Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (3) TMI 688 - BOMBAY HIGH COURT

2016 (3) TMI 688 - BOMBAY HIGH COURT - [2016] 382 ITR 474 - Reopening of assessment - addition on Capital gains - transfer of a capital asset in India - Held that:- The shares of the Petitioner company were transferred by its shareholders to Ingram Micro Asia. The Petitioner itself has not transferred anything. In order to attract capital gains tax there are two requirements that need to be fulfilled (1) that there is a transfer of a capital asset; and (2) there is a gain by virtue of such tra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Ingram Micro Asia for a total consideration of AUD 730 million (Australian dollars) equivalent to ₹ 2,501.72 crores (conversion rate being 1 Australian dollar = ₹ 34.l27).

Even if we were to assume that by virtue of Ingram Micro Asia purchasing the 100% shareholding of the Petitioner, there was a transfer of a capital asset in India, the same could never be taxed as capital gains in the hands of the Petitioner company. This is for the simple reason that the shares of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Officer could never have reason to believe that income of the Petitioner chargeable to tax in India had escaped assessment. If the Assessing Officer could not have had any reason to form the aforesaid belief, then naturally what follows is that no notice under section 148 of the Act could be issued in the facts of the present case. Consequently, the Assessment Order passed under section 144 of the Act was therefore wholly without jurisdiction. On this count also, we find that the Assessment Orde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 25th March, 2013 passed by Respondent No.1 [Dy. Commissioner of Income Tax (OSD-II), Mumbai] in relation to A.Y. 2005-06. This Assessment Order was passed under section 144 read with section 147 of the Income Tax Act, 1961 (for short, the Act ). By this Assessment Order, Respondent No.1 has inter alia held that a sum of ₹ 575.39 crores is the capital gains in the hands of the Petitioner arising out of a transfer of a capital asset in India. Accordingly, a demand of ₹ 697.94 crores .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hearing and final disposal. 3. The two principal grounds of challenge to the impugned Assessment Order are that:- (i) none of the notices [viz. under sections 148, 142(1) or 143(2) of the Act] were ever served on the Petitioner which is a company incorporated under the laws in Bermuda. Since service of these notices was mandatory before any Assessment Order could be passed under section 144 of the Act, the impugned Assessment Order is wholly without jurisdiction; and (ii) that in any event, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e case of the Petitioner that the impugned Assessment Order is wholly without jurisdiction and it is in these circumstances that the Petitioner has sought to justify invocation of our writ jurisdiction under Article 226 of the Constitution of India without first exhausting the statutory remedies available to it under the Act for challenging the impugned Assessment Order. 5. To understand the present controversy, it would be necessary to refer to some relevant facts which are as under:- (a) The P .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

disputed position that the shares of the Petitioner company (equity as well as preferential) were held by certain non-resident as well as resident shareholders. The bulk of the shareholding was held by three private equity funds viz. CVC Capital Partners Asia Pacific LP, Asia Investors LLC, and Hagemeyer Caribbean Holding NV. The Petitioner is a holding company and has under its fold several operating companies in Australia, New Zealand and Thailand including a company called Tech Pacific Asia L .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y incorporated in Singapore. All the aforesaid companies (over 20 Companies in 13 different countries) are hereinafter referred to as the Techpac Group. Hence the Petitioner was the ultimate holding company of the Techpac Group. (c) The Techpac Group was a technology distributor and a leading technology sales, marketing and logistics group in the Asia Pacific region. One Ingram Micro Inc., USA, a company registered in the United States of America is also one such company who has its presence wor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpany incorporated in USA. Ingram Micro Asia had a fully owned subsidiary in India by the name Ingram Micro India Pvt. Ltd. (d) The Ingram Group felt that it required to strengthen its presence in the Asia Pacific region and accordingly offered to take over the Techpac Group. Accordingly, in November 2004, Ingram Micro Asia acquired the shares of the Petitioner company under a share purchase agreement in which Ingram Micro Asia was the purchaser, the shareholders of the Petitioner company (descr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

c India] and post the merger, the name of Tech Pacific India was changed to Ingram Micro India Ltd (hereinafter referred to as Ingram Micro India ). In other words, Tech Pacific India continued to exist post the merger, but under a new name viz. Ingram Micro India. In this fashion, the Ingram Micro Group took over the Techpac Group. (e) During the course of search and seizure proceedings carried out at the premises of Ingram Micro India [earlier known as Tech Pacific India] on 17th September 200 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fic India] seeking to treat them as an agent of the Petitioner in respect of the alleged capital gains which had arisen in the previous year relevant to A. Y. 2005-06. In addition thereto, Respondent No.1 by its letter dated 24th November, 2010 also called upon Ingram Micro India to furnish details of the sale of shares of the Petitioner company along with the details of the amounts received. Thereafter, on 3rd December 2010, Ingram Micro India received another letter from Respondent No.1 callin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

said order further recorded that in case the order passed by Respondent No.1 was adverse to Ingram Micro India, no further action would be taken thereupon for a period of four weeks from the date of communication of the said order. (g) Be that as it may, Respondent No.1, after hearing Ingram Micro India passed an order dated 14th January, 2011 under section 163 of the Act inter alia holding it to be an agent of the Petitioner company and also computing capital gains in the hands of the Petitione .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Petitioner company. This order has not been challenged by the Revenue and has attained finality. (i) In this Writ Petition, it is the specific stand of the Petitioner that after passing of the aforesaid order dated 30th November, 2011 (in Writ Petition No.285 of 2011), it was not aware of any proceedings being taken by the Revenue authorities to make any assessment in the hands of the Petitioner company of the alleged capital gains arising from the transfer of its shares. It is the specific ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r dated 25th March, 2013 passed under section 144 of the Act holding that the total taxable income computed in relation to the Petitioner company was ₹ 575.39 crores. It is the case of the Petitioner that this Assessment Order was forwarded by Ingram Micro Inc., USA to the Petitioner on 30th October, 2013. It is only at this time that the Petitioner first came to know of the impugned Assessment Order and has therefore approached this Court in its writ jurisdiction seeking to quash the same .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion wherein it has now been admitted that the notices under sections 148, 142(1) and 143(2) were sought to be served not on the Petitioner but on Ingram Micro India [previously known as Tech Pacific India]. This is despite the fact that the Revenue authorities were in possession of the address of the Petitioner in Bermuda and yet chose not to serve any notice on the Petitioner on the said address. He submitted that in the facts of the present case before any Assessment Order could be passed unde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

35 ITR 388. (B) that in any event of the matter, in law, no capital gains had accrued in the hands of the Petitioner as the shares of the Petitioner company were transferred by its shareholders to Ingram Micro Asia and therefore Respondent No.1 could never have any reason to believe that income chargeable to tax had escaped assessment as contemplated under section 147 of the Act. To elaborate this point further, Mr Mistry contended that in the facts of the present case, it was the shares of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not in the hands of Larsen & Toubro Ltd . To attract capital gains, Mr Mistry submitted that (i) the person who is sought to be taxed has to have transferred a capital asset; and (ii) some gain ought to have arisen by virtue of such transfer in the hands of the transferor. In the facts of the present case, Techpac Holdings Ltd. (the Petitioner) has neither transferred any capital asset and neither has it received any gain by virtue of any such transfer. In this view of the matter, he submit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an admitted fact that Ingram Micro India [earlier known as Tech Pacific India] is a down-stream company of the Petitioner. The Revenue was having the last known address of the Petitioner as that of Ingram Micro India [earlier known as Tech Pacific India] being Gate No.1A, Godrej Industrial Estate, Phirozsha Nagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079. Since this was the last known address of the Petitioner, the notice dated 29th March, 2012 under section 148 of the Act was se .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mitting the correspondence address of the Petitioner, which was not supplied to them. Since Ingram Micro India [earlier known as Tech Pacific India] was having a business understanding with the Petitioner, the service of the notice issued under section 148 of the Act on Ingram Micro India [earlier known as Tech Pacific India] was good service on the Petitioner; (B) With reference to the service of notices dated 16th January, 2013 issued under sections 142(1) and 143(2) of the Act, Mr Malhotra ga .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nder section 144 of the Act on 25th March, 2013. In these circumstances, Mr Malhotra submitted that there was no merit in the contention of the Petitioner that they were not served with the notices under sections 148, 142(1) or 143(2) of the Act; (C) The Assessing Officer clearly had reason to believe that income chargeable to tax had escaped assessment because by virtue of the aforesaid share purchase agreement entered into in November, 2004 there was clearly a transfer of a capital asset in In .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uch transfer was deemed to accrue in India. Mr Malhotra submitted that as the income was earned towards consideration of transfer of its business / economic interest i.e. Ingram Micro India [earlier known as Tech Pacific India] by reason of the above transaction, the Petitioner had earned income liable for capital gains tax in India. Mr Malhotra submitted that the share purchase agreement entered into in November, 2004 would clearly establish that the same was not really between the shareholders .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

it is an admitted position that the said notices were never served on the Petitioner. The Revenue seeks to justify service of these notices on the Petitioner by contending that they have served the said notices on the last known address of the Petitioner which was the address of Ingram Micro India [earlier known as Tech Pacific India], the downstream company of the Petitioner. We fail to see how the notices being served on Ingram Micro India [earlier known as Tech Pacific India] would amount to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

company is clearly mentioned; and (ii) the letter dated 30th March, 2012 (Exh.R-2, page 203 of the paper-book) addressed by Respondent No.1 to the Joint Secretary, (FT & TR)-II, Central Board of Direct Taxes, North Block, New Delhi 110 001 in which Respondent No.1 clearly mentions that the registered office of the Petitioner is Charladon House, 2- Churchstreet, Hamilton, HM-11, Bermuda. Despite having this address prior to issuance of the notices under section 148, 142(1) and 143(2) of the A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

