TaxTMI 
TaxTMI 
2019 (4) TMI 671
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....void and bad in law having been passed on a non existent entity, despite the Assessing Officer (AO) having full knowledge of the merger of the entity with UTV Software Communications Limited (USCL) as on the date of passing the order. The AO as well as the Honourable CIT (Appeals) have ignored judicial precedents including that of the jurisdictional Courts. 2. Without prejudice to Ground 1 above, on the facts and in the circumstances of the case and in law, the AO erred in disallowing Rs. 23,41,000/- being cost of production of abandoned TV serial. The AO assumed a commercial viability of the abandoned serial and erred in applying Rule 9A of the Income Tax Rules, which pertains to cinematograph films and not for TV serial. 3. Without prejudice to Ground 1 above, on the facts and in the circumstances of the case and in law, the AO erred in adding back Rs. 95,511/- pertaining to Cenvat credit of service tax relying on section 145A of the Income Tax Act, 1961. The AO ought to have known that service tax credit on input services was not towards any purchase or sale of goods and hence the said section was inapplicable. 4. Without prejudice to Ground 1 above, on the facts and in the c....
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....s framed by the AO u/s. 143(3) of the 1961 Act in the name of erstwhile company i.e. 'UTV Tele Talkies Limited' vide assessment order dated 01.02.2016. The main bone of contention in this appeal before us by learned counsel for the assessee is that the assessee namely 'UTV Tele Talkies Limited' got merged with its ultimate holding company namely 'UTV Software Communications Ltd.' w.e.f. 01.04.2013 under an scheme of arrangement approved by Hon'ble Bombay High Court vide order dated 11.04.2014 passed u/s 391 to 394 of The Companies Act, 1956 in company scheme petition no. 791 of 2013 connected with company summon for direction no. 755 of 2013 . The copy of said scheme of arrangement as approved by Hon'ble Bombay High Court vide orders dated 11.04.2014 is placed by the assessee in paper book filed with the tribunal at pages 59-91. We have carefully gone through the said scheme of arrangement which is placed in factual paper book. It is the contention of the learned counsel for the assessee that the AO was duly informed of the order of the Hon'ble Bombay High Court approving the scheme of amalgamation of the assessee company namely 'UTV Tele Talkies Limited' with its ultimate holding ....
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....of merger as approved by Hon'ble Bombay High Court. The assessee also requested the learned ITO,8(3)(4), Mumbai to migrate its PAN to learned ITO, Ward 11(1)(4), Mumbai vide aforesaid letter dated 10.09.2014. The assessee again intimated to the learned ITO, Ward 8(3)(4), Mumbai about its changed address for communication. The said letter was duly submitted on letter head of 'UTV Software Communications Limited' and it was clearly outlined by the authorised signatory signing the aforesaid letter dated 10.09.2014 that the assessee 'UTV Tele Talkies Limited' is now merged with 'UTV Software Communications Limited'. The learned ITO, Ward 11(1)(4), Mumbai issued notice dated 15.04.2015 u/s 142(1) of the 1961 Act to the assessee which is placed in paper book/page 97-102. The assessee replied to said notice u/s 142(1) vide reply dated 29.04.2015 filed with learned ITO, Ward 11(1)(4), Mumbai , inter-alia, again intimating about its merger with 'UTV Software Communications Limited' with effect from 01.04.2013 (page 103-105/pb). The assessee then intimated the address of 'UTV Software Communications Limited' for communications in its reply dated 29.04.2015. The assessee again submitted reply....
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....eing merged into parent, the share capital of subsidiary is cancelled and no share need to be allotted or consideration need to be paid. Shares held by other shareholder, Mr Prashant Jadhav (assessed under ITO 25(2)(4) were purchased by UTV TV Content Limited prior to merger and was paid Rs. 24,500 as purchase consideration." Thus, as could be seen above, the assessee has brought to the notice of the Revenue about its merger with its ultimate holding company namely 'UTV Software Communications Limited' vide several communications listed above. We have carefully gone through these communications addressed by the assessee to Revenue , which are all placed in factual paper book filed with tribunal, which is now placed in file. 3.4 Our attention was also drawn by learned counsel for the assessee to para 4.2 and 4.3 of the assessment order dated 01.02.2016 passed by the AO u/s 143(3) of the 1961 Act, which is reproduced here under:- "4.2 During the course of assessment proceedings it is noticed that loss arose on account of write off of the cost of production of Rs. 23,41,000/- in respect of the TV serial titled "Anandam". Accordingly, the assessee company was asked to substantiate ....
