Cooperative Rabobank U A,20[Th] Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel (West),Mumbai – 400 013.… v. Commissioner Of Income Tax (It),Mumbai-2, Having His Office At17[Th] Floor, Air India Building,Nariman Point, Mumbai – 400 021

Digitally signedNIKITAby NIKITAYOGESHYOGESHGADGILGADGILDate:2021.08.2611:09:11 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1025 OF 2021 Cooperative Rabobank U A,20[th] Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel (West),Mumbai – 400 013.… Petitioner Versus 1. Commissioner of Income Tax (IT),Mumbai-2, having his office at17[th] Floor, Air India Building,Nariman Point, Mumbai – 400 021. 2. Union of IndiaThrough the Secretary,Department of Finance, Ministry of Finance, Government of India, North Block, New Delhi-110.… Respondents------- Mr. Percy Pardiwala, Senior Counsel a/w Mr. Atul Jasani forPetitioner.Mrs.S.V. Bharucha for Respondents. ------- CORAM :SUNIL P. DESHMUKH ANDABHAY AHUJA, JJ. RESERVED ON:20TH JULY, 2021. PRONOUNCED ON : 25[th] AUGUST, 2021. 2 Judgment-WP 1025-21.odt JUDGMENT : (PER COURT) 1.By this Petition filed under Article 226 of theConstitution of India, 1950, Petitioner is challenging the validity ofForm-3, dated 30[th] January, 2021 and 26[th] March, 2021 issuedunder Section 5 of the Direct Tax Vivad Se Vishwas Act, 2020 (the“DTVSV Act”) by the Designated Authority for Assessment Year2003-2004. 2.Petitioner is a bank established in The Netherlands andis part of the Rabobank Group worldwide. It is submitted thatPetitioner is a regular assessee under the Income Tax Act, 1961(the “IT Act”). 3.A return of income dated 28[th] November, 2003 was fileddeclaring Nil income. On 7[th] March, 2006, an Assessment Order waspassed assessing business profits attributable to permanentestablishment (PE) at Rs.1,50,75,790/-. Aggrieved by the saidorder, assessee filed an Appeal on 19[th] April, 2006 before theCommissioner of Income Tax (Appeals) (“CIT(A)”). On 31[st] January,2007, CIT(A) passed an order holding that Petitioner does not have PE in India and deleted the addition made by the Assessing Officer. The order giving effect to the CIT(A) order was passed on 16[th] April,2007 pursuant to which a sum of Rs.7,75,272/- was paid by theRevenue to Petitioner as interest under Section 244A of the IT Acton the refund due to the Petitioner. Aggrieved by the order of theCIT(A), the Department filed an Appeal before the Tribunal on 8[th]May, 2007. On 1[st] April, 2015, the Tribunal passed an order partlyallowing Revenue's Appeal and restoring the issue whetherPetitioner has a permanent establishment in India under certainprovisions of the India-Netherlands double taxation avoidanceagreement to the Assessing Officer. 4.Aggrieved by the order of the Tribunal, Petitioner filedan Appeal before this Court and also a miscellaneous applicationbefore the Tribunal. The Tribunal dismissed the miscellaneousapplication vide its order dated 21[st] August, 2018 against which alsoPetitioner was before this Court. By judgment dated 29[th] August,2018, in Income Tax Appeal No.1198 of 2015 with Income TaxAppeal No.260 of 2016 with Income Tax Appeal No.264 of 2016, thisCourt set aside the orders dated 1[st] April, 2015 and 21[st] August,2018 passed by the Tribunal and restored the Appeal to the file of the Tribunal for a decision afresh on merits. The followingparagraphs of the order of this Court are relevant and are quoted asunder :- 4.Aggrieved by the order of the Tribunal, Petitioner filedan Appeal before this Court and also a miscellaneous applicationbefore the Tribunal. The Tribunal dismissed the miscellaneousapplication vide its order dated 21[st] August, 2018 against which alsoPetitioner was before this Court. By judgment dated 29[th] August,2018, in Income Tax Appeal No.1198 of 2015 with Income TaxAppeal No.260 of 2016 with Income Tax Appeal No.264 of 2016, thisCourt set aside the orders dated 1[st] April, 2015 and 21[st] August,2018 passed by the Tribunal and restored the Appeal to the file of the Tribunal for a decision afresh on merits. The followingparagraphs of the order of this Court are relevant and are quoted asunder :- “26In the backdrop of all this, and further factsnoted, a cryptic order has been passed by theTribunal. In fact, in paragraph 5 of the order underchallenge in reference to the Income Tax Appeal No.4632/MUM/2006 for Assessment Year 2002-2003,the Tribunal says that the Indian company had madepayment to the Assessee for providing the advisoryservices to it and under the Head “GuaranteeCommission” and that the Indian company waspaying the Assesee more than 30% of its income. Thatthe basic issues are, as to whether the Assesee hadpermanent establishment in India or not and as towhether the services rendered by the Indiancompany could be treated as the activities carried outby the Assessee. Yet, it says that there is nothing onrecord to prove that the provisions of Article 5(1) ofthe Agreement are applicable. That stipulates thatthe permanent establishment for the purpose ofconvention meant a fixed business through which thebusiness of the enterprise was wholly or partlycarried on. The conclusion is that the Assessee wasnot having fixed place of business in India. Hence, theFirst Appellate Authority rightly held that theprovisions of Article 5 (1) were inapplicable. It is inthese circumstances we are surprised that theTribunal still deems it fit and proper to remand thecase. If there was indeed no material on record, then,the above conclusion was impossible to be reached. 