-2019 :

4. The Assessee has raised the following grounds of appeal:

1. “On the facts and circumstances of the case, the Final assessment order (“FAO”) dated 06.12.2024 is bad both in the eye of law and on facts.

2. Invalid Draft Assessment Order as passed after Order giving Effect to Hon’ble ITAT Order has been passed.

2.3. The Ld AO erred in passing the consequential before making TPO reference which leads to violation of provision of the Act. Therefore, the consequential orders will automatically be invalid.

3. The Final assessment order passed u/s 143(3) r.w.s.144C(13) 153A is barred by limitation as per provisions of Sec 153 of the Act.

4. The AO erred in passing two assessment orders which would invalidate the assessment proceedings.

4.1. The AO erred in passing the two assessment orders which would make the whole assessment invalid.

4.2. The AO erred in passing the two assessment orders without application of his mind, one vide DIN & order No ITBA/AST/M/143(3)/2024-25/1070658764(1) dated 0612-2024 and the other vide DIN & order No. ITBA/AST/M/143(3)/2024-25/1070978313(1) dated 06.12.2024.

5. Erred in making the adjustment of Arm’s Length Price for Rs.37,22,500/- towards Corporate Guarantee relating to the transaction which had been entered with the assessee’s Associated Enterprise.

5.1. The Ld.AO erred in not appreciating the fact that the Credit rating of the AE’s and the country of incorporation is much higher than the credit rating of the assessee and the country of incorporation, the credit facilities are sanctioned by the banker based on the financial stability and credit rating of the associated enterprise.

5.2. The Ld AO erred in calculating the ALP of the corporate guarantee fee using ‘CUP method as the most appropriate method and by applying the rates of SBI without any basis and without complying with the procedure laid down for computation of arm’s length price as given in the provisions of section 92C of the Act.

5.3. The Ld.AO erred in not appreciating the fact that the TPO has erred in comparing the domestic bank rate with the international transaction which is not in accordance with Rule10B(1) of the Income Tax Rules, 1962.

5.4. The Ld.AO erred in not appreciating the fact that no comparison can be made between guarantee issued by commercial bank and the corporate guarantee issued by the holding company for the benefit of the Associated Enterprises.

5.5. The Ld. AO erred in not appreciating the fact that the comparison should be based on real transactions of similar nature and it cannot be based on the hypothesis as to what would have happened if the assessee was to have similar transactions with Non Associated Enterprises.

5.6. The Ld.AO erred in not appreciating the fact that when two divergent views are possible, the view which is favourable to assessee should be adopted.

5.7. Without prejudice to other grounds, the Ld. AO erred in calculating the guarantee fee on the entire amount of the guarantee instead of restricting the same to the extent of the withdrawal of guaranteed amount by the Associated Enterprises.

5.8. Without prejudice to other grounds, even if it is proposed to 5.8 make an adjustment towards fee on corporate guarantee, it has to be restricted to reasonable rate.

6. Erred in making adjustment of Arm’s Length Price for Rs.55,03,931/- towards international transaction of Interest on Receivables from the Associated Enterprises:-

6.1. The Ld.AO ought to have appreciated the fact that, the assessee has adopted TNMM method for determining the ALP of its transactions and the operating margin of the assessee is much higher than its comparables, hence any adjustment with regard to ALP affecting the operating margin would be unjustifiable and against the provisions of Section 92C of the Act.

6.2. The Ld.AO ought to have appreciated the fact that the assessee is following a policy of not charging interest on receivables irrespective of the fact whether the sales are made to AE or Non-Associated Enterprises.

6.3. The Ld. AO ought to have appreciated the fact that no ALP adjustment is required to be made in a case in which the margin of comparable is less than the margin of the assessee after reducing the amount of notional interest charged on outstanding receivables from operating profit.

6.4. The Ld.AO ought to have appreciated the fact that allowing of extended credit period to the associated enterprises is closely linked to the determination of sale price, which is inturn the basis for arriving at the margins of the assessee.

6.5. The AO/TPO erred in not appreciating the fact that the outstanding receivables are foreign currency receivable and same has to be benchmark with the LIBOR rate.

6.6. The Ld. AO erred in not appreciating the fact that there are payables to AE’s for the year under consideration which are clearly evident from the 3CEB report and TPO failed to net-off the same with the receivables while calculating interest on receivables.

