AI Drafter 
TaxTMI 
TaxTMI 
2023 (8) TMI 1582
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....mport of goods including spares from Associated Enterprises. Secondly, disallowance of business promotion expenses; and lastly, levy of interest u/s. 234B and 234C. However, in both the years, assessee has taken a legal ground that wherein not only the draft assessment order, transfer pricing order and final assessment order have been passed in the case of a non-existing entity and therefore, the entire final assessment order is null and void. The relevant petition for admission of additional ground and the ground reads as under:- 2. In this regard this office has received the above referred letter dated 06.02.2023 requiring this office to comments on the following ground of the assessee for AY 2016-17 in their appeal against order u/s 143(3) rws 144C(13). "Transfer pricing order, draft assessment order, directions of the Hon'ble DRP and final assessment order passed in the name of non-existent entity: 2. erred in passing the transfer pricing order, draft assessment order, directions of the Hon'ble DRP and final assessment order in the name of Covidien Healthcare India Private Limited, which was not in existence as on the date of passing the order....
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....dings and notice u/s. 143(2) dated 29/08/2017 was issued by ACIT, Corporate Circle 1(2) Chennai in the name of M/s.Covidien Healthcare India Pvt. Ltd. In response, assessee immediately vide letter dated 21/09/2017 intimated that M/s. Covidien Healthcare India Pvt. Ltd. has now been merged with IMPL. Assessee informed the ld. AO about the merger vide letter dated 26/12/2017 filed in the name of M/s.Covidien Healthcare India Pvt. Ltd. Thereafter, again assessee filed another letter dated 11/01/2018 with the same AO at Chennai and copy of the said letter was also filed to the ACIT-10(1)(1), Mumbai for transfer of records in the name of India Medtronic Pvt. Ltd. as the case was transferred from Chennai to AO Mumbai because IMPL was assessed in Mumbai. Thereafter, a follow up letter was also filed on 14/02/2018 pursuant to the same, a transfer order u/s. 127 dated 14/06/2018 was received to the assessee on the same date. 4. Now post transfer of jurisdiction to Mumbai, a notice u/s. 143(2) dated 13/08/2018 was issued by ACIT Circle 10(1)(1), Mumbai in the name of M/s.Covidien Healthcare India Pvt. Ltd. (CHIPL) which was no longer in existence to which assessee submitted a response aga....
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....nformed AO (Assistant Commissioner of Income-tax Corporate Circle 1(2), Chennai) of merger 26-Dec-2017 4 Appellant informed AO (Assistant Commissioner of Income-tax (OSD), Corporate Range 1, Chennai) of merger 28-Dec-2017 5 Letter filed with the ACIT - Corporate Circle 1(2), -Chennai and a copy of the said letter has been filed to the ACIT- 10(1}(1), Mumbai for transfer of records 18-Jan-2018 6 Follow up letter filed with the ACIT -Corporate Circle 1(2), -Chennai and a copy of the said letter has been filed to the ACIT -10(1 )(1), Mumbai for transfer of records 14-Feb-2018 7 Transfer of jurisdiction from DCIT, CC -1(2), Chennai to ACIT-10(1)(1), Mumbai consequent to merger of Covidien Healthcare India Private Limited with India Medtronic Private Limited vide order u/s 127 14-June-2018 8 Notice under section 143(2) of the Act in the name of Covidien Healthcare India Private Limited issued by ACIT Circle 10(1)(1), Mumbai [pre-merger notice] 29-Aug-2017 9 Submission dated 21 September 2017 in the name of India Medtronic Private Limited {Successor to CHIPL) against notice dated 29 August 2017 21-Sept-2017 10 Notice under se....
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....1)(1), Mumbai in the name Covidien Healthcare India Private Limited 5-Dec-2019 28 Submission dated 5 December 2019 against issue letter dated 5 December 2019 in the name of India Medtronic Private Limited (Successor to CHIPL) 5-Dec-2019 29 Draft assessment order passed in the name 'Covidien Healthcare India Private Limited' [Amalgamated with India Medtronic Private Limited] 12-Dec-2019 30 DRP objections filed in the name of India Medtronic Private Limited (successor to Covidien Healthcare India Private Limited) 10-Jan-2020 31 DRP directions passed in the name of 'Covidien Healthcare India Private Limited' [Amalgamated with India Medtronic Private Limited] 17-Mar-2021 32 Final assessment order passed in the name 'Covidien Healthcare India Private Limited' [Amalgamated with India Medtronic Private Limited] 26-May-2021 6. Thereafter, the ld. Counsel further pointed out that during the pendency of proceedings for A.Y.2016-17 and 2017-18 there have been various correspondences, payment of taxes etc for the earlier years of erstwhile CHIPL, the taxes were paid continuously in the name of IMPL for which he has agai....
