2010 (7) TMI 1030 - AT - Income Tax

Summary

Issues Involved:
1. Validity of assessment orders passed u/s 143(3) in the name of a dissolved company.
2. Disallowance of foreign traveling expenses.
3. Treatment of non-competition fee as capital receipt versus revenue receipt.

Summary:

Issue 1: Validity of Assessment Orders
The primary issue raised by the assessee in the Cross Objection was the validity of the assessment orders passed u/s 143(3) in the name of Spice Corporation Ltd., which had been dissolved following its amalgamation with Mcorp Global P. Ltd. w.e.f. 1.7.2003. The assessee contended that the assessment orders were invalid and void ab initio. The CIT(A) upheld the assessment orders, considering the procedural defect as curable u/s 292B of the Act. The Tribunal concluded that the assessments were, in substance and effect, made against the amalgamated company, Mcorp Global P. Ltd., and thus were not invalid. The Tribunal held that the omission to mention the name of the amalgamated company was a procedural defect covered by Section 292B. The assessments were restored to the AO for fresh assessment after correcting the procedural defect, with a direction to provide a reasonable opportunity of being heard to the assessee.

Issue 2: Disallowance of Foreign Traveling Expenses
The revenue appealed against the CIT(A)'s decision to disallow the foreign traveling expenses. Since the assessment order was restored to the AO for fresh assessment, this issue was also remanded to the AO for fresh adjudication. The AO was directed to examine the facts and circumstances, including evidence produced by the assessee, to determine the connection of the foreign traveling expenses to the business activity of the assessee.

Issue 3: Treatment of Non-Competition Fee
In the Asstt. Year 2002-03, the revenue also contested the CIT(A)'s treatment of the non-competition fee as a capital receipt instead of a revenue receipt. This issue was similarly restored to the AO for fresh adjudication, with instructions to provide a reasonable opportunity of being heard to the assessee and to examine the evidence regarding the nature of the non-competition fee.

Conclusion:
The Cross Objections filed by the assessee were partly allowed for statistical purposes, and the appeals filed by the revenue were treated as allowed for statistical purposes. The Tribunal ordered the AO to conduct fresh assessments after addressing the procedural defect and providing a reasonable opportunity of being heard to the assessee.