6.7. The Ld. AO ought to have appreciated that the TPO erred in not netting off the payables while calculating the interest on receivables even after the directions issued by the Hon’ble ITAT in ITA No.428/Hyd/2022 vide order dated 30.01.2023.

6.8. The Ld. AO erred in not following the directions of the 6.8 Hon’ble ITAT in ITA No. 428/Hyd/2022 vide order dated 30.01.2023. Hence, the assessment becomes invalid.

7. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

5. The learned Authorised Representative of the Assessee has submitted that the Orders passed by the Assessing Officer are not valid being barred by limitation prescribed u/sec.153(5) of the Income Tax Act [in short “the Act”], 1961. He has contended that for the assessment years 2014-2015 and 2015-2016 the Tribunal vide Order dated 12.04.2022 remanded the two issues to the Assessing Officer. However, the Assessing Officer has not passed giving effect Orders within the period of limitation i.e., within 03 months from the end of the month in which the Orders were passed by the Tribunal. In support of his contention, he has relied upon the following decisions:

Judgment of Hon’ble Karnataka High Court in the case of Wipro Ltd. v. Jt. CIT ITR 581 (Karnataka);

ii.

Judgment of Hon’ble Delhi High Court in the case of Aircom International India (P.) Ltd. v. Dy. CIT(Delhi);

iii.

Judgment of Hon’ble Karnataka High Court in the case of Dy. CIT v. Biesse India (P.) Ltd. (Karnataka)/Writ Appeal No.1619 of 2024 (T-IT);

iv.

Order of ITAT, Delhi in the case of Hitachi Astemo Haryana (P.) Ltd. v. ACIT [IT Appeal No. 3353/Del./2024, dated 3-9-2025];

5.1. Thus, he has submitted that the Orders passed by the Assessing Officer to give effect to the Order of this Tribunal are barred by limitation and therefore, the same are invalid and liable to be quashed.

5.2. The learned Authorised Representative of the Assessee has submitted that for the assessment year 20182019 the Assessing Officer passed the consequential Order dated 06.12.2024 giving effect to the Order of this Tribunal dated 30.01.2023. Therefore, this Order passed by the Assessing Officer is also barred by limitation as beyond 03 months from the end of the month in which the Tribunal has passed the impugned order. He has reiterated his contentions and relied upon the Judgments as referred above.

6. On the other hand, the learned DR has submitted that all theses cases involves transfer pricing and therefore, the limitation provided u/sec.153(3) is applicable along with the extended limitation provided in sub-sec.(4) of sec.153 of the Act. He has further submitted that the provisions of sub-secs.3 and 5 of sec.153 are applicable to the Order passed by the Transfer Pricing Officer [in short “TPO”] u/sec.92CA of the Act only after the amendment by Finance Act, 2022 and therefore, before the said amendment the extended period as provided under sub-sec.(4) of sec.153 of the Act is applicable.

7. We have considered the rival submissions as well as the relevant material on record. In the first round of appeals the Tribunal vide Vivimed Labs Ltd. v. Assttt. CIT [IT Appeal Nos. 186 to 189 (Hyd.) of 2021, dated 12-4-2022] has remanded the two issues of TP adjustment in Para nos.2 to 6 as under:

“2. We advert to the various identical issues in the assessee’s instant four appeals. It’s first substantive grievance common in all these four assessment years is that the learned lower authorities have erred in law and on facts in making Arm’s Length Price “ALP” adjustment of Rs.18,31,62,550/-, Rs.10,50,45,151/- Rs.16,41,02,540/-; and Rs.2,01,88,555/-; assessment year wise; respectively pertaining to advances made to associated enterprises. We note with the able assistance coming from both the sides that the assessee’s case all along has been that its corresponding advances to the overseas Associated Enterprises “AEs” had been made for the purpose of equity investments followed by allotment of corporate stake therein than loans simplicitor. Learned counsel further submits that the assessee has also filed copies of corresponding share allotments before the learned lower authorities. We note that this has been very much a recurring issue between the parties wherein the learned co-ordinate bench’s earlier order involving assessee’s appeal ITA No.212/Hyd/2016 for A.Y. 2011-12 has restored the matter back to the Transfer Pricing Officer “TPO” as follows :

