Wa/1034/2023 Of The Pr. Commissioner Of Income Tax v. Mangalore Refinery And Petrochemicals Ltd

Digitally signedby SHARADAVANI BLocation: HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21 DAY OF JANUARY, 2025 PRESENT THE HON'BLE MR JUSTICE KRISHNA S DIXIT AND THE HON'BLE MR JUSTICE G BASAVARAJA -WRIT APPEAL NO. 1034 OF 2023 (TIT) BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX PANAJI, 2 FLOOR, AAYKAR BHAWAN, E.D.C. COMPLEX, PATTO PLAZA, PANJI-403 001. PANAJI, 2 FLOOR, AAYKAR BHAWAN, E.D.C. COMPLEX, PATTO PLAZA, PANJI-403 001. 2. THE ASST. COMMISSIONER OF INCOME TAX CIRCLE- 1(1), MANGLAURU, 1 FLOOR, ANNEXE, C.R.BUIDLDING, ATTAVARA, MANGALURU - 575 001. CIRCLE- 1(1), MANGLAURU, 1 FLOOR, ANNEXE, C.R.BUIDLDING, ATTAVARA, MANGALURU - 575 001. …APPELLANTS (BY SRI. Y V RAVIRAJ., ADVOCATE FOR SRI. DILIP M.,ADVOCATE) SRI. DILIP M.,ADVOCATE) AND: MANGALORE REFINERY AND PETROCHEMICALS LTD., KUTHETHOOR, P.O. VIA KATIPALLA, MANGALURU-575 030, A COMPANY REGISTERED BY COMPANIES ACT 1956 REPRESENTED BY ITS MANAGER-FINANCE. …RESPONDENT (BY SRI.C N MAHADESHWARAN.,ADVOCATE FOR SRI. GEORGE PHILIP., ADVOCATE FOR C/R1) SRI. GEORGE PHILIP., ADVOCATE FOR C/R1) THIS WRIT APPEAL FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO A)SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP NO.10523/2022 DATED 18/11/2022 AND B)PASS SUCH OTHER SUITABLE ORDERS. THIS WRIT APPEAL COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE KRISHNA S DIXIT and HON'BLE MR JUSTICE G BASAVARAJA ORAL JUDGEMENT (PER: HON'BLE MR JUSTICE KRISHNA S DIXIT) This intra court appeal by the Revenue seeks to call in question a learned Single Judge’s order dated 18.11.2022 whereby, Assessee’s W.P.No.10523/2022 (T- IT) having been favoured, relief has been accorded. The operative portion of the order reads as under: “(iv) W.P.No.10523/2022 is hereby allowed; (v) The impugned Certificate at Annexure-Q in Form-3 dated 06.01.2021 issued by 1[st]Respondent-Principal Commissioner as well as the impugned orders at Annexure-T dated 13.07.2021 and Annexure-U dated 01.04.2022 are hereby quashed. vi) The respondents are directed to issue fresh Form-3 in favour of the petitioner in terms of Form-1 submitted by the petitioner after carrying out necessary rectifications/revisions/modifications as sought for by the petitioner in its representations/requests as expeditiously as possible.” 2. Learned Panel Counsel appearing for the Revenue endeavors to falter the impugned order contending that the ITAT failed to appreciate relevant grounds urged in the Appeal Memo namely the dispute was in relation to the entire disallowance of Rs.80,19,59,658/- made u/s 40(a)(ia) of the Direct Tax Vivad Se Vishwas Act, 2020 and therefore, that amount ought to have been treated as the disputed tax and not the difference of Rs.80,19,59,658/- minus the amount earmarked by the Appellate Commissioner; under the incentive scheme enacted in the Statute, eligibility conditions have to be strictly complied with and any ambiguity in regard to compliance should enure to the benefit of the Revenue. Learned Sr. Advocate appearing for the Assessee resists the appeal making submission in justification of the impugned order and the reasons on which it has been constructed. 3.FOUNDATIONAL FACTS OF THE CASE: 3.1. Assessee is a company incorporated under the provisions of the erstwhile Companies Act, 1956, now the Companies Act, 2013. For the subject Assessment Year 2009-10, the Assessing Officer passed the Assessment Orders u/s 143(3) of the Income Tax Act, 1961 by making certain additions/disallowance to the returned income as under: 3.FOUNDATIONAL FACTS OF THE CASE: 3.1. Assessee is a company incorporated under the provisions of the erstwhile Companies Act, 1956, now the Companies Act, 2013. For the subject Assessment Year 2009-10, the Assessing Officer passed the Assessment Orders u/s 143(3) of the Income Tax Act, 1961 by making certain additions/disallowance to the returned income as under: 3.2. Being aggrieved by the Assessment Order, the Assessee filed Appeal before the Commissioner of Income Tax (Appeals) and the same came to be partly allowed vide order dated 24.09.2014. This order was carried in appeal both by the Assessee and the Revenue. During the pendency of this appeal, the Assessing Officer passed order dated 19.1.2015 giving effect to the order of the Commissioner. Thereafter, The Tribunal vide order dated 7.9.2018 favoured Assessee’s Appeal and negatived that of the Revenue. The Assessing Officer vide order dated 4.1.2019 gave effect to the ITAT order. 