D.b. Civil Writ Petition v. Deputy Commissioner Of Income Tax, Internationaltaxation, Jaipur.taxation, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 22244/2018 Shree Cement Limited, Having Registered Office At BangurNagar, Beawar-30591 Rajasthan through its Joint PresidentCommercial, Arvind Khicha S/o Shri Inder Mal Khicha aged about56 Years, R/o 5-6 Nanesh Nagar, Near Jawahar Bhawan, VinodNagar, Beawar-305901 ----Petitioner Versus 1. Deputy Commissioner of Income Tax, InternationalTaxation, Jaipur.Taxation, Jaipur. 2. Additional Commissioner of Income Tax, Range-3, NewDelhi.Delhi. ----Respondents For Petitioner(s) For Respondent(s) : Mr. Sanjay Jhanwar, Senior Advocate assisted by Mr. Rajat Sharma assisted by Mr. Rajat Sharma : Mr. Siddharth Bapna with Mr. Meyhul Mittal & Mr. Rahul Kumar Mr. Meyhul Mittal & Mr. Rahul Kumar HON'BLE THE CHIEF JUSTICE MR. K.R. SHRIRAM HON'BLE MR. JUSTICE ANAND SHARMA Judgment :: 29[th] July 2025:: 04 August 2025 RESERVED ON PRONOUNCED ON 04 August 2025 REPORTABLE (Per Hon'ble Anand Sharma, J.) 1.This writ petition under Article 226 of Constitution of Indiahas been filed by petitioner in order to assail the certificate ofdetermination under Section 197(1)/195 of Income Tax Act, 1961(for short 'Act of 1961') dated 13[th] August 2018 (wrongly referredas an ‘order’ by petitioner) relating to Tax deducted at Source (forshort, 'TDS'), authorising petitioner to pay or credit other sums upto Rs.30,76,12,500/- after deducting income tax at the rate of5% to the account of HSBC Bank (Mauritius) Limited, (HSBCMauritius), a foreign lender. This pertains to period between 27[th]April 2018 to 31[st] March 2019. Petitioner has further prayed for adirection against respondents to refund amount of Rs. 57,71,736/-being the tax amount deposited by petitioner under protestpursuant to impugned determination dated 13[th] August 2018 alongwith interest thereon. 2.Brief facts of writ petition are that petitioner, a companyincorporated under Companies Act, 2013, is engaged ininfrastructure projects and renewable energy facilities. For availingfunds for its new long-term project, petitioner entered into anExternal Commercial Borrowing (for short, 'ECB') agreement dated20[th] March 2018 with a non-resident financial institution namelyHSBC Mauritius, which is a tax resident of Mauritius. 3.Section 7(3) of ECB deals with taxes and lays down asunder:- "7.3:Taxes(a) All payments to be made by theBorrower to the Bank under the FacilityDocuments shall be made free and clear ofall present and future taxes and deductionsof whatever nature for or on account of taxunless the Borrower is required to makesuch a payment subject to the deduction orwithholding of tax, in which case the sumpayable by the Borrower in respect of whichsuch deduction or withholding is required tobe made by the Government of India or anyother agency under the Indian Governmentor otherwise, shall be increased to theextent necessary to ensure that, after themaking of the required deduction orwithholding, the Bank receives (free fromany liability in respect of any such deductionor withholding) a net sum, equal to the sum which it would have received had no suchdeduction or withholding been made orrequired to be made." 4.It has been contended that India has entered into a DoubleTaxation Avoidance Agreement (for short, 'DTAA') dated 6[th]December 1983 with Mauritius. Petitioner further contends thatArticle 11 of DTAA deals with “Interest” and its sub-clause (4) laysdown that interest arising in a contracting State shall be exemptedfrom tax in that contracting State to the extent approved byGovernment of that State, provided that transaction giving rise to debt-claim has been approved in this regard by Government offirst mentioned contracting State. 5.Following clauses of DTAA are relevant for purpose of disputeinvolved in instant writ petition: “ARTICLE 2 which it would have received had no suchdeduction or withholding been made orrequired to be made." 4.It has been contended that India has entered into a DoubleTaxation Avoidance Agreement (for short, 'DTAA') dated 6[th]December 1983 with Mauritius. Petitioner further contends thatArticle 11 of DTAA deals with “Interest” and its sub-clause (4) laysdown that interest arising in a contracting State shall be exemptedfrom tax in that contracting State to the extent approved byGovernment of that State, provided that transaction giving rise to debt-claim has been approved in this regard by Government offirst mentioned contracting State. 