Vedanta Limited, New Delhi V. ACIT, Circle-26(2), New Delhi

ITA 9495/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0558 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Assessment Year: 2015-2016
• Appeal Filed On: 11-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT KR. SINGH
• Keywords: Depreciation; Transfer pricing; International transaction; Additional depreciation; Rule 8D; Set aside
• Section: 147; 148; 154; 143(3); 14A; 115JB; 144C; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) (THROUGH VIDEO CONFERENCE ) BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER A ND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 9495/DEL./2019 A. Y. : 2015-16 M/S. VEDANTA LIMITED VS. ACIT (SUCCESSOR TO M/S. CAIRN INDIA LTD.) CIRCLE-26(2) CORE-6, 3 RD FLOOR, LODHI ROAD, NEW DELHI-110003 NEW DELHI PAN : AACCS7101B (APPELLANT) ( RESPONDENT) S.A. 248/ DEL/ 2020 ARISING OUT OF ITA NO. 9495/DEL./2019 A. Y. : 2015-16 M/S. VEDANTA LIMITED VS. ACIT (SUCCESSOR TO M/S. CAIRN INDIA LTD.) CIRCLE-26(2) CORE-6, 3 RD FLOOR, LODHI ROAD, NEW DELHI-110003 NEW DELHI PAN : AACCS7101B (APPELLANT) ( RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, SR. ADV. REVENUE BY : SHRI AJIT KR. SINGH, CIT-DR DATE OF HEARING : 07.12.2020 DATE OF ORDER : 24.12.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER APPELLANT, M/S. VEDANTA LIMITED (HEREINAFTER REFERR ED TO AS THE TAXPAYER) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE ITA NO. 9495/DEL/2019 VEDANTA LTD. 2 IMPUGNED ORDER DATED 28/11/2019 PASSED BY THE ASSES SING OFFICER (AO) IN CONSONANCE WITH THE ORDERS PASSED BY THE LD . DRP/TPO UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2015-16 ON THE GROUNDS INTER ALIA THAT :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE DRAFT ASSESSMENT ORDER (AND THE CONSEQUENTIAL FINAL ASSESSMENT ORDER) PASSED BY ASSTT COMMISSIONER OF INCOME TAX, CIRCLE 26(2), NEW DELHI (LD AO) IS VOID AB INITIO FOR THE REASO N THAT THE DRAFT ORDER ITSELF HAS BEEN PASSED IN THE NAME OF A NON-E XISTENT ENTITY AND ACCORDINGLY VITIATES THE WHOLE ASSESSMENT PROCE EDINGS. 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & I N LAW, THE TRANSFER PRICING ORDER PASSED BY LEARNED. TRANSFER PRICING OFFICER (LD. TPO) IN THE NAME OF NON-EXISTENT CA IRN INDIA LTD. IS VOID AB-INITIO THEREBY RENDERING CONSEQUEN T PROCEEDINGS UNDER SECTION 143(3) READ WITH 144C OF THE ACT AS I NVALID. 1.2 WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, TH E DRAFT ASSESSMENT ORDER PASSED BY THE LD. AO (AND CONSEQUE NTIAL ASSESSMENT PROCEEDINGS) ARE VOID AB-INITIO FOR THE REASON THAT LD. AO GROSSLY ERRED IN PASSING A DRAFT ASSESSMENT ORDE R INSTEAD OF A FINAL ASSESSMENT ORDER WHEN THE TRANSFER PRICING OR DER WAS ITSELF A NULLITY IN THE EYES OF LAW FOR HAVING BEING PASSED IN THE NAME OF NON-EXISTENT CAIRN INDIA LTD.. 2 WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPE AL, ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . AO ERRED IN ASSESSING THE TOTAL INCOME AND ADJUSTED BOOK PROFIT OF THE APPELLANT AT RS.374,09,75,540 AND RS. 2942,51,39,96 4 RESPECTIVELY AS AGAINST RS. 154,42,26,610 AND RS 2668,37,95,346 DECLARED BY THE APPELLANT IN THE RETURN OF INCOME. 3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO/DRP GROSSLY ERRED IN MAKING DISALLOWANCE OF RS. 6,77,00,000 UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES). 