Citation Codes

Equivalent Citations

citation codes

Case Number

ITA 2468/DEL/2015

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Acts

u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter referred to as the Act). ITA
Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. ITA
Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963,
section 391/394 of the Companies Act, 1956,
"Section 170(2) of the Income-tax Act, 1961,
provisions of section 292-B.
Indian Companies Act
INCOME TAX ACT 1961

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Smart Summary

Tribunal Opinion Summary — Akzo Nobel India Ltd. (ITA Nos. 2073/Del/2014 & 2468/Del/2015)

Factual and Procedural Background

These consolidated appeals arise from separate assessment orders dated 31.01.2014 and 23.02.2015 passed under section 143(3) read with section 144C of the Income Tax Act, 1961 for assessment years 2009-10 and 2010-11 respectively. The assessee, Akzo Nobel India Ltd., filed appeals challenging several adjustments and additions made by the Assessing Officer (AO) following directions of the Dispute Resolution Panel (DRP) and work of the Transfer Pricing Officer (TPO). The appeals were heard together because common issues were involved.

The assessee also sought admission of an additional legal ground under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963, contending that the assessment and related orders were passed on a non-existent entity — the erstwhile Akzo Nobel Car Refinishes India Pvt. Ltd. — which had amalgamated with Akzo Nobel India Limited effective 01.04.2011 (sanctioned by the Karnataka High Court on 18.04.2012). The assessee asserted it had informed the AO of the amalgamation by letter dated 11.06.2012 (received 19.06.2012). The Tribunal admitted this additional ground and considered whether the assessment was void ab initio because it was framed in the name of an entity that had ceased to exist.

Legal Issues Presented

Whether the assessment orders passed pursuant to directions of the DRP (and the TPO/AO) are void ab initio because they were framed in the name of the amalgamating company Akzo Nobel Car Refinishes India Pvt. Ltd., which had ceased to exist following amalgamation with Akzo Nobel India Limited effective 01.04.2011.
Whether the TPO/DRP/AO correctly made transfer pricing adjustments for the contract R&D services segment (alleged adjustments amounting to INR 56,223,008), including issues of comparable selection, year/data selection, comparability analysis, risk adjustment and application of the +/-5% range under the proviso to section 92C(2).
Whether the AO/DRP/TPO correctly treated payment of administrative services (INR 41,942,829) as not constituting an arm's length international transaction and whether the correct transfer pricing method was applied.
Whether interest on overdue receivables (INR 11,56,859) was rightly added and whether the rate/method of calculating such interest was justified.
Whether interest under section 234D was levied in error and interest under section 244A was wrongly withdrawn.
Whether penalty proceedings under sections 271(1)(c), 271AA and 271BA were rightly initiated.

Arguments of the Parties

Appellant's Arguments

The DRP/AO/TPO erred in confirming transfer pricing adjustments for the contract R&D services segment (disputing methodology, selection of comparables, use of current year data, rejecting multi-year averages, and ignoring FAR analysis and limited-risk nature of the services).
The DRP/TPO/AO erred in treating payments for administrative services to Associated Enterprises as having no economic value, rejecting the Transactional Net Margin Method and applying CUP instead, and disregarding documentary evidence supporting arm's length nature and commercial benefit.
The AO/TPO erred in levying interest on overdue receivables by applying an arbitrary interest rate (SBI lending rate plus 150 basis points) and not appreciating commercial realities of receivables/payables in ordinary course of business.
The AO erred in levying interest under section 234D and in withdrawing interest under section 244A.
The AO erred in initiating penalty proceedings under sections 271(1)(c), 271AA and 271BA.
Additional ground (sought under Rule 11): The assessment orders and related orders were issued on a non-existent entity (Akzo Nobel Car Refinishes India Pvt. Ltd.) after its amalgamation with Akzo Nobel India Limited w.e.f. 01.04.2011; the assessments are therefore void ab initio. The assessee relied on prior judicial decisions to support admission and merits of this legal ground.

