M/S.IBS SOFTARE P. LTD(SUCCESSOR IN INTEREST OF IBS SOFTWARE SERVICES P. LTD),TRIVANDRUM V. DCIT,NATIONAL E ASSTT (J)ACIT, TRIVANDRUM

ITTPA 6/COCH/2021

AI Insights

The case revolves around the assessment orders issued for the Assessment Year 2016-2017 against IBS Software Services Private Limited, which had been amalgamated into IBS Software Private Limited prior to the assessment. The primary legal contention was the validity of the assessment orders issued in the name of a non-existent entity post-amalgamation. The Tribunal examined the procedural adherence to the Income Tax Act, particularly Sections 143(2) and 144C, and the implications of the amalgamation on the legal standing of the assessment orders. The Tribunal's decision emphasized the importance of legal identity in the issuance of tax assessment orders and the procedural requirements for such assessments under Indian tax law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784802 (ITAT-COCHIN)
• Duration Of Justice: 4 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 13-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 29-06-2021
• Other Referred Cases: Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Ltd., Oasys Green Tech (P.) Ltd. vs. Income-tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Revised return; Transfer pricing; International transaction; Tax effect; Notional interest; Services rendered outside India; FORM 26AS
• Section: 143(3); 10AA

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN “DB” BENCH, COCHIN SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER IT(TP)A No.06/COCH/2021 (Assessment Year:2016-2017) IBS Software Private Limited (Successor in interest of IBS Software Services Private Limited) 521-524, NILA, Technopark Campus, Karyavottam P.O., Trivandrum, Kerala-695581 [PAN:AADCI5529A (erstwhile: AAACI6825N] …………. Appellant Deputy Additional/ Joint/ Deputy/ Assistant Commissioner of Income Tax/ Income-tax Officer, National e- Assessment Centre, Delhi Jurisdictional Assessing Officer: Assistant Commissioner of Income Tax Circle 1(1), Trivandrum. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Rajakannan, Advocate Shri Sanjit Kumar Das, CIT-DR Date Conclusion of hearing Pronouncement of order : : 19.08.2025 13.11.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is pertaining to Assessment Year 2016-2017 challenging Final Assessment Orders, dated 30/04/2021, passed by the Assessing Officer under Section 143(3) read with Section 144C(13) read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], as per the directions issued by Dispute Resolution Panel - 2, Bengaluru [for short ‘DRP’], on 22/03/2021 under Section 144C(5) of the Act. Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 2 2. The Assessee has raised following grounds of appeal : “The grounds mentioned herein are without prejudice to one another 1. That on the facts and circumstances of the case and in law, the assessment order framed under section 143(3) read with section 144C(13) and section 144B of the Income-tax Act, 1961 (The Act') passed by the Assessing officer (AO) dated 30 April 2021 is beyond jurisdiction, bad in law and void ab initio. (Tax effect-26,746,186) 2. That, on the facts and circumstances of the case and in law, the AO has erred in framing the assessment on a non-existent entity namely, Mis IBS Software Services Private Limited which was merged with M/s IBS Software Private Limited with effect from 1 April 2017 vide National Company Law Tribunal, Chennai order CP/55558/CCA/2018 dated 27 March 2018. (Tax effect-26,746,186) 3. That, on the facts and circumstances of the case and in law, the AO has erred in not considering the interest income of INR 49,887,860 for the purpose of allowing deduction under section 10AA of the Act amounting to INR 32,182,537. (Tax effect-11,137,732) 4. That, on the facts and circumstances of the case and in law, the AO has erred in 4.1.1.considering refund of INR 13,121.464 as against refund claimed by the Appellant of INR 391,370 in the return of income. 