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* IN THE HIGH COURT OF DELHI AT NEW DELHI
18
+ ITA No. 65/2017
PR. COMMISSIONER OF INCOME TAX-6, NEW DELHI ..... Appellant
Through: Mr. Asheesh Jain, Senior Standing
Counsel with Mr. Vikrant A. Maheshwari,
Advocates
versus
MARUTI SUZUKI INDIA LIMITED (SUCCESSOR OF SUZUKI
POWERTRAIN INDIA LIMITED) ..... Respondent
Through: Mr. Ajay Vohra, Senior Advocate with
Ms. Kavita Jha and Mr. Vikrant A. Maheshwari,
Advocates
CORAM:
JUSTICE S. MURALIDHAR
JUSTICE PRATHIBA M. SINGH
ORDER
% 04.09.2017
Dr. S. Muralidhar, J.:
1. This is an appeal by the Revenue against the order dated 21 st July 2016
passed by the Income Tax Appellate Tribunal (`ITAT') in ITA No.
288/Del/2016 for the Assessment Year (`AY') 2011-12.
2. The question sought to be urged by the Revenue in this appeal is whether
the order of the ITAT is perverse inasmuch as it invalidates the assessment
order dated 29th December 2015 passed by the Assessing Officer (`AO') for
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AY 2011-12 on the ground that it has framed in the name of the
amalgamating company.
3. On 24th January 2017, while admitting this appeal, this Court framed the
following question of law:
"Did the ITAT misapply the provisions of Section 170 (2) of the
Income Tax Act in the circumstances of the case, while concluding
that the assessment order was not tenable for having been framed in
the name of the non-existent company."
4. The facts are that on 28th November 2011 Suzuki Powertrain India Ltd.
(`SPIL') filed its return for AY 2011-12 declaring an income of
Rs. 76,08,30,888/-. The return was processed under Section 143 (1) of the
Income Tax Act, 1961 (`Act') and then picked up for scrutiny. Notices
under Section 143 (2) of the Act were issued.
5. On 29th January 2013, this Court passed an order in Company Petition No.
490 of 2012 approving the Scheme of Amalgamation ('Scheme') by which
SPIL (Amalgamating Company) was amalgamated with Maruti Suzuki India
Ltd. (`MSIL') (Amalgamated Company) with effect from 1st April 2012 (the
'appointed date'). The Scheme inter alia provided that, "all the liabilities and
duties on the entire undertaking of the Petitioner/Amalgamating Company
be transferred without further act or deed to the Petitioner/Amalgamated
Company and accordingly the same shall pursuant to Section 394 (2) of the
Companies Act, 1956 be transferred to and become the liabilities of the
Petitioner/Amalgamated Company."
6. Thereafter, assessment proceedings continued with the participation of
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MSIL representing SPIL in the assessment proceedings.
7. On 29th December 2015, the AO passed the assessment order under
Section 143 (3) read with Section 144C (1) of the Act in which the name and
address of the Assessee was shown as:
"M/s. Suzuki Powertrain India Ltd
(Amalgamated with M/s Maruti
Suzuki India Ltd)., Plot No 1,
Nelson Mandela Road, Vasant
Kunj, New Delhi-110070"
8. MSIL filed an appeal before the ITAT where one of the grounds urged
was that the assessment order was without jurisdiction inasmuch as it had
been passed in the name of an entity that ceased to exist on the date of the
assessment order. The ITAT accepted the above plea of the Respondent-
MSIL, as a result of which the assessment order was set aside.
9. On the strength of the decision of the Supreme Court in Kuldeep Kumar
Dubey v. Ramesh Chandra Goyal (2015) 3 SCC 525, Mr. Asheesh Jain,
learned Senior Standing Counsel for the Revenue, urges that in the present
case the error, if at all, was a mere misdescription of the party in the
assessment order and nothing more. This could not result in the assessment
order itself being set aside. He further submits that the record of the
assessment proceedings shows that MSIL participated in it fully and raised
no objection as to the continuation of the proceedings on the ground of lack
of jurisdiction. Mr Jain invokes Section 292B of the Act to urge that the
Assessee is precluded from questioning the assessment order on the ground
that it was passed in the name of a non-existent entity. He points out that
ITA 65/2017 Page 3 of 8
below the name of the Amalgamating Company, the AO has taken care to
mention that it has since been amalgamated with MSIL.
10. In reply, Mr. Ajay Vohra, learned Senior Counsel for the Assessee, has
drawn the attention of the Court to a long line of decisions including
Saraswati Industrial Syndicate Ltd. v. CIT [1990] 186 ITR 278 (SC) and
Spice Infotainment Ltd. v. CIT (2011) 247 CTR (Del) 500 wherein an
identical question has been answered in favour of the Assessee and against
the Revenue. Mr. Vohra points out that for the purposes of Section 170 (2)
of the Act, two assessment orders will have to be passed: one in the name of
MSIL itself for the AY in question and the other again in the name of MSIL
indicating that the said assessment order is being passed under
Section 170 (2) of the Act in respect of its tax liability as successor in
interest of the Amalgamating company.
11.1 In Spice Infotainment (supra), the issue that arose was in the context
of the AO having framed the assessment in the name of `Spice Corp
Limited' after the said entity stood dissolved consequent to its amalgamation
with `MCorp Private Limited' with effect from 1st July, 2003. Like in the
present case, even there it was urged by the Revenue that this was a
procedural defect. It was also urged by the Revenue that since the
amalgamated entity had participated in the assessment proceedings without
raising any objection, it should be precluded from raising it thereafter.