Respondent's (Revenue) Position

The ld. CIT-DR opposed admission of the additional ground but could not controvert the factual contention that the assessee had informed the AO of the amalgamation.
The ld. CIT-DR supported the orders of the authorities below on the substantive transfer pricing and other additions, but the opinion records that the Revenue could not successfully rebut the assessee's contention regarding amalgamation and the framing of assessments in the name of a non-existent entity.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Spice Entertainment Ltd. v. Commissioner of Service Tax (ITA Nos. 475 & 476 of 2011) (Del. HC)	The opinion cites this decision for the proposition that an assessment framed in the name of a non-existent (amalgamating) company is void and that such a defect is jurisdictional, not merely procedural.	The Tribunal relied on this decision (and subsequent affirmance) to support the conclusion that assessment framed on an entity that had ceased to exist is void ab initio and cannot be cured by participation or by invoking procedural provisions.
CIT, New Delhi v. Spice Entertainment Ltd. (Civil Appeal No. 285/2014) — Supreme Court order dated 2.11.2017	The opinion cites the Supreme Court's order affirming the High Court's decision; used in context of admitting the additional ground and supporting the legal position that assessments against non-existent entities are void.	The Tribunal referenced this Supreme Court order as part of the legal backdrop justifying admission of the additional ground and quashing of assessments framed on a non-existent entity.
Akzo Nobel Chemicals (India) Ltd. (merged with Akzo Nobel India Ltd.) v. DCIT (ITA No. 1225/PUN/2015)	The opinion lists this case among authorities relied on by the assessee; the provided text does not set out a specific rule or principle extracted from it.	The opinion records the case as cited by the assessee; the provided opinion does not expressly describe how this case was applied in the Tribunal's reasoning beyond being listed as supporting authority.
CIT(C)-II v. Micra India Pvt. Ltd. (ITA Nos. 441, 444, 445, 446, 452, 461 of 2013)	The opinion cites this decision; the provided text does not elaborate a discrete rule taken from it within this opinion.	Listed among authorities relied upon; the Tribunal does not in the provided text detail a specific application of this case beyond its citation.
DCIT v. Transcend MT Services Pvt. Ltd. (ITA No. 2697/Del/2014)	The opinion cites this decision; the provided text does not set out a particular principle taken from it.	The case is recorded among the precedents cited by the assessee; the Tribunal's opinion does not explicitly summarize its application beyond listing it.
Genpact Infrastructure (Bhopal) Pvt. Ltd. (now merged with Genpact India) v. DCIT (ITA No. 2025/Del/2014) — Order dated 09.02.2018	The Tribunal's earlier order (same Bench) held that where the amalgamating company had ceased to exist, assessments/orders passed in the name of that non-existent entity were void; factual history of notice and intimation to AO was discussed.	The Tribunal expressly followed the findings and reasoning in this earlier Genpact order and applied the same approach here to hold the assessment framed on the non-existent Akzo Nobel Car Refinishes India Pvt. Ltd. void ab initio and quash it.
Shell India Markets Pvt. Ltd. v. ACIT (ITA No. 1055/Bang/2011)	The opinion records the case among those cited; the provided text does not state a specific principle taken from it in the present opinion.	Listed as cited authority; the Tribunal does not in the provided text elaborate its application.
CIT-III v. Dimension Apparels (P.) Ltd. (2015) 370 ITR 288 (Del.)	The opinion cites this High Court authority for legal propositions related to assessment procedure on amalgamation; text refers to supporting legal position that assessment on non-existent entity is not a curable procedural defect.	The Tribunal relied on the legal position exemplified by this decision (among others) to support quashing of the assessment framed on a non-existent amalgamating entity.
Maruti Suzuki India Ltd. v. DCIT, Circle-16(1), New Delhi (2016) 72 Taxmann.com 164 (Del. ITAT)	The opinion cites this ITAT decision (authored by the AM) addressing assessment framed in name of an entity that had ceased to exist post-amalgamation.	The Tribunal referred to and followed the analysis in this decision as persuasive authority for quashing assessments framed in the name of non-existent entities.
Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki Private Ltd. ((2017) 85 Taxmann.com 330) — Jurisdictional High Court order dated 4.9.2017	The opinion records that this High Court upheld the ITAT's approach that assessments framed in the name of an entity that had ceased to exist are not curable by section 292B and such assessments are void.	The Tribunal noted that the High Court's decision affirmed the ITAT approach and treated it as supporting authority for quashing the assessment in the present case.
National Thermal Power Co. Ltd. v. CIT (229 ITR 383)	The opinion refers to this Supreme Court decision in the context of admitting an additional ground of appeal under Rule 11; used to justify admission as the additional ground was legal and did not require fresh factual inquiry.	The Tribunal explicitly relied on the ratio laid down in this decision (as indicating permissible exercise of discretion) to admit the assessee's additional legal ground under Rule 11.
Jute Corporation of India v. CIT (187 ITR 688)	The opinion cites this precedent along with National Thermal Power to support the exercise of discretion under Rule 11; the provided text does not set out the principle in detail.	The Tribunal cited this authority as part of the jurisprudential basis for admitting the additional ground; the opinion does not elaborate further on any distinct application.
CIT, Central-1 v. Shaw Wallace Distilleries Ltd.	The opinion refers to this decision but notes that facts there were different (assessee did not inform department about amalgamation), indicating it was of no assistance to the Revenue in the present factual matrix.	The Tribunal distinguished that case on facts and treated it as not helpful to the Revenue's position here.

Court's Reasoning and Analysis

The Tribunal's analysis proceeded around two central strands: (A) admissibility and substance of the additional legal ground concerning assessment framed on a non-existent entity; and (B) the application of clear precedents on assessments after amalgamation. The Tribunal's reasoning, based on the material in the record, is summarized step-by-step below as set out in the opinion.