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....erstwhile CHIPL for AY 2013-14 07-Dec-2021 13 Form 5 received from designated authority under Direct Tax VsV for erstwhile CHIPL in the name and PAN of India Medtronic Private Limited for erstwhile CHIPL for AY 2013-14 08-Dec-2021 7. Thus, he submitted that, it cannot be a case where the department was not aware of the merger of erstwhile CHIPL with IMPL. Accordingly, in view of the judgment of Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. 413 ITR 613, the whole assessment is bad in law. Further, he has also relied upon the decision of the ITAT Mumbai Bench in the case of Candor Renewable Energy Pvt. Ltd. in ITA No.2561 & 2560/Mum/2021 dated 19/10/2022 wherein the Tribunal has considered the decision of Maruti Suzuki India Ltd. supra and the decision of the Hon'ble Supreme Court in the case of PCIT vs. Mahagun Realtors Pvt. Ltd. in SLP 4063/2020 and submitted that the Tribunal has categorically analysed the ratio and the principle of both the judgments and have held that once the intimation was given to the department and to the ld. AO about the merger, then the assessment order in the case of non-existing entity is bad in law. 8. On the o....
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....er we had pointed out to the department on last date of hearing, the department has changed the PAN only on 11/04/2023. Thus, the pleading has been taken before us that system does not permit for changing PAN or name of the entity. 10. We have heard both the parties at length on the legal issue and also perused the relevant finding given in the impugned order. As noted above, by the scheme of amalgamation of IMPL and CHIPL was approved by NCLT w.e.f. 26/08/2016. From the appointed date CHIPL had ceased to exist as it was merged with IMPL and therefore, any proceedings thereof should have been continue or any order which should have been passed was to be in the name of M/s. India Medtronic Pvt. Ltd. The way and manner in which various authorities of the department were intimated about this fact of merger has been elaborated and discussed in detail hereinabove and also sequence of events which has been incorporated above. From the sequence, it could be seen that, here right from various notices issued u/s. 143(2), 142(1), TPO's order, draft assessment order, ld. DRP order and the final assessment order have been passed in the case of M/s. Covidien Healthcare India Pvt. Ltd. despit....
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....s: a) Assessee - Suzuki Power-train India Limited (SPIL), was a joint venture between Suzuki Motor Corporation (SMC) and Maruti Suzuki India Ltd (MSIL). b) SPIL filed return declaring certain taxable income, which was processed u/s 143(1). c) Subsequently, SPIL (Amalgamating Company) was amalgamated with 'MSIL' (Amalgamated Company) with effect from 1-4-2012 under Court orders on 29.01.2013. d) MSIL intimated to the AO on 2.04.2013. e) Notice under section 143(2) dated 26.09.2013 was issued to SPIL, non-existent entity. f) Thereafter, MSIL participated in assessment proceedings of SPIL. g) The assessment order under section 143(3), read with section 144C (1) of the Act was passed in the name of "SPIL (amalgamated with MSIL)". * The assessee argued before the tax/ appellate authorities that an assessment order passed in the name of a non-existent entity was void ab initio, since after amalgamation, the amalgamating company ceases to exist. Tax Department was of the view that since name of both the entities were mentioned in the order, the assessment order cannot be declared as invalid. * Before the Apex ....
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....entity was invalid in the eyes of the law; f) SPIL ceased to be an "eligible assessee", in terms of section 144C(15) (b) of the Act. Consequently, there was no requirement to pass a draft assessment order/reference to DRPetc.; g) The final assessment order dated 31 October 2016 is beyond limitation in terms of Section 153(1) read with Section 153 (4) of the Act. h) The assessment framed in the name of the amalgamating Company is invalid [refer: Spice Entertainment vs. CIT, CIT v. Dimension Apparels (P.) Ltd. [2015] 370 ITR 288 (Delhi); affirmed by Hon'ble Apex Court vide Civil Appeal No. 3125 of 2015, CIT v. Micron Steels (P.) Ltd. 372 ITR 386 (Delhi), CIT v. Micra India (P) Ltd. 231 Taxman 809 (Delhi)]. i) Assessment framed in the case of a non-existent entity is non-est in the eyes of law [refer: Pr. CIT vs. BMA Capfin Ltd. [2018] 100 taxmann.com 329 (Delhi) (Revenue's SLP dismissed against the same in Pr. CIT vs. BMA Capfin Ltd. [2018] 100 taxmann.com 330/[2019] 260 Taxman 89 (SC)] * The Apex Court after taking into consideration submissions of both sides held as follows: a) Under the approved scheme of amalgamation, ....
