Home Case Index All Cases Income Tax Income Tax + SC Income Tax - 2017 (9) TMI SC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 53 - SC - Income TaxValidity of attachment orders u/s 281B - High Court [2016 (12) TMI 123 - DELHI HIGH COURT] has confirmed the tax liability of non-resident (FOWC) having PE in India - SC confirmed the order of HC [2017 (4) TMI 1109 - SUPREME COURT OF INDIA] - Income tax department directed the Axis Bank to have the drawing of LCs restricted to the extent of the liability of Jaypee to deduct Tax Deducted at Source (TDS) of FOWC. - On the one hand, Axis Bank was restrained from remitting the amount under the LCs to the extent of tax liability of FOWC and, on the other hand, Confirming Banks had taken the position that once LCs were invoked, they had no option but to make the payment. Axis Bank, faced with this situation, filed Writ Petition in the High Court of Delhi. - HC dismissed the petition and confirmed the attachment orders. Held that:- There is only one methodology which can be adopted in breaking this impasse or deadlock viz. to direct FOWC to secure the amount. After all, this stalemate is the creation of FOWC. Even when judgment of the Delhi High Court had come on December 21, 2016 fastening liability of income tax on the income generated by FOWC, FOWC tried to play smart by invoking the LCs. This was done by FOWC even after it was made aware of the attachment orders dated December 1, 2016 passed under Section 281B of the Act. No doubt, FOWC had challenged the orders of the High Court by filing special leave petition in this Court. Such a challenge was laid by Jaypee as well. Least that was expected of FOWC was to await the decision of this Court and act thereafter, depending upon the outcome of those proceedings. Fact remains that this Court has upheld the judgment of the Delhi High Court dated December 21, 2016 thereby sustaining the liability of FOWC. The attempt of the FOWC was nothing less than trying to over reach the judicial orders. We, therefore, affirm the order of the High Court which has upheld the attachment order made by the Income Tax Department. Having upheld the attachment order, the important moot question that arises is as to how to secure the amount? Whether Axis Bank be restrained from transmitting the amount to the Confirming Banks? Here, we find that insofar as Confirming Banks are concerned, they are under legal obligations to make the payments under the LCs once these LCs are invoked. These banks cannot go by any disputes between FOWC and Jaypee or FOWC and Tax Department in India. Therefore, it may be difficult to restrain Axis Bank from reimbursing the Confirming Banks, notwithstanding attachment orders. Best solution to the whole controversy, in these circumstances, is to direct the FOWC to remit the amount which it has received under the LCs as it is the FOWC which is to discharge the tax liability. - FOWC directed accordingly.
|