Appeal Allowed: Invalid Assessment Order, Transfer Pricing Adjustment Deleted, Tax Credit Granted

The Tribunal allowed the appeal, holding the draft assessment order in the name of a non-existent company void ab initio. It directed deletion of the Transfer Pricing adjustment and disallowance for non-deduction of tax at source. The Tribunal also instructed the Assessing Officer to grant credit for prepaid taxes.

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Issues Involved:
1. Validity of Draft Assessment Order in the Name of a Non-Existent Company.
2. Transfer Pricing Adjustment on Outstanding Receivables.
3. Disallowance for Non-Deduction of Tax at Source on Salary Reimbursements.
4. Non-granting of Credit for Prepaid Taxes.

Issue-Wise Detailed Analysis:

1. Validity of Draft Assessment Order in the Name of a Non-Existent Company:
The primary grievance of the assessee was that the Dispute Resolution Panel (DRP) upheld the action of the Assessing Officer in passing a draft assessment order in the name of a non-existent company. The facts reveal that the company BICIPL merged with BIPL, the appellant, effective from 15.02.2018. Despite being notified of this merger, the Assessing Officer issued a draft assessment order on 25.12.2018 in the name of the dissolved entity BICIPL. The DRP directed the Assessing Officer to rectify the mistake and pass the final assessment order in the name of BIPL. The Tribunal emphasized that issuing a draft assessment order in the name of a non-existent entity is a jurisdictional defect, rendering the entire proceeding void ab initio. The Tribunal cited several judicial precedents, including the cases of FedEx Express Transportation and Supply Chain Services (India) Pvt. Ltd., Nokia Solutions and Network India Pvt. Ltd., and Maruti Suzuki India Ltd., to support its decision that such an order is inherently without jurisdiction and cannot be cured under Section 292B of the Act. Consequently, the Tribunal allowed the first substantive grievance of the assessee.

2. Transfer Pricing Adjustment on Outstanding Receivables:
The second issue involved a Transfer Pricing (TP) adjustment of Rs. 22.16 lakhs on account of outstanding receivables from Associated Enterprises (AEs). The TPO treated the delayed payments as unsecured loans/advances and imputed an interest rate of 4.3405%, resulting in the proposed adjustment. The DRP partially accepted the assessee's contention, allowing interest on outstanding payments to be netted off against interest on outstanding receivables, reducing the adjustment to Rs. 22.16 lakhs. The Tribunal noted that the assessee is a debt-free company and does not pay or earn interest from unrelated parties. As a 100% captive service provider, the revenue of the assessee is entirely from its AEs, making the question of receiving any interest on receivables irrelevant. The Tribunal found no merit in the TP adjustment and directed its deletion.

3. Disallowance for Non-Deduction of Tax at Source on Salary Reimbursements:
The third issue related to the disallowance of Rs. 56.58 crores for the alleged failure to deduct tax at source on salary reimbursements to expatriate employees. The assessee contended that it was the real and economic employer of the expatriate employees, who were under its control, and that it had deducted and deposited appropriate taxes under Section 192 of the Act. The Assessing Officer, however, concluded that the assessee failed to deduct tax at source on the expenditure towards salaries and other allowances, invoking the provisions of Section 40(a)(i) of the Act. The Tribunal distinguished the facts of the case from those in Centrica India Offshore Pvt. Ltd., noting that the expatriate employees were under the supervision, control, and management of the appellant. The Tribunal found that the assessee had deducted tax at source under Section 192 and that the provisions of Section 195 did not apply. Consequently, the Tribunal directed the deletion of the disallowance of Rs. 56.58 crores.

4. Non-granting of Credit for Prepaid Taxes:
The final issue involved the non-granting of credit for prepaid taxes. The Tribunal directed the Assessing Officer to give credit for prepaid taxes as per the provisions of law.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the draft assessment order framed under Section 144C in the name of a non-existent company was void ab initio. On merits, the Tribunal directed the deletion of both the TP adjustment of Rs. 22.16 lakhs and the disallowance of Rs. 56.58 crores for non-deduction of tax at source. The Tribunal also directed the Assessing Officer to grant credit for prepaid taxes. The order was pronounced in the open court on 17.08.2020.

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