Writ Petition No. 3827 of 1998. Case: Sunflag Iron & Steel Co. Ltd. Vs The Central Board of Direct Taxes, Ministry of Finance, Govt. of India and Ors.. High Court of Bombay (India)
| Case Number | Writ Petition No. 3827 of 1998 |
| Counsel | For Appellant: V.R. Thakur, Advocate and For Respondents: Anand Parchure, Advocate |
| Judges | B. R. Gavai and P. N. Deshmukh, JJ. |
| Issue | Income Tax Act, 1961 - Sections 119, 154, 156, 160, 163, 163(1), 192, 194LB, 194LC, 194LD, 195, 195(2), 2, 2(7), 200, 201, 240, 244, 244A, 244A(1), 244A(1)(b), 260, 263, 273A, 9 |
| Judgement Date | January 19, 2016 |
| Court | High Court of Bombay (India) |
Judgment:
B. R. Gavai, J.
1. The petitioner which is a public limited company has approached this Court, in effect for a writ of mandamus directing the respondents to pay interest on the amount of Rs. 49,40,923/- as provided under Section 244-A of the Income Tax Act (hereinafter referred to as "the Act"). The petitioner has also prayed for quashing and setting aside the communication dated 18.7.1995 issued by the Central Board of Direct Taxes to the Chief Commissioner of Income Tax, Pune.
2. The facts in the present case are not in dispute. The petitioner is a steel manufacturing company. The petitioner when it was in the process of establishing an integrated steel plant at Bhandara entered into an agreement with M/s. Mannesmann Demag (MDH) Germany (hereinafter referred to as "the German company") on 8.11.1985 for transfer of technical knowhow. As per the said agreement, the petitioner company was required to make the payment of technical know-how fee in three instalments of Rs. 25,48,333/- DM, totalling to Rs. 76,45,000/-.
3. That the petitioner Company in pursuance to the said agreement deducted tax at source (TDS) and paid/deposited the same with respondent as detailed below:-
That the petitioner Company on 26.5.1990 deducted tax at source of Rs. 53,70,567/- for the third and final instalment and deposited the same in advance with the Assistant Commissioner of Income Tax, Survey Circle-II, Permanent Account No. S-14/Special Range-2 in accordance with the provisions of Section 195 of the Act.
4. Subsequently, since the German company was not able to fulfill its obligations, an agreement was entered into on 1.7.1992 between the petitioner company and the German company vide which the German company agreed to waive the payment of third instalment of technical knowhow fee, amounting to Rs. 25,48,334/- DM and treat the payment of first and second instalments as full and final payment against the contract. The petitioners subsequently on 31.1.1994 filed an application claiming refund of the amount of Rs. 53,70,567/- which was deposited as advance TDS towards the third instalment of the payment which was to be made to the German company and in fact which payment was not made to the German company. The petitioners as directed by the Department executed an indemnity bond for the said amount of Rs. 53,70,567/- on 18.2.1994. On 24.3.1994 the Deputy Commissioner of Income Tax, Special Range-2, Nagpur addressed a communication to the Commissioner of Income Tax, Vidarbha, Nagpur stating that since in the present case there was no excess tax liability, he was of the opinion that the excess tax deducted at source should be refunded to the assessee company. However, since going through note of his predecessor on the order-sheet, it was noticed that in similar situation the Chief Commissioner of Income Tax had referred the matter to the Central Board of Direct Taxes, he requested the Chief Commissioner of Income Tax to give necessary clarification.
5. The Central Board of Direct Taxes vide the communication dated 18.7.1995 informed the Chief Commissioner of Income Tax, thereby conveying the authorization of the Board for grant of refund of Rs. 53,70,567/- independent of the provisions of the said Act to the petitioner. However, it was made subject to certain administrative safeguards. Needless to state that the conditions stipulated in the said communication were complied with by the petitioner and accordingly, on 28.2.1996 the aforesaid amount of Rs. 53,70,567/- was refunded to the petitioner. After the said amount was refunded, the petitioners on 19.3.1996 made an application for interest in view of the provisions of Section 244-A of the Act. The said request was rejected by communication dated 20.4.1996 by the Deputy Commissioner of Income Tax, Nagpur. Since the request of the petitioner was not considered, several reminders were sent to the respondent. However, since the respondents did not consider the request for grant of interest, the petitioner moved Delhi High Court seeking a direction to the respondents to pay the interest. However, the Division Bench of Delhi High Court was of the view that it did not have territorial jurisdiction to entertain the petition and it is the Nagpur Bench of the Bombay High Court which had a territorial jurisdiction and, as such, dismissed the petition for want of territorial jurisdiction, reserving the right of the petitioner to approach this Court. After the orders were passed by the Delhi High Court on 2.7.1998, the present petition has been filed. Rule was granted in the matter on 22.12.1998. Thereafter the respondents have also filed on record their submission on affidavit.
6. Shri V.R. Thakur, learned Counsel for the petitioner, submits that in view of the provisions of Clause (7) of Section 2 read with provisions of Sections 195, 200, 201 of the Income Tax Act, petitioner would be "assessee" as provided under the said Act. The learned Counsel in any case submits that in view of provisions of Sections 160 & 163 of the said Act, the petitioner would be a representative assessee of the German company and as such, the application for refund as well as the interest thereon would be very much tenable at the instance of the present petitioner. Shri Thakur submits that the perusal of Section 244-A(1) Clause (b) would reveal that the said clause has a wide scope and the liability to pay interest would accrue on the respondents, if the payment which was made to the Department was in excess of the entitlement or the payment was made which was not due. The learned Counsel submits that the respondents would have been entitled to appropriate the third instalment of the TDS only in the event the third instalment was in fact paid to the German company. He submits that since undisputedly the third instalment has been agreed to be waived by the German company and as such, no payment was made, the respondents had no authority to retain the TDS for the said amount of Rs. 53,70,567/-. The learned Counsel submits that the respondents correctly understanding the position have rightly decided to refund the amount of Rs. 53,70,567/- which was deducted. Shri V.R. Thakur, learned Counsel for the petitioner, further submitted that as such, the petitioner would be entitled to the interest for the entire period between the date of deposit and the date of refund. The learned Counsel, however, submits that on an untenable ground, the respondents are denying to pay interest under the provisions of Section 244-A for the amount which was erroneously withheld by them. The learned Counsel relies on the judgment of the Apex Court in the case of Union of India through Director of Income Tax vs. Tata Chemicals Limited reported in (2014) 6 SCC 335, Commissioner of Income Tax, Bhopal vs. H.E.G. Limited reported in (2010) 15 SCC 349, Kerala Financial Corporation v. Commissioner of Income Tax reported in AIR 1994 SC 2416 and of the Division Bench of Delhi High Court in the case of Delhi Development Authority vs. Income Tax Officer reported in 1998 Vol. 230 ITR 9.
7. Per contra, Shri Anand Parchure, leaned Counsel appearing on behalf of respondents/Revenue, submits that the TDS which was credited by the petitioner was credited on behalf of the German company. The learned Counsel, therefore, submits that it is only the German company which can be construed to be an assessee for the purposes of the said Act. The learned Counsel, therefore, submits that it is only the German company which was entitled to make an application for refund. He submits that though the German company had not made an application for refund and it was made by the petitioner, the CBDT gratuitously granted the prayer for refund. He submits that the same was done independent of the...
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