4.1.2. sustaining incorrect adjustment of refund of INR 13,121,464 with non-existent and non-collectible demands for AY 2006-07 and AY 2008-09 respectively. (Tax effect-13,121,464) 5. On the facts and circumstances of the case and in law, the AO may be directed to grant the Appellant the deduction of Education Cess and Secondary and Higher Education Cess' as claimed in the Return of Income (subject to change based on conclusion of final order), in view of the Circular No. 91/58/66- ITJ(19) dated 18 May 1967 issued by the Central Board of Direct Taxes which is binding on the income-tax authorities and the judicial precedents (Tax effect 12,604,308) 6. That on the facts and circumstances of the case and in law, the AO may be directed to grant the full credit of taxes deducted at source amounting to INR 18,067.551 as reflected in Form 26AS while computing the tax liability of the appellant. (Tax effect 894,015) Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 3 7. That the directions of the learned Dispute Resolution Panel-2. Bangalore (learned DRP) and the consequent assessment order is bad in law and on facts, while upholding the action of the learned Deputy Commissioner of Income-tax. (Transfer Pricing) Range 2(3)(1), Kochi (learned Transfer Pricing Officer or learned TPO) of making an adjustment of INR 45, 100,709 to the transfer price of the Appellant's international transaction with its associated enterprises ('AEs') Tax effect: 15,608,453) 8. On the facts and circumstances of the case and in law, the AO erred in making the adjustment of INR 45,100,709 to the income of the Appellant in respect of notional interest on delay in collection of trade receivables outstanding for more than 60 days from AEs 8.1. In doing so, the AO/TPO erred in: 8.1.1 considering overdue receivable from the AEs as an international transaction under the provisions of section 928 of the Act 8.1.2 disregarding the fact that Assessee does not pay interest to the AEs in relation to outstanding payable from AEs, and 8.1.3 disregarding the fact that the Appellant has not charged any interest to its non-AEs for the delay in collection of dues (Tax effect: 15,608,453) 9. Without prejudice to the above, the AD/TPO erred in ignoring that, if at all transfer pricing adjustment has to be sustained with respect to notional interest on foreign currency overdue receivables against export of services, it has to be restricted at an interest rate of LIBOR as against SBI PLR 10. That the AO has erred, in law and in facts, in calculating the interest under section 234C of the Act at INR 21,497,360/-.” 3. The admitted facts in brief that IBS Software Services Private Limited (PAN:AAAC16825N) was a company engaged in the business of development and sale of computer software. The aforesaid Assessee-Company got amalgamated into its holding company [i.e IBS Software Private Limited (PAN:AADC15529A)] by virtue of the Order, dated 27/03/2018, passed by the National Law Company Tribunal (NCLT) in CP/55&56/CCA/2018 with effect from 01/04/2017. For the Assessment Year 2016-2017, the original Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 4 return was filed in the name of IBS Software Services Private Limited [for short ‘IBS Software Service’] on 31/11/2016. Thereafter, on 31/03/2018 [after the passing of the above Order, dated 27/03/2018, by the NCLT] a revised return was filed using Permanent Account Number of IBS Software Services [which was the amalgamating company]. The said revised return was selected for scrutiny and notice under Section 143(2) of the Act was issued on 13/08/2018. The intimation of the merger was given to AO on 05/05/2019. During the assessment proceedings reference was made to the Transfer Pricing Officer (TPO) for determination of Arm’s Length Price of the International Transactions undertaken by the Assessee with its Associated Enterprises. TPO passed order, dated 30/10/2019, under Section 92CA(3) of the Act in the name of IBS Software Services. The Assessing Officer also passed Draft Assessment Order, dated 04/12/2019, in the name of IBS Software Services Pvt. Ltd. The Assessee filed objections before the DRP in the name of IBS Software Private Limited in its capacity as successor in the interest of IBS Software Services challenging validity of the notice issued under Section 143(2) of the Act, Order passed by the TPO and the Draft Assessment Order, inter alia, on the ground that IBS Software Services had ceased to exist with effect from 01/04/2017 by virtue of Order, dated 27/03/2018, passed by the NCLT. Therefore, the notice/orders passed in the name of non- existing entity were bad in law. The objection raised by the Assessee were disposed off by the DRP vide Order, dated 22/03/2021. DRP upheld the assumption of jurisdiction by the Assessing Officer and directed the Assessing Officer to pass the final assessment order in the name of IBS Software Private Limited. Pursuant to which the Final Assessment Order, dated 30/04/2021, was passed by the Assessing Officer in the name of the IBS Software Private Limited. The Assessee has now preferred the present appeal challenging the validity of the assessment, directions issued by the DRP and the Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 5 validity of the Final Assessment Order. The Assessee has raised 10 grounds of appeal. Ground No.1 &2: 4. We would first take up Grounds No. 1 & 2 (reproduced in Paragraph 2 above) which go to the root of the matter. 5. We have heard both the sides on Ground No.1 and 2 and have perused the material on record. 6. The primary submission advanced on behalf of the Assessee is that the Draft Assessment Order as well as the Final Assessment Order was passed by the Assessing Officer in the name of non-existent entity and was, therefore, liable to be quashed. Vide order dated 27/03/2018, the NCLT had approved amalgamation of IBS Software Services into IBS Software Private Limited with effect from 01/04/2017. The intimation regarding the amalgamation was given to Assessing Officer vide letter, dated 05/03/2019. Despite having received the Intimation the Assessing Officer passed Draft Assessment Order on 04/12/2019 in the name of IBS Software Services. The DRP has recorded this fact in its order dated 22/03/2021. However, the DRP did not quash the Draft Assessment Order and directed the Assessing Officer to pass the Final Assessment Order in the name of IBS Software Private Limited. It was submitted that the Draft Assessment Order was bad in law, the DRP did not have jurisdiction to give directions to the Assessing Officer to pass the Final Assessment Order in the name of IBS Software Private Limited. In any case, the Final Assessment Order was passed by the Assessing Officer in the name of IBS Software Services which had ceased to exist and not in the name of IBS Software Private Limited. It was further submitted that even the assumption of jurisdiction by the Assessing Officer was bad in law as notice under Section 143(2) of the Act was issued in the name of Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 6 non-existent entity. 7. Per contra the learned Departmental Representative vehemently contended that the Final Assessment Order was passed in the name of amalgamated company (i.e. IBS Software Private Limited) which was very much in existence and therefore, it cannot be said that the Final Assessment Order was bad in law. It was further submitted that the assumption of jurisdiction was upheld by the DRP and the same has not been challenged by the Assessee in appeal before this Tribunal. In the Final Assessment Order was clearly stated by the Assessing Officer that the Final Assessment Order was being passed in the name of M/s IBS Software Private Ltd (PAN: AADC15529A) being successor in interest of erstwhile IBS Software Services (PAN: AAAC16825N). Since it was the first year of National Faceless Scheme, due to unavailability of functionality, the Final Assessment Order was being uploaded in the name of IBS Software Services (PAN: AAAC16825N). Therefore, it cannot be said that the Final Assessment Order has been passed in the name of non-existent entity. 8. Having given thoughtful consideration to the rival submissions and on perusal of the orders passed by the authorities below. 9. We note that the original return of income for the Assessment Year 2016-2017 was filed in the name of IBS Software Services on 30/11/2016. Thereafter, revised return was filed on 30/11/2018. Meanwhile, vide order dated 27/03/2018, the amalgamation of IBS Software Services with IBS Software Private Limited was approved by NCLT and the same was effective from 01/04/2017. Intimation of the aforesaid amalgamation was sent to the Assessing Officer after lapse of around 18 months on 05/09/2019. Taking into consideration the aforesaid facts the DRP had concluded that the assumption of jurisdiction by the Assessing Officer by issuance of notice under Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 7 Section 143(2) of the Act on 13/08/2018, in the name of IBS Software Services was valid in view of the judgment of the Hon’ble Supreme Court in the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Ltd. [2019] 265 Taxman 515 (SC)/[2019] 416 ITR 613 (SC)[25-07-2019] and judgment of Hon’ble Madras High Court in the case of Oasys Green Tech (P.) Ltd. vs. Income-tax Officer [2020] 272 Taxman 147 (Madras)/[2020] 426 ITR 124 (Madras)[21-01-2020]. We do not find any infirmity in the conclusion drawn by the DRP since the DRP has followed binding judicial precedents. Accordingly, we conclude that the notice issued by the Assessing Officer under Section 143(2) of the Act cannot be held to be bad in law as on the date of issuance of notice under Section 143(2) of the Act, the Assessing Officer did not have knowledge of the amalgamation. 