Income Tax Appellate Tribunal - Delhi
Genpact Infrastructure (Kolkata) Pvt. ... vs Dcit, New Delhi on 27 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'I-2' NEW DELHI
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
&
SMT. BEENA A PILLAI, JUDICIAL MEMBER
ITA No.- 198/Del/2015
(Assessment Year: 2010-11)
Genpact Infrastructure (Kolkata) Deputy Commissioner of
Pvt. Ltd. Vs. Income Tax,
(Now merged with Genpact India) Circle 10(1), New Delhi
Delhi Information Technology
Park, Shastri Park, Delhi-110053.
PAN No: AACCG9769R
APPELLANT RESPONDENT
Assessee by : Sh. Vishal Kalra, Ms. Reema Malik (Advs.)
Revenue by : Sh. Sanjay Kumar Yadav (Sr. D/R)
Date of Hearing : 23.04.2018.
Date of Pronouncement: 27/04/2018.
ORDER
PER: P.M. JAGTAP, ACCOUNTANT MEMBER This appeal filed by the assessee is directed against the order of Ld. Deputy Commissioner of Income Tax, Circle 10(1) New Delhi (Assessing Officer) dated 28.11.2014 passed under section 143(3) read with Section 144C of the Income Tax Act, 1961, whereby he made an addition of Rs. 12,59,80,912/- to the total income of the assessee on account of transfer pricing adjustment.
2 ITA No. 198/Del/2015.Genpact Infrastructure (Kolkata) Pvt. Ltd.
2. The assessee in the present case is a company which is engaged in providing Business Processing Outsourcing (BPO) services including finance and accounting, collections, insurance, customer fulfillment, data modeling and analytics support, managed IT services, software solution and e-learning etc. The return of income for the year under consideration was filed by it on 28.9.2010 declaring a loss of Rs. 4,21,61,955/-. During the course of assessment proceeding, a reference was made by the AO to the TPO for determining the arms' length price of the international transactions entered into by the assessee company with its associate enterprises. The TPO vide its order dated 17.01.2014 passed u/s 92CA(3) accordingly determined the arm's length price of the international transactions of the assessee company with its AE and proposed transfer pricing adjustment of Rs. 13,31,45,973/-. In the draft order passed u/s 143(3) read with section 144C of the Act on 28.2.2014, the addition on account of transfer pricing adjustments as suggested by the TPO was made by the AO to the total income of the assessee. Against the said draft order, objections were filed by the assessee company before the Dispute Resolution Panel (DRP). The DRP vide an order dated 23.09.2014 passed u/s 144C (5) of the Act disposed off the said objections by giving some specific directions to the TPO. As per the said directions of the DRP, the transfer pricing adjustment was recomputed by the TPO at Rs. 12,59,80,912/- and accordingly in the final order passed u/s 143(3) read with section 144C of the Act on 28.11.2014, the AO made addition to the total income of the assessee to that extent on account of transfer pricing adjustment. Against the said order of the AO, the assessee company has filed an appeal before the Tribunal.
3 ITA No. 198/Del/2015.Genpact Infrastructure (Kolkata) Pvt. Ltd.
3. During the course of appellate proceedings before the Tribunal, the assessee has raised an additional ground challenging the validity of the order passed by the AO u/s 143(3) read with section 144C of the Act on the ground that the same is passed in the name of a non-existent company.
4. In support of the preliminary issue raised in the additional ground, the Ld. Counsel for the assessee submitted that the erstwhile Genpact Infrastructure (Kolkata) Pvt. Ltd. was amalgamated with Genpact India with effect from April 1, 2010 vide order of the Hon'ble Delhi High Court passed on November 19, 2010. He submitted that the information regarding he said amalgamation was duly given to the AO vide a letter dated January 24, 2011. But still the Assessing Officer passed the final order u/s 143(3) read with section 144C on 28.11.2014 in the name of M/s Genpact Infrastructure (Kolkata) Pvt. Ltd. which was not in existence as on 28.11.2014 having already been amalgamated with M/s Genpact India with effect from April 1, 2010 as per the order of the Hon'ble Delhi High Court passed on November 19, 2010. He contended that the order passed by AO under section 143(3) read with section 144C in the name of a non-existent entity thus is invalid and the same is liable to be cancelled. He contended that a similar preliminary issue was raised in the case of Genpact Infrastructure (Bhopal) Pvt. Ltd., a sister concern of the assessee in AY 2009-10 before the Tribunal by way of additional ground and after admitting the said additional ground, the Tribunal has decided the issue raised therein in favour of the assessee and quashed the assessment framed by the AO in the name of Genpact Infrastructure (Bhopal) Pvt. Ltd., as the said entity was not in existence on the date of the passing the order by the AO under section 143(3) read with section 4 ITA No. 198/Del/2015. Genpact Infrastructure (Kolkata) Pvt. Ltd.
