2021 (9) TMI 280 - AT - Income Tax

Assessment on a non-existent entity - assessment in the name of the amalgamating company - Whether a curable defect as per Section 292B? - demand u/s 115QA - HELD THAT - As decided in GENPACT INDIA PVT. LTD. VERSUS DCIT CIRCLE-10 (1) NEW DELHI 2020 (7) TMI 712 - ITAT DELHI once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act. Hence, the Assessment proceedings as well as the Assessment order itself are void ab initio. Therefore, assessment order is set aside. - Decided in favour of assessee.

Issues Involved:

1. Treatment of income from interest on fixed deposits, inter-corporate deposits, and employee loans for deduction under Sections 10A and 10AA of the Income Tax Act, 1961.
2. Treatment of income from Foreign Exchange Gain & Forward Contract Gain for deduction under Sections 10A and 10AA.
3. Reduction of telecommunication charges and migration/on-the-job training expenses from total turnover for computation of deduction under Sections 10A and 10AA.
4. Disallowance of excess depreciation on computer peripherals.
5. Disallowance under Section 14A of the Act.
6. Validity of the assessment order considering the merger of the assessee with another entity.

Detailed Analysis:

1. Treatment of Income for Deduction under Sections 10A and 10AA:

The Revenue challenged the CIT(A)'s decision to treat income from interest on fixed deposits, inter-corporate deposits, and employee loans as eligible for deduction under Sections 10A and 10AA. The CIT(A) had allowed these incomes to be considered for deduction, which the Revenue opposed on the grounds that such incomes were not derived from the specified business activities.

2. Treatment of Foreign Exchange Gain & Forward Contract Gain:

The Revenue also contested the CIT(A)'s decision to treat income from Foreign Exchange Gain and Forward Contract Gain as eligible for deduction under Sections 10A and 10AA. The Revenue argued that these gains arose from hedging activities and were not derived from the specified business activities.

3. Reduction of Telecommunication Charges and Migration/On-the-Job Training Expenses:

The CIT(A) had reduced telecommunication charges and migration/on-the-job training expenses from the total turnover for the purpose of computing deduction under Sections 10A and 10AA. The Revenue opposed this reduction, arguing that these expenses should not be deducted from the total turnover.

4. Disallowance of Excess Depreciation on Computer Peripherals:

The Revenue appealed against the CIT(A)'s decision to delete the disallowance of excess depreciation on computer peripherals. The CIT(A) had allowed the depreciation, which the Revenue contested.

5. Disallowance under Section 14A:

The Revenue also contested the CIT(A)'s decision to delete the disallowance under Section 14A of the Act. The CIT(A) had allowed the deduction, which the Revenue opposed, arguing that the provisions of Section 14A read with Rule 8D of the IT Rules, 1962, were not properly applied.

6. Validity of the Assessment Order:

The assessee argued that the assessment order was void ab initio because it was passed in the name of an entity that had ceased to exist due to a merger. The Tribunal noted that the amalgamating company, Genpact India, was no longer in existence at the time of the assessment proceedings and the passing of the assessment order. The Tribunal relied on the Supreme Court's decision in the case of Maruti Suzuki India Ltd., which held that an assessment order passed in the name of a non-existent entity is void ab initio.

Tribunal's Findings:

The Tribunal quashed the assessment order on the grounds that it was passed in the name of a non-existent entity, thus rendering the entire assessment void ab initio. Consequently, the Tribunal did not need to address the other issues raised by the Revenue and the assessee.

Conclusion:

The appeal filed by the Revenue was dismissed, and the appeal of the assessee was rendered non est due to the quashing of the assessment order. The Tribunal's decision was pronounced in the open court on 01.09.2021 in the presence of both parties.

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