The Tribunal noted that the assessee had filed an application under Rule 11 to admit an additional ground alleging that the AO/DRP/TPO framed orders in the name of the erstwhile company (Akzo Nobel Car Refinishes India Pvt. Ltd.) which had amalgamated with Akzo Nobel India Ltd. effective 01.04.2011 and therefore did not exist at the time of passing the impugned orders.
It observed that the assessee had brought the amalgamation to the AO's notice by a letter dated 11.06.2012 (received 19.06.2012), and that despite this intimation the TPO, AO and DRP passed respective orders in the name of the erstwhile entity (TPO order dated 04.01.2013; draft assessment dated 12.03.2013; DRP directions dated 24.12.2013; final assessment dated 31.01.2014), without transposing the successor entity's name.
The Tribunal accepted that the additional ground was purely legal and did not require fresh investigation into facts; hence it admitted the ground under Rule 11, citing the ratio in National Thermal Power Co. Ltd. v. CIT and Jute Corporation v. CIT to justify the exercise of discretion to admit such legal points.
The Tribunal examined prior decisions of its own Bench and other fora (notably the Genpact Infrastructure order of 09.02.2018, the Maruti Suzuki line of authority, and Spice Infotainment) which had held that where an assessment is framed in the name of a company that has ceased to exist as a consequence of amalgamation, such an assessment is void ab initio and is not merely a procedural irregularity curable under section 292B.
Relying on these precedents and the material facts showing that the assessee had informed the department of amalgamation before the orders were passed, the Tribunal concluded that the AO framed the assessment on an entity that was not in existence at the time of the orders; this jurisdictional defect rendered the assessments void ab initio.
The Tribunal therefore quashed the assessment orders. Given this outcome, it declined to adjudicate further on the other substantive issues and additions (transfer pricing adjustments, administrative fee treatment, interest calculations, penalties), noting that since the assessment itself was quashed no findings on those issues were necessary in this decision.
For the second appeal (ITA No. 2468/Del/2015 for AY 2010-11), because the facts were identical, the Tribunal applied the same reasoning "mutatis mutandis" and reached the same result.

Holding and Implications

Holding: The Tribunal allowed the appeals and quashed the assessment orders framed by the AO in the name of the erstwhile Akzo Nobel Car Refinishes India Pvt. Ltd.

APPEALS ALLOWED; ASSESSMENTS QUASHED (void ab initio)

Implications:

The immediate legal consequence is that the assessments for the assessment years in question (2009-10 and 2010-11) that had been framed in the name of the non-existent amalgamating company are quashed.
Because the Tribunal quashed the assessments on jurisdictional grounds, it gave no separate findings on the other substantive grounds raised (transfer pricing adjustments, administrative fee treatment, interest, and penalties); those matters were therefore not decided on merits in this order.
The Tribunal expressly followed earlier precedents and its own prior order (Genpact) and treated the present decision as an application of existing law on the point that assessments in the name of companies that have ceased to exist post-amalgamation are void ab initio; the opinion does not purport to create a new legal principle beyond applying settled authorities.

Order pronounced in open Court on 10/07/2018; Tribunal Members: Suchitra Kamble (Judicial Member) and N. K. Saini (Accountant Member).

Availability of Information

This summary is compiled exclusively from the supplied Tribunal opinion. Where the supplied opinion cited cases without setting out the detailed principle relied upon, this summary records the citation and notes the opinion's use or lack of further elaboration as reflected in the supplied text.

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Akzo Nobel India Ltd., Gurgaon v. DCIT, New Delhi

Per N. K. Saini, AM: These two appeals are filed by the assessee against the separate order dated 31.01.2014 and 23.02.2015 for the assessment years 2009-10 and 2010-11 respectively passed by the AO u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter referred to as the Act). ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd.

2. Since, the common issues are involved in these appeals which were heard together, so, these are being disposed off by this consolidated order for the sake of convenience and brevity.

3. At the first instance, we will deal with the appeal in ITA No. 2073/Del/2014 for the assessment year 2009-10. Following grounds have been raised in this appeal:

1. That the Assessment Order passed in pursuance to the directions issued by the Learned Dispute Resolution Panel ('DRP') is a vitiated order as the Ld. DRP has erred both on facts and in law, in not considering the submissions made by the Appellant and in confirming the addition made by the Ld. Assessing Officer ('AO')/ Ld. Transfer Pricing Officer ('TPO') to the Appellant's income.

2. That on the facts and circumstances of the case and in law, the Ld. AO [following the directions of Learned Dispute Resolution Panel ("Ld. DRP")] erred in assessing the returned loss of the appellant of Rs.49,664,891 at the income of Rs. 65,58,117.