5.Following clauses of DTAA are relevant for purpose of disputeinvolved in instant writ petition: “ARTICLE 2 TAXES COVERED1. The existing taxes to which thisConvention shall apply are: (a) in the case of India,- (i) the income-tax including any surchargethereon imposed under the Income-tax Act,1961 (43 of 1961); (ii) the surtax imposed under the Companies (Profits) Surtax Act, 1964 (7 of 1964); DEFINITIONARTICLE 3 GENERAL DEFINITION (c) the terms "a Contracting State" and "theother Contracting State" mean India orMauritius as the context requires; ARTICLE -11 INTEREST 1. Interest arising in a Contracting State andpaid to a resident of the other ContractingState may be taxed in that other State. 2........ 3........ 3A...... 4. Interest arising in a Contracting Stateshall be exempt from tax in that ContractingState to the ex approved by the Governmentof that State if it is derived and beneficiallyowned by any person [other than a personreferred to in paragraph (3)] who is aresident of the other Contracting Stateprovided that the transaction giving rise to-the debtclaim has been approved in thisregard by the Government of the mentionedContracting State.” (emphasis supplied) 6.However, no separate machinery or mechanism has beenspecified in DTAA for getting approval of transaction/ agreementfor purpose of taking benefit of exemption as per sub-clause (4) ofArticle 11 of DTAA. 7.Petitioner indicated that in similar circumstance, Section194LC of Act of 1961, introduced by Finance Act, 2012 providesfor dealing with income by way of interest from Indian companyand lays down that where any income by way of interest ispayable to a non-resident, person responsible for making paymentshall at time of credit of such income to account of payee deductincome-tax at a lower rate of five percent. It further lays downthat where such interest shall be income by way of interestpayable by specified company in respect of monies borrowed by itin foreign currency from a source outside India under a loanagreement then such loan agreement should have been approvedby Central Government in this behalf. Section 194LC of Act of 1961 reads as under: "194LC. (1) Where any income by way ofinterest referred to in sub-section (2) ispayable to a non-resident, not being acompany or to a foreign company by aspecified company or a business trust, theperson responsible for making the payment,shall at the time of credit of such income tothe account of the payee or at the time ofpayment thereof in cash or by issue of acheque or draft or by any other mode,whichever is earlier, deduct the income-taxthereon at the rate of five per cent." (2) The interest referred to in sub-section(1) shall be the income by way of interestpayable by the specified company or thebusiness trust, - (i) in respect of monies borrowed by it inforeign currency from a source outsideIndia,- (a) under a loan agreement at any time onor after the 1st day of July, 2012 but beforethe 1st day of July 2020; or (b) by way of issue of long-terminfrastructure bonds at any time on or afterthe 1st day of July, 2012 but before the 1stday of October, 2014; or (2) The interest referred to in sub-section(1) shall be the income by way of interestpayable by the specified company or thebusiness trust, - (i) in respect of monies borrowed by it inforeign currency from a source outsideIndia,- (a) under a loan agreement at any time onor after the 1st day of July, 2012 but beforethe 1st day of July 2020; or (b) by way of issue of long-terminfrastructure bonds at any time on or afterthe 1st day of July, 2012 but before the 1stday of October, 2014; or (c) by way of issue of any long-term bondincluding long-term infrastructure bond atany time on or after the 1st day of October,2014 but before the 1st day of July 2020, as approved by the Central Government inthis behalf" 8.Petitioner further pointed out that simultaneous to aforesaidintroduction of Section 194LC in Act of 1961 and to make it moreworkable and effective, CBDT issued an Income Tax CircularNo.7/2012-CBDT dated 21[st] September 2012 providing forparameters for approval of loan agreement for availing benefitsunder Section 194LC of Act of 1961. It was also acknowledged that looking to large number of cases of overseas borrowings, tomitigate compliance burden and hardship, a concept of