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO/DRP WITHOUT ASSIGNING ANY COGENT REASON OR RECORDING NECESSARY SATISFACTION UNDER SUB-SECTION (2) OF SECTION 14A OF THE ACT, EMBARKED UPON MAKING THE DISALLOWAN CE BY MECHANICAL APPLICATION OF RULE 8D READ WITH 14A AND SO WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF RS. 6,77,00 ,000. 3.2 IN MAKING THE ABOVE DISALLOWANCE UNDER SECTION 14 A READ WITH RULE 8D OF THE ACT, THE LD. AO/DRP COMPLETELY CHOSE TO IGNORE THE SUBMISSIONS OF THE APPELLANT AND THE THI RD-PARTY INDEPENDENT QUOTATION FILED TO SUBSTANTIATE THE BAS IS OF SUO MOTO ITA NO. 9495/DEL/2019 VEDANTA LTD. 3 DISALLOWANCE AND SO FOR THIS REASON TOO THE ADDITIO N OF RS. 6,77,00,000 AS MADE BY THE LD. AO IS NOT AT ALL JUS TIFIED. 3.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO /DRP ERRED IN CONSIDERING AN ESTIMATE OF EXP ENDITURE OF 1NR 37,75,296/- (BASED ON THIRD PARTY QUOTATION) AS A DISALLOWANCE DESPITE THE FACT THAT THE APPELLANT HA D SUO MOTO DISALLOWED THE SAME IN ITS COMPUTATION OF INCOME. 3.4 WITHOUT PREJUDICE TO THE AFORESAID GROUND OF APPEAL , THE LD. AO/DRP ERRED IN MAKING DISALLOWANCE UNDER RULE 8D(2 )(II) OF THE RULES WITHOUT APPRECIATING THAT THERE WERE NO B ORROWINGS OUTSTANDING AT ANY TIME DURING THE CAPTIONED ASSESS MENT YEAR. 4 WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO/DRP ERRED IN ADDING BACK THE DISALLOWANCE OF RS.6,77,00,000 U NDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES IN CO MPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 4.1 THAT WHILE ADDING BACK THE DISALLOWANCE U/S 14A FO R MAT COMPUTATION, THE LD. AO/DRP CONVENIENTLY FAILED TO TAKE COGNIZANCE OF THE ORDER PASSED BY THE HONBLE 1TAT IN THE APPELLANTS OWN CASE FOR AY 2011-12 TO AY 2013-14. 5 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & I N LAW, THE LD. AO/DRP ERRED IN ALLOWING ADDITIONAL DEPRECIATIO N AMOUNTING TO 1NR 1,84,30,287/- UNDER SECTION 32( 1) (IIA) OF THE ACT DESPITE THE FACT THAT APPELLANT HAD NOT CLAIMED THE SAME IN ITS RETURN OF INCOME. 5.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO/DRP ERRED IN OBSERVING THAT THE CLA IM OF ADDITIONAL DEPRECIATION WAS TO BE MANDATORILY ALLOW ED IN TERMS OF EXPLANATION 5 TO SECTION 32(1) OF THE ACT, WITHOUT APPRECIATING THAT ADDITIONAL DEPRECIATION BEING OPTIONAL IN NATU RE, IS NOT COVERED WITHIN THE PURVIEW OF THE SAID EXPLANATION. 6 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & I N LAW, THE LD. AO/DRP GROSSLY ERRED IN ADDING INR 191,13,00,00 0/- BOTH UNDER THE NORMAL PROVISIONS OF THE ACT AS WELL AS U NDER SECTION 115JB OF THE ACT, WHILE ACCEPTING CHANGE IN THE MET HOD OF DEPRECIATION ON PLANT AND MACHINERY FROM STRAIGHT L INE METHOD (SLM) TO UNIT OF PRODUCTION (UOP) METHOD, IN AS MUCH AS THE ADDITIONAL DEPRECIATION DEBITED TO THE PROFIT & LOSS ACCOUNT, FOR THE PERIOD UPTO 31ST MARCH, 2014 AS A CONSEQUEN CE OF ADOPTING THE CHANGED METHOD, HAS BEEN ALLOWED. 6.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & I N LAW, THE LD. AO/DRP FAILED TO APPRECIATE THAT THE DEPRECIATI ON AMOUNTING TO INR 191,13,00,000/- WAS ALREADY DISALLOWED IN TH E COMPUTATION OF INCOME UNDER THE HEAD DEPLETION, DEPRECIATION A ND AMORTISATION AND HENCE THE ADDITION BY THE LD. AO/ DRP RESULTS IN DOUBLE DISALLOWANCE UNDER NORMAL PROVISIONS OF T HE ACT. 6.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ITA NO. 9495/DEL/2019 VEDANTA LTD. 4 LD. AO/DRP ERRED IN ADDING INR 191,13,00,000 TO THE TOTAL INCOME, REPRESENTING HIGHER PROVISION OF DEPRECIATI ON FOR THE YEAR UNDER CONSIDERATION, WHICH WAS NECESSITATED DUE TO CHANGE IN METHOD OF DEPRECIATION ON ACCOUNT OF IMPLEMENTATION OF SCHEDULE 11 TO COMPANIES ACT, 2013 W.E.F. 1.04.2014. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW, THE LD. AO/DRP ERRED IN PROPOSING TO MAKE THE ADDITION OF INR 191,13,00,000/- TO BOOK PROFITS OF THE APPELLANT UN DER SECTION 115JB OF THE ACT WITHOUT APPRECIATING THAT SAME MET HOD OF VALUATION IS USED IN PROFIT & LOSS ACCOUNT PRESENTE D IN ANNUAL GENERAL MEETING (AGM) OF SHAREHOLDERS. 7.1 THAT THE LD. AO/DRP ERRED IN ADDING INR 191,13, 00,000/- TO BOOK PROFITS OF THE APPELLANT IN COMPLETE DISREGARD TO THE FIRST PROVISO TO SECTION 115JB(2) OF THE ACT AND ALSO IGN ORING THAT THERE IS NO JURISDICTION WITH THE LD. AO TO RECAST THE AC COUNTS OF THE APPELLANT IN THE PRESENT CASE. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO/DRP ERRED IN MAKING ADJUSTMENT OF INR 68,46, 45,714/- UNDER SECTION 115JB OF THE ACT ON ACCOUNT OF CSR EX PENSES (WHICH INCLUDED INR 10,05,60,602/- ON ACCOUNT OF DO NATION) BY MISINTERPRETING THE TERM EXPENDITURE AS WELL AS P ROVISIONS OF THE COMPANIES ACT, 1956. 8.1 THAT THE LD. AO/DRP OUGHT TO HAVE APPRECIATED THAT THEIR POWER OF MAKING ADJUSTMENTS IS RESTRICTED TO THE IT EMS MENTIONED IN EXPLANATION 1 TO SECTION 115JB(2) OF THE ACT AND NOTHING MORE. 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E & IN LAW, THE LD. AO/DRP ERRED IN ADDING LEASE EQUALIZATION RESER VE EXPENSES OF INR 4,65,61,425/- TO BOOK PROFITS UNDER SECTION 115 JB OF THE ACT, WHICH WERE DEBITED TO PROFIT & LOSS ACCOUNT IN TERM S OF ACCOUNTING STANDARD (AS) 19-LEASES. 9.1 THAT THE LD. AO/DRP GROSSLY ERRED IN STATING THAT A S 19 DOES NOT APPLY TO LEASE OF BUILDING MORE SO WHEN FOR THE PURPOSE OF SECTION 115JB OF THE ACT THEY DO NOT HAVE THE POWER OF RECASTING THE ACCOUNTS OF THE APPELLANT CERTIFIED BY ITS STAT UTORY AUDITORS. 10. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW, THE LD. AO/TPO/DRP ERRED IN NOT APPRECIATING THAT THE T RANSACTIONS OF REIMBURSEMENT OF EXPENSES OF INR 62,62,135/-, MA NPOWER, GENERAL AND ADMINISTRATIVE (MGA) COST OF INR 397, 54,81,625/- AND PARENT COMPANY OVERHEADS (PCO) COST OF INR 46 ,29,715/- TOTALING TO INR 398,63,73,475/- ARE NOT IN THE NATU RE OF INTERNATIONAL TRANSACTION UNDER SECTION 92B(1) OF T HE ACT AND HENCE OUTSIDE PURVIEW OF TRANSFER PRICING PROVISION S. 10.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE & IN LAW, THE LD. AO/TPO/DRP ERRED IN NOT APPRECIATING THAT AS PR ESCRIBED IN ITA NO. 9495/DEL/2019 VEDANTA LTD. 5 PRODUCTION SHARING CONTRACT/PETROLEUM RESOURCE AGRE EMENT / JOINT OPERATING AGREEMENT, PARTNERS OF UNINCORPORAT ED JOINT VENTURE (UJV) ARE PERMISSIBLE TO PAY ONLY FOR ACTUA L COST INCURRED BY THE APPELLANT WITHOUT ANY MARK-UP. 10.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW, THE LD. AO/TPO/DRP ERRED IN NOT APPRECIATING THAT THE T RANSACTION OF REIMBURSEMENT OF EXPENSES AMOUNTING TO INR 62,62,13 5/- ENTERED INTO BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRIS ES (AES) IS IN THE NATURE OF PASS THROUGH COSTS AND HENCE NOTIONAL MARK UP OF 5% ON THE SAME IS UNWARRANTED. 10.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE & IN LAW, THE LD. AO/TPO ERRED IN NOT APPLYING COMPARABLE UNC ONTROLLED PRICE (CUP) METHOD AS DIRECTED BY LD. DRP WITH RE SPECT TO DETERMINATION OF ARMS LENGTH PRICE OF MGA COSTS OF INR 364,99,38,686/- REIMBURSED BY CEHL WHEN SAME TRANSA CTION WAS ENTERED INTO BETWEEN UNINCORPORATED JOINT VENTURE ( UJV) OF RJ ON-90/1 OIL BLOCK (ALLEGEDLY THE APPELLANT) AND THI RD PARTY OIL & NATURAL GAS CORPORATION OF INDIA LTD (ONGC). 