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TMI Blog2023 (8) TMI 1582X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has challenged transfer pricing adjustment as well as corporate additions in various grounds of appeal, which in sum and substance are; firstly, grounds pertaining to transfer pricing adjustment on account of import of goods including spares from Associated Enterprises. Secondly, disallowance of business promotion expenses; and lastly, levy of interest u/s. 234B and 234C. However, in both the years, assessee has taken a legal ground that wherein not only the draft assessment order, transfer pricing order and final assessment order have been passed in the case of a non-existing entity and therefore, the entire final assessment order is null and void. The relevant petition for admission of additional ground and the ground reads as under:- 2. In this regard this office has received the above referred letter dated 06.02.2023 requiring this office to comments on the following ground of the assessee for AY 2016-17 in their appeal against order u/s 143(3) rws 144C(13). Transfer pricing order, draft assessment order, directions of the Hon'ble DRP and final assessment order passed in the name of non-existent entity: 2. erred in passing the transfer pricing order, draft assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised to Rs. 12,30,15,930/- on 03/08/2017. Thereafter, the return filed by M/s. Covidien Healthcare India Pvt. Ltd. was selected for scrutiny assessment proceedings and notice u/s. 143(2) dated 29/08/2017 was issued by ACIT, Corporate Circle 1(2) Chennai in the name of M/s.Covidien Healthcare India Pvt. Ltd. In response, assessee immediately vide letter dated 21/09/2017 intimated that M/s. Covidien Healthcare India Pvt. Ltd. has now been merged with IMPL. Assessee informed the ld. AO about the merger vide letter dated 26/12/2017 filed in the name of M/s.Covidien Healthcare India Pvt. Ltd. Thereafter, again assessee filed another letter dated 11/01/2018 with the same AO at Chennai and copy of the said letter was also filed to the ACIT-10(1)(1), Mumbai for transfer of records in the name of India Medtronic Pvt. Ltd. as the case was transferred from Chennai to AO Mumbai because IMPL was assessed in Mumbai. Thereafter, a follow up letter was also filed on 14/02/2018 pursuant to the same, a transfer order u/s. 127 dated 14/06/2018 was received to the assessee on the same date. 4. Now post transfer of jurisdiction to Mumbai, a notice u/s. 143(2) dated 13/08/2018 was issued by ACIT Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aug-2017 2 Form INC-28 filed with the Registrar of Companies intimating about the merger 01-Sept-2017 3 Appellant informed AO (Assistant Commissioner of Income-tax Corporate Circle 1(2), Chennai) of merger 26-Dec-2017 4 Appellant informed AO (Assistant Commissioner of Income-tax (OSD), Corporate Range 1, Chennai) of merger 28-Dec-2017 5 Letter filed with the ACIT - Corporate Circle 1(2), -Chennai and a copy of the said letter has been filed to the ACIT- 10(1}(1), Mumbai for transfer of records 18-Jan-2018 6 Follow up letter filed with the ACIT -Corporate Circle 1(2), -Chennai and a copy of the said letter has been filed to the ACIT -10(1 )(1), Mumbai for transfer of records 14-Feb-2018 7 Transfer of jurisdiction from DCIT, CC -1(2), Chennai to ACIT-10(1)(1), Mumbai consequent to merger of Covidien Healthcare India Private Limited with India Medtronic Private Limited vide order u/s 127 14-June-2018 8 Notice under section 143(2) of the Act in the name of Covidien Healthcare India Private Limited issued by ACIT Circle 10(1)(1), Mumbai [pre-merger notice] 29-Aug-2017 9 Submission dated 21 September 2017 in the name of India Medtronic Private Limited {Successor to CHIPL) against notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 2019 against issue letter dated 5 December 2019 in the name of India Medtronic Private Limited (Successor to CHIPL) 5-Dec-2019 29 Draft assessment order passed in the name 'Covidien Healthcare India Private Limited' [Amalgamated with India Medtronic Private Limited] 12-Dec-2019 30 DRP objections filed in the name of India Medtronic Private Limited (successor to Covidien Healthcare India Private Limited) 10-Jan-2020 31 DRP directions passed in the name of 'Covidien Healthcare India Private Limited' [Amalgamated with India Medtronic Private Limited] 17-Mar-2021 32 Final assessment order passed in the name 'Covidien Healthcare India Private Limited' [Amalgamated with India Medtronic Private Limited] 26-May-2021 6. Thereafter, the ld. Counsel further pointed out that during the pendency of proceedings for A.Y.2016-17 and 2017-18 there have been various correspondences, payment of taxes etc for the earlier years of erstwhile CHIPL, the taxes were paid continuously in the name of IMPL for which he has again filed a separate chronology of events for the sake of ready reference it is reproduced hereunder:- 1 Regular Assessment tax paid in the name of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be a case where the department was not aware of the merger of erstwhile CHIPL with IMPL. Accordingly, in view of the judgment of Hon ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. 413 ITR 613, the whole assessment is bad in law. Further, he has also relied upon the decision of the ITAT Mumbai Bench in the case of Candor Renewable Energy Pvt. Ltd. in ITA No.2561 2560/Mum/2021 dated 19/10/2022 wherein the Tribunal has considered the decision of Maruti Suzuki India Ltd. supra and the decision of the Hon ble Supreme Court in the case of PCIT vs. Mahagun Realtors Pvt. Ltd. in SLP 4063/2020 and submitted that the Tribunal has categorically analysed the ratio and the principle of both the judgments and have held that once the intimation was given to the department and to the ld. AO about the merger, then the assessment order in the case of non-existing entity is bad in law. 8. On the other hand, ld. DR submitted that since assessee had filed the return of income in the name of M/s. Covidien Healthcare India Private Limited (PAN: AABCT6021C) and the assessment was done based on CASS selection in which return of assessee was selected for scrutiny and therefore, asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding given in the impugned order. As noted above, by the scheme of amalgamation of IMPL and CHIPL was approved by NCLT w.e.f. 26/08/2016. From the appointed date CHIPL had ceased to exist as it was merged with IMPL and therefore, any proceedings thereof should have been continue or any order which should have been passed was to be in the name of M/s. India Medtronic Pvt. Ltd. The way and manner in which various authorities of the department were intimated about this fact of merger has been elaborated and discussed in detail hereinabove and also sequence of events which has been incorporated above. From the sequence, it could be seen that, here right from various notices issued u/s. 143(2), 142(1), TPO s order, draft assessment order, ld. DRP order and the final assessment order have been passed in the case of M/s. Covidien Healthcare India Pvt. Ltd. despite being aware of the merger with IMPL and informed from time to time on several occasions. It has also been brought on record before us that this Tribunal while deciding the issue in assessee s own case for A.Y.2014-15 has passed the order dated 27/01/2023 wherein the Tribunal dealing with similar situation had quashed the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from 1-4-2012 under Court orders on 29.01.2013. d) MSIL intimated to the AO on 2.04.2013. e) Notice under section 143(2) dated 26.09.2013 was issued to SPIL, non-existent entity. f) Thereafter, MSIL participated in assessment proceedings of SPIL. g) The assessment order under section 143(3), read with section 144C (1) of the Act was passed in the name of SPIL (amalgamated with MSIL) . The assessee argued before the tax/ appellate authorities that an assessment order passed in the name of a non-existent entity was void ab initio, since after amalgamation, the amalgamating company ceases to exist. Tax Department was of the view that since name of both the entities were mentioned in the order, the assessment order cannot be declared as invalid. Before the Apex Court, the main contentions of the Revenue were as follows: (a) Names of both amalgamating and amalgamated company was mentioned in the assessment order; (b) Even otherwise, the mistake is curable u/s 292B (c) Assessment and subsequently appeal was represented by Amalgamated company and no prejudice is caused to the parties; (d) In Spice, the final order only referred to the name of non-existent entity without any refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (Delhi); affirmed by Hon'ble Apex Court vide Civil Appeal No. 3125 of 2015, CIT v. Micron Steels (P.) Ltd. 372 ITR 386 (Delhi), CIT v. Micra India (P) Ltd. 231 Taxman 809 (Delhi)]. i) Assessment framed in the case of a non-existent entity is non-est in the eyes of law [refer: Pr. CIT vs. BMA Capfin Ltd. [2018] 100 taxmann.com 329 (Delhi) (Revenue's SLP dismissed against the same in Pr. CIT vs. BMA Capfin Ltd. [2018] 100 taxmann.com 330/[2019] 260 Taxman 89 (SC)] The Apex Court after taking into consideration submissions of both sides held as follows: a) Under the approved scheme of amalgamation, the transferee assumed the liabilities of the transferor company, including tax liabilities; b) The consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist by relying on the judgment of Saraswati Industrial Syndicate Ltd vs. CIT (Supra). c) Upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act against whom assessment proceedings can be initiated or an order of assessment passed; d) Prior to the date on which the jurisdictional notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2007 by Mr. Amit Jain, MRPL's managing director, during statutory survey proceedings under Section 133A, unearthed discrepancies in the books of account, in relation to amounts of money in MRPL's account. The specific amount admitted was 5.072 crores, in the course of the statement recorded. vii. The warrant was in the name of MRPL. The directors of MRPL and MIPL made a combined statement under Section 132 of the Act, on 27.08.2008. viii. A total of Rs. 30 crores cash, which was seized- was surrendered in relation to MRPL and other transferor companies, as well as MIPL, on 27.08.2008 in the course of the search operation, when a statement of Mr. Amit Jain was recorded under Section 132 (4) of the Act. ix. Upon being issued with a notice to file returns, a return was filed in the name of MRPL on 28.05.2010. Before that, on two dates, i.e., 22/27.07.2010, letters were written on behalf of MRPL, intimating about the amalgamation, but this was for AY 2007-08 (for which separate proceedings had been initiated under Section 153A) and not for AY 2006-07. x. The return specifically suppressed - and did not disclose the amalgamation (with MIPL) - as the response to Query 27(b) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall. iii. The