10. However, having concluded as above, we find merit in the contention advanced on behalf of the Assessee that the Draft Assessment Order passed by the Assessing Officer cannot be sustained. It is admitted position that on 05/09/2019 Intimation was received by the Assessing Officer regarding amalgamation of IBS Software Services into IBS Software Private Limited. On perusal of order dated 30/11/2019 passed by the TPO under 92CA(3) of the Act, we find that the Assessing Officer was also informed about the order dated 27/05/2018, passed by NCLT. In response to notice issued by the TPO under Section 92CA(2) of the Act, the Assessee had, vide letter dated 28/12/2018, highlighted the fact of amalgamation. Taking note of the same, the TPO had written to the Assessing Officer for confirming the validity of reference sent to the TPO. In response the Assessing Officer had, vide letter dated 09/06/2019, sent a response to the TPO which has been reproduced in Paragraph 1.1 of the Order, dated 30/10/2019, passed by the TPO under Section 92CA(3) of the Act and the same reads as under: Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 8 “1.1 Based on the above submission of the assessee, a letter requesting to ascertain the facts and conform the validity of the reference was sent to the concerned Assessing Officer, DCIT Circle 1(1). Vide a letter dated 06.09.2019, the AO has replied that “4 In this context, it is pertinent to note that as per the Ref1, as the assessee's representative has informed TPO, the effective date for amalgamated company M/s IBS Software Private Limited is 01.04.2017 only. Any proceedings prior to that period will exist only on the erstwhile company, in this case being M/s IBS Software Services Pvt Ltd (PAN AAC16825N) the return of income pertains to the period financial year 2015-16 and hence scrutiny along with the TP proceedings have to be necessarily on M/s IBS Software Services Pvt Ltd (PAN AAACI6825N) only\" (Emphasis Supplied) 1.2 Accordingly, a fresh notice u/s 92CA(2) was issued on 06.09.2019 to M/s IBS Software Services Private Ltd. (subsequently known as M/s IBS Software Private Ltd) 5th Floor, NILA, Technopark Campus, Trivandrum-695581. Against the said notice the assessee filed the documents called for on 27.09.2019.” 11. On the basis of above response received from the Assessing Officer, the TPO proceeded to pass the Order, dated 30/10/2019, under Section 92CA(3) of the Act in the name of IBS Software Services which has ceased to exist by virtue of Order, dated 27/03/2018, passed by the NCLT. 12. From the record, it is clear that the Assessing Officer had knowledge of the amalgamation prior to passing of the Draft Assessment Order on 04/12/2019. Despite the same, the Assessing Officer proceeded to pass Draft Assessment Order on 04/12/2019 in the name of non- Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 9 existent entity. The DRP had also arrived on the same conclusion and has, in Paragraph 4.7 of its Order dated 22/03/2021, recorded as under: “4.7 Considering the facts of the present case and the judgement of Hon'ble Supreme Court in the case of PCIT v. Maruti Suzuki India Private Limited [Civil Appeal No 5409 of 2019] and Hon'ble High Court of Madras in the case of Oasys Green Tech Private Limited in the W.P. No. 21858 and 1759 of 2018, mentioned supra, we note that in the instant case, the assumption of jurisdiction u/s. 143(2) by the AO is correct as on the date of issue of this notice i.e., 13.08.2018, the Assessing Officer was not intimated of the merger. In fact, the same was intimated to the Assessing Officer only on 05.09.2019. Therefore till 05/09/2019, AO was not aware of any amalgamation of the company. Accordingly, assumption of jurisdiction by AO cannot be faulted with. We have also taken cognisance of the fact that revised return was filed in the name of the non-existent entity, i.e., amalgamating company. Thus, by