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2016 (8) TMI 820 - ITAT DELHI

2016 (8) TMI 820 - ITAT DELHI - TMI - Validity of the assessment framed u/s 143(3) r.w.s. 144C(1) - non-existing entity - Held that:- When the assessment was framed by the AO vide order dated 29.12.2015 in the name of M/s Suzuki Powertrain India Ltd., the said company had already amalgamated with M/s Maruti Suzuki India Ltd. and therefore, it was not inexistence. Moreover, it is clear from the provisions of Section 170(2) of the Act that in the case of amalgamation, the assessment must be made o .....

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r The Assessee : Sh. Ajay Vohra, Sr. Adv., Neeraj Jain, Rohit Jain, Advs. Ramit Katyah and Ms. Tejasvi jain, CAs For The Revenue : Sh. Amrendra Kumar, CIT DR ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 29.12.2015 passed by the AO u/s 143(3) r.w.s. 144C(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act). 2. Following grounds have been raised in this appeal: 1. That on the facts and circumstances of the case and in law, the impugned order d .....

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of the Act. 2.1 That the Transfer Pricing Officer ('TPO') /Dispute Resolution Panel ('DRP') erred on facts and in law in holding that the international transaction of payment of royalty does not satisfy the arm's length principles as envisaged under the Act. 2.2 That the TPO/DRP erred on facts and in law not appreciating that the transaction of payment of royalty was closely linked to the business of the assessee and was appropriately benchmarked by the appellant applying Tra .....

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g functionally dissimilar license agreements for the purpose of benchmarking the international transaction of payment of royalty undertaken by the appellant. 2.6 That the TPO/DRP erred on facts and in law in selecting license agreements relating to manufacture/assembly of products which are different than those covered under the license agreement entered into by the appellant with the associated enterprise. 2.7 That the TPO/DRP erred on facts and law in not appreciating that licensing transactio .....

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es of technology cannot be regarded as an appropriate comparable for benchmarking the transaction of licensing of technology undertaken by the appellant, manufacturing and selling products in the Indian market. 2.9 That the TPO/DRP erred on facts and in law in selecting comparable license agreements having significantly different contractual covenants as compared to the license agreement entered into by the assessee for the purpose of benchmarking the international transaction of payment of roya .....

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ppellant. 2.12 That the TPO/DRP erred on facts and in law in not appreciating that the royalty paid by the appellant is pursuant to specific approval from the Secretariat of Industrial Assistance, Ministry of Commerce and Industry and therefore cannot be regarded as excessive or unreasonable. 2.13 That the TPO/DRP erred on facts and in law in not appreciating that the arrears of royalty have been appropriately benchmarked by the appellant by applying TNMM wherein such arrears were considered as .....

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in law in holding that royalty aggregating to ₹ 16,67,00,000 was not allowable as deduction during the relevant year since the same pertained to earlier years, and consequently, making net disallowance of ₹ 2,63,00,000 as prior period item. 3.1 That the assessing officer/DRP erred on facts and in law in not appreciating that even though royalty pertained to earlier year(s), the liability crystallized after receipt of regulatory approvals during the year under consideration. 4. Withou .....

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. Vide Ground No. 1, the grievance of the assessee relates to the validity of the assessment framed u/s 143(3) r.w.s. 144C(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) vide order dated 29.12.2015. 4. Facts of the case relating to the above issue in brief are that the assessee filed the return of income on 28.11.2011, declaring an income of ₹ 76,08,30,888/- (income under Section 115JB of the Act declared at ₹ 209,50,06,325/-). During the year under consideration .....

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ncome of the assessee by an amount of ₹ 69,93,38,000/- to ensure that international transactions relating to payment of royalty by the assessee to its AEs was at arm s length. The AO also made an addition of ₹ 2,63,00,000/- on account of prior period expenses and framed the assessment in the hands of M/s Suzuki Powertrain India Ltd. which amalgamated with the assessee company, vide order dated 29.12.2015. 5. Now the assessee is in appeal. The ld. Counsel for the assessee at the very .....

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2013 and the said fact of amalgamation/merger of the erstwhile entity with M/s Maruti Suzuki India Ltd. was duly intimated to the Revenue authorities as under: a) Letter dated 2nd April, 2013 filed in the office of ACIT, Circle-50(1), New Delhi on 8th April, 2013; b) Letter dated 2nd April, 2013 filed in the office of ACIT, Circle-51(1), New Delhi on 18th April, 2013; c) Letter dated 5th April, 2013 filed in the office of Additional CIT, Range-VI, New Delhi on 8th April, 2013; d) Letter dated 2n .....

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the name of nonexistent entity, viz. M/s Suzuki Powertrain India Ltd. on or after the said date. It was pointed out that this fact that M/s Suzuki Powertrain India Ltd. stood amalgamated, was within the knowledge of the AO/Revenue authorities. In spite of the said fact following notices were issued in the name of the non-existent entity i.e. M/s Suzuki Powertrain India Ltd.: Notice dated 10th July, 2014 issued by Additional DIT, TPO-II(2), New Delhi under section 92CA(2) of the Act, Notice date .....

