M/s Maruti Suzuki India Ltd., New Delhi V. DCIT, New Delhi

ITA 288/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6849 (ITAT-DELHI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 18-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 20-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: TEJASVI JAIN CAS
• Keywords: Transfer pricing; International transaction; Procedural lapse; Scheme of amalgamation
• Section: 143(3); 142(1); 234B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 1 , NEW DELHI BEFORE SH. N. K. SAINI, A M AND SMT. BEENA PILLAI, JM ITA NO. 288/DEL/2016 : ASSTT. YEAR : 2011 - 12 MARUTI SUZUKI INDIA LTD. PLOT NO. 1, NELSON MANDELA ROAD, VASANT KUNJ, NEW DELHI - 110070 VS DY. COMMISSIONER OF INCOME TAX, CIRCLE - 16(1), C.R. BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A GCS7346J ASSESSEE BY : SH. AJAY VOHRA , SR. ADV., NEERAJ JAIN, ROHIT JAIN, ADVS. RAMIT KATYAH & MS. TEJASVI JAIN, CAS REVENUE BY : SH. AMRENDRA KUMAR, CIT DR DATE OF HEARING : 18 .07 .201 6 DATE OF PRONOUNCEMENT : 21 .07 .201 6 ORDE R 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 APPE AL: 1. THAT ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER DATED 29.12. 2015 PASSED UNDER SECTION 143(3) R . W . S . 144C(1) OF THE INCOME TAX ACT. 1961 ('THE ACT') IS WITHOUT JURISDICTION, ILLEGAL AND BAD IN LAW. ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 2 2. THAT THE ASSESSI NG OFFICER ('AO') ERRED ON FACTS AND IN LAW IN MAKING TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.69,93,38,000/ - ON ACCOUNT OF THE ALLEGED DIFFERENCE IN THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS OF PAYMENT OF ROYALTY ENTERED INTO BY THE APPELLAN T ON THE BASIS OF THE ORDER UNDER SECTION 92CA(3) 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 TH E 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 AP PELLANT APPLYING TRANSACTIONAL NET MARGIN METHOD ('TNMM') AT ENTITY LEVEL. 2.3 THAT THE TPO/DRP ERRED ON FACTS AND IN REJECTING THE BENCHMARKING ANALYSIS UNDERTAKEN BY THE ASSESSEE WITHOUT PROVIDING ANY COGENT REASONS. 2.4 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN INCORRECTLY APPLYING COMPARABLE UNCONTROLLED PRICE ('CUP') METHOD, NOT APPRECIATING THAT APPLICATION OF CUP METHOD REQUIRES HIGH DEGREE OF PRODUCT AND FUNCTIONAL COMPARABILITY. 2.5 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN SELECTING FUN CTIONALLY DISSIMILAR LICENSE AGREEMENTS FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 3 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 TRANSACTIONS WHERE THE LI CENSEE INCURS SIGNIFICANT RESEARCH AND DEVELOPMENT ( R&D') ACTIVITY CANNOT BE REGARDED AS AN APPROPRIATE COMPARABLE FOR BENCHMARKING THE TRANSACTION OF PAYMENT OF ROYALTY UNDERTAKEN BY THE APPELLANT, WHO DOES NOT UNDERTAKE ANY R&D ACTIVITY . 