TaxTMI 
TaxTMI 
2017 (5) TMI 1663
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....nder section 92CA of the Income Tax Act, 1961 ('the Act') was passed by the Ld. TPO determining the arm's length price of the international transactions at Rs. 1,50,19,55,712/- and the proposed adjustment was Rs. 8,14,15,61,720/-. In the draft assessment order, the AO computed the assessee's total income at Rs. 53,99,25,657/- which included adjustment made under section 92CA on the basis of the Ld. TPO's order as well as re-computation of the deduction allowable under section 10 A of the Act at Rs. 10,05,44,163/-. Other adjustments/disallowances were also made by the AO. The assessee then filed objections before the Hon'ble DRP and the Hon'ble DRP agreed with the Ld. TPO on majority of the issues. Subsequently, the assessee approached the ITAT and raised a preliminary objection that the AO had framed the order in the name of a non-existing company M/s Nokia Siemens Network India Private Limited which had merged with Nokia Siemens Network Private Limited in terms of the order of the Hon'ble High Court dated 09/01/2009 under which the merger had taken place with effect from 01/04/2008. It was the contention of the assessee before ....
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.... first time by us. Both the counsel fairly agreed that the matter may be restored to the file of the DRP to hear the assessee in the matter and decide, as per law......." 2.1 Subsequent to the directions of the ITAT, the Hon'ble DRP examined the issue and decided against the assessee by observing in Para 6 of its directions (vide directions dated 26/02/2016) as under - "Para 6. The DRP has perused the provisions of section 292B of the Income Tax Act which mandates that no assessment or notice shall be held to be invalid, because of the mistake, defect or omission, if it is in substance and effect in conformity with or according to the intent or purposes of this Act. It is not the case of the assessee that principles of natural justice has been violated, that it wanted to submit some detail but because of wrong notice it was prevented from submitting it. Nor it is the case of assessee that excess liability has been thrust upon it because of notice in the name of amalgamating company. The assessee willingly cooperated before AO/TPO/DRP. It is only in ITAT that assessee took this objection keeping in mind the possibility of getting the order deleted on this techni....
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....ting merger and the transfer of records did not tantamount to an intimation to the learned AO of the factum of amalgamation. 2.3 Without prejudice, that the directions issued by the Hon'ble DRP dated February 26, 2016 are grossly bad in law as even after having adjudicated on the issue, the directions have still been issued in the name of a company which is no longer in existence. 3. That the directions dated February 26, 2016 issued by the Hon'ble DRP to the learned AO / learned Transfer Pricing Officer ('learned TPO') are beyond powers vested in the Hon'ble DRP in terms of Section 144C (8) of the Act. Transfer Pricing Grounds - 4. That the learned AO/ learned TPO have erred on facts and in law in making a transfer pricing adjustment of INR 140,810,625 in respect of the international transaction related to the provision of software services ("impugned transaction") to the associated enterprise ("AE") undertaken by the Appellant. 4.1 That the learned AO/ learned TPO erred, on facts and in law, in rejecting the economic analysis in the documentation filed by the Appellant in terms of section 92D of the Act read with Rule 10D of th....
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...., Infosys Limited, Kals Infosystem Limited, Lucid Software Limited, Megasoft Limited, Persistent Systems Limited, R Systems International Limited, Synfosys Business Solutions Limited and Tata Elxsi Limited as comparables without appreciating that these comparables did not satisfy the FAR test vis-a-vis the Appellant in relation to software services provided to AE. 4.9 That the learned TPO has erred, on facts and in law, in violating the principle of natural justice by failing to give any show cause notice and/ or provide any reasonable opportunity to the Appellant before selecting Megasoft Limited as comparable in relation to the impugned transaction . 4.10 That the learned TPO has erred, on facts and in law, by considering reimbursement of expenses as business expense and thereby including the same in the total cost base and revenue while calculating the operating margin of the impugned transaction relating to the provision for software services. 4.11 The learned TPO/ Hon'ble DRP have erred, on the facts and in law, by failing to include foreign exchange gains/ losses and provisions written back as an operating income/ expenditure while computing the....
