M/S Motorola Solutions India Pvt. Ltd., Grumman v. Commissioner Of Income Tax, Faridabadand Others

Civil Writ Petition No.7652 of 2013 IN THE PUNJAB AND HARYANA HIGH COURT ATCHANDIGARH Civil Writ Petition No.7652 of 2013Date of Decision: 11[th] October, 2013 M/s Motorola Solutions India Pvt. Ltd., Grumman .....Petitioner Versus Commissioner of Income Tax, Faridabadand others. .....Respondents CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLAHON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present:Mr. Ashok Aggarwal, Senior Advocate, withMr. Ashim Aggarwal, Advocate,for the petitioner. Mr. Rupinder Khosla, Asst. Solicitor General of India, withMr. T.K.Joshi, Advocate,for the respondents. RAJIVE BHALLA, J. The petitioner prays for issuance of a writ, order or directionquashing notices dated 25.03.2013 (Annexure P-16 & P-17),26.03.2013 (Annexure P-19) and 28.03.2013 (Annexure P-20),issued by respondent no.2 and for a direction to the respondents torefund Rs.26,26,87,000/- appropriated from the petitioner's bankaccount towards an alleged demand of tax, relating to assessmentyear 2005-06. Counsel for the petitioner submits that execution of thetreaty for avoidance of double taxation, the Mutual AgreementProcedure (MAP) and the Memorandum of Understandings (MOU) signed by the Government of India and the United States of Ameritca, are admitted. The instructions issued by the CBDT, are notdenied. The Joint Secretary (respondent no.3), the competent IndianAuthority, has filed an affidavit that MAP procedings are pending.The petitioner already having invoked the Double Taxation andPrevention of Fiscal Evasion Treaty in accordance with procedureprescribed by MAP, the forcible appropriation of Rs.26,26,87,000/-from the petitioner’s bank account is a blatant violation of this intergovermental treaty. The arbitrary nature of the impugned notices andactions becomes apparent from the fact that vide letter dated25.03.2013, the petitioner was asked to confirm whether MAP hasbeen admitted. By way of the same letter, the officer recorded thatintimation is being sought from Joint Secretary (FT&TR 1) to confirmwhether MAP has been admitted, but in the same breath, the lettergoes on to record that no intimation has been received. Even, if it ispresumed, though, not accepted, that MAP was not “admitted”,notice dated 25.03.2013, required the respondents to wait forconfirmation from the Joint Secretary, before proceeding to forciblyappropriate this amount. The contents of the letters and notices havebeen found to be false as the Joint Secretary has confirmed, by wayof his affidavit, that MAP is pending and meetings have been held,thereby rendering the impugned action null and void. It is furthersubmitted that the respondents are under an apparent misconceptionthat the Indian Competent Authority is required to “admit” a requestfor suspension of collection of outstanding tax. The treaty, the MOU,the MAP and instructions issued by the CBDT do not envisage party has to merely file an application in its country, of residence,which is then taken up by competent authorities of both countries.The reply filed by the Joint Secretary, respondent no.3, the IndianCompetent Authority that the application is under consideration,proves that MAP proceedings were pending. Respondent no.2 hadonly to obtain confirmation regarding these facts but choose not to doso and by assuming that MAP has not been “admitted” by the IndianCompetent Authority, proceeded to arbitrarily violate an internationaltreaty. It is further submitted that as pendency of MAP has beenadmitted by the respondents, they should, have instead ofcontesting the present petition, refunded the amount to the petitioner. party has to merely file an application in its country, of residence,which is then taken up by competent authorities of both countries.The reply filed by the Joint Secretary, respondent no.3, the IndianCompetent Authority that the application is under consideration,proves that MAP proceedings were pending. Respondent no.2 hadonly to obtain confirmation regarding these facts but choose not to doso and by assuming that MAP has not been “admitted” by the IndianCompetent Authority, proceeded to arbitrarily violate an internationaltreaty. It is further submitted that as pendency of MAP has beenadmitted by the respondents, they should, have instead ofcontesting the present petition, refunded the amount to the petitioner. Counsel for the petitioner further submits that reference tonon-renewal of a bank guarantee, is now being canvassed as aground for raising the demand and appropriating money but is notreferred to in the show cause notices or letters addressed byrespondent no.2. The plea with respect to expiry of bank guaranteeis an after thought manufactured by the respondents when theyrealised their error. The plea with respect to bank guarantee hasbeen raised despite Citi Bank having addressed a letter confirmingvalidity of the bank guarantee. It is further submitted that powerunder Section 226 of the Income Tax Act can only be invoked againstan assessee in default. The outstanding demand of tax having beenduly secured by a subsisting and valid bank guarantee, there was noquestion of treating the petitioner as an assessee in default. It isfurther submitted that the bilateral agreement between two countries revenue. Respondent no.2 has not only violated a bilateral international treaty and agreement but circulars issued by the CBDT,provisions of the Act and, therefore, departmental