2.8 THAT THE T PO/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT DUE TO DIFFERENCES IN THE ECONOMIES, COMPETITIVENESS AND OTHER DYNAMICS OF THE INDIAN AND CHINESE AUTOMOTIVE MARKETS, THE TRANSACTIONS INVOLVING CHINESE LICENSEES 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 AGR EEMENTS HAVING SIGNIFICANTLY DIFFERENT CONTRACTUAL COVENANTS AS COMPARED TO THE LICENSE AGREEMENT ENTERED INTO BY THE ASSESSEE FOR THE PURPOSE OF BENCHMARKING THE ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 4 INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY UNDERTAKEN BY THE APPELLANT. 2.10 THAT THE T PO/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE LICENSE AGREEMENT ENTERED INTO BETWEEN EDMOND B CICOTTE AND WILLIAM CONTROLS INC PROVIDES FOR MINIMUM ROYALTY PAYMENTS AND IS THEREFORE NOT AN APPROPRIATE COMPARABLE FOR THE PURPOSE OF BENCHMARK ING THE TRANSACTION OF PAYMENT OF ROYALTY UNDERTAKEN BY THE APPELLANT. 2.11 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN ARBITRARILY REJECTING THE COMPARABLE LICENSE AGREEMENTS SUBMITTED BY THE APPELLANT. 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/D RP 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 PART OF COST OF SALES. 2.14 THAT THE TPO/DRP ERRED ON FACTS AND IN L AW IN MAKING ADJUSTMENT IN RESPECT OF ROYALTY PAID BY THE ASSESSEE DURING FINANCIAL YEARS 2006 - 07. 2008 - 09 AND 2009 - 10 WHICH HAVE ALREADY EXAMINED AND ACCEPTED TO BE ARM'S LENGTH BY THE TPO . ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 5 2 .15 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN FAILING TO APP RECIATE THAT THE TRANSACTION OF PAYMENT OF ROYALTY WAS ACCEPTED TO BE AT ARM'S LENGTH IN ALL THE PRECEDING YEARS. 3. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND IN LAW IN HOLDING THAT ROYALTY AGGREGATING TO RS. 16,67,00,000 WAS NOT ALLOWABLE AS DEDU CTION DURING THE RELEVANT YEAR SINCE THE SAME PERTAINED TO EARLIER YEARS, AND CONSEQUENTLY, MAKING NET DISALLOWANCE OF RS.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 R OYALTY PERTAINED TO EARLIER YEAR(S), THE LIABILITY CRYSTALLIZED AFTER RECEIPT OF REGULATORY APPROVALS DURING THE YEAR UNDER CONSIDERATION. 4. WITHOUT PREJUDICE, THE AO/ DRP ERRED IN NOT ALLOWING/ DIRECTING ROYALTY, HELD TO BE PRIOR PERIOD ITEM, TO BE ALLO WED AS DEDUCTION IN THE YEAR TO WHICH THE ROYALTY PERTAINS AND CONSEQUENTLY, APPROPRIATE DIRECTION MAY BE GIVEN. 5. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN COMPUTING/LEVYING INTEREST UNDER SECTION 234A, SECTION 234B AND SECTION 234C OF THE ACT. THE APPELLANT PRAYS LEAVE TO ADD, AMEND, ALTER, DELETE OR FOREGO ANY OF THE GROUNDS EITHER BEFORE OR DURING THE COURSE OF HEARING. 3. VIDE GROUND NO. 1, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE VALIDITY OF THE ASSESSMENT FRAMED U/S 143(3) R.W. S. ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 6 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 RS.76 ,08,30,888/ - (INCOME UNDER SECTION 115JB OF THE ACT DECLARED AT RS.209,50,06,325/ - ). DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD UNDERTAKEN INTERNATIONAL TRANSACTION S WITH ITS ASSOCIATED ENTERPRISES (AE S), T HEREFORE, THE AO REFERRED THE MATTER T O THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING THE ARM S LENGTH PRICE. THE TPO DETERMINED THE ADJUSTMENT OF RS.69,93,38,000/ - ON ACCOUNT OF EXCESS ROYALTY, CONSIDERING THE ARM S LENGTH ROYALTY @ 3% INSTEAD OF 1.39% PAID BY THE ASSESSEE FOR THE REASON THAT IN EARLIER YEARS THE ROYALTY PAID WAS AT 4.3% OF THE NET SALES. THE AO ACCORDINGLY ENHANCED THE INCOME OF THE ASSESSEE B Y A N AMOUNT OF RS.69,93,38,000/ - TO ENSURE THAT INTERNATIONAL TRANSACTIONS RELATING TO PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS A ES WAS AT ARM S LENGTH. THE AO ALSO MADE AN ADDITION OF RS.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 . ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 7 5. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THE ASSESSMENT FRAMED BY THE AO ON THE AMALGAMATING COMPANY IS VOID AB INIT I O. IT WAS POINTED OUT THAT THE HON BLE DELHI HIGH COURT APPROVED THE SCHEME OF AMALGAMATION W.E.F. 01.04.2012 VIDE ORDER DATED 29.01.2013 AND THE AMALGAMATION WAS TAKEN ON RECORD BY THE REGISTRAR OF COMPANIES ON 17.03.2013. THEREFORE, IN PURSUANT TO THE AFORESAID ORDER OF THE HON BLE DELHI HIGH COURT THE ERSTWHILE ENTITY, M/S SUZUKI POWERTRAIN INDIA LTD. CEASED TO EXIST IN THE EYES OF LAW W.E.F. 17.03.2013 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 2 ND AP RIL, 2013 FILED IN THE OFFICE OF ACIT, CIRCLE - 50(1), NEW DELHI ON 8 TH APRIL, 2013; B) LETTER DATE D 2 ND APRIL, 2013 FILED IN THE OFFICE OF ACIT, CIRCLE - 51(1), NEW DELHI ON 18 TH APRIL, 2013; C) LETTER DATED 5 TH APRIL, 2013 FILED IN THE OFFICE OF ADDITIONAL C IT, RANGE - VI, NEW DELHI ON 8 TH APRIL, 2013; D) LETTER DATED 2 ND APRIL, 2013 FILED IN THE OFFICE OF JOINT DIRECTOR OF INCOME TAX, TRANSFER PRICING OFFICER - II(2), NEW DELHI ON 3 RD APRIL, 2013; E) LETTER DATED 5 TH APRIL, 2013 FILED IN THE OFFICE OF CIT - II, NE W DELHI ON 8 TH APRIL, 2013; ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 8 6. IT WAS FURTHER SUBMITTED THAT SINCE THE ERSTWHILE ENTITY DISSOLVED AND CEASED TO EXIST AS A LEGAL ENTITY IN THE EYES OF LAW FROM 17.03.2013 I.E. THE DATE ON WHICH THE AMALGAMATION WAS TAKEN ON RECORD BY THE REGISTRAR OF C OMPANIES, NO PROCEEDINGS CAN BE INITIATED/CONTINUED IN THE NAME OF NON - EXISTENT ENTITY, VIZ. M/S SUZUKI POWERTRAIN INDIA LTD. ON OR AFTER THE SAID D ATE. 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 10 TH JULY, 2014 ISSUED BY ADDITIONAL DIT, TPO - II(2), NEW DEL HI UND ER SECTION 92CA(2) OF THE ACT, N OTICE DATED 1 ST AUGUST, 2014 ISSUED BY ADDITIONAL DIT, TPO - II(2), NEW DELHI OF THE ACT; SHOW CAUSE NOTICE DATED 21 ST JANUARY, 2015 BY JCIT, TPO - 3(1), NEW DELHI UNDER SECTION 92CA(2) OF THE ACT. NOTICE DATED 7 TH NOVEMBE R, 2014 ISSUED BY ASSESSING OFFICER UNDER SECTION 143(2) R.W.S. 142(1) OF THE ACT. 7. IT WAS STATED THAT THE IMPUGNED ASSESSMENT ORDER HAD BEEN PASSED IN THE NAME OF NON - EXISTENT ENTITY THOUGH THE NAME IS MERELY FOLLOWED BY ( AMALGAMATED WITH M/S MARUTI SUZUKI INDIA LTD.) , WHICH WAS PATENTLY ERRONEOUS BECAUSE MERELY MENTIONING IN THE FINAL ASSESSMENT ORDER, THE NAME OF ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 9 THE SUCCESSOR ENTITY AFTER THE NAME OF THE ERSTWHILE/NON - EXISTENT ASSESSEE DID NOT AND COULD NOT