TMI Blog2018 (4) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in favour of assessee. - I.T.A. No.1177/Mum/2015 And I.T.A. No.1517/Mum/2016 - - - Dated:- 11-4-2018 - SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Revenue : Jayant Kumar Ld. CIT DR And V.Jenardhanan,Ld. Sr. DR For The Assessee : Nishant Thakkar And Jasmin Amalsadvala, Ld. AR s ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeals by assessee for Assessment Years [AY] 2010- 11 2011-12 contest the final assessment orders passed by Ld. Assessing Officer [AO] pursuant to the directions of Ld. Dispute Resolution Panel [DRP]. Since common issues are involved, we dispose-off the same by way of this common order for the sake of convenience and brevity. First we take up ITA No.1177/Mum/2015 for AY 2010-11 where the assessee has raised following grounds of appeal:- 1. The learned Assessing Officer / Transfer Pricing Officer erred in holding that the Arm s Length Price of the Synovate Shared Resources Fees paid by Appellant was Nil. 2. The Learned Assessing Officer / Transfer Pricing Officer erred in making a Transfer Pricing adjustment of ₹ 5,80,47,258/- in respect of Synovate Shared Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The assessee, vide letter dated 07/12/2017, has raised additional grounds of appeal which read as follows:- 13. The Learned AO has erred in passing the final assessment order in respect of Assessment Year 2010-11 on a non-existent entity i.e.Synovate India Pvt.Ltd. which has been merged with IPSOS Research Pvt. Ltd with effect from 1st April,2012 vide order of the Hon ble Bombay High Court dated 3rd May,2013. Hence the said final assessment order is bad in law and deserves to be quashed. 14. The assessment order is bad in law having been passed by an officer having no jurisdiction over the assessee . Since additional grounds raised by the assessee are legal grounds and do not require appreciation of new facts, the same are taken on record in terms of judgment of Hon ble Court rendered in Jute Corporation of India Ltd. Vs. CIT [187 ITR 688] and National Thermal Power Co. Ltd. Vs. CIT [229 ITR 383]. 3.1 Facts in brief are that the assessee being resident corporate assessee engaged in the field of market research was assessed u/s 143(3) pursuant to directions of Ld. DRP vide final assessment order dated 12/01/2015 passed by Ld. Additional Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces regarding advice and assistance in the areas of business development client liaising, planning, financing, accounting, legal and personal matters, communication, branding and public affairs etc. The group companies nominated SMSL to aggregate the full costs of the said resources and then share / allocate these costs amongst the group companies on continuing basis. Besides actual cost, the assessee has paid a mark-up of 6% to SMSL during the impugned AY, which is claimed by the assessee to be at Arm s Length in terms of an external comparability study performed by Ceteris, US LLC in 2007. 3.4 The main thrust of Ld. TPO was on verification of factum of receipt of actual services by the assessee against the payments made to its AE . Since the assessee failed to file any evidences to substantiate the receipt of service, Ld. TPO concluded the matter by making following observations:- The assessee has failed to demonstrate that it has received services. It has further failed to demonstrate the incurrence of cost by the AE as well as its allocation among the various group entities. In this view of the matter, there could neither be any cost contribution or payment fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee has finally been determined on 12/01/2015 at ₹ 14.88 crores. Aggrieved as aforesaid, the assessee is in further appeal before us. 5.1 The Ld. Authorized Counsel for Assessee [AR], taking us through the documents placed in the paper-book reiterated the stand by placing reliance on several judicial pronouncements rendered on similar factual matrix and submitted that the impugned additions were not justified since the payments made by assessee were duly supported by various agreements / documents / emails etc. and the assessee derived huge benefits in terms of Shared Resources Allocation Agreement. 5.2 At the same time, the final assessment order has been assailed on legal grounds by drawing our attention to the fact that the final assessment has been made on an entity, which was not in existence at the time of passing of the final order, which vitiates the entire proceedings itself in terms of certain judgment of Hon ble apex Court coupled with several other judicial pronouncements and therefore, the same is liable to be set aside. In this regard, reliance has been placed on following judicial pronouncements:- ( i) CIT Vs. Spice Infotainment Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce has been placed on following judicial pronouncements:- ( i) GE Medical Systems (India) Pvt. Ltd. Vs ACIT [IT(TP) No. 563/Bang/2016 Bangalore Tribunal 21/04/2017] ( ii) CIT Vs Shaw Wallace Distilleries Ltd. [70 Taxmann.com 381 Calcutta High Court 06/06/2016] ( iii) Subhlakshmi Vanijya (P) Ltd. Vs. CIT [60 Taxmnan.com 60 Kolkata Tribunal 30/07/2015] ( iv) Maruti Suzuki India Ltd. Vs. DCIT [72 Taxmann.com 164 Delhi Tribunal 21/07/2016] ( v) Jitendra Chandralal Navlani Vs Union of India [80 Taxmann.com 107 Bombay High Court 08/06/2016] 6.1 We have carefully considered the rival contentions and perused relevant material on record. At the outset, it is noted that the assessee, by way of additional ground of appeal, has raised a pertinent legal ground which goes to the root of the matter and questions the very validity of the assessment proceedings itself and therefore, the same is taken up first. 