its very conduct, the assessee has led the department to believe that the amalgamating company as an entity existed. The revised return ought not to have been filed in the name of amalgamating company after its amalgamation. Therefore, the assessee furthered the impression of the continued existence of the amalgamating entity. If only the revised return were filed in the name of the amalgamated company subsequent to the amalgamation, the amalgamated company would have got selected for scrutiny and all subsequent proceedings would have continued in the name of amalgamated company. We are also aware that the assessee took almost 18 months to intimated the AO about the amalgamation and the same was done only three months before the time barring date of passing of the order. The case of the assessee is similar in fact to the Maruti Suzuki case cited supra except, in respect of assumption of jurisdiction by the AO. In the Maruti Suzuki case, the notice u/s 143(2) was issued in the name of amalgamating company even after the intimation given to the AO regarding amalgamation by the assessee. In the case at hand, notice u/s 143(2) was issued before the intimation of merger was given to the AO by the Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 10 assessee. Also, in this case, the revised return, which was selected for scrutiny, was filed in the name of amalgamating company even though the process of amalgamation was completed well before the date of filing of the return. Thus, the assessee has led the AO to believe that the amalgamating company as an entity existed. In the respect of assumption of jurisdiction, this case is similar to Oasys Green Tech Private Limited, wherein, assessee, by its conduct, gave the impression of continued existence of amalgamating company to the AQ We note that the Hon'ble Supreme court in the case of Maruti Suzuki has observed that the assessment cannot be made in the hand of non-existent company post amalgamation. Accordingly, we are of the view that passing of draft order in the name of amalgamating company is not correct as per aforementioned judgements. On the date of passing the draft order, the amalgamating company was not in existence and the order cannot be passed on a non-existent entity. The AO was required to pass the draft assessment order in the name of the amalgamated company. In View of the above discussions, we direct the Assessing Officer to pass the final order in the name of the amalgamated company i.e. M/s IBS Software Pvt Ltd (successor in the interest of erstwhile IBS Software services Pvt Ltd since amalgamated).” 13. Thus, it is clear that the Draft Assessment Order was passed in the name of non-existing entity and therefore, could not be sustained. 14. In view of the above, we hold that neither the Order passed by TPO under Section 92CA(3) of the Act on 30/10/2019 nor the Draft Assessment Order passed under Section 144C of the Act on 04/12/2019 can be sustained since both have been passed in the name of non-existing amalgamating company. Accordingly, both the aforesaid orders are quashed as being nullity in the eyes of law. Accordingly, we accept the contention of the Assessee that the DRP did not have jurisdiction to issue directions to the Assessing Officer to pass final assessment order in the name of amalgamating company. Since, we have concluded as aforesaid the Order, dated Printed from counselvise.com IT(TP)A No.06/Coch/2021 Assessment Year 2016-2017 11 22/03/2021, passed by DRP and the Final Assessment Order, dated 30/04/2021, passed by Assessing Officer are also quashed as being nullity in the eyes of law. Thus, Ground No.1 and 2 raised by the Assessee are allowed. Ground No.3 to 10: 15. Since we have allowed Ground No.1 & 2, Ground No.3 to 10 raised by the Assessee are dismissed as having been rendered infructuous. 16. In result, in terms of paragraph 10 and 11 above, the appeal preferred by the Assessee is allowed. Order pronounced on 13.11.2025. Sd/- Sd/- (Inturi Rama Rao) Accountant Member (Rahul Chaudhary) Judicial Member कोचीन Cochin; Ǒदनांक Dated : 13.11.2025 Milan/- आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. आयकर आयुÈत/ The CIT 4. Ĥधान आयकर आयुÈत / Pr.CIT 5. ͪवभागीय ĤǓतǓनͬध ,आयकर अपीलȣय अͬधकरण कोचीन / DR, ITAT, Cochin 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, स×याͪपत ĤǓत //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, कोचीन / ITAT, Cochin Printed from counselvise.com "