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....1) on 30.06.2006. ii. The order of amalgamation was dated 11.05.2007 - but made effective from 01.04.2006. It contained a condition - Clause 220-whereby MRPL's liabilities devolved on MIPL. iii. The original return of income was not revised even though the assessment proceedings were pending. The last date for filing the revised return was 31.03.2008, after the amalgamation order came into operation. iv. A search and seizure proceeding was conducted in respect of the Mahagun group, including the MRPL and other companies. v. When search and seizure of the Mahagun group took place, no indication was given about the amalgamation. vi. A statement made on 20.03.2007 by Mr. Amit Jain, MRPL's managing director, during statutory survey proceedings under Section 133A, unearthed discrepancies in the books of account, in relation to amounts of money in MRPL's account. The specific amount admitted was 5.072 crores, in the course of the statement recorded. vii. The warrant was in the name of MRPL. The directors of MRPL and MIPL made a combined statement under Section 132 of the Act, on 27.08.2008. viii. A total of Rs. 30....
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....ation, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues - enfolded within the new or the existing transferee entity. ii. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. It is, therefore, essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action or the complaint does not per se cease - depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall. iii. The combined effect, therefore, of Section 394 (2) of the Companies Act, 1956, Section 2 (1A) and various other provisions of the Income Tax Act, is that despite amalgamation, the business, enterpri....
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.... the cases relied upon, the amalgamated companies had participated in the proceedings before the department and the courts held that the participation by the amalgamated company will not be regarded as estoppel. However, in the present case, the participation in proceedings was by MRPL which held out itself as MRPL. vii. What is overwhelmingly evident- is that the amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group. A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT. Even the affidavit before this court is on behalf of the director of MRPL. Furthermore, the assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special auditor's report, brings specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of MRP....
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....peal filed by the Revenue, additional ground was urged that the assessment order was nullity because MRPL was not in existence. The assessment order was issued in the name of MRPL (representative of MIPL) and even in the first appeal before the Id. CIT (A) and cross objection before the ITAT, it was mentioned as "MRPL represented by MIPL". At no point of time, even at the time of search and subsequently on receipt of the notice, it was stated that MRPL was not in existence and its business of the erstwhile MRPL was taken over by MIPL. Even in the counter affidavit filed before the Hon'ble Apex Court, it has been affirmed by Shri Amit Jain, who has been described in the affidavit as Director of M/s. Mahagun Realtors (P) Ltd.. It was in this background, the Hon'ble Court in para 33 observed as under - "33. There is no doubt that MRPL amalgamated with MIPL and ceased to exist thereafter; this is an established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to contend that the notice issued in the name of the amalgamating company is void and illegal. The facts of present case, however, can be distinguished from the facts in S....
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....ssee. Thus, the assessment order passed in the name of MRPL was held to be valid. 16. Further, the Court distinguished the judgments passed in the case of Maruti Suzuki (Supra) and Spice on the following grounds: a) The legislative amendment by way of introduction of section 2(1A), defining "amalgamation", was not taken into account by the Apex Court in earlier decisions. Further, the tax treatment in case of amalgamation under various provisions (such as in section 72A, 80IA, etc.) of the Act were not brought to the notice of the Apex Court, in the earlier decisions; b) In the relied upon cases, the assessee had duly informed the tax authorities about the fact of the merger of companies and yet the assessment order was passed in the name of the non-existent entity. However, in the present case, the assessee failed to inform the assessing officer about the amalgamation for assessment year 2006-07 (year in dispute), though disclosure was made for subsequent years (AYs 2007-08 and 2008-09). The return of income filed on 28.05.2010 (post amalgamation) pursuant to notice under section 153A was filed in the name of MRPL and the fact of business reorganization was me....
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....s, depreciation, all bear out that under the Act, (a) the business-including the rights, assets and liabilities of the transferor company do not cease, but continue as that of the transferor company; (b) by deeming fiction- through several provisions of the Act, the treatment of various issues, is such that the transferee is deemed to carry on the enterprise as that of the transferor. d) Combined effect of Section 394 (2) of the Companies Act, 1956, Section 2 (1A) and various other provisions of the Income Tax Act, is that despite amalgamation, the business, enterprise and undertaking of the transferor or amalgamating company- which ceases to exist, after amalgamation, is treated as a continuing one, and any benefits, by way of carry forward of losses (of the transferor company), depreciation, etc., are allowed to the transferee. Therefore, unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation continues. e) Whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its ....