144C on 16.1.2013. He also relied on the following judicial pronouncements in support of the assessee's case on this issue that the assessment made in the name of an amalgamating company after the date of amalgamation is bad in law.
1. CIT vs. Micra India (P) Ltd. 231 Taxman 809 (Delhi)
2. CIT vs. Dimension Apparels (P) Ltd. 370 ITR 288 (Delhi)
3. PCIT vs Maruti Suzuki 397 ITR 681 (Delhi)
5. The Ld. DR, on the other hand, contended that the order passed by the Ld. AO u/s 143(3) read with Section 144C in the name of an amalgamating company even after the date of amalgamation is valid as per the specific provisions contained in section 170(1) of the Act. He contended that as per the said provisions, the predecessor is liable to be assessed in respect of income up to date of succession and the successor is liable to be assessed only in respect of the income after the date of succession. He contended that the AO, therefore, was empowered to assess the predecessor being the amalgamating company in respect of income up to the date of succession. He contended that all the properties and liabilities of the amalgamating company have become the property and liability of the amalgamated company as a result of amalgamation and since the shareholders of not less than ¾ of the value of shares in the amalgamating company have also become shareholders of the amalgamated company, the provision of section 170(1) is squarely applicable. He contended that this specific provision however has not been taken into consideration in the various judicial pronouncements cited by the Ld. Counsel for the assessee in 5 ITA No. 198/Del/2015. Genpact Infrastructure (Kolkata) Pvt. Ltd.
support of the assessee's case and the issue has been decided in favour of the assessee by wrongly placing reliance on the provisions of the section 170(2). He contended that section 170(2) is applicable only when predecessor cannot be found and since in the case of amalgamation, predecessor can be found in the form of amalgamating company, the reliance on section 170(2) in the various judicial pronouncements while deciding this issue in favour of the assessee is clearly misplaced.
6. In rejoinder, the Ld. Counsel for the assessee submitted that the order of the Tribunal in the case of Genpact Infrastructure (Bhopal) Pvt. Ltd. deciding the similar issue in favour of the assessee for AY 2009-10 is passed by placing reliance on the various decisions of the Hon'ble jurisdictional High Court and therefore it cannot be said that the issue has been decided without considering the provision of section 170. Relying on the decision of the Hon'ble Supreme Court in the case of Saraswati Industrial Syndicate Ltd. vs CIT 186 ITR 278 (SC), he contended that when one company is absorbed into and blended with another by way of amalgamation, the amalgamating company loses its entity. He contended that the amalgamating company thus no longer remains in existence after amalgamation and since the same cannot be found, the provisions of section 170(2) are applicable whereby assessment after the date of amalgamation can validly be made only in the name of amalgamated company being a successor. He contended that this aspect has already been appreciated by the Hon'ble Delhi High Court at least in 3 cases viz Dimension Apparels (P) Pvt. Ltd. (Supra), Micra India (P) Ltd. (Supra), Maruti Suzuki (Supra) and after considering the provisions of sub section (1) and (2) of section 170, the 6 ITA No. 198/Del/2015. Genpact Infrastructure (Kolkata) Pvt. Ltd.
assessment made in the name of amalgamating company after the date of amalgamation have been held to be invalid being made in the name of the a non- existent entity.
7. We have considered the rival contentions and perused the material available on record. It is observed that a similar preliminary issue challenging the validity of order passed by the AO under section 143 (3) read with section 144C was raised by the assessee by way of an additional ground before the Tribunal in the case of Genpact Infrastructure (Bhopal) Pvt. Ltd., a sister concern of the assessee for AY 2009-10 and vide its order dated 25.01.2018 passed in ITA No. 2025/Del/2014, the Tribunal admitted the additional ground and also decided the issue raised in the additional ground in favour of the assessee by quashing the order passed by the AO on 16.01.2013 in the name of Genpact Infrastructure (Bhopal) Pvt. Ltd. as the said entity was not in existence on 16.01.2013 having already been amalgamated with Genpact India with effect from April 1, 2010.
8. At the time of hearing before the Tribunal, the Ld. D/R has not disputed the position that the facts involved in the present case similar to the facts involved in the case of Genpact Infrastructure (Bhopal) Pvt. Ltd. (Supra) decided by the Tribunal. He however has contended that the order passed by the AO under section 143(3) read with section 144C in the name of amalgamated company being predecessor is valid as per the specific provisions contained in section 170(1) and the decision in the case of Genpact Infrastructure (Bhopal) Pvt. Ltd. (Supra) as well as other judicial pronouncements cited by the Ld. 7 ITA No. 198/Del/2015. Genpact Infrastructure (Kolkata) Pvt. Ltd.
Counsel for the assessee in support of the assessee's case have failed to take into consideration section 170(1). As pointed out by the Ld. counsel for the assessee in this regard, the decision in the case of Genpact Infrastructure (Bhopal) Pvt. Ltd. (Supra) was rendered by the Tribunal by relying on the various judgments of the Hon'ble Delhi High Court on similar issue and in one of such decisions rendered in the case of Dimension Apparels Pvt. Ltd. (Supra), the provisions of section 170(1) and 170(2) were duly taken into consideration by the Hon'ble Delhi High Court. Like in the present case, it was contended on behalf of the Revenue in the said case by relying on section 170(1) that the assessment made in the name of amalgamated company was valid because the liabilities of the amalgamating company were taken over and accrued to the amalgamating company. While the position as regards the accrual of liabilities of the amalgamating company to the amalgamated company was found to be undisputed by the Hon'ble Delhi High court, it was held by their lordships that the text of section 170(2) makes it clear that the assessment must be made in the name of amalgamated company being a successor. Even in the case of Micra India (P) Ltd. (Supra), it was held by the Hon'ble Delhi High Court that in the case of amalgamation, the predecessor being the amalgamating company cannot be found and consequently the assessment after the date of amalgamation can validly be made only in the name of amalgamated company being a successor as per the provision of section 170(2).
9. In the case of Maruti Suzuki (Supra), the erstwhile company Maruti Suzuki Powertrain India Ltd. was amalgamated with effect from 01.04.2012 vide an order by the Hon'ble High Court on 29.1.2013. On 29.12.2015, the AO passed 8 ITA No. 198/Del/2015. Genpact Infrastructure (Kolkata) Pvt. Ltd.
the assessment order u/s 143(3) read with section 144C of the Act for AY 2011- 12 in the name of Maruti Suzuki Powertrain India Ltd. Since M/s Maruti Suzuki Powertain India Ltd. was not in existence on 29.12.2015 having already been amalgamated with effect from 01.04.2012, the order passed by the AO under section 143(3) read with section 144C was cancelled by the Tribunal as the same was passed in the name of the non-existent company. The decision of the Tribunal was challenged by the assessee in the appeal filed before the Hon'ble Delhi High Court and while admitted the same, the following question was framed by their lordships "Did ITAT misapply the provision of section 170(2) of the Income tax Act in the circumstances of the case while concluded that the assessment order was not tenable was having being amalgamated in the name of the non-existent company" ?
Hon'ble Delhi High Court finally answered the question framed as above in the negative i.e. in favour of the assessee and against the revenue after discussing the various decisions already rendered by the Court on a similar issue making the legal position evidently clear.
