Case Law Details

Case Name : Techpac Holdings Ltd. Vs DCIT (Bombay High Court)
Appeal Number : Writ Petition No. 241 of 2014
Date of Judgement/Order : 18/03/2016
Related Assessment Year : 2005-06
Courts : All High Courts (1347) Bombay High Court (304)

Brief of the Case

Bombay High Court held In the case of Techpac Holdings Ltd. vs. DCIT that it is an admitted position that notices under sections 148, 142(1) and 143(2), never served on the Petitioner. The Revenue seeks to justify service of these notices by contending that they have served the said notices on the last known address of the Petitioner which was the address of Ingram Micro India [earlier known as Tech Pacific India], the downstream company of the Petitioner. We fail to see how the notices being served on Ingram Micro India would amount to service on the Petitioner. This is more so in the facts of the present case considering that admittedly on the date when these notices were sought to be served on Ingram Micro India, the Revenue was aware of the address of the Petitioner. Despite having this address prior to issuance of the notices, we fail to understand why these notices were not served on the Petitioner at this address. In these circumstances, service of the notices on Ingram Micro India which is a subsidiary of the Petitioner would not be good service on the Petitioner.

More ever, the shares of the Petitioner have been transferred to Ingram Micro Asia by the Petitioner’s shareholders and therefore the transferor in the aforesaid transaction is the shareholders of the Petitioner and not the Petitioner. In these circumstances, if there was any liability towards capital gains tax, if at all, it was that of the shareholders of the Petitioner and not the Petitioner itself. This being the position in law, the Assessing Officer could never have reason to believe that income of the Petitioner chargeable to tax in India had escaped assessment. Hence without valid servicing of notices, assessment u/s 144 is not valid.

Facts of the Case

The Petitioner is a company incorporated under the laws of Bermuda and is the holding company of the entire Techpac Group. It is an undisputed position that the shares of the Petitioner company (equity as well as preferential) were held by certain non-resident as well as resident shareholder. The Petitioner is a holding company and has under its fold several operating companies in Australia, New Zealand and Thailand including a company called Tech Pacific Asia Ltd., a company registered in the British Virgin Islands. In turn, Tech Pacific Asia Ltd. was the holding company of Techpac Mauritius Ltd. as well as other operating companies in Hong Kong, Malaysia and Singapore.  Techpac Mauritius Ltd. was in turn the holding company of an Indian subsidiary by the name of Tech Pacific (India) Ltd. (Tech Pacific India).  This Indian subsidiary in turn was the holding company of Tech Pacific India (Exports) Pte. Ltd. which was a company incorporated in Singapore.  All the aforesaid companies (over 20 Companies in 13 different countries) are hereinafter referred to as the Techpac Group. Hence the Petitioner was the ultimate holding company of the Techpac Group.

The Techpac Group was a technology distributor and a leading technology sales, marketing and logistics group in the Asia Pacific region.  One Ingram Micro Inc., USA, a company registered in the United States of America is also one such company who has its presence worldwide. Ingram Micro Asia had a fully owned subsidiary in India by the name Ingram Micro India Pvt. Ltd. The Ingram Group felt that it required to strengthen its presence in the Asia Pacific region and accordingly offered to take over the Techpac Group. After the aforesaid acquisition, the Indian entity of the Ingram Group [Ingram Micro India Pvt. Ltd.] was merged into the Indian entity of the Techpac Group [Tech Pacific India] and post the merger, the name of Tech Pacific India was changed to Ingram Micro India Ltd. In other words, Tech Pacific India continued to exist post the merger, but under a new name viz. Ingram Micro India. In this fashion, the Ingram Micro Group took over the Techpac Group.

During the course of search and seizure proceedings carried out at the premises of Ingram Micro India [earlier known as Tech Pacific India] on 17th September 2007, the annual report of Ingram Micro Inc., USA for the year 2005 was inter alia found along with the share purchase agreement.  Looking at the documents seized during the search, revenue was of the opinion that since the shares of the Petitioner Company had been transferred to the Ingram Group, capital gains had accrued to the Petitioner. Accordingly revenue served a notice under section 163 of the Act dated 22nd November, 2010 on Ingram Micro India [previously known as Tech Pacific India] seeking to treat them as an agent of the Petitioner in respect of the alleged capital gains which had arisen in the previous year relevant to A. Y. 2005-06. In addition thereto by its letter dated 24th November, 2010 also called upon Ingram Micro India to furnish details of the sale of shares of the Petitioner company along with the details of the amounts received.  Thereafter, on 3rd December 2010, Ingram Micro India received another letter calling upon it to furnish the details as required failing which assessment would be completed under section 144.

Being aggrieved by the aforesaid order, Ingram Micro India approached this Court in its writ jurisdiction by filing Writ Petition No.285 of 2011.  This Court by its order dated 30th November, 2011 quashed the order passed by revenue under section 163 of the Act on the ground that the same was beyond the period of limitation prescribed under the Act.  In other words, this Court quashed the order of revenue treating Ingram Micro India as an agent of the Petitioner company. In this Writ Petition, it is the specific stand of the Petitioner that after passing of the aforesaid order dated 30th November, 2011 (in Writ Petition No.285 of 2011), it was not aware of any proceedings being taken by the Revenue authorities to make any assessment in the hands of the Petitioner company of the alleged capital gains arising from the transfer of its shares.

On 29th October 2013, Ingram Micro Inc., USA (having its address at 1600 E. St. Andrew Place, Santa Ana, CA 92705, USA) received the impugned Assessment Order dated 25th March, 2013 passed under section 144 of the Act holding that the total taxable income computed in relation to the Petitioner was Rs.575.39 crores. It is the case of the Petitioner that this Assessment Order was forwarded by Ingram Micro Inc., USA to the Petitioner on 30th October, 2013.  It is only at this time that the Petitioner first came to know of the impugned Assessment Order and has therefore approached this Court in its writ jurisdiction seeking to quash the same.

Contention of the Petitioner

The ld counsel of the petitioner submitted that despite the fact that the impugned Assessment Order records that notices under sections 148, 143(2) as well as 142(1) were issued and served on the Petitioner, no such notices were ever received by the Petitioner. He contends that this has now become expressly clear from the affidavit in reply filed in this Writ Petition wherein it has now been admitted that the notices under sections 148, 142(1) and 143(2) were sought to be served not on the Petitioner but on Ingram Micro India [previously known as Tech Pacific India].  This is despite the fact that the Revenue authorities were in possession of the address of the Petitioner in Bermuda and yet chose not to serve any notice on the Petitioner on the said address. He submitted that in the facts of the present case before any Assessment Order could be passed under section 144 of the Act, it was a sine qua-non that a notice under section 148 of the Act ought to have been served on the Assessee.  If this was not done, the Assessment Order passed under section 144 was wholly without jurisdiction requiring our interference under Article 226 of the Constitution of India. In support of the aforesaid proposition, Mr Mistry relied upon a decision of the Supreme Court in the case of Y. Narayana Chetty and another v/s Income Tax Officer, Nellore and others [1959] 35 ITR 388.

He further submitted that in any event of the matter, in law, no capital gains had accrued in the hands of the Petitioner as the shares of the Petitioner company were transferred by its shareholders to Ingram Micro Asia and therefore Respondent No.1 could never have any reason to believe that income chargeable to tax had escaped assessment as contemplated under section 147 of the Act.  To elaborate this point further, Mr Mistry contended that in the facts of the present case, it was the shares of the Petitioner company that were transferred by its shareholders to Ingram Micro Asia.  If there was any capital gains that accrued to any person in this transaction, if at all, the same would be in the hands of the shareholders of the Petitioner and not in the hands of the Petitioner company viz. Techpac Holdings Ltd.. In the facts of the present case, Techpac Holdings Ltd. (the Petitioner) has neither transferred any capital asset and neither has it received any gain by virtue of any such transfer.  In this view of the matter, he submitted that the Revenue Authorities have proceeded on a total misconception in seeking to tax capital gains, if any, in the hands of the Petitioner.

Contention of the Revenue

The ld counsel of the revenue submitted that it is admitted fact that Ingram Micro India [earlier known as Tech Pacific India] is a down-stream company of the Petitioner.  The Revenue was having the last known address of the Petitioner as that of Ingram Micro India [earlier known as Tech Pacific India] being Gate No.1A, Godrej Industrial Estate, Phirozsha Nagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079.  Since this was the last known address of the Petitioner, the notice dated 29th March, 2012 under section 148 of the Act was sent to this address on 30th March, 2012.  This notice was duly received by Ingram Micro India [earlier known as Tech Pacific India] and was thereafter returned to the Revenue Authorities.  He further submitted that Ingram Micro India opened the postal envelope and after seeing the contents thereof, closed it and sent it back to the Revenue Authorities.  He submitted that therefore a request was made to the authorized representative of Ingram Micro India [earlier known as Tech Pacific India] for submitting the correspondence address of the Petitioner, which was not supplied to them.  Since Ingram Micro India [earlier known as Tech Pacific India] was having a business understanding with the Petitioner, the service of the notice issued under section 148 of the Act on Ingram Micro India [earlier known as Tech Pacific India] was good service on the Petitioner.

He further submitted that the Assessing Officer clearly had reason to believe that income chargeable to tax had escaped assessment because by virtue of the aforesaid share purchase agreement entered into in November, 2004  there was clearly a transfer of a capital asset in India as contemplated under section 9(1)(i)  of the Act. He also submitted that as a consequence of the said agreement, Ingram Micro India [earlier known as Tech Pacific India] along with all its assets and liabilities was transferred to Ingram Micro Asia.  Since  Ingram Micro India [earlier known as Tech Pacific India] was a company situated in India, there was clearly a transfer of a capital asset in India and therefore by virtue of the provisions of section 9(1)(i) of the Act, the income from such transfer was deemed to accrue in India. He submitted that as the income was earned towards consideration of transfer of its business / economic interest i.e. Ingram Micro India [earlier known as Tech Pacific India] by reason of the above transaction, the Petitioner had earned income liable for capital gains tax in India.

Held by High Court

 High Court held that as the issue of service of notices under sections 148, 142(1) and 143(2) are concerned, it is an admitted position that the said notices were never served on the Petitioner. The Revenue seeks to justify service of these notices on the Petitioner by contending that they have served the said notices on the last known address of the Petitioner which was the address of Ingram Micro India [earlier known as Tech Pacific India], the downstream company of the Petitioner. We fail to see how the notices being served on Ingram Micro India would amount to service on the Petitioner.  This is more so in the facts of the present case considering that admittedly on the date when these notices were sought to be served on Ingram Micro India, the Revenue was aware of the address of the Petitioner. Despite having this address prior to issuance of the notices, we fail to understand why these notices were not served on the Petitioner at this address. In these circumstances, we cannot accede to the contention of that service of the aforesaid notices on Ingram Micro India which is a subsidiary of the Petitioner would be good service on the Petitioner.

In the present case Ingram Micro India was not the assessee or even a representative – assessee of the Petitioner.  In fact, the Revenue in the earlier round of litigation, sought to treat Ingram Micro India as an agent of the Petitioner under the provisions of section 163. Being aggrieved by this action of the Revenue, Ingram Micro India approached this Court in its writ jurisdiction by filing Writ Petition No.285 of 2011.  This Court by its order dated 30th November, 2011 quashed the order of the Revenue Authorities passed under section 163 of the Act treating Ingram Micro India as the agent of the Petitioner.  Once this Court struck down the action of the Revenue treating Ingram Micro India as an agent of the Petitioner, all the more, service of the notices under sections 148, 142(1) and/or 143(2) of the Act on Ingram Micro India could never be considered as good service on the Petitioner. In view of our above finding that in the absence of service of notice issued under section 148, the Assessing Officer does not acquire jurisdiction to proceed further, the notices issued under section 142(1) and 143(2) both dated 16th January, 2013 (and which, in the facts of this case, can only be issued post the service of notice issued under section 148), also fall to the ground.

Nevertheless, in the present facts we find that both these notices under section 142(1) and 143(2) were not served on the Petitioner. More importantly, we fail to understand how a notice under section 142(1) and under section 143(2) can be issued on the same date. Section 142(1) stipulates that for the purpose of making  an assessment under the Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case, the time allowed under sub-section (1) of section 139 for furnishing the return has expired, a notice requiring him on a date therein specified (a)   where such person has not filed a return within the time allowed under sub-section (1) of section 139 of the Act or before the end of the relevant assessment year, inter alia to furnish a return  of income.  Section 143(2) in turn applies where a return has been furnished either under section 139 or in response to a notice under sub-section (1) of section 142 of the Act. Therefore, clearly, sub-section (2) of section 143 would come into play only when a return is furnished under section 139 or a return is furnished in response to a notice under subsection (1) of section 142.This would clearly establish that a notice under section 142(1) and under section 143(2) can never be issued on the same date.  Furthermore in the facts of the present case, section 143(2) could never apply because admittedly no return had ever been filed by the Petitioner. We find that the Assessment Order merely records that notices under sections 148, 142(1) and 143(2) have been served on the Petitioner. Apart from the fact that this is factually incorrect, we find that there is a total non-application of mind on the part of the Assessing Officer in issuing a notice under section 143(2).

Further in current case, there was a transfer of a capital asset in India; the same could never be taxed as capital gains in the hands of the Petitioner. This is for the simple reason that the shares of the Petitioner have been transferred to Ingram Micro Asia by the Petitioner’s shareholders and therefore the transferor in the aforesaid transaction is the shareholders of the Petitioner and not the Petitioner. In these circumstances, if there was any liability towards capital gains tax, if at all (we are not called upon to consider this aspect), it was that of the shareholders of the Petitioner and not the Petitioner itself. This being the position in law, the Assessing Officer could never have reason to believe that income of the Petitioner chargeable to tax in India had escaped assessment.  If the Assessing Officer could not have had any reason to form the aforesaid belief, then naturally what follows is that no notice under section 148 could be issued in the facts of the present case. Consequently, the Assessment Order passed under section 144 was therefore wholly without jurisdiction.  On this count also, we find that the Assessment Order passed under section 144 is unsustainable and has to be set aside.

Accordingly, appeal of the assessee allowed.

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