“5. As regards ground no.3, the brief facts are that during the transfer pricing proceedings, in the T.P. documentation of assessee, the AO found that the assessee had stated that it had provided working capital advance of Rs.252.06 million to Vivimed Hong Kong and also of Rs.8.41 millions to Vivimed, US i.e. total amount outstanding was Rs.26,01,90,000/- and it was stated that the advance is for administrative convenience and there was no interest accrued during the year and hence determination of ALP is not warranted. AO noticed that assessee had not charged interest from it’s A.E. though interest @ 6% was charged from Vivimed Hongkong in the earlier year, and also that there is no interest charged in this year. Therefore, he proposed to charge interest on the outstanding balances and the taxpayer was issued a letter accordingly. After considering the assessee’s submissions at length, the AO held that the interest is chargeable on the interest free advances given by the assessee to its subsidiaries towards working capital advances. Thus, he charged 12.25% on the working capital advances as rate of interest and brought it to tax.

5.1. Further, he also treated corporate guarantee as an international transaction and proposed addition by charging corporate credit at 2% of the corporate guarantee given by assessee. In accordance with these findings of the TPO, the final assessment order was passed and the assessee has filed second appeal before the Tribunal.

5.2 The Ld. Counsel for the assessee submitted that though TPO has stated that these are working capital advances given to its subsidiaries, they are not advances but are the investments made by assessee in the equity of its subsidiaries and the said companies have also subsequently allotted shares to the assessee.

5.3. Ld. DR, on the other hand, supported the orders of the authorities below and drew our attention to the paper book filed by assessee wherein in its letter addressed to the AO, the assessee had clearly stated and that it had advanced working capital to its sister concerns. Therefore, according to him, the advances were not equity at all. He further submitted that documents filed by assessee towards investment such as board resolutions and evidence of allotment of shares to assessee were never filed before the authorities below nor does the assessment record show that they were on record. Therefore, according to him, these evidences should not be considered at all.

5.4. Having regard to the rival contentions and the material placed on record, we find that the assessee, not only in its T.P. documentation, but also in its reply to notice of the TPO, has clearly stated that these are working capital advances, though at para 2.5 of its submissions before the TPO, assessee had stated that it had invested in its sister concerns. However, neither the TPO nor the DRP have gone into this aspect, nor has the assessee filed any evidence in this context before the authorities below. The board resolutions and the evidence that assessee has been allotted equity shares in the subsequent year were never put before the authorities below. In view of these facts, we deem it fit and proper to set aside the issue to the file of AO/TPO with a direction to consider the evidence filed by assessee to the effect that assessee had invested money in equity shares of its subsidiaries and has not given working capital advances and if it is found that these transactions were in fact investments in equity shares of the subsidiaries, then no T.P. adjustment shall be made. However, if it is found that the funds transferred by the assessee to its subsidiaries during the year were working capital advances, which were later decided to be treated as investments, then the T.P. adjustment already made by the AO shall be revived and the assessment shall be completed accordingly.”

3. Mr. Sai fails to pin-point any distinction on the relevant facts involved in all these assessment years since the learned lower authorities have adopted consistency in making the impugned adjustment. We therefore adopt the foregoing detailed discussion mutatis mutandis to restore the assessee’s instant first and foremost substantive grievance back to the TPO in all these four years in very terms. Ordered accordingly. This first issue is accepted for statistical purposes.

4. Next comes the 2nd common issue of corporate guarantee fees “ALP” adjustments of Rs.3,47,45,600/-, Rs.4,25,70,000/-, Rs.5,69,60,000/- and Rs.4,35,40,000/-; assessment year wise; respectively. The assessee interalia submitted before us that a corporate guarantee does not form an international transactions as it does not result in any quantifiable benefits to the “AEs” being since it is a shareholding activity only than an international transaction falling under section 92B of the Act. Learned counsel further submitted that no comparison could be made between a corporate guarantee vis-a-vis bank guarantee. And that the learned lower authorities ought to have adopted a nominal commission rate as well.

The Revenue has placed strong reliance on the impugned adjustment(s) made in the lower proceedings.

5. We have given our thoughtful consideration to rival pleadings qua the impugned corporate guarantee issue. The first and foremost question as to whether a corporate guarantee amounts to an international transactions or not stands decided in Revenue’s favour and against the assessee in PCIT v. Redington (India) Limited(Madras). Their lordships have considered Explanation to Section 92B inserted by the Finance Act, 2012 to with effect from 01.04.2002 to hold that such a corporate guarantee indeed forms an international transaction with retrospective effect. We thus reject the assessee’s legal arguments and express our agreement with a learned lower authorities’ action treating the assessee’s corporate guarantee(s) as an international transaction in principle.

