M/S.cognizant Technology Solutions India Private Limited v. The Assistant Commissioner Of Income Tax,Central Circle 1(1), Chennai,Investigation Building

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM W.P.No.23566 of 2021andW.M.P.Nos.24788 & 24789 of 2021 M/s.Cognizant Technology Solutions India Private Limited,Represented by its Authorised SignatoryV.N.Achutarama Gupta. ...Petitioner vs. The Assistant Commissioner of Income Tax,Central Circle 1(1), Chennai,Investigation Building, No.46, (Old No.108), Mahatma Gandhi Road,Nungambakkam, Chennai 600 034. ...Respondent Prayer : Writ Petition filed under Article 226 of the Constitution of India, for issuance of a Writ of Certioari, calling for the records on the file of the respondent and quash the impugned order in PAN : dated 30.09.2021 in DIN & Order No.ITBA/AST/S/144/2021-22/1036081063(1) passed under Section 144 of the Income Ttax Act, 1961 for the Assessment year 2016-17. Senior Standing Counsel The petitioner has challenged the impugned Assessment Order dated 30.09.2021 passed under Section 144 of the Income Tax Act,1961 by invoking best judgment method. The specific case of the petitioner is that five different assessees were amalgamated with the petitioner with effect from 01.04.2016 namely: https://hcservices.ecourts.gov.in/hcservices/ (1)M/s.Cognizant Technology Services Private Limited (Transferor Company 1); (2)M/s.Cognizant Global Services Private Limited (Transferor Company 2); (3)M/s.Excellence Data Research Private Limited (Transferor Company 3); (4)M/s.Itaas India Private Limited (Transferor Company 4) and (5)M/s.Saband Software Technologies Private Limited (Transferor Company 5) with M/s.Cognizant Technology Solutions India Private Limited (Transferee Company) 2. These five companies were also subjected to separate Assessment and Draft Assessment order were passed on various dates on 18.12.2019, 10.12.2019 and 10.12.2019. Inrespect of Transferor Nos.1, 2 & 4 the income has been added into the Income of the petitioner even though they were to be assessed separately. 3. The learned counsel for the petitioner submits that after draft assessment was passed in respect of Transferor Companies Nos.1, 2 and 4, these transferor companies approached the Dispute Resolution Panel. Separate orders dated 23.03.2021 were passed by the Dispute Resolution Panel inrespect to transferor companies Nos.1, 2 & 4. 4. It is therefore submitted that though this transferor Company stood merged and do not have any independent existence there cannot be any clubbing of income of these three transferor companies into the petitioner's company . 5. It is further submitted that while completing the assessment under Section 144 of the Income Tax Act, 1961 the respondent has wrongly clubbed the portion of the income of the Transferor companies. It is submitted that these incomes cannot be concluded into the income of the petitioner during the same assessee. 6. It is submitted that for invoking Section 144 of the Income Tax Act, 1961 was without any merits. https://hcservices.ecourts.gov.in/hcservices/ 7. Opposing the prayer, the learned Senior Standing Counsel for the respondent submits that the impugned order is well reasoned and requires no interference. It is submitted that the order has been passed by taking note of the decision of the Hon'ble Supreme Court in PCIT vs. Maruti Suzuki India Ltd., in C.A.No.5409 of 2018. 8. It is submitted that the petitioner has an alternate remedy before the Appellate commissioner under Section 246A of the Income Tax Act 1961 and therefore the writ petition is devoid of merits. It is further submitted that the issue as to whether the respondent could have added the income of the transferee company into the it or not is a matter which pertain to issue on merits and not on jurisdiction. https://hcservices.ecourts.gov.in/hcservices/ 7. Opposing the prayer, the learned Senior Standing Counsel for the respondent submits that the impugned order is well reasoned and requires no interference. It is submitted that the order has been passed by taking note of the decision of the Hon'ble Supreme Court in PCIT vs. Maruti Suzuki India Ltd., in C.A.No.5409 of 2018. 8. It is submitted that the petitioner has an alternate remedy before the Appellate commissioner under Section 246A of the Income Tax Act 1961 and therefore the writ petition is devoid of merits. It is further submitted that the issue as to whether the respondent could have added the income of the transferee company into the it or not is a matter which pertain to issue on merits and not on jurisdiction. 9. It is submitted that even if the respondents has passed wrong order, it cannot be stated that the orders is without jurisdiction and therefore the petitioner has to workout the remedy before the Appellate Commissioner. 10. I have considered the arguments advanced by the learned counsel for the petitioner and the learned counsel for the respondent and perused the returns filed by the petitioner on 13.11.2016 and the order of the Regional Director. The five transferor companies merged with the petitioner with effect from 01.04.2016. 11. The dispute in the present case pertains in the Assessment Year 2016-17 ( previous year 2015-16). Though 5 transferor companies merged with the petitioner's company with effect from 01.04.2016, the Transfer Pricing Officer (TPO) passed orders in the name of the non existing Transferor companies. A separate Draft Assessment Order was also passed on various dates under Section 144C, the detailed below in the name of the non-existing transferor companies:- 12. Aggrieved by the same, the petitioner had filed the proceedings before the Dispute Resolution Panel (DRP). The Dispute Resolution Panel ( DRP) after considering the facts and taking into consideration the decision of the Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Limited in Civil Appeal No.5409 of 2019, concluded that the assessment cannot be made in the name of the non-existing transferor companies and directed the assessing officer in each of the transferor's case, to pass the final order in the name of the Amalgamated Company i.e. M/s.Cognizant Technology Solution India Private Limited namely the petitioner (as successor in the interest of erstwhile”.. amalgamating company..”, since amalgamated). The DRP also directed to use PAN – AABC17719J ( for Itaas India): PAN – ( for CGSPL) and PAN – (CTSPL) for uploading purposes implying that the assessment orders of the amalgamating companies should be different from the assessment orders of the Amalgamated company. By separate orders dated 30.09.2021, it held as follows:- We note that in view of the above judgments, the order was required to be passed in the name of the amalgamated company. We also note that the AO/TPO cannot be held responsible alone. By its very conduct as mentioned in para 11.2 and 11.3 supra, the assessee had led the AO/TPO to believe that the amalgamating company as an entity existed. Therefore, the assessee furthered the impression of the continued existence of the amalgamating entity. Even before the panel, the assessee has filed Form 35A quoting PAN of amalgamating company, which is non-existent. We note that the Hon'ble Supreme Court in the case of Maruti Suzuki has observed that the assessment cannot be made in the hand of non-existent company post amalgamation. Accordingly, we are of the view that the draft order passed by the AO in the name of amalgamating company is not correct as per the aforementioned judgments. On the date of the We note that the Hon'ble Supreme Court in the case of Maruti Suzuki has observed that the assessment cannot be made in the hand of non-existent company post amalgamation. Accordingly, we are of the view that the draft order passed by the AO in the name of amalgamating company is not correct as per the aforementioned judgments. On the date of the draft order, the amalgamating company was not in existence and therefore, the order cannot be passed on a non-existent entity. The Assessing Officer is required to pass the draft assessment order in the name of the amalgamated company. In view of the above discussions, we direct the Assessing Officer to pass the final order in the name of the amalgamatedcompanyi.e.M/s.Cognizant Technology Solutions India Private Limited (as successor in the interest of erstwhile ITAAS India Private Limited since amalgamated).” 13. On the objections regarding Transfer Pricing, the Dispute Resolution Panel (DRP) directed the Transfer Pricing Officer (TPO) to re-computate in each of the Transferor's case. Pursuant to the aforesaid order of the Dispute Resolution Panel (DRP), the Transfer Pricing Officer (TPO) passed separate orders as detailed above again only in the name of the non-existent entities. These have culminated in the impugned Assessment Order dated 30.09.2021 under Section 144 of the Income Tax Act, 1961. While passing the impugned Assessment Order, the respondent Assessing Officer has included the income of the above three mentioned Transferor Companies as income of the petitioner, when indeed the three Transferor Companies were independent companies. The Assessment pertains, the Assessment Year 2016-17 for the relevant previous year (2015-16) when these Transferor companies were independent entities. While tax liability of the Transferor companies is to be borne by the petitioner Transferee company, there is no justification including the income of the Transferor companies into the Transferee company petitioner's herein for computation of the taxable income of the petitioner for the above assessment year. The Assessing Officer should have merely determined the taxable income of each of the Transferor Companies as a separate head in the same assessment order and added only the tax liability of the petitioner. 14. Under such circumstances, the impugned order is hereby set aside and the case is remitted back to the respondent to pass a fresh Assessment Order to ascertain the taxable income of the three Transferor Companies and the petitioner's Transferee company and to make a consolidated demand in respect of the same on the petitioner. 15. Accordingly, this writ petition is allowed with the above observation. No costs. Consequently, connected miscellaneous petitions are closed.s/d- Assistant Registrar True CopySub-Assistant Registrar Jas/kkdToThe Assistant Commissioner of Income Tax,Central Circle 1(1), Chennai,Investigation Building,No.46, (Old No.108), Mahatma Gandhi Road,Nungambakkam, Chennai 600 034. +1 CC to Mr.N.V. Balaji, advocate sr 25339+1 CC to Mr.A.P.Srinivas, Advocate sr 24502. W.P.No.23566 of 2021MT(CO)SP(06/05/2022)