2016 (6) TMI 535 - HC - Income Tax

Refund of tax paid due to loss brought forward - losses for the earlier year could be decided only after final decision by the tribunal that Royalty was not taxable - Held that - The assessee agreed to said royalty income being substantially taxed in the assessment year 1996-1997. This communication dated 21.4.2002 was made by the assessee after the Commissioner(Appeals) dismissed the appeal and confirmed the addition made by the Assessing Officer. The department acted on such request of the assessee deleted the protective assessment for the year 1997-1998 and adjusted the refund for the assessment years 1997-1998 and 1998-1999 against the tax demand of Rs. 3, 76, 74, 095/-. Under no circumstances the assessee can resile from such position and now claim that the entire amount of Rs. 4, 94, 20, 595/- should be deleted from the income also for the assessment year 1996-1997. Quite apart from the principle of estoppal acting against the petitioner one must realise that the petitioner is in a writ petition which is entirely a discretionary remedy. When we find from the facts that the petitioner has no basis for contending that the income of Rs. 4, 94, 20, 595/- of royalty cannot be in law taxed for the assessment year 1996-1997 merely because the Assistant Commissioner of Rajkot passed an order which in plain terms baffles us and on closer scrutiny is not what the Tribunal ever directed we would certainly not be persuaded to grant relief to the petitioner for sum of Rs. 4, 94, 20, 595/- with interest which even otherwise is not due to it.

Summary

Issues Involved:
1. Challenge to the order refusing refund of Rs. 3,76,74,095/-.
2. Taxation of royalty income for the assessment year 1996-1997 and 1997-1998.
3. Adjustment of refunds against tax demand.
4. Principle of estoppel and discretionary remedy in writ petition.

Issue-wise Detailed Analysis:

1. Challenge to the order refusing refund of Rs. 3,76,74,095/-:
The petitioner challenged the respondent's order dated 7.7.2015, which refused to grant a refund of Rs. 3,76,74,095/- and sought a consequential direction for payment of this sum with interest. The petitioner argued that the Assistant Commissioner had reduced the income by Rs. 4,94,20,595/- and worked out the revised total income, thereby entitling them to a refund.

2. Taxation of royalty income for the assessment year 1996-1997 and 1997-1998:
The petitioner company filed its return for the assessment year 1996-1997, and the Assessing Officer initially framed a nil demand. However, upon reassessment, the officer held the petitioner liable for income tax on royalty income of Rs. 4,94,20,595/-, raising a demand of Rs. 3,76,74,095/-. This addition was confirmed by the Commissioner (Appeals) and subsequently challenged before the Tribunal. The Tribunal's order on 30.5.2005 noted that the petitioner had offered this income for taxation in the subsequent year and assessed it on a protective basis for 1997-1998. The Tribunal remanded the issue back to the Assessing Officer for verification.

3. Adjustment of refunds against tax demand:
During the pendency of the appeal before the Tribunal, the petitioner requested the department to delete the protective assessment for 1997-1998, which would result in a loss carried forward to 1998-1999 and entitle them to refunds. The department acted on this request, adjusting the refunds for 1997-1998 and 1998-1999 against the tax demand for 1996-1997. The Assistant Commissioner passed an order on 3.8.2005, giving effect to the Tribunal's order and recomputed the total income, leading to the petitioner's claim for a refund.

4. Principle of estoppel and discretionary remedy in writ petition:
The court noted that the petitioner had agreed to the royalty income being taxed substantially in 1996-1997 and requested the deletion of the protective assessment for 1997-1998. The department granted this relief and adjusted the refunds accordingly. The court emphasized that the petitioner could not now claim a refund for 1996-1997, as it would contradict their earlier position and the principle of estoppel would apply. Additionally, the court highlighted that a writ petition is a discretionary remedy, and given the facts, the petitioner had no basis for claiming the refund. The court dismissed the petition, finding no merit in the petitioner's arguments.

Conclusion:
The court dismissed the petition, stating that the petitioner could not resile from their earlier position and claim a refund for the assessment year 1996-1997. The principle of estoppel applied, and the petitioner had no legal basis for the refund claim. The court also requested an inquiry into the circumstances under which the Assistant Commissioner passed the order on 3.8.2005.