Aberdeen Asia Pacific Including Japan Equity Fund v. Deputy Commissioner Of Income Tax (International Taxation)-1(1)(1), Mumbai And Another

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2796 OF 2019 Aberdeen Asia Pacific Including Japan Equity Fund Vs.Deputy Commissioner of Income Tax (InternationalTaxation)-1(1)(1), Mumbai and another ...Petitioner ...Respondents WITH WRIT PETITION NO.2803 OF 2019 Aberdeen Emerging Markets Equity Fund Vs.Deputy Commissioner of Income Tax (InternationalTaxation)-1(1)(1), Mumbai and another ...Petitioner ...Respondents WITH WRIT PETITION NO.3525 OF 2019 Aberdeen Asia Pacific Excluding Japan Equity Fund...PetitionerVs.Deputy Commissioner of Income Tax (InternationalTaxation)-1(1)(1), Mumbai and another... ...Respondents Mr. Porus Kaka, Senior Advocate a/w. Mr. Manish Kanth, Mr. AnanduUnnikrishnan and Ms. Shipra Padhi i/b. Nishith Desai Associates for Petitionerin all the Petitions. Mr. Charanjit Chanderpal a/w Mr. S. B. Shenoy, Ms. Vaibhavi Gala and Ms.Shaista Hadi for Respondents. CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ.Reserved on : MARCH 06, 2020Pronounced on : JUNE 12, 2020 P.C.: 1.Heard Mr. Porus Kaka, learned senior counsel along with Mr. ManishKanth, Mr. Anandu Unnikrishnan and Ms. Shipra Padhi instructed by NishithDesai Asssociates for the petitioners; and Mr. Charanjit Chanderpal, learned standing counsel, Revenue along with Mr. S. B. Shenoy, Ms. Vaibhavi Gala andMs. Shaista Hadi, leanred counsel for the respondents. 2.Facts and reliefs sought for in all the three writ petitions being identical,those were heard together and are being disposed of by this common order. In fact,status of the petitioners in all the three writ petitions are identical. 3.Since learned counsel for the petitioners had argued Writ Petition No.2796of 2019 as the lead case, facts of that case are adverted to hereunder foradjudication of the lis covering all the writ petitions. 4.Petitioner is Aberdeen Asia Pacific Including Japan Equity Fund. Petitioneris a sub-fund or series of Aberdeen Institutional Commingled Funds, LLC(AICFL), a Delaware (USA) based Limited Liability Company. AICFL has beenorganised for the purpose of investing and dealing in all securities and instrumentsacross the world. AICFL has set up various investment schemes in the form ofsub-funds or 'series' with different sets of investors for investing in specificstrategies. 5.Petitioners in the three writ petitions are the sub-funds or 'series' of AICFLand have obtained necessary sub-account registration of Foreign InstitutionalInvestors with the Securities Exchange Board of India (SEBI). 6.Originally AICFL was set up as a Trust under the laws of the State ofDelaware, USA, to be precise on 09.12.1996, known as Aberdeen DelawareBusiness Trust with three sub-trusts. Petitioner was constituted as one of the sub-trusts under Aberdeen Delaware Business Trust, the other two sub-trusts being theother two writ petitioners. 7.Because of popularity of the LLC regime i.e., Limited Liability Company WP2796&group_19.odt across the investment funds industry, AICFL was re-organized / converted from aTrust into a Limited Liability Company (LLC) on 19.04.2010 in accordance withthe provisions of the Trust Act and the LLC Act in the State of Delaware, USA. Itis stated that Section 3821 of the Trust Act and Section 214 of the LLC Act inDelaware, USA provide that when a statutory trust is converted into LLC, for thepurposes of the law in the State of Delaware, USA, the LLC would be deemed tobe the same entity as the trust. Therefore, such conversion would not constitutecreation of a new entity. 8.As a consequence of such conversion of AICFL from trust to LLC,petitioner was also converted from a sub-trust to a sub-fund or 'series' of AICFL.Petitioner has highlighted the following salient aspects of such re-organization /conversion:- 8.As a consequence of such conversion of AICFL from trust to LLC,petitioner was also converted from a sub-trust to a sub-fund or 'series' of AICFL.Petitioner has highlighted the following salient aspects of such re-organization /conversion:- (i)AICFL which previously existed as a trust was continued as LLCwithout dissolution and was deemed by law to be the same entity as theerstwhile trust;without dissolution and was deemed by law to be the same entity as theerstwhile trust; (ii)Upon such conversion of AICFL, each sub-trust, including thepetitioner, continued as a corresponding sub-fund or 'series' of AICFLwithout dissolution;petitioner, continued as a corresponding sub-fund or 'series' of AICFLwithout dissolution; (iii) Each investor's interest in a sub-trust issued and outstandingimmediately prior to conversion was automatically converted into LLCinterest in the corresponding sub-fund or 'series' of AICFL;immediately prior to conversion was automatically converted into LLCinterest in the corresponding sub-fund or 'series' of AICFL; (iv) All the rights, privileges and powers of each sub-trust including thepetitioner and all property and debs due to such sub-trust vested in thecorresponding sub-fund of the LLC and became the property of suchsub-fund;petitioner and all property and debs due to such sub-trust vested in thecorresponding sub-fund of the LLC and became the property of suchsub-fund; (v)There was no change in the beneficial ownership of the beneficiaries ofthe sub-trusts including the petitioner upon conversion; andthe sub-trusts including the petitioner upon conversion; and (vi) Conversion did not lead to a taxable event for United States income taxpurposes or for Delaware State income tax purposes.purposes or for Delaware State income tax purposes. 