deemedapproval was evolved in respect of loan agreements and issue oflong-term infrastructure term bond by Indian companies whichsatisfy conditions mentioned in said circular dated 21[st] September2012. Para 5 and 6 of Circular dated 21[st] September 2012 read as under: "5.Considering the fact that there wouldbe a large number of cases of overseasborrowings or bond issues to be undertakenby Indian companies, providing amechanism involving approval in each andevery specific case would entail avoidablecompliance burden on the borrower/issuer ofbond. In order to mitigate the complianceburden and hardship, the Central Board ofDirect Taxes [with the approval of CentralGovernment] hereby conveys the approvalof Central Government for the purposes ofsection 194LC in respect of the loanagreements and issue of long-terminfrastructure term bond by Indiancompanies which satisfy the conditionsmentioned in paras A, B and C below: A. In respect of agreements for loan a. The borrowing of money should be undera loan agreement. b. The monies borrowed under the loanagreement by the Indian company shouldcomply with clause (d) of sub section (3) ofsection 6 of the Foreign ExchangeManagement Act, 1999 read withNotification No. FEMA3/2000-RB viz. ForeignExchange Management (Borrowing orLending in Foreign exchange) Regulations2000, dated May 3, 2000, as amended fromtime to time, (hereafter referred to as "ECBregulations"), either under the automaticroute or under the approval route………. ………………………………………….” 6.In view of the above, any loanagreement or bond issue, which satisfies the above conditions, would be treated asapproved by the Central Government for thepurposes of Section 194LC. 9.Further, it has been averred that in compliance with statutoryframework and Circular dated 21[st] September 2012 issued byCBDT, petitioner applied for and obtained approval under Section194LC(2)(ia) of Act of 1961 in respect of aforesaid ECB agreementdated 20[th] March 2018. It is contended that vide letter dated 23[rd]March 2018, Reserve Bank of India allotted loan registrationNo.201803161, which was done as per ECB guidelines. Thisapproval was granted recognizing that borrowing was made underan agreement approved for the purpose of providing long-terminfrastructure finance, satisfying statutory requirement forconcessional taxation under Section 194LC of Act of 1961. 9.Further, it has been averred that in compliance with statutoryframework and Circular dated 21[st] September 2012 issued byCBDT, petitioner applied for and obtained approval under Section194LC(2)(ia) of Act of 1961 in respect of aforesaid ECB agreementdated 20[th] March 2018. It is contended that vide letter dated 23[rd]March 2018, Reserve Bank of India allotted loan registrationNo.201803161, which was done as per ECB guidelines. Thisapproval was granted recognizing that borrowing was made underan agreement approved for the purpose of providing long-terminfrastructure finance, satisfying statutory requirement forconcessional taxation under Section 194LC of Act of 1961. 10.Subsequently, while making interest payments to foreignlender, petitioner claimed benefit of Article 11 of applicable DTAA,which provided for reduced or NIL tax on interest income arisingin a contracting State and received by a tax-resident of othercontracting State (treaty partner country). It has been mentionedthat HSBC Mauritius i.e., foreign lender duly furnished its TaxResidency Certificate (for short, 'TRC') and all otherdocumentation was made available to demonstrate its eligibilityunder DTAA. 11.However, Assessing Officer refused to accept petitioner’sposition contending that unless a separate approval of ECBagreement, solely accorded for purpose of benefits under DTAA isissued, petitioner would not be entitled for benefits otherwise admissible in Clause 11 of DTAA and thus by issuing impugnedcertificate under Section 195(2)/197, limited only for purpose ofSection 194-LC of Act of 1961, petitioner was statutorily obligatedto deduct tax at source at the rate of 5%. Since Foreign lenderwas not subjected to any tax liability on interest accrued from anytransaction, by virtue of specific terms under DTAA, petitioner hadto deposit 5% TDS from its own account. Petitioner has submittedthat irrational approach of respondents based uponmisinterpretation of statutory provisions, has caused graveprejudice and miscarriage of justice to petitioner. Hence, petitionerhas prayed for refunding aforesaid 5% TDS, which albeit notpayable as per DTAA, yet deposited under protest by petitioner. 