11.2 The two questions framed by this Court in Spice Infotainment (supra)
were as under:
"(i) Whether on the facts and in the circumstances of the case, the
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Tribunal erred in law in holding that the action of the Assessing
Officer in framing assessment in the name of "Spice Corp Ltd", after
the said entity stood dissolved consequent upon its amalgamation with
Mcorp Private Limited w.e.f. 01.07.2003, was a mere "procedural
defect"?
(ii) whether on the facts and in the circumstances of the case, the
Tribunal erred in law in holding that in view of the provisions of
section 292B of the Act, the assessment, having in substance and
effect, been framed on the amalgamated company which could not be
regarded as null and void?"
11.3 This Court, in Spice Infotainment (supra) discussed and noted the
following observations in the decision of the Supreme Court in Saraswati
Industrial Syndicate (supra):
"Generally, where only one Company is involved in change and the
rights of the share holders and creditors are varied, it amounts to
reconstruction or reorganisation or scheme of arrangement. In
amalgamation two or more companies are fused into one by merger or
by taking over by another. Reconstruction or amalgamation has no
precise legal meaning. The amalgamation is a blending of two or
more existing undertakings into one undertaking, the share holders of
each blending Company become substantially the share holders in the
Company which is to carry on the blended undertakings. There may
be amalgamation either by the transfer of two or more undertakings to
a new Company, or by the transfer of one or more undertakings to an
existing Company. Strictly amalgamation does not cover the mere
acquisition by a Company of the share capital of other Company
which remains in existence and continues its undertaking but the
context in which the term is used may show that it is intended to
include such an acquisition. See Halsburys Laws of England 4th
Edition Vol. 7 Para 1539. Two companies may join to form a new
Company, but there may be absorption or blending of one by the
other, both amount to amalgamation. When two companies are
merged and are so joined, as to form a third Company or one is
absorbed into one or blended with another, the amalgamating
Company loses its entity."
ITA 65/2017 Page 5 of 8
11.4 The Court in Spice Infotainment (supra) thereafter held as under:
"11. After the sanction of the scheme on 11th April, 2004, the Spice
ceases 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 Assessing Officer made the assessment in the name of
M/s Spice which was non existing 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 the appellant would be of no effect as
there is no estoppel against law.
11.5 Consequently, the aforesaid two questions were answered in favour of
the Assessee and against the Revenue.
12. Even thereafter the Revenue has repeatedly brought the said issue before
this Court in a large number of cases where, in more or less identical
circumstances, the AO had passed the assessment order in the name of the
entity that had ceased to exist as on the date of the assessment order. In
many of these cases, as in the present case, the AO, after mentioning the
name of the Amalgamating Company as the Assessee, mentioned below it
the name of the Amalgamated Company. Illustratively the cases are:
(i) CIT v Micra India (P) Ltd. (2015) 231 Taxman 809 (Del);
(ii) CIT v. Micron Steels (P) Ltd. [2015] 372 ITR 386 (Del)
(iii) CIT v. Dimensions Apparels (P) Ltd. [2015] 370 ITR 288 (Del)
(iv) BDR Builders & Developers Pvt. Ltd. v. ACIT (Decision dated 26th
July 2017 passed by this Court in W.P.(C) No. 2712 of 2016)
ITA 65/2017 Page 6 of 8
13. The question whether, for the purposes of Section 170 (2) of the Act, the
defect of passing the assessment order in the name of an non-existent entity
is a mere irregularity was answered by this Court in CIT v. Dimensions
Apparels (P) Ltd. (supra), where in paras 6 and 7 it was held as under:
"6. Sections 170(1) and 170(2) of the Act do not assist the revenue in
their case. The revenue does not contest that in a case of
amalgamation, the predecessor (being a dissolved company) "cannot
be found". Consequently, Section 170(2) applies. This provision
clarifies that where the predecessor cannot be found,
"the assessment of the income of the previous year in which the
succession took place up to the date of the succession and of the
precious year preceding that year shall be made on the
successor in like manner and to the same extent as it would
have been made on the predecessor." (Emphasis Supplied)
7. The revenue seems to argue that the assessment is justified because
the liabilities of the amalgamating company accrue to the
amalgamated (transferee) company. While that is true, the question
here is which entity must the assessment be made on. The text of
Section 170(2) makes it clear that the assessment must be made on the
successor (i.e., the amalgamated company)."
14. The submission that under Section 292B of the Act, the successor-in-
interest is precluded from raising an objection if it has participated in the
assessment proceedings was negative in Spice Infotainment (supra) where
it was held: "...once it is found that the assessment is framed in the name of
a non-existent entity it does not remain a procedural irregularity of the
nature which could be cured by invoking the provisions of Section 292-B of
the Act."
15. On the issue of participation, the Court CIT v. Dimensions Apparels (P)
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Ltd. (supra) observed:
"22. On the last contention, i.e with respect to participation by the
previous assessee, i.e the amalgamating company (which ceases to
exist), again Spice (supra) is categorical; it was ruled on that occasion
that such participation by the amalgamated company in proceedings
did not cure the defect, because "there can be no estoppel in law."
Vived Marketing Servicing Pvt. Ltd., (supra) had also reached the
same conclusion."
16. The legal position having been made abundantly clear in the above
decisions, the Court has no hesitation in answering the question framed in
the negative, i.e. in favour of the Assessee and against the Revenue.
17. The appeal is accordingly dismissed but, in the circumstances, with no
orders as to costs.
S. MURALIDHAR, J.
PRATHIBA M. SINGH, J.
SEPTEMBER 04, 2017
rd
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