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y erroneous because merely mentioning in the final assessment order, the name of the successor entity after the name of the erstwhile/nonexistent assessee did not and could not validate the invalid assessment proceedings, continued in the name of the nonexistent entity, without issuing formal notices and bringing on record that the successor is an amalgamated entity. It was also pointed out that the Income tax computation form dated 29.12.2015 and the notice u/s 274 r.w.s. 271(1)(c) of the Act d .....

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irmed by Supreme Court in 53 ITR 250] Birla Cotton v CIT: 123 ITR 354 (Delhi) R. C. Jain v. CIT : 140 Taxman 379 (Del) CIT v. Kumari Prabhavati Gupta: 231 ITR 188 (MP) CIT vs. Fatelal (1996) 88 Taxman 320 (MP) Sajjan Kumar Saraf vs. CIT: 114 ITR 155 (Cal) CIT vs. Surendra Kumar Bhandan: 164 ITR 323 (Pat) Smt. Sudha Prasad V. Chief CIT: 186 CTR 475/133 Taxman 864 (Jharkhand) Braham Prakash vs. ITO (2004) 192 CTR 190 (Del) CIT vs. Ram Das Deokinandan Prasad (HUF): 277 ITR 197 (All) M/s Computer En .....

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ACIT:[2007] 15 SOT 331 (Kol) 8. The ld. Counsel for the assessee submitted that a mere participation by the amalgamated company in the assessment proceeding would not cure the defect as the assessment framed in the name of a non-existent entity would tantamount to jurisdictional defect, thus making it void ab initio. The reliance was placed on the following case laws: CIT v. Amarchand N. Shroff: 48 ITR 59 (SC) Saraswati Industrial Syndicate Ltd. v. CIT [1990]: 53 Taxman 92 (SC) ITO v. Ram Prasa .....

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) Ltd.: 232 Taxman 279 (Kar) Satwant Exports (P.) Ltd. vs. ACIT: ITA No.5340 to 5345/Del/2013 (Del) ACIT v. DLF Cyber City Developers Ltd.: ITA No.4010, 4270/Del/2010 (Del) Impsat (P) Limited V. ITO: 91 ITD 354 (Del.) Images Credit & Portfolio (P) Ltd. vs. ACIT: ITA No. 5301 to 5306 & 5418 to 5423/Del/13 (Del) Makers Development Services Ltd. v. CIT: 40 ITD 185 (Bom) Slocum Investment (P) Limited: 101 TTJ 558 (Del.) HCL Corporation Limited V. ACIT: ITA No. 447/Del/2004 (Del Trib) Eicher .....

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2(1) of the Act was issued to the assessee who had filed the return of income and the assessment was also framed in the name of the person who filed the return. It was further submitted that in the present case, the assessment year involved is assessment year 2011-12 and the return of income was filed on 28.11.2011 while the scheme of amalgamation was approved by the Hon ble Delhi High Court vide order dated 29.01.2013. Therefore, the income was earned for the assessment year under consideration .....

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e succession took place w.e.f. 01.04.2012 as a result of scheme of amalgamation duly approved by the Hon ble Delhi High Court vide order dated 29.01.2013, therefore, the predecessor M/s Suzuki Powertrain India Ltd. was to be assessed in respect of the income of the previous years ending on or before 31.03.2012 and as such the AO rightly assessed the income in the name of amalgamating company i.e. M/s Suzuki Powertrain India Ltd. 10. We have considered the submissions of both the parties and care .....

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5, M/s Suzuki Powertrain India Ltd. was not inexistence. It is also noticed that the aforesaid fact was in the knowledge of the department as the assessee informed vide various letters mentioned in para 5 of the former part of this order which were written to the various Tax Authorities. However, the AO in spite of knowing this fact that M/s Suzuki Powertrain India Ltd. amalgamated with M/s Maruti Suzuki India Ltd., made the reference to the TPO and also issued the notice dated 07.11.2014 to the .....

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ssed, instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; the order also mentioned the transferee's name below that of assessee's company. Now, that did not lead to the assessment being completed in the name of the transferee-company. According to the Assessing Officer, the assessee-company was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed against a non-existent compan .....

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M Corp Pvt. Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Court which was dully sanctioned vide orders dated 11th February, 2004. With this amalgamation made effective from 1st July, 2003, M/s Spice ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, M/s Spice was also stood dissolved by specific order of this Cou .....

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ifficult to digest the circuitious route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect. After the sanction of the scheme on 11th April, 2004, the Spice ceased to exit w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said dead person‟. When notice under Section 143 (2) was sent, the appellant/am .....

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s been further held as under: Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B. The framing of assessment against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person . 13. In the present case also as the assessment w .....

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ome was earned, it was inexistence. This controversy has been settled by the Hon ble Jurisdictional High Court in the case of CIT Vs Dimension Apparels Pvt. Ltd. (2015) 370 ITR 288 wherein it has been held as under: Section 170(2) of the Income-tax Act, 1961, makes it clear that in the case of amalgamation, the assessment must be made on the successor (i.e., the amalgamated company). Section 176 which contains provisions pertaining to a discontinuation of business, does not apply to a case of am .....

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