12.Revenue, through its reply to writ petition, contends thatbenefit of DTAA cannot be claimed merely on basis of Section194LC of Act of 1961 approval. It maintains that Section 195imposes an independent obligation on any person responsible forpaying any amount chargeable under Act to a non-resident todeduct tax at applicable rates and if payer seeks to deduct tax at alower or NIL rate, a separate approval of Central Governmentissued in reference to the terms and conditions of DTAA fordetermination under Section 195(2) or a certificate under Section197, is a mandatory precondition. 13.It is the stand of Revenue that approval granted underSection 194LC(2)(ia) of Act of 1961 is limited to concessional taxtreatment under domestic law and does not automatically entitlepayer to apply DTAA rates without specific permission from taxauthority under Section 195. 14.It has also been submitted on behalf of Revenue that taxingstatutes must be construed strictly and there should not be anyinterpretation to frustrate manifest object of statute or to allowtaxpayers to circumvent tax liability by resorting to irrationalreasons. 15.An objection has also been raised by Revenue that noapplication whatsoever has been filed by petitioner beforecompetent authority for seeking refund of TDS deposited by itpursuant to certificate dated 13[th] August 2018 at the rate of 5%,hence, relief of refund, as prayed in writ petition, is totallyinconceivable and untenable. 14.It has also been submitted on behalf of Revenue that taxingstatutes must be construed strictly and there should not be anyinterpretation to frustrate manifest object of statute or to allowtaxpayers to circumvent tax liability by resorting to irrationalreasons. 15.An objection has also been raised by Revenue that noapplication whatsoever has been filed by petitioner beforecompetent authority for seeking refund of TDS deposited by itpursuant to certificate dated 13[th] August 2018 at the rate of 5%,hence, relief of refund, as prayed in writ petition, is totallyinconceivable and untenable. 16. Thus, in view of aforesaid facts, first and foremost questionbefore this Court is whether approval granted in respect of ECBbetween petitioner and HSBC Mauritius under Section 194LC(2)(ia) of Act of 1961 was sufficient to enable petitioner to applyDTAA rates for determination under Section 195(2) of the Act of1961 or not? 17.In this regard, we may refer that Section 90(2) of Act of1961 provides a statutory override in favour of taxpayers. Its barereading would lead to an inference that where an agreement toavoid double tax has been entered into between Government ofIndia and a foreign country and agreement provides a morebeneficial treatment, then the domestic law provisions ofagreement (DTAA) shall prevail. 18.Section 194LC of Act of 1961, on other hand, is a specialprovision introduced to incentivize foreign investment into Indiathrough concessional withholding rates. Sub-section (2)(ia) specifically allows Central Government to approve borrowings forthe purpose of long-term infrastructure development, which thenautomatically qualifies interest payment for a lower TDS rate of5%. 19.Indisputably, approval under Section 194LC(2)(ia) of Act of1961 was granted to petitioner that after due scrutiny bycompetent authority and such approval represents a formalrecognition that borrowing qualifies for long-term infrastructurefinancing and meets legislative intent of provision. 20.Now, if applicable DTAA provides for an even lower rate; orNIL rate, as the case may be, of tax on interest income, then byvirtue of Section 90(2), that treaty rate becomes applicable. Onceforeign recipient is established to be a tax-resident of treatycountry and interest income falls within scope of Article 11 ofDTAA, payer must be allowed to apply that concessional rate. 21.Now, even if Section 195(2) is considered to be a mandatoryprerequisite to claim such benefit would negate plain languageand effect of Section 90(2). Section 195(2) is a safeguardmechanism, and obviously not a gateway for eligibility. It is meantto be invoked in cases where there is doubt as to chargeability ofpayment and not where transaction is transparent and dulyapproved by the Government. 