combined effect, therefore, of Section 394 (2) of the Companies Act, 1956, Section 2 (1A) and various other provisions of the Income Tax Act, is that despite amalgamation, the business, enterprise and undertaking of the transferee or amalgamated company- which ceases to exist, after amalgamation, is treated as a continuing one, and any benefits, by way of carry forward of losses (of the transferor company), depreciation, etc., are allowed to the transferee. Therefore, unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation, continues. iv. There is no doubt that MRPL amalgamated with MIPL had ceased to exist thereafter; this is an established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to contend that the notice issued in the name of the amalgamating company is void and illegal. The facts of present case, however, can be distinguished from the facts in Spice and Maruti Suzuki. v. Firstly, in both the relied upon cases, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore this court is on behalf of the director of MRPL. Furthermore, the assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special auditor's report, brings specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of MRPL (as the assessee) - but represented by the transferee, MIPL. All these clearly indicate that the order adopted a particular method of expressing the tax liability. The AO, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home Decor Pvt. Ltd.). viii. The mere choice of the AO in issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it. Right from the time it was issued, and at all stages of various proceedings, the parties concerned (i.e., MIPL) treated it to be in respect of the transferee company (MIPL) by virtue of the amalgamation order -and Section 394 (2). Furthermore, it would be anybody's guess, if any refund were due, as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er; this is an established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to contend that the notice issued in the name of the amalgamating company is void and illegal. The facts of present case, however, can be distinguished from the facts in Spice and Maruti Suzuki on the following bases. 15. Therefore, the Supreme Court merely distinguished the facts in Spice and Maruti, while continuing to agree with the fundamental principle that on amalgamation, the amalgamating entity ceases to exist. Thereafter, the Court in paras 34 onwards, held as under: a) No intimation was given to the AO for A.Y 2006-07 [refer para 34]; b) Return filed, pursuant to notice, suppressed the fact of amalgamation. The return was filed in the name of MRPL. Further in Business Reorganization' column it was mentioned not applicable [refer para 34, 40]. c) Name of both the companies were mentioned in the order [refer para 34]; d) Assessee before authorities held itself out to be as MRPL [refer para 35]; e) Substantial surrender in survey and search on behalf of MRPL [refer paras 37-38]; f) Facts of present case distinctive [refer para 40]; g) The fact of amalgama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled on 28.05.2010 (post amalgamation) pursuant to notice under section 153A was filed in the name of MRPL and the fact of business reorganization was mentioned as 'not applicable in the return form. c) In relied upon cases, the amalgamated companies participated in the assessment proceedings before the tax department in their own capacity, due to which the Apex Court affirmed that participation of amalgamated company shall not be regarded as estoppel against law. In the present facts, the participation in the assessment proceedings was by MRPL which held itself as MRPL. d) The relied upon judgment of Saraswati Syndicate (Supra) was decided in relation to assessment issues when the amalgamation was not separately defined under the Act. Specific definition of 'amalgamation has been incorporated in section 2(1 A) of the Act by way of amendment in 1967. 17. Other relevant observations made in the judgment while expressing the aforesaid opinion and holding that Maruti/ Spice cannot (de-hors facts) be blindly applied in all cases, pointed out following points: a) It has been observed that amalgamation is unlike winding up of a corporate entity. In the case of amalgamation, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act) but would depend on the terms of the amalgamation and the facts of each case. 18. The Apex Court with the aforesaid observations, quashed the order of the High Court which held that the assessment order passed in the name of non-existent entity is invalid, and restored the revenue's appeal along with assessee's cross objections to the file of the Hon ble Tribunal to decide the issues on merits other than nullity of assessment order. 19. The aforesaid judgment of Hon ble Supreme Court in the case of Mahagun Realtors Pvt. Ltd. (supra) in our humble opinion, nowhere disagrees with the principles laid down by the Hon ble Apex Court in the case of Maruti Suzuki India Ltd. (supra) and Spice Entertainment Ltd. (supra) of Hon ble Delhi High Court, for the reason that:- Firstly, the judgment in Mahagun nowhere disagrees with the principle in Maruti and Spice. In fact, in para 33, the Court categorically held that there is no doubt that MRPL amalgamated with MIPL and ceased to exist thereafter which is an established fact and not in contention. Further the Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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