TaxTMI 
TaxTMI 
2018 (4) TMI 708
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....red in holding that the Arm's Length Price of the Synovate Shared Resources Fees paid by Appellant was Nil. 2. The Learned Assessing Officer / Transfer Pricing Officer erred in making a Transfer Pricing adjustment of Rs. 5,80,47,258/- in respect of Synovate Shared Resources Fees paid. 3. The Learned Assessing Officer / Transfer Pricing Officer erred in holding that the Appellant had not filed documentary evidences in support of receipt of intra-group services. 4. The learned Assessing Officer / Transfer Pricing Officer erred in holding that the Appellant had not benchmarked the transaction of payment of Synovate Shared Resources fees properly. 5. The Learned Assessing Officer / Transfer Pricing Officer erred in holding that the Appellant failed to demonstrate the incurrence of costs by the Associated Enterprise as well as its allocation amongst various group entities. 6. The Learned Dispute Resolution Panel while confirming that the Arm's Length Price of the Synovate shared Resources Fees was Nil, erred in drawing conclusions which were not supported by any material. 7. Without prejudice to ground Nos.1 to 5, the Assessing Offic....
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.... Co. Ltd. Vs. CIT [229 ITR 383]. 3.1 Facts in brief are that the assessee being resident corporate assessee engaged in the field of market research was assessed u/s 143(3) pursuant to directions of Ld. DRP vide final assessment order dated 12/01/2015 passed by Ld. Additional Commissioner of Income-tax-11(2), Mumbai wherein the assessee has been assessed at Rs. 14.88 crores after certain additions / adjustments as against returned income of Rs. 8.23 crores filed by the assessee on 11/10/2010. The assessee has been saddled with additions aggregating to Rs. 6.65 crores on account of certain Transfer Pricing adjustment, disallowance u/s 40(a)(i) & disallowance u/s 43B for delayed payment of PF/ESIC and the same are the subject matter of this appeal. 3.2 During impugned AY, the assessee carried out certain international transactions with its Associated Enterprises [AE] and filed the details thereof in Form No. 3CEB. To compute the Arm Length Price [ALP] of these transactions, the same was referred to Ld. Transfer Pricing Officer-II(4) [TPO] u/s 92CA(1) on 27/07/2012. The Ld.TPO, vide order u/s 92CA(3) dated 21/01/2014, suggested upward adjustment of Rs. 5.80 Crores against shares ....
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....er failed to demonstrate the incurrence of cost by the AE as well as its allocation among the various group entities. In this view of the matter, there could neither be any cost contribution or payment for such service to the AE. Further, as no expenditure would have been incurred, there is no necessity to apply a particular method to arrive at such conclusion. In view of the judicial precedents as well as the facts on record, the ALP of intra group services is Nil Thus, an adjustment of Rs. 5,80,47,258/- is made to the international transaction of the assessee. Incorporating the same, the aforesaid adjustment has been proposed in the draft order dated 26/03/2014 by Ld. AO which was sent for the directions of Ld. DRP in terms of Section 144C(1). 4. Aggrieved, the assessee raised objections before Ld. DRP and contested the impugned additions as proposed in the draft order. During proceedings, the assessee by way of detailed explanation, justified the payments in terms of the shared resource allocation agreement and drew attention to the entire gamut of shared services being availed by the assessee and the benefits derived there-from. However, not convinced, L....
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.... pronouncements and therefore, the same is liable to be set aside. In this regard, reliance has been placed on following judicial pronouncements:- (i) CIT Vs. Spice Infotainment Ltd & Others [Civil Appeal No. 285 of 2014 Supreme Court] (ii) Spice Infotainment Ltd Vs CIT [ITA No. 475-476 of 2011 Delhi High Court] (iii) PCIT Vs. Sapient Consulting Ltd. [ITA No. 341/2016 Delhi High Court] (iv) CIT Vs Dimensions Apparels (P) Ltd. [370 ITR 288 Delhi High Court] (v) PCIT Vs Maruti Suzuki India Ltd. [85 Taxmann.com 330 Delhi High Court] (vi) CIT Vs Intel Technology Ina P Ltd [380 ITR 272 Karnataka High Court] (vii) Sapient Consulting Ltd. Vs. DCIT [ITA 1278/Del/2014 Delhi Tribunal] (viii) ACIT Vs DLF Cyber City Developers Ltd [34 ITR 696 Delhi Tribunal] (ix) Shell India Markets Pvt. Ltd. Vs. ACIT [ITA No. 772/M/2013 Mumbai Tribunal] (x) Siemens Technology Services Pvt. Ltd. Vs. ACIT [ITA No. 6313/M/2012 Mumbai Tribunal] (xi) Instant Holdings Ltd s ACIT [4593/M/11 & 4748/M/11 Mumbai Tribunal] (xi) Marshall Sons & Co Vs ITO [223 ITR 809 Supreme Court] 5.3 Per contra, Ld. DR, on mer....
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.... the details of various orders passed by lower authorities are tabulated below:- No. Nature of Order Dated Authority Passed in the name of 1. Draft Assessment order-AO 26/03/2014 Additional commissioner of Income Tax-8(3) M/s. Synovate India Pvt. Ltd. 2. Order u/s 92 CA(3)-TPO 21/01/2014 Additional commissioner of Income Tax-Transfer Pricing II(1) M/s. Synovate India Pvt. Ltd. 3. Directions u/s 144C(5)-DRP 16/12/2014 Dispute Resolution Panel-1 Synovate India Pvt. Ltd. (Now merged with IPSOS Research Pvt. Ltd.) 4. Final Assessment Order-AO 12/01/2015 Additional commissioner of Income Tax-11(2) M/s. Synovate India Pvt. Ltd. A perusal of the above chart clearly reveals that the final assessment order dated 12/01/2015 has been passed by Ld. AO in the name of M/s Synovate India Pvt. Ltd. 6.3 The documents on record reveal that the erstwhile assessee namely M/s Synovate India Pvt. Ltd. stood amalgamated with another entity namely IPSOS Research Private Limited in terms of order of Hon'ble Bombay High Court dated 03/05/2013. Pursuant to same, M/s Synovate India private Limited filed relevant Form No. 21 intim....
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....Officer (HQ) regarding application of stay of demand for AY 2008-09 is similarly addressed. The letter dated 05/01/2015 by Joint Commissioner of Income Tax (Transfer Pricing)-2(3) regarding Transfer Pricing Proceedings for AY 2011-12 is also similarly addressed. All these evidences lend certain strength to the argument of Ld. AR that the stated fact was well within the knowledge of revenue and the same has also been recognized by way of various correspondences. Last, but not the least, upon perusal of assessment table as extracted at Para-6.2, we find that Ld. DRP directions are also issued in the name of M/s Synovate India Pvt. Ltd. (Since merged with IPSOS Research Pvt. Ltd.) which reveal that the said fact was considered / recognized by the Ld. DRP also. It is further noted that final assessment order has been passed by Ld. AO only in conformity with the directions of Ld. DRP and this fact, in itself, tilt the balance in assessee's favor. Therefore, we find strength in legal arguments raised by Ld. AR that the final assessment order dated 12/01/2015 has been passed in the name of a non-existent assessee despite being within the knowledge of the revenue. Now the only question tha....
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....wati Industrial Syndicate Ltd. Vs. CIT, 186 ITR 278 the legal position is explained in the following terms: "The question is whether on the amalgamation of the Indian Sugar Company with the appellant Company, the Indian Sugar Company continued to have its entity and was alive for the purposes of Section 41(1) of the Act. The amalgamation of the two companies was effected under the order of the High Court in proceedings under Section 391 read with Section 394 of the Companies Act. The Saraswati Industrial Syndicate, the transferee Company was a subsidiary of the Indian Sugar Company, namely, the transferor Company. Under the scheme of amalgamation the Indian Sugar Company stood dissolved on 29th October, 1962 and it ceased to be in existence thereafter. Though the scheme provided that the transferee Company the Saraswati Industrial Syndicate Ltd. undertook to meet any liability of the Indian Sugar Company which that Company incurred or it could incur, any liability, before the dissolution or not thereafter. Generally, where only one Company is involved in change and the rights of the share holders and creditors are varied, it amounts to reconstruction or reorganisa....
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....2004, the Spice ceases 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 sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer 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 name 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. 12. 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 provisions of Section 292B of the Act. Section 292B of the Act reads as under:- "292B. No return of income assessment, notice, summons or other proceedings furnished or made or issue or taken or purported to have been furnished or made....
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.... authorize the AO to ignore a defect of a substantive nature and it is, therefore, that the aforesaid provision categorically records that a return would not be treated as invalid, if the same "in substance and effect is in conformity with or according to the intent and purpose of this Act". Insofar as the return under reference is concerned, in terms of Section 140 of the 1961 Act, the same cannot be treated to be even a return filed by the respondent assessee, as the same does not even bear her signatures and had not even been verified by her. In the aforesaid view of the matter, it is not possible for us to accept that the return allegedly filed by the assessee was in substance and effect in conformity with or according to the intent and purpose of this Act. Thus viewed, it is not possible for us to accept the contention advanced by the learned Counsel for the appellant on the basis of Section 292B of the 1961 Act. The return under reference, which had been taken into consideration by the Revenue, was an absolutely invalid return as it had a glaring inherent defect which could not be cured in spite of the deeming effect of Section 292B of the 1961 Act." 15. Likewise, in....