even a representative - assessee of the Petitioner. In fact, the Revenue in the earlier round of litigation, sought to treat Ingram Micro India [earlier known as Tech Pacific India] as an agent of the Petitioner under the provisions of section 163 of the Act. Being aggrieved by this action of the Revenue, Ingram Micro India [earlier known as Tech Pacific India] approached this Court in its writ jurisdiction by filing Writ Petition No.285 of 2011. This Court by its order dated 30th November, 2011 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dered as good service on the Petitioner. 11. Section 148 of the Act clearly stipulates that before making any assessment, re-assessment or re-computation under section 147 of the Act, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period as may be specified in the notice a return of income or the income of any other person in respect of which he is assessable in the prescribed form and verified in the prescribed manner and setting forth such other .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s that flow therefrom would have no legs to stand on and would fall to the ground. This is no longer res-integra as it stands concluded by the decision of the Supreme Court in the case of Y. Narayana Chetty and another. [1959] 35 ITR 388. The Supreme Court, whilst considering similar provisions under the Income Tax Act, 1922 held that service of the requisite notice on the assessee is a condition precedent to the validity of any re-assessment. If a valid notice is not issued as required, proceed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d or if the notice issued is invalid, then the proceedings taken by the Income Tax Officer without a notice, or in pursuance of the invalid notice, would be illegal and void. The relevant portion of the Supreme Court decision [at pg 392 of the ITR report] reads thus:- The first point raised by Mr Sastri is that the proceedings taken by Respondent No.1 under Section 34 of the Act are invalid because the notice required to be issued under the said section has not been issued against the assessees .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ax has been underassessed , he may, within the time prescribed, serve on the assessee a notice containing all or any of the requirements which may be included in the notice under subsection (2) of Section 22 and may proceed to reassess such income, profits or gains . The argument is that the service of the requisite notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34; and if a valid notice is not issued as required, proceedings taken by the I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

validity of the proceedings taken by the Income Tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. That is the view taken by the Bombay and Calcutta High Courts in the CIT v.Ramsukh Motilal [ (1955) 27 ITR 54] and R.K. Das & Co. v. CIT [ (1956) 30 ITR 439] and we think that that view is right. (emphasis supplied) 12. Looking to the facts of the present case and since the notice issued under section 148 of the Act was admittedly not served upon the P .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se, can only be issued post the service of notice issued under section 148), also fall to the ground. Nevertheless, in the present facts we find that both these notices under section 142(1) and 143(2) were not served on the Petitioner. More importantly, we fail to understand how a notice under section 142(1) and under section 143(2) can be issued on the same date. Section 142(1) of the Act stipulates that for the purpose of making an assessment under the Act, the Assessing Officer may serve on a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hed either under section 139 or in response to a notice under sub-section (1) of section 142 of the Act. Therefore, clearly, sub-section (2) of section 143 would come into play only when a return is furnished under section 139 or a return is furnished in response to a notice under subsection (1) of section 142. This would clearly establish that a notice under section 142(1) and under section 143(2) can never be issued on the same date. Furthermore in the facts of the present case, section 143(2) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er section 144 of the Act is wholly without jurisdiction as the notices under section 148 as well as under section 142(1) were never served on the Petitioner. 14. Having held so, we must state that in the facts of the present case, we find that even otherwise the Assessing Officer could never have reason to believe that income chargeable to tax had escaped assessment warranting the issuance of a notice under section 148 of the Act. Section 147 of the Act (to the extent it is relevant for our pur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of sections 148 to 153, assess or re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. Therefore, before any notice under section 148 of the Act can be issued for initiating assessment / re-assessment proceedings, the Assessing Of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tal gains tax there are two requirements that need to be fulfilled - (1) that there is a transfer of a capital asset; and (2) there is a gain by virtue of such transfer. If these conditions are satisfied, then capital gains tax is to be computed as set out in section 48 of the Act. The facts of the present case would clearly show that the Petitioner has not transferred any capital asset in India that would give rise to any capital gains tax in their hands. This is borne out from the share purcha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in India, the same could never be taxed as capital gains in the hands of the Petitioner company. This is for the simple reason that the shares of the Petitioner company have been transferred to Ingram Micro Asia by the Petitioner's shareholders and therefore the transferor in the aforesaid transaction is the shareholders of the Petitioner and not the Petitioner company. In these circumstances, if there was any liability towards capital gains tax, if at all (we are not called upon to conside .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sment Order passed under section 144 of the Act was therefore wholly without jurisdiction. On this count also, we find that the Assessment Order passed under section 144 of the Act is unsustainable and has to be set aside. 17. Faced with this situation, Mr Malhotra very feebly tried to contend that the share purchase agreement entered into in November, 2004 was one which was actually between the Petitioner company and Ingram Micro Asia and not between the shareholders of the Petitioner and Ingra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version