27Be that as it may, we do not wish to expressany opinion on the rival contentions for it mayprejudice both sides. In fact, resorting to suchshortcuts, results in wastage of precious judicial timeof the Tribunal as also Higher courts and delaying thecollection and recovery of Revenue, if any. It onlyenables the parties to postpone the inevitable. It alsoresults in uncertainty and chaos. Judicial decisionshave to be consistent and all the more there should beno confusion. There ought to be some predictabilityand when given facts and circumstances give rise tocertain legal principles which parties assert areapplicable, then, as a last fact finding authority, theTribunal could have summoned all records andthereafter should have arrived at a categoricalconclusion whether the First Appellate Authority wasright or the Assessing Officer. This having admittedlynot been done, we are of the firm opinion that theTribunal failed to act as a last fact finding authority. Itfailed to discharge its duty and function expected of itby the law. We have no hesitation, therefore, inanswering question nos.1 and 2 as reproduced abovein favour of the Assessee and against the Revenue. 28Having thus answered these substantialquestions of law, we set aside the order of theTribunal. We cause no prejudice to the parties butbalance their rights and equities. We restore theRevenue's Appeal to the file of the Tribunal for adecision afresh on merits and in accordance with law. 29Needless to clarify therefore, that the initialorder dated 1[st] April, 2015 and the order on theMiscellaneous Applications for rectification arequashed and set aside There shall be no order as tocosts. 30All the three Appeals are disposed ofaccordingly.” 28Having thus answered these substantialquestions of law, we set aside the order of theTribunal. We cause no prejudice to the parties butbalance their rights and equities. We restore theRevenue's Appeal to the file of the Tribunal for adecision afresh on merits and in accordance with law. 29Needless to clarify therefore, that the initialorder dated 1[st] April, 2015 and the order on theMiscellaneous Applications for rectification arequashed and set aside There shall be no order as tocosts. 30All the three Appeals are disposed ofaccordingly.” It is to be noted that the aforesaid order was withreference to three Income Tax Appeals in respect of AssessmentYears 2002-03, 2003-04 and 2005-06. This Petition concernsAssessment Year 2003-04. 5.On 17[th] March, 2020, the DTVSV Act was enacted,pursuant to which Petitioner made declaration in Form-1 referringto Appeal Reference No. ITA/3633/Mum/2007 in respect ofAssessment Year 2003-04 as pending alongwith undertaking inForm-2 on 29[th] December, 2020. 6.On 30[th] January, 2020, Form-3 was issued byRespondent No.1, wherein the amount payable under the DTVSVAct was determined at Rs.63,31,832/-, i.e., 100% of the tax arrears.The said Form-3 refers to the same Appeal Reference No. ITA/3633/Mum/2007, as was contained in Form-1. Even the correspondingcolumn pertaining to schedule number referred to the pendency ofAppeal of the Department before the Income Tax Appellate Tribunal (the “ITAT”) as on 31[st] January, 2020, viz., the specified date underthe DTVSV Act. 7.It is Petitioner’s case that this determination byRespondent No.1 was against Rs.31,65,916/-, i.e., 50% of the taxarrears as computed by Petitioner as the said Appeal was stated tobe filed by the Department. Further, interest of Rs.7,75,272/-granted earlier under Section 244A of the IT Act was sought to bewithdrawn. 8.It is submitted that to resolve this issue, Petitioner had a discussion with the office of Respondent No.1, however, Petitionerwas informed that it is the Petitioner, and not the Respondent, thatwould be treated as the Appellant before the Tribunal and,therefore, the amount payable was correctly determined at 100% ofthe tax arrears. 9.It is further contended that though there is no provisionunder the DTVSV Act or the Rules for withdrawal of interestgranted earlier under Section 244A of the DTVSV Act, RespondentNo.1 has in the said Form-3 sought to withdraw the said interest by adding the said amount of interest to the amount declared to be paidby Petitioner. It is submitted that, therefore, the amount payableunder the DTVSV Act was determined as Rs.63,31,832/- being100% of the tax arrears plus Rs.7,75,272/-, being the interest paidearlier under Section 244A of the IT Act, now sought to bewithdrawn, totalling to Rs.71,07,104/-. 10.Petitioner filed a submission to this effect vide letterdated 19[th] March, 2021 before Respondent No.1 requesting forrectification of Form-3 in line with the aforesaid discussion.However, vide revised Form-3 dated 26[th] March, 2021, ITANo.3633/Mum/2007, which was in the earlier Form-3 stated to befiled by Revenue, was in the revised Form-3 stated to be filed byPetitioner and the amount payable under the DTVSV Act remainedat Rs.71,07,104/- as apart from treating the appeal to be anAssessee Appeal, the interest of Rs.7,75,272/- was also notreversed. In the remarks column of the revised Form-3, thefollowing reason was given :- “The assessee is requested to pay the amount as perthe DTVSV scheme. The revenue filed appeal beforeITAT vide appeal no.3633/Mum/2007. The Hon’bleITAT directed to restore back the issue to AO for fresh 9 Judgment-WP 1025-21.odt “The assessee is requested to pay the amount as perthe DTVSV scheme. The revenue filed appeal beforeITAT vide appeal no.3633/Mum/2007. The Hon’bleITAT directed to restore back the issue to AO for fresh 9 Judgment-WP 1025-21.odt adjudication. The revenue accepted the decision of theITAT. The assessee filed appeal before the Hon’ble HCBombay against the said order. The Hon’ble court hasrestored back the matter to ITAT for fresh order.Therefore, the ITA No 3633/Mum/2007 has beenrestored but on the assessee’s appeal therefore thedispute pending before ITAT is assessee’s appeal not ofthe revenue.” 