action should beinitiated against respondent no.2. It is further submitted that as per Clause-2 of the bankguarantee, if the tax payer does not renew the bank guarantee, thebank is obliged to serve a written notice upon the Government, 60days prior to the expiry of the bank guarantee. The fact that no suchnotice was issued by the bank and the bank has instead addressed aletter dated 25.03.2013, reiterating the validity of the bank guarantee,there is no question of the bank guarantee having expired. If thebank guarantee had, as asserted by the respondents, expired on28.02.2012, it is rather surprising that they waited for an year, i.e., theend of financial year 2012-13, to adopt coercive procedure. It isfurther submitted that as the affidavit filed by respondent no.3 hasclearly established that there is no provision for admission of MAP,which is pending consideration, the action of respondent no.2, inappropriating the petitioner’s money is illegal and should, therefore,be set aside with a direction to the respondents to restore theamount to the petitioner, with interest. Counsel for the respondent submits, by reference toaverments in the reply and orders passed by respondent no.2, on thefile, that stay granted by the Assistant Commissioner of Income Tax,Circle-12(1), Bangalore, on 22.02.2009, was subject to payment oftwo instalments of two crores each and furnishing of a bankKumar Naresh Nguarantee, before 16.03.2009. The petitioner paid Rs.4 crores in two2013.10.21 14:02I attest to the accuracy andintegrity of this documentHigh Court Chandigarh Counsel for the respondent submits, by reference toaverments in the reply and orders passed by respondent no.2, on thefile, that stay granted by the Assistant Commissioner of Income Tax,Circle-12(1), Bangalore, on 22.02.2009, was subject to payment oftwo instalments of two crores each and furnishing of a bankKumar Naresh Nguarantee, before 16.03.2009. The petitioner paid Rs.4 crores in two2013.10.21 14:02I attest to the accuracy andintegrity of this documentHigh Court Chandigarh instalments and furnished bank guarantee No.5679063528, dated04.03.2009, for Rs.17.63 crores, valid upto 28.02.2012. The stayorder dated 22.02.2009, stood vacated as the bank guarantee whichexpired on 28.02.2012, was not renewed. The petitioner was askedto furnish a fresh guarantee or substitute guarantees with respect toassessment years 2003-04, 2004-05 and 2005-06. The petitionerfurnished bank guarantees for assessment years 2003-04, 2004-05but did not furnish a bank guarantee for assessment year 2005-06, inthe Model Draft Format. The stay order dated 22.02.2009, stoodvacated with respect to assessment year 2005-06, thereby conferringa right upon the revenue to recover outstanding tax, payable by thepetitioner. The expiry of the bank guarantees was conveyed by DCIT,Circle-II, Gurgaon, vide order sheet entry dated 25.03.2013, dulysigned by Sh. Sant Dass, representative of the petitioner. The officeentry dated 25.03.2013, refers to status of the MAP application, aletter written to Joint Secretary(FT&TR), CBDT, New Delhi to confirmadmission of MAP and expiry of bank guarantee of Rs.17.63 crores.It is further submitted that the letter, written by the petitioner, inresponse to notice dated 25.03.2013, clearly reveals that thepetitioner was aware that the bank guarantee has expired asreference by the petitioner to letters written by its bank clearlyreveals that the petitioner was aware of the revenue's stand that thebank guarantee has expired. The letter forwarded by the banker wasnot accompanied by a bank guarantee in the prescribed proforma.The respondents have rightly proceeded to recover tax payable by petitioner to claim that order dated 22.02.2009 subsists withoutproving that the bank guarantee was renewed, after 28.02.2012. Inthe absence of any fresh bank guarantee, the stay order stoodvacated conferring power upon respondent no.2 to issue a demandnotice and recover the amount legally, in accordance with powersconferred by the Income Tax Act. The mere pendency of MAP,without complying with conditions of the stay order does not entitlethe petitioner to any relief much less to assert that money has beenwrongly appropriated or that it should be returned to the petitioner. Itis further argued that letter issued by the Citi Bank, is vague as it onlyconfirms that bank guarantee No.5679063528, dated 04.03.2009was isued, on behalf of the petitioner in favour of the revenue. Theletter is silent on the expiry/continuance of the bank guarantee. It isprayed that as the action of the respondent is bonafide and inaccordance with law, the present petition should be dismissed. It would be appropriate, at this stage, to make a briefreference to the rejoinder filed by the petitioner, to the reply filed byrespondent no.2, wherein it is pleaded that the bank guaranteefurnished on 16.03.2009 did not expire on 28.02.2012 and is valid tilldate. It is also averred that City Bank had vide letter dated25.03.2013, intimated to the respondents that the bank guarantee iscurrently valid. We have heard counsel for the parties, perused thepleadings and proceed to narrate the facts. It would be appropriate, at this stage, to make a briefreference to the rejoinder filed by the petitioner, to the reply filed byrespondent no.2, wherein it is pleaded that the bank guaranteefurnished on 16.03.2009 did not expire on 28.02.2012 and is valid tilldate. It is also averred that City Bank had vide letter dated25.03.2013, intimated to the respondents that