1. ITA No. 304/Kol./2005 and CO. Nos. 227 and 228/Kol./2005 are filed by the assessee for assessment years 1999-2000 to 2001-02 respectively.
The ITA No. 558/Kol./2005, ITA No. 559/Kol./2005 and ITA No. 560/ Kol./2005 are the appeals filed by the revenue for assessment years 1999-2000 to 2001-02. All the above appeals by the revenue and appeal and cross-objection by the assessee are directed against the common order of Commissioner (Appeals)-V, Kolkata dated 19-11-2004. ITA Nos.
1672 to 1676/Kol./2005 are filed by the revenue for assessment years 1994-95 to 1998-99.
2. In the assessee's appeal in ITA No. 304/Kol./2005 as well as in Cross Objection Nos. 227 and 228/Kol./2005 filed by the assessee, it has raised additional ground which reads as under: The order needs to be vacated as on the date of passing of order the company was non-existent having merged with Shah Wallace Distilleries Ltd. with effect from 1-7-2000.
3. At the time of hearing before us it is stated by the ld. Counsel that the additional ground raised by the assessee is purely a legal ground which goes to the root of the matter and, therefore, the same should be admitted. He also stated that all the necessary facts relating to this ground already on record and any investigation of fact is not required for adjudicating the additional ground.
4. Ld. D.R. did not seriously objected to the admissions of additional ground.
5. We have carefully considered the rival submissions and perused the material placed before us. We find that the Hon'ble Apex court has considered the issue with regard to the admission of additional ground in the case of National Thermal Power Co. Ltd. v. CIT . Their Lordships of the Hon'ble Apex court has held as under : Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.
6. The ratio of the above decision would squarely supports the case of the assessee because the additional ground being raised by the assessee is purely a legal issue which goes to the root of the matter. Moreover, no new fact is required to be investigated for adjudicating the above additional ground.
7. In view of above we respectfully following the above decision of the Hon'ble Apex court admit the additional ground of the assessee.
8. Coming to the merit of the above additional ground, it is submitted by the id. Counsel that the assessee, viz., Pampasar Distillery Ltd. has merged with Maharashtra Distilleries Ltd. with effect from 1-7-2000. The petition for merger has been accepted by the Hon'ble High Court of Bangalore and Mumbai vide order dated 25-6-2002 and 12-12-2001 respectively. Thereafter, name of Maharashtra Distilleries Ltd. was changed to M/s. Shaw Wallace Distilleries Ltd. with effect from 12-5-2003. That the assessment for assessment years 1999-2000 to 2001-02 was completed on 26-3-2004 while assessment for assessment year 2001-02 was completed on 29-3-2003 in the hands of Pampasar Distillery Ltd. That after merger of Pampasar Distillery Ltd. with Maharashtra Distilleries Ltd. with effect from 1 -7-2000, Pampasar Distillery Ltd. does not remain in existence. The assessment in the hands of a non-existent entity is void, ab initio and nullity. That merely because the Pampasar Distillery Ltd. has filed the return in its name will not give jurisdiction to the assessing officer to make the assessment in the hands of a non-existent entity. In support of this contention he has relied upon the following decisions : 2. Hewlett Packard India (P.) Ltd. v. Assistant Commissioner (IT Appeal No. 4016 (Delhi) of 2005).
9. Ld. D.R. on the other hand stated that the income prior to date of amalgamation is assessable in the hands of amalgamating company. In support of this contention, he has relied upon the decision of Hon'ble Allahabad High Court in the case of Motor Sales v.CIT. He, therefore, stated that the assessing officer was fully justified in making the assessment of the income for the period prior to amalgam- ation in the hands of Pampasar Distillery Ltd. The same should be sustained. Alternatively it is submitted by the ld.D.R. that if at all a view is taken that the assessment cannot be made in the hands of a non-existent company, it would only be a irregularity and will not be illegality. Therefore, the assessment order can be set aside to the file of Assessing Officer with a direction to make the assessment in the hands of the amalgamated company. In support of this contention, he has relied upon the decision ITAT, Mumbai Bench in the case of Century Enka Ltd. v. Dy. CIT (2006) 101 ITD 489. He further submitted that even as per provision of Section 170 Sub-section (2) of the Income Tax Act, 1961, the assessment can be made in the hands of the successor company. In the scheme of amalgamation, the business of the amalgamating company is taken over as a going concern by the amalgamated company. Thus, there is succession of business as provided in Section 170 of the Income Tax Act.
