COMMISSIONER OF INCOME TAX FARIDABAD vs. M/S MOTOROLA SOLUTIONS INDIA PVT LTD

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ITA/222/2014HC Punjab & HaryanaPHHC01109356201409 March 2015Author: MR. JUSTICE A.B. CHAUDHARI,MR. JUSTICE M.M. AGGARWAL5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court of Punjab & Haryana held that it has no territorial jurisdiction to entertain the appeal. The Court upheld the preliminary objection raised by the assessee. The reasoning was based on the principle established in Commissioner of Income Tax Vs. Motorola India Ltd. (supra), which stated that the High Court exercising territorial jurisdiction over the situs of the Assessing Officer has jurisdiction. The Court emphasized that an assessee cannot take advantage of a transfer of records to avoid inconvenient law. The Court also noted that the merger of the company on 01.04.2005, with the Assessing Officer's order dated 27.03.2006, does not alter the jurisdiction. Section 170 of the Act was discussed, indicating that the predecessor is assessed up to the date of succession and the successor thereafter. Since the assessment at Bangalore was of the predecessor company, the AO of the predecessor company at Bangalore had jurisdiction. The argument that appeals are a continuation and subsequent appeals grant jurisdiction to the successor's AO was rejected. Consequently, the appeal was dismissed as not maintainable and returned to the Revenue for filing before the competent court of jurisdiction.

What were the facts?

The Revenue, Commissioner of Income Tax, Faridabad, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 21.06.2013 passed by the Income Tax Appellate Tribunal, Bangalore Bench 'A', for the assessment year 2003-04. The appeal was filed before the High Court of Punjab & Haryana. The assessee, M/s Motorola Solutions India Pvt. Ltd., raised a preliminary objection regarding the jurisdiction of the High Court. The assessee contended that the original assessment was made by an Assessing Officer in Bangalore, and the Tribunal's order was also passed at Bangalore. The assessee further argued that the High Court's jurisdiction is determined by the situs of the Assessing Officer, citing a previous judgment in CIT vs. Motorola India Ltd. The Revenue countered that the assessee company had merged with Motorola Solutions India Pvt. Ltd., which was assessed at Gurgaon, thus conferring jurisdiction on this High Court. The merger took place on 01.04.2005, and the Assessing Officer's order was dated 27.03.2006.

What were the issues?

1. Whether this High Court has territorial jurisdiction to entertain an appeal against an order passed by the Income Tax Appellate Tribunal at Bangalore, considering the original assessment was made by an Assessing Officer in Bangalore, and the assessee company has subsequently merged. Assessee's Arguments: The assessee argued that the jurisdiction of the High Court is determined by the situs of the Assessing Officer. They relied on the judgment in Commissioner of Income Tax Vs. Motorola India Ltd. (2010) 326 ITR 156, which held that the High Court exercising territorial jurisdiction over the Assessing Officer has jurisdiction. They contended that the Tribunal's location is not the determining factor and that the original assessment at Bangalore dictates the jurisdictional High Court. Revenue's Arguments: The Revenue argued that the merger of the original company with Motorola Solutions India Pvt. Ltd., which was assessed at Gurgaon, confers jurisdiction on this High Court. They relied on Commissioner of Income Tax Vs. Aar Bee Industries (2013) 357 ITR 542, which considered the Motorola India Ltd. judgment. The Revenue submitted that the situs of the Assessing Officer has changed and the Tribunal's location is not relevant. They also argued that appeals are a continuation of proceedings and the subsequent merger grants jurisdiction to the successor's Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 260A,Section 127,Section 170

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of decision:09.03.2015 Commissioner of Income Tax, Faridabad

....Appellant

Versus M/s Motorola Solutions India Pvt. Ltd.

......Respondent CORAM: HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr.Tajender K.Joshi, Advocate, for the appellant. Mr.Himanshu Sinha, Advocate and Mr.Ashim Aggarwal, Advocate, for the respondent. ****

G.S.Sandhawalia J.

The present appeal, preferred by the Revenue, has been filed under Section 260A of the Income Tax Act, 1961 (for short, the 'Act'), against the order dated 21.06.2013, passed by the Income Tax Appellate Tribunal, Bangalore Bench 'A' Bangalore in IT(TP)A No.1274/BANG/2008 dated 21.06.2013, for the assessment year 2003-04. The Revenue has claimed the following question of law for determination by this Court: “Whether, in view of the first proviso to section 92C(2) of the Income Tax Act, 1961, the Tribunal was correct in holding that if some profit level indicators of a comparable, out of a set of comparables, is higher than the profit level indicators of the taxpayer, then the transactions reported by the taxpayer is at an arm's length price as contemplated in section 92, 92C and other related provisions of the said Act?” Counsel for the respondent-assessee, however, has raised a preliminary objection as to the juri iction of this Court on the ground that the SAILESH RANJAN 2015.03.23 10:43 integrity of this document -2- order has been passed by the Tribunal at Bangalore and that the original company which was assessed on 27.03.2006 was Motorola India Electronics Pvt. Ltd. The company, thereafter, had been known as Motorola Solutions India Pvt. Ltd., which had filed an appeal before the Commissioner, Income Tax (Appeals)-IV, Assessing Officer (for short, the 'AO') has to be seen and the High Court which 2015.03.23 10:43 integrity of this document -3- the respondent-assessee is liable to be upheld. As noticed above, in the case of Motorola India Ltd. (supra), there was a transfer order passed under Section 127 of the Act, whereby the records were transferred from Bangalore to Gurgaon and the juri iction of the respondent-assessee was transferred to this Court. It was held that the assessee could not take advantage of the transfer and the situs of the AO would give the High Court the territorial juri iction. Otherwise, it would lead to an assessee avoiding inconvenient law, laid down by the High Court concerned. The relevant observations read as under: “The decision of the High Courts are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territory in relation to which it exercises juri iction but it does not extend beyond its territorial juri iction. In other words, the decision of one High Court is not a binding precedent for another High Court or for Courts or Tribunals outside its territorial juri iction. The doctrine of precedents and rule of binding efficacy of law laid down by the High Court within its territorial juri iction, the questions of law arising out of decision in a reference, has to be determined by the High Court which exercises territorial juri iction over the situs of the Assessing Officer and if it was otherwise then it would result in serious anomalies as an assessee affected by an assessment order at Bombay may invoke the juri iction of Delhi High Court to take advantage of a suitable decision taken by it. Thus, such an assessee may avoid application of inconvenient law laid down by the juri ictional High Court of Bombay. On the basis of the aforementioned reasoning, the Division Bench sustained the objection that the juri iction to entertain the application under sub- section (1) and (2) of Section 256 of the Act vested in the High Court of Bombay and not of Delhi. We are in respectful agreement with the aforementioned reasoning of the Delhi High Court. Accordingly, we hold that the preliminary objection raised by learned counsel for the assessee-respondent is sustainable. xxxx xxxx xxxx A conjoint reading of the aforementioned provisions makes it evident that the Director General or Chief Commissioner or Commissioner is empowered to transfer any case from one or more Assessing Officers subordinate to him to any other Assessing Officer. It also deals with the procedure when the case is SAILESH RANJAN 2015.03.23 10:43 integrity of this document -4- transferred from one Assessing Officer subordinate to a Director General or Chief Commissioner or Commissioner to an Assessing Officer who is not subordinate to the same Director General, Chief Commissioner or Commissioner. The aforementioned situation and the definition of expression 'case' in relation to juri iction of an Assessing Officer is quite understandable but it has got nothing to do with the territorial juri iction of the Tribunal or High Courts merely because Section 127 of the Act dealing with transfer has been incorporated in the same chapter. Therefore, the argument raised is completely devoid of substance and we have no hesitation to reject the same. In view of the above, the appeal is dismissed by sustaining the preliminary objection that this Court has no territorial juri iction over an order passed by the Assessing Officer at Bangalore. Accordingly, these appeals are returned to the revenue appellant for their filing before the competent court of juri iction in accordance with law.” The said view was followed in ITA No.49 of 2012 titled Commissioner of Income Tax (Central) Gurgaon Vs. M/s Parabolic Drugs Ltd., decided on 11.10.2012, wherein also, the assessee's case had been transferred from New Delhi to Central Circle, Chandigarh under Section 127 of the Act. The Tribunal's order was sought to be challenged in the said appeal and this Court returned the appeal for filing before the competent Court of juri iction, keeping in view the settled principles of this Court and the binding precedent of the Division Bench of this Court, as noticed above. Another ground which militates against the Revenue is that the merger with the respondent-company is stated to have taken place on 01.04.2005 and the AO's order was made on 27.03.2006. As per Section 170 of the Act, the predecessor is to be assessed in respect of the income of the previous year only in which the succession took place upto the date of succession and the successor is to be assessed in respect of the income of the previous year, after the date of succession. Relevant portion reads as under: SAILESH RANJAN 2015.03.23 10:43 integrity of this document -5- “Succession to business otherwise than on death.

170.

(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.” Once the assessment at Bangalore was of Motorola India Electronics Ltd. on 27.03.2006 for the assessment year 2003-04, the subsequent merger would not give right to the assessing authorities who had juri iction over the successor company and only the AO of the predecessor company would have juri iction, which was, admittedly, at Bangalore. The submission that the appeal is the continuation of the proceedings and the subsequent appeals filed by the Revenue, would give the AO of the successor company juri iction, cannot, thus, be accepted, in view of the provisions of Section 170 of the Act, also. Accordingly, the present appeal, being not maintainable, is dismissed by holding that this Court has no territorial juri iction to adjudicate upon the lis over an order passed by the AO at Bangalore. Consequently, the appeal is returned to the Revenue for filing before the competent Court of juri iction, in accordance with law.

(S.J.Vazifdar) (G.S.Sandhawalia)

Acting Chief Justice Judge 09.03.2015

sailesh

SAILESH RANJAN 2015.03.23 10:43 integrity of this document

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