TaxTMI 
TaxTMI 
2023 (2) TMI 1392
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.... Chandigarh bench also passed an order on 26/2/2020 according to which all the property, rights and powers of the assessee company pursuant to the provisions of section 230 to 232 of the companies act 2013 were transferred to be vested in Hindustan Unilever limited (the transferee company). The effective date of merger was 1 April 2020. This fact was intimated by email dated 3/4/2022 the joint Commissioner of income tax (OSD) circle 4 (1) Chandigarh and copy was marketed to (1) the principal chief Commissioner of income tax, Northwest region, Chandigarh, (2) the principal Commissioner of income tax - 2, Chandigarh, (3) the joint Commissioner of income tax range 4, Chandigarh, (4) the deputy Commissioner of income tax, transfer pricing officer - 1 (3) (1), New Delhi, (5) the Commissioner of income tax, transfer pricing - 1, New Delhi. In the body of the email it was submitted that a letter involved format with digital signature as well as a PDF copy of the same as an intimation/communication of approved merger/amalgamation of GlaxoSmithKline consumer healthcare Ltd with Hindustan Unilever limited with effective from 1 April 2020. In the above letter both the orders of the National c....
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....94,748,600/- against the returned income of the assessee filed on 30/11/2007 at a total income of Rs. 1,858,727,920/-. 04. Assessee has raised following grounds of appeal:- 1. That on the facts and circumstances of the case and in law, the order passed under section 143(3) read with section 144C of the Income Tax Act, 1961 (the Act) on the non-existing amalgamating entity, is unlawful, void-ab-initio and liable to be quashed. 1.1 That on the facts and circumstances of the case, the impugned order having been passed without complying with the binding directions issued by the Dispute Resolution Panel (DRP) is without jurisdiction, illegal and bad-in-law. 1.2 That the assessing officer ('AO') erred on facts and in law in completing the assessment under section 143(3) read with section 144C of the Income-tax Act ("the Act") at an income of Rs. 1409,47,48,600 as against the returned income of Rs. 1085,87,27,920. Re: Transfer pricing adjustment in relation to AMP Expenses: 2. That the AO erred on facts and in law in making addition of Rs. 16,001 lacs on protective basis applying Bright Line Test (BLT) and Rs. 17,303.59 lacs on substantive basis applying Profit Spli....
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....ernational transaction in relation to the advertisement, marketing and brand promotion expenses unilaterally incurred by the appellant, so as to establish that the same constituted an international transaction. 2.7 The AO/TPO/ DRP erred on facts and in law in not appreciating that the only Transfer Pricing adjustment permitted by Chapter X of the Act was in respect of the difference between the arm's length price ('ALP') and the contract or declared price, but the said provision could not be invoked to determine the 'quantum' / extent of business expenditure. 2.8 That the AO/ TPO/ DRP erred on facts and in law in not appreciating that the AMP expenses were incurred by the appellant for its own benefit and the benefit to the AE, if any, being incidental cannot be a basis to construe an international transaction between the appellant and the associated enterprises. 2.9 That the AO/ TPO/ DRP erred on facts and in law in concluding that the AMP efforts undertaken by the appellant was to promote the brand of the AE and to develop market and customer loyalty for the AE's brand without appreciating that the appellant is a publicly listed company in India m....
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....P erred in law and in facts in not appreciating that protective adjustment can only be made in two separate entities to ensure that income does not escape taxation. Re: Disallowance of Market Research Expenses 3. That the AO/ DRP erred on facts and in law in disallowing market research expenses amounting to Rs.1587.33 lacs (1190.49750 lacs after allowing depreciation) under section 37(1) of the Act, alleging the same to be capital in nature. 3.1 Without prejudice, the AO erred on facts and in law in not appreciating that since the Transfer Pricing Officer vide order dated 31.01.2021 has proposed adjustment in relation to AMP expenses by considering portion of such market research expenses of Rs. 1265.22 lacs as part of AMP expenses incurred by the assessee, any further disallowance of the same expense will result in double disallowance/adjustment of Rs. 1265.22 lacs. 3.2 Without prejudice, the AO/ DRP erred on facts and in law in not allowing depreciation @ 25% on the market research expenses disallowed in the earlier assessment year, i.e. AY 2000-01 to 2016-17, by treating the same as capital in nature. Re: Disallowance of incremental provision for post-retirement m....