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.... Rule 10 of CPC which requires a prima facie enquiry for substitution of successor-in-interest although it is a prima facie enquiry and not a very detailed enquiry as laid down by Hon'ble Supreme Court in the case of Amit Kumar Shaw v. Farida Khatoon 2005 (11) SCC 403 to substitute successor in interest . We find that despite voluminous evidences on record filed by the assessee before the AO intimating about its merger, no prima facie enquiry was conducted by the AO to bring on record successor in interest to the assessee viz. „UTV Software Communications Limited „and instead the AO proceeded to frame an assessment order dated 01.02.2016 against a non existent entity viz. the assessee u/s 143(3) of the 1961 Act , which in our considered view is fatal to the sustaining of an assessment framed by the AO on a non existent entity . Despite several communications filed by the assessee intimating about its merger, the AO chose not to bring on record name of the successor in interest pursuant to merger of the assessee namely 'UTV Tele Talkies Limited' with its ultimate holding company 'UTV Software Communications Limited' which is fatal for upholding assessment framed by the A....
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.... * Abandoned TV Serial written off- Rs. 23,41,000 * Unutilised Cenvat credit- Rs. 95,511. * Adhoc disallowances of expenses- Rs. 15,02,716 * Unreconciled amount of Form 26AS betwcen UTV Teletalkies and USCL -Rs 45,15,489 6. The Appellant, USCL being the amalgamated Company is aggrieved by this addition and is in appeal before you. 7. The Learned AO has further initiated penalty proceedings under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income. Appellant's Contention: The Appellant has filed before you an additional ground challenging the legality of the Assessment order and begs to plead its submission in this respect first: 8. Additional Ground - Assessment completed on a non-existent assessee: 8.1 The appellant has taken this ground as an additional ground before you. 8.2 The Appellant submits that an assessment order on a non-existent assessee is void ab inito and bad in law, 8.3 The fact that there was an amalgamation was within the knowledge of the Assessing Officer when he completed the assessment. 8.4 The merged Company (USCL) had written to the Assessing Officer a letter dated 31/7/2014 filed on 6/8/2014 informing him about this f....
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.... precedents in particular the judgment of the Hon'ble Delhi High Court in the ease of Spice Infotainment Limited and set aside the assessment order which was passed on the assessee company which was non-existent as it stood amalgamated with another company. The ITAT Mumbai has specifically taken note of the argument of the revenue that the amalgamating company was in existence throughout the previous year relevant to the assessment year under consideration and therefore the order passed in the name of the amalgamating company was a valid assessment. The ITAT opined that the aforesaid argument of the revenue deserves to be repelled. * CIT vs Micron Steel Pvt Ltd & Ms Steels Pvt Ltd the Delhi High Court in ITA No 19/2014 & 21-24 /2014 held that: "the issue urged is no longer res integra. As stated earlier, Spice Entertainment (supra) is an authority for the proposition that completion of assessment in respect of a nonexistent company, due to the amalgamation order, would render assessment in the name and in respect of the original assesses company, a nullity. The Court held that "it is difficult to digest the circuitous route adopted by the Tribunal holding that the assessmen....
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....earned CIT(A) wherein the AO has not controverted that 'UTV Tele Talkies Limited' was merged with its ultimate holding company 'UTV Software Communications Limited', which remand report of the AO is reproduced hereunder:- " At the outset, I strongly object to the additional ground raised by the assessee at this stage. Without prejudice to the above, I am offering my comments on the submissions made by the assessee as follows: 2. The assessee's grievance seems to be that an assessment order on a non-existent assessee which was already merged as on the date of passing the order, with UTV Software Communications Limited, order is void ab initio and bad in law. It may be stated, at the outset, that the objections are not acceptable as the same are unfounded. The reasons for stating so are as under:- i) The assessee has filed its return of income for the A.Y. 2012-13 i.e. Financial Year 2011-12 on 25.09.2013 for the period 1.4.2011 to 31.03.2012, During the entire stretch of the financial year the assessee has operated as UTV Tele Talkies Limited. During the period for which assessment has been made, amalgamation had not taken place. ii) Notice for assessment was issued to UTV ....
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....tands amalgamated with appellant company i.e. M/s UTV Tele Talkies Limited (Now merged with UTV Software Communications Limited). It is, thus, clear that the present amalgamated company has participated in assessment proceedings as well as CIT(A) appeals proceedings taken up by the A.O. & Hon'ble CIT(A). The conduct of the amalgamated company clearly establishes the fact that the present amalgamated company was well aware that the assessment was being made against it in the assessment of M/s UTV Tele Talkies Limited, being represented by appellant company M/s UTV Tele Talkies Limned (Now merged with UTV Software Communications Limited) i.e. amalgamated company, and, therefore, no prejudice has been caused to the assessee so as to render the assessment order as void ab initio and bad in law. The various decisions relied upon by the A.R. for the assessee are distinguishable on facts, and do not applicable to the facts of the present case. 3, The mere omission the name of M/s UTV Tele Talkies Limited (Now merged with UTV Software Communications Limited} i.e. amalgamated company in the body of assessment is a mere procedural defect covered by Section 292B of the Act, Section 292B ....
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....d that it was the same unit all through, carrying on the same business, at the same place and there was no cesser of that business or any change in the unit". In the instant case, the successor (transferee company) M/s UTV Software Communications Ltd. is also in same line of business of predecessor (transferor) i.e. M/s UTV Tele Talkies Ltd. and that it was the same unit all through, carrying on the same business, at the same place. For the sake of convenience the place of business of amalgamating (transferor) company and amalgamated (transferee) company is reproduced here :- Predecessor (transferor) /amalgamating company Successor(transferee)/ amalgamated company M/s. UTV Tele Talkies Ltd., Flat No. 1181-1182, 1ST Floor, Building No.14, Solitaire Corporate Park, Guru Hargovindji Road, Chakala, Andheri (E), Mumbai-400 093. M/s UTV Software Communications Ltd. Flat No.1181-1182, 1st Floor, Building No. 14, Solitaire Corporate Park, Guru Hargovindji Road, Chakala, Andheri (E), Mumbai-400 093. 5. The Supreme Court in the case of C1T vs. Jai Prakash Singh reported in 219 ITR 737 held that '"an omission to serve or any defect in the service of notices provided by procedural....
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....malgamated company. "An order of amalgamation made by the High Court under the provisions of S.394 of the Companies Act is not an order which is meant to relieve either of the legal entities which are parties to the scheme of amalgamation, for the liability for payment of tax. None of the provisions of the Companies Act providing for amalgamation, nor any other provision in the Act, confers immunity from payment of tax to either of the entities which are parties to the order of amalgamation.," "It is not open to the amalgamated company which was taken over all assets and liabilities of the amalgamating company to claim that it is not in any way liable for the tax payable by the amalgamating company, even though the order under section 104 came to be made after the order of amalgamation.." "The provisions of the Companies Act should be read harmoniously with those of the Income tax Act. After the transfer of all assets and liabilities, debts and obligations of the amalgamating company to the amalgamated company in terms of sanction accorded by the company court under Section 394 of the Companies Act, the striking out of the name of the amalgamating company from the register do....
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.... business or profession carried on by one person is succeeded by another person who continues to carry on that business, the predecessor shall be assessed in respect of the income up to the date of succession and the successor shall be assessed in respect of income after the date of succession. As per sub-section (2) when the predecessor cannot be found, the assessment of income up to the date of succession shall be made on the successor in the like manner and to the same extent as it would have been made on the predecessor. 12. Scope of Section 170 Section 170 of the Income tax Act, 1961 deals with cases of succession in general and can be applied to succession of companies by way of amalgamation. It provides that in a case where predecessor cannot be found the assessment shall be made on the successor (transferee company) for (a) the year of succession till the date of succession and (b) for the year preceding the year of succession. Sub-section (2) of Section 170 provides that if the predecessor cannot be found then the income shall be assessed on the successor. It is difficult to conceive as to how the highlighted phrase can be read as „Income shall be assessed in the ....
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....raised by the assessee be dismissed forthwith. 14 **** 15 In the light of the above, I once again humbly submit that the additional ground raised by the assessee be dismissed forthwith." 3.7 The assessee in rejoinder to remand report, submitted before learned CIT(A) that the AO has admitted in his remand report that he had knowledge of the fact the assessee company got merged with its ultimate holding company 'UTV Software Communication Limited'. The AO had in fact in his assessment order as well in remand report has captured the factum of merger of the assessee with 'UTV Software Communication Limited'. The assessee claimed that it participated in the assessment proceedings and duly informed the AO of the fact of its merger with 'UTV Software Communication Limited' through series of communications. Thus, it was claimed that assessment order suffers from an incurable defect and is bad in law which is liable to be quashed. The assessee also relied upon large number of judicial precedents before learned CIT(A) to contend that an assessment order is bad in law liable to be quashed and the defect in assessment order by way of framing of an non existent entity is not a curable defect....
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....d reported in (2015) 57 taxmann.com 159(Kar.) f) Dismissal of SLP by Hon'ble Supreme Court in the case of ACIT v. Dharmnath Shares & Services Private Limited SLP (Civil) Diary No. 41239 of 2018 reported in (2018) 100 taxmann.com416(SC). g) Mumbai-tribunal decision in the case of Instant Holdings Ltd. v. ACIT in ITA no. 4593/Mum/2011 and ITA No. 4748/Mum/2011, vide order dated 09.03.2016 h) Mumbai-tribunal decision in the case of Orbit Corporation Ltd. v. DCIT in ITA no. 2411/Mum/2013 and ITA no. 6928/Mum/2010 and ITA no. 2413/Mum/2013 for AY 2007-08 and 2008-09 vide common order dated 21.03.2016. 3.10 The assessee at this stage during the course of hearing was directed by the Bench to file various compliances made by it in pursuance to the directions giving by Hon'ble Bombay High Court in its order dated 11.04.2014 sanctioning scheme of amalgamation , vide para no. 18-20 (page no. 65 of the paper book). The assessee in compliance to the directions of the Bench has filed following documents in connection with compliances made by it in pursuance of directions issued by Hon'ble Bombay High Court in its order dated 11.04.2014 vide para 18 to 20, which are placed in file : a) Copy ....
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....8.2011. Similar view has been taken by Hon'ble Delhi High Court in the case of PCIT v. Nokia Solutions & Network India Private Limited(supra) in favour of the tax-payer by holding that no question of law arises. Similar view has been taken by Hon'ble Karnataka High Court in the case of CIT v. Intel Technology India Private Limited(supra) in favour of the tax-payer by following the decision of Hon'ble Delhi High Court in the case of Spice Infotainment Limited v. CIT(ITA no. 475 & 476 of 2011, dated 03.08.2011). The Mumbai tribunal in the case of Instant Holdings Limited(supra) quashed assessment framed by the AO u/s 143(3) vide orders dated 19.12.2008 as the assessment was framed against a non-existent entity after recording a finding of fact in para 7 that Instant Trading and Investment Company Limited was merged with Instant Holding Limited under a scheme of amalgamation approved by Hon'ble Bombay High Court on 14.12.2007 w.e.f. 01.04.2007 and its name was struck off from the records of Registrar of Companies on 05.02.2008. The assessee has rightly relied upon the aforesaid judgments of Hon'ble Courts/tribunal. 3.12 As we have extensively seen in the preceding para's of this orde....