+W.p.(C) v. Principal Commissioner Of Income Tax-7 Delhi, &Anr

$~30 *IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 11083/2021 & C.M.No.34159/2021XCHANGING TECHNOLOGY SERVICES INDIA PRIVATELIMITED..... PetitionerThroughMr.Kamal Sawhney with Mr.PrashantMeharchandani, Mr.Nitin Agarwal,Mr.Arun Bhaduria and Mr.DivyanshSingh, Advocates.XCHANGING TECHNOLOGY SERVICES INDIA PRIVATELIMITED..... PetitionerThroughMr.Kamal Sawhney with Mr.PrashantMeharchandani, Mr.Nitin Agarwal,Mr.Arun Bhaduria and Mr.DivyanshSingh, Advocates. versus PRINCIPAL COMMISSIONER OF INCOME TAX-7 DELHI, &ANR...... Respondents ..... RespondentsThroughMr.Sunil Kumar Agarwal, Advocate. % Date of Decision: 30[th]September, 2021 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MR. JUSTICE NAVIN CHAWLA MANMOHAN, J. (Oral) 1.Present writ petition has been filed challenging the order dated 31[st]March 2021 for Assessment Year 2018-19 passed under Section 264 of theIncome Tax Act, 1961. Petitioner also seeks directions to Respondent No.2to issue refund amounting to INR 71,41,29,257/-, on account of excessDividend Distribution Tax (DDT) paid, within a time bound period.Petitioner also seeks a declaration that Section 115-O be read in a mannerthat is not inconsistent with Article 10 and other provisions of the India-Mauritius DTAA. 2.Learned Counsel for the Petitioner states that the beneficial rate of 5%prescribed under Article 10(2) of the India- Mauritius DTAA shall prevailover the DDT rate of 15% (20.36% after grossing up with 15% rate asprovided u/s 115-O of the Act plus applicable surcharge and cess). 3.Learned Counsel for the Petitioner states that the Respondent No. 1 hasrejected Petitioner’s request for refund of the DDT paid in excess of thebeneficial rate provided under the DTAA by refusing to follow the bindingdecision of the jurisdictional ITAT Delhi in Giesecke & Devrient (India)Pvt. Ltd. v. Addl CIT (ITA 7075/Del/2017) which squarely covers the issue,even after carrying out a detailed enquiry on the Petitioner’s claim anddespite accepting that the said decision squarely covers the issue raised bythe Petitioner. He states that the Respondent has decided not to follow abinding decision by simply stating that the department had yet to make up itsmind about filing an appeal against Giesecke & Devrient (India) (supra). Hepoints out that this is in gross violation of judicial discipline even after notbeing able to refute that the said decision was squarely applicable to thePetitioner. 4.Learned Counsel for the Petitioner relies on the decision in Riso IndiaPrivate Limited v. PCIT, W.P.(C) 6809/2021 wherein this Courthasquashed an identical order under Section 264 of the Act. 5.Issue notice. Mr. Sunil Kumar Agrawal, learned counsel forrespondents, accepts notice. He submits that the matter pertains to theperiod during which Dividend Distribution Tax regime under Section115-O was prevalent. Under this system, the tax on distributed profits wasto be borne by the Company distributing the dividends, and subsequentlythe dividends received by shareholders post payment of Dividend Distribution Tax by the Company was statutorily exempted from taxunder Section 10 of the Act. He states that this scheme of DividendDistribution Tax has been construed by Hon’ble Supreme Court in thecase of Godrej & Boyce Manufacturing Co.Ltd. v. DCIT [(2017) 394ITR 449 (SC)]. In view of the same, he further submits that the rate of taxon distributed profits that is applicable is the one stipulated under section115-O of the Income Tax Act and not the one prescribed under Article 10of the DTAA, because the rate of tax in the hands of the shareholders ismore beneficial under the Income Tax Act as compared to the DTAA. Distribution Tax by the Company was statutorily exempted from taxunder Section 10 of the Act. He states that this scheme of DividendDistribution Tax has been construed by Hon’ble Supreme Court in thecase of Godrej & Boyce Manufacturing Co.Ltd. v. DCIT [(2017) 394ITR 449 (SC)]. In view of the same, he further submits that the rate of taxon distributed profits that is applicable is the one stipulated under section115-O of the Income Tax Act and not the one prescribed under Article 10of the DTAA, because the rate of tax in the hands of the shareholders ismore beneficial under the Income Tax Act as compared to the DTAA. 6.Upon hearing the counsel for the parties, this Court finds that therespondents have dismissed the petitioner’s revision petition without givingany reason on merits, except stating that the petition was premature, asaccording to the learned Commissioner, the Revenue still had time to file anappeal against the ITAT judgment in the case of Giesecke & Devrient(India) (Supra). The relevant portion of the impugned order is reproducedhereinbelow:- “7. I find that the submissions of the assessee in the presentpetition substantially draw from and are based on thediscussion in the aforesaid order of ITAT in the case of M/sGiesecke & Devrient [India] Pvt. vs. Addl. CIT, SpecialRange-04, New Delhi [ITA No.7075/DEL/2017]. However, Inote that this judgment was delivered on 13.10.2020 and theIncome Tax Department still has time to take decision onfiling of appeal, if any, against the said judgment. As such,it cannot be said that the Department has accepted oracquiesced in the judgment of ITAT on the above issues onmerit, and the legal position of the question involved is notyet settled. Hence a remedy under Section 264, asrequested, is pre-mature. 8. As such, without going into the merits of the groundsraised by the assessee, I, in view of the above facts and legalposition, decline to interfere with the order passed byAssessing Officer on 29.01.2020” 7.Consequently, from the aforesaid, it is apparent that the learnedCommissioner has neither applied its mind to the controversy at hand norpassed a reasoned order. Accordingly, the impugned order dated 31[st]March,2021 is set aside and the matter is remanded back to the respondent-PCIT,Delhi-7 for passing a reasoned order within six weeks after giving anopportunity of hearing to the petitioner. This Court clarifies that it has notexpressed any opinion on merits of the controversy. All rights andcontentions of the parties are left open. In the event the petitioner isaggrieved by the decision of the respondent, it shall be open to the petitionerto file appropriate proceedings in accordance with law. Accordingly, thepresent writ petition along with pending application stands disposed of. MANMOHAN, J SEPTEMBER 30, 2021KA NAVIN CHAWLA, J