TaxTMI 
TaxTMI 
2024 (9) TMI 639
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....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. Subsequently, during the AY 2018-19 (i.e. the year of sale), the asse....
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....ection 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'). 16. However, immediately after filing the objections, the Registrar of Companies, Mauritius vide order dated 29.10.2021 removed the name of the compan....
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....4 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 known creditors, and has distributed its surplus assets in accordance with its constitution and this Act; or (b) that the company has no surplus assets after paying its debts in full or in part, and no creditor has applied to the Court under section 216 of the Companies Act 1984 for an order putting the company i....
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....ice; (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 of the matters set out in subsection (4). (3) Where a company is to be removed from the register under section 309(1) (c), the Registrar, or, where it is to be removed from the register under section 309(1)(d), the applicant, as the case may be, shall also give notice of the matters set out in subsection (4) to - (a) the company; and (b) any person entitled to a charge registered under section 127. (4) The notice to be given under this section shall specify - (a) the name of the company and its registered office....
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....h 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 in section 265(4) of the Companies Act 1984 23. It is important to note that in a case where the registrar receives a request to remove a company from the Register of Companies [i.e. under section 309(l)(d)], in that case provisions of Mauritius Companies Act, 2001 provides following compliances: (a) Application in approved form [Section 309(1)(d)]; (b) A special resolution of shareholders to make application for removal of company's name from the Register of Companies [Section 309(1)(d)]; (c) Company has ceased to carry on business, has discharged in full its liabilities to all its known creditors, and has distributed its surplus assets or no surplus assets left after paying its debts in full [Section 309(2)]; (d) W....
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....f 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 part, and no creditor has applied to the Court under section 216 of the Companies Act, 1984 for an order putting the company into liquidation- No " Section 309(l)(d) read with section 309(2) 24.12.2020 Special Resolution passed by the shareholders (Page 59 of PB) Section 309(1)(d) 06.01.2021 Notices given in the Government Gazette and newspapers intimating that the company has ceased to carry on business, has discharged in full all its liabilities to all known creditors and has distributed its surplus assets in accordance with the Companies Act, 2001 (Pages 53 to 56 of the PB); Section 311 21.05.2021 No objection certificate dated 21.05.2021 granted by Mauritius Revenue Authority for removal of company's name (Page 58 of PB) Section 309(3) 04.06.2021 Letter of no-charge dated 04.06.2021 fi....
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....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 been included as a 'person' chargeable to tax under the provisions of the Act. As a natural corollary, once a company is dissolved i.e. the company ceases to exist as a legal entity, it cannot be treated as person assessable to the Act. 29. It is submitted that the existence of the name of the company in the Register of Companies is the proof of its existence. Once the name of the company is struck off from the Register of Companies, the company ceases to be an artificial juridical person, having a separate legal entity. Thus, the assessment made in the name of a dissolved company whose name has been struck off from the Register of Companies is akin to assessment in the name of a dead person. Such assessment is, it is submitted, nullity in the eyes of law. 30. The Courts/ Tribunals have consistently held, that assessment order passed in the name of a dead person or a ....
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.... 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. Amarchand N. Shroff: 48 ITR 59 (SC) - Saraswati Industrial Syndicate Ltd. v. CIT [1990]: 53 Taxman 92 (SC) - ITO v. Ram Prasad: 86 ITR 145 (SC) - Savita Kapila vs. ACIT: 426 ITR 502 (Del) - Mrs. Sripathi Subbaraya Manahora L/H Late Sripatlti Subbaraya Gupta vs. PCIT [WP(C)No.267812020; decided on 08.07.2021] (Del)] - ACIT v. Micra India (P.) Ltd.: 231 Taxman 809 (Del) - Vived Marketing Servicing (P) Limited in ITA No. 273/2009 (Del) - CIT v. Micron Steels (P.) Ltd.: 233 Taxman 120 (Del) - CIT v. Express Newspaper: 40 ITR 38 (Mad) [affirmed by Supreme Court in 53 ITR 250] - CIT v. Intel Technologies India (P.) Ltd.: 232 Taxman 279 (Kar) - Kunvarji Fincorp Pvt. Ltd. vs. DCIT: SCA 1110 of 2022 (Guj HC) - CIT vs. Sony Mobile Communications Ind Pvt Ltd (Now merged with Sony India Pvt. Ltd.): ITA No. 115/ 2019 (Del HC) - Adani Wilmar Limited vs ACIT: SCA 5374 of 2022 (Guj HC) - Roquette India Pvt. Ltd. vs. ACIT: SCA 5719 of 2022 (Guj HC) - Motorola So....