3.3. The Revenue preferred Appeal against the ITAT order before the Bombay High Court. During its pendency, the DTVSV Act came into force and the Assessee filed declaration in Form 1 on 2.4.2020 before the prescribed authority. The 1[st] respondent issued certificate dated 6.1.2021 in Form 3 accepting the said declaration in part. Therefore, Assessee had moved rectification application which came to be rejected vide order dated 1.4.2022. This led to the filing of subject Writ Petition which came to be allowed by the learned Single Judge. The said order is put in appeal at our hands. 4. Having heard the learned counsel for the parties and having perused the Appeal Papers, we decline indulgence in the matter broadly agreeing with the findings and the reasoning of the learned Single Judge. 4.1. The short question that arises for consideration revolves around the term ‘disputed tax’. Section 2(j) of DTVSV Act, 2020 defines this term. Relevant part of it is as under: “(j) “disputed tax”, in relation to an assessment year or financial year, as the case may be, means the income-tax, including surcharge and cess (hereafter in this clause referred to as the amount of tax) payable by the appellant under the provisions of the Income-tax Act, 1961 (43 of 1961), as computed hereunder:— (A) in a case where any appeal, writ petition or special leave petition is pending before the appellate forum as on the specified date, the amount of tax that is payable by the appellant if such appeal or writ petition or special leave petition was to be decided against him;” Admittedly, the ITAT had favoured appeal of the Assessee and negatived that of the Revenue. That resulted into Revenue filing the appeals before the Bombay High Court. Therefore, the ‘disputed tax’ means the income tax including surcharge and cess payable by the petitioner should appeal be decided in favour of the Revenue i.e., against the Assessee. 4.2. Before the First Appellate Authority, the Assessee had raised a two fold argument for attacking disallowance u/s 40(a)(i) of the IT Act viz (i) the freight charges payable to non-residents outside India are not chargeable tax in India, hence, the Assessee is not liable to deduct tax at source under the Act and (ii) without prejudice, those payees of freight charges who are residents of Singapore, UAE & Turkey, as per India’s Double Taxation Avoidance Agreements with the said countries, the aforesaid freight cannot be taxed in India. Although the First Appellate Authority did not agree with the first contention, it cottoned with the second by holding that the Assessee was not liable to deduct tax at source. Assessee preferred appeal against negativing of his first contention above; however, Revenue did not prefer any appeal against the adverse finding on the second contention that had gone in favour of the Assessee. Thus, the finding on the second contention attained finality. 4.3. The order of the ITAT shows that it upheld even the first contention that the freight charges payable to non-residents outside India are not chargeable to tax in India and as a consequence, the Assessee was not liable to deduct tax at source under the IT Act. As already mentioned above, we repeat, no challenge was laid by the Revenue to the order of the First Appellate Authority before the ITAT. The Order Giving Effect to the order of the ITAT, passed by the Assessing Officer was in respect of disallowance of Rs.42,92,10,516/- for the Assessment Year 2009-10. The Revenue had preferred appeal before the Bombay High Court and the subject matter is as under: If Revenue‘s appeals were to be allowed in its favour, the amount of tax (i.e., disputed tax) payable by the Assessee is as under: In that view of the matter, learned Single Judge at paragraph 22 rightly observed: “It is significant to note that the orders passed by the Assessing Officer giving effect to the orders of the ITAT confirm the aforesaid facts and figures. Accordingly, as per Section 2(1)(o)(i), the tax arrears mean the disputed tax and as per the table given in Section 3(1) read with the first proviso thereunder, the Petitioner has to pay 50% of tax arrears…” That figure would be Rs.7,29,44,327/-. Therefore, at para 23, he rightly recorded the following finding. “It is therefore clear that the impugned Certificates and orders passed by the respondents demanding much higher sums from the petitioner are clearly illegal, arbitrary and contrary to the material on record and law as well as the provisions of the DTVSV Act and the same deserve to be quashed and necessary directions are to be issued to the respondents in this regard.” In the above circumstances, this appeal being devoid of merits, is liable to be and accordingly dismissed, costs having been made easy. The appellants are directed to give effect to the mandate of the learned Single Judge, forthwith. Sd/- (KRISHNA S DIXIT) JUDGE Bsv/cbc List No.: 1 Sl No.: 44 Sd/- (G BASAVARAJA) JUDGE