He further contented that after the date of amalgamation the amalgamating company does not remain in existence and, therefore, cannot be found by the assessing officer. In such circumstances as per Section 170(2) the assessing officer can make the assessment in the hands of the successor company. He also stated that even as per the scheme of amalgamation any proceedings pending against the amalgamating company shall continue with the amalgamated company. Similarly any proceeding which is required to be initiated against the amalgamating company can be initiated against the amalgamated company.
10. In the rejoinder it is submitted by the ld. Counsel that the scheme of the amalgamation is only an agreement between the parties and, there fore, it will not give any jurisdiction to the assessing officer to make the assessment prior to the period of amalgamation in the hands of amalgamated company. He further stated that there is no provision in the Act which will permit the assessing officer to make the assessment of the dissolved company in the hands of amalgamated company. He further submitted that the decision of the ITAT Delhi Bench in the case of Impsat (P.) Ltd. (supra) was dated 28-7-2004. However, unfortunately the same was not brought to the notice of ITAT Mumbai Bench while adjudicating the case of Century Enka Ltd. (supra). Therefore, Hon'ble Members of Mumbai Bench did not have the benefit of the above decision of the ITAT Delhi Bench. He stated that before the ITAT Mumbai Bench all the legal issues were not properly placed and, therefore, they had no opportunity to examine the same. He further stated that the decision of ITAT Delhi Bench in the case of Impsat (P.) Ltd. (supra) is after considering the legal aspect of the matter in detail and this decision is earlier in time. Therefore, the same should be preferred than the decision of ITAT Mumbai Bench in the case of Century Enka Ltd. (supra).
He also stated that the assessment in the hands of a non-existent person is a nullity and it is irrelevant whether this fact was brought to the knowledge of the assessing officer or not.
11. We have carefully considered the argument of both the sides and perused the material placed before us. The first question is whether the income for the period prior to the date of amalgamation is assessable in the hands of amalgamating company or amalgamated company.
On this issue perhaps there is no dispute between the views expressed by the authorities before us.
12. Ld. D.R. has canvassed that the income prior to date of amalgamation is assessable in the hands of amalgamating company. Ld.
Counsel for the assessee has also not disputed the above submission of the ld. D.R. We also find that the view canvassed by the ld. D.R. is supported by the decision of the Hon'ble Allahabad High Court in the case of Motor Sales (supra) wherein their Lordship held as under : Held, that where a firm is converted into a company then the business of the firm is succeeded by the company. Therefore, the Tribunal was right in handling that the firm was assessable till it was succeeded by the company.
No contrary decision is brought to our knowledge. We, therefore, agree with the submission of ld. D.R. that the income till date of amalgamation is assessable in the hands of the amalgamating company.
13. Now the question is whether the income prior to the date of amalgamation can be assessed in the hands of amalgamating company on the date when amalgamating company does not remain in existence or it is to be assessed in the hands of amalgamated company as a representative of amalgamating company.
14. It is contended by the ld. Counsel that the assessing officer has made the assessment on the date on which the amalgamating company, viz., Pampasar Distillery Ltd. was not in existence and the assessment cannot be made in the hands of a non-existing person. We find this issue is considered by the ITAT Delhi Bench in the case of Impsat (P.) Ltd. (supra) wherein it is held as under : Thus, it is absolutely essential that the person, sought to be assessed, should be in existence at the time of making the assessment and that elaborate provisions were made in the Act to ensure that if the person, sought to be assessed, is not in existence, at the time of making the assessment, some other person or body or entity is expressly fastened with the liability to be assessee.
Once it ceased to exist, there was no question of assessing it for income-tax, as there is no provision in the Act to assess a company which is dissolved. Section 159 does not cure the lacuna. This section, in the very nature of things and considering the language employed in Sub-section (1), can apply only to individual's or natural persons. It cannot cover a case of a dissolution of a company and there is no statutory fiction extending Section 159 to a case of dissolution of a company under Section 560 of the Companies Act.
Just as an individual cases to exist on death and a joint Hindu family cases to exist under Section 560 of the Companies Act. If the company is not in existence at the time of making the assessment, no order of assessment can be validly passed upon it under the Act and if one is passed, it must be a nullity.
Similar view is reiterated by the ITAT Delhi Bench in the case of Hewlett Packard India (P.) Ltd. (supra) wherein ITAT Delhi Bench held as under : In view of the legal position as laid down in the aforesaid decisions, it is clear that the assessment made in the present case in the name of HP India after the date of its dissolution is not valid. The fact that this company filed a return of income is not of any consequence. The order of assessment was made on 25-2-2005. As on this date HP India as an entity did not exist. The assessment is therefore held to be invalid and is cancelled.