10.4 WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE L D. AO/TPO/DRP ERRED IN IMPUTING NOTIONAL MARK UP OF 5% ON REIMBURSEMENT OF EXPENSES, MGA COSTS AND PCO COSTS IN GROSS DISREGARD OF RULE 10B(2) OF THE RULES AND OECD GUID ELINES. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE & I N LAW, LD. AO/TPO/DRP GROSSLY ERRED IN HOLDING THAT: THE APPELLANT HAS NOT FURNISHED ANY DOCUMENTARY EVI DENCE TO DEMONSTRATE THE BENEFITS RECEIVED FROM THE SERVICES PROVIDED BY THE AE, IGNORING THE SUBMISSIONS AND DOCUMENTS SUBM ITTED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCE EDINGS; - THE APPELLANT HAS NOT FURNISHED ANY COST BENEFIT ANALYSIS WITH RESPECT TO COST OF SERVICES AND BENEF ITS RECEIVED FROM AE VIS--VIS INDEPENDENT PARTIES; - THERE IS NO CLAUSE DEFINING THE SCOPE OF WORK FOR WHICH THE PAYMENT WAS TO BE MADE; - THERE IS ABSENCE OF WRITTEN BINDING CONTRACT BETWEE N THE PAYER ANDPAYEE COMPANIES; - THE APPELLANT HAS NOT PROVIDED FULL DETAILS OF NATU RE AND EXTENT OF SERVICES PROVIDED BY AE; - THE APPELLANT HAS NOT PROVIDED BASIS FOR DETERMINING THE REIMBURSEMENT TO BE CHARGED. 11. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW, THE LD. AO/TPO/DRP GROSSLY ERRED IN MAKING AN ADJUS TMENT OF FNR 48,320/- TO THE INCOME OF THE APPELLANT ON ACCO UNT OF BANK GUARANTEE FEE IN COMPLETE DISREGARD TO CUP IN THE F ORM OF ACTUAL COST OF THE SAID BANK GUARANTEE TO THE APPELLANT AN D ALSO A QUOTATION FROM AN EXTERNAL COMMERCIAL BANK. 11.1 THAT THE LD. AO/TPO/DRP ALSO ERRED IN DISREGARDING ITA NO. 9495/DEL/2019 VEDANTA LTD. 6 THE DETAILED AND PROPER COMPARABILITY ANALYSIS SUBM ITTED BY THE APPELLANT IN GROSS VIOLATION OF SECTION 92(C)(3) OF THE ACT. 12. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW, THE LD. AO ERRED IN IMPOSITION OF INTEREST UNDER SE CTION 234C OF THE INCOME-TAX ACT, 1961. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. VEDANTA LIMITED, THE TAXPAYER IS INTO THE BUSINESS OF EXPLORING & DRILLING, DEVELOPING, P RODUCING REFINING, MARKETING OF MINERALS AND OIL BYE-PRODUCT S AND OTHER ACTIVITIES INCIDENTAL TO THE ABOVE. APART FROM ITS BUSINESS ACTIVITIES, THE TAXPAYER ALSO HOLDS INTERESTS IN IT S SUBSIDIARY COMPANIES WHICH HAVE BEEN GRANTED RIGHT TO EXPLORE AND DEVELOP OIL EXPLORATION BLOCKS IN THE INDIAN SUB-CONTINENT. THE MAIN SOURCE OF REVENUE IS SALE OF CRUDE OIL AND NATURAL GAS FROM THE BLOCKS AT RAJASTHAN AND CANBAY OFFSHORE AND RAVVA B LOCK (KG BASIN). DURING THE YEAR UNDER ASSESSMENT, THE TAXPA YER ENTERED INTO INTERNATIONAL TRANSACTIONS AND SPECIFIED DOMESTIC T RANSACTIONS AS MENTIONED IN FORM 3CEB WITH ITS ASSOCIATED ENTERPRI SES (AES) AS UNDER :- INTERNATIONAL TRANSACTION S. NO. NATUREOF TRANSACTION AMOUNT IN (RS.) METHOD APPLIED 1 BANK GUARANTEE 805346 CUP 2 SUBSCRIPTION OF EQUITY SHARES 12102900 OTHER METHOD 3 RECOVERY OF TRAVEL & ACCOMMODATION EXPENSES 6262135 4 PARENT COMPANY OVERHEADS 415346005 5 SHARE OF MANPOWER GENERAL AND ADMINISTRATIVE COST 3975481665 6 INDIRECT CHARGES 3705186 7 SALE OF INVENTORY AND CONSUMABLES 5089707 8 TRANSFER OF INVENTORY 4912809 ITA NO. 9495/DEL/2019 VEDANTA LTD. 7 SPECIFIC DOMESTIC TRANSACTIONS S.NO. NATURE OF TRANSACTION AMOUNT IN (RS.) 1 DIRECTORS REMUNERATION 73306921 2 DIRECTOR SITTING FEE 4700000 3 PAYMENT OF COMMISSION 30000000 3 TRANSFER OF INVENTORY AND CONSUMABLES FROM AN ELIGIBLE UNIT TO NON-ELIGIBLE UNIT 10789036 4 HEAD