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....owed as a deduction in the preceding years and on the facts of the present case upon a deferral of the sales tax liability, the amount got converted into a loan which was never claimed as a deduction by the Appellant. 6. The AO has erred in law and in facts in reducing the data communication charges incurred in foreign currency amounting to Rs. 53,34,082 from Export Turnover, while computing the amount of deduction under section 10A of the Act, without appreciating that no part of data communication expenses incurred in foreign currency has been invoiced to the customers as 'consideration' in respect of export of computer software. 6.1 Without prejudice, the AO has erred in law and in facts in not deducting the aforesaid data communication charges from the total turnover, while calculating the deduction under section 10A of the Act. 7. Without prejudice to the Appellant's grounds of appeal in earlier assessment years, based on the facts and circumstances of the case, the learned AO has erred in law and in fact in not allowing deduction for provisions utilized / released during AY 2006-07, which were disallowed by the Ld. Assessing Officer in the ea....
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....ng interest under Section 234D of the Act upto the date of order passed under Section 254 read with Section 143(3) and Section 144C of the Act (i.e. till April 29, 2016) in complete ignorance of the fact that refund granted to the appellant for subject AY was recovered on January 31, 2011, by way of adjustment of refund determined for AY 2009-10. 10.4 Without prejudice, that on the facts and circumstances of the case and in law, the learned AO has erred in computing interest under Section 234C of the Act." 3. At the outset, it was submitted by the Ld. AR that before the appeal is heard on merits, he should be heard on the legal issue as agitated in Ground Nos. 2, 2.1, 2.2, 2.3 of the appeal. The Ld. AR submitted that the assessment vide order dated 28/10/2010 was framed on a non-existent entity and, therefore, the essential question to be adjudicated first was as to whether such assessment was sustainable in the eyes of law. The Ld. CIT (DR) also agreed to the plea of the Ld. AR. Accordingly, we proceed to hear both the parties on the legal issue of the validity of the assessment proceedings in the present appeal and the arguments on merits will be heard at a later stag....
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....uty Commissioner of Income Tax, Circle 13(1), New Delhi July 17, 2009 Joint Director of Income-tax (TPO), Banqalore 4 August 10,2009 Notice under Section 142(1) of the Income-tax Act, 1961 ('Act') issued by the Deputy Commissioner of Income-tax, Circle 12(2), Bangalore in the name of Nokia Siemens Networks India Private Limited (,NSNIPL') 5 October 29, 2009 Order under section 92CA of the Act passed by the Joint Director of Income-Tax (TPO), Bangalore in the name of Nokia Siemens Networks India Private Limited (,NSNIPL'Siemens Networks India Private Limited (,NSNIPL') 6 December 29, 2009 Draft assessment order passed under Section 143(3) read with Section 144C of the Act by the Deputy Commissioner of Income- tax, Circle 12(2), Bangalore in the name of Nokia Siemens Networks India Private Limited (,NSNIPL') 7 September 20,2010 Directions under Section 144C(5) read with section 144C(8) of the Act issued by the Dispute Resolution Panel (,DRP'), Bangalore in the name of Nokia Siemens Networks India Private Limited (,NSNIPL') 8 ....
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....ssue in the case of Spice Entertainment Ltd versus Commissioner of Service Tax in ITA numbers 475 and 476 of 2011. The question that arose for consideration before the Hon'ble Delhi High Court was as to whether the assessment in the name of a company which had been amalgamated and had been dissolved with the amalgamating company will be null and whether the framing of assessment in the name of such a company was a mere procedural defect which can be cured. It was submitted that the Hon'ble Delhi High Court had adjudicated that in the facts of the case the irresistible conclusion would be that provisions of section 292B of the Act were not applicable. The Hon'ble Court held that the framing of assessment against a non-existing entity/person went to the very root of the matter which was not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against dead person. Reliance was also placed on another judgment of the Hon'ble Delhi High Court in the case of CIT versus Dimension Apparels Private Limited reported in 370 ITR 288 (Delhi) wherein the Hon'ble Delhi High Court had held that while section 292B could cure technical defects, it could not cu....
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....ction issue (Ground No 2) is not sustainable. 2. The letter referred to at Page.9 of the order of Hon'ble ITAT dtd 16/4/2014 is addressed to Public Relations Officer Bangalore and not to the AO /TPO or DRP with copies marked to different authorities. 3. This letter also does not make any mention about any ongoing tax proceedings under the Act. 4. The letter only asks for transfer of file to Delhi from Bangalore. This is a letter specifically asking to issue orders u/s 127 of the Act. But the authorities (AO/TPO/DRP) were not referred to / informed about the pending IT proceedings. 5. Further, the Counsel of the Appellant has appeared on so many occasions before the Authorities below during assessment, Transfer pricing and DRP proceedings; but on none of the occasions he has drawn attention to the fact that the notice or any of the orders are being addressed in the amalgamating company's name and still they were complying. It is noted here that even when the addressee is the old amalgamating company, it is the amalmagated company that has been presenting itself before the authorities below. 6. The assessee has not been affected at all by ....
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....algamated company. 11. Ground never raised before AO, TPO nor DRP: As per S. 124(3) of IT Act 1961, the assessee cannot question the jurisdiction of the assessing officer if he has not objected to the same within 30 days from the date of receipt of notice u/s 143(2) of the Act. In the present case the assessee did not raise objections before the TPO nor even before the DRP in the lsl round of proceedings. So the same cannot be a ground for annulling the order. 12. It is humbly submitted that the issue needs to be appreciated in a practical and realistic way. Suppose the appellant had never submitted any letter before the authorities below and the AO had passed the same order in the name of the old company - whether the order could still be null and void ab initio. The answer is in the negative. 13. The fact that the proceedings have been validly initiated in the correct name of the then existing company and the appellant had duly participated in the proceedings without any objections (May pi refer to S. 124(3) of I.T.Act 1961), would make the mistake, if any, only a technical error covered by the provisions of S.292B of the Income Tax Act 1961. ....
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.... The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument." b. In Collector, Land Acquisition, Anantnag and another vs. Mst. Katiji and others 7 AIR 1353, the Hon'ble Supreme Court has observed as under: i. "THE legislature has conferred the powers to condone delay by enacting S. 5 of the Indian Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on merits. The expression "sufficient cause" employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose for the existence of the institution of Courts..... ii. When substantial justice consideration and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.... iii. It must be ....
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....t. 136 is not meant to correct an illegality brought to the notice of the Supreme Court, nor to undo, merely on account of such illegality, an adjudication which has done substantial justice to the parties." e. Lastly observations made by the Division Bench of the Hon'ble Karnataka High Court in Mangalore Ganesh Beedi Works and others and Mangalore Ganesh Beedi Workers and Allied Beedi Factories Workers Association, Akbar Road Mandi Mohalla, Mysore [2004 (103) FLR 387] are submitted here since the same are material in view of the facts of the present case. i. "The judicial review power vested in this Court under Article 226 of the Constitution of India should be exercised in such a way as to advance the objectives of law and not to thwart those objective. Technicalities cannot be permitted to hijack the divine rhythm of justice. The parties should win or lose on substantive grounds and not on technical tortures. The relief to be granted by the High Court must be such as could be considered permissible in law and worked out by application of legally recognized principles. The decision must have legitimacy of legal reasoning and should not incur the cri....
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.... proceedings afresh from the stage of issuance of notice under s. 143(2) of the Act. In substitute, the name of the appellant in place of M/s Spice and then issue notice to the appellant. However, such a course of action can be taken by the Assessing Officer only if it is still permissible as per law and has not become timebarred. " 5.1 At the very outset, we respectfully note the dicta laid down by the Hon'ble High Court is that the provisions of section 292B of the Act are not applicable in such a case where the assessment has been framed in the name of a non-existent amalgamated company. Their Lordships have further held that the framing of assessment against non-existent entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person. In the case of Spice Entertainment Ltd. (supra), their Lordships also pointed out that the returns were filed by M/s Spice on the day when it was in existence. It would be permissible to carry out the assessment on the basis of those returns after taking the proceedings afresh from the stage of issuance of notice u/s 143(2) of the Act. ....