2023 (9) TMI 1151 - AT - Income Tax

Validity of TP Adjustment against non existent entity - scheme of amalgamation approved - DRP passed order in the name of non-existent company - HELD THAT - It is clear from the draft assessment order that the AO was known the fact of change of name of company after amalgamation, but still he has passed the order in the name of old company. The assessee informed the TPO regarding the change of name of assessee and there were series of events in which the assessee made the correspondence with the department in the name of new company. However, all the revenue authorities i.e., the AO, TPO and DRP have passed the order in the name of old company. We are of the opinion that the order passed by the revenue authorities in the name of non-existent company which was in the knowledge of the revenue authority does not survive. Decided against revenue.

Issues Involved:
1. Validity of order passed on a non-existing entity.
2. Transfer Pricing Adjustment.
3. Disallowance of entrance fees.
4. Disallowance u/s 36(1)(va) for employee's welfare fund.
5. Addition of duty drawback.
6. Disallowance u/s 40(a)(ia).
7. Addition of interest expense.
8. Rectification of mistakes u/s 154.

Summary:

1. Validity of Order Passed on a Non-Existing Entity:
The primary issue was whether the assessment order passed in the name of a non-existent entity, SKF Technologies India Private Limited (STIPL), was valid. The assessee argued that STIPL had merged with Lincoln Helios (India) Limited and was known as SKF Engineering and Lubrication India Pvt. Ltd. (SELIPL) from 1.4.2018. Despite multiple intimations to the authorities, the orders were passed in the name of the old company. The Tribunal held that the assessment order passed on a non-existent entity is void ab initio, relying on the Supreme Court judgment in PCIT vs Maruti Suzuki India Ltd [2019] 416 ITR 613 (SC) and other relevant case laws. The Tribunal quashed the assessment order, rendering all subsequent proceedings null and void.

2. Transfer Pricing Adjustment:
The assessee challenged the transfer pricing adjustment of INR 3,42,16,173/- proposed by the AO/TPO/DRP. The assessee contended that the authorities erred in rejecting the economic analysis and comparable companies without cogent reasons and arbitrarily selected additional companies. The Tribunal did not address this issue in detail as the primary legal ground was allowed.

3. Disallowance of Entrance Fees:
The assessee contested the disallowance of INR 3,04,628 treating entrance fees as personal expenses. This issue was not adjudicated as the primary legal ground was allowed.

4. Disallowance u/s 36(1)(va):
The assessee contested the disallowance of INR 32,50,605 for contributions to the Employee's Welfare Fund, arguing that payments were made before the due date of filing the return. This issue was not adjudicated as the primary legal ground was allowed.

5. Addition of Duty Drawback:
The assessee contested the addition of INR 1,45,81,900 as duty drawback, arguing that it had already offered INR 1,30,90,550 to tax, leading to double taxation. This issue was not adjudicated as the primary legal ground was allowed.

6. Disallowance u/s 40(a)(ia):
The assessee contested the disallowance of 30% of INR 3,42,65,580, arguing that tax was already deducted and paid. This issue was not adjudicated as the primary legal ground was allowed.

7. Addition of Interest Expense:
The assessee contested the addition of interest expense, arguing that accrued interest payable was already part of the interest expense debited to the Profit & Loss account. This issue was not adjudicated as the primary legal ground was allowed.

8. Rectification of Mistakes u/s 154:
The assessee claimed that the order contained mistakes rectifiable u/s 154. This issue was not adjudicated as the primary legal ground was allowed.

Conclusion:
The Tribunal quashed the assessment order passed on the non-existent entity, rendering all subsequent proceedings null and void. Other grounds on merits were left open.

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