11.In addition to the abovesaid remark, which was absent in the earlier Form-3, in the revised Form-3, the correspondingcolumn pertaining to schedule number referred to pendency ofAppeal of the assesseebefore the ITAT as on 31[st] January, 2020. 12.Being aggrieved by the aforesaid action, Petitioner isbefore us seeking essentially the following reliefs :-before us seeking essentially the following reliefs :- “a.to issue a Writ of Certiorari or a Writ in thenature of Certiorari or any other appropriateWrit, Order or Direction under Article 226 of theConstitution of India calling for the records ofthe Petitioner’s case and after examining thelegality and validity thereof, quash and set asidethe Impugned Forms No.3 dated 30[th] January2021 (Exhibit “K”) and 26[th] March 2021(Exhibit “M”) issued by Respondent No.1 for theassessment year 2003-04;nature of Certiorari or any other appropriateWrit, Order or Direction under Article 226 of theConstitution of India calling for the records ofthe Petitioner’s case and after examining thelegality and validity thereof, quash and set asidethe Impugned Forms No.3 dated 30[th] January2021 (Exhibit “K”) and 26[th] March 2021(Exhibit “M”) issued by Respondent No.1 for theassessment year 2003-04; b.to issue a Writ of Mandamus or a Writ in thenature of Mandamus or any other appropriateWrit, Order or Direction under Article 226 of thenature of Mandamus or any other appropriateWrit, Order or Direction under Article 226 of the 10 Judgment-WP 1025-21.odt Constitution of India, ordering and directingRespondent No.1 to forthwith withdraw andcancel the Impugned Forms No.3 dated 30[th]January 2021 (Exhibit “K”) and 26[th] March2021 (Exhibit “M”) issued by Respondent No.1for the assessment year 2003-04 and furtherordering and directing Respondent No.1 to issueForm No.3 treating the Petitioner as theRespondent and consequently determining theamount payable under the VSV Act at 50% of thetax arrears and further ordering and directingRespondent No.1 not to withdraw interestgranted under section 244A of the Act;” 13. Respondent-Revenue has filed its affidavit in reply dated 11[th] June, 2021, additional affidavit in reply dated 3[rd] July, 2021 aswell as common supplementary affidavit in reply dated 14[th] July,2021. 14. It is submitted on behalf of the Revenue that the Revenue has filed an Appeal before the ITAT and the ITAT directedrestoration of the issue back to the Assessing Officer for freshadjudication. The Revenue accepted the said decision of the ITAT.Thereafter, assessee filed an Appeal before this Court against theorder of the ITAT. This Court has restored the matter to the ITAT forfresh orders, i.e., ITA No.3633/Mum/2007 has been restored, but on the assessee’s Appeal, therefore, the dispute pending before theITAT is the assessee Appeal and not of the Revenue; the Appealcurrently in adjudication being assessee’s appeal, levy of 100% taxas per the DTVSV Act is justified. 14. It is submitted on behalf of the Revenue that the Revenue has filed an Appeal before the ITAT and the ITAT directedrestoration of the issue back to the Assessing Officer for freshadjudication. The Revenue accepted the said decision of the ITAT.Thereafter, assessee filed an Appeal before this Court against theorder of the ITAT. This Court has restored the matter to the ITAT forfresh orders, i.e., ITA No.3633/Mum/2007 has been restored, but on the assessee’s Appeal, therefore, the dispute pending before theITAT is the assessee Appeal and not of the Revenue; the Appealcurrently in adjudication being assessee’s appeal, levy of 100% taxas per the DTVSV Act is justified. 15.With respect to the issue regarding withdrawal ofinterest paid under Section 244A of the IT Act, it is submitted in theadditional affidavit that the difference between the disputed tax andthe amount payable in Form-3 is interest paid under Section 244Aof the IT Act. It is submitted that assessee was already given arefund alongwith interest under Section 244A pursuant to theorder giving effect to the order of CIT(A); the money was inpossession of the assessee from the date of issue of refund and afterassessee filed for the DTVSV, the total payable demand was raised.In this context, it has been stated in the affidavit that on the onehand, the assessee had taken refund from the Department and onthe other hand he has also taken interest under Section 244A of theIT Act on the said refund and has been earning interest on interestduring this period. It is submitted that the VSV Scheme is abeneficiary scheme by the Department, whereby the Department iswaiving off the interest to be charged under Section 234A, 234B 12 Judgment-WP 1025-21.odt and 234C alongwith penalties. Thus, on the one hand, theDepartment is waiving off interest liabilities and, on the other handthe Department had given interest to Petitioner under Section244A, which means that assessee has been benefited from both endsas it has got its interest liability waived off and has also got intereston refund. It is submitted that this is not in the interest