22.The DTAA under sub-clause (4) of Article 11 only providesthat the transaction giving rise to the debt claim has to beapproved in that regard by the Government of the mentionedcontracting State, which, in this case is India. Admittedly, it hasbeen given approval because in the certificate dated 13[th] August 2019 issued under Section 197 (1), the Assessing Officer hasauthorised the assessee-petitioner to pay interest to HSBCMauritius after deducting income tax @ 5%. The DTAA does notprescribe any separate permission to be obtained. 23.Therefore, we are of the considered view that to demandanother certificate or approval of agreement addressing terms andconditions of DTAA in such cases amounts to duplication and aformalistic interpretation of tax law, which cannot be appreciatedin light of facts and circumstances of case. Rather requiringmultiple clearances for the same transaction not only hampersease of doing business but also undermines legislative intentbehind Sections 194LC and 90 of Act of 1961. 2019 issued under Section 197 (1), the Assessing Officer hasauthorised the assessee-petitioner to pay interest to HSBCMauritius after deducting income tax @ 5%. The DTAA does notprescribe any separate permission to be obtained. 23.Therefore, we are of the considered view that to demandanother certificate or approval of agreement addressing terms andconditions of DTAA in such cases amounts to duplication and aformalistic interpretation of tax law, which cannot be appreciatedin light of facts and circumstances of case. Rather requiringmultiple clearances for the same transaction not only hampersease of doing business but also undermines legislative intentbehind Sections 194LC and 90 of Act of 1961. 24.As regards objection raised by Revenue that petitioner hasnot filed any application for refund in instant matter, it would besufficient to observe that petitioner was not a representativeassessee of foreign lender ‘HSBC Mauritius’, within the meaning ofSection 160 of Act of 1961 and, therefore, it could not have filed arefund claim for tax deducted at source. Legal relationshipbetween petitioner and HSBC Mauritius was purely contractual,governed by ECB agreement and petitioner was under a statutoryduty to deduct TDS only insofar as required by law. There isnothing on record to suggest that HSBC Mauritius had authorizedpetitioner to act on its behalf in tax proceedings, nor is there anystatutory deeming provision applicable in this case that wouldrender petitioner its representative assessee. 25.As such, the Revenue’s expectation that petitioner ought tohave filed for refund of excess TDS on behalf of HSBC is wholly misplaced and contrary to settled tax jurisprudence. Mere fact thatpetitioner had filed an application under Section 195, even thoughnot strictly mandatory in light of Section 90(2) and DTAAeligibility, reflects a bona fide effort on its part to comply with lawand avoid any future dispute. That application was, in effect,indicative of transparency, not a precondition to DTAA benefit. 26.Moreover, approval granted under Section 194LC(2)(ia) ofAct of 1961, which Revenue itself has never disputed, was basedon a thorough evaluation of ECB agreement entered into betweenpetitioner and HSBC. Once such approval is granted, it logicallyfollows that same agreement qualifies not just for concessionaltreatment under domestic law but also triggers beneficialtreatment under DTAA, wherever applicable. 27.We find that conduct of Revenue to accept validity ofagreement under Section 194LC, at one hand and, yetsimultaneously reject its relevance for DTAA purposes, is to adoptan inconsistent and contradictory position which this Court cannotcountenance. 28.For the foregoing reasons, this Court is of firm view thatapproval granted under Section 194LC(2)(ia) of Act of 1961 issubstantive and sufficient for applying DTAA rate on interestpayments to foreign lender. Foreign lender’s eligibility under DTAAhaving been established through supporting documentation, nofurther separate approval under Section 195(2) or Section 197was required. 29.On the issue of entitlement of petitioner for getting refund ofTDS deposited under protest at the rate of 5%, it would be relevant that almost similar question arose before Bombay HighCourt in case of Grasim Industries Ltd. Vs. AssistantCommissioner of Income Tax and Ors., [1]where Division Benchof Bombay High Court observed as under: 28.For the foregoing reasons, this Court is of firm view thatapproval granted under Section 194LC(2)(ia) of Act of 1961 issubstantive and sufficient for applying DTAA rate on interestpayments to foreign lender. Foreign lender’s eligibility under DTAAhaving been established through supporting documentation, nofurther separate approval under Section 195(2) or Section 197was required. 