9.The conversion was taken note of and accepted by both the US Securitiesand Exchange Commission and by SEBI as effectively involving nothing morethan a change of name of the entity. As a matter of fact SEBI did not consider thepetitioner to be a new entity and the petitioner continued to use its existing sub-account registration with SEBI for investing in Indian public markets. 10.Notwithstanding the fact that petitioner is a sub-fund or 'series' of AICFL, ithas been treated as an independent entity for tax purposes by the tax authorities inIndia, both before and after conversion. 11.Prior to conversion, petitioner as a sub-trust had incurred and accumulatedlosses under the head 'capital gains' to the tune of Rs.5,83,56,060.00 from theassessment year 2009-10 to the assessment year 2010-11. Such losses were fullyand properly disclosed by the petitioner in the returns filed for each of theassessment years. After conversion, these losses were carried forward by thepetitioner, now organised as a sub-fund or 'series' of the LLC, to assessment year2011-12 and beyond in accordance with Section 74 of the Income Tax Act, 1961(briefly 'the Act' hereinafter). 12.On 16.04.2012, AICFL filed an application before the Authority forAdvance Rulings (AAR) seeking an advance ruling on the following question:- Whether on the facts and in the circumstances of the case, AberdeenInstitutional Commingled Funds, LLC i.e., the applicant was entitled tocarry forward accumulated capital losses as disclosed in the applicationto the assessment year 2011-12 and thereafter, under Section 74 of theAct, notwithstanding its reorganisation effective from April 19, 2010? 13.The above application was registered as AAR No.1308 of 2012. By theruling dated 21.02.2018, the Authority for Advance Rulings (AAR) took the view 12.On 16.04.2012, AICFL filed an application before the Authority forAdvance Rulings (AAR) seeking an advance ruling on the following question:- Whether on the facts and in the circumstances of the case, AberdeenInstitutional Commingled Funds, LLC i.e., the applicant was entitled tocarry forward accumulated capital losses as disclosed in the applicationto the assessment year 2011-12 and thereafter, under Section 74 of theAct, notwithstanding its reorganisation effective from April 19, 2010? 13.The above application was registered as AAR No.1308 of 2012. By theruling dated 21.02.2018, the Authority for Advance Rulings (AAR) took the view that Section 70 of the Act limits the claim of carry forward of loss to the assesseeto the exclusion of everyone else. The benefit of setting off of loss is availableonly to the assessee. While acknowledging that under the provisions of the twostatutes of the State of Delaware (USA), the new LLC (Aberdeen InstitutionalCommingled Funds, LLC) may be deemed to be the same entity as that of theTrust (Aberdeen Delaware Business Trust), AAR however accepted the stand ofthe Revenue that allowance of carry forward and setting off of accumulated losshas to be examined under the provisions of the Indian income tax law, moreparticularly under Sections 70 to 79 of the Act, where there are no such deemingprovisions. The deeming fiction created by the statutes of Delaware under whichthe Trust and the LLC are treated to be the same entity cannot be invoked tocanvass carry forward and set off of losses in India in the absence of any suchspecific provisions in the Act. It was held that the LLC was never an assessibleentity in India; it had never filed any income tax returns in India. The Trust andLLC are separate assessible entities. The LLC having not filed any return cannotcarry forward and cannot claim set off of losses accumulated by the Trust and thiscannot effect the tax liability of the LLC. There being no specific provision in theAct allowing one assessee to carry forward and set off losses incurred by someother assesee, the question was answered by the AAR in the negative and againstthe applicant. 14.Thereafter respondent No.1 issued a notice under Section 148 of the Actdated 23.03.2018 for the assessment year 2011-12 addressed to the petitionerstating that he had reasons to believe that petitioner's income chargeable to tax forthe said assessment year had escaped assessment within the meaning of Section147 of the Act. Respondent No.1 stated that he proposed to re-assess the income ofthe petitioner for the said assessment year and called upon the petitioner to submita return in the prescribed form for the said assessment year within the specifiedperiod. It was further mentioned that the said notice was issued after obtaining thenecessary satisfaction of respondent No.2. 15.In accordance with the law laid down by the Supreme Court in GKNDriveshafts India Vs. ITO, 259 ITR 19, petitioner requested respondent No.1 for acopy of the reasons recorded prior to re-opening of assessment vide letter dated19.04.2018. 16.In the meanwhile petitioner also informed respondent No.1 on 11.06.2018that a writ petition was being filed in the High Court to challenge the ruling ofAAR. But without prejudice to the above, petitioner stated that it had dischargedthe tax arising pursuant to the ruling of the AAR and provided the details of thetaxes discharged enclosing therewith the challans evidencing discharge of theoutstanding tax liability. 15.In accordance with the law laid down by the Supreme Court in GKNDriveshafts India Vs. ITO, 259 ITR 19, petitioner requested respondent No.1 for acopy of the reasons recorded prior to re-opening of assessment vide letter dated19.04.2018. 16.In the meanwhile petitioner also informed respondent No.1 on 11.06.2018that a writ petition was being filed in the High Court to challenge the ruling ofAAR. But without prejudice to the above, petitioner stated that it had dischargedthe tax arising pursuant to the ruling of the AAR and provided the details of thetaxes discharged enclosing therewith the challans evidencing discharge of theoutstanding tax liability. 17.Respondent No.1 thereafter provided a copy of the reasons recorded prior toissuance of notice under Section 148 of the Act vide letter dated 20.07.2018. Itwas mentioned in the reasons recorded that the application filed by the AICFLbefore the AAR was the principal source of tangible information coming to thepossession of respondent No.1 from which he had reasons to believe that incomechargeable to tax had escaped assessment in the case of the assessee i.e., thepetitioner. Relying on the ruling given by the AAR, it was mentioned thatpetitioner is a person which is separate from the sub-trust. Upon re-organisationthe legal status of the Trust was converted into LLC. Presently, only the LLC existand the Trust has ceased to exist. The loss was incurred by a different entity and itcannot be carried forward and set off by another assessee. Loss claimed as set offunder Section 74 of the Act amounting to Rs.3,11,39,585.00 and the claim of carryforward of loss amounting to Rs.2,72,16,475.00 for the assessment year 2011-12by the assesee, totalling Rs.5,83,56,060.00, are not losses incurred by the assessee;rather those were losses incurred by a different person. This gave reason to believeto the Assessing Officer that income chargeable to tax had escaped assessmentwithin the meaning of Section 147 of the Act. It was further mentioned that the present case is squarely covered by clause (b) of Explanation-2 below Section 147of the Act which provides that where a return of income has been furnished by theassessee and no assessment has been made but it is noticed by the AssessingOfficer that the assessee has understated the income or claimed excessive loss,deduction, allowance or relief in the return, then such a situation shall also bedeemed to be a case where income chargeable to tax has escaped assessment. 18.On 24.09.2018, petitioner submitted letter of objection before respondentNo.1 against the reasons recorded for initiation of re-assessment proceedingsunder Section 147 of the Act, also seeking a copy of the prior sanction ofrespondent No.2. On 25.10.2018, respondent No.1 informed the petitioner that theobjections raised by it were not acceptable. While calling upon the petitioner tojoin the assessment proceedings, a copy of prior sanction of respondent No.2 wasfurnished to the petitioner. 19.In the meanwhile, AICFL filed Writ Petition No.9358 of 2018 before thiscourt challenging the ruling of AAR dated 21.02.2018. By order dated 24.11.2018,this Court passed an interim order restraining the Assessing Officer fromcompleting the re-assessment in terms of the ruling of AAR. 20.By the judgment and order dated 08.03.2019, this Court dismissed WritPetition No.9358 of 2018. It may be mentioned that the present petitioner had alsojoined AICFL as petitioner No.3 in Writ Petition No.9358 of 2018 in assailing theAAR ruling. In the said judgment this Court deleted the present petitioner andsimilarly situated the other two sub-funds who are presently petitioners in WritPetition Nos.2803 and 3525 of 2019 respectively from the list of petitioners inWrit Petition No.9358 of 2018 on the ground that they had not approached AAR;only AICFL had approached AAR. 20.1. On the substantive issue this Court held that in accordance with the 20.By the judgment and order dated 08.03.2019, this Court dismissed WritPetition No.9358 of 2018. It may be mentioned that the present petitioner had alsojoined AICFL as petitioner No.3 in Writ Petition No.9358 of 2018 in assailing theAAR ruling. In the said judgment this Court deleted the present petitioner andsimilarly situated the other two sub-funds who are presently petitioners in WritPetition Nos.2803 and 3525 of 2019 respectively from the list of petitioners inWrit Petition No.9358 of 2018 on the ground that they had not approached AAR;only AICFL had approached AAR. 20.1. On the substantive issue this Court held that in accordance with the principles of private international law, the status of an entity incorporated abroadhas to be determined even in India according to the law of the country where theentity was incorporated. It was held that in terms of the law of Delaware, USA,AICFL both as Trust and as LLC continues to be the same person. This position isaccepted in India. Therefore, gain and loss earned by it in its earlier avatar wouldin law not be denied only because of change in status from Trust to