1. Amalgamation of companies — Assessment proceedings initiated and final order passed in the name of the amalgamating company after it ceased to exist — Validity under Income Tax Act. (Para 1 , 5 , 6 , 7 , 8 , 10 , 15 )
Back
Next 
2019 Supreme(SC) 782
SUPREME COURT OF INDIA
DHANANJAYA Y CHANDRACHUD, INDIRA BANERJEE, JJ.
Pr. Commissioner of Income Tax, New Delhi – Appellant
Versus
Maruti Suzuki India Limited – Respondent
Civil Appeal No. 5409 of 2019 (Arising out of SLP(C) No 4298 of 2019)
Decided On : 25-07-2019
Important Points
IMPORTANT POINT
Amalgamating entity ceases to exist upon approval of scheme of amalgamation. Notice and consequential actions of assessment in respect of such amalgamating unit is null and void. Participation in the proceedings by amalgamating entity cannot operate as an estoppel against law.
Amalgamating entity ceases to exist upon approval of scheme of amalgamation. Notice and consequential actions of assessment in respect of such amalgamating unit is null and void. Participation in the proceedings by amalgamating entity cannot operate as an estoppel against law.
Subject
ASSESSMENT - AMALGAMATION
Act Referred
COMPANIES ACT: S.394
INCOME TAX ACT: S.260(a), S.143(2), S.153(1), S.144(c)(15)(b), S.148, S.292(b), S.147
INCOME TAX ACT: S.260(a), S.143(2), S.153(1), S.144(c)(15)(b), S.148, S.292(b), S.147
Headnote
(a) Doctrine of merger - Judgments of High Court - Same view taken by Supreme Court in a civil appeal - High Court judgments merge in the decision of Supreme Court. (Para 25)
(b) Income Tax Act, 1961 - Section 144C(2) - Amalgamation scheme approved by High Court - Assessing officer informed of the position - Yet assessing officer issuing notice to the amalgamating unit - Well settled that amalgamating entity ceases to exist upon the approved scheme of amalgamation - Participation in the proceedings by amalgamating entity cannot operate as an estoppel against law - Notice and consequential actions held null and void. (Para 33, 34)
Facts of the case:
The Income Tax Appellate Tribunal held that the assessment made in the name of Suzuki Powertrain India Limited for Assessment Year 2012-13 is a nullity since the entity had been amalgamated with Maruti Suzuki India Limited under an approved scheme of amalgamation and was not in existence.
The High Court, while affirming this view of the Tribunal followed its own decision for AY 2011-12 in Principal Commissioner of Income Tax – 6, New Delhi v Maruti Suzuki India Limited (successor of SPIL) (2017) 397 ITR 681 (DEL.). Holding that no question of law arose, the High Court dismissed the appeal under Section 260A of the Income Tax Act 1961.
Finding of the Court:
There is no error in the impugned judgment.
Result: Appeal dismissed.
Legal Category Hierarchy
- taxation
- corporate law
- practice and procedure
Advocates Appeared:
For the Appellant(s) :Zoheb Hussain, Anil Katiyar, Advocates
For the Respondent(s):Ajay Vohra, Kavita Jha, Vaibhav Kulkarni, Advocates
For the Appellant(s) :Zoheb Hussain, Anil Katiyar, Advocates
For the Respondent(s):Ajay Vohra, Kavita Jha, Vaibhav Kulkarni, Advocates
Table of Contents
2. Whether assessment in the name of a non-existent amalgamating company is a curable procedural defect under Section 292B or a void jurisdictional error. (Para 17 , 18 )
3. Amalgamating company ceases to exist upon merger and cannot be a person for assessment; jurisdictional notices to non-existent entities are void ab initio and not curable under Section 292B. (Para 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 )
4. Assessment proceedings initiated and orders passed in the name of a non-existent amalgamating company are void ab initio and cannot be cured as procedural defects under Section 292B. (Para 19 , 31 , 33 )
5. Appeal dismissed; assessment order held to be a nullity. (Para 34 , 35 )
6. What is the legal status of an amalgamating company after an approved scheme of amalgamation?
Upon an approved scheme of amalgamation, the amalgamating company is dissolved without winding up and ceases to exist as a legal entity, meaning it can no longer be regarded as a person under Section 2(31) of the Income Tax Act. (Para 19 )
7. Is a notice issued to a non-existent amalgamating company curable under Section 292B of the Income Tax Act?
No. A jurisdictional notice issued to a non-existent entity is void ab initio. Such a defect is a substantive illegality rather than a mere procedural mistake, defect, or omission curable under Section 292B. (Para 19 , 31 )
8. Does the participation of the amalgamated company in assessment proceedings cure a void order passed in the name of the amalgamating company?
No. Participation by the amalgamated company in proceedings conducted in the name of the non-existent amalgamating company does not cure the jurisdictional defect, as there can be no estoppel against law. (Para 20 , 21 , 33 )
9. How does the court distinguish between a clerical error in a notice and a jurisdictional defect?
A clerical error occurs when material on record clearly shows the notice was intended for the successor entity despite a wrong name. Conversely, issuing a jurisdictional notice to a dissolved entity is a substantive illegality. (Para 27 , 29 , 31 )
JUDGMENT :
DHANANJAYA Y CHANDRACHUD, J.
1. This appeal arises from a judgment of a Division Bench of the Delhi High Court dated 9 January 2018 which upheld the decision of the Income Tax Appellate Tribunal(“the Tribunal”). The Tribunal held that the assessment made in the name of Suzuki Powertrain India Limited(“SPIL”) for Assessment Year(“AY”) 2012-13 is a nullity since the entity had been amalgamated with Maruti Suzuki India Limited(“MSIL”) under an approved scheme of amalgamation and was not in existence. The High Court, while affirming this view of the Tribunal followed its own decision for AY 2011-12 in Principal Commissioner of Income Tax – 6, New Delhi v Maruti Suzuki India Limited (successor of SPIL) ((2017) 397 ITR 681 (DEL.)) (“Maruti Suzuki”) . Holding that no question of law arose, the High Court dismissed the appeal under Section 260A of the Income Tax Act 1961(“The Act 1961”).
2. The Revenue is in appeal.
3. Against the decision of the High Court for AY 2011-12, a Special Leave Petition(SLP (C) Diary No. 14106 of 2018) was dismissed by a two judge Bench of this Court on 16 July 2018 with the following observations:
“Heard learned counsel for the parties.
Delay condoned.
In view of the order dated 02.11.2017 passed by this Court in C.I.T., New Delhi Vs. M/s. Spice Enfotainment Ltd. (Civil Appeal No. 285 of 2014 etc. etc.), this special leave petition also stands dismissed. Pending applications, if any, shall stand disposed of.”
On behalf of the respondent, it has been urged that in view of the dismissal of the Special Leave Petition in relation to AY 2011-12, the same course of action must follow in the present case which deals with the assessment for AY 2012-13.
4. We have heard submissions on behalf of the appellant by Mr Zoheb Hossain, learned Counsel and for the respondents by Mr Ajay Vohra, learned Senior Counsel. In order to appreciate the nature of the controversy, a narration of the facts would be instructive.
5. The assessee is a joint venture between Suzuki Motor Corporation and MSIL. The shareholding of the two companies in the assessee was 70 per cent and 30 per cent. The assessee was known upon incorporation as Suzuki Metal India Limited. Subsequently, with effect from 8 June 2005, its name was changed to SPIL.
6. On 28 November 2012, the assessee filed its return of income declaring an income of Rs. 212,51,51,156/-. The return of income was filed in the name of SPIL (no amalgamation having taken place on the relevant date).
7. On 29 January 2013, a scheme for amalgamation of SPIL and MSIL was approved by the High Court with effect from 1 April 2012. The terms of the approved scheme provided that all liabilities and duties of the transferor company shall stand transferred to the transferee company without any further act or deed. On the scheme coming into effect, the transferor was to stand dissolved without winding up. The scheme stipulated that the order of amalgamation will not be construed as an order granting exemptions from the payment of stamp duty or taxes or any other charges, if payable, in accordance with law.
8. On 2 April 2013, MSIL intimated the assessing officer of the amalgamation. The case was selected for scrutiny by the issuance of a notice under Section 143(2) on 26 September 2013, followed by a notice under Section 142(1) to the amalgamating company.
9. On 22 January 2016, the Transfer Pricing Officer(“TPO”) passed an order under Section 92CA (3) determining the Arm’s Length Price of royalty at 3 per cent and making an adjustment of Rs. 78.97 crores in respect of royalty paid by the assessee for the relevant previous year.
10. On 11 March 2016, a draft assessment order was passed in the name of Suzuki Powertrain India Limited” (amalgamated with Maruti Suzuki India Limited). The draft assessment order sought to increase the total income of the assessee by Rs. 78.97 crores in accordance with the order of the TPO in order to ensure that the international transactions with regard to the payment of r
