2020 (12) TMI 1072 - AT - Income Tax

Assessment order passed on non-existent entity - Scheme of amalgamation conceived - HELD THAT - As discussed and has also been held by Hon ble Delhi High Court in case of Spice Entertainment 2011 (8) TMI 544 - DELHI HIGH COURT and in the case of Maruti Suzuki 2019 (7) TMI 1449 - SUPREME COURT framing the transfer pricing order on the basis of which draft assessment order has been passed in the name of amalgamating entity is not a curable defect and the assessment framed is bad in law. So, the contention raised by the Ld. DR is not sustainable. Thus assessment order framed in this case on the basis of TP order passed by the TPO is bad in law, hence, non-est and consequently hereby quashed.

Issues Involved:
1. Validity of assessment order passed in the name of a non-existent entity.
2. Validity of transfer pricing order passed in the name of a non-existent entity.
3. Assessment of total income and adjusted book profit.
4. Disallowance under section 14A of the Income Tax Act.
5. Addition of disallowance under section 14A in computing book profit under section 115JB.
6. Allowance of additional depreciation under section 32(1)(iia).
7. Addition due to change in the method of depreciation.
8. Adjustment on account of CSR expenses under section 115JB.
9. Addition of lease equalization reserve expenses to book profits under section 115JB.
10. Classification of transactions as international transactions under section 92B.
11. Adjustment on account of bank guarantee fee.
12. Imposition of interest under section 234C.

Issue-wise Detailed Analysis:

1. Validity of Assessment Order Passed in the Name of a Non-Existent Entity:
The taxpayer argued that the assessment order was void ab initio as it was passed in the name of a non-existent entity, Cairn India Ltd., which had amalgamated with Vedanta Ltd. The Tribunal agreed, citing the Supreme Court's decision in PCIT vs. Maruti Suzuki India Ltd., which held that an assessment order in the name of a non-existent entity is void and non-est. The Tribunal concluded that the assessment order was invalid, thus vitiating the entire assessment proceedings.

2. Validity of Transfer Pricing Order Passed in the Name of a Non-Existent Entity:
The taxpayer contended that the transfer pricing order was also void ab initio for being passed in the name of Cairn India Ltd. The Tribunal supported this view, noting that the TPO's order was not curable under section 292B of the Act, as it was a jurisdictional defect. The Tribunal referred to the Delhi High Court's decision in Spice Entertainment Ltd., affirming that an assessment framed in the name of a non-existent entity is void.

3. Assessment of Total Income and Adjusted Book Profit:
The taxpayer challenged the assessment of total income and adjusted book profit, arguing that the AO erred in assessing these at higher amounts than declared. However, since the assessment order was found to be void ab initio, the Tribunal did not delve into the merits of this issue.

4. Disallowance under Section 14A:
The taxpayer contested the disallowance of ?6,77,00,000 under section 14A read with Rule 8D, arguing that the AO/DRP made the disallowance without recording necessary satisfaction and by mechanical application of Rule 8D. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

5. Addition of Disallowance under Section 14A in Computing Book Profit under Section 115JB:
The taxpayer argued that the AO/DRP erred in adding back the disallowance under section 14A for MAT computation. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

6. Allowance of Additional Depreciation under Section 32(1)(iia):
The taxpayer contended that the AO/DRP erred in allowing additional depreciation without the taxpayer's claim. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

7. Addition Due to Change in the Method of Depreciation:
The taxpayer argued against the addition of ?191,13,00,000 due to the change in the method of depreciation. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

8. Adjustment on Account of CSR Expenses under Section 115JB:
The taxpayer contended that the AO/DRP erred in adjusting ?68,46,45,714 on account of CSR expenses in computing book profits. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

9. Addition of Lease Equalization Reserve Expenses to Book Profits under Section 115JB:
The taxpayer argued against the addition of ?4,65,61,425 to book profits under section 115JB. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

10. Classification of Transactions as International Transactions under Section 92B:
The taxpayer contested the classification of certain transactions as international transactions under section 92B. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

11. Adjustment on Account of Bank Guarantee Fee:
The taxpayer argued against the adjustment of ?48,320 on account of bank guarantee fee. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

12. Imposition of Interest under Section 234C:
The taxpayer contested the imposition of interest under section 234C. The Tribunal did not address this issue on merits due to the invalidity of the assessment order.

Conclusion:
The Tribunal concluded that the assessment order was void ab initio and non-est, as it was passed in the name of a non-existent entity. Consequently, the Tribunal quashed the assessment order and did not address the other grounds on merits. The appeal filed by the taxpayer was allowed, and the stay petition was dismissed as infructuous.

← Previous Next →