OFFICE ALLOCATION 2329733043 5 SHARE OF MANPOWER, GENERAL AND ADMINISTRATIVE COST 3649938686 3. AFTER CONSIDERING THE CONTENTIONS RAISED BY THE TAXPAYER, THE LD. TPO COMPUTED THE ARMS LENGTH PRICE (ALP) OF IN TERNATIONAL TRANSACTIONS/SPECIFIED DOMESTIC TRANSACTIONS AS UND ER :- S.NO. 1 COST RECOVERY 3986373475 4185692148 19,93,18,674 2. CORPORATE GUARANTEE 8,05,346 66,68,263 58,62,91 7/- TOTAL ADJUSTMENT 20,51,81,591/- 4. AO IN COMPLIANCE TO THE PROPOSED ADJUSTMENT MAD E BY THE TPO/DRP MADE ADDITION OF RS.191,13,18,674/- ON ACCO UNT OF TRANSFER PRICING ADJUSTMENT QUA INTERNATIONAL TRANS ACTIONS ENTERED INTO BY THE TAXPAYER WITH ITS AES, MADE ADDITION OF RS.1,84,30,287/- ON ACCOUNT OF ADDITIONAL DEPRECIAT ION CLAIMED BY THE TAXPAYER, MADE ADDITION OF RS.191,13,00,000/- B Y WAY OF DISALLOWANCE FOR DEPRECIATION ON ACCOUNT OF CHANGE IN ACCOUNTING POLICIES, MADE ADJUSTMENT IN THE BOOKS PROFIT OF TH E TAXPAYER TO THE TUNE OF RS.77693904/- MADE ADJUSTMENT OF RS.68,46,4 5,714/- ON ACCOUNT OF PAYMENT OF CSR ADJUSTED IN THE BOOK PROF IT OF THE ITA NO. 9495/DEL/2019 VEDANTA LTD. 8 COMPANY FOR CALCULATION OF MAT AND MADE ADJUSTMENT OF RS.6,77,00,000/- BY WAY OF DISALLOWANCE U/S 14A OF THE ACT BY WAY OF ADJUSTMENT IN THE BOOKS OF COMPANY OF THE TA XPAYER FOR CALCULATION OF MAT. FEELING AGGRIEVED, THE TAXPAYE R HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THOUGH THE TAXPAYER HAS RAISED NUMEROUS GROUNDS CHALLENGING THE ADDITION/ADJUSTMENT MADE BY THE AO/ DRP/TPO, HOWEVER LD. AR FOR THE TAXPAYER BROUGHT TO THE NOTI CE OF THE BENCH THAT HE HAS SPECIFICALLY RAISED GROUND NO.1 CHALLEN GING THE IMPUGNED ORDER PASSED BY THE AO/DRP/TPO ON THE GROU ND THAT THE SAME WAS VOID AB INITIO HAVING BEEN PASSED IN THE NAME OF NON-EXISTENT ENTITY VITIATING THE WHOLE ASSESSMENT PROCEEDING. 7. SO, FIRSTLY, WE WOULD DEAL WITH GROUND NO.1 RAIS ED IN THE APPEAL SO AS TO DECIDE ISSUE AS TO WHETHER ASSESSME NT ORDER PASSED BY THE AO ON NON-EXISTENT ENTITY I.E. CAIRN INDIA LIMITED IS VOID AB INITIO VITIATING THE ENTIRE ASSESSMENT PROCEEDINGS. 8. LD. AR FOR THE TAXPAYER CHALLENGING THE IMPUGNED TRANSFER PRICING ORDER PASSED ON A NON-EXISTENT ENTITY AND T HE VALIDITY OF ITA NO. 9495/DEL/2019 VEDANTA LTD. 9 DRAFT ASSESSMENT ORDER CONTENDED INTER ALIA THAT TH E FACTUM OF AMALGAMATION OF CAIRN INDIA LTD. WITH VEDANTA LTD. WAS DULY INTIMATED TO THE AO; THAT THE ORDER PASSED BY THE T PO IN THE NAME OF AMALGAMATING COMPANY IS NULLITY/NON-EST ; THAT F INAL ASSESSMENT ORDER PASSED BY THE AO IS ALSO BARRED BY LIMITATION HAVING BEEN PASSED ON 28.11.2019 AND RELIED UPON THE DECISION O F HONBLE SUPREME COURT IN CASES OF PCIT VS. MARUTI SUZUKI IN DIA LTD. 416 ITR 613 & SPICE INFOTAINMENT LTD. VS. CIT IN CIVIL APPEAL NO.285 OF 2014 AND THE DECISION OF THE TRIBUNAL IN FEDEX EXPRESS TRANSPORTATION AND SUPPLY CHAIN SERVICES (I NDIA) PVT. LTD. VS. DCIT IN ITA NO.857 OF 2016 . LD. AR FOR THE TAXPAYER FURTHER RELIED UPON THE DECISION RENDERED BY THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2014-15 IN ITA NO.7684DE L/2018 . 9. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVEN UE TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. AR FOR THE TAXPA YER FILED WRITTEN SUBMISSIONS DATED 15.09.2020, WHICH HAVE BE EN MADE PART OF THE JUDICIAL FILE, CONTENDED THEREIN INTER-ALIA THAT IN THE DRAFT ASSESSMENT ORDER, NAME OF VEDANTA LTD. I.E. AMALGAM ATED ENTITY IS WRITTEN (EARLIER KNOWN AS CAIRN INDIA LTD.) WITH PA N OF AMALGAMATED ENTITY ONLY WHICH IS A MERE IRREGULARIT Y AND DOES NOT GO TO THE ROOTS OF THE CASE; THAT THE TPO RECTIFIED THE NAME OF THE AMALGAMATING COMPANY U/S 154 OF THE ACT VIDE ORDER ITA NO. 9495/DEL/2019 VEDANTA LTD. 10 DATED12.12.2018 WELL BEFORE PASSING THE DRAFT ASSES SMENT ORDER RECTIFYING THE MISTAKE OF MENTIONING THE NAME OF AM ALGAMATING ENTITY BEING A MISTAKE APPARENT ON RECORD AND RELIE D UPON THE DECISION RENDERED BY HONBLE APEX COURT IN CASE OF SKY LIGHT HOSPITALITY LLP VS. ACIT (2018) 92 TAXMANN.COM 93 ( SC). 10. UNDISPUTEDLY, ERSTWHILE ENTITY M/S. CAIRN INDIA LTD. STOOD AMALGAMATED WITH THE VEDANTA LTD. WITH APPOINTED DA TE 1 ST APRIL, 2016 AND EFFECTIVE DATE 11.04.2017, WHICH FACT HAS BEEN DULY BROUGHT TO THE NOTICE OF THE AO. IT IS ALSO NOT IN DISPUTE THAT IN THE ASSESSEES OWN CASE IN SIMILAR SET OF FACTS AND CIR CUMSTANCES OF THE CASE FOR AY 2014-15 ASSESSMENT ORDER IN THE NAME O F NON-EXISTENT ENTITY HAS BEEN HELD TO BE VOID AND NON-EST. 11. WHEN WE EXAMINE THE ISSUE IN CONTROVERSY IN THE LIGHT OF PROVISIONS CONTAINED U/S 144C(15)(B) OF THE ACT, T HE TAXPAYER IN WHOSE NAME TRANSFER PRICING PROCEEDINGS HAS BEEN CO NCLUDED AND DRAFT ASSESSMENT ORDER HAS BEEN PASSED IS NOT AN E LIGIBLE ASSESSEE. FOR FACILITY OF REFERENCE PROVISION CON TAINED U/S 144C(15)(B) ARE EXTRACTED FOR READY PERUSAL AS UNDE R :- 144C. (1) THE ASSESSING OFFICER SHALL, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT, IN THE FIRST INSTANCE, FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT (HEREAFTER IN THIS SECTION REFE RRED TO AS THE DRAFT ORDER) TO THE ELIGIBLE ASSESSEE IF HE PRO POSES TO MAKE, ON OR AFTER THE 1 ST DAY OF OCTOBER, 2009, ANY VARIATION [ ] WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. (15) FOR THE PURPOSES OF THIS SECTION ITA NO. 9495/DEL/2019 VEDANTA LTD. 11 (A) ---- (B) ELIGIBLE ASSESSEE MEANS (I) ANY PERSON IN WHOSE CASE THE VARIATION REFERRED TO IN SUB-SECTION (1) ARISES AS A CONSEQUENCE OF THE ORDE R OF THE TRANSFER PRICING OFFICER PASSED UNDER SUB-SECTI ON (3) OF SECTION 92CA; AND (II) ANY NON-RESIDENT NOT BEING A COMPANY, OR ANY FOREIG N COMPANY. 12. WHEN WE ADHERE TO THE PROVISIONS CONTAINED U/S144C(15)(B)II OF THE ACT ELIGIBLE ASSESSEE N EEDS TO BE AN ENTITY NAMELY M/S. VEDANTA LIMITED , WHEREAS TRANSFER PRICING ORDER HAS BEEN PASSED IN THE NAME OF ERSTW HILE M/S. CAIRN INDIA LIMITED WHICH WAS NOT IN-EXISTENCE AS ON THE DATE OF ORDER I.E 29 TH OCTOBER, 2018, BECAUSE M/S. CAIRN INDIA LTD. GOT AMALGAMATED WITH M/S. VEDANTA LTD. WITH EFFECT FROM 11 TH APRIL, 2016. SIMILARLY DRAFT ASSESSMENT ORDER DATE D 28 TH DECEMBER, 2018 HAS BEEN PASSED IN THE NAME OF M/S. VEDANTA LTD. FORMERLY KNOWN AS CAIRN INDIA LTD. WHICH CAN NOT BE CONSIDERED AS AN ELIGIBLE ASSESSEE U/S 144C(15)(B) (II). 13. IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE DELHI HIGH COURT IN CASE OF SPICE ENTERTAINMENT LTD. BEARING ITA NO. 475 AND 476 OF 2011 WITH DATE OF ORDERS AS 3 RD AUGUST, 2011 , WHICH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN C IVIL APPEAL NO. 285 OF 2014 (SC) DATE OF ORDER 2 ND NOVEMBER, 2017. HONBLE DELHI HIGH COURT IN CASE OF SPICE ENTERTAINMENT LTD . THRASHED THE ITA NO. 9495/DEL/2019 VEDANTA LTD. 12 ISSUE AT LENGTH BY EXAMINING PROVISIONS CONTAINED U /S 292(B) OF THE ACT BY FRAMING THE FOLLOWING QUESTIONS OF LAW : - (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL ERRED IN LAW IN HOLDING THAT THE ACTION OF THE ASSESSING OFFICER IN FRAMING ASSESSMENT IN T HE NAME OF 'SPICE CORP