29.On the issue of entitlement of petitioner for getting refund ofTDS deposited under protest at the rate of 5%, it would be relevant that almost similar question arose before Bombay HighCourt in case of Grasim Industries Ltd. Vs. AssistantCommissioner of Income Tax and Ors., [1]where Division Benchof Bombay High Court observed as under: "20. In our view, the consequence of theabove provisions is that once the appellantsucceeds in the appeal, the Revenueauthorities must proceed on the basis that theappellant did not have any obligation to makethe payment. Thus the amount wronglydeducted or paid to the Revenue authoritieswhere it was not required to be paid wouldbecome refundable to the appellant. Of course,that is subject to the condition that the personreceiving the payment has not claimed creditfor the same or is not claiming credit for thesame. 22.The Department had also issued twoCirculars No. 769 dated August 6, 1998([1998] 232 ITR (St.) 25 ) and No. 790 datedApril 20, 2000 ([2000] 243ITR (St.) 58).Though the petitioner is not claiming any reliefunder those circulars, these circulars are alsopointers to the effect that in appropriate casesRevenue authorities must grant refund and/orreturn the sums collected without lawfulauthority, independent of the provisions of theAct. The Central Board of Direct Taxes ("CBDT")issued a Circular No. 7 of 2007 dated October23, 2007 ([2007] 294 ITR (St.) 32)highlighting further problems regardingprocedure for refund of tax deducted atsource. Based on representation received fromtaxpayers to take into account situationswhere genuine claim for refund arises to theperson deducting tax at source from paymentto the non-resident, the Central Board ofDirect Taxes amended Circular No. 790 datedApril 20, 2000. In Circular No. 7 of 2007 datedOctober 23, 2007, the Central Board of DirectTaxes was conscious of situation where non-resident may not apply for refund which wouldput the resident deductor to genuine hardshipas he would not be able to deduct and depositas tax. The circular states that where noincome has accrued to the non-resident due to cancellation of contract or where income hasaccrued but no tax is due on that income ortax is due at a lesser rate the amountdeposited to the credit of Government to thatextent under section 145 cannot be said to be"tax". The circular further states that thisamount can be refunded with prior approval ofthe Chief Commissioner of Income-tax or theDirector General of Income-tax concerned, tothe persons who deducted it from the paymentto the non-resident under section 195 of theAct. 23.In our view, the refusal of theDepartment to return the amount andretaining the same is unauthorised by law andwould only amount to unjust enrichment bythe Department on technical grounds. cancellation of contract or where income hasaccrued but no tax is due on that income ortax is due at a lesser rate the amountdeposited to the credit of Government to thatextent under section 145 cannot be said to be"tax". The circular further states that thisamount can be refunded with prior approval ofthe Chief Commissioner of Income-tax or theDirector General of Income-tax concerned, tothe persons who deducted it from the paymentto the non-resident under section 195 of theAct. 23.In our view, the refusal of theDepartment to return the amount andretaining the same is unauthorised by law andwould only amount to unjust enrichment bythe Department on technical grounds. 24.The apex court in CIT v. Shelly Products[2003] 261 ITR 367 (SC), as relied upon byMr. Mistri, has held that where an assesseechooses to deposit by way of abundant cautionadvance tax or self-assessment tax which is inexcess of his liability on the basis of returnfurnished or by mistake or inadvertence or onaccount of ignorance, included in his incomeany amount which is exempted from paymentof Income-tax or is not an income within thecontemplation of law, he can certainly makesuch claim before the concerned authority forrefund and he must be given that refund onbeing satisfied that refund is due and payable.Not giving the refund, in our view, would be inbreach