3. The Ld. Transfer Pricing officer (TPO)/ Ld.DRP erred on facts and circumstances of the case and in law by confirming an Transfer Pricing adjustment amounting to INR 56,223,008 holding that the international transaction pertaining to provision of contract research and development services ('R&D segment') do not satisfy the arm's length principle envisaged under the Act and in doing so have grossly erred in: 3.1 not appreciating that the Appellant had prepared the Transfer Pricing documentation bona fide and in good faith in compliance with the provisions of Section 92D of the Act read with Rule 10D of the Income Tax Rules, 1962 ('Rules') and selected uncontrolled comparable companies based on a detailed Functional, Asset and Risk ('FAR') analysis, following a methodical and consistent benchmarking process in respect of contract research and development services. 3.2 rejecting the arm's length margin computed by the Appellant for contract research and development services segment using multiple year / average data and instead of using current year data for comparable companies, i.e., data for FY 2008-09, ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. despite the fact that the same was not available with the Appellant at the time of preparing its transfer pricing documentation. 3.3 ignoring the comparability analysis undertaken by the Appellant for its contract research and development services and thereby performing his own comparability analysis in making adjustment to the transfer price of the Appellant. 3.4 ignoring the limited risk nature of the contract research and development services provided by the Appellant and in not providing an appropriate adjustment towards the risk differential. 3.5 denying the benefit of (+/-) 5% range mentioned in the proviso to Section 92C(2) of the Act in determination of the arms length price.

4. The Ld. Transfer Pricing officer (TPO)/ Ld.DRP erred in considering the payment of Rs. 41,942,829 by the Appellant towards the administrative services received from the Associated Enterprises("AEs") to be 'Nil, and in doing so grossly erred in law and in facts for the following reasons: 4.1 applying the Comparable Uncontrolled Price method and rejecting the application of Transactional Net Margin Method as most appropriate method for determination of arm's length price in case of payment of administration fee. 4.2 drawing conclusion as regards to no economic value was derived and that no tangible and substantial commercial benefit was derived out of services for which the admin fee was paid. 4.3 disregarding the collective evidences provided in justification of the arms length nature of international transactions pertaining to the payment of administration fee. 4.4 the support services are in the nature of stewardship as it result into benefit to the AEs and such coordination actuary is required to be carried out by the parent companies to improve its global presence and global profit. ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd.

5. The Ld. AO/ Ld. DRP erred in enhancing the income of the Appellant on account of interest on overdue receivables by Rs. 11,56,859 without stating any cogent reasons and basis for interest calculation. The Ld TPO grossly erred in charging interest to the receivables which were outstanding in ordinary course of business and has been collected in a reasonable period and in doing so grossly erred in law and in facts for the following reasons: 5.1 applying an arbitrary interest rate of 14.25 percent (lending rate of SBI plus 150 basis points) for calculating interest on outstanding receivables. 5.2 not considering the fact that the amount outstanding in the name of AEs represents the normal course of business activity and looking into the commercial expediency of the business, this situation prevails for both receipts and payments to/from the AEs.

6. That the Ld. AO has grossly erred in law in levying interest under section 234D of the Act and also withdrawing interest under section 244A of the Act.

7. On the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 271(1)(c), 271AA and 271BA of the Act. That the above grounds of appeal are independent and without prejudice to each other. That the appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.

4. The assessee also moved an application dated 05.04.2018 under Rule

11 of the Income Tax (Appellate Tribunal) Rules, 1963 for admission of the additional ground by stating as under: Re: Request for admission of additional ground of appeal under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. The Appellant requests to allow raising of the following ground of appeal in addition to those filed for adjudication before the Hon'ble Income Tax Appellate Tribunal ("Hon'ble Bench"): Ground No. 8

8. That on the facts and circumstances of the case and in taw, the orders passed by the Assessing Officer ("AO") / Dispute Resolution Panel ("DRP") / Transfer Pricing Officer ("TPO") are bad in law and void ab initio as the same have been passed on a non-existent entity, namely Akzo Nobel Car Refinishes India Private Limited. The brief facts giving rise to the aforesaid ground of appeal are stated hereunder: The Appellant was incorporated on December 5, 1997 as a wholly owned subsidiary of Akzo Nobel Coatings International BV, Netherlands. The Appellant sells high quality coatings for the car refinish market. It is also engaged in selling ancillary products used with the coatings such as hardeners, additives, thinners, color mixing machines, etc. In addition, the Appellant also undertakes contract research and development for Akzo Group. It is submitted that the erstwhile Akzo Nobel Car Refinishes India Private Limited amalgamated with Akzo Nobel India Limited with effect from April 01, 2011 vide order of the Hon'ble Karnataka High Court dated April 18, 2012 (Copy of the order enclosed as Annexure 1). Further, the AO was informed about the scheme of amalgamation vide letter dated June 11, 2012 (Copy enclosed as Annexure 2). However, the lower authorities namely the AO / DRP / TPO, have framed / passed orders on the erstwhile entity i.e. Akzo Nobel Car Refinishes India Private Limited. The orders, thus, passed by the lower authorities are bad in law and void ab initio as the same have been passed on a non-existent entity. Further, it is respectfully submitted that the issue involved in the said additional ground of appeal also stands covered in favor of the Appellant by the jurisdictional High Court's decision in the case of Spice Entertainment Limited vs Commissioner of Service Tax (ITA 475, 476 of 2011) (Delhi), which has now been affirmed by ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. the Hon'ble Supreme Court vide order dated November 2, 2017 in CA No. 285 of 2014. Reliance is also placed upon the following judicial precedents: Akzo Nobel Chemicals (India) Ltd. (merged with Akzo Nobel India Limited) Vs. The Dy. Commissioner of Income Tax [ITA No.l225/PUN/2015] - Hon'ble Pune ITAT CIT(C)-II Vs. Micra India Pvt. Ltd. [ITA 441, 444, 445, 446, 452, 461 of 2013] -Hon'ble Delhi High Court DCIT Vs. Transcend MT Services Pvt. Ltd. [ITA No. 2697/Del/2014] - Hon'ble Delhi ITAT Genpact Infrastructure (Bhopal) Pvt. Ltd., (now merged with Genpact India) Vs. DCIT [ITA No. 2025/Del/ 2014] Hon'ble Delhi ITAT Shell India Markets Private Limited Vs. ACIT [ITA NO. 1055/BANG/2011] - Hon'ble Mumbai ITAT In light of the above settled legal position, the assessment completed on the erstwhile entity which had ceased to exist pursuant to the scheme of amalgamation, is a jurisdictional defect which is beyond cure under the Income-tax Act, 1961, thus making the orders of the lower authorities, void ab initio. It is further submitted that the aforesaid additional ground of appeal is purely legal in nature and does not involve any fresh investigation into facts of the case. The Appellant by way of this application, craves leave of the Hon'ble Bench to raise the aforesaid additional ground. In view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT: 229 ITR 383 as also the decision in the case of Jute Corporation of India vs. CIT: 187 ITR