LLC.However, this Court noted that AAR had answered the question in the negative noton the above ground of change of status but on the ground that AICFL was not theassessee which had claimed loss in the earlier assessment year. It was notpossessed of any carry forward of loss from earlier assessment years to be set offin assessment year 2011-12 and subsequent assessment years in terms of Section74 of the Act. Rather, AICFL had admittedly filed no return of income and has notbeen allotted any Permanant Account Number (PAN). However, it was clarifiedthat the ruling of AAR would not impact the case of the three 'series' (funds) i.e.,the three writ peitioners in the three present writ petitions to claim the benefit ofcarry forward of loss under Section 74 of the Act, if they are otherwise entitled toin law. 21.Following the aforesaid judgment, respondent No.1 issued another noticedated 12.03.2019 under Section 142(1) of the Act to the petitioner for theassessment year 2011-12 calling upon the petitioner to comply with the previousnotice issued by respondent No.1. 22.Pursuant to the aforesaid judgment, petitioner submitted its final objectionto the re-opening of assessment on 19.03.2019 buttressing its claims on the basisof the aforesaid judgment of this Court in the case of AICFL. 23.On 08.04.2019, respondent No.1 issued notice under Section 142(1) of theAct calling upon the petitioner to furnish the accounts and documents specified inthe annexure to the notice in justification of its claim of set off of brought forward WP2796&group_19.odt loss of Rs.1,03,34,976.00 and carry forward of loss of Rs.1,68,81,499.00 for theassessment year 2012-13. In response thereto, petitioner filed detailed submissionsdated 15.04.2019 in the light of the judgment in AICFL and providing theinformation sought for. 24.Petitioner has stated that to its utter shock and surprise, respondent No.1 asthe Assessing Officer passed the draft assessment order dated 06.05.2019 for theassessment year 2011-12 under Section 143(3) read with Sections 147 and 144-C(1) of the Act. By the said order respondent No.1 disallowed the claim ofaccumulated loss amounting to Rs.5,83,56,060.00 carried forward by thepetitioner to assessment year 2011-12 and thereafter pursuant to conversion. 25.This was followed by the draft assessment order dated 07.05.2019 passedby respondent No.1 as the Assessing Officer for the assessment year 2012-13under Section 143(3) read with Section 144-C(1) of the Act. By the said order,respondent No.1 disallowed the claim of the petitioner for set off of lossamounting to Rs.1,03,34,976.00, further disallowing petitioner's claim of carryforward of loss amounting to Rs.1,68,81,499.00. 26.Aggrieved by the aforesaid, petitioner has preferred the present writ petitionunder Article 226 of the Constitution of India seeking the following reliefs:- 25.This was followed by the draft assessment order dated 07.05.2019 passedby respondent No.1 as the Assessing Officer for the assessment year 2012-13under Section 143(3) read with Section 144-C(1) of the Act. By the said order,respondent No.1 disallowed the claim of the petitioner for set off of lossamounting to Rs.1,03,34,976.00, further disallowing petitioner's claim of carryforward of loss amounting to Rs.1,68,81,499.00. 26.Aggrieved by the aforesaid, petitioner has preferred the present writ petitionunder Article 226 of the Constitution of India seeking the following reliefs:- (i)to set aside and quash the notice dated 23.03.2018 issued byrespondent No.1 under Section 148 of the Act for the assessment year2011-12;respondent No.1 under Section 148 of the Act for the assessment year2011-12; (ii) to set aside and quash the draft assessment order dated 06.05.2019passed by respondent No.1 for the assessment year 2011-12; and,passed by respondent No.1 for the assessment year 2011-12; and, (iii) to set aside and quash the draft assessment order dated 07.05.2019passed by respondent No.1 for the assessment year 2012-13.passed by respondent No.1 for the assessment year 2012-13. 27.Writ Petition No.3525 of 2019 was taken up for consideration on WP2796&group_19.odt 18.12.2019. On that day, this Court while issuing notice returnable on 13.01.2020granted ad-interim stay to the impugned notice dated 23.03.2018 issued underSection 148 of the Act for the assessment year 2011-12. 27.1. On 13.01.2020 this Court while adjourning the case on the request oflearned counsel for the respondents, granted liberty to the petitioner to seek earlydate for consideration of stay in the event Dispute Resolution Panel sought toproceed post passing of draft assessment orders. 27.2. Thereafter, this Court passed an order on 14.02.2020 directing that the ad-interim stay granted on 18.12.2019 in Writ Petition No.3525 of 2019 shouldcontinue. Further, it was directed that the draft assessment orders dated 06.05.2019and 07.05.2019 as well as proceedings before the Dispute Resolution Panel wouldremain stayed. 28.Mr. Porus Kaka, learned senior counsel for the petitioner submits thatnotwithstanding the interim order of this Court, Dispute Resolution Panel issueddirections under Section 144-C(5) of the Act on 28.02.2020 in respect of the draftorder of assessment dated 06.05.2019 for the assessment year 2011-12. This isunacceptable, he submits. Referring to the ruling of AAR dated 21.02.2018 andjudgment of this Court dated 08.03.2019 passed in the writ petition filed byAICFL, he submits that Supreme Court in the case of Technip SA Vs. SMSHolding (P) Ltd., (2005) 5 SCC 465 has settled the position that ordinarilyquestion of status of an entity would have to be decided according to the laws ofdomicile or place of incorporation. Following this position, this Court held thatAICFL both as a Trust and as LLC in terms of the law of Delaware, USA,continues to be the same person which position is accepted in India. However, onthe ground that AICFL had not filed any return in the earlier assessment years andtherefore it did not possess any loss of earlier assessment years to be carriedforward and set off in the assessment year 2011-12 and subsequent assessment years, both AAR and this Court held that since AICFL was not the assesseepossessing accumulated loss, it could not claim the benefit of carry forward andsetting off of loss. However, this Court had clarified that the above decision wouldnot impact the case of the three 'series' or funds i.e., the present writ petitioners toclaim the benefit of carry forward and set off of loss under Section 74 of the Act.In the reasons recorded for re-opening of asessment, it is specifically stated thatthe application of AICFL before the AAR was the principal source of tangibleinformation on the basis of which respondent No.1 had formed the belief thatincome of the petitioner chargeable to tax had escaped assessment. Reverting backto the judgment of this Court, Mr. Kaka submits that this Court had clarified thatwhile the benefit of carry forward and set off of loss was not available to theAICFL since it had never filed any return, it would be open to the three writpetitioners. Even the Revenue had admitted before this Court that it is the three'series' or funds i.e., the three writ petitioners which had filed returns of incomebeing individually recognised as assessees under the Act entitled to carry forwardthe loss and claim set off. He submits that having taken such a stand by theRevenue in the case of AICFL, it is not open to the Revenue to take a contrarystand in the case of the present three petitioners. He therefore, submits that theformation of belief by respondent No.1 being contrary to the law laid down by theSupreme Court in Technip SA(supra) and of this Court in the case of AICFL(supra), the same is wholly untenable in law and on that basis no notice of re-opening of assessment under Section 148 of the Act could have been issued or canbe sustained. 28.1. Referring to the draft assessment order dated 06.05.2019 for the assessmentyear 2011-12, he submits that the sole ground on which re-assessment was madewas that the petitioner as sub-trust of the Trust and as 'series' or fund of LLC aretwo different entities. Therefore, the 'series' or fund cannot claim the benefit ofcarry forward of loss of the other entity. This is completely contrary to the law laiddown by the Supreme Court in Technip SA (supra) and the judgment of this Court in AICFL(supra). Besides, being consequential to the impugned notice, the draftassessment order cannot survive independently in the event the impugned notice isinterdicted despite directions issued by the Dispute Resolution Panel which areagain in violation of the interim order of this Court. 28.2. In so far the draft assessment order dated 07.05.2019 for the assessmentyear 2012-13 is concerned, Mr. Kaka submits that since it is structured on thesame erronous principle, it also cannot be sustained. 28.3. He, therefore, submits that the impugned notice as well as the two draftassessment orders are liable to be set aside and quashed. 29.On the other hand, Mr. Chanderpal, learned standing counsel, Revenuesubmits that the writ petition may not be entertained by this Court as following thenotice under Section 148 of the Act, respondent No.1 had passed draft assessmentorder. In fact, for assessment year 2012-13 it is not a case of re-assessment butregular assessment. Petitioner has got adequate and efficacious alternative remedyprovided under the statute by way of several layers of appeal. Therefore, petitionershould avail the alternative remedy. All the writ petitions should be dismissed, hesubmits. 28.3. He, therefore, submits that the impugned notice as well as the two draftassessment orders are liable to be set aside and quashed. 29.On the other hand, Mr. Chanderpal, learned standing counsel, Revenuesubmits that the writ petition may not be entertained by this Court as following thenotice under Section 148 of the Act, respondent No.1 had passed draft assessmentorder. In fact, for assessment year 2012-13 it is not a case of re-assessment butregular assessment. Petitioner has got adequate and efficacious alternative remedyprovided under the statute by way of several layers of appeal. Therefore, petitionershould avail the alternative remedy. All the writ petitions should be dismissed, hesubmits. 30.In response, learned counsel for the petitioner submits that the fact that draftassessment order has been passed would not denude the right of the petitioner tochallenge the notice of re-assessment if it is without jurisdiction. If the assumptionof jurisdiction is wrong, the re-assessment order passed subsequently would haveno legs to stand. If the notice goes, so does the order of re-assessment. In supportof his submission learned counsel for the petitioner has placed reliance on thedecision of the Supreme Court in Calcutta Discount Company Ltd. Vs. ITO, 41ITR 191, which has been subsequently explained and reiterated by the GujaratHigh Court in Garden Finance Ltd. Vs. ACIT, 268 ITR 48 and by the Delhi High 31.Submissions made by learned counsel for the parties have been considered.Also perused and considered the materials on record and the cases cited at the Bar. 32.In Technip SA(supra), Supreme Court held that questions as to the statusof a corporation are to be decided according to the laws of its domicile orincorporation subject to certain exceptions including the exception of domesticpublic policy. This is because a corporation is a purely artificial body created bylaw. It can act only in accordance with the law of its creation. Therefore, if it is acorporation, it can be so only by virtue of the law by which it was incorporatedand it is to this law alone that all questions concerning the creation and dissolutionof the corporate status are referred unless it is contrary to public policy. However,Supreme Court carved out a distinction to the above principle by holding that theabove general rule regarding determination of status will not apply when the issuerelates to discharge of obligations or assertion of rights by a corporation in anothercountry whether such obligation is imposed by or right arises under the statute orcontract which is governed by the law of such other country. 33.Having noticed the above, we may revert back to the facts of the presentcase. Prior to conversion, AICFL was a trust by the name of Aberdeen DelawareBusiness Trust which was set up as a trust under the Trust Act of Delaware State.It had three sub-trusts briefly known as Ex Japan Sub-Trust, Inc Japan Sub-Trustand Emerging Markets Sub-Trust i.e., the earlier avatars of the present three writpetitioners. After conversion from statutory trust to LLC, Aberdeen DelawareBusiness Trust came to be known as Aberdeen Institutional Commingled Funds,LLC (already referred to as AICFL). The three sub-trusts as above wereaccordingly converted to sub-fund or 'series' of AICFL and in short came to beknown as Ex Japan Series, Inc Japan Series and Emerging Markets Series i.e., thepresent three writ petitioners. 33.Having noticed the above, we may revert back to the facts of the presentcase. Prior to conversion, AICFL was a trust by the name of Aberdeen DelawareBusiness Trust which was set up as a trust under the Trust Act of Delaware State.It had three sub-trusts briefly known as Ex Japan Sub-Trust, Inc Japan Sub-Trustand Emerging Markets Sub-Trust i.e., the earlier avatars of the present three writpetitioners. After conversion from statutory trust to LLC, Aberdeen DelawareBusiness Trust came to be known as Aberdeen Institutional Commingled Funds,LLC (already referred to as AICFL). The three sub-trusts as above wereaccordingly converted to sub-fund or 'series' of AICFL and in short came to beknown as Ex Japan Series, Inc Japan Series and Emerging Markets Series i.e., thepresent three writ petitioners. 34.AICFL sought an advance ruling from AAR on the question as to whether itwas entitled to carry forward accumulated capital loss as disclosed in theapplication filed before it to the assessment year 2011-12 and thereafter underSection 74 of the Act notwithstanding its reorganization from a statutory trust to alimited liability company (LLC). Revenue's stand in the proceedings before AARwas that the loss was not incurred either by the AICFL or by its earlier avatarAberdeen Delaware Business Trust. The loss stood in the name of the three trustfunds which was claimed to be carried forward by the three new LLC funds (i.e.,the present three writ petitioners), which have separate legal existence fromAICFL. AAR noted that under Sections 70 to 79 of the Act it is only the assesseewho is entitled to claim carry forward and setting off of loss. Whileacknowledging that under the provisions of the Trust Act and the LLC Act of theState of Delaware, USA, the LLC may be deemed to be the same entity as that ofthe Trust upon re-organization / conversion but the claim of carry forward andsetting off of loss of the applicant i.e., AICFL would have to be examined underthe Indian income tax law, more particularly under Sections 70 to 79 of the Act.AAR found as a fact that AICFL was never an assessee in India and that it hadnever filed any income tax returns in India. The Trust and LLC are separateassessible entities. Assertion of rights by AICFL of carry forward and set off ofaccumulated loss in India can only be governed by the provisions of the Act.Taking the view that there was no specific provision in the Act allowing oneassessee to carry forward and set off loss incurred by some other assessee, AARanswered the question posed before it in the negative and against AICFL. 35.When the above ruling of AAR was challenged by AICFL before this Court,the stand taken by the Revenue while opposing the writ petition was that it did notdispute the position in law that the status of AICFL under the conflict of law has tobe decided by the law of the country in which the entity was incorporated, in thiscase the State of Delaware, USA. However, it was contended that AICFL was not an assessee under the Act and consequently it did not file any return of income.Therefore, it was not entitled to claim benefit of Section 74 of the Act. On theother hand, returns of income were filed by its three 'series' (funds) i.e., the presentthree writ petitioners, which have been individually assigned separate PermanentAccount Numbers (PANs). It was therefore, submitted that it was the three 'series'(funds) each of which is recognized as an assessee under the Act which would beentitled to carry forward the accumulated loss of earlier years to the assessmentyear 2011-12 and subsequent years, if otherwise permitted in law. an assessee under the Act and consequently it did not file any return of income.Therefore, it was not entitled to claim benefit of Section 74 of the Act. On theother hand, returns of income were filed by its three 'series' (funds) i.e., the presentthree writ petitioners, which have been individually assigned separate PermanentAccount Numbers (PANs). It was therefore, submitted that it was the three 'series'(funds) each of which is recognized as an assessee under the Act which would beentitled to carry forward the accumulated loss of earlier years to the assessmentyear 2011-12 and subsequent years, if otherwise permitted in law. 35.1. This Court held that there could be no dispute to the proposition that AICFLboth as a Trust and as LLC in terms of the laws of Delaware, USA continues to bethe same person. Noting that this position is accepted in India, this Court held thatgain and loss earned by AICFL in its earlier avatar would in law not be deniedonly because of change in status from Trust to LLC. However this Court notedthat AAR had answered the question posed before it in the negative not because ofchange of status of AICFL but on the ground that AICFL was not an assessee inIndia and had not filed any return of income. Therefore, question of any claim asto loss or carry forward of loss or setting off of loss by AICFL did not arise. ThisCourt further noted that SEBI as the regulatory authority has allowed the 'series'(funds) i.e., the present three writ petitioners to continue with their earlierregistration even after change of name. But this Court took the view that thiswould not assist AICFL because before the AAR it was not the 'series' (funds)which were seeking to carry forward the loss but by AICFL which had admittedlyfiled no return of income and was not assessed under the Act being not anassessee. It was in that context this Court made it clear that the ruling of AARwould not impact the case of the three 'series' (funds) i.e., the present three writpetitioners to claim the benefit of carry forward of loss under Section 74 of theAct, if they are otherwise entitled under the law. 36.Having deliberated upon the above, let us now examine the reasons recorded by respondent No.1 for re-assessment because it is the reasons alonewhich are to be examined while adjudicating as to whether the Assessing Officerhad reason to believe that any income of the assessee chargeable to tax hadescaped assessment within the meaning of Section 147 of the Act. 37.In the reasons recorded, respondent No.1 acknowledged that the applicationfiled by AICFL before the AAR was the principal source of tangible informationcoming to his possession on the basis of which he had formed the belief thatincome chargeable to tax had escaped assessment in the case of the petitioner.Upon analysis of the information collected / received, respondent No.1 as theAssessing Officer came to the finding that the assessee i.e., Aberdeen Asia PacificIncluding Japan Equity Fund, a 'series' (fund) of AICFL, is a person which isseparate from Aberdeen Delaware Business Trust Asia Pacific Inc Japan Fund.The latter existed as a trust fund and upon re-organization its legal status wasconverted into a 'series' (fund) of the LLC. At present only the LLC exist as theTrust has ceased to exist. Consequently, the sub-trusts do not exist. Therefore, forthe purpose of the Act each of them is a separate assessee. From the AARapplication it came to the knowledge of the Assessing Officer that the loss claimedas set off under Section 74 of the Act amounting to Rs.3,11,39,585.00 and theclaim of carry forward of loss amounting to Rs.2,72,16,475.00 by the assessee forthe assessment year 2011-12, totalling Rs.5,83,56,060.00, are not losses incurredby the assessee; rather those are losses incurred by Aberdeen Delaware BusinessTrust Asia Pacific Inc Japan Fund which is a different person being a trust fund orsub-trust. 37.1. In that context respondent No.1 observed that carry forward and set off ofloss is a privilege given by the Act to an assessee who has suffered the loss.Therefore, loss incurred by one assessee cannot be claimed to be carried forwardor allowed to be set off by another assessee. It was on that basis that respondentNo.1 issued the impugned notice under Section 148 of the Act re-opening the 38.It is quite apparent that the view taken by respondent No.1 which led to theformation of belief that income of the petitioner chargeable to tax has escapedassessment is totally erroneous being contrary to the ruling of AAR. Further, itstood totally contradicted by the judgment of this Court in AICFL. Moreover, it isalso contrary to the stand taken by the Revenue itself in the said writ proceeding.It was the stand of the Revenue that AICFL was not the assessee under the Act andit did not file return of income. Therefore, claiming of any carry forward of loss orset off of loss by AIFCL did not arise. On the other hand, it was the specific caseof the Revenue that returns of income were filed by the three 'series' (funds) i.e.,the present three writ petitioners each of which are recognised as assessees underthe Act. It was admitted by the Revenue that it is the 'series' (funds) which wouldbe entitled to carry forward the loss declared in the earlier returns of income to theassessment year 2011-12 and subsequent years, if otherwise eligible. 38.1. This Court accepted the position that in terms of the laws of Delaware,AICFL earlier as the Trust and presently as LLC continues to be the same personwhich position is accepted in India. Thereafter, this Court categorically held thatgain and loss earned by AICFL in its earlier avatar would in law not be deniedonly because of change in status from Trust to LLC. If this be so, then byextension, gain and loss earned by the present petitioner in its earlier avatar wouldnot be denied only because of change in status from sub-trust of the Trust to'series' (funds) of LLC. This Court had negated the claim of AICFL not on theground of change of status from Trust to LLC but on the ground that AICFL wasnot possessed of any carry forward of loss of earlier assessment years to be set offin assessment year 2011-12 and subsequent assessment years because AICFL wasnot an assessee under the Act and had filed no return of income previously. Whileupholding the ruling of AAR this Court however clarified that the said decisionwould not impact the case of the three 'series' (funds) i.e., the present three writ petitioners to claim the benefit of carry forward and set off of loss under Section74 of the Act if otherwise entitled under the law. 39.However, in the reasons recorded by respondent No.1 it was precisely onthe ground of change of status that the claim of the assessee i.e., the petitioner wasfound to be not acceptable which led to formation of the belief that income of thepetitioner chargeable to tax had escaped assessment for the assessment year 2011-12. Therefore, the very foundation for formation of such belief is erroneous, whichhas been contradicted by this Court. In other words, after the judgment of thisCourt in AICFL, the very basis for re-opening the assessment no longer survived.This position is buttressed in the draft assessment order dated 06.05.2019 passedby respondent No.1 for the assessment year 2011-12 under Section 143(3) readwith Sections 147 and 144-C(1) of the Act. In the said order passed on re-assessment it was clearly held that the old trust fund and the new LLC fund areseparate legal entities for the purpose of the Act. Therefore, loss of the old trustfund could not be carried forward by the new LLC fund. As indicated above, thisis a complete misreading of the judgment of this Court which has vitiated the re-assessment proceeding for the assessment year 2011-12 as well as the assessmentproceeding for the subsequent assessment year 2012-13. 40.Coming to the objection raised by learned standing counsel for the Revenuethat in view of the fact that re-assessment order has been passed for the assessmentyear 2011-12 and assessment order for the assessment year 2012-13 petitionershould be relegated to the alternative remedy of appellate forum as provided underthe statute, it is trite that if the Assessing Officer had no jurisdiction to initiate re-assessment proceeding, the mere fact that subsequent orders have been passedwould not render the challenge to jurisdiction infructuous. If the very basis for re-opening assessment does not survive, orders on such re-opening would not survivetoo. 41.That being the position and considering the matter in its entirety we are ofthe view that the impugned notice dated 23.03.2018 under Section 148 of the Actissued by respondent No.1 for the assessment year 2011-12 cannot be sustained.Consequential draft assessment order dated 06.05.2019 for the said assessmentyear and all orders passed thereafter would thus also be rendered unsustainable.That apart, the draft assessment order dated 07.05.2019 for the assessment year2012-13 in so far it followed the principle applied in the order dated 06.05.2019while disallowing the claim of the petitioner to carry forward and set-off of losswould also be unsustainable to that extent. 42.Accordingly, impugned notice dated 23.03.2018 and all consequentialorders pursuant thereto for the assessment year 2011-12 are hereby set aside andquashed. Likewise, the assessment order dated 07.05.2019 for the assessment year2012-13 would accordingly stand interfered with to the above extent. 43.Petitioners in the other two writ petitions i.e. Writ Petition Nos.2803 and3525 of 2019 are similarly placed like the petitioner in Writ Petition No.2796 of2019 seeking identical reliefs, being 'series' (funds) of AICFL. In view of thedecision in Writ Petition No.2796 of 2019, petitioners in these two writ petitionsare also granted similar relief as granted to the petitioner in Writ Petition No.2796of 2019. 44.Consequently, all the three writ petitions are hereby allowed. However,there shall be no order as to costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) Minal Parab