9911796707
TMI Blog2020 (8) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is aggrieved by the disallowance of Rs. 56, 58, 19, 799/- for alleged failure in deducting tax u/s 195 of the Act by treating the said payments as Fees for Included Services [FIS]. 3. Facts relating to first substantive grievance of the assessee are that on 19.01.2018, the Regional Director, u/s 233 of the Companies Act, notified a merger of BICIPL with the appellant from the effective date. The effective date means the date on which certified copy of order u/s 233 of the Companies Act is filed with the Registrar of Companies, which was 15.02.2018. On 10.04.2018, a letter was filed before the Assessing Officer intimating that BICIPL was dissolved and all proceedings be transferred in the name of the appellant i.e. BIPL. On 19.10.2018, the TPO framed an order u/s 92CA(3) of the Act in the name of the amalgamated entity i.e. BIPL i.e. the appellant. However, on 25.12.2018, the Assessing Officer framed a draft assessment order u/s 144C of the Act in the name of a non-existent amalgamated company i.e. BICIPL. 4. On 25.01.2019, objections were raised before the DRP that the Assessing Officer has framed draft assessment order in the name of a non-existent entity. Surprisingly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading to nullification of the entire assessment proceedings, the stand of the Revenue is that it is only a procedural mistake and the same has also been cured by the Assessing Officer at the stage of the final assessment order, which is passed in the name of the correct entity, i.e. the amalgamated company which was in existence. 20. The next question which we are required to examine now is as to whether a valid draft assessment order is mandatory to assume jurisdiction under Section 144C of the Act. In other words, it would be appropriate to examine as to whether an invalid draft assessment order, as noted above in the earlier paras, can be construed as a jurisdictional defect meaning thereby that the same is incurable thereby making the subsequent assessment proceedings null and void in the eyes of law. The phraseology of Sec. 144C(1) of the Act itself shows that the Assessing Officer is required to forward a draft of the proposed order of assessment if he proposes to make a variation in the returned income or loss which is prejudicial to the interests of the assessee. Undoubtedly, the draft assessment order has legal connotations as it lays the foundation of any prospective re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrected by passing the final assessment order in the correct name, as canvassed by the Ld. DR. To emphasise, a draft assessment order in the name of an 'eligible assessee' provides the requisite jurisdiction to the Assessing Officer under Section 144C(1) of the Act. If there is a mistake while complying with such a jurisdictional requirement, the same cannot be termed as a procedural irregularity or mistake rectifiable under Section 292B of the Act. Thus, the said stand of the Ld. DR is liable to be rejected. We hold so. 27. Before parting, we may also refer to the reliance placed by the Ld. DR on the judgment of the Hon'ble Delhi High Court in the case of Sky Light Hospitality LLP (supra) to canvass that the mistake in the draft assessment order by passing it in the name of a nonexistent entity is a procedural mistake. We have carefully perused the said decision and find that in the case before the Hon'ble High Court, there was a mistake by the Assessing Officer only while issuing the notice under Section 148 of the Act. The notice was issued in the name of the erstwhile amalgamating company, so however, all other documents, namely, tax evasion report, reasons to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a nullity. This Court is of the opinion that the ruling in Spice Entertainment Ltd. (supra) is categorical, in that, if the assessment is concluded in favour of a non existing entity, then notwithstanding Section 292B, the position does not improve. Applying Spice Entertainment Ltd. (supra), this Court had in Commissioner of Income Tax v. Dimension Apparels Pvt. Ltd. (2015) 370 ITR 288 also held that the position taken or urged by the assessee cannot be held against it if the primary jurisdiction does not exist i.e. to conclude an assessment in the name of a non existing entity." 10. The Hon'ble Supreme Court in the case of Maruti Suzuki India Ltd 416 ITR 613 has held as under: "19. ........................ (iii) Thirdly, the consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating 24 8 ITA No. 583/Del/2020 company ceased to exist. In Saraswati Industrial Syndicate Ltd., the principle has been formulated by this Court in the following observations: "5. Generally, where only one company is involved in change and the rights of the shareholders and creditors are varied, it amounts to reconstruction or reorgani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which had ceased to exist was void ab initio." 11. Strongly supporting the order of the DRP, the ld. DR stated that the Assessing Officer has merely framed a draft of the proposed order of assessment. Hence it cannot be equated with the draft of any order of assessment. Therefore, there is no order at that point of time and claim of an order in the name of non est entity cannot be made by the assessee. 12. Both these objections of the ld. DR do not hold any ground, in as much, as the first objection has been answered by judicial decisions discussed elsewhere, and in so far as non-intimation is concerned, firstly, there is no obligation upon the assessee to intimate the Assessing Officer and secondly, as mentioned elsewhere, vide letter dated 10.04.2018, the assessee has intimated the Assessing Officer regarding the dissolution of BICIPL and to transfer all proceedings in the name of the appellant, BIPL. 13. Considering the factual matrix discussed elsewhere in the light of judicial decisions referred to hereinabove, we hold that the draft order framed u/s 144C(1) of the Act is in the name of a non-existent company and accordingly, void ab initio, making all subsequent proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditor/supplier nor any interest has been earned from unrelated party. Moreover, being a 100% captive service provider, the revenue of the assessee is 100% from its AEs. In our considered opinion, the question of receiving any interest on receivables does not arise. Considering the facts of the assessee in hand, in totality, we do not find any merit in the TP adjustment of Rs. 22.16 lakhs and the same is, accordingly, directed to be deleted. 21. Th next grievance relates to the disallowance of Rs. 56.58 crores for alleged failure of non-deduction of tax at source. 22. During the course of assessment proceedings, the Assessing Officer sought clarification of services performed by Boeing Company USA, Boeing Defence Australia Ltd, Boeing Korea LLC and whether the salary paid to expatriates has been included in the total salary. Further, the assessee was asked to explain the work performed by the expatriates. The assessee was asked to explain the reimbursement of expenses to Boeing company USA, Boeing International Corporation Korea and Boeing Defence Australia. The assessee furnished necessary details. It was explained that reimbursement of salary cost to expatriate employees i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble High Court was satisfied that the secondary employees are making available their experience and skill in managing and applying the processes. It is the say of the ld. counsel for the assessee that in so far as the assessee is concerned, it is in existence since 2003 and the employees recruited outside India do not possess any specific skill set that is not available with Indian employees. The ld. counsel for the assessee explained that in in-house administration support division, the appellant has 58 employees out of which only 6 are expatriate employees. This division renders travel logistics, finance and accounting support etc and the qualifications and role show that such ex-patriate employees cannot make available any knowledge. Further reliance was placed on the decision of the coordinate bench in the case of AT & T Communication Services India Pvt Ltd 101 TAxmannn.com 105 [Delhi Trib] 29. Per contra, the ld. DR strongly supported the findings of the lower authorities and placed strong reliance on the decision of the Hon'ble High Court in the case of Centrica India Offshore Pvt Ltd [supra]. 30. We have given thoughtful consideration to the orders of the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