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.... on the facts and circumstances of the case and in law, the DRP erred in not adjudicating upon the objections raised by the appellant regarding (a) of import of income as determined in intimation and (b) merits of the adjustment made in the intimation and simply directing the assessing officer to verify and pass a speaking order. 7.2 That on the facts and circumstances of the case and in law, the AO/ DRP erred in confirming the disallowance of Rs. 33,26,26,510 being amounts out of disallowances made in preceding years and reversed and credited to profit and loss account in the relevant previous year without considering the evidences submitted before him/ DRP merely by repeating the allegations made in the draft assessment order. 7.3 That the AO erred on facts and in law in sustaining the disallowance of Rs. 33,26,26,510 being amounts out of disallowances made in preceding years and reversed and credited to profit and loss account in the relevant previous year allegedly relying upon Clause 26(1)(A)(b) of the Tax Audit Report, not appreciating that the auditors have clearly stated that the said amount of Rs. 33,26,26,510 has been not paid and has been reversed and credited to P....
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.... Renovation expenses and DLF deferred expenses, which were held to be capital in nature by the assessing officer in earlier years, allegedly holding that (a) the assessee has not claimed the depreciation in the return of income and (ii) the DRP has not allowed such depreciation in the assessment year 2016-17. Re: Disallowance of incremental balance in PLA 10. That the AO erred on facts and in law in not appreciating that since the deduction of Excise PLA closing of Rs. 21,27,074 (as on 31.03.2016) claimed in the preceding assessment year 2016-17 was not allowed by him, the same ought to have been reduced from the assessed income of assessment year 2017-18 since the same has been added back by the assessee in the Returned Income of the assessment year 2017-18. 11. That the assessing officer erred on facts and in law in levying interest under section 234B of the Act. 12. That the assessing officer erred on facts and in law in levying interest amounting to Rs. 16,31,151 under section 234C of the Act mechanically following the intimation order passed under section 143(1) of the Act. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of ....
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....romotion of brand Horlicks for which the assesse should have been appropriately compensated, especially the explicitly mentioned Marketing Expense and Marketing research which are for improving Horlicks brand, ensuring quality and creating goodwill for PMI. But by creating a structure of a make-believe trading arrangement, an attempt has been made to characterize these AMP expenses a trading." 2.3 That the DRP erred on facts and in law in arbitrarily holding that in the appellant's case the expenses incurred for the purpose of promoting brand image of the AE was an international transaction in as much as the only substantial activity is marketing and promoting the brand image of AE products and the legal structure of trading created by the assessee company is only a facade, a smokescreen to conceal the real activity. 2.4 That the DRP erred on facts and in law in arbitrarily returning the above findings, which are inconsistent and disconnected with the facts of the appellant's case. 2.5 The AO/TPO/DRP erred on facts and in law in not appreciating that the AMP expenses, unilaterally incurred by the appellant in India could not be characterized as an international tra....
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.... 2.12 Without prejudice, that the AO/ DRP/ TPO erred on facts and in law in inconsistently applying rPSM and BLT method for benchmarking the alleged transaction of incurring AMP expenses without appreciating that in the preceding assessment year 201314 intensity approach was considered for benchmarking the AMP expense. 2.13 Without prejudice, that the AO/DRP/TPO erred on facts and in law in considering selling expenses (market research expenses) as brand building expenses for the purpose of benchmarking alleged AMP expense applying rPSM and BLT method. 2.14 Without prejudice, the AO/TPO DRP erred on facts and in law in considering inappropriate comparables for the purpose of benchmarking the alleged transaction of incurring AMP expenditure for promotion of 'Horlicks brand in India, BLT and rPSM. 2.15 Without prejudice, that the DRP/TPO erred on facts and in law, in not considering appropriate companies for the purpose of benchmarking alleged AMP expense applying rPSM and BLT method. 2.16 Without prejudice, the AO/TPO/DRP erred on facts and in law in not appreciating that mark-up, if at all, had to be restricted to the value added expenses incurred by the assessee f....