6.2 To appreciate the issue in correct perspective, the details of various orders passed by lower authorities are tabulated below:- No. Nature of Order Dated Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 2. 02/06/2014 Letter from office of Deputy Commissioner of Income Tax-8(3) to the Assessee addressed to Synovate India Pvt. Ltd. (Since merged with IPSOS Research Pvt. Ltd 3. 10/07/2014 Letter from the Commissioner of Income Tax-8 to the assessee addressed to Synovate India Pvt. Ltd. (since merged with IPSOS Research Pvt. Ltd) 4. 05/01/2015 Letter from Joint Commissioner of Income Tax, Transfer Pricing-2(3) addressed to IPSOS Research Pvt. Ltd (formerly known as Synovate India Pvt. Ltd.) whereby the Joint Commissioner is assuming charge of Synovate India Pvt. Ltd. TP Assessment on account of merger with IPSOS Research Pvt. Ltd. in view of the fact that he has jurisdiction over alphabet I vide jurisdiction order dated 15/11/2014 The letter dated 09/01/2014 is reply of assessee to Ld. TPO where the assessee, at para-2 has clearly mentioned that we have merged with Ipsos Research Pvt. Ltd. with effect from 03rd September, 2013 vide order of Bombay High Court dated 03rd May, 2013 . The said repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted by the Tribunal is clearly blemished with legal loopholes and is contrary to law. No doubt, M/s Spice was an assessee and as an incorporated company and was in existence when it filed the returns in respect of two assessment years in questions. However, before the case could be selected for scrutiny and assessment proceedings could be initiated, M/s Spice got amalgamated with MCorp 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 Court. With the dissolution of this company, its name was struck off from the rolls of Companies maintained by the Registrar of Companies. 8. A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsburys Laws of England 4th Edition Vol. 7 Para 1539. Two companies may join to form a new Company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third Company or one is absorbed into one or blended with another, the amalgamating Company loses its entity. 9. The Court referred to its earlier judgment in General Radio and Appliances Co. Ltd. Vs. M.A. Khader (1986) 60 Comp Case 1013. In view of the aforesaid clinching position in law, it is difficult to digest the circuitous 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. 10. Section 481 of the Companies Act provides for dissolution of the company. The Company Judge in the High Court can order dissolution of a company on the grounds stated therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, Section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to Section 292B. 14. The issue again cropped up before the Court in CIT Vs. Harjinder Kaur (2009) 222 CTR 254 (P H). That was a case where return in question filed by the assessee was neither signed by the assessee nor verified in terms of the mandate of Section 140 of the Act. The Court was of the opinion that such a return cannot be treated as return even a return filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... void and it was not a case of irregularity. Therefore, Section 292B of the Act had no application. 16. When we apply the ratio of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of Section 292B of the Act are not applicable in such a case. 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 . 17. The order of the Tribunal is, therefore, clearly unsustainable. We, thus, decide the questions of law in favour of the assessee and against the Revenue and allow these appeals. 18. We may, however, point out that the returns were filed by M/s Spice on the day when it was in existence it would be permissible to carry out the assessment on the basis of those returns after taking the proceedings afresh from the stage of issuance of notice under Section 143 (2) of the Act. In these circumstances, it would be incumbent upon the AO to first substitute the name of the appellant in place of M/s Spice and then issue notice to the appellant. However, such a course of action ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true, the question here is which entity must the assessment be made on. The text of Section 170(2) makes it clear that the assessment must be made on the successor (i.e., the amalgamated company).' 