of theRevenue nor was it the intention of the law makers while draftingthe DTVSV Scheme. Therefore, when the Department, on the onehand, waives off assessee’s liabilities, on the other hand, it isimperative for the Department to take back the interest given to theassessee. Also, the Department will take back the interest from thedate of issue of refund till the date of issue of Form-3 as this amountis public money, which cannot be forgone. It is stated that hence theDepartment has taken back its interest on refund given earlier tothe assessee. In this view of the matter, it is submitted that theassessee be directed to pay disputed tax as per Form-3 issued to it. 16.Mr. Pardiwala, Learned Senior Counsel appearing onbehalf of Petitioner submits that as regards the first issue, i.e., as towhether the Appeal pending before the ITAT is a departmentalAppeal or an assessee Appeal, he submits that the said issue is 13 Judgment-WP 1025-21.odt 16.Mr. Pardiwala, Learned Senior Counsel appearing onbehalf of Petitioner submits that as regards the first issue, i.e., as towhether the Appeal pending before the ITAT is a departmentalAppeal or an assessee Appeal, he submits that the said issue is 13 Judgment-WP 1025-21.odt squarely covered by the decision of this Court in Writ PetitionNo.1028 of 2021 in the case of Petitioner for the Assessment Year2002-03. In support of his contention, he draws our attention to therevised Form-3 issued on 26[th] March, 2021. He submits that for theyear under consideration, viz., Assessment Year 2003-04, theschedule of the earlier Form-3 dated 30[th] January, 2020 clearlyrefers to the said ITA No.3633/Mum/2007 as schedule ‘A’ to be filledup in case Appeal of Department is pending before the ITAT on 31[st]January, 2020, whereas the revised Form-3 refers to the same to befilled in case Appeal of assessee is pending. He draws our attentionto the oral judgment dated 29[th] August, 2018 of this Court, which isalso in respect of Petitioner herein for Annual Year 2003-04referred to earlier, to submit that there being categorical findings bythis Court as contained in Paragraphs 26 to 30 (reproduced inParagraph 4 above) that this Court had restored the Revenue’sAppeal to the file of the Tribunal for a decision afresh on merits andin accordance with law. He submits that in Writ Petition No.1028 of2021 this Court has clearly held that having observed that pendingappeal is a Revenue appeal, the first proviso to Section 3 of theDTVSV Act making 50% of the disputed tax would payable, would beapplicable and submits that in view of the identical facts, similar treatment be given in this matter as well and this Court direct theRespondents to accept 50% of the disputed tax. 17.With respect to the issue relating to withdrawal ofinterest granted earlier under Section 244A of the IT Act, Mr.Pardiwala submits that in Form-3 no reason has been given andthere is no mention as to why the amount payable under the DTVSVAct is Rs.71,07,104/- and not Rs.63,31,832/- being the tax arrearsdetermined by the income tax authority, although, the said amountis also erroneous, as the same should be Rs.31,65,916/- as thepending Appeal is a Revenue Appeal as demonstrated earlier. Mr.Pardiwala submits that the difference of Rs.7,75,272/- has not beenspecified and no reason has been furnished in the Form-3 to pay ahigher amount. He submits that Exhibit ‘L’, to which is annexed theincome tax computation form for giving effect to the CIT(A) order,the said amount of Rs.7,75,272/- is shown as interest payable underSection 244A. He submits that only the additional affidavit on behalfof the Revenue admits this amount as interest paid to Petitionerunder Section 244A, which is now sought to be recovered byincluding the same in the disputed income for which there is nopower under the scheme of the DTVSV Act. Mr. Pardiwala draws our attention in this regard to the scheme of the DTVSV Act. He drawsour attention to Section 2(1)(j) which defines disputed tax. attention in this regard to the scheme of the DTVSV Act. He drawsour attention to Section 2(1)(j) which defines disputed tax. 18.He thereafter takes us to Section 3 of the DTVSV Act aswell as Sections 4 and 5 of the said Act. He submits that none of thesections of the Act permit addition of any amount to the amount ofdisputed tax as determined under Section 5 read with Section 3 ofthe DTVSV Act. Mr. Pardiwala submits that there is no statutorymandate for recovery or refund of this amount under the saidScheme referring to the submissions in Paragraph 2 of additionalaffidavit of the Revenue. He submits that without any statutorymandate to withdraw or recover interest paid, the Departmentcannot seek to withdraw/take back the interest given to theassessee. He submits that the Scheme of the DTVSV Act is to settledisputed tax and the same cannot be lost sight of. In support of hiscontention, he refers to a decision of Gujarat High Court in the caseof Commissioner of Income-Tax Vs. Vishwajit M. Mehta; 254 ITR 66to submit that without any specific power/provision to withdrawinterest, the said act of Respondents is untenable, there being noprovision in the DTVSV Act permitting them to do so. He thereforeurges this Court to intervene in the matter and direct the 16 Judgment-WP 1025-21.odt Respondents to issue revised Form-3 for an amount ofRs.31,65,916/-. 