10. It is thus clear that the preliminary issue involved in this case relating to the validity of the assessment made in the name of the amalgamating company being a non-existent entity is squarely covered in favour of the assessee by the various decisions of the Hon'ble Delhi High Court discussed above and atleast there of such decisions are rendered after taking into consideration the provisions of section 170(1) and 170(2). We therefore find no merit in the contention raised by the Ld. D/R in support of the revenue's case by relying on 9 ITA No. 198/Del/2015. Genpact Infrastructure (Kolkata) Pvt. Ltd.
provision of section 170(1) and since the decision in the case of Genpact Infrastructure (Bhopal) Pvt. Ltd. (Supra) on a similar issue has been rendered by the Tribunal by relying on the said decisions of the Hon'ble jurisdictional High court, we respectfully follow the same and quash the assessment order passed by the AO u/s 143(3) read with section 144C by holding the same to be invalid for having made in the name of a non-existent company. Additional ground raised by the assessee in this appeal is accordingly allowed.
11. During the course of hearing, the Ld. Counsel for the assessee was asked to make his submissions on the latest decision of the Hon'ble Supreme Court in the case of Sky Light Hospitality LLP vs. ACIT (2018) 92 taxmann.com 93 wherein the decision of Hon'ble Delhi High Court treating the notice issued under section 148 in the name of erstwhile company despite the same ceasing to exist, to be valid by recourse to section 292B has been upheld by the Hon'ble Supreme Court. In this regard, he has invited our attention to the decision of the Hon'ble Delhi High Court reported in 90 taxmann.com 413 to point out that the facts involved in the said case are materially different from the facts involved in the present case. He has submitted that a notice under section 148 in the said case was issued by the AO after recording the reasons and as found by the Hon'ble Delhi High Court, conversion of erstwhile Pvt. Ltd. Company into a Limited Liability Partnership with effect from 13.05.2016 was noticed and mentioned in the tax evasion report, the reason to believe recorded by the Assessing Officer, the approval obtained from the Principal Commissioner and the order passed u/s 127 of the Act. It was also noted by the Hon'ble Delhi High Court that Permanent Account Number of the limited liability partnership was 10 ITA No. 198/Del/2015. Genpact Infrastructure (Kolkata) Pvt. Ltd.
also mentioned in some of these documents. He has submitted that keeping in view this substantial and affirmative material and evidence on record, the mistake in issuing the notice u/s 148 in the name of erstwhile company M/s Sky Light Hospitality Pvt. Ltd. was held to be an irregularly and procedural/technical lapse by the Hon'ble Delhi High Court which was curable u/s 292B. As further pointed out by him, the issue involved in the case of Sky Light Hospitality LLP (Supra) relating to validity of notice u/s 148 was also different than the issue involved in the present case relating to the validity of assessment made in the name of non-existent entity and this distinguishing aspect was taken note of by the Hon'ble Delhi High Court in the case of Sky Light LLP (Supra) when the decisions of the Court in the case of Spice Enfotainment Ltd. and Dimension Apparel (Supra) were cited by the assessee in support of his case. In this regard, it was observed by the Hon'ble Delhi High Court in para no. 18 and 20 of its judgment that these were not the cases wherein notice u/s 147/148 of the Act was declared to be void and invalid but the same were the cases wherein the assessment order passed in the name of and against a juristic person, which had ceased to exist was held to be void and illegal. The Hon'ble Delhi High Court accordingly held that the cases of Spice Infotainment Ltd. and Dimension Apparels (Supra) were distinguishable.
12. As a result of our decision rendered above on a preliminary issue cancelling the assessment made by the AO u/s 143(3) read with section 144C by holding the same to be invalid, other grounds raised by the assessee in this appeal challenging the addition made by the AO in the said assessment on account of transfer pricing adjustment have become infructuous or academic.
11 ITA No. 198/Del/2015.Genpact Infrastructure (Kolkata) Pvt. Ltd.
We therefore do not consider it necessary or expedient to adjudicate upon the same.
13. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 27/4/2018
Sd/- Sd/-
(BEENA A PILLAI) (P.M JAGTAP)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 27.04.2018
Pooja/-
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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ITA No. 198/Del/2015.
Genpact Infrastructure (Kolkata) Pvt. Ltd.