India Medtronic Private Limited Vs Additional/Joint/Deputy/ACIT/ITO (ITAT Mumbai)
ITAT Mumbai held that the entire assessment order have not been passed in the case of non-existing entity i.e. amalgamated entity is null and void and hence liable to be quashed.
Facts- 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.
Notably, throughout assessee has been intimating various authorities not only about the merger of CHIPL with IMPL, but still the orders have been passed in the name of non-existing entity.
Conclusion-
Held that the decision of Hon’ble Apex Court in the case of Mahagun Realtors Pvt. Ltd. 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. Thus, the entire assessment order have not been passed in the case of non-existing entity is null and void and is hereby quashed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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).
2. 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:-
2. 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:
2. 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.”
3. 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.
4. 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.
5. 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.
4. Now post transfer of jurisdiction to Mumbai, a notice u/s. 143(2) dated 13/08/2018 was issued by ACIT Circle 10(1)(1), Mumbai in the name of M/s.Covidien Healthcare India Pvt. Ltd. (CHIPL) which was no longer in existence to which assessee submitted a response again on 04/09/2018 in the name of M/s. India Medtronic Pvt. Ltd (successor of CHIPL). Simultaneously transfer proceedings were initiated by the ld. TPO u/s. 92CA(2) dated 19/02/2018. When the ld. TPO issued notice u/s. 92D(3) on 04/10/2018 in the name of erstwhile CHIPL. The assessee replied and submitted vide letter dated 12/10/2018 intimating the merger with the name of the company M/s. India Medtronics Pvt. Ltd. Thereafter, the ld. TPO continued to issue notice in the name of CHIPL and assessee continued to give its reply in the name of IMPL. Finally, the ld. TPO passed transfer pricing order on 28/10/2018 still in the name of non-existing entity i.e. ‘M/s. Covidien Healthcare India Pvt. Ltd.’ wherein he has proposed to make adjustment of Rs.10,31,01,041/-. Post passing of ld. TPO’s order, the ld. AO continued to issue notice u/s.142(1) in the name of non-existing entity and assessee kept on responding in the name of IMPL only. Finally, the draft assessment order was passed on 12/12/2019 by ACIT, Circle 10(1)(1) in the name of ‘M/s. Covidien Healthcare India Pvt. Ltd.’ wherein he has made disallowance of business promotion expenses of Rs.16,32,28,601/-.
5. The assessee filed objections before the ld. DRP on 10/01/2020 in the name of India Medtronic Pvt. Ltd. and also pointed out the same fact before the ld. DRP, and DRP disposed of objection vide directions dated 17/03/2021 directed the ld. AO to pass the order in the correct name of IMPL. In spite of categorical direction by the ld. DRP, National Faceless Assessment Centre issued the final assessment order in the name of M/s. Covidien Healthcare India Pvt. Ltd. (instead of amalgamated company M/s. India Medtronic Pvt. Ltd.) vide order dated 26/05/2021 u/s.144(3)(3) r.w.s. 144C(13). Thus, throughout assessee has been intimating various authorities not only about the merger of CHIPL with IMPL, but still the orders have been passed in the name of non-existing entity. In support, he has filed a chronology summary of sequence of events alongwith relevant details in the following manner:-
