9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (8) TMI 410 - AT - Income TaxDraft assessment order u/s 144C in the name of a non-existent company - Amalgamated Company / Merger - HELD THAT - There is no obligation upon the assessee to intimate the Assessing Officer and secondly, as mentioned elsewhere, vide letter dated 10.04.2018, the assessee has intimated the AO regarding the dissolution of BICIPL and to transfer all proceedings in the name of the appellant, BIPL. Considering the factual matrix we hold that the draft order framed u/s 144C(1) of the Act is in the name of a non-existent company and accordingly, void ab initio, making all subsequent proceedings non- est. First substantive grievance is, accordingly, allowed. TP adjustment on account of outstanding receivables - HELD THAT - The undisputed fact is that the assessee is a debt free company. It is also not in dispute that no interest was paid to the creditor/supplier nor any interest has been earned from unrelated party. Moreover, being a 100% captive service provider, the revenue of the assessee is 100% from its AEs. In our considered opinion, the question of receiving any interest on receivables does not arise. Considering the facts of the assessee in hand, in totality, we do not find any merit in the TP adjustment of ₹ 22.16 lakhs and the same is, accordingly, directed to be deleted. TDS u/s 192 or 195 - salary paid to expatriates - Failure of non-deduction of tax at source - assessee explained that reimbursement of salary cost to expatriate employees is not taxable as FIS, both under the provisions of the Act and relevant DTAA, and no withholding tax was required on the same - HELD THAT - As perused the TDS certificates, Forms 15CA and 15CB, tax deducted by the assessee and all these documents are part of the paper book. There is no dispute that the assessee has deducted tax at source u/s 192 of the Act. On the given facts of the case, we are of the considered opinion that the provisions of Section 195 of the Act do not apply. Considering the facts of the case in totality, in light of judicial decisions referred to hereinabove, we do not find any merit in the disallowance made by the Assessing Officer/DRP. We, accordingly, direct for deletion of addition .
Issues Involved:
1. Validity of Draft Assessment Order in the Name of a Non-Existent Company. 2. Transfer Pricing Adjustment on Outstanding Receivables. 3. Disallowance for Non-Deduction of Tax at Source on Salary Reimbursements. 4. Non-granting of Credit for Prepaid Taxes. Issue-Wise Detailed Analysis: 1. Validity of Draft Assessment Order in the Name of a Non-Existent Company: The primary grievance of the assessee was that the Dispute Resolution Panel (DRP) upheld the action of the Assessing Officer in passing a draft assessment order in the name of a non-existent company. The facts reveal that the company BICIPL merged with BIPL, the appellant, effective from 15.02.2018. Despite being notified of this merger, the Assessing Officer issued a draft assessment order on 25.12.2018 in the name of the dissolved entity BICIPL. The DRP directed the Assessing Officer to rectify the mistake and pass the final assessment order in the name of BIPL. The Tribunal emphasized that issuing a draft assessment order in the name of a non-existent entity is a jurisdictional defect, rendering the entire proceeding void ab initio. The Tribunal cited several judicial precedents, including the cases of FedEx Express Transportation and Supply Chain Services (India) Pvt. Ltd., Nokia Solutions and Network India Pvt. Ltd., and Maruti Suzuki India Ltd., to support its decision that such an order is inherently without jurisdiction and cannot be cured under Section 292B of the Act. Consequently, the Tribunal allowed the first substantive grievance of the assessee. 2. Transfer Pricing Adjustment on Outstanding Receivables: The second issue involved a Transfer Pricing (TP) adjustment of ?22.16 lakhs on account of outstanding receivables from Associated Enterprises (AEs). The TPO treated the delayed payments as unsecured loans/advances and imputed an interest rate of 4.3405%, resulting in the proposed adjustment. The DRP partially accepted the assessee's contention, allowing interest on outstanding payments to be netted off against interest on outstanding receivables, reducing the adjustment to ?22.16 lakhs. The Tribunal noted that the assessee is a debt-free company and does not pay or earn interest from unrelated parties. As a 100% captive service provider, the revenue of the assessee is entirely from its AEs, making the question of receiving any interest on receivables irrelevant. The Tribunal found no merit in the TP adjustment and directed its deletion. 3. Disallowance for Non-Deduction of Tax at Source on Salary Reimbursements: The third issue related to the disallowance of ?56.58 crores for the alleged failure to deduct tax at source on salary reimbursements to expatriate employees. The assessee contended that it was the real and economic employer of the expatriate employees, who were under its control, and that it had deducted and deposited appropriate taxes under Section 192 of the Act. The Assessing Officer, however, concluded that the assessee failed to deduct tax at source on the expenditure towards salaries and other allowances, invoking the provisions of Section 40(a)(i) of the Act. The Tribunal distinguished the facts of the case from those in Centrica India Offshore Pvt. Ltd., noting that the expatriate employees were under the supervision, control, and management of the appellant. The Tribunal found that the assessee had deducted tax at source under Section 192 and that the provisions of Section 195 did not apply. Consequently, the Tribunal directed the deletion of the disallowance of ?56.58 crores. 4. Non-granting of Credit for Prepaid Taxes: The final issue involved the non-granting of credit for prepaid taxes. The Tribunal directed the Assessing Officer to give credit for prepaid taxes as per the provisions of law. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the draft assessment order framed under Section 144C in the name of a non-existent company was void ab initio. On merits, the Tribunal directed the deletion of both the TP adjustment of ?22.16 lakhs and the disallowance of ?56.58 crores for non-deduction of tax at source. The Tribunal also directed the Assessing Officer to grant credit for prepaid taxes. The order was pronounced in the open court on 17.08.2020.
|
