Marlabs Innovations Pvt. Ltd Vs DCIT (ITAT Bangalore)
Respectfully following the decision of Hon’ble Supreme Court in case of PCIT vs. Maruti Suzuki India Ltd. ITAT Held that, since the assessee ceased to be in existence as on the date when the Ld. AO passed the impugned order of assessment, the assessment so framed is not sustainable in the eye of law.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal is filed by assessee against order dated 28/12/2018 passed by Ld.DCIT, Circle – 4(1)(2), Bangalore for A.Y. 2011-12.
2. The assessee has raised various issues on the transfer pricing adjustment made in respect of the international transactions between assessee and its AE.
3. However, in ground no. 2, assessee challenges the validity of impugned order as it is passed on a non-existing entity i.e. erstwhile Marlabs Software Pvt. Ltd. The relevant grounds reads as under:
“2. That on facts and circumstances of the case, the LAO has erred in passing the order on a non-existing entity i.e. erstwhile Marlabs Software Private Limited.”
4. The Ld.AR relied on decision of Hon’ble Supreme Court in case of PCIT vs. Maruti Suzuki India Ltd. reported in (2019) 107 com 375 wherein the Hon’ble Supreme Court has held that an income that was sought to be subjected to the charge of tax for the year was the income of the erstwhile entity prior to amalgamation. Under an approved scheme of amalgamation Hon’ble Supreme Court held that the transferee has assumed the liabilities of the transferor company, including tax liabilities. The consequence of the scheme of amalgamation approved u/s. 394 of the Companies Act, 1956 was that the amalgamating company ceased to exist. Hon’ble Supreme Court has held that upon the amalgamating company ceasing to exist, it cannot be regarded as a person u/s. 2(31) against whom assessment proceedings can be initiated or an assessment order would be passed. Hon’ble Supreme Court has noted that a notice issued u/s. 143(2) was issued to the amalgamating company followed by the notice u/s. 142(1) prior to the scheme of amalgamation being approved, the assessing officer subsequently cannot initiate assessment proceedings against an entity that ceased to exist. Hon’ble Supreme Court in that relevant facts held that a notice issued to a non-existent company would be void-ab-initio and no valid jurisdiction can be assumed by the assessing officer by issuing such invalid notice. In the present facts of the case, the Ld.AR submitted that the effective date of amalgamation was 01/04/2016 and intimation to the Ld.AO was given by letter dated 15/12/2017 and a copy of which is placed in the records filed before this Tribunal. For the sake of convenience the said letter is scanned and reproduced herewith.
5. It is submitted that the order of amalgamation by the National Company Law Tribunal, Bangalore Bench, was delivered on 05.09.2017.
6. The Ld.AR referring to the DRP order submitted that the directions are issued in the name of the transferee company being the Marlabs Innovations Pvt. Ltd., however, the Ld.AO while passing the impugned assessment order passed the order in the name of Marlabs Software Pvt. Ltd., which is a non-existent company. The Ld.AR thus submitted that, the impugned order passed is without jurisdiction, and prayed for quashing of the same.
The Ld.DR on the contrary, relied on the orders passed by authorities below.
7. We have perused the submissions advanced by both sides in the light of records placed before us.
8. We note that the scheme of amalgamation was approved by the NCLT, Bangalore Bench on 05/09/2017. The DRP took cognizance of the company that came into existence post amalgamation to be “Marlabs Innovations Pvt. Ltd.” which is clear from the cause title of the DRP directions. On receipt of the DRP direction, the Ld.AO passed the final assessment order in the name of erstwhile company being Marlabs Software Pvt. Ltd.
9. The following chart will explain the facts of the assessee’s case and the facts decided by Hon’ble Supreme Court in case of PCIT vs. Maruti Suzuki India Ltd.(supra).
10. The following chart will explain the facts of the Assessee’s case and the facts of the case decided by the Hon’ble Supreme Court in the case of M/s.Maruti Suzuki India Limited (supra):