15. Ld. D.R. supported the assessment in the hands of Pampasar Distillery Ltd. that is the amalgamating company which ceased to exist after the amalgamation. However, he further stated that if the assessment cannot be made in the hands of non-existent company, i.e., Pampasar Distillery Ltd. the same should be made in the hands of amalgamated company, i.e., Shaw Wallace Distilleries Ltd., for which he placed reliance on Section 170 of the Income Tax Act.
16. Section 170 of the Income Tax Act deals with the succession to the business otherwise than on death. It reads as under : 170. Succession to business otherwise than on death. (1) Where a person carrying on any business or profession (such person hereinafter in this section being referred to as the predecessor) has been succeeded therein by any other person (hereinafter in this section referred to as the successor) who continues to carry on that business or profession, (a) the predecessor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession; (b) the successor shall be assessed in respect of the income of the previous year after the date of succession.
(2) Notwithstanding anything contained in Sub-section (1), when 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 succession and of the previous 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, and all the provisions of this Act shall, so far as may be, apply accordingly.
(3) When any sum payable under this section in respect of the income of such business or profession for the previous year in which the succession took place up to the date of succession or for the previous year preceding that year, assessed on the predecessor, cannot be recovered from him, the assessing officer shall record a finding to that effect and the sum payable by the predecessor shall thereafter be payable by and recoverable from the successor, and the successor shall be entitled to recover from the predecessor any sum so paid.
(4) Where any business or profession carried on by a Hindu undivided family is succeeded to, and simultaneously with the succession or after the succession there has been a partition of the joint family property between the members or groups of members, the tax due in respect of the income of the business or profession succeeded to, up to the date of succession, shall be assessed and recovered in the manner provided in Section 171, but without prejudice to the provisions of this section.
Explanation.- For the purposes of this section, 'income' includes any gam accruing from the transfer, in any manner whatsoever, of the business or profession as a result of the succession.
As per Sub-section (1) of Section 170 when a business or profession carried on by one person is succeeded by another person who continues to carry on that business, the predecessor shall be assessed in respect of the income up to the date of successor and the successor shall be assessed in respect of income after the death of successor. As per Sub-section (2) when the predecessor cannot be found, the assessment of income up to the date of succession shall be made on the successor in the like manner and to the same extent as it would have been made on the predecessor. In our opinion, the provision of Section 170 would be squarely applicable in respect of the case of amalgamation. By the process of amalgamation the business which was being carried on by the amalgamating company-is succeeded by the amalgamated company who continues to carry on the said business. Therefore, the amalgamating company is assessable in respect of income up to the date of amalgamation. However, after the amalgamation once the amalgamating company is dissolved it does not remain in existence and, therefore, it cannot be found. Once it cannot be found the income up to the date of amalgamation should be assessed in the hands of amalgamated company i.e. the successor company in the like manner and to the same extent as it would have been assessed in the hands of amalgamating company. We also found that similar view was taken by the ITAT Delhi Bench in the case of Hewlett Packard India (P.) Ltd. (supra) wherein the ITAT held as under : In a case of amalgamation where one entity takes over the business of two other entities, the same would be a case of succession to business otherwise on death and therefore the provisions of Section 170 of the Act would apply.
17. Now the only question remains whether the assessment in the hands of a non-existent company is a nullity and invalid or it is only an irregularity. We find that the Delhi Bench of Tribunal in case of Impsat (P.) Ltd. (supra) has held the assessment in the hands of the amalgamating company which is non-existent to be nullity and invalid.