the bank guarantee iscurrently valid. We have heard counsel for the parties, perused thepleadings and proceed to narrate the facts. The latter is registered as a company under the Indian CompaniesAct, 1956. The petitioner filed its return, for assessment year 2005-06, on 31.10.2005, at Bangalore, declaring a total income ofRs.207,013,290/- with a tax liability of Rs.75,751,339/- etc. Thepetitioner's case was taken up for scrutiny. A notice was served uponthe petitioner under Section 143(2) of the Income Tax Act, 1961(hereinafter referred to as 'the Act'), by the Assistant Commissionerof Income Tax, Circle 12(1), Bangalore. The matter was, thereafterreferred to the Transfer Pricing Officer under Section 92 CA of theAct. The Assessing Officer, vide order dated 29.12.2008, madecertain additions to the income declared by the petitioner and raiseda tax demand of Rs.8,56,91,161/-, which led to the issuance of ademand notice dated 29.12.2008, under Section 156 of the Act. Thepetitioner filed an appeal before the Commissioner of Income Tax(Appeals)-IV, Bangalore. A further demand of Rs.13.06 crores wasraised by a rectification order dated 10.02.2009. The Government of India and the Government of UnitedStates of America have signed a Convention/Treaty for avoidance ofdouble taxation and prevention of fiscal evasion. Article 27 of theconvention provides for a Mutual Agreement Procedure (MAP),whereby a person aggrieved by taxation can present his case to thecompetent authority of the country of his residence. A Memorandumof Understanding (MOU) providing for deferment of assessmentand/or suspension of collection of taxes, during pendency of MAPwas signed between the Government of India and United States of to suspend collection of taxes potentially payable till such time asMAP proceedings are disposed off. Clause 5 of the MOU providesthat collection and assessment of any interest or penalty levied shallalso be suspended. Clause 2 of the MOU, requires the assessee tofurnish an irrevocable bank guarantee, as security. The CentralBoard of Direct Taxes(CBDT) has issued instruction No.2, dated28.04.2003, directing that the tax would remain suspended duringpendency of MAP. Vide instruction no.10/2007, dated 23.10.2007,the CBDT extended applicability of the MOU to Indian residententities during the course of pendency of MAP. Motorola Solutions Incorporated USA, of which thepetitioner is a 100% subsidiary, admittedly, invoked MAP forassessment year 2005-06 by filing an application, dated 28.01.2009,before the competent authority in the USA. The invocation of MAPwas brought to the notice of the Indian competent authority i.e., theJoint Secretary (FT & TR-1), CBDT. The Joint Secretary, arrayed asrespondent no.3 has admitted the pendency of MAP proceedings.The petitioner filed an application for stay before the AssistantCommissioner of Income Tax, Bangalore. Vide order dated22.02.2009, the petitioner was required to deposit Rs. 4 Crores intwo instalments, of Rs.2 Crores each and till such time as the MAPapplication is not decided, to furnish a bank guarantee, before16.03.2009. Order dated 22.02.2009 reads as follows:- “3. The assessee requested to stay the balanceamount till the application filed before the Boardunder Mutual Agreement Procedure on 11.02.2009 “3. The assessee requested to stay the balanceamount till the application filed before the Boardunder Mutual Agreement Procedure on 11.02.2009 and the required Bank Guarantee is produced bythe company vide petition filed on 20.02.2009.The assessee's request is considered. Subject tothe payment of the tax as per the aboveinstalments, the assessee will not be deemed an'Assessee in default' for the balance amunt ofdemand till the application filed before the CBDT isconsidered by the Board and on production ofBank Guarantee by the assessee before16.03.2009. If there is any failure on the part of theassessee in adhering to the above schedule, thedemand will be recovered from the assessee asper the provisions of L.T. Act.” The petitioner paid Rs.4 crores in two equal instalments,without prejudice to its rights on 27.02.2009 and 16.03.2009,respectively and furnished a bank guarantee of Rs.17.63 crores, interms of the MOU as well as the stay order. It is, therefore, apparentthat at the time of passing of order dated 22.02.2009, the pendencyof MAP was accepted by the revenue. The proceedings were, thereafter, transferred to Gurgaon,where respondent No.2, despite the stay order accepting thependency of MAP, issued notice, dated 25.03.2013, under Section221(1)of the Act, calling upon the petitioner to show cause whypenalty should not be levied as tax determined has not been paidand it is not clear whether MAP has been admitted. Another letter outstanding tax for assessment year 2003-04, 2004-05 and 2005-06.It would be appropriate at this stage, to reproduce the letter in itsentirety as a major part of the controversy revolves around thisletter:- “To Dated: 25.03.2013 The Principal Officer,Motorola India Electronics Pvt. Ltd.,(Now K/a Motorola Solutions India Pvt. Ltd.)415/2, Mehrauli Gurgaon Road,Gurgaon-122001. Sir/madam, Sub:- Request to deposit the outstanding demandin your case for A.Y 2003-04, A.Y. 2004-05 and2005-06-Reg. ******* From perusal of records, it is seen thatthere is a demand of Rs.27.15 Cr. is outstanding inyour case for above A.Y’s. The assessmentrecords of this case were received from DCIT,circle 12(1), Bangalore on 06.12.2010. As per theDossier folder, it has been stated that a MAPapplication has been filed by you before Hon’bleCBDT, New Delhi. However, since it was not clear from theirletter whether request for suspension of collectionof outstanding taxes under MAP has beenadmitted or not by the Indian Competent Authorityin terms of para 4 of Instruction No.10/2007, whichis a condition precedent to suspend collection of taxes, a letter has been written to the CompetentAuthority (i.e. Joint Secretary (FT&TR I) on25.03.2013 requesting to intimate whether therequest of the assessee for suspension ofcollection of outstanding taxes has been admittedin terms of para 4 of Instruction No.10/2007, sothat further necessary action in the matter may betaken. However, no confirmation to the effect thatrequest for suspension of collection foroutstanding tax in terms of MOU has beenadmitted by the Indian Competent Authority,has been received from them. In view of above facts, it is concluded that yourrequest for suspension of collection of outstandingdemand in your case has not been admitted by theCompetent Authority, so far, you are, therefore,requested to- (i) To intimate whether you have any communication to the effect request for suspension ofcollection for outstanding tax in terms ofMOU has been admitted by the IndianCompetent Authority. If yes, please furnish acertified copy of the same, and (ii) Deposit the outstanding demand without any further delay. A notice u/s 221 in this regard is attached herewith so as to enable you tosubmit your reply in this regard. Your reply with regard to above points must reachto the office undersigned on 26.03.2013, positively. Encl. As above. Sd/-Shahsi Kajle Recd. In view of above facts, it is concluded that yourrequest for suspension of collection of outstandingdemand in your case has not been admitted by theCompetent Authority, so far, you are, therefore,requested to- (i) To intimate whether you have any communication to the effect request for suspension ofcollection for outstanding tax in terms ofMOU has been admitted by the IndianCompetent Authority. If yes, please furnish acertified copy of the same, and (ii) Deposit the outstanding demand without any further delay. A notice u/s 221 in this regard is attached herewith so as to enable you tosubmit your reply in this regard. Your reply with regard to above points must reachto the office undersigned on 26.03.2013, positively. Encl. As above. Sd/-Shahsi Kajle Recd. (Shashi Kajle)Deputy Commissionerof Income tax Circle-II,Gurgaon. Sd/- Santdas25/03/2013” A perusal of the letter reveals that respondent no.2 hasrecorded that the dossier folder reveals that a MAP application hasbeen filed before the CBDT, New Delhi, but, thereafter, goes on torecord that it is not clear whether request for suspension of collectionfor outstanding tax under MOU has been “admitted” by the IndianCompetent Authority in terms of paragraph 4 of instructionNo.10/2007. The letter also records that a letter has been addressedto the Joint Secretary (FT&TR 1) on 25.03.2013, requesting it tointimate whether request of the assessee for suspension of collectionof outstanding tax has been admitted, but strangly enough records, in the same letter, that no confirmation has been received by26.03.2013. The petitioner is, thereafter, called upon to intimate, whether it has any communication that request for suspension ofcollection of outstanding tax has been admitted by the IndianCompetent Authority, by 26.03.2013. In response to letter dated 25.03.2013, the petitioneraddressed a letter dated 26.03.2013. A relevant extract from theletter, reads as follows:- “We refer to your notice dated 25.03.2013requesting the assessee to deposit theoutstanding demands for the captionedassessment years. In this regard, the companysubmits as follows:-- 1. For all the captioned years, the company hasalready furnished bank guarantees (BG) andinvoked MAP in accordance with the Indo-UStreaty law. We understand that one bankguarantee for a sum of Rs. 9 Crores is alreadyin your files. A confirmation from our bankers(City Bank) to the effect that the second bankguarantee for Rs.17.63 Crores is alsocontinuing in your favour is enclosed asAnnexure-1 to this petition. In view of theabove, the requisite bank guarantees issuedby the company in accordance with Indo-UStreaty law have always been in place and partof your records. It would also be appreciated that the company had invoked the BG route as pertreaty law way back in 2007(for AYs 2003-04and 2004-05) and then again in 2009 (for AY2005-06). These were duly accepted by theDepartment and have since continued to be inforce in favour of the Revenue and for whichthe assessee has been incurring recurringcharges to keep the BGs alive. In view of theabove, it is submitted that the Revenue hadaccepted the bank guarantees issued by thecompany for the captioned years and hadconsequently accepted the company’s claimthat its demands for the captioned years bekept in abeyance as long as the BGs are inforce and its MAP application pending beforethe Competent Authorities of the twocountries. Any allegation to the contrary at thisstage (as is made out to be vide yourcaptioned notice) would go against theprinciples of consistency and fair play, moreso since the Department has accepted theBGs issued by the company for all theseyears without any objection whatsoever. Thisis without prejudice to the company’scontention that it was always eligible to invokethe Indo-US treaty law and issue the bank guarantee for the requisite amount and obtaina stay in accordance