TaxTMI 
TaxTMI 
2024 (9) TMI 639
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.... Real Estate Humayun (hereinafter referred to as 'Red Fort Mauritius/assessee') was incorporated on 16.07.2007 as 'Company limited by shares' under the provisions of Mauritius Companies Act, 2001, for the specific purpose of making investment in the securities of Prestige Projects Pvt Ltd ('Prestige India"). The beneficial shareholding of the company was held by Red Fort India Real Estate Fund 1 LP situated in Cayman Islands ('Red Fort Cayman'). 2. During the financial year 2008-09, the assessee had made investment in 11,22,000 Class A Equity Shares of Prestige India, for an aggregate amount of Rs. 1,12,00,000, under the Foreign Direct Investment ('FDF) route. 3. In addition to investment made by the assessee, another entity namely Alena Investments Limited situated in Cyprus ('Alena Cyprus'), wholly owned subsidiary of the assessee, also made an aggregate investment of Rs. 106,35,13,000 in various instruments of Prestige India during the FY 2008-09 to 2011-12. 4. The above investments in Prestige India were made by the assessee and Alena Cyprus to earn long term capital appreciation and the investment were held by the entities for almost 10 years....
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....r of companies. 12. In the meanwhile, the assessing officer passed the draft assessment order dated 30.09.2021 under section 144C(1) of the Act, denying benefit of exemption under Article 13(4) of the Indo- Mauritius DTAA to the assessee, holding that there was no commercial/ economic substance behind the existence of that Company in Mauritius and, therefore, benefit of Treaty cannot be applied, simply on the basis of TRC issued by the Revenue authorities of Mauritis to that company. 13. Additionally, the assessing officer also erroneously disregarded the separate legal existence of Alena Cyprus, holding the same also to be a mere arrangement to take benefit of India Cyprus Treaty and added the entire capital gains derived by Alena Cyprus, on sale of securities/shares of Prestige India, to the income of the assessee . 14. Accordingly, the assessing officer proposed assessment at total income of Rs. 97,14,67,000 under the head capital gains on sale of securities/shares of Prestige India in the hands of the assessee. 15. Against the aforesaid draft assessment order, the assessee filed its objections before the Dispute Resolution Panel ('DRP'). ....
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.... and (ii) there is no other reason for the company to continue in existence; or (c) the company has been put into liquidation, and - (i) no liquidator is acting; or (ii) the documents referred to in section 265(3) of the Companies Act 1984 have not been sent or delivered to the Registrar within 6 months of the date on which the liquidation of the company is completed; or (d) the Registrar receives a request, in a form approved by him, from - (i) a shareholder authorised to make the request by a special resolution of shareholders entitled to vote and voting on the question; or (ii) the Board or any other person, where the constitution of the company so requires or permits that the company be removed from the register on any grounds specified in subsection (2); or (e) a liquidator sends or delivers to the Registrar the documents referred to in section 265(4) of the Companies Act 1984 (2) A request that a company be removed from the register under subsection (l)(d) may be made on the grounds - (a) that the company has ceased to carry on business, has discharged in full its liabilities to all its ....
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....n 28 days after the date of the notice, the company satisfies the Registrar by notice in writing that it is still carrying on business or there is other reason for it to continue in existence; or (ii) the Registrar does not proceed to remove the company from the register under section 313, the company shall be removed from the register. (3) The notice to be given under subsection (1) (b) and (c) shall specify- (a) the name of the company and its registered office; (b) the section under, and the grounds on, which it is intended to remove the company from the register; and (c) the date by which an objection to the removal under section 309 shall be delivered to the Registrar, which shall not be less than 28 days after the date of the notice. 311. Notice of intention to remove in other cases (1) Where a company is to be removed from the register under section 309(1)(c), the Registrar shall give public notice of the matters set out in subsection (4). (2) Where a company is to be removed from the register under section 309(1)(d) or (e), the applicant, or the liquidator, as the case may be, shall give public notice o....
