TMI Blog2012 (11) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... . Soparkar for the Petitioner. Varun K. Patel for the Respondent. JUDGMENT Akil Kureshi, J - The petitioner has challenged a communication dated 15.1.2001 and further prayed for a direction for refund of the sum of Rs.3,69,157/- with interest from 1.2.1999 till actual payment. 2. Brief facts are as under. 2.1 The petitioner is a company registered under the Companies Act, 1956. In the year 1998, the petitioner had awarded a contract to a foreign company one M/s Niro Kestner S.A. of France (hereinafter to be referred to as "the foreign company") for erection and commissioning of flanking unit. For such purpose, the petitioner had opened a Letter of Credit originally for a sum of FRF 5,50,000. The same was, however, subsequently modified to FRF 7,36,000. On such payment being made to a non-resident in terms of section 195 of the Income Tax Act, 1961 ("the Act" for short), the petitioner was required to deduct tax at source. The petitioner after grossing up the said payment of FRF 7,36,000 to the foreign company, calculated the requirement of tax to be deducted at source at FRF 1,84,000 at the rate of 20% on FRF 9,20,000. Accordingly, an amount of Rs. 11,69,395 equiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was sent by the petitioner to the Income Tax Officer (TDS) in which he referred to his earlier letters demanding refund of the excess tax and also referred to some personal hearing which had taken place during the previous week and supplied further documents, including a copy of the contract awarded to the foreign company, a copy of the TDS certificate of Rs. 8,00,238/- issued in favour of such foreign company and such other relevant details. 2.5 The application of the petitioner, however, came to be dismissed by the respondent No.2 by impugned order dated 15.1.2001. In such order, it was stated as under : "2. As directed by CIT-I, Gujarat vide his letter No. HQ-I/PG-200485/2000-01 dtd. 5.1.2001 and the same is intimated to this office vide Addl. CIT's letter No. Addl. CIT/TDS/PG/2000-01 dtd. 10.1.2001 your claim is not entitled for any refund because the contract was not cancelled (para 8 and 9 of Circular No.790). Though excess tax was deducted at source, refund of same is not permissible to the person who is deducting the tax in view of specific prohibition in para-9 of Circular No.790 dtd. 20.4.2000. Therefore, your claim is to be treated as filed." 3. Facts are more or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent circular dated 20.4.2000 could not be given retrospective effect and the application made for refund where the circular dated 6.8.1998 was applicable, must be decided in terms of the provisions made in such circular. 5.2 Counsel also relied on an unreported decision of a Division Bench of this Court dated 28.06.2011, wherein it was opined that the Department could not decide the application of the assessee after indefinite period of time and apply the rule position which emerged out of the circulars subsequently issued. 6. On the other hand, learned counsel Shri Varun Patel for the revenue put up a stiff resistance contending that the petitioner's first application dated 28.9.1999 for refund was incomplete. Relevant documents such as contract between the petitioner and the foreign company, undertaking that no refund is claimed by the foreign company and other relevant documents were never supplied to the Department. It was only on 7.9.2000 that the petitioner supplied such documents by which time, the Board's circular dated 20.4.2000 was already issued. The case of the petitioner, therefore, was rightly rejected since the same did not fall in any of the categories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at source; (c) the tax deducted at source is found to be in excess of tax deductible for any other reason;" 10. Recognizing that there is no statutory provision empowering the Assessing Officer to refund tax deducted at source to the deductee and in certain situations, the foreign company would not be interested in filing refund claims which would lead to a hardship, the circular provided that, "The matter has been considered by the Board. It has been decided that in the type of cases referred to above, a refund may be made independent of the provisions of the Income-tax Act, 1961 to the person responsible for deducting the tax at source from payments to the non-resident, after taking the prior approval of the Chief Commissioner concerned.". Such circular, of course, provided for certain procedural safeguards to ensure that there are no instances of claims of double refund by the deductor as well as the foreign company. The circular also provided that such refund could be adjusted against the existing tax liability of the assessee. It is not in dispute that the case of the petitioner would fall under clause (i)(c) of the circular dated 6.8.1998; of course subject to other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been non-suited only on the ground of applicability of the second circular, the said view is, no longer sustainable for the reasons recorded hereinabove. In our considered view, this petition is liable to be allowed on this count alone. Refund to the petitioners is liable to be granted applying the first circular. So far as other contentions are concerned, they need no consideration for the view taken by us." 14. We need not go to the extent of laying down such a proposition of absolute nature. Without even going to such an extent, in the facts of the present case, we are of the opinion that the respondents erred in applying subsequent circular dated 20.4.2000. The petitioner had already made an application on 20.9.1999 giving details of the refund claim. The respondents did not respond to such an application for a considerable period of time despite reminders from the petitioner. More than six months passed before the application of the petitioner was even attended to. If later on the rule position changed by virtue of the subsequent circular issued by the Board, the petitioner can hardly be penalized by withholding the refund claim which was covered under the earlier circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unattended or dormant for nearly 20 months. It is not the case of the respondents that the petitioner was called upon to furnish certain details which it did not do. No other or further reasons are stated by the Department why the application received no response for an inordinate long time. Counsel for the Revenue pointed out that in the guidelines of 2008, there is provision that an application be considered preferably within six months. No corresponding provision was made in the previous guidelines and no time limit, therefore, was prescribed. We are of the opinion that merely because in the previous guidelines no such time limit was prescribed does not mean that the application of the assessee can be attended to after indefinite period of time. The respondents were required to process the application of the petitioner within a reasonable time. What could be stated to be reasonable period of time is always a question of fact to be considered in the facts and circumstances of a given case. In the present case, we find that for nearly 20 months, the petitioner's application did not receive any response and further that there is no explanation for such delay coming forth from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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