with the treaty includingthe Board Instruction No.10/2007. In thisregard, the company is enclosing copies ofMAP applications that it had filed with theCBDT stating that suitable MAP applicationshad been filed by it before the US CompetentAuthority for the captioned years inaccordance with Article 27 of Indo-US taxtreaty. It is thus clear that the company hadcomplied with the requirements of Article 27 ofthe treaty and was entitled to invoke the BGroute which it did in 2007 and 2009 and wasduly accepted by the tax department. It maynot be out of place to mention here that thispractice has been consistently adapted andaccepted by the tax department for all USbased taxpayers who have invoked theMAP/BG route from time to time to stay theirdemands through issuance of bank guaranteefor the appropriate amounts.” no.2, certain objections were raised with respect to validity of thebank guarantee furnished by the petitioner. A perusal of the petitioner's letter reveals that the petitionerasserted that it has already furnished bank guarantee and invokedMAP in accordance with the Indo-US treaty and a bank guarantee ofRs.9 crores is already on the file. The letter also records that thepetitioner’s banker (Citi Bank) has sent confirmation that the secondbank guarantee of Rs.17.63 crores (the relevant bank guarantee) isvalid and continuing. It is further asserted that MAP application hasbeen filed in accordance with the Indo-US treaty and is pending. TheCiti Bank also addressed letter dated 25.03.2013, to the AssistantCommissioner, Income Tax Circle, Income Tax Dept, Ministry ofFinance, Govt. of India, New Delhi, confirming the validity of the bankguarantee. After receipt of the letter, respondent no.2, issued notice,dated 26.03.2013, under Section 226(3) of the Act, calling upon thepetitioner to forthwith deposit Rs.26,26,87,000/- in favour of DeputyCommissioner of Income Tax, Circle-2, Gurgaon, followed by anothernotice dated 28.03.2013, under Section 226(3) of the Act, to theStandard Chartered Bank, i.e. the petitioner maintained its accountrequiring it to remit Rs.26,26,87,000/-. The bank issued a DemandDraft of Rs.26,26,87,000/- in favour of the revenue for assessmentyear 2005-06. The question that arises for adjudication from these facts iswhether the revenue is justified in appropriating Rs.26,26,87,000/- dated 22.02.2009 stood vacated for non-admission of MAP and or forfailure to re-renew the bank guarantee. The controversy with respect to admission or pendency ofMAP stands conceeded in favour of the petitioner by theaffidavit/reply filed by the Joint Secretary (Foreign Tax and TaxResearch Division), Department of Revenue, Ministry of Finance,Central Board of Direct Taxes. The affidavit also clarifies the statusof MAP, the mode and manner of filing an application, the procedureof the Double Taxation Agreement/Convention and the mode andmanner of considering and deciding a MAP application. A relevantextract from the reply reads as follows:- “3. As per paragraphs 1 and 2 of Article 27 of theDouble Taxation Agreement(Convention)entered into between India and the USA, arequest for MAP must be received from theUS competent Authority, on that CompetentAuthority being satisfied that it is not itselfable to arrive at a satisfactory solution to theissue of taxation which is not in accordancewith the Convention. After receiving the MAPrequest from the US Competent Authority, theIndian Competent Authority calls for therelevant orders related to the MAP requestfrom the concerned Chief Commissioner inorder to verify details such as the name of thetaxpayer, assessment year concerned, “3. As per paragraphs 1 and 2 of Article 27 of theDouble Taxation Agreement(Convention)entered into between India and the USA, arequest for MAP must be received from theUS competent Authority, on that CompetentAuthority being satisfied that it is not itselfable to arrive at a satisfactory solution to theissue of taxation which is not in accordancewith the Convention. After receiving the MAPrequest from the US Competent Authority, theIndian Competent Authority calls for therelevant orders related to the MAP requestfrom the concerned Chief Commissioner inorder to verify details such as the name of thetaxpayer, assessment year concerned, whether the tax demand/dispute exists andwhether the MAP request has been filed withthe US Competent Authority within threeyears of the date of receipt of notice of theaction which gives rise to the taxation indispute. In cases where any discrepancies insuch details are noticed, a clarification issought from the US Competent Authority.Once the MAP application fulfils all theconditions of Article 27, the MAP proceedingsare taken as pending and can be said to be“admitted”. On receipt of the details, positionpaper is prepared and sent for the MAPnegotiation. Rules 44G and 44H of theIncome Tax Rules further prescribe theprocedure for action to be taken by the Competent Authority of India. That an MOU in this regard was entered intobetween India and USA. On receipt of theMAP request from the US CompetentAuthority, in the light of the MOU,FT&TR-IDivision requests the Chief Commissioner ofIncome Tax concerned to consider the stay ofdemand. The conditions for suspension ofcollection of demand as per the MOU areprovided vide Instruction No.10/2007 dated 23.09.2007. It is clearly stated in paragraph 4 of the Instruction No.10/2007, dated23.10.2007, in a case involving Mutualagreement Procedure, a suspension ofcollection of tax is mandated only. (i) after obtaining a confirmation regardingpendency of MAP from the Foreign Tax andTax Research Division of the CentralBoard of Direct Taxes andpendency of MAP from the Foreign Tax andTax Research Division of the CentralBoard of Direct Taxes and (ii) on receipt of a bank guarantee in themodel draft format annexed to the MOU foran amount calculated in accordance withthe manner indicated therein.model draft format annexed to the MOU foran amount calculated in accordance withthe manner indicated therein. 