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....o be made to the creditor; and (b) a claim by a shareholder or any other person against a company is not an undischarged claim unless - (i) payment has been made to the shareholder or that person in accordance with a right under the company's constitution or this Act to receive or share in the company's surplus assets; or (ii) a receiver or liquidator has notified the shareholder or that person that the company has no surplus assets. " 22. On perusal of the aforesaid sections, it may be observed that section 309 of the Mauritius Companies Act, 2001 provides following grounds for removal of a company from the register: a) Company is amalgamated with another company; b) Registrar is satisfied that company had ceased to carry on business and there is no reason for the company to continue in existence; c) Company has been put into liquidation; d) Registrar receives a request in a form approved by him from shareholders that the company may be removed from the register on the ground that company has ceased to carry on business e) Liquidator sends or delivers to the Registrar the document referred to ....
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....rvices Commission, Mauritius for the purpose of removing it from the Registrar of Companies in Mauritius. Accordingly, it is in the process of being wound up. " (Refer Pages 361 to 369 of the PB) 04.06.2021 The application was filed by the assessee before the Registrar of Companies, Mauritius on 04.06.2021 for removing the name of the company from register of companies as per section 309(1)(d) of the Mauritius Companies Act, 2001. Copy of application filed is enclosed at Pages 50 to 59 of the PB. Section 309(1)(d) All the other necessary compliances were made in accordance with Mauritius Companies Act, 2001 before the name of the assessee was removed from the register of companies in the following manner: 04.06.2021 Form 23 i.e. Application for removal of company from register duly filed by company (Page 51-52 of PB) with following disclosures: "The company has ceased to carry on business, has discharged in full all its liabilities to all known creditors and has distributed its assets in accordance with its constitution/ the Companies Act, 2001 - Yes The company has no surplus assets after paying its debts in full or in pa....
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....r any dispute in the dissolution process, necessary recourse could have been adopted in terms of section 312 of the Mauritius Companies Act, 2001. 26. Accordingly, it is submitted, that since the assessee ceased to exist/became non-existent in the eyes of law as on 29.10.2021, no order could have been passed in the name of such non-existent entity after the said date. In view of the same, the impugned orders dated 03.06.2022 passed by the DRP as also the order dated 20.06.2022 passed under section 143(3)/144C in the name of the assessee/non-existent entity are illegal, bad in law and beyond jurisdiction, which deserves to be quashed on that ground itself, at the threshold. 27. Attention in this regard is invited to the provisions of section 4 of the Act which provides that the charge of tax is on the total income of a person for the previous year. The expression 'person' has been defined in section 2(31) to include, inter alia, a 'company' including a foreign company. 28. It will be kindly appreciated that under the Act, charge of income-tax is on the total income of a person, which has been specifically defined in section 2 thereto. A foreign company has....
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....as issued, the scheme of amalgamation had been approved on 29th January 2013 by the High Court of Delhi under the Companies Act 1956 with effect from 1 April 2012; e) Assessing officer assumed jurisdiction to make an assessment in pursuance of the notice under Section 143(2). The notice was issued in the name of the amalgamating company in spite of the fact that on 02.04.2013, the amalgamated company MSIL had addressed a communication to the assessing officer intimating the fact of amalgamation. f) Initiation of assessment proceedings against an entity which had ceased to exist was void ab initio. g) The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. h) Participation in the proceedings by MSIL in the circumstances cannot operate as an estoppel against law 33. Further, reliance is placed on the following decisions wherein it has been held that that an assessment framed in the name of a non-existent entity/ dead person would tantamount to jurisdictional defect, thus, making it void-ab-initio: - CIT v. ....
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....placed on the following decisions wherein it has been held that assessment proceedings under section 144C, even when they are pending before DRP, are pending assessment proceedings, until final assessment order is passed. - The Bombay High Court in the case of Vodafone India Services (P.) Ltd. vs. UOI: 361 ITR 531 held that process before the DRP is a continuation of the assessment proceedings as only thereafter would a final appealable assessment order be passed. - The Delhi High Court in the case of Alpine Electronics Asia Pte Ltd.: 341 ITR 247 held that where the assessee raised objection to service of notice under section 143(2) for the first time before the DRP, since the assessment proceedings were pending and not concluded, the said objection was not barred under section 292BB of the Act, which bars objection after the conclusion of assessment. 37. Reliance is placed on the following decisions, wherein it has been successively held that, assessment on a company dissolved as per the provisions of the (Indian) Companies Act, is an assessment on a non-existent entity, which is nullity in the eyes of law: 38. Specific reliance is placed on the....
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....ny shall stand dissolved". There is provision for restoration of the name of the company and if the name is restored, sub-section (7) says that the "company shall be deemed to have continued inexistence as if its name had not been struck off. 15. There is a distinction under the company law between winding up or liquidation on the one hand and dissolution of the company on the other. This has been brought out by the Supreme Court in Hari Prasad JayantilaI & Co's case (supra). At page 798, Hon'ble Justice Shah, speaking for the court observed:...... 16. The quoted observations show' that dissolution is a stage subsequent to the winding up or liquidation, the end of the existence of the company. Till dissolution, the corporate existence continues. It follows, per contra, that once a company is dissolved, its corporate existence comes to an end. It is no longer in existence; it is dead. 17. A reference to page 1901 of A. Ramaiya's commentary on the Companies Act, 1956 (12th Edition) by Hon'ble Justice Y.V. Chandrachud (former Chief Justice of India) show's the following extract from Halsbury's Laws of England, fourth edition, Vol. 7, para 1448, page 809 unde....
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....s normally referable to the life of a living person, animal or plant and in the absence of any statutory fiction cannot be extended to cover a case of a disruption of a joint family. Similarly, it cannot also cover a case of a dissolution of a company, and there is no statutory fiction extending section 159 to a case of dissolution of a company under section 560 of the Companies Act. In the above judgment, it was held at page 48 that "a specific provision is necessary to make an order of assessment against a taxable entity which does not exist on the date of the assessment even though the said entity was in existence when the liability to tax arose". ..................................... 21. That takes us to the next question regarding the validity of an assessment on a non-existent person. It is a nullity. Reference may be made to the judgments of the Supreme Court in Amarchand N. Shroff's case (supra) and ITO v. Ram Prasad [1972] 86ITR 145. These are cases of an individual and a joint family respectively, but the ratio is that there can be no assessment on a dead person. Just as an individual ceases to exist on death and a joint Hindu family ceases to exist on b....
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....o exist and therefore, no order of assessment could be validly passed against it under the Income Tax Act and if it is passed, it would be a nullity. The relevant extracts of the order of Hon'ble High Court are as under: "21. Be that as it may, now it has come to light that on the date the assessment order was passed, the appellant-company stood dissolved under Section 560(5) of the Companies Act and, therefore, could not have been assessed. In terms of Section 143 of the Income Tax Act, assessment can be made by the assessing authority only against the assessee, who has filed a return under Section 139 of the Income Tax Act or in response to a notice issued under Subsection (1) of Section 142 of the Income Tax Act. The term "assessee" is defined in Subsection (7) of Section 2 of the Income Tax Act to mean that a person by whom any tax or any other sum of money is payable under the Income Tax Act and the term "person" used in Subsection (7) is defined in Subsection (31) of Section 2 of the Income Tax Act to include an individual, a Hindu undivided family, a company, a firm, an association of person or a body of individuals, whether incorporated or not, a local authority, a....
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.... the assessment order dated 29.12.2011 in the name of non-existing entity whose name was already struck off by the RoC. Hence, the assessee raised a ground before the ITAT that the assessment order passed on a non-existent company is void ab initio. The Hon'ble Tribunal held as under: "8. We have considered the rival submissions and perused the material on record. The assessee-company placed on record the order of ROC, Delhi and Haryana, dated 30,h May, 2011 whereby, pursuant to Section 560(5) of the Companies Act, 1956, the name of the assessee-company has been struck-off in the Register of Companies and the assessee- company is dissolved. Therefore, w.e.f 30th May, 2011, the assessee-company became non-existent and stood dissolved. The A.O. however, passed the assessment order on 29th December, 2011 i.e., after dissolution of the assessee-company. Therefore, there could not have been any valid assessment order passed against the assessee-company which was not in existence as on the day of passing of the assessment order because it had already been dissolved. The assessment in the case of non-existing entity is thus nullity. Therefore, A. O. had no jurisdiction to pass th....
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....ty. Further, during the course of assessment proceedings, it was again informed to the assessing officer that the company had ceased to exist. However, the assessing officer proceeded to pass the assessment order in the name of non-existing entity. On appeal, the CIT(A) confirmed the order of the AO. On further appeal, the Tribunal held that the assessment framed by the AO on a company which was non-existing on the date of the passing of the order is invalid. The relevant findings of the Hon'ble Tribunal are reproduced as under: "4. I have considered the rival submissions and perused the relevant finding during the impugned order as well as material referred to before me. One of the main legal contention raised is, that the initiation of proceedings u/s 147 and consequently assessment order framed u/s 147/143(3) is void ab initio as the assessee company has ceased to exist since November, 2013 and therefore, any subsequent proceedings on such non existing company have no legal basis. On the perusal of material placed on record which is even borne out from the appellate order, specifically from pages 12 to 20, it is seen that Registrar of Company had issued a notic....
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....ple and ratio laid down by the Hon'ble Delhi High Court, it is quite ostensible that assessment order cannot be passed in the case of non-existing company especially when this has been brought to the knowledge of the department. 6. However there is one judgment of Hon'ble Delhi High Court in the case of Sky Light Hospitality LLP vs. ACIT (2018) 405 ITR 296, wherein Hon'ble High Court on the issue of notice u/s 148 which was addressed to an erstwhile Private Limited which has ceased to exist and was converted into LLP, it was observed that it will not invalidate the reassessment proceedings and the same was not a jurisdictional error bid irregularity and procedural laps which could be cured u/s 292B. In the case before the Hon'ble Court the issue pertains to notice u/s 148 addressed to the erstwhile company. However, it was not a case that where the assessment order was passed in the case of the non-existing entity. This distinction has been made clear by the Hon'ble High Court in para 18 in the following manner:- 7. Thus, here in this case assessment framed by the AO on company which was non existing on the date of the passing of the order is not valid assessment ....
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....oes not apply to the facts of this case. 6. Therefore respectfully following decision of coordinate benches in assessee "s own case as well as the decision of Honourable J & K High court, Both the assessment orders passed in the name of non existing company are not sustainable and correctly quashed by Id CIT (A). Thus, orders of the ld CIT (A) are upheld for both the years. " - The Mumbai Bench of the Tribunal in the case of DCIT vs. Asia Pacific Systems Ltd Republic of Mauritius: ITA No. 4778 of 2015. In that case, the assessee-company was liquidated on 11.03.2009. However, the assessing officer issued notice dated 29.03.2012 under section 148 of the Act in the name of liquated company which has ceased to exist and also proceeded to pass the assessment order dated 20.05.2013 in the name of non-existing entity. On appeal, the CIT(A) quashed the reassessment order passed in the name of liquidated company. On further appeal, the Tribunal confirmed the order passed by CIT(A), the relevant extracts of the order of the Tribunal are as under: "5. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities b....
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.... determination of "representative assessee" for various class of assessee including the non-residents and then section 161 provides for the liability of representative assessee as per section and Section 162 of the Act is providing for the rights of the representative of the assessee to recover the tax paid. Then section 163 of the Act defines for the purpose of this Act, who can be considered as 'agent' for Non- Resident Indian and Section 166 of the Act provides for direct assessment in case of assessee on whose behalf representative assessee have been appointed or for whose benefit income therein referred to is receivable. None of these provisions came to help the AO in regard to erstwhile company. 4.1. We further find that the remedies of the AO against the property in cases of representative assessee under section 167 of the Act have no application in case before us and do not come for assistance of the AO, where, a foreign company opts for voluntarily closure of business and getting name struck off with ROC. 4.2 However, we note that section 170 of the Act is applicable in cases wherever there is a succession of business otherwise than on death and in cases where the pe....
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....her there is a successor in interest left or during the proceedings of dissolution or liquidation the claim of creditors including of revenue is duly considered and met. Further in these cases the assessing officer was well informed of the fact of entity going non-existent before the passing of the assessment order. 7. However, in this case before us, the Bench was confronted with a situation where the assessee claims of filing an application on 28.12.2020 before the Financial Services Commission, Mauritius, which is the regulatory authority responsible for the regulation, supervision and inspection of all financial services and business in Mauritius. The application was moved intimating the said authority the intent to remove the company from Register of Companies of Mauritius and obtaining No Objection. The reason was closure of business. The claim of counsel is that the said application was duly accompanied by a shareholders resolution dated 24th December, 2020, the global licence of the company and management account as at 24.12.2020, the copy of which is placed on the record at pages 44 to 49 of the paper book. The Revenue does not dispute that filing of this application wa....
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.... AO that on 28.12.2020 an application is moved to the Financial Services Commission, Mauritius for the purpose of removing it from Register of Companies, Mauritius. Accordingly, it was in the process of being wound up. 12. The reply, however, does not show that if there was any mention as to who would be the successor of the company or authorized representative or agent to contest the assessment order further after the name of company is struck off. In this manner the cases relied about entities going into amalgamation or liquidation, where assets of any erstwhile company are succeeded by successor in interest and fact being conveyed to AO being on record are distinguishable and have no persuasive value. 13. At the same time we are of view that when the draft assessment order was passed on 30.09.2021, the company was very much in existence and, at the same time, the AO was not informed of the further steps taken after 28.12.2020. In this context, when we consider the letter dated 28.12.2020 available at page 44 of the paper book, we find that it is addressed to Chief Executive, Financial Services Commission and is merely an intimation of the intention of the assessee to apply....
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....assessment order of 30.09.2021, the Registrar of Companies, Mauritius had removed the name of the company on 29.10.2021. To consider the plea that DRP was informed of same yet directions are passed against non-existing entity we find from the DRP directions, that the objections were filed on 29.10.2021 only i.e., the day on which the Registrar of Companies, Mauritius had removed the name of the company u/s 308 of the Mauritius Companies Act, 2001. This cannot be a mere co-incidence. Rather seems to an attempt of the erstwhile company to combat the assessment proceedings with self inflicted harm, of closing the business and getting name struck off, leaving Indian Tax Authorities, frustrated. 16. At the same time, it becomes questionable as to if at all the company having got its name struck off, had locus standi to file the objections before DRP. 17. Then, going through the grounds and objections raised before the DRP, there was no specific ground that the draft assessment has been passed against a non-existing entity. As Ld. Counsel was specifically confronted of this aspect, at time of hearing it was claimed by him that by letters dated 04.02.2022 and 11.02.2022, the DRP was....
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....llows:- "3. The case was fixed for virtual hearing on 04.02.2022, The Panel received letter dated 04.02.2022 stating that the Power of Attorney (POA) issued by the taxpayer in favour of Price Waterhouse & Co LLP had lapsed as the company had been liquidated. Shri Kshitiz Bansal appeared for virtual hearing on the above mentioned date and the case was adjourned to 15.02.2022. Subsequently, a notice under section 144C(11) of the Income Tax Act, 1961 (the Act) was generated and was sent to the assessee through ITBA. However no one appeared on behalf of the assessee. In view of the same, the issues are decided on the basis of material available on record." 21. However, on going through the record of the appeal set, we find still the appeal is shown to be filed by the assessee company through Mr. Boopendradas (Vikash) Sungker as ex-Director. 22. Further more, it is apparent from the appeal set and Form 36 that the same is signed by Mr. Boopendradas (Vikash) Sungker and he has not mentioned as to if he has signed and verified this appeal as a director of the assessee company. There is nothing on record to show that there was a resolution in favour of him to file the appeal....
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....dent, the tax chargeable thereon, whether in his name or in the name of his agent who is liable as a representative assessee, may be recovered by deduction under any of the provisions of Chapter XVII-B and any arrears of tax may be recovered also in accordance with the provisions of this Act from any assets of the non-resident which are, or may at any time come, within India." 24.3 Then, most important is the relevancy of provision of section 179 of the Act, which provides for liability of directors of a private company as follows:- Liability of directors of private company . 179. (1) Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach o....
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....e CIT(A)" and the Cross Objections of the assessee was dismissed being filed by former director being unauthorized to file the memo. 26. The second issue before us is also somehow covered against the erstwhile company and in this context, the issue has been considered by the coordinate Bench at Delhi in the case of Dwarka Portfolio (P) Ltd. vs. ACIT (2022) 139 taxmann.com 477 (Delhi-Trib.) wherein one of us, i.e., the ld. Accountant Member was also on the Bench and it was held that the appeal filed on behalf of the company whose name is struck off is maintainable and the conclusion of the Bench in para 24 being relevant is reproduced below:- "24. CONCLUSION:- (i). Though the Assessee company has been struck off under Section 248 of the Companies Act 2013, in view of sub-sections (6) and (7) of Section 248 and Section 250 of companies Act 2013, the Certificate of Incorporation issued to the Assessee company cannot be treated as cancelled for the purpose of realizing the amount due to the company and for payment or discharge of the liability or obligations of the company, we are of the opinion that the Appeal filed by the struck off Assessee Company or Appeal fil....