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.... is placed on the decision of Delhi Bench of the Tribunal in the case of Impsat (P.) Ltd. vs. ITO: 91 ITD 354. In that case, the Board of directors applied to have the company's name struck off under section 560 of the Companies Act, 1956. Consequently, the name of the company was struck off by ROC on 18.09.2001 and the company ceased to exist. Subsequent thereto, the assessee filed its return for the assessment year 2001-2002 on 29.10.2001. However, the assessing officer completed assessment and made addition under section 56(1) of the Act which was confirmed by CIT(A). On further appeal, a ground was raised before the Tribunal that the assessment order was passed in the name of a dissolved entity and therefore, was illegal. On this aspect, the Tribunal held as under: "......... 13. From, the above, the position that emerges is that both under the old Act and the new Act it is absolutely essential that the person sought to be assessed should be in existence at the time of making the assessment and that elaborate provisions were made in the Acts to ensure that if the person sought to be assessed is not in existence at the time of making the assessment, some other person or body....
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....dissolution" ................................................................ 18. At page 1930 of the same treatise, under the heading "Property after dissolution", it has been stated that the property of the company after dissolution is bona vacantia and escheats to the State. There is also a reference to the judgment of the Supreme Court in Narendra Bahadur Tandonv. Shanker Lal [1982] 52 Comp. Cas. 62, in which it has been held that once a company is dissolved it ceases to exist and thereafter a liquidator cannot represent the company, since it is non-existent. 19. It is thus clear that in the present case the assessee-company ceased to exist after being dissolved under section 560. Once it ceased to exist, there was no question of assessing it for income-tax, as it appears that there is no provision in the present Act to assess a company which is dissolved. Our attention was not drawn to any provision in the Act enabling the Assessing Officer to do so. Section 159 of the present Act does not cure the lacuna. It corresponds to section 24B of the 1922 Act. Sub-section (1) says that where a person dies, his legal representatives shall be liable to pay any sum which the deceased....
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....ssolved under section 560 of the Companies Act. We have already noted the judgment of the Supreme Court in Hari Prasad Jayantilal's case (supra) as to the effect of dissolution and the treatise of A. Ramaiya on Company Law in this behalf. If the company is not in existence at the time of making the assessment, no order of assessment can be validly passed upon it under the Income-tax Act and if one is passed, it must be a nullity. ........... 23. For the above reasons, we accept the first contention and hold that the assessment order passed on the assessee-company is a nullity. " 39. The aforesaid decision has been approved by the Hon'ble jurisdictional High Court in the case of CIT v. Vived Marketing Servicing (P.) Ltd. [IT Appeal No. 273 of 2009]. The relevant extracts of the decision of High Court are as under: "When the Assessing Officer passed the order of assessment against the respondent company, it had already been dissolved and struck off the register of the Registrar of companies under Section 560 of the Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any assessment order passed against the company which was not in ex....
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.... 22. From a reading of Subsection (7) along with Subsection 31 of Section 2 of the Income Tax Act, it becomes abundantly clear that the assessee to be assessed for income tax under Section 143 of the Income Tax Act must be a person in existence. Indisputably, a company is a juridical person but the moment it is struck off from the Register of Companies and is dissolved, it ceases to exist. Making of an assessment order against a non-existent company would be like passing a decree by a civil court against a dead person. Such order of assessment made against a non-existent entity would be nullity and would not give rise to any right or liability under such assessment order. The view we have taken is supported by a judgment of the High Court of Delhi dated 17.09.2009 passed in ITA No.273/2009 titled Commissioner of Income Tax v. Vived Marketing Servicing Pvt. Ltd. One paragraph judgment rendered by the Delhi High Court has upheld the decision of ITAT in Impsat Pvt. Ltd. v. ITO 276 ITR 136 (AT). One paragraph judgment reads thus:- ..... 23. The relevant observations of the IT AT Delhi Bench in Impsat (P) Ltd. v. Income Tax Officer are also worth taking note of and are, thus, set out....
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....the facts and circumstances of the case. Even the judgment of the Hon 'ble Delhi High Court in the case of Spice Infotainment Ltd., vs. CIT (supra), has been confirmed by the Hon'ble Supreme Court vide order dated 02nd November, 2017 (supra). It may also be noted here that A.O. in the remand report has referred to certain correspondence between Revenue Department and the O/o. ROC through which certain information against the assessee company has been obtained. Ultimately, the O/o. ROC intimated to the Income Tax Department that it is not within their powers to revive the assessee- company under section 560(6) of the Companies Act. The information have been taken by the Department and it is not intimated as to what action have been taken by the Department against the assessee company in this regard. However, as on today, it is an established fact that assessee-company has already been dissolved and its name is struck-off from the Registrar of Companies. Therefore, it is a non-existing Company and as such, A.O. cannot pass the assessment order under section 143(3) of the I.T. Act, 1961 against the assessee company. The issue is, therefore, covered in favour of the assessee-company ....