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....0 lacs) incurred during the year allegedly holding the same to be capital in nature. 5.1 Without prejudice, that the AO/DRP erred on facts and in law in not allowing depreciation@25% on the written down value of royalty expenses disallowed in the assessment years, i.e. AY 2008-09 to 2017-18 (except AY 2011-12), by treating the same as capital in nature. Disallowance adjustments made under section 1431) of the Act 6. That on the facts and circumstances of the case and in law, the assessing officer DRP erred in completing the assessment by taking the income as determined in intimation issued under section 143(1) dated 06.11.2019 as the starting point without appreciating that as per section 144B of the Act, variation, if any, can be made only to the returned income. 6.1. That on the facts and circumstances of the case and in law, the DRP erred in not adjudicating upon the objections raised by the appellant regarding (a) validity of import of income as determined in intimation and (b) merits of the adjustment made in the intimation and simply directing the assessing officer to verify and pass a speaking order. 6.2. That on the facts and circumstances of the case and in ....
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....allow such depreciation. Short TDS/TCS Credit 9. That the AO/DRP erred on facts and in law in allowing partial TDS credit of Rs. 45,86,40,640/- and partial TCS Credit of Rs.2,43,595/- as against TDS credit of Rs.45,95,50,556 and TCS Credit of Rs 2,59,649 claimed by the appellant in the return of income filed for the year under consideration. 9.1 That the AO erred on facts and in law in not considering the unclaimed TDS credit of Rs.9,09,916 (Rs.45,95,50,556 - Rs.45,86,40,640) brought forward from earlier years, income corresponding to which was accrued during the relevant assessment year and offered to tax in the year under consideration. 9.2 That the AO erred on facts and in law in disallowing the entire TCS Credit of Rs.16,054 (Rs.2,59,649 - Rs.2,43,595) instead of disallowing Rs.484 only (Rs.16,054 - Rs.15,570), towards tax collected at source by Capital Vehicles Sales Limited [vide TAN No. DELC04598G] as per Form 26AS. Interest 10. That the AO erred on facts and in law in levying excess interest amounting to Rs.31,294 (Rs.26,74,909 - Rs.26,43,615) under section 234C of the Act mechanically following the intimation order passed under section 143(1) of the Act. ....
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....n panel where the name and address of the eligible assessee was mentioned that Hindustan Unilever limited (as legal successor of GlaxoSmithKline consumer healthcare limited). v. Ld DRP passed its direction on 26/05/2022. The direction issued by the dispute resolution panel - 1, New Delhi was passed in the name of Hindustan Unilever limited (as legal successor of GlaxoSmithKline consumer healthcare limited). Submission before DRP dated January 17, 2022 also mentioned in the caption subject that the assessee is Hindustan Unilever limited. During the hearing before the learned dispute resolution panel, the secretary on 17/1/2022 referred to letter to the income tax officer in case of remand report with respect to Hindustan Unilever limited. The letter dated May 2, 2022 addressed to the dispute resolution panel also mentioned about the fact of merger. On May 13, 2022 remand report reply was submitted by the assessee also stating in the name of Hindustan Unilever limited. Further reply in remand proceedings on 6 May 2022 also made a reference to the assessee is Hindustan Unilever limited. vi. On 23/5/2022 the learned transfer pricing officer passed the order giving effect to the d....