19.On the other hand, Mrs. Bharucha, Learned StandingCounsel for the Revenue reiterates the submissions made in theaffidavits. In particular, she refers to Paragraph 2 of the additionalaffidavit to submit that on the one hand, the Department is waivingoff the interest liabilities under Sections 234A, 234B, 234C alongwith penalties but on the other hand the Department had also paidinterest under Section 244A and Petitioner having received theamount of interest under Section 244A, the said amount, beingpublic money, Petitioner cannot retain this additional amount, butthe same ought to be returned by Petitioner. 20.With further reference to the issue relating to interestunder Section 244A of the IT Act, Mrs. Bharucha, Learned StandingCounsel for the Revenue has filed a common supplementaryaffidavit in reply dated 14[th] July, 2021 on behalf of Respondents.She fairly points out the statement therein that the DTVSV Act issilent about the interest on refund issued to assessee under Section244A of the IT Act. She submits that although the DTVSV Act neither mentions treatment of interest under Section 244A grantedto the assessee nor talks about waiver of interest received by theassessee on the refund of disputed tax, all the same, the Schemedoes not offer any right to the competent authority to waive off theinterest received by the assessee on refund on account of disputedtax to it. She submits that the disputed tax has to be computed asper the provisions and rates prescribed in the IT Act and, hence,liability under the VSV Scheme is to be ascertained on the basis ofdisputed tax only. She submits that the interest that was issued onthe refund to the assessee under Section 244A was for the benefit tothe assessee, but subject to the final decision in favour of either ofthe parties before superior forum. Therefore, the same amount ofdisputed tax exists prior to deletion by appellate authority. Shesubmits that the interest received by the assessee under Section244A is a liability of the assessee towards the Department and theDepartment is duty bound to recover the same as disputed tax thatwas refunded to the assessee alongwith the interest as per the ITAct. She submits that this is a rightful claim of the Department,which the Department is duty bound to consider as disputed tax.She submits that in this case disputed tax is the refund alongwithinterest received by it in respect of the said disputed tax. Further, that non-recovery of the same will be entirely contrary to theDTVSV Scheme and a great loss to the public exchequer and againstthe interest of Revenue and a loss to tax payers money/publicmoney. Mrs. Bharucha relies on the following paragraphs of thesupplementary affidavit, which are set forth as under :- “5Our Submission : In this instant case, the amountpayable under VSV Scheme as computed, thedisputed tax includes the refund of tax ondisputed income and also the interest on suchrefund received by the assessee. The VSV Act isquite silent about interest on refund issued toassessee u/s 244A. The VSV Act neither mentionstreatment of Interest u/s 244A issued to theassessee nor talks about waiver off interestreceived by the assessee on the refund ofdisputed tax. It is true that the Scheme provideswaiver of interest chargeable or charged undersection 234A, 234B and 234C of the Act on suchdisputed tax. It is also true that the Schemeprovides waiver of penalty chargeable or chargedon such disputed tax and immunity fromprosecution. It is obvious that the Scheme doesn’toffer any right to the competent authority towaive off interest received by the assessee onrefund on account of ‘disputed tax’ to him. Thedisputed tax is computed as per provisions andrates prescribed in Income Tax Act, 1961 andhence the liability under VsV Scheme to beascertained on the basis of disputed tax only. Itwould be pertinent to mention here that there isno variance in the amount of disputed tax beingconsidered for accepting under VSV with respect 7 to the disputed tax arising out of OriginalAssessment Order against which appeal has beenmade by the assessee. Still the quantum ofdisputed tax is same which is expresslymentioned in VSV for determination ofdeclaration under the scheme. Therefore, thesame amount of disputed tax exists before ITATas existing prior to deletion by appellateauthority. The interest issued on refund u/s 244Awas a benefit to the assessee subject to finaldecision in favour of either of the parties bySuperior Courts. In view of the above, it is amount paid to theassessee over and above refund of tax ondisputed income. Once the dispute is adjudicatedby superior Court or under any Scheme broughtthrough any legislation (If immunity is notprovided under any relevant provisions) ondisputed tax, the assessee is bound to return theinterest. In this instant case, the assessee hasdeclared the disputed tax under the scheme in itsapplication and hence the tax liability would bedetermined as per VSV Scheme along withrecovery of interest while considering assessee’sapplication under VSV Scheme as these are allpublic monies. In the instant case, consequent to appellate orderof CIT(A), the assessee was issued refund on theentire disputed tax along with interest u/s 244Aon refund of such disputed tax. The assessee wasalready given a refund of Rs.1,75,85,971 alongwith interest u/s 244A of Rs.62,42,923 on17.3.2016. This money was in possession of theassessee from the date of issue of refund till thedate of issue of form 3 under VsV. As per IncomeTax Act, the refund given to the assessee is not absolute but subjected to certain terms andconditions. The major condition is that the refundis given subject to decision by