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DCIT, Circle-16 (1) , New Delhi Versus Transcend MT Services Pvt. Ltd. And Vice-Versa

2017 (12) TMI 652 - ITAT DELHI

Validity of assessment against non existent amalgamated company - Held that:- In the present case the assessment was framed by the AO on the non-existent amalgamated company, not on the amalgamating company. Therefore, the assessment framed was void ab initio and accordingly the same is quashed. Since, we have quashed the assessment framed by the AO therefore no separate finding is being given on the issues raised in the Departmental appeal. - Decided in favour of assessee. - I.T.A. No. 2697/Del .....

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i. Ld. CIT(A) had rejected the comparables / upward adjustment made by the AO / TPO and directed the AO to reject some comparables so that Arm s Length Margin comes within range of 5%. ii. Ld. CIT(A) had erred in allowing deduction amounting to ₹ 2,28,87,852/- u/s 10A of the Act. iii. The appellant craves for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing or appeal. 2. The grounds raised by the assessee in its cr .....

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amp; Services Private Limited. Further, CIT(A) erred in upholding such order(s). 2. That that CIT(A) erred on facts and in law in upholding the action of the AO, in invoking the provisions of Chapter X - Special Provisions relating to avoidance of tax of the Act, without appreciating that there would have been not profit shifting from India. 3. That the CIT(A) erred on facts and in law in upholding the order of the AO / TPO in modifying filters and / or comparables set adopted by the Assessee in .....

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parable to the Assessee, such as, i. Bodhtree Consulting Limited; ii. Informed Technologies India Limited; and iii. Apex Knowledge Solutions. 6. That the CIT(A) erred on facts and in law in upholding the order of the AO / TPO in selecting company with abnormal profit margin, namely, Iservices India Private Limited. 7. That the CIT(A) erred on facts and in law, in not allowing adjustment on account of difference in working capital and / or risk assumed by the Assessee vis a vis the comparable com .....

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e case was selected for scrutiny. Since there were international transactions, the AO referred the matter to the TPO u/s 92 CA of the Act. The TPO proposed the adjustment on account of Arm s Length Price. Accordingly, the AO enhanced the income by ₹ 1,54,79,764/- in the draft assessment order. The AO framed the assessment u/s 144 C / 143(3) of the Act and determined the arm s length price of back office to the medication prescription services at ₹ 16,93,17,347/- as against the book v .....

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amounting to 1,54,79,764/- and deleted the disallowance of deduction u/s 10A of the Act amounting to ₹ 2,28,87,852/-. 6. Now the Department is in appeal against the relief allowed and the assessee has filed the cross objection challenging the validity of the assessment order passed by the AO on the non-existent (amalgamated entity) namely M/s Heartland Information and Consultancy Services Pvt. Ltd. The learned counsel for the assessee submitted that the assessee company was amalgamated wit .....

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on 17th September, 2008. It was stated that M/s HDTS has ceased to exists i.e. dissolved without binding up and HICS has taken over the assessee s liabilities, responsibilities and obligations. It was further stated that aforesaid information was also given to the TPO and the ld. CIT(A)-4, Delhi vide letters of the even dates. Our attention was drawn towards page nos. 900 to 907 of the assesee s paper book which are the copies of the said letters written to the respective authorities. It was fu .....

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6 of 2011) (Delhi), [2012 (280) EL T43 (Del.)] 3. PCIT vs. Maruti Suzuki India Limited [2017] 85 taxmann.com 330 (Delhi) 4. Maruti Suzuki India Limited vs. DCIT [2016] 72 taxmann.com 164 (Del-Trib.) 5. CIT vs. Micra India (P) Limited [2015] 231 Taxmann 809 (Delhi) 6. CIT vs. Dimension Apparels (P) Limited [2015] 370 ITR 288 (Delhi) 7. Samsung India Electronics Pvt. Ltd vs. DCIT (ITA No. 6452/Del/2013) (Del-Trib.) 8. DCIT vs. Satwat Exports Pvt. Ltd (ITA No. 5963/D/2013) (Del- Trib.) 7. In his ri .....

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ble on the record. In the present case, it is an admitted fact that the assessee M/s Heartland Delhi Transcription and Services Pvt. Ltd. (HDTS) amalgamated with M/s Heartland Information and Consultancy Pvt. Ltd. (HICS) in pursuant to the order of the Hon ble Delhi High Court dated 25th July, 2008 and this fact was brought to the notice of the AO (Income Tax Officer, Ward-12 (3), Director of Income Tax, TP-1, New Delhi, Additional Commissioner of Income Tax-12 New Delhi and Commissioner of Inco .....

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so passed the assessment order dated 22.2.2011 u/s 144C / 143(3) of the Act on the aforesaid entity i.e. HDTS which amalgamated in HICS, therefore, it is crystal clear that the entity M/s (HDTS) was not in existence when the TPO as well as the AO passed their respective order. 9. On a similar issue, the ITAT Delhi Bench I-1, New Delhi having the same combination passed a detailed order authored by the AM in the case of Maruti Suzuki India Ltd. vs. Dy. CIT reported in (2016) 72 taxmann.com. 164. .....

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r dated 03.03.2015. Therefore, dear that when the assessment order was passed on 03.03.2015, M/s Suzuki Powertrain India Ltd. lot inexistence. It is also noticed that the aforesaid fact was in the knowledge of the department as the informed vide various letters mentioned in para 5 of the former part of this order which were to the various Tax Authorities. However, the AO in spite of knowing this fact that M/s Suzuki in India Ltd. amalgamated with M/s Maruti Suzuki India Ltd., made the reference .....

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

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itiated, M/s Spice got amalgamated with 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 le 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 dis .....

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ng position in law, it is difficult 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 se .....

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gainst law. It has 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 per son'. 13. In the present ca .....

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rn of income and when the income was earned, it was inexistence. This controversy has been settled by the Hon'ble Jurisdictional High Court in the case of CIT v. Dimension Apparels (P.) Ltd. [2015] 370 ITR 288/[2014] 52 taxmann.com 356 (Delhi) 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 pertaini .....

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ould not cure the defect because there can be no estoppels against law. 15. In the present case also 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 on the successor i.e. the amalgama .....

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10. It is also relevant to point that the order of the ITAT in the case of Maruti Suzuki Pvt. Ltd. vs. DCIT, Circle 16(1), New Delhi (Supra) has been upheld by the Hon ble Jurisdictional High Court vide order dated 4th September, 2017 in the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki Private Ltd., (2017) 85.com 330 wherein it has been held as under:- The revenue has repeatedly brought the issue before the Court in a large number of cases where, in more or less iden .....

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