TII Instant Update - 2018-TII-INSTANT-ALL-533

CASE LAWS

2018-TII-11-HC-AHM-INTL

MULTIBASE INDIA LTD Vs ITO: GUJARAT HIGH COURT (Dated: February 14-15, 2018)

Income tax - Writ - Sections 119 & 195

Keywords - bonafide mistake - belated approach - excess deduction of tax - non furnishing of PAN - TDS refund

The Assessee company is engaged in the business of silicone based thermoplastics. For the A.Y 2005-06, the assessee had made payment of royalty of Rs.2,00,39,165/- to a foreign based company Multibase S.A. France. Since the said company did not have PAN, the assessee therefore deducted tax at source while making the payment at higher rate of 20% coming to a sum of Rs.40,26,438/-. The assessee later on realized that under clause 13 of DTAA between India and France, the royalty paid by assessee to the parent company would invite TDS liability only at the rate of 10% and not 20%. Thus, the assessee had made excess deduction of Rs.20,03,912/- under the said head and thereupon approached the ACIT requesting for refund of the excess amount of Rs.20,03,912/-. The authorities however declined to accept such request primarily on the ground that the approach by assessee was belated, relying upon a CBDT Circular dated Oct 23, 2007. Since the assessee's application for refund was beyond the period of limitation prescribed under the said circular, the assessee also approached CBDT requested for intervention by exercising powers u/s 119, but in vain.

On Writ, the HC held that,

Whether excess amount of tax deposited mistakenly by assessee, can be retained by the Department on the ground of delay in seeking refund - NO: HC

Whether application filed beyond period of limitation, is no ground to discard assessee's claim for refund of excess TDS deposited by him as compared to what is prescribed under DTAAs - YES: HC

+ this Court is informed that CBDT has not yet responded to the refund petition of assessee. It is seen that the assessee's application for refund of excess TDS deposited is not being decided primarily on the ground that the same was filed after the period of limitation prescribed under the scheme. Primafacie, there seems no ground to discard the assessee's contention that there has been excess deposit of TDS as compared to what is prescribed under DTAA and therefore, such excess deposit is required to be refunded, of course subject to fulfillment of conditions contained in the scheme. Be that as it may, these issues have not been examined by the department since at the very threshold, Commissioner believed that the application is belated. In the opinion of this Court, if the assessee is correct in pointing out that there has been a clear excess deduction of TDS and in depositing the Government revenue, subject to fulfillment of conditions of the scheme, he must receive refund thereof. Unless the delay is gross or intentional or arising out of inaction and lethargy on the part of assessee, tax mistakenly deposited cannot be retained by the Government on the ground of delay. Quite apart from the fact whether the authority itself under the scheme had power to condone the delay, section 119 clearly empowers the CBDT to do so;

+ it is to be noted that the CBDT undoubtedly has powers to condone the delay even if the Commissioner does not have such powers. This Court would have ordinarily requested the CBDT to examine the issue and consider exercising such powers on the petition already filed by the assessee. However, in the present case, the dispute is lingering since quite some time. In any case, the delay is not gross and the repercussion in law is not widespread. It is seen that the assessee upon coming to realize that excess deduction has been made and deposited with the Government, has approached the appropriate authority asap. Under these circumstances, this court proposes to condone the delay here itself and then require the competent authority before whom the assessee's application for refund is pending to decide the same on merits.

Assessee's petition allowed

2018-TII-102-ITAT-PUNE-TP

AKZO NOBEL CHEMICALS INDIA LTD Vs DCIT: PUNE ITAT (Dated: February 9, 2018)

Income Tax - Sections 92CA, 143(2) & 292B.

Keywords - Amalgamation - Assessment against dead person - Jurisdictional defect - Legal issue- Non existing entity & Procedural irregularity.

The Assessee-company, engaged in the business of manufacture and sale of organic peroxides, had filed its return for the relevant AY decalring its loss. Consequent to the same, notice u/s 143(2) was issued and served upon the Assessee and thereafter, assessment proceedings were taken up. On reference made by the AO, TPO noted that the Assessee got amalgamated with Akzo Nobel India Ltd. vide order of the Bombay High Court and was intimated to the jurisdictional AO. During the TP proceedings, specific query in this regard was raised by the TPO and complete details were filed along with copy of the order of the Bombay High Court sanctioning the scheme of amalgamation and also a copy of the said scheme of amalgamation. However, the TPO passed order u/s 92CA(3) in the Assessee's name. Accordingly, the AO also passed draft assessment order in the name of the Assessee.

On appeal, the Tribunal held that,

Whether assessment framed against the non-existing entity is a not a procedural irregularity, which is curable by invoking the provisions of sec 292B - YES: ITAT

Whether additional grounds towards passing of assessment order in the name of non-existing entity is a legal issue and hence is required to be answered by Appellate Authority - YES: ITAT

+ it is seen that in all the communications, the Assessee has mentioned the fact of its merger and has pointed out that the proceedings for amalgamation had started on Aug 29, 2011 and the Bombay High Court passed the order on May 11, 2012. The said intimation was filed before the Registrar of Companies on May 18, 2012. The scheme had become effective from the said date but the appointed date was April 01, 2011. The first intimation to the AO was filed immediately after communication was filed before the RoC. The perusal of the said letter would reflect that the AO was not only informed about the amalgamation but it was also pointed out that as per clause 4 of the scheme, the entire business had been transferred on a going concern basis to ANIL and henceforth the tax liabilities and obligations of the Assessee would become the liabilities and obligations of ANIL as per clause 8 of such scheme. Clause 15 of the scheme further provided that amalgamation was dissolution of ANCIL without being would-up. It was also pointed out that PAN of ANIL would be used in relation to the Assessee as well and the new PAN was mentioned in the said letter itself. Further, even during the course of assessment proceedings, a letter in reply to various queries raised by the AO was filed by the Assessee. In the subject itself the Assessee mentioned that ANCIL had merged with ANIL vide approval by High Court. The factum of amalgamation vide the High Court approval was also clearly intimated. Therefore, intimation having been given by the Assessee, the question which arises is whether the assessment order which has been passed by the AO in the name of ANCIL i.e. non existing entity survives or not;

+ it is seen that the Bombay High Court in Kansai Nerolac Paints Ltd. held that the additional ground of appeal taken by the Assessee in relation to passing of assessment order in the name of non-existing entity was void ab-initio, was a legal issue to be answered by the Appellate Authority and that it cannot be remanded back to the AO. Further, the Supreme Court in Spice Enfotainment Ltd. upheld the decision of the High Court of Delhi in the case of Spice Entertainment Ltd. Vs. Commissioner of Service Tax, wherein it was held that framing of assessment against the non-existing entity/person goes to the root of the matter and the same is not just a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a 'dead' person and thereby, the order of the Tribunal is unsustainable. The High Court of Delhi in Spice Entertainment Ltd. Vs. Commissioner of Service Tax had also decided the issue of whether the assessment made in the name of non-existing entity was procedural irregularity of the nature which could be cured by invoking provisions of sec 292B. Applying the ratios of various High Courts i.e. the High Court of P&H in the case of Norton Motors and in Harjinder Kaur held that provisions of sec 292B were not applicable in such a case. The High Court held that the framing of assessment against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a 'dead person. Accordingly, the assessment order passed in the case is quashed.

Assessee's appeal allowed