VALIDATE THE INVALID ASSESSMENT PROCEEDI NGS , CONTINUED IN THE NAME OF THE NON - EXISTENT 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 DATED 29.12.2015 W AS ALSO IN THE NAME OF NON - EXISTENT ENTITY , THEREFORE, IT WAS ILLEGAL AND BAD IN LAW WH ICH WA S LIABLE TO BE QUASHED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT V. AMARCHAND N. SHROFF: 48 ITR 59 (SC ) RUSTAGI ENGINEERING UDYOG P. LTD. V. DCIT: 382 ITR 443 (DEL) CIT V. MICRON STEELS (P.) LTD.: 233 TAXMAN 120 (DEL) ACIT V. MICRA INDIA (P.) LTD.: 231 TAXMAN 809 (DEL) CIT V. INTEL TECHNOLOGY INDIA PVT. LTD.: 380 ITR 272 (KAR) CIT V EXPRESS NEWSPAPER : 40 ITR 38 (MAD) [AFFIRMED 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: 1 14 ITR 155 (CAL) ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 10 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 COMPUT ER ENGINEERING SERVICES INDIA (P.) LTD. V. ACIT: 172 TTJ 317 (DEL) M/S MEVRON PROJECTS PVT. LTD. VS. ACIT: ITA NO.5412 TO 5416/DEI/2013 (DEL) MAKERS DEVELOPMENT SERVICES LTD. V. CIT: 40 ITD 185(BOM) LATE A.Y. PRABHAKAR (INDL.) V. ACIT: 105 TTJ 391(CHENN.) IMPSAT (P) LIMITED V. ITO: 91 ITD 354 (DEL.) SLOCUM INVESTMENT (P) LIMITED: 106 ITD IT 101 TTJ 658 (DEL.) ACIT VS. WELLVEST INVESTMENT (P) LTD.: CO NO. 251/DEL./2006 HEWLETT PACKARD (I)(P) LTD. V ACIT: ITA NO : 4016/DEL/05 PAMPASAR DISTILLERY LTD. V 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 TANTAM OUNT TO JURISDICTION AL 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) ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 11 SARASWATI INDUSTRIAL SYNDICATE LTD. V. CIT [1990]: 53 TAXMAN 92 (SC) ITO V. RAM PRASAD: 86 ITR 145 (SC) VIVED MARKETING SERVICING (P) LIMITED IN ITA NO. 273/2009 (DEL) CIT V. DIMENSIONS APPARELS PVT. LTD.: 370 ITR 288 [DEL HC] CIT V. MICRON STEELS (P.) LTD.: 233 TAXMAN 120 (DEL) BIRLA COTTON V CIT: 123 ITR 354 (DELHI) R. C. JAIN V. CIT : 140 TAXMAN 37 9 (DEL) CIT V EXPRESS NEWSPAPER : 40 ITR 38 (MAD) [AFFIRMED BY SUPREME COURT IN 53 ITR 250] CIT V. KUMARI PRABHAVATI GUPTA: 231 ITR 188 (MP) SMT. SUDHA PRASAD V. CHIEF CIT: 186 CTR 475 (JHARKHAND) CIT V. INTEL TECHNOLOGIES INDIA (P.) 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 INTERNATIONAL LTD. VS. DCIT IN ITA NO.L824/ DEL/2011 (DEL) ACIT V. DLF CYBER CITY DEVELOPERS LTD.: 34 ITR(TRIB) 696 (DEL) ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 12 LATE A.Y. PRABHAKAR (INDL.) V. ACIT: 105 TTJ 391 (CHENN.) MODI CORP. LTD. (AS SUCCESSOR TO CALCUTTA INSTALMENTS (P) LTD.) V. JT. CIT: 105 TTJ 303 (DEL.) CENTURY ENKA LTD. V. DCIT : 105 TTJ 528 (MUM) 9. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR SUBMITTED THAT THE ASSESSEE FILED THE RETURN OF INCOME IN THE NAME OF M/S SUZUKI POWERTRAIN INDIA LTD. AND THE NOTICE U/S 143(2) R.W.S. 