Commissioner Of Income Tax, Faridabad v. M/S Motorola Solutions India Pvt. Ltd

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No.222 of 2014Date of decision:09.03.2015 Commissioner of Income Tax, Faridabad ....Appellant Versus M/s Motorola Solutions India Pvt. Ltd| ...... Responden CORAM:HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICEHON'BLE MR.JUSTICE G.S.SANDHAWALIAHON'BLE MR.JUSTICE G.S.SANDHAWALIA Present:Mr.Tajender K.Joshi, Advocate, tor the appellant. Mr.Himanshu Sinha, Advocateand Mr.Ashim Aggarwal, Advocate, for the respondent, G.S.Sandhawalia J. 1111 The present appeal, preferred by the Revenue, has been filed undersection 260A of the Income Tax Act, 1961 (for short, the 'Act'), against the orderdated 21.06.2013, passed by the Income Tax Appellate Tribunal, BangaloreBench 'A' Bangalore in IT(TP)A No.1274/BANG/2008 dated 21.06.2013, for theassessment year 2003-04. The Revenue has claimed the following question of law fordetermination by this Court: “Whether, in view of the first proviso to section 92C(2) of theIncome Tax Act, 1961, the Tribunal was correct in holding that ifsome profit level indicators of a comparable, out of a set ofcomparables, is higher than the profit level indicators of thetaxpayer, then tne transactions reported by the taxpayer Is at anarm's length price as contemplated in section 92, 92C and otherrelated provisions of the said Act?” Counsel tor the respondent-assessee, however, has raised apreliminary objection as to the jurisdiction of this Court on the ground that the order has been passed by the Tribunal at Bangalore and that the original companywhich was assessed on 27.03.2006 was Motorola India Electronics Pvt. Ltd. Thecompany, thereafter, had been known as Motorola Solutions India Pvt. Ltd.,which had filed an appeal before the Commissioner, Income Tax (Appeals)-IV,Bangalore, which had been partly allowed. Thereafter, an appeal had been filedbefore the Tribunal at Bangalore. The company, in the meantime, merged withMotorola India Pvt. Ltd. and the name had been changed to Motorola SolutionsIndia Pvt. Ltd., the respondent herein. The Tribunal had passed the order on21.06.2013, which is a subject matter of challenge. Accordingly, it wascontended that this Court would have no jurisdiction. Reliance was placed upona Division Bench judgment of this Court inCommissioner of Income Tax Vs. Motorola India Ltd. (2010) 326 ITR 156to contend that the situs of theAssessing Officer (for short, the 'AO') has to be seen and the High Court whichexercises territorial jurisdiction of such an Officer would be the jurisdictionalHigh Court, On the contrary, counsel for the Revenue has placed reliance upon aDivision Bench judgment of the Delhi High Court inCommissioner of Income Tax Vs. Aar Bee Industries (2013) 357 ITR 542>in which case, the judgment in|Motorola India Ltd.(Supra) was also taken into consideration and discussed. Itis, accordingly, submitted this Court would have jurisdiction since the initialcompany had merged with Motorola Solutions India Pvt. Ltd. which had beenassessed at Gurgaon. It is contended that merely because of the fact that theassessment had been made at Bangalore would not be a relevant factor since theAO has, now, been changed and therefore, the situs of the Tribunal would not bea determining factor. the respondent-assessee is liable to be upheld. As noticed above, in the case ofMotorola India Ltd.(supra), there was a transfer order passed under Section 127of the Act, whereby the records were transferred trom Bangalore to Gurgaon andthe jurisdiction of the respondent-assessee was transferred to this Court. It washeld that the assessee could not take advantage of the transfer and the situs of theAO would give the High Court the territorial jurisdiction. Otherwise, it wouldlead to an assessee avoiding inconvenient law, laid down by the High Courtconcerned. The relevant observations read as under: the respondent-assessee is liable to be upheld. As noticed above, in the case ofMotorola India Ltd.(supra), there was a transfer order passed under Section 127of the Act, whereby the records were transferred trom Bangalore to Gurgaon andthe jurisdiction of the respondent-assessee was transferred to this Court. It washeld that the assessee could not take advantage of the transfer and the situs of theAO would give the High Court the territorial jurisdiction. Otherwise, it wouldlead to an assessee avoiding inconvenient law, laid down by the High Courtconcerned. The relevant observations read as under: “The decision of the High Courts are binding on the subordinateCourts and authorities or Tribunals under its superintendencethrougnout tne territory in relation to wnicn it exercises jurisdictionbut It does not extend beyond its territorial jurisdiction. In otnerwords, the decision of one High Court is not a binding precedent foranother High Court or for Courts or Tribunals outside its territorialjurisdiction. The doctrine of precedents and rule of binding efficacyof law laid down by the High Court within its territorial jurisdiction,the questions of law arising out of decision in a reference, has to bedetermined by the High Court which exercises territorial jurisdictionover the situs of the Assessing Officer and if it was otherwise then itwould result in serious anomalies as an assessee affected by anassessment order at Bombay may invoke the jurisdiction of DelhiHigh Court to take advantage of a suitable decision taken by it.Thus, such an assessee may avoid application of inconvenient lawlaid down by the jurisdictional High Court of Bombay. On the basisof the aforementioned reasoning, the Division Bench sustained theopjection that the jurisdiction to entertain tne application under sub-section (1) and (2) of Section 256 of the Act vested in the HighCourt of Bombay and not of Delhi. We are in respectful agreementwith the aforementioned reasoning of the Delhi High Court.Accordingly, we noida that the preliminary objection raisea bylearned counsel for the assessee-respondent is sustainable. xX XxXxXxxXxXx A conjoint reading of the aforementioned provisions makes itevident that the Director General or Chief Commissioner orCommissioner is empowered to transfer any case from one ormore Assessing Officers subordinate to him to any other AssessingOfficer. It also deals with the procedure when the case is transterreaq trom one Assessing Officer subordinate to a DirectoGeneral or Chief Commissioner or Commissioner to an AssessingOfficer who is not subordinate to the same Director General, ChiefCommissioner or Commissioner. [ne aforementioned situation anathe definition of expression case in relation to jurisdiction of anAssessing Officer is quite understandable but it has got nothing todo with the territorial jurisdiction of the Tribunal or High Courtsmerely because section 12/ of tne Act dealing with transfer nasbeen Incorporated in the same chapter. I|nerefore, the argumenraised is completely devoid of substance and we have no hesitationto reject the same. In view of the above, the appeal is dismissed by sustaining thepreliminary objection that this Court has no territorial jurisdictionover an order passed by the Assessing Officer at Bangalore.Accoraingly, these appeals are returned to the revenue appellantfor their filing before the competent court of jurisdiction inaccordance witn law. The said view was followed inITA No.49 of 2012titledCommissioner of Income Tax (Central) Gurgaon Vs. M/s Parabolic Drugs Ltd.,decided on 11.10.2012, wherein also, the assessee's case had been transferredfrom New Delhi to Central Circle, Chandigarh under Section 127 of the Act. TheTribunal's order was sought to be challenged in the said appeal and this Courtreturned the appeal for filing before the competent Court ofjurisdiction, keepingin view the settled principles of this Court and the binding precedent of theDivision Bench of this Court, as noticed above. The said view was followed inITA No.49 of 2012titledCommissioner of Income Tax (Central) Gurgaon Vs. M/s Parabolic Drugs Ltd.,decided on 11.10.2012, wherein also, the assessee's case had been transferredfrom New Delhi to Central Circle, Chandigarh under Section 127 of the Act. TheTribunal's order was sought to be challenged in the said appeal and this Courtreturned the appeal for filing before the competent Court ofjurisdiction, keepingin view the settled principles of this Court and the binding precedent of theDivision Bench of this Court, as noticed above. Another ground which militates against the Revenue is that themerger with the respondent-company is stated to have taken place on 01.04.2005and the AO's order was made on 27.03.2006. As per Section 170 of the Act, thepredecessor is to be assessed in respect of the income of the previous year only inwhich the succession took place upto the date of succession and the successor isto be assessed in respect of the income of the previous year, after the date ofsuccession. Relevant portion reads as under: “Succession to business otnerwise than on deatn. 170. (1) Where a person carrying on any business or profession(such person hereinafter in this section being referred to as thepredecessor) has been succeeded therein by any other person(nereinatter in this section referred to as the successor) whocontinues to carry on that business or profession,— (a) the predecessor shall be assessed in respect of the income ofthe previous year in wnicn the succession took place up to the dateof succession: (l) the successor shall be assessed in respect of the income of theprevious year after the date of succession." Once the assessment at Bangalore was of Motorola India ElectronicsLtd. on 27.03.2006 for the assessment year 2003-04, the subsequent mergerwould not give right to the assessing authorities who had jurisdiction over thesuccessor company and only the AO of the predecessor company would havejurisdiction, which was, admittedly, at Bangalore. The submission that the appealis the continuation of the proceedings and the subsequent appeals filed by theRevenue, would give the AO of the successor company jurisdiction, cannot, thus,be accepted, in view of the provisions of Section 170 of the Act, also. Accordingly, the present appeal, being not maintainable, is dismissedby holding that this Court has no territorial jurisdiction to adjudicate upon the lisOver an order passed by the AO at Bangalore. Consequently, the appeal isreturned to the Revenue for filing before the competent Court of jurisdiction, inaccordance with law| (S.J.Vazifdar) Acting Chief Justice (G.S.Sandhawalia)Judge 09.03.20158%+*68(