6. Next comes the issue of quantification of the impugned corporate guarantee commission adjustments. Both parties have quoted a catena of case law wherein various learned co-ordinate benches have adopted different rates. Faced with this situation, we deem it appropriate in these peculiar facts and circumstances that a lumpsum commission rate of 0.5% qua the extent of amount of assessee’s corporate guarantee(s) actually utilized only in all these four assessment years; would be just and proper. This second substantive ground is partly allowed in very terms.”

7.1. Thus, as regards the issue of determination of Arms Length Price [in short “ALP”] in respect of international transactions of advances made to the Associated Enterprises [in short “AE”] the Tribunal has remanded the matter to the record of the Assessing Officer/TPO with a direction to consider the evidence filed by the assessee to the effect that the assessee has invested money in equity shares of its subsidiary and has not given working capital advances and consequently, the TP adjustment if any, can be made only in respect of the advances given to the AE for working capital requirements. Thus, this issue was remanded to the Assessing Officer/TPO for verification and examination of the record and hence, the same will fall in the purview of sub-sec.(3) of sec.153 and not under sub-sec.(5) of sec.153 of the Act. Even otherwise, the 2^nd proviso to sub-sec.(5) to sec.153 also provides that where the Order, inter alia, u/sec.254 of the Act requires verification of any issue by way of submissions of documents by the assessee or any other person or an opportunity being heard to be provided to the assessee in order to give effect to the said Order passed u/sec.254 of the Act shall be made within the time specified under sub-sec.(3) of sec.153 of the Act. Therefore, the limitation provided in sub-sec.(3) of sec.153 of the Act will be applicable in this case. For ready reference, sub-sec.(3) of sec.153 is reproduced as under:

“(3) Notwithstanding anything contained in sub-sections (1), (1A)) and (2), an order of “fresh assessment [or fresh order under section 92CA, as the case may be] in pursuance of an order under [section 250 or] section 254 or section 263 or section 264, setting aside or cancelling an assessment, [or an order under section 92CA, as the case may be], may be made at any time before the expiry of nine months from the end of the financial year in which the order under [section 250 or] section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be]:

Provided that where the order under [section 250 or] section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,] on or after the 1^st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words “nine months”, the words “twelve months” had been substituted.]”

7.2. A plain reading of sub-sec.(3) with proviso makes it clear that the limitation for passing giving effect Order is 12 months from the end of the financial year in which the Order u/sec.254 is received by the Principal CIT or Chief CIT, as the case may be. In the case in hand, the Order of the Tribunal was passed on 12.04.2022 and therefore, the limitation of 12 months will reckoned from 01.04.2023 and expires on 31.03.2024 whereas the impugned order was passed by the Assessing Officer on 06.12.2024 which is barred by limitation qua this issue.

7.3. The Hon’ble Karnataka High Court in the case of Wipro Ltd. (supra) has also analysed these provisions of sec.153 of the Act and laid down a harmonious construction of these provisions as under:

“(iv) It is pertinent to note that section 153(3) [post substitution vide Finance Act, 2016 w.e.f. 1-6-2016] does not use the word ‘reassessment’ alongside ‘fresh assessment’; however, the said word has been used alongside ‘fresh assessment’ in section 153(5) (post-substitution vide Finance Act, 2016; accordingly, reassessment is not envisaged u/s 153(3); such reassessment can only come u/s 153(2) or section 153(6) which deals with assessment, reassessment or re-computation to give effect to any finding or direction contained in the order of superior authority or court; thus if an order of assessment is set aside in appeal with a direction that a fresh reassessment be made, the same would be covered by section 153(3); One may also note that section 2(40) of the Income-tax Act, 1961, Act defines the term “regular assessment” to mean assessment under sub section 3 of section 143 or section 144; therefore these terminologies have different import in different sections. In the light of this discussion, it is clear that the term “assessment” is used in section 153(1) to mean the entire process of assessment; section 153(2) uses the words, ‘assessment’, ‘reassessment’ or ‘re-computation’ but in respect of section 147 which deals with income escaping assessment; section 153(3) uses the term “fresh assessment” in pursuance of the orders passed setting aside or cancelling an assessment; therefore, this term “fresh assessment”, though not defined, contemplates a new assessment consequent to the higher authorities cancelling or setting aside the assessment; section 153(5), talks of giving effect to an order passed by the higher authorities, wholly or partly, otherwise than by making a fresh assessment or reassessment. The words “wholly or partly” obviously pertain to giving effect to the order of the higher authorities which would be done by the lower authority either in part or in whole depending on the issues that are settled by the higher authorities. However, such an exercise cannot be done within the time limits specified in section 153(5), where there is a fresh assessment or reassessment and in such cases the longer time limits specified in section 153(3) would apply; a harmonious construction of these provisions would mean as under:

That in order to give effect to the order of the superior authorities, either wholly or partly in terms of section 153(5), it should not be a case of reassessment or fresh assessment, which if they are, would otherwise fall into section 153(3);

That section 153(3), when it uses the term ‘fresh assessment’, would mean that the entire exercise of assessment is to be done afresh as it is used along with the terminology “setting aside or cancelling” which would mean the whole order of assessment being set at naught and not some issues comprised in the assessment order; when the assessment order is set aside on some issues only and confirmed on other, it is not a case of ‘setting aside or cancelling the assessment’.

That section 153(5) would apply where the assessing officer has to give effect to the order of the higher authorities in whole or in part provided that no fresh assessment 1 u/s.153(3) or a reassessment u/s. 153(2) relating to income escaping assessment, is to be undertaken.

Therefore, if the orders to be given effect to are to be made by following the principles already laid down by the higher forum, it would not be a case of fresh assessment in terms of section 153(3) or a reassessment in terms of section 153(2); it would simply mean that the orders of the higher forum are to be applied & followed by the assessing officer, it may be borne in mind that longer time limits are provided in section 153 & second proviso to section 153(5) because it may entail doing the entire process once over or where detailed evidences may be required for accomplishing the task; however where a shorter time limit is prescribed u/s. 153(5), the legislative mandate is to subserve the objectives of ensuring timely compliance with the orders of the superior authorities.”

7.4. Thus, it is clear that where the Orders to be given effect to are to be made by following the principles already laid down by the Higher Forum then, the limitation provided u/sec.153(5) will be applicable and where an exercise of verification of record is required then, the limitation provided under sub-sec.(3) of sec.153 is applicable. We do not find any force in the contention of the learned DR that the extended period provided under sub-sec.(4) will be applicable in the case because the issue was set aside and remanded to the record of the Assessing Officer/TPO which falls in the ambit of sub-sec.(3) of sec.153 of the Act and not under sub-sec.(4) of the Act. Even the amendment vide Finance Act, 2022 is also prior to the Orders of this Tribunal.

8. The next issue which was considered by the Tribunal is regarding the ALP of corporate guarantee commission for the guarantee provided to its AE.

9. The Tribunal has given a finding on the ALP of corporate guarantee commission @ 0.5% and therefore, that issue was decided conclusively by the Tribunal and the Assessing Officer/TPO was required to only give effect to the findings of the Tribunal. Hence, the limitation provided in sub-sec.(5) of sec.153 is applicable for passing the Order to give effect to the findings of the Tribunal. It is clear that the Assessing Officer/TPO was not required to verify or examine any record or any contention but was to just give the effect to the Order of the Tribunal. Therefore, the Order passed by the Assessing Officer dated 06.12.2024 in pursuance to the Order of this Tribunal dated 12.04.2022 is barred by limitation as provided in sub-sec.(5) as well as under sub-sec.(3) of sec.153 of the Act. Accordingly, the Orders passed by the Assessing Officer dated 06.12.2024 for the assessment years 2014-2015 and 2015-2016 are set aside being barred by limitation. Since we have set aside the Orders of the Assessing Officer being barred by limitation, therefore, the other grounds raised by the assessee becomes infructuous and were not taken up for adjudication.

10. In the result, appeals of the Assessee for the assessment years 2014-2015 and 2015-2016 are allowed.

ITA.No.183/Hyd./2025 – A.Y. 2018-2019:

11. The Tribunal passed order Vivimed Labs Ltd. v. ACIT, Central(Hyderabad – Trib.)/ITA.No.428/Hyd./2022, dated 30.01.2023 in whereby the Tribunal has decided two issues regarding ALP on corporate guarantee commission as well as the interest on outstanding receivables from AE in Para nos.8.6 to 9.4 as under:

“8.6. We have heard the rival arguments made by both sides and perused the record. We find the TPO in the instant case has adopted the corporate guarantee commission rate of 1.80% on account of the corporate guarantee provided by the assessee to its AE and accordingly suggested upward adjustment of Rs.1,34,01,000/-. We find the DRP directed the Assessing Officer to reduce such corporate guarantee commission to 1%. We find the Tribunal in assessee’s own case for the immediately preceding 4 AYs has directed the Assessing Officer/TPO to adopt a lumpsum commission rate of .5% by observing as under:

“6. Next comes the issue of quantification of the impugned corporate guarantee commission adjustments. Both parties have quoted a catena of case law wherein various learned co-ordinate benches have adopted different rates. Faced with this situation, we deem it appropriate in these peculiar facts and circumstances that a lumpsum commission rate of 0.5% qua the extent of amount of assessee’s corporate guarantee(s) actually utilized only in all these four assessment years; would be just and proper. This second substantive ground is partly allowed in very terms.”

8.7. Respectfully following the decision of the Tribunal in assessee’s own case in the preceding 4 A.Ys and in absence of any distinguishable features brought to our notice against the order of the Tribunal in assessee’s own case, we direct the Assessing Officer/TPO to adopt the corporate guarantee commission rate of .5% qua the extent of amount of assessee’s corporate guarantee actually utilized. The grounds raised by the assessee on this issue are accordingly allowed for statistical purposes.

9. In Ground of appeal No.3 to 3.1.5 the assessee has challenged the order of the Assessing Officer in making addition of Rs.55,03,931/- on account of interest on outstanding receivables.

9.1. The learned Counsel for the assessee at the outset drew the attention of the Bench to the order of the DRP at Para 2.3.22 wherein it has been held as under:

“2.3.22. In view of the above, considering the objections of the assessee, the TPO is directed to impute interest on receivables after netting off payables following credit period mentioned in the intercompany agreement with AEs or as per the invoice period date applying the SBI short term deposit rate”.

9.2. He submitted that since the Assessing Officer in the final order has not followed the directions of the DRP, therefore, he has no objection if the matter is restored to the file of the Assessing Officer with a direction to compute the interest on receivables after netting off payables.

9.3. The learned DR has no objection for the same.

9.4. Since the AO in the instant case has not followed the direction of the ld. DRP, therefore, the grounds on this issue are restored to the file of the Assessing Officer with a direction to follow the directions of the DRP at Para 2.3.22 of its order and make appropriate addition. Needless to say, while deciding the issue the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. While doing so, he shall keep in mind the order of the Tribunal for the preceding years. We hold and direct accordingly. Grounds of appeal No. 3 to 3.1.5 are accordingly allowed for statistical purposes.”

11.1. It is clear that the issue regarding ALP on corporate guarantee commission has been decided by the Tribunal by laying down the principles and rate at 0.5% which is the conclusive finding and therefore, the limitation provided under sub-sec.(5) of sec.153 will be applicable.

12. As regards the issue of ALP of interest on outstanding receivables from AE, the Tribunal directed the Assessing Officer to follow the directions of Disputes Resolution Panel [in short “DRP”] and make appropriate additions. It was also directed that the assessee was to be given an opportunity of being heard before deciding the issue as per law. Thus, in view of 2^nd proviso to sub-sec.(5) of sec.153 the limitation provided in sub-sec.(3) of sec.153 is applicable for passing an Order on this issue. In any case, even as per sub-sec.(3) of sec.153 of the Act the limitation would reckon from 01.04.2023 and will expire on 31.03.2024 whereas the Assessing Officer has passed the impugned order on 06.12.2024 which is barred by limitation provided under sub-sec.(5) as well as sub-sec.(3) of sec.153 of the Act. Hence, in view of our findings on this issue for the assessment years 2014-2015 and 2015-2016 the Order passed by the Assessing Officer for the assessment year 2018-2019 is set aside being barred by limitation. Since we have set aside the Order of the Assessing Officer being barred by limitation, therefore, the other grounds raised by the assessee becomes infructuous and were not taken up for adjudication.

13. In the result, appeal of the assessee for the assessment year 2018-2019 is allowed.

14. To sum-up, all the three appeals of the Assessee are allowed. A copy of this common order be placed in the respective case files.