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....ge number of cases where, in more or less identical circumstances, the AO had passed the assessment order in the name of the entity that had ceased to exist as on the date of the assessment order. In many of these cases, as in the present case, the AO, after mentioning the name of the Amalgamating Company as the Assessee, mentioned below it the name of the Amalgamated Company. Illustratively the cases are: (i) CIT v Micra India (P.) Ltd. [2015] 231 Taxman 809/57 taxmann.com 163 (Del); (ii) CIT v. Micron Steels (P.) Ltd. [2015] 372 ITR 386/233 Taxman 120/59 taxmann.com 470 (Del) (iii) CIT v. Dimension Apparels (P.) Ltd. [2015] 370 ITR 288/[2014] 52 taxmann.com 356 (Del) (iv) BDR Builders & Developers (P.) Ltd. v. Asstt. CIT (Decision dated 26th July 2017 passed by this Court in W.P.(C) No. 2712 of 2016) 13. The question whether, for the purposes of Section 170 (2) of the Act, the defect of passing the assessment order in the name of an non-existent entity is a mere irregularity was answered by this Court in Dimension Apparels (P.) Ltd. (supra), where in paras 6 and 7 it was held as under: '6. Sections 170(1) and 170(2) of the....
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....:- 'On receipt of the reopening notice, the Chartered Accountant of the erstwhile M/s. Addler Security Systems Pvt. Ltd., had originally accepted the some but immediately thereafter by letter dated 5th May, 2015 pointed out that the company M/s. Addier Security Systems Pvt. Ltd. is no longer in existence as it has been dissolved. Consequent thereto, the Assessing Officer has also issued a notice under Section 142(1) of the Act to one of the petitioner who was the Director of erstwhile M/s. Addler Security Systems Pvt. Ltd. (since dissolved). In response, the Director of the erstwhile M/s. Addler Security Systems Pvt. Ltd., pointed out that the company has already been dissolved and it is no longer in existence. Notwithstanding the above, the Assessing Officer by an order dated 28th March, 2016 has passed the impugned order framing the assessment in case of M/s. Addler Security Systems Pvt. Ltd. (since dissolved) for Assessment Year 2008-09. 4. Normally we would not have entertained a petition as an alternative remedy to file an appeal is available to the petitioners. However, prima facie, the impugned notice has been issued in respect of a non existing entity ....
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....on 5.2.2008 consequent to the scheme of amalgamation approved by the Hon'ble Bombay High Court on 14.12.2007. 8. In the case of Spice Infotainment Ltd. (supra), the facts were that a return was filed for Assessment Year 2002-03 on 30.10.2002 by M/s. Spice Corp Ltd., i.e., the amalgamating company. Subsequently, vide order dated 11.2.2004 passed by the Hon'ble High Court, the said company stood amalgamated with M/s. MCorp Private Ltd., i.e., the amalgamated company w.e.f. 1.7.2003. The return so filed was picked up for scrutiny assessment vide notice u/s. 143(2) of the Act dated 18.10.2003 in the name of M/s. Spice Corp Ltd., i.e., the amalgamating company. In the course of assessment proceedings, the factum of M/s. Spice Corp Ltd. having been dissolved as a result of amalgamation with M/s. MCorp Private Ltd. was brought to the notice of the Assessing Officer. However, the Assessing Officer vide order dated 28.3.2005 passed u/s. 143(3) of the Act framed the assessment on M/s. Spice Corp Ltd., i.e., the amalgamating company. In this factual background, the plea raised by the assessee before the Hon'ble High Court was that the assessment was framed against a non-e....
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.... as on 27.3.2006, i.e., the date of passing of assessment order, the said concern had ceased to exist upon its amalgamation with the successor company. In this factual background, the Hon'ble Karnataka High Court, following the judgement of the Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. (supra), answered the following questions of law in favour of the assessee and against the Revenue. "(1) Whether the Tribunal was correct in holding that the order passed by the Assessing Officer on M/s Software & Silicon Systems India Pvt. Ltd., after being intimated about the merger with M/s Intel Technology India Pvt. Ltd., was without jurisdiction against the said company and null and void ? (2) Whether the Tribunal was correct in holding that the provisions of section 292B of the Act will not make the assessment valid as a defect/omission to incorporate the name of M/s Intel Technology India Pvt. Ltd., in the assessment order as the same is not in substance and effect in confirmative with or according to the intend and purpose of this Act? (3) Whether the Tribunal has to examine the matter on merits and record finding on the controversy ra....
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.... 13. In the result, we set-aside the action of the Assessing Officer in framing the assessment against ITICL on 19.12.2008 as the said company was non-existent as it stood amalgamated with IHL w.e.f. 1.4.2007, following the scheme of amalgamation approved by the Hon'ble Bombay High Court on 14.12.2007 To the similar effect is the decision of the Mumbai Tribunal in the case of Ambuja Cements Rajasthan (supra). The Hon'ble Bombay High Court in the case of Jitendra Chandralal Navlani & Anr. (surpa) also upholds the proposition that no assessment can be made in respect of non-existent entity. In fact, the judgment of the Hon'ble Bombay High Court also brings out that framing of assessment in respect of a non-existent entity goes to the root of the jurisdiction of the Assessing Officer to assess the non-existent concern and, thus, said decision also clearly answers the objection of the Revenue in the present case that the plea of the assessee is merely hyper-technical. 8.1 Considering the entirety of facts and circumstances of the case, we set- aside the action of the Assessing Officer in framing the impugned assessment against the Siemens Corporat....