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....e Ltd with Hindustan Unilever Ltd. with effect from 1st April, 2020 and intimation of the same to the jurisdictional Assessing Officer. Based on above proceedings, the learned Transfer Pricing Officer passed an order under Section 92CA(3) of the Act on 31st July, 2021, wherein in the first paragraph, he mentioned that the assessee Company M/s Glaxo Smithkline Consumer Healthcare Ltd. is legally succeeded by Hindustan Unilever Ltd. He passed an order in the name of Glaxo Smithkline Consumer Healthcare Ltd. iii. Based on this, the National Faceless Assessment Centre, Delhi, passed an order under Section 143(3) of the Income-tax Act, 1961 (the Act) as a draft order under Section 144C of the Act assessing the total income of the assessee at Rs.1,444,14,24,770/- in the name of Glaxo Smithkline Consumer Healthcare Ltd. iv. On 28th September, 2021. Against the above draft order, the assessee preferred the objection before the learned Dispute Resolution Panel-1, New Delhi. The form no.35A states the name and address of the assessee as Hindustan Unilever Ltd (as legal successor of Glaxo Smithkline Consumer Healthcare Ltd.). Almost 8 objections were raised before the learned Dispute Re....
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....ppeals and demands for several assessment years are pending in case of Glaxo Smithkline Consumer Healthcare Ltd. and now such tax proceedings pending on the effective date shall continue against Hindustan Unilever Ltd. Therefore, the assessee requested to transfer and address all communications, notices, orders, demands, proceedings, etc. pertaining to all years of Glaxo Smithkline Consumer Healthcare Ltd. in favour of Hindustan Unilever Ltd. This letter was placed at page nos. 285 to 288 of the Paper Book volume-2. iv. It was further submitted that the order of the learned Transfer Pricing Officer for assessment year 2018 - 19 categorically mentioned in Paragraph no. 1, of his order at page no.1, that reference was received from the learned Assessing Officer technical unit for determining the Arms Length Price in respect of international transactions entered into by the assessee which is legally succeeded by Hindustan Unilever Ltd. v. The learned Transfer Pricing Officer after issue of show cause notice and its reply by the assessee informing the factum of above amalgamation passed the order under Section 92CA(3) of the Act in the name of Glaxo Smithkline Consumer Healthcare....
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....assessee means 'any person'. He submitted that 'person' is defined under Section 2 (31) of the Act and all of these entities must be in existence. Here the person in whose name the assessment order is passed is not an existing entity, therefore, there is no valid draft assessment order passed in the case of the assessee. Accordingly, as the draft assessment order itself is invalid, all the subsequent proceedings are also invalid.Relying on the decision of the co-ordinate bench in case of Fedex express Transprotaiton and supply chain services (India) (private) Ltd versus DCIT ITA number ITA number 857 of 2016, he submitted that the final assessment order is bad in law. xi. He further relied upon the decision of Vedanta Limited (ITA number 9495/del/2019 for assessment year 2015 - 16 dated 24/12/2020) and submitted that when the draft order is passed in the name of non-existing company and draft order is also in the name of non-eligible assessee found if the final assessment order passed in the name of correct assessee, even such assessment order is also invalid. xii. He further referred to the decision of the honourable Supreme Court in case of Maruti Suzuki Ltd....
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....th Hindustan Unilever Ltd during the assessment proceedings and otherwise. Considering the above mentioned facts of the case and provisions of section 292B of the act, the ground number 1 raising the assessee that the order under section 143 (3) read with section 144C of the act was passed on the nonexisting amalgamating entity is unlawful, void ab initio and liable to quashed is not tenable. It was also submitted that that the impugned order has been passed without complying with the binding direction issued by the learned dispute resolution panel has challenged by the learned authorised representative, the matter would be verified once again in view of the DRP direction issued in this regard. 012. Further communication on 9/11/2022 was also received from the secretary (DRP - 1), New Delhi where the coordinate bench asked to offer comments on this issue that the order is passed in the name of Hindustan Unilever limited by the learned dispute resolution panel mentioning as legal successor of GlaxoSmithKline consumer healthcare limited by the DRP whereas an intimation letter for order under section 144C (5) on 26/05 2022 for assessment year 2017 - 18 and on 7/6/2022 for assessment ....
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....ited 8 Assessment order passed under section 143 (3) read with section 144C (13) by the DRP 30/6/2022 GlaxoSmithKline consumer healthcare limited Assessment Year 2018-19 Serial number Particulars Date Name of the assessee 1 return of income filed 30/11/2018 GlaxoSmithKline consumer healthcare limited 2 order under section 92CA (3) of the act 31/7/2021 GlaxoSmithKline consumer healthcare limited though in the first paragraph itself the fact of amalgamation is mentioned 3 draft assessment order 28/9/2021 GlaxoSmithKline consumer healthcare limited 4 objection in form number 35A 25/10/2021 Hindustan Unilever limited (as legal successor of GlaxoSmithKline consumer healthcare limited) 5 direction of the dispute resolution panel - 1, New Delhi 3/6/2022 Hindustan Unilever limited (as legal successor of GlaxoSmithKline consumer healthcare limited) 6 intimation letter for order under section 144C (5) by CIT (DRP - 1) 7/6/2022 GlaxoSmithKline consumer healthcare limited 7 assessment order under section 143 (3) read with section 144C (13) read with section 144B of the act 30/7/2022 GlaxoSmithKline consumer healthcare limited 015. Error of mentioning the n....
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.... not support the case of the revenue that there was no mention of assessment year in letter dated 1/4/2020 of Hindustan Unilever limited. This is also once again not correct for the simple reason because in every communication made by the assessee at all stages of assessment proceedings, the assessee clearly in the subject matter itself mentioned Hindustan Unilever limited (legal successor to GlaxoSmithKline consumer healthcare limited). The replies submitted by the assessee are also on the letterhead of Hindustan Unilever limited and signed by officers of Hindustan Unilever limited. We have mentioned many communication above wherein the letters are addressed intimating the assessing authorities about the fact of business reorganisation on account of amalgamation. Therefore, the arguments advanced by the AO and the secretary of learned dispute resolution panel are not acceptable. 017. The identical issue arose before the honourable Supreme Court 018. Facts in the case of decision of PCIT V Mahagun Realtors Limited ([2022] 137 taxmann.com 91 (SC)) was of no indication given to the assessing authority about amalgamation and return was also filed pursuant to the notice suppressing t....
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....l transferor companies, and MIPL. A special audit was directed (which is possible only after issuing notice under section 142). Objections to the special audit were filed in respect of portions relatable to MRPL. 9. After fully participating in the proceedings which were specifically in respect of the business of the erstwhile MRPL for the year ending 31-3-2006, in the crossobjection before the ITAT, for the first time (in the appeal preferred by the Revenue), an additional ground was urged that the assessment order was a nullity because MRPL was not in existence. 10. Assessment order was issued - undoubtedly in relation to MRPL (shown as the assessee, but represented by the transferee company MIPL). 11. Appeals were filed to the CIT (and a cross-objection, to ITAT) - by MRPL "represented by MIPL". 12. At no point in time - the earliest being at the time of search, and subsequently, on receipt of notice, was it plainly stated that MRPL was not in existence, and its business assets and liabilities, taken over by MIPL. 13. The counter affidavit filed before this court - (dated 711-2020) has been affirmed by Shri Amit Jain S/o Shri P.K. Jain, who- is described in the af....
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.... "an assessment can always be made and is supposed to be made on the Transferee Company taking into account the income of both the Transferor and Transferee Company." 019. Revenue could not point out anything to suggest that the facts before the honourable Supreme Court are identical or similar to the facts before us. 020. Whereas the facts in the present case are also almost similar to the facts before the honourable Supreme Court in case of principal Commissioner of income tax versus Maruti Suzuki India Ltd [2019] 107 taxmann.com 375 (SC). The court held that:- "33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. 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. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of tw....