superior courts. Ifin any subsequent year, the superior courtreverses its decision, then the assessee is dutybound to return the refund along with theinterest u/s 244A given to the assessee. In the instant case, consequent to appellate orderof CIT(A), the assessee was issued refund on theentire disputed tax along with interest u/s 244Aon refund of such disputed tax. The assessee wasalready given a refund of Rs.1,75,85,971 alongwith interest u/s 244A of Rs.62,42,923 on17.3.2016. This money was in possession of theassessee from the date of issue of refund till thedate of issue of form 3 under VsV. As per IncomeTax Act, the refund given to the assessee is not absolute but subjected to certain terms andconditions. The major condition is that the refundis given subject to decision by superior courts. Ifin any subsequent year, the superior courtreverses its decision, then the assessee is dutybound to return the refund along with theinterest u/s 244A given to the assessee. For better understanding of the issue at hand, itis submitted that the situation may be consideredalternatively for a while. A situation may kindlybe considered where the assessee would havecontested the disputed tax before the SuperiorAppellate Authorities, High Court (if required)and the Supreme Court (if required). Let usconsider that the Superior Appellate Authorities,the High Court and the Supreme Court haddecided the matter against the assessee, in thatcase the department, in order to give effect to theAppellate order would have collected the refundearlier issued to the assessee including theinterestalready issued to the assessee u/s 244Aon the said refund. Apart from this, thedepartment would have charged interest u/s234A, 234B and 234C of the Act. Further thedepartment would have levied penalty on thedisputed tax. Now coming back to the assesseeopting for settling the dispute under Vivaad SeVishvas Scheme, it is nothing but an implicationthat the assessee wants to settle the dispute. Theassessee confirms the disputed tax. In such acase, the department is duty bound to waive offinterest u/s 234A, 234B and 234C chargeableunder the Act on the said disputed income. Thedepartment is also duty bound to waive offpenalty chargeable or charged on such disputedincome as per VsV. However, the department is 11 12 duty bound to recover the disputed tax that wasrefunded to the assessee along with the interestissued to the assessee on such refund as per ITAct. It is submitted that in determination of demandpayable under the VSV Scheme, the Departmentwas duty bound to waive off interest u/s 234A,234B and 234C of the Act. The Department wasalso duty bound to waive off penalty chargeableon the disputed tax. But the Department wasduty bound to consider the refund and interest onthe said refund issued to the assessee whiledetermining demand payable under VSV. Non-recovery of the said refund and interest on thesaid refund will be entirely contrary to the VSVScheme. Such an action of not recovering ofinterest received by the assessee on refund – asrequested by the assessee – will be contrary tothe VSV Scheme and great loss to the publicexchequer and against the interest of revenueand a loss of the taxpayer’s money/public moneyfor the unreasonable plea made by the assessee. In view of what is stated above the respondentshumbly pray that the assessee may be directed topay the disputed tax as per form 3 issued by theCIT-IT-2, Mumbai for all the assessment years indispute which the Petitioner desires to settlethrough VsV.” She submits that therefore the act of the Department islegitimate and Petitioner be directed to pay the amount as perForm-3 issued. In view of what is stated above the respondentshumbly pray that the assessee may be directed topay the disputed tax as per form 3 issued by theCIT-IT-2, Mumbai for all the assessment years indispute which the Petitioner desires to settlethrough VsV.” She submits that therefore the act of the Department islegitimate and Petitioner be directed to pay the amount as perForm-3 issued. 21.In rejoinder, Mr. Pardiwala, Learned Senior Counseldraws the attention of this Court to Paragraphs 5 and 12 of thecommon supplementary affidavit of the Respondents to reiteratethat the DTVSV Scheme envisages payment with respect to thedisputed tax alone. He once again takes us through the definition ofthe disputed tax as contained in Section 2(1)(j) of the DTVSV Act toreiterate that the said definition includes only surcharge and cess,but not interest or penalty. 22.He also once again refers to the provisions of Section 3 ofthe DTVSV Act to submit that the plain language of the said Sectionclearly indicates that the reference to the amount payable is in thecontext of disputed tax alone and that the non-obstante languagetherein conclusively suggests that irrespective of anythingcontained in the IT Act or any other law, where a declarant files adeclaration to the Designated Authority in accordance with theprovisions of Section 4 in respect of the tax arrears on or before thelast date, the amount payable under the Act in the case where anappeal is filed by the Income-tax authority, shall be one half of theamount of the disputed tax. He also once again draws the attentionof this Court to Form-3 issued by the Designated Authority to reiterate that despite the above provisions, the DesignatedAuthority has increased the amount of disputed tax without anyauthority and determined the amount payable as Rs.71,07,104/-instead of Rs.31,65,916/-. 23.He also draws the attention of this Court to Section 6 ofthe DTVSV Act to submit that even under the provisions of the saidSection, the Designated Authority is prohibited from charging anyinterest under the IT Act in respect of the tax arrears. In support ofhis contention that “tax” does not include interest, Learned SeniorCounsel draws our attention to the decision of the Hon’ble SupremeCourt in the case of Harshad Shantilal Mehta Vs. Custodian; [1998]99 Taxman 216 (SC) to submit that the definition of tax underSection 2(43) referred to therein does not include interest. Herefers to Paragraph 33 of the said decision, which is quoted asunder:- “Question No.533.One other connected question remains :Whether ‘taxes’ under section 11(2)(a) wouldinclude interest or penalty as well? We areconcerned in the present case with penalty andinterest under the Act. Tax, penalty and interestare different concepts under the Act. The definitionof ‘tax’ under section 2(43) does not include penalty or interest. Similarly, under section 157, itis provided that when any tax, interest, penalty,fine or any other sum is payable in consequence ofany order passed under this Act, the AssessingOfficer shall serve upon the assessee a notice ofdemand as prescribed. Provisions for imposition ofpenalty and interest are distinct from theprovisions for imposition of tax. Learned SpecialCourt Judge, after examining various authorities inparagraphs 51 to 70 of his Judgment, has come tothe conclusion that neither penalty nor interest canbe considered as tax under section 11(2)(a). Weagree with the reasoning and conclusion drawn bythe Special Court in this connection”. 24.Learned Senior Counsel submits that the above finding penalty or interest. Similarly, under section 157, itis provided that when any tax, interest, penalty,fine or any other sum is payable in consequence ofany order passed under this Act, the AssessingOfficer shall serve upon the assessee a notice ofdemand as prescribed. Provisions for imposition ofpenalty and interest are distinct from theprovisions for imposition of tax. Learned SpecialCourt Judge, after examining various authorities inparagraphs 51 to 70 of his Judgment, has come tothe conclusion that neither penalty nor interest canbe considered as tax under section 11(2)(a). Weagree with the reasoning and conclusion drawn bythe Special Court in this connection”. 24.Learned Senior Counsel submits that the above finding of the Hon’ble Supreme Court has been usefully referred to by thisCourt in the decision of this Court in the case of Arthur Anderson &Co. Vs. Assistant Commissioner of Income-tax [2010] 190 Taxman279 (Bombay), wherein it was observed that the definition of taxunder Section 2(43) of the IT Act does not include penalty orinterest and that concepts of tax, penalty and interest are differentconcepts under the IT Act. Paragraphs 9 and 10 of the said decisionare quoted as under :- “9.Apart from the fact that there has been nofailure on the part of the assessee to make a fulland true disclosure of all material facts, it will be necessary to advert to the decision of theSupreme Court in Harshad Shantilal Mehta v.Custodian [1998] 231 ITR 871. The SupremeCourt, in the course of its judgment observed thatunder the Income-tax Act, 1961 the definition oftax under section 2(43) does not include penaltyor interest and that the concepts of tax, penaltyand interest are different concepts under the Act.Justice Sujata Manohar speaking for a Bench ofthree Learned Judges of the Supreme Courtobserved thus : "We are concerned in the present case withpenalty and interest under the Income-tax Act.Tax, penalty and interest are different conceptsunder the Income-tax Act. The definition of "tax"under section 2(43) does not include penalty orinterest. Similarly, under section 156 , it isprovided that when any tax, interest, penalty,fine or any of other sum is payable inconsequence of any order passed under this Act,the Assessing Officer shall serve upon theassessee a notice of demand as prescribed. Theprovisions for imposition of penalty and interestare distinct from the provisions for imposition oftax." 10.The decision of the Supreme Court wasdelivered in an appeal which arose out of theSpecial Court (Trial of Offences Relating toTransaction in Securities) Act, 1992. Theinterpretation which has been placed on theprovisions of section 2(43) and the observationsof the Supreme Court noted earlier, however, bindthis Court as regards the ground on which thereopening of the assessment has been sought inthis case.” 26 Judgment-WP 1025-21.odt 25.Mr. Pardiwala also submits that nowhere in the DTVSVAct there is a specific reference to the waiver of interest only underSections 234A, 234B and 234C of the IT Act, though the same isrepeatedly being stated in the affidavits filed on behalf of theRevenue as the Scheme of the DTVSV Act envisages completewaiver of interest as can be gathered from the provisions thereof. 26.We have heard Mr. Pardiwala, Learned Senior Counsel,on behalf of Petitioner and Mrs. Bharucha, Learned StandingCounsel for Respondents and with their able assistance, we haveperused the papers and proceedings in the matter. We have heard Mr. Pardiwala, Learned Senior Counsel, 26 Judgment-WP 1025-21.odt 25.Mr. Pardiwala also submits that nowhere in the DTVSVAct there is a specific reference to the waiver of interest only underSections 234A, 234B and 234C of the IT Act, though the same isrepeatedly being stated in the affidavits filed on behalf of theRevenue as the Scheme of the DTVSV Act envisages completewaiver of interest as can be gathered from the provisions thereof. 26.We have heard Mr. Pardiwala, Learned Senior Counsel,on behalf of Petitioner and Mrs. Bharucha, Learned StandingCounsel for Respondents and with their able assistance, we haveperused the papers and proceedings in the matter. We have heard Mr. Pardiwala, Learned Senior Counsel, 27.This Petition raises two issues for our consideration. Thefirst is whether the Appeal, that is pending before the ITAT is anassessee Appeal or a Revenue Appeal. The second issue is whetheran interest of Rs.7,75,272/- granted under Section 244A of the ITAct to Petitioner earlier can be recovered by the Respondents byadding the same to the amount of disputed tax otherwise payable byPetitioner under the DTVSV Act. 28.Coming to the first issue, we observe that in this case,Assessing Officer had made addition with respect to permanentestablishment in the case of Petitioner and consequently denied itbenefit of the double taxation avoidance agreement. The entireincome was taxed at 40% instead of 10% as declared by Petitioner.Then the matter was appealed to CIT(A). The additions weredeleted. Against the said deletions, the Department filed an Appealbefore the ITAT being ITA No. 3633/Mum/2007 against the order ofCIT(A). The Tribunal restored the matter back to the AssessingOfficer for fresh examination. It is stated that the Department hadaccepted this order of the ITAT. However, Petitioner challenged thisorder before this Court by way of an Appeal raising the followingtwo questions :- “(i): Whether, on the facts and in thecircumstances of the case and in law, theTribunal was justified in not concluding that theAppellant does not have a PermanentEstablishment in India and instead setting asidethe order of the CIT (A)? (ii):Whether, on the facts and in thecircumstances of the case and in law, theTribunal was justified in remanding the matterback to Assessing officer for fresh considerationwhen the Assessing officer has not discharged theburden of proving that the Appellant had a PE inIndia?” 29. This Court by its order dated 29[th] August, 2018, inIncome Tax Appeal No.1198 of 2015 with Income Tax AppealNo.260 of 2016 with Income Tax Appeal No.264 of 2016, answeredthe substantial questions of law in favour of the assessee andagainst the Revenue and set aside the order of the Tribunal,restoring the Revenue's Appeal to the file of the Tribunal for adecision afresh on merits and in accordance with law. 30.The matter is, therefore, pending before the ITAT forfresh adjudication and this is the dispute, which Petitioner isdesirous of settling under the DTVSV Act. Relevant factual aspectsare not in dispute. Against order of departmental assessing officer,appeal under Section 246 of the IT Act had been preferred by theassessee/petitioner to the CIT(A) and the same was decided in itsfavour. Aggrieved by the decision of CIT(A), the Revenue-Respondent preferred an Appeal bearing No. 3633/Mum/2007before ITAT as provided under Section 253 of the IT Act, whichremanded the matter back to the Assessing Officer. Against order ofremand passed by ITAT, Petitioner preferred appeal before thisCourt under Section 260A of the IT Act. The substantial questions oflaw in appeal before this Court were tested and the matter resulted in setting aside order of ITAT, restoring the Appeal No. 3633/Mum/2007 before ITAT for decision pursuant to aforementioned orders ofthis Court. The Appeal before ITAT was not filed by the assesseeagainst order of CIT(A), but by the Revenue which went to ITATagainst order of CIT(A). This Court had sent back the matter toITAT and what was before ITAT is a matter by Revenue. Factually aswell as in law it was Revenue's matter which is revived. It is also notthe Revenue's case that they have not accepted the said decision ofthis Court. This Court has in Writ Petition No.1028 of 2021considered an identical issue with respect to Assessment Year2002-03 in the case of the same Petitioner and held that thepending appeal is a Revenue Appeal and the first proviso to Section3 of the DTVSV Act would be applicable and only 50% of thedisputed tax could be payable. The following paragraphs are relvantand are quoted as under :- “10.Plain reading of the table in the aboveSection of the DTVSV Act suggests that in the caseof an eligible Appellant, if it is a non search case,then the amount, that is payable would be 100% ofthe disputed tax, if it is a search case, then it wouldbe 125% of the disputed tax. However, in a casewhere the Appeal is filed by the Income Taxauthority, the amount payable shall be one-half ofthe amount calculated. The question is whether Petitioner is eligible for payment of 50% of disputedtax or 100%. 11.In this case, assessing officer had madeaddition with respect to permanent establishmentin the case of Petitioner and consequently denied itbenefits of the double taxation avoidanceagreement. The entire income was taxed at 40%instead of 10% as declared by Petitioner. Then thematter was appealed to CIT(A). The additions weredeleted. Against the said deletions, the Departmentfiled an Appeal before the ITAT being ITA No.4632/MUM/2006 against the order of CIT(A). TheTribunal restored the matter back to the assessingofficer for fresh examination. It is stated that theDepartment had accepted this order of the ITAT.However, Petitioner challenged this order beforethis Court by way of an Appeal raising the followingtwo questions :- “(i): Whether, on the fac