S.144C-Draft assessment order can be issued only to eligible assessee

Brief of the Case

Delhi High Court held In the case of Honda Cars India Limited vs. DCIT that Since the petitioner is not an eligible assessee in terms of Section 144C(15)(b), no draft order can be passed in the case of the petitioner U/s. 144C(1).  Section 144C (15)(b) of the Act defines an “eligible assessee” to mean (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 section 92CA(3); and (ii) any foreign company.

In this case appellant is admittedly not a foreign Company and  Secondly, the Transfer Pricing Officer has not proposed any variation to the return filed by the petitioner so he is not an eligible Assessee U/s. 144C (15)(b) and as a consequence of this  Assessing Officer cannot propose an order of assessment that is at variance in the income or loss return.

Facts of the Case

The petitioner is a Company incorporated in India and is engaged in the business of manufacture and sale of passenger cars.  The petitioner is a subsidiary company of Honda Motors Company Limited, Japan (“Honda Japan” for short).The petitioner purchases raw material, spare parts, capital goods etc. from Honda Japan and cars are manufactured in India under the technical collaboration agreements.  The petitioner pays royalty to Honda Japan. On 29.11.2011, return of income was filed by the petitioner for the assessment year 2011-2012 declaring NIL income. Since the petitioner had entered into international transaction, on 11.11.2013, the Assessing Officer referred the same to the TPO. On 30.01.2015, the TPO passed an order under Section 92CA (3) of the Act and no variation was proposed to the returned income of the petitioner.

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