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....will be struck off from the register and such company will be dissolved. Another notice/undertaking was sent vide intimation dated 9.11.2013 by Registrar of Company to the Income Tax Department, specifically intimating that 'Galaxy Technosys Private Ltd. ' has been struck off from the register and the said company is dissolved. Again this information was given to the AO during the course of the assessment proceedings by the assessee vide letter dated 21st March, 2016 which reads as under ............................................. 5. Despite communications by the Registrar of the Company to the department and again by the Company before the AO and Ld. C1T (A), it is very surprising to see that none ofthe authorities have addressed this issue, as to how the assessment can be passed in the case of non existing entity which was dissolved much prior of initiation of provision u/s 147/148. Hon 'ble Delhi High Court in the case of Spice Infotainment Ltd. vs CIT reported in (2012) 247 CTR 500, has held that assessment in the name of the company which has been amalgamated with another company and stood dissolved is null and void and assessment framed in the name of a non-existing ent....
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....vs. M/s Silverline Trading Company Ltd.: ITA No. 2253 of 2023. In that case, the assessee-company was struck off from the Register of Companies as per the certificate dated 18.03.2011 issued by the MCA. However, despite this fact available, the learned Assessing Officer passed assessment orders dated 29.02.2016 in the name of non-existing entity. On appeal, the CIT(A) quashed the assessment orders passed in the name of non-existing entity. On Revenue's appeal before the Tribunal, it was held as under: 4. On careful consideration of the facts and rival contention, we find that the above appellant entity is not in existence since 18th March, 2011, as per the certificate issued by the Registrar of Companies, Maharashtra, Mumbai as its name has been struck off under Section 560 (5) of the Companies Act, 1986, in easy exist Scheme, 2010. The coordinate Benches in asses see ".s own case in IT A no. 2435/Mum/2021, for A.Y. 2011- 12 and further in ITA No. 6633/Mum/2017, for A.Y. 2007-08 has already quashed the assessment orders. The issue is now also squarely covered by the decision of Hon'ble Jammu and Kashmir and Ladakh High Court in ITA No. 21 of 2014 dated 3rd November, 2013, M/S....
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....e do not find any infirmity in the order of the CIT(A) in holding that the assessment framed as null and void in the name of the company which had already liquidated. Our aforesaid view is duly supported by the following decisions: .... No contrary decision was brought to our knowledge by the learned DR, even though he has vehemently relied on the order of the Assessing Officer. We, therefore, confirm the order of the CIT(A) and quash the assessment framed by the Assessing Officer. 5. Since the assessment made by the Assessing Officer has eventually been quashed by us, the other grounds taken by the Revenue does not require any adjudication. " - To the same effect is the decision of Ahmedabad Bench of the Tribunal in the case of Mehta Air Travels Pvt. Ltd. vs. ITO: ITA No. 3300 of 2016. 40. In view of the above, it is the respectful submission, that the impugned assessment order passed in the name of non-existent entity is illegal and calls to be quashed and the present ground of appeal be allowed." 3. Giving thoughtful consideration to the submissions made by Sh. Gaurav Jain, Advocate, we are of the considered view that before examining the grounds on merits of additions,....
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....fession is discontinued during the assessment year and subsection (1) of section 176 provides that the income of the period from the expiry of the previous year for that assessment year upto the date of such discontinuance may, at the discretion of the AO, be charged to tax in the assessment year. 4.4 Section 178 of the Act, provides for company in liquidation, which is not the case here, as there was voluntary dissolution of company followed by request to ROC for striking off name of the company. 5. Based on aforesaid, we examine the substantial plea raised by Sh. Gaurav Jain Advocate that that courts and Tribunals have consistently held that the assessment order passed in the name of a dead person or a non-existing entity would be nullity and of no consequence. Reliance in this regard is placed on the judgement of the Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. (2019) 107 taxmann.com 375 (SC) and a series of decisions as referred in paras 33 and 34 of the synopsis. Ld. Counsel, has relied decision of the coordinate Bench in the case of Impsat (P) Ltd. vs. ITO, 91 ITD 354 and the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. ....