688 and the discretion vested with your Honours under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, it is prayed that the aforesaid additional ground of appeal may kindly be admitted and adjudicated on merits. The Appellant trusts that its request shall be acceded to. ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd.

5. During the course of hearing, the ld. Counsel for the assessee reiterated the contents of the aforesaid application and requested for admission of the additional ground.

6. In his rival submissions, the ld. CIT DR opposed the admission of the additional ground but could not controvert the aforesaid contention of the ld. Counsel for the assessee.

7. After considering the submissions of both the parties, it is noticed that the assessee has raised legal ground which does not involve any fresh investigation into the facts of the case. Therefore, the same is admitted by keeping in view the ratio laid down by the Honble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT reported at 229 ITR 383 (supra).

8. During the course of hearing, the ld. Counsel for the assessee at the very outset stated that the assessment in this case, has been framed by the AO on the erstwhile amalgamating company i.e. M/s Akzo Nobel Car Refinishes India Pvt. Ltd. which is not in existence. Therefore, the assessment framed is void ab initio. The ld. Counsel for the assessee furnished the sequence of events as under: Points Particulars Remarks Amalgamation effective from: April 1, 2011 Facts of merger brought to notice of AO Yes (vide letters dated June 11, 2012, filed before AO's office on June 19, 2012) Attached as Annexure 2 along with the additional ground of appeal ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. Date of passing draft assessment order March 12, 2013 Passed in the name of erstwhile entity, i.e. Akzo Nobel Car Refinishes India Pvt. Ltd., without any mention of the transferee entity's name, i.e. Akzo Nobel India Limited. (refer pages 121 of appeal set) Date of transfer pricing order January 4, 2013 Passed in the name of erstwhile entity, i.e. Akzo Nobel Car Refinishes India Pvt. Ltd., without any mention of the transferee entity's name, i.e. Akzo Nobel India Limited. (refer page 124 of the appeal set) Date of DRP directions December 24, 2013 Passed in the name of erstwhile entity, i.e. Akzo Nobel Car Refinishes India Pvt. Ltd., without any mention of the transferee entity's name, i.e. Akzo Nobel India Limited. (refer page 11 of the appeal set) Date of final assessment order January 31, 2014 Passed in the name of erstwhile entity, i.e. Akzo Nobel Car Refinishes India Pvt. Ltd., without any mention of the transferee entity's name, i.e. Akzo Nobel India Limited. (refer page 1 of appeal set)

9. The reliance was placed on the following case laws: Spice Entertainment Ltd. Vs Commissioner of Service Tax in ITA Nos. 475 & 476/2011 order dated03.08.2011 (Del. HC) CIT, New Delhi Vs M/s Spice Entertainment Ltd. in Civil Appeal No. 285/2014 (SC) Akzo Nobel Chemicals (India) ltd. (merged with Akzo Nobel India Ltd.) Vs DCIT in ITA No. 1225/Pun/2015 order dated 09.02.2018 CIT(C)-II Vs Micra India Pvt. Ltd. in ITA 441, 444, 445, 446, 452 & 461/2013 order dated 22.01.2015 DCIT Vs Transcend MT Services Pvt. Ltd. in ITA No. 2697/Del/2014 order dated 30.11.2017 Genpact Infrastructure (Bhopal) Pvt. Ltd. (now merged with Genpact India) Vs DCIT in ITA No. 2025/Del/2014 order dated 09.02.2018 Shell India Markets Pvt. Ltd. Vs ACIT in ITA No. 1055/Bang/2011 order dated 20.12.2017 CIT-III Vs Dimension Apparels (P.) Ltd. (2015) 370 ITR 288 (Del.) ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. Maruti Suzuki India Ltd. Vs DCIT, Circle-16(1), New Delhi (2016) 72 Taxmann.com 164 (Del.) Pr. CIT-6, New Delhi Vs Maruti Suzuki India Ltd. (2017) 85 Taxmann.com 330 (Del.)

10. In his rival submissions, the ld. CIT DR although supported the orders of the authorities below but could not controvert the aforesaid contention of the ld. Counsel for the assessee.

11. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the erstwhile company M/s Akzo Noble Car refinishes India Pvt. Ltd. in whose hands, the assessment was framed by the AO, amalgamated w.e.f. 01.04.2011 with M/s Akzo Nobel India Ltd. and this fact was brought to the knowledge of the AO by the assessee vide letter dated 11.06.2012 which was received in his office on 19.06.2012, copy of the same is placed on record as Annexure-2 annexed to the assessees compilation. It is also noticed that the TPO passed the order dated 04.01.2013 on the erstwhile Akzo Nobel Car Refinishes India Pvt. Ltd. but ignored the aforesaid intimation furnished by the assessee before the AO on June 19, 2012. The AO passed the draft assessment order dated 12.03.2013 and the ld. DRP also issued the directions vide order dated 24.12.2013, thereafter, the AO framed the final assessment order dated 31.01.2014 in the name of erstwhile entity i.e. Akzo Nobel Car Refinishes India Ltd. without any mention of the transferee entity name i.e. Akzo Noble India Ltd. From the aforesaid narrated facts, it is clear that the assessment has been ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. framed by the AO on an entity which was not in existence after the order dated 18.04.2012 passed by the Honble High Court of Karnataka at Bangalore, copy of which is placed at page nos. 2 to

37 of the assessees compilation.

12. It is noticed that an identical issue having similar facts has been decided by this bench of the Tribunal wherein one of us (Accountant Member is the author) in ITA No. 2025/Del/2014 for the assessment year 2009-10 in the case of M/s Genpact Infrastructure (Bhopal) Pvt. Ltd. (now merged with Genpact India) Vs DCIT, Circle-12(1), New Delhi (supra) wherein the relevant findings have been given in paras 8 to 14 of the order dated 09.02.2018 which read as under:

8. We have considered the submissions of both the parties and perused the material avai lable on the record. In the present case, it is an admitted fact that the assessee M/s Genpact Infrastructure (Bhopal) Pvt. Ltd. amalgamated with M/s Genpact India in pursuant to the order dated 19.11.2010 w.e.f. 01.04.2010 of the Honble Delhi High Court and this fact was brought to the notice of the AO (ACIT, Circle-1, Jaipur) vide letter dated 24.01.2011 which was received in the office of Additional Commissioner of Income Tax, Range-12, New Delhi on 03.02.2011. In the said letter it has been mentioned as under: Genpact Infrastructure (Bhopal) Private Limited was an Indian company engaged in providing Information Technology (IT") / IT Enabled Services (ITES), which had changed its registered office Co Delhi Information Technology Park, Shastri Park, New Delhi. It has been assessed to income-tax with your office vide PAN AACCG6569R. ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. Genpact India is another Indian company, engaged in rendering ITES. It maintains its registered office at Delhi Information Technology Park, Shastri Park, New Delhi. Genpact India is presently assessed to income-tax with Circle I2(1), New Delhi vide PAN AAACG9163H. Pursuant to a scheme of amalgamation under section 391/394 of the Companies Act, 1956, as sanctioned by the Hon'ble Delhi High Court vide order dated November 19, 2010. Genpact Bhopal has been amalgamated with Genpact India. Consequently, Genpact Bhopal has ceased to exist as separate legal entity and all its assets and liabilities along with all rights, obligations, licenses, registrat ions etc. stands transferred to Genpact India w.e.f. April 1, 2010 being, the appointed date under the Scheme of Amalgamation. A copy of the order passed by the Honble Delhi High Court and the acknowledgment of f ifing, the same with the office of Registrar of Companies on December 31, 2010 is collectively enclosed as Annexure A for your records. We request your office to take the above record. It has further been mentioned as under: Further, in view of the aforesaid, we hereby surrender the PAN AACCG6569R issued to Genpact Bhopal and request your office to transfer all the files/records pertaining to Genpact Bhopal maintained by your office, to Circle 12(1) , New Delhi and consequently, enable the office of Circle 12(1), New Delhi to issue all pending refunds due to Genpact Bhopal to Genpact India, it being the amalgamated company. We believe that our above request will be acceded ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd.

9. From the aforesaid letter, it is crystal clear that information was received by the AO on 03.02.2011 relating to the amalgamation of the assessee with M/s Genpact India and a reference was made by the AO u/s 92CA(1) of the Act to the TPO who vide letter dated 17.02.2012 asked the assessee to submit the document maintained in terms of Section 92D of the Act. The TPO passed the order u/s 92CA(3) of the Act on 29.01.2013. Thereafter, the AO passed the draf t assessment order dated 12.03.2013 and the assessee raised the objections before the ld. DRP who issued the direction to the TPO/AO vide order dated 26.12.2013 and the TPO on the directions of the ld. DRP passed the order giving effect of the direction of the DRP-1 u/s 24(5) of the Act on 21.01.2014. All the aforesaid orders were passed in the name of erstwhile entity i.e. M/s Genpact Infrastructure (Bhopal) Pvt. Ltd. without any mentioning of the transferee name i.e. M/s Genpact India. Therefore, it is crystal clear from the aforesaid narrated facts that the entity M/s Genpact Infrastructure (Bhopal) Pvt. Ltd. which amalgamated with M/s Genpact India, was not in existence when the TPO/AO/DRP passed their respective orders.

10. On a similar issue, the ITAT Delhi Bench I-1, Ne w Delhi having the same combination passed a detailed order authored by the AM in the case of M/s Maruti Suzuki India Ltd. vs. Dy. CIT reported in (2016) 72 taxmann.com. 164. and the relevant findings have been given as under:

10. We have considered the submissions of both the parties and carefully gone through the material le on the record. In the present case, it is an admitted fact that the amalgamating company M/s Powertrain India Ltd. amalgamated with M/s Maruti Suzuki India Ltd. w.e.f. 01.04.2012, as a of scheme of amalgamation duly approved by the Hon'ble Delhi High Court vide order dated 2013 and the assessment in this has been framed by the AO vide order dated 03.03.2015. Therefore, dear that when the assessment order was passed on 03.03.2015, M/s Suzuki Powertrain India ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. Ltd. lot inexistence. It is also noticed that the aforesaid fact was in the knowledge of the department as the informed vide various letters mentioned in para 5 of the former part of this order which were to the various Tax Authorities. However, the AO in spite of knowing this fact that M/s Suzuki in India Ltd. amalgamated with M/s Maruti Suzuki India Ltd., made the reference to the TPO and -sued the notice dated 07.11.2014 to the non-existent entity i.e. M/s Suzuki Powertrain India Ltd.

11. A similar issue the Hon'ble Jurisdictional High Court in the case of Micra India (P.) Ltd. (supra) under: In the instant case, no doubt there was participation during the course of assessment; however, the Assessing Officer, despite being told that the original company was no longer in existence, did not Le remedial measures and did not transpose the transferee as the company which had to be assessed, instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; order also mentioned the transferee's name below that of assessee's company. Now, that did not to the assessment being completed in the name of the transferee-company. According to the sing Officer, the assesseecompany was still in existence. Clearly, this was a case where the assesssment was contrary to law, as having being completed against a non- existent company. The Tribunal's decision is, in the circumstances, justified and warranted."

12. Similarly, the Hon'ble Jurisdictional High Court in the case of Spice Infotainment Ltd. v. CIT [IT Nos.

475 & 476 of 2011, dated 3-8-2011] held as under: No doubt, M/s Spice was an assessee and as an incorporated company and was in existence when it the returns in respect of two assessment years in question. However, before the case could be ted for ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. scrutiny and assessment proceedings could be initiated, M/s Spice got amalgamated with M Corp Pvt. Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Court which was dully sanctioned vide orders dated 11th February, 2004. With this amalgamation made effective from 1st July, 2003, M/s Spice ceased to exist. That is the plain and le effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, M/s Spice was also stood dissolved by specific of this Court. With the dissolution of this company, its name was struck off from the rolls Companies maintained by the Registrar of Companies. A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. In view of the aforesaid clinching position in law, it is difficult to digest the circuitious route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect. After the sanction of the scheme on 11th April, 2004, the Spice ceased to exit w.e.f 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said "dead person". When notice under Section 143 (2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record Instead, the AO made the assessment in the name of M/s Spice which was nonexisting entity on that day. In such proceedings and assessment order passed in the name of M/s Spice would clearly be void such a defect cannot be treated as procedural defect. Mere participation by ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. the appellant would be of no effect as there is no estoppel against law." It has been further held as under: "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. The framing of assessment against a non- existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a 'dead per son' ."

13. In the present case also as the assessment was framed in the name of non-existing entity i.e. M/s Suzuki Powertrain India Ltd. which amalgamated with M/s Maruti Suzuki India Ltd. and this irregularity was not curable. Therefore, the assessment order passed by the AO in the name of non- existing entity was void ab initio and deserves to be quashed, we order accordingly.

14. In the present case, the contention of the Id. CIT DR was that the assessment was right ly framed by the AO on the assessee who filed the return of income and when the income was earned, it was inexistence. This controversy has been settled by the Hon'ble Jurisdictional High Court in the case of CIT v. Dimension Apparels (P.) Ltd. [2015] 370 ITR 288/[2014] 52 taxmann.com 356 (Delhi) wherein it has been held as under: "Section 170(2) of the Income-tax Act, 1961, makes it clear that in the case of amalgamation, the assessment must be made on the successor (i.e., the amalgamated company). Section 176 which contains provisions pertaining to a discontinuation of business, does not apply to a case of amalgamation. The language of section 159 evidently only applies to natural persons and ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. cannot be extended through a legal fiction, to the dissolution of companies. 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. Participation by the amalgamated company in assessment proceedings would not cure the defect because "there can be no estoppels against law."

15. In the present case also when the assessment was framed by the AO vide order dated 29.12.2015 in the name of M/s Suzuki Powertrain India Ltd., the said company had already amalgamated with M/s Maruti Suzuki India Ltd. and therefore, it was not inexistence. Moreover, it is clear from the provisions of Section 170(2) of the Act that in the case of amalgamation, the assessment must be made on the successor i.e . the amalgamated company and not on the predecessor i.e . amalgamating company. Therefore, in the present case, the assessment framed by the AO vide order dated 29.12.2015 on the amalgamating company i.e. M/s Suzuki Powertrain India Ltd. which was not inexistence on the date of passing the assessment order was not valid and as such the same is quashed. Since we have allowed ground No. 1 of the assessee and assessment order is quashed, therefore, no finding is given on the other issues raised by the assessee.

11. It is also relevant to point that the aforesaid order of the ITAT in the case of Maruti Suzuki Pvt. Ltd. vs. DCIT, Circle 16(1), New Delhi (Supra) has been upheld by the Honble Jurisdictional High Court vide order dated 4th September, 2017 in the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki Private Ltd., reported at (2017) 85 Taxmann.com 330 (supra) wherein i t has been held as under: The revenue has repeatedly brought the issue before the Court in a large number of cases where, in more or less identical circumstances, the Assessing Officer had passed the assessment order in the name of the entity ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. that had ceased to exist as on the date of the assessment order. In many of these cases, as in the present case, the Assessing Officer, after mentioning the name of the Amalgamating Company as the assessee, mentioned below it the name of the Amalgamated Company. The submission of revenue that under section 292B, the successor-interest is precluded from raising an objection if it has participated in the assessment proceedings was negatived in Spice Infotainment Ltd. v. CIT [2012] 247 CTR (Del.) 500 wherein i t was held that once it was found that the assessment was framed in the name of a non-existent entity, it did not remain a procedural irregularity of the nature which could be cured by invoking the provisions of section 292-B. The legal position having been made abundantly clear, there is no hesitation in holding that impugned order passed by Tribunal does not require any interference The appeal is accordingly dismissed.

12. Recently the Honble Apex Court dismissed the SLP moved by the Department in the case of M/s Spice Enfotainment Ltd. which has been followed in the aforesaid referred case of M/s Maruti Suzuki Pvt. Ltd. vs. DCIT, vide order dated 2nd November, 2017.

13. In the present case also, as we have already pointed out that the assessment was framed by the AO on the non- existent amalgamated company, not on the amalgamating company, therefore, the assessment framed was void ab initio and the same was rightly quashed by the ld. CIT(A). Since, we have quashed the assessment framed by the AO therefore no separate finding is being given on the other issues raised in the Departmental appeal.

14. Before parting, it is relevant to point out that in the order relied by the ld. Sr. DR i.e. in the case of CIT, Central-1 Vs M/s Shaw Wallace Dist i lleries Ltd. (supra), the facts were totally dif ferent because in the said case, the assessee had not brought to the notice of the department in particular the Assessing Officer, the fact about the amalgamation sanctioned by the Honble High and it had also fi led its return of income for the subsequent assessment year. Therefore, the assessee itsel f ITA No. 2073/Del/2014 ITA No. 2468/Del/2015 Akzo Nobel India Ltd. had not acted upon the amalgamation but in the present case, the facts are totally different as the assessee brought to the notice of the AO about the amalgamation of the erstwhile Genpact Infrastructure (Bhopal) Pvt. Ltd. which amalgamated with M/s Genpact India w.e.f. 01.04.2010 vide order of the Honble Delhi High Court dated 19.11.2010. Therefore, the case relied by the ld. Sr. DR is of no help to the department.

13. So, respectfully following the aforesaid referred to order dated 09.02.2018, we hold that the assessment framed by the AO on the non-existent company i.e. Akzo Noble Car Refinishes India Pvt. Ltd. is void ab initio. Accordingly, the same is quashed.

14. In ITA No. 2468/Del/2015 for the assessment year 2010-11, the facts are identical as were involved in ITA No. 2073/Del/2014 for the assessment year 2009-10, therefore, our finding given in the former part of this order shall apply mutatis mutandis.

15. In the result, the appeals of the assessee are allowed. (Order Pronounced in the open Court on 10/07/2018) Sd/- Sd/- (Suchitra Kamble) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10/07/2018 *Subodh* Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR

Akzo Nobel India Ltd., Gurgaon v. DCIT, New Delhi

Tribunal Opinion Summary — Akzo Nobel India Ltd. (ITA Nos. 2073/Del/2014 & 2468/Del/2015)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's (Revenue) Position

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Availability of Information

Akzo Nobel India Ltd., Gurgaon v. DCIT, New Delhi

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