of article 265 of the Constitution ofIndia which states, "no tax shall be levied orcollected except by authority of law". In New India Industries Ltd. v. Union of India,AIR 1990 Bom 239 the court held that taxesillegally levied must be refunded. The doctrineof unjust enrichment has to be applied afterhaving regard to the facts of each case. 25.InNirmalaL.Mehtav.A.Balasubramanian, CIT [2004] 269 ITR 1 (Bom)the court relying on a Constitution Benchjudgment of the Supreme Court inAmalgamated Coalfields Ltd. v. JanapadaSabha, AIR 1961 SC 964 opined thatacquiescence to illegal tax for a long time isnot a ground for denying the party the reliefthat he is entitled to. 26.In Balmukund Acharya v. Dy. CIT [2009]310 ITR 310 (Bom) the court held that theauthorities under the Act are under an obligation to act in accordance with the law.Tax can be collected only as provided underthe Act. If any assessee, under a mistake,misconceptions or on not being properlyinstructed is over assessed, the authoritiesunder the Act are required to assist him andensure that only legitimate taxes due arecollected. Paragraphs 31, 32 and 33 ofBalmukund Acharya (supra) read as under(page 318 of 310 ITR) : "Having said so, we must observe that theapex court and the various High Courts haveruled that the authorities under the Act areunder an obligation to act in accordance withlaw. Tax can be collected only as providedunder the Act. If any assessee, under amistake, misconceptions or on not beingproperly instructed is over assessed, theauthorities under the Act are required to assisthim and ensure that only legitimate taxes dueare collected (see S. R. Koshti v. CIT [2005]276 ITR 165 (Guj), C. P. A. Yoosuf v. ITO[1970] 77 ITR237 (Ker), CIT v. Bharat GeneralReinsurance Co. Ltd. [1971] 81 ITR303 (Delhi)and CIT v. Smt. Archana R. Dhanwatay [1982]136 ITR355 (Bom). If particular levy is not permitted under theAct, tax cannot be levied applying the doctrineof estoppel. (See Dy. CST (Revenue) v. SreeniPrinters [1987] 67 STC 279 (Ker). If particular levy is not permitted under theAct, tax cannot be levied applying the doctrineof estoppel. (See Dy. CST (Revenue) v. SreeniPrinters [1987] 67 STC 279 (Ker). This court in the case of Nirmala L. Mehta v. A.Balasubramaniam, CIT [2004] 269 ITR 1(Bom) has held that there cannot be anyestoppel against the statute. Article 265 of theConstitution of India in unmistakable termsprovides that no tax shall be levied or collectedexcept by authority of law. Acquiescencecannot take away from a party the relief thathe is entitled to where the tax is levied orcollected without authority of law. In the caseon hand, it was obligatory on the part of theAssessing Officer to apply his mind to the factsdisclosed in the return and assess theassessee keeping in mind the law holding thefield." 30.This court entirely concurs with reasoning given by BombayHigh Court in Grasim Industries Ltd. (supra)[authored by oneof us (the CJ)] and holds that for foregoing reasons, where despite there being no statutory obligation petitioner bonafidely deposited5% under protest, Revenue cannot be allowed to retain the sameand is bound to refund the same to petitioner. 31.Accordingly, writ petition is allowed. Impugned action ofRevenue in denying DTAA benefit is hereby quashed and set aside.Respondents are directed to allow petitioner to apply beneficiallower rate of DTAA, including NIL rate if applicable, on the interestpayable to foreign lender in accordance with terms of applicableDTAA, read with approval granted under Section 194LC(2)(ia) ofAct of 1961. 32.Revenue is directed to extend benefit of concessional taxdeduction or NIL rate of TDS, as the case may be, under DTAA topetitioner in respect of interest paid to HSBC Mauritius, inaccordance with valid government approval already on record. 33.In view of foregoing findings and conclusion reachedhereinabove that petitioner was under no legal obligation todeduct tax at source under Section 195 of Act of 1961, at the rateof 5% in light of beneficial provisions of applicable Double TaxationAvoidance Agreement (DTAA) read with Section 90(2) of Act of1961, it is further directed that concerned authority of Income TaxDepartment shall refund 5% TDS amount deposited by petitioneralong with applicable interest under Section 244A of Act of 1961within a period of eight weeks from the date of this judgment. (ANAND SHARMA),J (K.R. SHRIRAM),CJ -/57