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....is application is on record at pages 50-59 of the paper book. On 04.06.2021 itself, Form No.23 which is application for removal of company was filed along with the 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 part and no creditor has applied to the Court under section 216 of the Companies Act, 1984 for an order putting the company into liquidation - No." 9. The Special Resolution passed by the shareholders on 24.12.2020 is available at page 59 of the paper book. On pages 53 to 56, notices given in Government Gazette and newspapers intimating that the company has ceased to carry on business and has discharged in full all its liabilities to all loan creditors and has distributed its surplus assets in accordance with the Companies Act, 2002 is filed. 10. Then at page 58, the copy of no objection certificate dated 21.05.2021 granted by Mauritius Revenue Authorities for removal of company's name is filed. At page No.57, the....
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....es, Mauritius for getting struck off the name of the company from Register of Companies so as to expect the AO to have taken any recourse under the Act. 14. Further, we find that this application, to the Registrar of Companies, Mauritius for getting struck off the name of the company from Register of Companies was filed on 04.06.2021, in Form 23 and the copies of which are made available from pages 50-59 of the paper book. However, this fact of making application in Form 23 was not intimated to the AO at any time. 14.1 Then, we can see that the grounds for removal mentioned in this Form 23 as available at page 52 of the paper book are incorrect and false, as the fact of pendency of the assessment before the Indian tax authorities was not disclosed. 14.2 Even otherwise, with regard to the question of the assessment order being passed against the non-existing entity for which the assessment order is vitiated, the aforesaid discussion establishes that at no point of time before the AO or DRP the erstwhile company had claimed that the name of the assessee is being struck off for closure of the business or discontinuance of the business after the distribution of assets. In this conte....
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....dation in Mauritius and subsequent to same Power of Attorney of the client signed by the client's director on 13.10.2021 has lapsed and as director signing the power of attorney does not have any authority, post liquidation of the client, Price Waterhouse & Co. LLP withdraws the Power of Attorney filed before the DRP and request was made that the proceedings be abated as they have become infructuous. 18. It appears that thereafter, a notice u/s 144C(11) of the Act was issued to the erstwhile company for which Mr. Boopendradas (Vikash) Sungker had informed DRP, by letter dated 11/2/22, as follows:- "This is with reference to the captioned notice received from your good office to my email id addressed to Red Fort Humayun. In this regard, I, Boopendradas Sungker, wish to inform your Honours that the name of the company has been removed from the register under Section 308 of the (Mauritius) Companies Act 2001 with effect from October 29, 2021. The proof of the same is enclosed as Annexure 1 for your kind reference. Accordingly, I, no longer serve as a Director of the liquidated company and have no authority to respond to this notice. Based on the above, by way of this letter, as....
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....ven by Mr. Boopendradas (Vikash) Sungker. 24. There is more to look into if Mr. Boopendradas (Vikash) Sungker, being former director has any locus standi to challenge the assessment order against the erstwhile company, on question of law or merits of addition. The definition of 'assessee', as given u/s 2(7) of the Act provides as follows:- "Section 2(7). "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes- (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act;" 24.1 Taking into consideration aforesaid definition of 'assessee', we are of the considered view that the return is filed by erstwhile company and consequent to the assessment concluded by the AO, the tax d....
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....able for any assessment year commencing before the 1st day of April, 1962. Explanation.-For the purposes of this section, the expression "tax due" includes penalty, interest , fees or any other sum payable under the Act. 24.4 Thus based on aforesaid section 179 of the Act, we are of considered view that it is only when the AO, proceeds against the former director for making a recovery of tax payable by the erstwhile company, the former director will he aggrieved with the recovery. But that too will not place the former director in the cradle of 'assessee', as only limited right given to former director is to deny the liability by proving that the non-recovery of tax demand cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. However, the merits of assessment order cannot be assailed by an appeal u/s section 246(1) providing for appeal before CIT(A) or under section 253 of the Act, which, provides for appeal to this Tribunal, since it is 'assessee' who can challenge the merits of assessment order passed u/s 143(3) of the Act. 24.5 Thus, based on the aforesaid discussion, the only conclusions that can be d....
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....the regular Bench for hearing on 07/09/2022." 27. The aforesaid decision categorically holds that 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 and discharge of the liability or obligations of the company. Though in that case assessment order was not passed against a company whose name was struck off, and name was struck off at stage of pendency of appeal before the Tribunal, however, the ratio of the order of the coordinate Bench substantiates our conclusion that as for the purpose of tax liability the provisions of the Act concerning the amalgamated corporate entities or which are liquidated, are not applicable, as different consequences follow under law, in case of the company whose name is struck off on discontinuance of business 28. Further more, a coordinate Bench wherein, both of us, were on the Bench had considered the aspect of effect of passing an assessment order in case of a company whose name is struck off, and in the case of Zoetic Infrastructure and Constructions Pvt. Ltd. vs. ITO, ITA No.5896/Del/2019, order dated 10.08.2022, we held in para ....