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE WHO HAD FIL ED 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 28.1 1.2011 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 BY THE ERSTWHILE ENTITY M/S SUZUKI POWERTRAIN INDIA LTD. AND THE AO RIGHTLY ASSESSED THE INCOME IN ITS HAND. IT WAS FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 170(1) OF THE ACT . THE PREDECESSOR SHALL BE ASSESSED IN RESPECT OF THE INCOME OF THE PREVIOUS YEAR IN WHICH THE SUCCESSION TOOK PLACE UP TO THE DATE OF SUCCESSION AND THAT THE SUCCESSOR SHALL BE ASSESSED IN RESPECT OF THE INCOME OF THE PREVIOUS YEAR AFTER THE DATE OF SUCCESSION . IT WAS POINTED OUT THAT IN THE PRESENT CASE , THE ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 13 SUCCESSION TOOK PLACE W.E.F. 01.04.2012 AS A RESULT OF SCHEME OF AMALGAMATIO N 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 RIG HTLY 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 CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN AD MITTED FACT THAT THE AMALGAMATING COMPANY M/S SUZUKI POWERTRAIN INDIA LTD. AMALGAMATED WITH M/S MARUTI SUZU KI INDIA LTD. W.E.F. 01.04.2012, A S A RESULT OF SCHEME OF AMALGAMATION DULY APPROVED BY THE HON BLE DELHI HIGH COURT VIDE ORDER DATED 29.01.2013 AND THE ASSESSMENT IN THIS HAS BEEN FRAMED BY THE AO VIDE ORDER DATED 03.03.2015. THEREFORE, IT IS CLEAR THAT WHEN THE ASSESSMENT ORDER WAS PASSED ON 03.03.2015, M/S SUZUKI POWERTRAIN INDIA LTD. WAS NOT INEXISTENCE. IT IS ALSO NOTICED THAT THE AFORESAID FACT W AS IN THE KNOWLEDGE OF THE DEPARTMENT AS THE ASSESSEE INFORMED VIDE VARIOUS LETTER S MENTIONED IN PARA 5 OF THE FORMER PART OF THIS ORDER WHICH WERE WRITTEN TO THE VARIOUS TAX AUTHORITIES . HOWEVER, THE ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 14 AO IN SPITE OF KNOWING THIS FACT THAT M/S SUZUKI POWERT RAIN INDIA LTD. AMALGAMATED WI TH M/S MARUTI SUZUKI INDIA LTD., MADE THE REFERENCE TO THE TPO AND ALSO ISSUED THE NOTICE DATED 07.11.2014 TO THE NON - EXISTENT ENTITY I.E. M/S SUZUKI POWERTRAIN INDIA LTD. 11. ON A SIMILAR ISSUE THE HON BLE JURISDICTIONAL HIG H COURT IN THE CASE OF CIT VS MICRA INDIA (P.) LTD. (2015) 57 TAXMANN.COM 163 HELD AS UNDER: IN THE INSTANT CASE, NO DOUBT THERE WAS PARTICIPATION DURING THE COURSE OF ASSESSMENT; HOWEVER, THE ASSESSING OFFICER, DESPITE BEING TOLD THAT THE ORIGINAL COMPA NY WAS NO LONGER IN EXISTENCE, DID NOT TAKE REMEDIAL MEASURES AND DID NOT TRANSPOSE THE TRANSFEREE AS THE COMPANY WHICH HAD TO BE ASSESSED, 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 COMPANY. THE TRIBUNAL'S DECISION IS, IN THE CIRCUMSTANCES, JUSTIFIED AND WARRANTED. 12. SIMILARLY, THE HON BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF SPICE INFOTAINMENT LTD. VS CIT (SUPRA) HELD AS UNDER: ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 15 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 A SSESSMENT YEARS IN QUESTION . HOWEVER, BEFORE THE CASE COULD B E SELECTED FOR SCRUTINY AND ASSESSMENT PROCEEDINGS COULD BE INITIATED, 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 D ATED 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 S ANCTIONING 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. A COMPANY INCORPORATED UNDER T HE INDIAN COMPANIES ACT IS A JURISTIC PERSON. IT TAKES ITS BIRTH AND GETS LIFE WITH THE INCORPORATION. IT DIES WITH THE DISSOLUTION AS PER THE PROVISIONS OF THE COMPANIES ACT. IT IS TRITE LAW THAT ON AMALGAMATION, THE AMALGAMATING COMPANY CEASES TO EXIST I N THE EYES OF LAW. IN VIEW OF THE AFORESAID CLINCHING 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 11 TH 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 ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 16 SENT, THE APPELLANT/AMALGAMATED COMPANY APPEARED AND BROUGHT THIS FACT T O THE KNOWLEDGE OF THE AO. HE, HOWEVER, DID NOT SUBSTITUTE THE NAME OF THE APPELLANT ON RECORD. INSTEAD, THE AO MADE THE ASSESSMENT IN THE NAME OF M/S SPICE WHICH WAS NON - EXISTING ENTITY ON THAT DAY. IN SUCH PROCEEDINGS AND ASSESSMENT ORDER PASSED IN THE N AME OF M/S SPICE WOULD CLEARLY BE VOID. SUCH A DEFECT CANNOT BE TREATED AS PROCEDURAL DEFECT. MERE PARTICIPATION BY THE APPELLANT WOULD BE OF NO EFFECT AS THERE IS NO ESTOPPEL AGAINST LAW. IT HAS BEEN FURTHER HELD AS UNDER: ONCE IT IS FOUND THAT ASSE SSMENT 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 WAS FRAMED IN THE NAME OF NON - EXISTING ENTITY I.E. M/S SUZUKI POWE RTRAIN INDIA LTD. WHICH AMALGAMATED WITH M/S MARUTI SUZUKI INDIA LTD. AND THIS IRREGULARITY WAS NOT CURABLE. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A O IN THE NAME OF NON - EXISTING ENTITY WAS VOID AB INITIO AND DESERVES TO BE QUAS HED, WE ORDER ACCORDI NGLY. ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 17 14. ON THE PRESENT CASE, THE CONTENTION OF THE LD. CIT DR WAS THAT THE ASSESSMENT WAS RIGHTLY FRAMED BY THE AO ON THE ASSESSEE WHO FILED THE RETURN OF INCOME AND WHEN THE INCOME WAS EARNED, IT WAS INEXISTENCE . T HIS CONTROVERSY HAS BEEN SETTLED BY TH E 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 AMALGAMATION. THE LANGUAGE OF SECTION 159 EVIDENTLY ONLY APPLIES TO NATURAL PERSONS AND CANNOT BE EXTENDED THROUGH A LEGAL FICTION, TO THE DISSOLUTION OF COMPANIES. 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 PROV ISIONS OF SECTION 292B. PARTICIPATION BY THE AMALGAMATED COMPANY IN ASSESSMENT PROCEEDINGS WOULD 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 2 9.12.2015 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 ITA NO. 288 /DEL /201 6 MARUTI SUZUKI INDIA LTD. 18 THE PROVISION S OF SECTION 170(2) OF THE ACT THAT IN THE CASE OF AMALGAMATION, THE ASSESSMENT MUST BE MADE ON THE SUCCESSOR I.E. THE AMALGAMATED COMPANY AND NOT ON THE PREDECESSOR I.E. AMALGAMATING COMPANY. THEREFORE, IN THE PRESENT CASE, THE ASSESSMENT FRAMED BY THE AO VIDE ORDER DATED 29.12.2015 ON THE AMALGAM ATING COMPANY I.E. M/S SUZUKI POWERTRAIN INDIA LTD. WHICH WAS NOT INEXISTENCE ON THE DATE OF PASSING THE ASSESSMENT ORDER WAS NOT VALID AND AS SUCH THE SAME IS QUASHED. SINCE WE HAVE ALLOWED GROUND NO. 1 OF THE ASSESSEE AND ASSESSMENT ORDER IS QUASHED, THE REFORE, NO FINDING IS GIVEN ON THE OTHER ISSUES RAISED BY THE ASSESSEE. 16 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ( ORDER PRON O UNCE D IN THE COURT ON 21 /07/2016) SD/ - SD/ - (BEENA PILLAI ) ( N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 21 /07 /2016 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRA R