WNS Globel Services Private Ltd, Bangalore V. DCIT, Bangalore

ITA 1198/BANG/2010

• Counselvise Citation: 119821114 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 02-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA CIT DR I
• Assessee Lawyers: K P KUMAR SR
• Keywords: Transfer pricing; International transaction; Scheme of amalgamation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N. BARAT H VAJA SANKAR, VICE - PRESIDENT A ND SMT. P.MADHAVI DEVI , JUDICIAL MEMBER ITA NO.1198/BANG/2010 (ASSESSMENT YEAR: 2006-07) M/S.W N S GLOBAL SERVICES PVT. LTD., AS SUCCESSOR TO WNS CUSTOMER SOLUTIONS PVT. LTD., [FORMERLY KNOWN AS AVIVA GLOBAL SERVICES (BANGALORE) PVT. LTD.,] NO.8A, RMZ C E NTENNIAL, KUNDALAHALLI MAIN ROAD, WHITEFIELD, BANGALORE. APPELLANT PAN: AACCC1172A VS DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 11(1), BANGALORE. RESPONDENT A PPELLANT BY: SHR I K.P.KUMAR, SR. COUNSEL. RESPONDENT BY : SHRI S.K.AMBASTHA, CIT - DR - I DATE OF HEARING: 06 - 09 - 2012. DATE OF PRONOUNCEMENT: 14 - 09 - 2012. O R D E R PER SMT. P.MADHAVI DEVI, JM: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 006-07 AGAINST THE ORDER OF THE DY.CIT, CIRCLE 11(1), BANG ALORE, DATED 31-8-2010. 2. ONE OF THE GROUNDS RAISED BY THE ASSESSEE IN THI S APPEAL IS THAT THE ASSESSMENT MADE ON THE ASSESSEE IS NULL AN D VOID FOR THE ITA NO.1198/BANG/2010 PAGE 2 OF 8 REASON THAT THE ASSESSMENT IS SOUGHT TO BE MADE ON M/S.WNS CUSTOMER SOLUTIONS PVT. LTD.,(FORMERLY KNOWN AS AV IVA GLOBAL SERVICES (BANGALORE) PVT. LTD., HEREINAFTER REFERRE D TO AS WNSCS FOR SHORT) MERGED WITH M/S.WNS GLOBAL SERVICES PVT. LTD., [WNSGS FOR SHORT] WITH EFFECT FROM 1 ST APRIL 2007 AS APPROVED BY THE HONBLE BOMBAY HIGH COURT. 3. THE FOLLOWING SUBMISSIONS ARE MADE BY THE LEARNE D COUNSEL FOR THE ASSESSEE: I) M/S.WNSCS HAD FILED ITS RETURN OF INCOME ON 25-1 1-2006 FOR THE ASSESSMENT YEAR 2006-07. II) SINCE THERE WERE INTERNATIONAL TRANSACTIONS BET WEEN THE ASSESSEE AND ITS ASSOCIATED ENTERPRISE (AE), THE MA TTER WAS REFERRED BY THE AO TO THE TRANSFER PRICING OFFICER (TPO) U/S 92CA OF THE OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERR ED TO AS 'THE ACT'] FOR DETERMINATION OF THE ARMS LENGTH PRICE (A LP). III) IN THE MEAN TIME, THE ASSESSEE FILED AN APPLIC ATION BEFORE THE HONBLE HIGH COURT OF BOMBAY FOR AMALGAMATION W ITH M/S.WNS GLOBAL SERVICES PVT. LTD.,[WNSGS] AND THE APPOINTED DATE FOR AMALGAMATION WAS 1-4-2007. IV) ON 11-8-2009, THE HONBLE BOMBAY HIGH COURT APP ROVED THE SCHEME OF AMALGAMATION AS ON 1-4-2007. V) THE ASSESSEE ADDRESSED A LETTER (DATED 24-8-2009 ) TO THE JOINT DIRECTOR OF INCOME-TAX (TRANSFER PRICING)-II, BANGALORE, BRINGING TO HIS NOTICE THAT THE ASSESSEE HAD BEEN A MALGAMATED WITH WNSGS AND THEREFORE THE ASSESSMENT CANNOT BE CONCLU DED IN THE HANDS OF THE ASSESSEE. ITA NO.1198/BANG/2010 PAGE 3 OF 8 VI) SIMILARLY, THE ASSESSEE ALSO ADDRESSED A LETTER ON 27-8- 2009 TO THE CHIEF COMMISSIONER OF INCOME-TAX-I, BAN GALORE INFORMING HIM THAT THE HONBLE BOMBAY HIGH COURT HA D APPROVED THE SCHEME OF MERGER W.E.F. 1-4-2007 VIDE ORDERS DA TED 11-8-2009 PURSUANT TO WHICH THE ASSESSEE HAS AMALGAMATED INTO WNSGS AND THAT WNSGS IS ASSESSED UNDER THE JURISDICTION OF CC IT-VI, MUMBAI AND SUB-JURISDICTION OF CIT-X, MUMBAI. IT WAS ALSO INFORMED THAT THE REGISTERED OFFICE OF THE AMALGAMATING COMPANY W AS SHIFTED FROM BANGALORE TO MUMBAI DURING FINANCIAL YEAR 2008 -09 AND THAT IN ANY CASE, IN VIEW OF THE MERGER, THE RECORDS MAY BE TRANSFERRED TO MUMBAI JURISDICTION. VII) THE ASSESSEE AGAIN ADDRESSED A LETTER DATED 9- 9-2009 TO ACIT, CIRCLE 11(1), BANGALORE REITERATING THAT THE ASSESSEE- COMPANY WAS NO LONGER IN EXISTENCE PURSUANT TO MERG ER WITH EFFECT FROM 1-4-2007 AND WAS ALSO SURRENDERING THE PAN ALL OTTED TO THE ASSESSEE-COMPANY AND ALSO ANNEXING THE ORDER OF THE HONBLE BOMBAY HIGH COURT. VIII) THE ASSESSEE FURTHER ADDRESSED LETTERS TO DCI T, CIRCLE-11, BANGALORE, ON 24-11-2009 AND TO THE DRP, BANGALORE STATING THE ABOVE FACTS. IX) HOWEVER, BY ORDERS DATED 16-7-2010, THE DRP, BANGALORE, REJECTED THE OBJECTION OF THE ASSESSEE T O THE JURISDICTION OF THE AO IN RESPECT OF THE ASSESSMENT YEAR 2006-07 PURSUANT TO WHICH THE ASSESSMENT ORDER U/S 143(3) FOR THE ASSES SMENT YEAR 2006-07 WAS PASSED ON 31-8-2010. AGGRIEVED BY THIS ORDER OF ITA NO.1198/BANG/2010 PAGE 4 OF 8 ASSESSMENT MAKING TRANSFER PRICING ADJUSTMENT AND A LSO OTHER ADDITIONS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE NARR ATING THE ABOVE FACTS SUBMITTED THAT THE ASSESSEE HAS CEASED TO EXIST W.E.F. 1-4-2007 AS PER THE SCHEME OF AMALGAMATION APPROVED BY THE HONBLE BOMBAY HIGH COURT AND THEREFORE THE ASSESSM ENT ORDER DATED 31-8-2010 ON THE ASSESSEE IS NOT VALID AS IT IS MADE ON A NON-EXISTING PERSON. THE LEARNED COUNSEL FOR THE AS SESSEE FURTHER SUBMITTED THAT THE ASSESSMENT HAS TO BE DONE IN THE HANDS OF THE AMALGAMATED COMPANY I.E. WNSGS AND AS THE REGISTERE D OFFICE OF THE AMALGAMATED COMPANY IS AT MUMBAI, IT IS ONLY TH E REVENUE AUTHORITIES AT MUMBAI WHO CAN DO THE ASSESSMENT EVE N FOR THE RELEVANT ASSESSMENT YEAR 2006-07. IN SUPPORT OF HI S CONTENTIONS, HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS: I) SPICE ENTERTAINMENT LTD. VS. CIT (DELHI HC)(ITA NO.475 OF 2011 DT.3-8-2011), II) CIT VS. SRMB UDYOG LTD . (CALCUTTA HC) (ITAT NO.241 OF 2011 DT.8-11-2011), III) I.K.AGENCIES PVT. LTD. VS. CWT (CALCUTTA HC) AWT NO.1 OF 2003 ETC., DATED 11-3-2011) 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE RELEVANT PREVIOUS YEAR IN THIS CASE IS 200 5-06 DURING WHICH PERIOD THE ASSESSEE WAS VERY MUCH IN EXISTENCE. HE SUBMITTED THAT THE ASSESSEE HAS ALSO FILED THE RETURN OF INCOME IN ITS OWN NAME AND THEREFORE THE AO HAD THE JURISDICTION TO ASSESS THE INCOME OF THE ASSESSEE. HE FURTHER SUBMITTED THAT UNLESS AND UNTIL THE CCIT ITA NO.1198/BANG/2010 PAGE 5 OF 8 PASSED ORDERS U/S 127 TRANSFERRING THE RECORDS FROM BANGALORE TO MUMBAI, THE AO HAS THE JURISDICTION OVER THE ASSESS EE TO COMPLETE THE ASSESSMENT AND THEREFORE THE ASSESSMENT COMPLET ED BY THE AO HAVING JURISDICTION OVER THE ASSESSEE FOR THE RELEV ANT PERIOD IS VALID. HE TRIED TO DISTINGUISH THE DECISIONS OF TH E HONBLE DELHI HIGH COURT AND CALCUTTA HIGH COURT RELIED UPON BY THE LE ARNED COUNSEL FOR THE ASSESSEE ON FACTS. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT UNDISPUTEDLY THE AS SESSEE-COMPANY WAS IN EXISTENCE IN BANGALORE FOR THE RELEVANT PREV IOUS YEAR 2005- 06 AND IT IS THE ASSESSEE WHO HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 25-11-2006. THE NOTICE U/S 143(2) WAS ISSUED ON 4-10-2007 WHEREAS THE AMALGAMATION OF THE ASSESSEE-COMPANY WITH WNSGS HAS COME INTO EFFECT FR OM THE APPOINTED DATE I.E. 1-4-2007. AS SOON AS THE SCHEM E OF AMALGAMATION HAS BEEN APPROVED BY THE HONBLE HIGH COURT OF BOMBAY W.E.F. 1-4-2007, THE ASSESSEE COMPANY CEASED TO EXIST FROM 1-4-2007. THEREFORE, ISSUANCE OF NOTICE U/S 1 43(2) PRIOR TO THE ORDER OF THE BOMBAY HIGH COURT WILL LOSE ITS SI GNIFICANCE AS THE ASSESSEE CEASED TO BE IN EXISTENCE FROM A DATE PRIO R TO THE DATE OF NOTICE ISSUED U/S 143(2). 7. WE FIND THAT SIMILAR FACTS EXIST IN CASE OF SPICE ENTERTAINMENT LTD. (SUPRA) BEFORE THE HONBLE DELHI HIGH COURT. IN THE CASE OF SPICE ENTERTAINMENT LTD. ALSO, THE ASSESSEE THEREIN HAD FILED ITS RETURN OF INCOME ON 30-10-2002 WHILE THE ASSESSEE AMALGAMATED WITH MNSGS W.E.F. 1-7-2003. IN THE SAI D CASE ALSO, ITA NO.1198/BANG/2010 PAGE 6 OF 8 NOTICE U/S 143(2) WAS ISSUED BY THE AO ON 18-10-200 3 WHILE THE ORDER OF THE DELHI HIGH COURT APPROVING THE AMALGAM ATION IS 11-2-2004. THE FACTUM OF AMALGAMATION WAS BROUGHT TO THE NOTICE OF THE AO THEREIN AND DESPITE THE SAME, THE ASSESSM ENT WAS COMPLETED ON 28-3-2005 FRAMING THE ASSESSMENT ON TH E AMALGAMATING COMPANY. AFTER CONSIDERING THE ABOVE FACTS OF THE CASE AND THE LEGAL POSITION THEREON, THE HONBLE DE LHI HIGH COURT HELD THAT AFTER SANCTION OF THE SCHEME VIDE ORDERS DATED 11-2-2004, THE SPICE ENTERTAINMENT CEASES TO EXIST W.E.F. 1-7- 2003 AND EVEN IF SPICE HAD FILED ITS RETURN OF INCOME, IT BECOMES IN CUMBENT UPON THE INCOME-TAX AUTHORITY TO SUBSTITUTE THE SUCCESSOR IN PLACE OF THE SAID DEAD PERSON. IT WAS HELD THAT WHERE THE AMALGAMATE D COMPANY WAS NOT SUBSTITUTED AND THE AO MADE THE ASSESSMENT IN THE NAME OF THE SPICE WHICH WAS NOT AN EXISTING ENTITY ON TH E DATE OF ASSESSMENT, SUCH PROCEEDINGS WOULD CLEARLY BE VOID IN SPITE OF THE PARTICIPATION OF THE AMALGAMATED COMPANY IN THE PRO CEEDINGS. IT WAS HELD THAT SUCH A DEFECT IS NOT A PROCEDURAL IRR EGULARITY WHICH COULD BE CURED BY INVOKING THE PROVISIONS OF 292B O F THE ACT. THE HONBLE DELHI HIGH COURT FINALLY HELD THAT AS THE R ETURNS WERE FILED BY SPICE ON THE DATE WHEN IT WAS IN EXISTENCE, IT W