5. In light of the above discussion, the facts ofthe case for Assessment Year 2005-06 isstated herein under:the case for Assessment Year 2005-06 isstated herein under: (i) A MAP request in the case of M/s MotorolaIndia Electronics Pvt. Ltd. (now mergedwith Motorola Solutions India Pvt Ltd.) forAY 2005-06 was received by the IndianCompetent Authority from the USCompetent Authority vide request dated07.04.2009.India Electronics Pvt. Ltd. (now mergedwith Motorola Solutions India Pvt Ltd.) forAY 2005-06 was received by the IndianCompetent Authority from the USCompetent Authority vide request dated07.04.2009. (ii) After verifying all the conditions stated inparagraph 3 above, the MAP proceedingswere taken as pending and subsequentlyparagraph 3 above, the MAP proceedingswere taken as pending and subsequently MAP discussions were held by the IndianCompetent Authority with the USCompetent Authority in the MAP meetingsdated September 16-18, 2009 and January5-8, 2010. (iii) The collection of demand was required tobe suspended as per the MOU for AY2005-06 on satisfaction of conditions statedinInstructionNo.10/2007dated23.09.2007, as stated in Paragraph 4above.”be suspended as per the MOU for AY2005-06 on satisfaction of conditions statedinInstructionNo.10/2007dated23.09.2007, as stated in Paragraph 4above.” (ii) After verifying all the conditions stated inparagraph 3 above, the MAP proceedingswere taken as pending and subsequentlyparagraph 3 above, the MAP proceedingswere taken as pending and subsequently MAP discussions were held by the IndianCompetent Authority with the USCompetent Authority in the MAP meetingsdated September 16-18, 2009 and January5-8, 2010. (iii) The collection of demand was required tobe suspended as per the MOU for AY2005-06 on satisfaction of conditions statedinInstructionNo.10/2007dated23.09.2007, as stated in Paragraph 4above.”be suspended as per the MOU for AY2005-06 on satisfaction of conditions statedinInstructionNo.10/2007dated23.09.2007, as stated in Paragraph 4above.” Sub-para (ii) of para 5 of the affidavit, contains anunequivocal admission that MAP proceedings were taken to bepending and discussions were held by the Indian CompetentAuthority with US Competent Authority on 16/18.09.2009 and5/8.01.2010. It is also averred that collection of demand was requiredto be suspended on satisfaction of conditions, namely, furnishing ofbank guarantee, and confirmation of pendency of MAP from theForeign Tax and Tax Research Division of the Central Board of DirectTaxes. The Indian competent Authority having admitted pendency ofMAP, puts at rest this part of the controversy thereby negatingcontents of the show cause notice, based upon failure to intimate“admission of MAP”. It would be appropriate to once again point outthat relating to this very demand of tax, the Assistant Commissionerof Income Tax, Circle 12(1), Bangalore, had already acceptedpendency of MAP while granting stay of recovery of demand videKumar Naresh N2013.10.21 14:02I attest to the accuracy andintegrity of this documentHigh Court Chandigarh -21- order dated 22.02.2009. It is rather surprising or let us saydistressing that respondent no.2 drew an artificial distinction between“pendency” and “admitted” and using it as a device, proceeded toappropriate an amount, recovery whereof had already been stayed.The assumption of jurisdiction by respondent no.2, in violation of thetreaty is clearly erroneous and bordering on the malafide. The matter, however, does not rest here as the respondentsassert and it is apparent from proceedings in the office of theconcerned officer and reply filed by the petitioner to the notices thatthe department had also asserted, though, not in their letters ornotices that as the bank guarantee No.5679063528, dated04.03.2009, had expired on 28.02.2012, its confers a right upon therevenue to raise a demand and recover Rs.26,26,87,000/- from thepetitioner. The question that remains is whether bank guaranteeNo.5679063528, dated 04.03.2009, had expired and the affect ofletter dated 25.03.2013, issued by the Citi Bank to the respondents,confirming validity of the bank guarantee. The show cause notice, issued under Section 226(3) of theAct, does not refer to expiry of the bank guarantee as it is basedupon failure to intimate “admission” of MAP. However, in proceedingsin the office, the respondents pointedly referred to expiry of the bankguarantee. In response, the petitioner addressed letter dated26.03.2013 (which we have already reproduced) specificallyasserting that the bank guarantee is in force and Citi Bank hasKumar Naresh Naddressed letter dated 25.03.2013, confirming validity of the bank2013.10.21 14:02I attest to the accuracy andintegrity of this documentHigh Court Chandigarh Guarantee. The letter addressed by Citi Bank, on 25.03.2013, readsas follows:- “Subject:- Confirmation for Issuance of BankGuarantee No:5679063528 dated 04.03.2009. The show cause notice, issued under Section 226(3) of theAct, does not refer to expiry of the bank