If an entity doesn’t exist, the order that was passed is void
Fact and issue of the case
The aforesaid appeals have been filed by the assessee against separate final assessment order dated 26/05/2021 for the A.Y.2016-17 passed in pursuance of direction given by the DRP dated 17/03/2021 and 28/01/2022 for the A.Y.2017-18 passed in pursuance of direction given by the DRP dated 24/12/2021 u/s.144C(5).
In the grounds of appeal assessee 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:-
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:
erred in passing the transfer pricing order, draft assessment order, directions of the Hon’ble DRP and final assessment order in the name of Covidien Healthcare India Private Limited, which was not in existence as on the date of passing the orders and accordingly, subsequent final assessment order passed is null and void and should be quashed.”
It is seen from the record that the assessee filed return of income in the name of M/s Covidian Healthcare India Pvt Ltd [PAN:AABCT6021C] and the assessment was done based on the CASS selection in which return of the assessee was selected for scrutiny. Secondly, while passing orders it has been duly mentioned that M/s Covidien Healthcare India Private Limited has amalgamated with M/s India Medtronics Private Limited. First page of return of Income for AY 2016-17 is hereby attached for ready reference.
In view of the above, the ground raised by the assessee does not have any substance and the assessment of income was of M/s Covidian Healthcare India Pvt Ltd was correctly done by the AO, wherein the AO had clearly taken into the aspect of amalgamation of M/s Covidien Healthcare India Private Limited with M/s India Medtronics Private Limited.
The above comments may be considered as the due compliance from this office on the matter. 3. Before us ld. Counsel for the assessee submitted that the erstwhile company, India Medtronic Pvt. Ltd. (IMPL) was incorporated on 02/05/2002 which was primarily engaged in trading and marketing of medical devices, medical equipment products and their spares and consumables and rendering related services. M/s. Covidien Healthcare India Pvt. Ltd. (CHIPL) in whose name the orders have been passed including the draft assessment order, transfer pricing order as well as final assessment order, has been merged with IMPL w.e.f. 26/08/2016 pursuant to the order of National Company Law Tribunal (NCLT) dated 10/08/2017. M/s. Covidien Healthcare India Pvt. Ltd. had filed copy of NCLT order with Registrar of companies and accordingly, effective date of merger was 01/09/2017. Thus, M/s. Covidien Healthcare India Pvt. Ltd. had ceased to exist from the appointed date on the receipt of filing of NCLT order w.e.f. 26/08/2016. Prior to its merger, M/s. Covidien Healthcare India Pvt. Ltd. had filed its return of income for A.Y.2016-17 on 30/11/2016 declaring total income under the normal provisions of Act of Rs.13,46,94,930/-. Later on the said return was revised 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.
Observation of the court
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.
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 the respondent has relied upon Spice and Maruti Suzuki (supra) whereas the facts of present case can be distinguished from the facts in Spice and Maruti Suzuki.
> Secondly, the judgment by the Hon’ble Apex Court in Mahagun Realtors is rendered in peculiar facts and merely holds that the law declared in the case of Maruti Suzuki cannot be applied without looking into the overall facts, in particular the conduct of the assessee and the manner of framing of assessment.
> Thirdly, the judgment raises a pertinent point that the business of the amalgamating entity survives even after merger, though the corporate entity may have come to an end. This point is merely to emphasize that the liability of the successor and therefore, it cannot be held that merely on account of nonexistence of the predecessor, successor is not liable.
> Fourthly, in para 43, the Court categorically held that the aforesaid discussion is “having regard to the facts of this case” and the said observation is in continuation of repeated observations that the decision in Spice and Maruti are distinguishable and,
> Lastly, the Apex Court has decided the appeal on peculiar facts, without disagreeing with the decision in Maruti Suzuki India Ltd. and Spice Entertainment Ltd.
Thus, the decision of Hon’ble Apex Court in the case of Mahagun Realtors Pvt. Ltd. (supra) is not applicable on the facts of the assessee’s case albeit its facts are clearly covered by the judgment of Apex Court in the case Maruti Suzuki India Ltd. (supra). .
This has also been highlighted in detail by the ITAT Mumbai Bench in the case of Candor Renewable Energy Pvt. Ltd., Before us ld. Counsel has also stated various other decisions, however, we are not discussing of these judgments. Thus, the entire assessment order have not been passed in the case of nonexisting entity is null and void and is hereby quashed.
In A.Y.2017-18 also exactly similar facts are permeating and therefore, our finding given hereinabove will apply mutatis and mutandis for this year also and therefore, the assessment order passed for A.Y.2017-18 is also hereby declared null and void and it is quashed.
In the result appeals of the assessee are dismissed.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from hereIndia-Medtronic-Private-Limited-Vs-ADDL-JT-DY-CIT-ITO-ITAT-Mumbai-2