Tribunal deems assessment on non-existent entity void due to jurisdictional defects, remands for further review.

The Tribunal found the assessment on a non-existent entity to be illegal and void, citing jurisdictional defects. The case was remanded back to the Assessing Officer to verify compliance and the representation of the wound-up entity. The Transfer Pricing Adjustment issue was intertwined with the assessment's validity and was also remanded for reconsideration. Other issues raised by the appellant were linked to the main assessment validity issue and were remanded for further consideration. The Tribunal allowed the appeal for statistical purposes, directing a review of compliance and objections raised by the appellant.

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Issues Involved:
1. Validity of assessment on a non-existent entity.
2. Transfer pricing adjustment.
3. Non-applicability of Transfer Pricing provisions.
4. Rejection of valuation report and alternate valuation methodology.
5. Application of Discounted Cash Flow (DCF) method.
6. Transfer Pricing implication under Double Taxation Avoidance Agreement (DTAA).
7. Computation of gain.
8. Re-characterization of income.
9. Taxation of notional income.
10. Initiation of penalty proceedings.

Issue-wise Detailed Analysis:

1. Validity of Assessment on a Non-existent Entity:
The appellant argued that the assessment orders were null and void as they were issued to 'Pesak Ventures Limited,' which had been voluntarily wound up as of 24 May 2013. The Tribunal noted that the assessment was indeed completed on a non-existent entity, which is illegal and void. The Tribunal cited the Hon'ble Delhi High Court's decision in Spice Infotainment Limited Vs. CIT, which held that assessments on non-existent entities are jurisdictional defects. However, the Tribunal also considered the Gujarat High Court's ruling in CIT Vs. Sumantbhai C Munshaw, which allowed for the continuation of proceedings if the legal representative did not object during the assessment. The Tribunal remanded the issue back to the Assessing Officer (AO) to verify compliance with relevant provisions and the locus standi of the parties representing the wound-up entity.

2. Transfer Pricing Adjustment:
The AO/DRP/TPO made an upward adjustment of Rs. 24,78,73,420 to the value of the transaction related to the sale of Compulsorily Convertible Debentures (CCDs) to Shriram Properties Limited. The appellant contended that they were not provided with a reasonable opportunity to be heard, as required by section 92CA(3) read with the proviso to 92C(3) of the Act. The Tribunal found that this issue was intertwined with the validity of the assessment and remanded it for reconsideration based on the outcome of the first issue.

3. Non-applicability of Transfer Pricing Provisions:
The appellant argued that Shriram was not an Associated Enterprise (AE) at the time of the transaction and that Form No. 3CEB was filed out of caution. The AO/DRP/TPO rejected this contention without providing cogent reasons. The Tribunal did not provide a separate ruling on this issue, as it was linked to the main issue of assessment validity.

4. Rejection of Valuation Report and Alternate Valuation Methodology:
The appellant contended that the AO/DRP/TPO erred in not accepting the fair value of the CCDs as per an independent valuer's report and disregarded the prevailing business and commercial reasons. The Tribunal noted that the valuation method used by the AO/TPO was a matter of dispute and remanded it for reconsideration based on the outcome of the main issue.

5. Application of Discounted Cash Flow (DCF) Method:
The appellant argued that the AO/DRP/TPO erred in applying the DCF method by considering the Weighted Average Cost of Capital (WACC) at 15% instead of 16.89% and not applying correct valuation principles. The Tribunal found that this issue was also linked to the main issue and remanded it for reconsideration.

6. Transfer Pricing Implication under DTAA:
The appellant contended that the transaction was not liable to tax in India under the India-Cyprus DTAA and that there was no intention to shift profits outside India. The Tribunal did not provide a separate ruling on this issue, as it was linked to the main issue of assessment validity.

7. Computation of Gain:
The appellant argued that the AO/DRP erred in substituting the fair market value for the actual sale consideration received and computing the gain accordingly. The Tribunal found that this issue was also linked to the main issue and remanded it for reconsideration.

8. Re-characterization of Income:
The appellant contended that the AO/DRP erred in re-characterizing the gain on sale of CCDs as interest income, contrary to the Delhi High Court's decision in Zaheer Mauritius v. Director of Income-tax (International tax). The Tribunal noted that the DRP did not pass a speaking order on this objection and remanded it for reconsideration.

9. Taxation of Notional Income:
The appellant argued that even if the increase in sale value was considered as 'interest,' it would be notional interest and not taxable as it was not received nor expected to be received. The Tribunal found that this issue was also linked to the main issue and remanded it for reconsideration.

10. Initiation of Penalty Proceedings:
The appellant contended that the AO erred in initiating penalty proceedings under section 271(l)(c) of the Act. The Tribunal did not provide a separate ruling on this issue, as it was linked to the main issue of assessment validity.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding the matter to the AO/TPO to verify compliance with relevant provisions, the locus standi of the parties representing the wound-up entity, and to reconsider the objections raised by the appellant. The decision was pronounced in the open court on 19th June 2018.

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