2018 (2) TMI 1759 - AT - Income Tax

Validity of assessment passed after amalgamation of company - Transfer pricing - transactions pertaining to export of certain finished goods and Marketing Support Services (MSS) provided to group companies - determination of arm s length price - Held that - where ANCIL had amalgamated with ANIL and necessary intimation in this regard was given to the Assessing Officer, who have also raised specific query in this regard but has failed to take cognizance of the facts of present case and the submissions made during the course of assessment proceedings and TP proceedings, we hold that assessment order passed in the name of ANCIL does not stand being an order passed on a non-existing entity. Accordingly, we quash the assessment order passed in the case. - Decided in favor of assessee.

Issues Involved:
1. Transfer pricing adjustment for export of finished goods.
2. Transfer pricing adjustment for Marketing Support Services (MSS).
3. Validity of assessment order passed in the name of a non-existing entity due to amalgamation.

Detailed Analysis:

Transfer Pricing Adjustment for Export of Finished Goods:
The assessee contested the transfer pricing adjustment of ?78,67,104 made by the Assessing Officer (AO) for export transactions. The AO erred by "disregarding the underlying transactional differences while considering the prices charged (for certain products) to third parties in India as CUPs for determining the arm’s length nature of similar products exported to the AE."

Transfer Pricing Adjustment for Marketing Support Services (MSS):
The AO made a transfer pricing adjustment of ?7,95,410 for MSS provided to group companies. The AO erred by "disregarding the few comparable companies while determining the arm’s length nature of Management Support Services rendered by the Appellant."

Validity of Assessment Order Passed in the Name of a Non-Existing Entity:
The primary jurisdictional issue raised by the assessee was that the assessment order dated 07.04.2014 was passed in the name of Akzo Nobel Chemicals (India) Limited (ANCIL), which had merged with Akzo Nobel India Limited (ANIL) vide order of the Hon’ble Bombay High Court dated 11.05.2012. The assessee argued that the assessment order was void ab-initio as it was passed on a non-existing entity. The Tribunal admitted the additional grounds of appeal based on the ratio laid down by the Apex Court in National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC).

The Tribunal noted that the intimation of amalgamation was given to the jurisdictional AO via letter dated 11.06.2012. Despite this, the TPO and AO continued to pass orders in the name of ANCIL. The Tribunal highlighted the reliance on the Apex Court's decision in Spice Enfotainment Ltd. Vs. Commissioner of Service Tax, which held that framing of assessment against a non-existing entity/person is a jurisdictional defect, not a procedural irregularity.

The Tribunal also referred to the Bombay High Court's decisions in Jitendra Chandralal Navlani & Anr. Vs. Union of India and Kansai Nerolac Paints Ltd. Vs. DCIT, which supported the view that assessment orders passed in the name of non-existing entities are void ab-initio.

The Tribunal concluded that the assessment order passed in the name of ANCIL was invalid, as ANCIL had already merged with ANIL. Therefore, the assessment proceedings were quashed, and the issues raised on merits did not survive.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order passed in the name of a non-existing entity due to the amalgamation. Consequently, the issues regarding transfer pricing adjustments for export of finished goods and MSS were not adjudicated on merits.

← Previous Next →