guarantee as it is basedupon failure to intimate “admission” of MAP. However, in proceedingsin the office, the respondents pointedly referred to expiry of the bankguarantee. In response, the petitioner addressed letter dated26.03.2013 (which we have already reproduced) specificallyasserting that the bank guarantee is in force and Citi Bank hasKumar Naresh Naddressed letter dated 25.03.2013, confirming validity of the bank2013.10.21 14:02I attest to the accuracy andintegrity of this documentHigh Court Chandigarh Guarantee. The letter addressed by Citi Bank, on 25.03.2013, readsas follows:- “Subject:- Confirmation for Issuance of BankGuarantee No:5679063528 dated 04.03.2009. We hereby confirm that we have on04.03.2009issuedBankGuaranteeNo.5679063528 for Rs.17,63,46,462 (RupeesSeventeen Crores Sixty three Lakhs Forty SixThousand Fourt Hundred and Sixty Two only) inyour favour, which is valid in our records and hasbeen issued on behalf of Motorola India PrivateLimited and Mr. Dheeraj Jain and Mr. Arun Yadavhave signed this guarantee who are authorised tosign the guarantees on behalf of the Bank.” The letter bearing the title “Confirmation for Issuance ofBank Guarantee No:5679063528 dated 04.03.2009” contains anunequivocal statement, by and on behalf of Citi Bank, affirming thevalidity of bank guarantee. The respondents, however, seek tointerpret this letter as a mere confirmation of issuance of bankguarantee and not a renewal of the bank guarantee. Counsel for therespondents asserts that a perusal of the bank guarantee furnishedon behalf of the petitioner reveals that the bank guarantee expiredon 28.02.2012 and required the assessee and the bank to furnish afresh bank guarantee. The absence of fresh bank guarantee orrenewal, after 28.02.2012, establishes that the bank guaranteeexpired on 28.02.2012, thereby conferring a right upon the revenueKumar Naresh N2013.10.21 14:02I attest to the accuracy andintegrity of this documentHigh Court Chandigarh to demand and recover tax from the petitioner. The petitioner per-contra submits that a perusal of the bankguarantee reveals that the Citi Bank has undertaken that the bankshall renew the bank guarantee for another three years and in casethe tax payer does not renew the agreement between the assesseeand the bank, it shall inform the government 60 days prior to theexpiry of the bank guarantee. The bank has, admittedly, addressedletter dated 25.03.2013, informing the respondents that bankguarantee remains in force, and is valid. At this stage, it would be appropriate to appraise the bankguarantee and reproduce relevant paragraphs from the bankguarantee, which read as follows:- “.....Whereas the Government has agreed thatMotorola India Private Limited. Having itsregistered office at 415/2, MEC MG Road,Gurgaon, Haryana-122001 and permanentaccount number AAACM9243B (hereinafter called“The Assessee”, which expression shall, unlessexclided by or repungant to the context, inclide itssuccessrs and assignees) shall furnish a bankguarantee in respect of a demand of INR17,63,46,462(Indian Rupees Seventeen CroreSixty Three Lacs Fourty Six Thousand FourHundred Sixty Two only) for the assessment year(s) 2005-06, in lieu of which the recovery of anypart of such demand shall not be enforced until 30 days after the assessing officer receives writtennotice of the MAP agreement between thecompetent authorities of the Governments of Indiaand the United States, and the assessee will notbe treated as in default for the above assessmentyear (s)....” days after the assessing officer receives writtennotice of the MAP agreement between thecompetent authorities of the Governments of Indiaand the United States, and the assessee will notbe treated as in default for the above assessmentyear (s)....” 2. The bank further agrees that the guaranteeherein contained shall remain in full force andeffect from the date hereof, i.e., 4[th] March 2009, till28[th] February 2012; and further agrees to renewthis guarantee for another 3 years on the followingterms: the bank will provide the government withwritten notice no later than 60 days prior to theexpiration date of this bank guarantee if thetaxpayer has not renewed the agreementsbetween the assessee and the bank that underliethis bank guarantee for an additional period of 3years. If the government does not receive arenewal of this bank guarantee or a substitutebank guarantee for the amounts of tax and interestin dispute prior to 30 days before the expirationdate of this bank guarantee, the government mayinstruct the bank to pay the guaranteed amountsprior to expiration of the bank guarantee. 4. The obligation of the bank to the governmentunder this bank guarantee will terminate upon the occurrence of any of the following for the taxableyears in question: (1) The payment by the bank orthe assessee to the government of the guaranteedamounts; (II) The payment by the assessee to thegovernment of all amounts owed, as agreed to bythe competent authorities in a MAP agreement;(III) a map agreement by the competent authoritiesthat the government will not seek to recover anypart of the previously demanded amounts; or (IV)the assessee furnishes to the government similarsecurity from another bank.” A perusal of these paragraphs reveals that the bankguarantee was valid between 04.03.2009 and 28.02.2012. The bank,agreed that the bank guarantee would stand renewed for anotherthree years except if “........ the bank will provide the government withwritten notice no later than 60 days prior to the expiration date of thisbank guarantee if the taxpayer has not renewed the agreementsbetween the assessee and the bank that underlie this bankguarantee for an additional period of 3 years. If the government doesnot receive a renewal of this bank guarantee or a substitute bankguarantee for the amounts of tax and interest in dispute prior to 30days before the expiration date of this bank guarantee, thegovernment may instruct the bank to pay the guaranteed amountsprior to expiration of the bank guarantee......” The bank has not sentany communication to the revenue that the assessee did not execute guarantee, 60 days prior to expiry of the bank guarantee, therebyclearly proving that the bank guarantee stood renewed for a furtherperiod of three years. Clause 4 of the Bank Guarantee enumeratesthe circumstances in which obligation of the bank shall terminateupon events. The revenue does not allege any of these events. It is,thus, apparent that the bank guarantee would be automaticallyrenewed for a period of three years except if the assessee does notexecute documents in favour of the bank that underline the bankguarantee or on the happening of events enumerated in Clause 4 ofthe Bank Guarantee. The revenue does not allege or assert that itreceived any communication from the bank at any time before theexpiry date of 28.02.2012, informing it that the assessee has notexecuted documents in favour of the bank and the bank guarantee isto expire on 28.02.2012. The revenue does not allege or assert thateven between 28.02.2012 and 25.03.2013 when the revenue issuednotice of demand, though, not based upon expiry of the bankguarantee, it received any communication from Citi Bank that theassessee has not executed any document in favour of the bank withrespect to the bank guarantee. The revenue does not allege thehappening of any event referred to in Clause 4 of the BankGuarantee. The Citi Bank has instead addressed a letter dated25.03.2013, to the revenue, before the revenue appropriated theamount from the petitioner's account with Standard Chartered Bank,reiterating the validity of the bank guarantee. A reference to theletter, which we have already reproduced in a preceding paragraph ofKumar Naresh Nthe judgment, cannot, as urged by counsel for the respondents, be2013.10.21 14:02I attest to the accuracy andintegrity of this documentHigh Court Chandigarh read as a mere confirmation of issuance of the bank guarantee. Aperusal of the letter reveals that the Citi Bank has clearly stated thatthe bank guarantee No.5679063528, dated 04.03.2009, forRs.17,63,46,462/- is valid in their records and has been issued onbehalf of the “Motorola India Private Limited.” It is not denied by therespondents that letter dated 25.03.2013, was received by therespondents before they appropriated money from the petitioner'saccount. It is, therefore, rather surprising as to how and why noticeswere issued, under Section 226(3) of the Act, treating the petitioneras an assessee in default and, thereafter, directing the StandardChartered Bank to remit an amount of Rs.26,26,87,000/- to thedepartment. A further perusal of the aforesaid bank guarantee revealsthat renewal does not require any formal format, as the clausesreproduced above clearly envisage an automatic renewal for a periodof three years except if the assessee does not furnish requisitedocuments regarding the bank guarantee to the bank and the bank,thereafter intimates the government 60 days before expiry of thebank guarantee that the guarantee shall expire on 28.02.2012 or onthe happening of events enumerated in Clause 4 of the bankguarantee. The revenue's contention that as the petitioner furnishedbank guarantee for assessment years 2003-04, 2004-05 on26.10.2012, but did not furnish a bank guarantee with respect to thebank guarantee, in dispute, in our considered opinion, is irrelevant in the absence of any intimation by the bank to the respondents that theassesee has not furnished documents in favour of the bank regardingthe bank guarantee. The bank guarantee, therefore, stoodautomatically renewed for a further period of three years. The plea ofnot furnishing a bank guarantee in the prescribed format appears tobe a mere after thought. the absence of any intimation by the bank to the respondents that theassesee has not furnished documents in favour of the bank regardingthe bank guarantee. The bank guarantee, therefore, stoodautomatically renewed for a further period of three years. The plea ofnot furnishing a bank guarantee in the prescribed format appears tobe a mere after thought. Before parting with the judgment, it would be necessary topoint out that we would have relegated the petitioner to its alternativeremedy available under the Act but as the matter involves a doubletaxation treaty and MAP proceedings that are admittedly pending andthe notice relates to violation of terms and conditions of MAP, whichare admittedly pending, we do not deem it appropriate in the factsand circumstances of the present case to relegate the petitioner to itsalternative remedy. In view of what has been stated hereinabove, we allow thewrit petition, quash notices dated dated 25.03.2013 (Annexure P-16& P-17), 26.03.2013 (Annexure P-19) and 28.03.2013 (AnnexureP-20) and direct the respondents to refund Rs.26,26,87,000/- to thepetitioner. The latter direction shall, however, be kept in abeyanceand shall be subject to conclusion of MAP proceedings, which shouldbe concluded within six months from receipt of a certified copy of thisor