OULD BE PERMISSIBLE TO CARRY OUT THE ASSESSMENT ON THE BASI S OF THOSE RETURNS AFTER TAKING PROCEEDINGS AFRESH FROM THE ST AGE OF ISSUANCE OF NOTICE U/S 143(2) OF THE ACT BY FIRST SUBSTITUTI NG THE NAME OF THE AMALGAMATED COMPANY IN PLACE OF THE AMALGAMATING CO MPANY AND THEN ISSUE NOTICE TO THE AMALGAMATED COMPANY. IT W AS HOWEVER, ITA NO.1198/BANG/2010 PAGE 7 OF 8 MADE CLEAR THAT SUCH COURSE OF ACTION CAN BE TAKEN BY THE AO ONLY IF IT IS STILL PERMISSIBLE AS PER LAW AND HAS NOT B ECOME TIME-BARRED. 8. IN THE CASE BEFORE US ALSO, WE FIND THAT THE ASS ESSEE HAS BEEN BRINGING TO THE KNOWLEDGE OF THE AO AND ALSO T HE TPO AND THE DRP, THE FACTUM OF AMALGAMATION AND ALSO HAS PRAYED THAT THE FILES MAY BE TRANSFERRED TO THE JURISDICTION OF THE AMALG AMATED COMPANY I.E. MUMBAI FOR NECESSARY ACTION. HOWEVER, WE FIND THAT THE REVENUE HAS NOT TAKEN ANY STEPS TO SUBSTITUTE THE A MALGAMATING COMPANY WITH THE AMALGAMATED COMPANY. MERE CHANGE OF NAME IN THE ASSESSMENT ORDER WILL NOT AMOUNT TO SUBSTITUTIO N OF THE AMALGAMATING COMPANY WITH THE AMALGAMATED COMPANY A S SUBMITTED BY THE LEARNED DEPARTMENTAL REPRESENTATIV E. NOTICE WILL HAVE TO BE ISSUED TO AND SERVED UPON THE AMALGAMATE D COMPANY AS IT IS ONLY THE AO WHO HAS JURISDICTION OVER THE AMALGAMATED COMPANY, WHO CAN INITIATE AND COMPLETE THE ASSESSME NT. IN THE CASE BEFORE US, THE ASSESSEE CANNOT BE FOUND FAULT WITH AS IT HAS BEEN VIGILANT AND CONSISTENT IN BRINGING THE FACTS OF AMALGAMATION TO THE NOTICE OF THE REVENUE AUTHORITIES FROM TIME TO TIME WITHOUT ANY DELAY. BECAUSE THE REVENUE AUTHORITIES HAVE NO T TAKEN ANY STEPS PURSUANT TO SAID LETTERS, IT CANNOT BE PRESUM ED THAT THEY HAVE AUTHORITY TO COMPLETE THE ASSESSMENT ON A NON-EXIST ING ASSESSEE- COMPANY. 9. IN VIEW OF THE SAME, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SPICE ENTERTAINMENT LTD., (SUPRA) WE HOLD THAT THE ASSESSMENT ON WNSCS, WHICH IS A NON-EXISTING COMPANY, IS NOT VALID. HOWEVER, AS TH E RETURN OF ITA NO.1198/BANG/2010 PAGE 8 OF 8 INCOME WAS FILED BY WNSCS ON THE DATE WHEN IT WAS I N EXISTENCE, WE HOLD THAT IT WOULD BE PERMISSIBLE TO CARRY OUT T HE ASSESSMENT ON THE BASIS OF THE SAID RETURN ON THE AMALGAMATED COM PANY AFTER INITIATING PROCEEDINGS AFRESH FROM THE STAGE OF ISS UANCE OF NOTICE U/S 143(2) OF THE ACT AFTER FIRST SUBSTITUTING THE NAME OF WNSGS IN PLACE OF WNSCS. HOWEVER, AS HELD BY THE HONBLE D ELHI HIGH COURT IN THE CASE OF SPICE ENTERTAINMENT, SUCH A COURSE O F ACTION CAN BE TAKEN BY THE AO ONLY IF IT IS STILL PERMISSIBLE AS PER LAW AND HAS NOT BECOME TIME BARRED. SINCE WE HAVE HELD THAT THE AS SESSMENT ITSELF IS VOID, WE DO NOT SEE ANY REASON TO ADJUDICATE THE OTHER GROUNDS OF APPEAL. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER, 2012 . SD/- SD/- (N.BARATHVAJA SANKAR) VICE-PRESIDENT (SMT.P.MADHAVI DEVI ) JUDICIAL MEMBER EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBU NAL, BANGALORE.