2023 (8) TMI 1582 - AT - Income Tax

Assessments framed in the name of non-existent entities - corporate death of an entity upon amalgamation - HELD THAT - As relying on MARUTI SUZUKI INDIA LIMITED 2019 (7) TMI 1449 - SUPREME COURT assessment order passed in the name of non-existent entity is invalid.

Issues Involved:

1. Transfer pricing adjustment on account of import of goods including spares from Associated Enterprises.
2. Disallowance of business promotion expenses.
3. Levy of interest under sections 234B and 234C.
4. Validity of assessment orders passed in the name of a non-existing entity.

Detailed Analysis:

1. Transfer Pricing Adjustment:

The assessee challenged the transfer pricing adjustment made on account of import of goods including spares from Associated Enterprises. The Tribunal noted that the transfer pricing order, draft assessment order, and final assessment order were all passed in the name of a non-existing entity, which was a critical issue impacting the validity of the entire assessment process. Despite the merger of M/s. Covidien Healthcare India Pvt. Ltd. (CHIPL) with M/s. India Medtronic Pvt. Ltd. (IMPL), the orders continued to be issued in the name of the non-existent CHIPL, rendering the adjustments void.

2. Disallowance of Business Promotion Expenses:

The assessee also contested the disallowance of business promotion expenses amounting to Rs. 16,32,28,601/-. This disallowance was made in the draft assessment order passed in the name of the non-existent entity. The Tribunal emphasized that any order passed in the name of a non-existing entity is invalid, and thus, the disallowance could not stand.

3. Levy of Interest under Sections 234B and 234C:

The levy of interest under sections 234B and 234C was also challenged by the assessee. The Tribunal's decision on the validity of the assessment orders directly impacted the imposition of interest, as the orders themselves were deemed null and void due to being issued in the name of a non-existent entity.

4. Validity of Assessment Orders Passed in the Name of a Non-Existing Entity:

The core issue was the validity of assessment orders passed in the name of a non-existing entity, CHIPL, which had merged with IMPL. The Tribunal referred to the Supreme Court judgment in the case of PCIT vs. Maruti Suzuki India Ltd., which held that assessment orders in the name of a non-existent entity are void ab initio. Despite repeated notifications to the tax authorities about the merger, the orders continued to be issued incorrectly. The Tribunal found that the department's failure to update the ITBA system to reflect the merger did not justify the issuance of orders in the name of a non-existent entity. The Tribunal quashed the assessment orders for both A.Y. 2016-17 and 2017-18, declaring them null and void.

The Tribunal distinguished the facts of this case from the Supreme Court's decision in Mahagun Realtors Pvt. Ltd., where the assessment was upheld due to the assessee's conduct and participation in proceedings in the name of the amalgamated entity. In this case, the assessee consistently notified the authorities of the merger, and the orders were still issued in the name of the non-existent entity, aligning with the principles established in the Maruti Suzuki case.

Conclusion:

The Tribunal concluded that the entire assessment process was flawed due to the issuance of orders in the name of a non-existent entity, and thus, all related adjustments and disallowances were invalid. The appeals for both assessment years were dismissed, and the orders were quashed as null and void.

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