14. The submission that under Section 292B of the Act, the successor-in- interest is precluded from raising an objection if it has participated in the assessment proceedings was negative in Spice Infotainment Ltd.'s case (supra) where it was held: ...once it is found that the assessment is framed in the name of a non-existent entity it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292-B of the Act.' 15. On the issue of participation, the Court Dimension Apparels (P.) Ltd.'s (supra) observed: '22. On the last contention, i.e with respect to participation by the previous assessee, i.e the amalgamating company (which ceases to exist), again Spice (supra) is categorical; it was ruled on that occasion that such participation by the amalgamated company in proceedings did not cure the defect, because there can be no estoppel in law. Vived Marketing Servicing Pvt. Ltd., (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations:- 8. We have carefully considered the rival submissions. The fact-situation in the present appeal clearly brings out that at the time of finalization of assessment order in the name of Siemens Corporate Finance Pvt. Ltd. on 16/08/2012, the said concern was nonexistent as it stood amalgamated with Siemens Technology and Services Pvt. Ltd. consequent to the scheme of amalgamation approved by the Hon'ble Bombay High Court vide order dated 26/08/2011(supra). It is also a fact that the assessee brought to the notice of the Assessing Officer the factum of its amalgamation with Siemens Technology Pvt. Ltd. vide communication dated 6/12/2011, a copy of which is also placed on record. In fact, such a position was also in the knowledge of the DRP, which was approached by the assessee by filing Form No.35A containing objections with respect to the draft assessment order, and in such Form No.35A, the name of the correct entity was mentioned. In this context, the decision of the Mumbai Tribunal in the case of Instant Holdings Ltd.(supra), relied upon by the assessee before us is squarely applicable. The following discussion in the order of the Tribunal is relevant:- 7. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said entity stood dissolved consequent upon its amalgamation with Mcorp Private Limited w.e.f 01.07.2003, was a mere procedural defect ? ( ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that in view of the provisions of section 292B of the Act, the assessment, having in substance and effect, been framed on the amalgamated company which could not be regarded as null and void? 9. The Hon'ble Delhi High Court after referring to the judgment of the Hon'ble Supreme Court in the case of (i) Saraswati Industrial Syndicate v. CIT, 186 ITR 278 and (ii) General Radio and Appliances Co. Ltd. v. M.A. Khader (1986) 60 Comp Case 1013 held that framing of assessment against a non- existing entity goes to the root of the matter, which did not constitute a procedural irregularity but a jurisdictional defect. Accordingly, it answered the aforesaid questions of law in favour of the assessee and against the Revenue and allowed the stand of the assessee. 10. Similarly, even in the case of Intel Technology India Pvt. Ltd. (supra) the Hon'ble Karnataka High Court has reached to a similar conclusion. In the case before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to the notice of the Assessing Officer that ITICL stood amalgamated with IHL w.e.f. 1.4.2007 in terms of a scheme of amalgamation approved by the Hon'ble High Court vide order dated 14.12.2007. In our considered opinion, the aforesaid error on the part of the Assessing Officer is liable to be construed as a jurisdictional defect which goes to the root of the matter and such an assessment order is liable to be set-aside. We hold so. At this point, we may take note of the argument set up by the Revenue, which is to say that the amalgamating company, i.e., ITICL was in existence throughout the previous year relevant to assessment year under consideration, and therefore, the order passed in the name of the amalgamating company, i.e., ITICL was a valid assessment. The aforesaid reason has prevailed with the CIT(A) also to reject the plea of the assessee. In our considered opinion, the aforesaid argument of the Revenue deserves to be repelled considering the ratio of the judgement of the Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. (supra). A reading of the judgement of the Hon'ble Delhi High Court in Spice Infotainment Ltd. (supra) reveals that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral other judicial pronouncements as relied upon by Ld. AR. Upon perusal of the same, we find that it is settled law that passing of assessment order in the name of non-existent entity is a jurisdictional defect and is not merely a technical defect which could not be cured by the provisions of Section 292B. 6.6 So far as the facts in GE Medical Systems (India) Pvt. Ltd. Vs ACIT [supra] as relied upon by revenue, is concerned, we find that the final assessment order dated 27/03/2015 passed by Ld. AO had recognized the factum of merger as evident from para-5 of the order and therefore, the facts of the same are distinguishable from the present case. Similarly, in the case of CIT Vs Shaw Wallace Distilleries Ltd. [supra], upon perusal of para- 7, we find that in that case the fact of amalgamation was never brought to the notice of Ld. AO which is factually different from present case in hand in view of our observations in para-6.4 above. Same is the position with Subhlakshmi Vanijya (P) Ltd. Vs. CIT [supra] where we find that the fact of amalgamation was never brought to the notice of revenue. The other two case laws relied upon by revenue, in fact, helps the contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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