2016 (12) TMI 239 - AT - Income Tax

Validity of assessment against non-existent concern - Held that - We set-aside the action of the Assessing Officer in framing the impugned assessment against the Siemens Corporate Finance Pvt. Ltd. on 16/08/2012, because on the said date, it was a non-existing concern on account of its amalgamation with Siemens Technology and Services Pvt. Ltd. w.e.f. 01/10/2011 following the scheme of amalgamation approved by the Hon ble Bombay High Court on 26/08/2011.As a consequence, the assessment order dated 16/08/2012 is held to be as invalid and void-ab-initio - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the assessment order passed in the name of a non-existent entity due to amalgamation.
2. Whether the addition of ?1,12,46,145 to the assessee's income was justified under the arm's length principle.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order:
The primary issue revolves around the validity of the assessment order dated 16/08/2012, which was passed in the name of Siemens Corporate Finance Pvt. Ltd., a non-existent entity due to its merger with Siemens Technology and Services Pvt. Ltd. effective from 01/10/2011. The assessee argued that the assessment order is void-ab-initio as the entity had ceased to exist on the date of the order. The tribunal admitted this additional ground of appeal, citing the Supreme Court's judgment in National Thermal Power Company Ltd. vs. CIT, which allows raising points of law based on existing records without fresh investigation.

The tribunal noted that the merger was approved by the Bombay High Court on 26/08/2011, and the assessee had informed the Assessing Officer (AO) about the amalgamation on 06/12/2011. Despite this, the AO finalized the assessment in the name of the non-existent entity. The tribunal referenced several judgments, including those of the Delhi High Court in Spice Infotainment Ltd. and the Karnataka High Court in Intel Technology India Pvt. Ltd., which held that assessments made on non-existent entities due to mergers are invalid and constitute jurisdictional defects, not mere procedural irregularities.

The tribunal concluded that the assessment order dated 16/08/2012 was invalid and void-ab-initio since it was passed against a non-existent entity. Consequently, the tribunal set aside the assessment order, rendering it null and void.

2. Addition to Income Under Arm's Length Principle:
The second issue pertained to the addition of ?1,12,46,145 to the assessee's income, which the Dispute Resolution Panel (DRP) confirmed, holding that the international transaction of 'Provision of Business Support Services' did not satisfy the arm's length principle under the Income-tax Act, 1961.

However, since the tribunal upheld the preliminary plea of the assessee regarding the invalidity of the assessment order, it did not find it necessary to examine the merits of this addition. The tribunal's decision to set aside the assessment order as void-ab-initio obviated the need to address this ground of appeal.

Conclusion:
The tribunal allowed the appeal of the assessee, setting aside the assessment order dated 16/08/2012 as invalid and void-ab-initio due to it being passed in the name of a non-existent entity following the merger. As a result, the tribunal did not address the merits of the addition to the assessee's income under the arm's length principle. The appeal was pronounced in favor of the assessee on 16/11/2016.