LTD', AFTER THE SAID ENTITY STO OD DISSOLVED CONSEQUENT UPON ITS AMALGAMATION WITH MCO RP PRIVATE LIMITED W.E.F 01.07.2003, WAS A MERE 'PROCE DURAL 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 ASSE SSMENT, HAVING IN SUBSTANCE AND EFFECT, BEEN FRAMED ON THE AMALGAMATED COMPANY WHICH COULD NOT BE REGARDED AS NULL AND VOID?' 14. OPERATING PART OF THE FINDINGS RETURNED BY THE HONBLE HIGH COURT IS AS UNDER :- 12. ONCE IT IS FOUND THAT ASSESSMENT IS FRAMED IN THE NAME OF NON-EXISTING ENTITY, IT DOES NOT REMAIN A PROCEDURA L IRREGULARITY OF THE NATURE WHICH COULD BE CURED BY INVOKING THE PROVISIONS OF SECTION 292B OF THE ACT. SECTION 292B OF THE ACT READS AS UNDER:- '292B. NO RETURN OF INCOME ASSESSMENT, NOTICE, SUMM ONS OR OTHER PROCEEDINGS FURNISHED OR MADE OR ISSUE OR TAK EN OR PURPORTED TO HAVE BEEN FURNISHED OR MADE OR ISSUED OR TAKEN IN PURSUANCE OF ANY OF THE PROVISIONS OF THIS ACT SHAL L BE INVALID OR SHALL BE DEEMED TO BE INVALID MERELY BY REASONS OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOM E, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IF SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PRO CEEDINGS IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCOR DING TO THE INTENT AND PURPOSE OF THIS ACT.' 15. LIKEWISE, IN THE CASE OF SRI NATH SURESH CHAND RAM NARESH VS. CIT (2006) 280 ITR 396, THE ALLAHABAD HI GH COURT HELD THAT THE ISSUE OF NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT IS A CONDITION PRECEDENT TO THE VALIDITY OF ANY ASSESSMENT ORDER TO BE PASSED UNDER SECTION 147 OF THE ACT AND WHEN SUCH A NOTICE IS NOT ISSUED AND ASSESSMENT MAD E, SUCH A ITA NO. 9495/DEL/2019 VEDANTA LTD. 13 DEFECT CANNOT BE TREATED AS CURED UNDER SECTION 292B OF THE ACT. THE COURT OBSERVED THAT THIS PROVISIONS CONDON ES THE INVALIDITY WHICH ARISES MERELY BY MISTAKE, DEFECT O R OMISSION IN A NOTICE, IF IN SUBSTANCE AND EFFECT IT IS IN CONFO RMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT. SI NCE NO VALID NOTICE WAS SERVED ON THE ASSESSEE TO REASSESS THE I NCOME, ALL THE CONSEQUENT PROCEEDINGS WERE NULL AND VOID AND IT WA S NOT A CASE OF IRREGULARITY. THEREFORE, SECTION 292B OF THE ACT HAD NO APPLICATION. 16. WHEN WE APPLY THE RATIO OF AFORESAID CASES TO T HE FACTS OF THIS CASE, THE IRRESISTIBLE CONCLUSION WOULD BE PRO VISIONS OF SECTION 292B OF THE ACT ARE NOT APPLICABLE IN SUCH A CASE. THE FRAMING OF ASSESSMENT AGAINST A NON-EXISTING EN TITY/PERSON GOES TO THE ROOT OF THE MATTER WHICH IS NOT A PROCE DURAL IRREGULARITY BUT A JURISDICTIONAL DEFECT AS THERE C ANNOT BE ANY ASSESSMENT AGAINST A DEAD PERSON . 17. THE ORDER OF THE TRIBUNAL IS, THEREFORE, CLEARLY UNSUSTAINABLE. WE, THUS, DECIDE THE QUESTIONS OF LA W IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND ALLOW T HESE APPEALS. 15. HONBLE SUPREME COURT ALSO DECIDED IDENTICAL IS SUE IN CASE OF PR. COMMISSIONER OF INCOME TAX, NEW DELHI VS. MARU TI SUZUKI INDIA LTD. CIVIL APPEAL NO. 5409 OF 2019 AS TO FRAMING THE ASSESSMENT IN THE NAME OF ERSTWHILE ENTITY / AM ALGAMATING COMPANY IN THE LIGHT OF PROVISIONS CONTAINED U/S 29 2(B) OF THE ACT. HONBLE SUPREME COURT HAS ALSO DISTINGUISHED THE DE CISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF SKYLIGHT HOSPITALITY LLP VS. ASSISTANT COMMISSIONER OF INCOM E TAX RELIED UPON BY LD. DR ON FACTS VIS-A-VIS DECISION RENDERED BY THE DELHI HIGH COURT IN SPICE ENTAINMENT LTD. (SUPRA) ON THE GROUND THAT DEFECT IN THAT CASE (SKYLIGHT HOSPITALITY LLP) REGARDING THE NAME OF NON-EXISTENT COMPANY IN A NOTICE U/S 148 WA S A PROCEDURAL ITA NO. 9495/DEL/2019 VEDANTA LTD. 14 DEFECT OR A MISTAKE CURABLE U/S 292(B) AS NO PREJUD ICE WAS CAUSED TO THE ASSESSEE. WHEREAS IN SPICE ENTERTAINMENT LTD . ASSESSMENT FRAMED IN THE NAME OF NON-EXISTENT ENTITY WAS FOUN D TO BE VOID AB INITIO AND AS SUCH NOT A CURABLE DEFECT U/S 292(B). 16. THE LD. DR FOR THE REVENUE CONTENDED THAT MISTA KE/ DEFECT IN PASSING THE TPO ORDER IN THE NAME OF AMALGAMATIN G ENTITY NAMELY M/S. CAIRN INDIA LTD . WAS RECTIFIED BY THE TPO BY INSERTING THE NAME OF AMALGAMATED COMPANY NAMELY VE DANTA LTD. U/S 154 OF THE ACT VIDE ORDER DATED 12.12.2018 BEFO RE PASSING OF THE DRAFT ASSESSMENT ORDER AND AS SUCH ASSESSMENT F RAMED IN THIS CASE U/S 143(3) / 144C IS A VALID ASSESSMENT. 17. WE ARE OF THE CONSIDERED VIEW THAT AS DISCUSSED IN THE PRECEDING PARAS AND HAS ALSO BEEN HELD BY HONBLE D ELHI HIGH COURT IN CASE OF SPICE ENTERTAINMENT (SUPRA) AND HO NBLE SUPREME COURT IN THE CASE OF MARUTI SUZUKI (SUPRA) FRAMING THE TRANSFER PRICING ORDER ON THE BASIS OF WHICH DRAFT ASSESSMEN T ORDER HAS BEEN PASSED IN THE NAME OF AMALGAMATING ENTITY IS NOT A CURABLE DEFECT AND THE ASSESSMENT FRAMED IS BAD IN LAW. SO, THE CO NTENTION RAISED BY THE LD. DR IS NOT SUSTAINABLE. 18. IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO-ORD INATE BENCH OF TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2014-15 IN ITA NO. 9495/DEL/2019 VEDANTA LTD. 15 ITA NO.7684/DEL/2018, VEDANTA LTD. VS. ACIT VIDE ORDER DATED 04.02.2019 IN FAVOUR OF THE ASSESSEE BY HOLDING THE ASSESSMENT ORDER AND ORDER PASSED BY THE TPO IN THE NAME OF AM ALGAMATING ENTITY IS NON-EST. 19. LD. AR FOR THE ASSESSEE FURTHER CONTENDED THAT EVEN THE FINAL ASSESSMENT ORDER DATED 28 TH NOVEMBER, 2019 PASSED U/S 143(3)/ 144C OF THE ACT IS BARRED BY LIMITATION. UNDISPUTED LY, LD. TPO PASSED THE TRANSFER PRICING ORDER ON 29 TH OCTOBER, 2018 ON THE BASIS OF WHICH DRAFT ASSESSMENT ORDER WAS PASSED BY 28.10 .2018 AND DIRECTIONS, WERE ISSUED BY THE LD. DRP ON 28.11.201 9 AND CONSEQUENTLY FINAL ASSESSMENT ORDER WAS PASSED 28.1 1.2019. WHEN WE REFER TO THE PROVISIONS CONTAINED U/S 153(1) REA D WITH SECTION 153(4), THE FINAL ASSESSMENT ORDER U/S 143(3)/ 144C (15) REQUIRES TO BE PASSED BY 31.12.2018. IN THESE CIRCUMSTANCES THE ORDER DATED 28.11.2019 PASSED BY AO IS APPARENTLY BARRED BY LIM ITATION. 20. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE DECISIONS OF HONBLE DELHI HIGH COURT SPICE ENTERTAINMENT AND HONBLE SUPREME COURT MARUTI SUZUKI (SUPRA) , WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSMENT ORDER FRAME D IN THIS CASE ON THE BASIS OF TP ORDER PASSED BY THE TPO IS BAD I N LAW, HENCE, NON-EST AND CONSEQUENTLY HEREBY QUASHED. SINCE, ASS ESSMENT ITA NO. 9495/DEL/2019 VEDANTA LTD. 16 FRAMED IS A NULLITY BEING IS NOT LEGALLY SUSTAINABL E WE ARE NOT ENTERING INTO THE MERITS OF THIS CASE BY DECIDING O THER GROUNDS ON MERITS. SO THE APPEAL FILED BY THE ASSESSEE IS HERE BY ALLOWED. 21. CONSEQUENTLY, STAY PETITION FILED BY THE ASS ESSEE IS ALSO DISMISSED HAVING BEEN BECOME INFRUCTUOUS. ORDER PRONOUNCED IN OPEN COURT ON 24 TH DECEMBER, 2020 SD/- SD/- (ANIL CHATURVEDI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH DECEMBER, 2020 *BINITA* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI DATE OF DICTATION 11-15/12/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17/12/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER ITA NO. 9495/DEL/2019 VEDANTA LTD. 17