Similarly ITAT Delhi Bench in the case of Hewlett Packard India (P.) Ltd. (supra) held such assessment to be invalid. However, the ITAT Mumbai Bench in the case of Century Lnka Ltd. (supra) has held such assessment to be only irregularity. ITAT Delhi Bench in the case of Hewlett Packard India (P.) Ltd. (supra) has considered and relied upon the decision of Hon'ble Madras High Court in the case of CIT v. Express Newspapers Ltd. their Lordships held as under : There cannot be an assessment of a non-existent person. The definition of the word 'assessee' in Section 2(2) would obviously apply only to a living person. The rule contained in order 22, Rule 6, cannot, therefore, apply to the assessment proceedings. The assessment in the instant case was made long after the Free Press Company was struck off from the register of the companies, and it could not be valid."(p. 57) 18. We have also noticed that the decision of ITAT Delhi Bench in the case of Impsat (P.) Ltd. (supra) was available at the time when ITAT Mumbai Bench heard the appeal of Century Enka Ltd. (supra) but, the same was not brought to the knowledge of ITAT Mumbai Bench. Therefore, they had no occasion to consider the same and took a decision contrary to the decision of ITAT Delhi Bench. In view of the totality of the above facts and legal position we respectfully following the decision of ITAT Delhi Bench in the case of Impsat (P.) Ltd. and Hewlett Packard India (P.) Ltd. (supra) and the decision of the Madras High Court in the case of Express Newspapers Ltd. (supra) hold that the assessment made in the hands of non-existent company is nullity. Accordingly we quash the assessment made in the hands of Pampasar Distillery Ltd. for the assessment year under consideration, i.e., 1999-2000, 2000-01 and 2001-02, because assessment for these years were made on the date when it was not in existence.
19. However, before we part with the matter, we may mention that the assessing officer can make the assessment of the income prior to the period of amalgamation of Pampasar Distillery Ltd. in the hands of Successor Company that is amalgamated company which is Shaw Wallace Distilleries Ltd. as per provision of Sub-section (2) of Section 170 of the Income Tax Act. Now it is for the revenue to initiate appropriate proceedings against the right person i.e. Shaw Wallace Distilleries Ltd. in accordance with law. At present the assessment framed against Pampasar Distillery Ltd. is liable to be cancelled being invalid.
Accordingly, we cancel the assessment made in the hands of Pampasar Distillery Ltd. 20. As we have cancelled the assessment made in the hands of Pampasar Distillery Ltd., the revenue's appeal in ITA Nos. 558 to 560/Kol./2005 for assessment years 1999-2000 to 2001-02 which is against some relief allowed by Commissioner (Appeals), does not survive, accordingly the same are rejected.
21. Appeal in ITA Nos. 1672 to 1676/Kol./2005 are by the revenue for assessment years 1994-95 to 1998-99 in the case of Parasakthi Finance & Investments Co. Ltd. In all these appeals by the revenue the common ground raised which reads as under : Ld. Commissioner (Appeals), Madras, erred by deleting the demand standing in the A name of M/s. Parashakti Finance & Investment Ltd. for the under noted reasons: Deductor committed default during the respective financial years, i.e., 1994-95, 1995-96, 1996-97, 1997-98 and 1998-99 whereas, the order for amalgamation was passed by the Hon'ble High Court, Madras, on 9-12-1997.
During the material point of time, the deductor and the deductee company had their independent existence. Hence, the deductor company had legal liability to deduct tax at source and deposit the same into the Exchequer.
22. We have heard both the parties and perused the material placed before us. It has been submitted by the ld. Counsel that the company, viz., Parashakti Finance & Investment Ltd. has merged with Shaw Wallace Distilleries Ltd. with effect from 1-7-1988 while the orders under Section 201(1)/201(1A) was passed against Parashakti Finance & Investment Ltd. on 4-1-1999 when Parashakti Finance & Investment Ltd. was not in existence. That the scheme of amalgamation was approved by the Hon'ble Madras High Court vide order dated 9-12-1997 and by Hon'ble Calcutta High Court vide order dated 10-2-1995. Therefore, he stated that any order passed by the revenue authorities on the date when Parashakti Finance & Investment Ltd. is not in existence is nullity. He also stated that the detailed argument made in the case of Pampasar Distillery Ltd. would be equally applicable in the case of Parashakti Finance & Investment Ltd. also. Ld. D.R. has also relied upon his argument advanced in the case of Pampasar Distillery Ltd. We have already considered the rival submission and for the detailed discussion from paragraphs 11 to 19 of this order, we hold the order passed under Section 201 /201 (1A) on the date on which Parashakti Finance & Investment Ltd. was not in existence is a nullity. However, the revenue is at liberty to take appropriate action in the case of amalgamated company i.e. Shaw Wallace Distilleries Ltd. in accor dance with law.
23. In view of above, we uphold the order of the Commissioner (Appeals) wherein he has cancelled the order passed by the assessing officer under Section 201/201(1A).
24. In the result, the appeal in the case of assessee in ITA No.304/Kol./ 2005 and the cross objection by the assessee vide C.O. Nos.
227 and 228/ Kol./2005 are allowed and the appeal by the revenue in ITA No. 558 to 560/K.ol./2005 and ITA Nos. 1672 to 1676/Kol./2005 are dismissed.