SFDC IRELAND LIMITED,DELHI vs. DEPUTY COMMISSIONER OF INCOME-TAX- 3(1)(1) INTL TAX, DELHI

The appellant assessee; namely, SFDC Ireland Limited (erstwhile entity Tableau International, unlimited company, Ireland) filed its Income Tax Return (‘ITR’) for the relevant year on 20.10.2022 declaring income of INR 3,677,250. The case was picked up for scrutiny and the consequential SFDC Ireland Limited, Delhi

Dissatisfied with the assessment order, the assessee filed this appeal raising following grounds: “1. On the facts and in the circumstances of the case and in law, the impugned final assessment order dated 27 January 2025 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ("the Act") by the Learned Deputy Commissioner of Income Tax, International Tax, Circle 3(1)(1), Delhi ("Ld. AO") and also the directions dated 19 December 2024 issued under section 144C(5) of the Act by the Ld. Dispute Resolution Panel ("DRP") for Assessment Year ("AY") 2022-23, are invalid, bad in law and are liable to be quashed. 1.1 On the facts and in the circumstances of the case and in law, the impugned final assessment order passed by the Ld. AO and the directions issued by the Ld. DRP are without juri iction, invalid and bad in law, as the same have been passed on a non-existent entity, which ceased to exist with effect from 1 April 2024 in pursuance to the Scheme of Merger, vitiating the whole assessment proceedings. 1.2 On the facts and in the circumstances of the case and in law, the impugned final assessment order dated 27 January 2025 passed by the Ld. AO is barred by limitation prescribed under section 153 of the Act and therefore, is void-ab-initio, bad in law and is liable to be quashed.

On the facts and in the circumstances of the case and in law, the notice dated 31 May 2023 under section 143(2) of the Act issued by the Deputy Commissioner of Income Tax, Circle, Delhi is without juri iction and all proceedings pursuant to the aforesaid notice under section 143(2) are also without juri iction, had in law, void ab initio and liable to be quashed. SFDC Ireland Limited, Delhi

On the facts and in the circumstances of the case and in law, the Ld. AO/Ld. DRP have grossly erred in observing that the consideration received by the Appellant amounting to INR 125,93,72,055 from its customers is in the nature of Fees for Technical Services ("FTS") as per the provisions of the Act and under Article 12 of the Double Taxation Avoidance Agreement entered into between India and Ireland ("DTAA"), without appreciating that the same is in the nature of business income and thus, not taxable in India in the absence of a Permanent Establishment ("PE”). 4.1 On the facts and in the circumstances of the case and in law, the t AO/Ld. DRP have grossly erred in not appreciating that the substantial consideration amounting to INR 111,37,81,206 (out of alleged total consideration of INR 125,93,72,055) pertains to sale of non-customized standard off-the-shelf/shrink wrapped software, software upgrades and support and maintenance services incidental to supply of software, which is not taxable in India being sale of copyrighted article. 4.2 On the facts and in the circumstances of the case and in law, the Ld. AO/ Ld. DRP have further grossly erred in taxing the consideration amounting to INR 14.44.28,209 (out of alleged total consideration of INR 125.93.72,055) from the provisions of software-as-a-service (including support and maintenance services), without appreciating that the same is a standard facility and not taxable as FTS, both under the Act and the DTAA. 4.3 The Id. AO/ Ld. DRP have further grossly erred in taxing the consideration amounting to INR 10,12,000 (out of alleged total consideration of INR 125.93.72,055) from training services, without SFDC Ireland Limited, Delhi

On the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest under section 2348 of the Act.

On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 970A of the Act.

At the outset, Sh. Ravi Sharma, Ld. Authorized Representative (‘AR’) of the assessee requested for deciding the juri ictional issue first and other grounds thereafter, if required. The Ld. AR before us, submitted copy of the letter dated 9th August, 2024 and 22th October, 2024 addressed to the Ld. Assessing Officer (‘AO’) and the Ld. DRP informing both authorities about the change of name of the appellant assessee. The said letters addressed to the Ld. AO and the Ld. DRP are scanned as under: SFDC Ireland Limited, Delhi

The Ld. AR further submitted that the Tableau, a company incorporated on 30th November, 2012 under the laws of Ireland, was engaged in the business of distribution of non-customized shrink wrapped/ off-the shelf/electronically downloadable tableau software (software products) to its customers in many countries, including in India. The contract for distributing the software to the Indian customers was entered into by Tableau outside India. SFDC Ireland Limited, Delhi

We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so wall only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable.”

Further, The Ld. AR placed reliance on the decision of Hon’ble Delhi High Court in the case of Vedanta Limited in ITR 88/2022 dated 17th January, 2025. The relevant part of the order reads as under: - “3. The undisputed facts which emerge from the record are as follows. The respondent-assessee, M/s Vedanta Limited (Vedanta) is the resultant entity which came into existence consequent to M/s Cairn India Limited (Cairn) amalgamating with it from an Effective Date of 01 April 2017. The Appointed Date under the Scheme of Amalgamation was stated to be 01 April 2016. 15. In the facts of the present case, however, we find that there was a valid disclosure made by the respondent-assessee and the AO being duly apprised of the factum of merger. Despite the above, it chose to make the draft assessment order in the name of a party which no longer existed on that date. This was, therefore, not a case where the factum of merger had either been suppressed or where the respondent had held out that Cairn still existed and could be proceeded against. It was the conduct of the assessee in Sky Light which had convinced the Supreme Court to observe that the mistake would not render the order of assessment invalid and that it could be saved under Section 292B of SFDC Ireland Limited, Delhi

Regard must also be had to the fact that Section 154 enables an authority under the Act to rectify and correct an accidental slip or omission. It pertains to a power to rectify a mistake apparent from the record. Section 292B seeks to save orders which may suffer from similar mistakes provided they be otherwise compliant with the letter and spirit of the Act. However, and as the Supreme Court explained in Maruti Suzuki, the making of an order of assessment which is inherently flawed or suffering from a patent illegality, and which would include a case where the order is drawn in the name of a non-existent entity, cannot be saved or rescued.

In our considered opinion, the power conferred by Section 154 would stand restricted to an inadvertent or unintentional error. The appellant has woefully failed to establish that the order of assessment as originally framed was intended to be in respect of the affairs of Vedanta, the respondent herein, or made cognizant of the factum of merger. Mr. Rai has also failed to draw our attention to any recital or observation forming part of the order of assessment which may have been representative of a conscious intent of the AO to frame an assessment in the name of the resultant entity and the order drawn in the name of Cairn being an accidental or inadvertent error.

We also bear in mind the indubitable fact that the AO proceeded to draw the order of assessment using the expression “formerly known as”. The appellant thus failed to acknowledge the merger even at this stage. The usage of the expression “formerly known as” is indicative of them presuming that the amalgamation was akin to a change to the façade of a legal entity as opposed to a fundamental alteration and the merger giving rise to a new being. It was these facts which had weighed upon us when we had amended the question of law on which the appeal was admitted. We thus find no merit in the argument of Mr. Rai that the challenge would be liable to be answered in light of Sky Light. Bearing in mind the fundamental error which beset the order of the TPO, the said decision would clearly not salvage the inherent and patent error which beset the order passed by the TPO. Absent any intent to assess the SFDC Ireland Limited, Delhi

We thus answer the question as posited in the negative and against the Commissioner. The appeal fails and shall consequently stand dismissed.”

Further reliance was also placed by the Ld. AR in cases of International Hospital Ltd. [2024] 167 taxmann.com 317 (Del), Micra India Ltd. [2015] 57 taxmann.com 163 (Del) and Dimension Apparels (P) Ltd. [2014] 52 taxmann.com 356. In view of the above cited decisions of Hon’ble Supreme Court and Hon’ble Delhi High Court, the Ld. AR prayed for quashing the assessment order as void ab initio.

We have heard both parties and have perused the material available on the record. Keeping in facts of the case as mentioned above and in view of the above-mentioned cited decisions of Hon’ble Supreme Court and Hon’ble Delhi High Court, we are of the considered view that once the scheme of merger becomes effective and transferor company losses its existence by operation of law i.e. with effect from 1 April, 2024 in the instant case, a notice or proceedings drawn against a company which no longer exists in law would invalidate proceedings. Consequentially, we hold that the directions of the Ld. DRP panel and final assessment order passed in pursuance of the said directions in the name of Tableau International, unlimited company, Ireland is invalid in the eyes of law. Hence, the impugned order is hereby quashed as the assessment in the hands of a SFDC Ireland Limited, Delhi

Other grounds of appeal, in view of the above finding, become academic in nature. Hence, remaining grounds of appeal are not being adjudicated here.

In the result, the appeal of assessee is allowed as above. Order pronounced in open Court on 02 September, 2025 (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER