TMI Blog2017 (8) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... en raised, as the parties are ad idem on the fact that, there is an excess payment made by the respondent no. 3 warranting the first petitioner to refund the same. With respect, the issue was raised by the respondent no. 3 in the reply dated June 8, 2007. The issue is one of mixed question of fact and law. The showcause notice and the reply thereto raises such an issue. The parties at issue are the Income Tax department and the respondent no. 3 as well as the first petitioner. It cannot be said, in the facts of the present case that, the Income Tax department had accepted that, there is an excess payment made by the respondent no. 3 to the first petitioner for the relevant years. The Income Tax department has also not accepted the quantum of the alleged excess payment. A consensus between the petitioner and the respondent no. 3 cannot bind the Income Tax department. In such circumstances, it would be appropriate to set aside the impugned order and remand the matter to the Income Tax authority for the purpose of deciding the show-cause notice and the reply thereto in accordance with law. Needless to say that, the Income Tax authority is at liberty to hear such parties and consult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He has relied upon Rules 87 and 88 of the Income Tax Rules, 1962 read with Rule 9(b) of the Trust Refund Rule. He has submitted that, the petitioner could not receive excess fund than as prescribed under such Rules. The impugned order does not consider the aspect of excess payment. It does not take into consideration that, the petitioner being put in excess payment had refunded it to the legal entity from which it had received the same. The petitioner and the company had acted in accordance with law in doing so. Learned Senior Advocate for the petitioner has submitted that, a number of disputes between the employer and the various sections of its employees were pending in different forai. Ultimately a suit was filed in Bangalore by a disgruntled section of the employees of the company. The issues raised therein had received the consideration of the Karnataka High Court. The parties were sent to mediation. The mediation was successful and an award was filed in the mediation. The same was accepted by the Karnataka High Court. Withdrawal of approval is not permissible in the facts of the present case. The withdrawal of approval under Rule 91 of the Income Tax Rules, 1962 will prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 11 of the Rules appearing at Part B of the Fourth Schedule. He has submitted that, Part B of the Fourth Schedule contemplates that, there can be a refund of excess payment. Therefore, the concept of refund of excess amount is not alien to the Income Tax Act, 1961. He has submitted that, Rule 91(2) of the Income Tax Rules, 1962 is equivalent to Rule 29 of the Britannia Biscuits Company Covenanted Staff Pension Fund Rules. He has also prayed for setting aside of the impugned order. Learned Senior Advocate appearing for the respondent nos. 10, 11 and 12 has submitted that, the respondent nos. 10, 11 and 12 are Non-Executive Directors of the Company. They were not involved in the affairs of the trust. Therefore, no liability should be fastened on such respondents. Learned Additional Advocate General appearing for the respondent no. 5 has submitted that, the settlement arrived at in the mediation was approved by the Karnataka High Court. He has submitted that, the impugned order should be set aside. Rule 91(2) of the Income Tax Rules, 1962 is under Part III and is a subordinate legislation. Such Rule is subservient to the Act of 1961. It cannot override Part B of the Fourth Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to provide annuities to the exemployees of the respondent no. 3. The petitioners claim that, the petitioners had discovered during the financial year 2002-2003 that, the respondent no. 3 had made an excess contribution of ₹ 1,211.99 Lakhs and as such the petitioner had refunded such sum to the respondent no. 3. A section of the disgruntled ex-employees of the respondent no. 3 had lodged a complaint with the respondent no. 2. By a letter dated April 11, 2007 the respondent no. 2 had alleged violation of Rule 91(2) of the Income Tax Rules, 1962. It had proposed to withdraw the approval. The petitioners had challenged the legality and validity of the notice dated April 11, 2007 by a writ petition being W.P. No. 12951 (W) of 2007. An interim Order dated October 15, 2007 was passed in such writ petition. The respondent no. 3 was directed to deposit the entire amount in a fixed deposit to be separately held by the petitioner. An appeal was carried from such order. Such appeal was disposed of by an Order dated November 30, 2007 by permitting the authorities to continue with the showcause notice after affording a reasonable opportunity of hearing to the affected parties. A Spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first petitioner under Rule 91(2) of the Income Tax Rules, 1962. Excepting the revenue, all other parties have contended that, the impugned order proceeds on the basis of the Rule 91(2) of the Income Tax Rules, 1962 without taking into consideration Rules 87 and 88 of the Income Tax Rules, 1962 as also Rules 2, 3, 5 and 11 of the Rules appearing at Part B of the Fourth Schedule of the Act of 1961. Part B of the Fourth Schedule of the Income Tax Act, 1961 deals with approved superannuation funds. Rule 2 deals with grant of approval and withdrawal of the approval. The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may accord approval to any superannuation fund or may at any time withdraw such approval. Rule 3 deals with the conditions of the grant of approval. Rule 4 contemplates the application for approval. Rule 5 deals with contributions by employer when deemed to be income of the employer. Rule 5 contemplates that, where any contribution by an employer including the interest thereon, if any, are repaid to the employer, the amount so repaid shall be deemed for the purpose of income tax to be the income of the employer of the prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 211.99 Lakhs was paid over, above and in addition to the annual contribution which the respondent no. 3 was required to make under Rule 9(b) of the Fund Rules approved under the Income Tax Act, 1961. The respondent no. 3 had contended that, it was neither compulsorily nor contractually obligatory for it to make such additional contributions. Such excess contribution was duly allowed as deduction in the Income Tax assessment for the relevant assessment year of the respondent no. 3. The applicability of Rule 91(2) of the Income Tax Rules, 1962 in the facts of the present case, was questioned. The interplay of Rule 5 of Part B of the Fourth Schedule of the Income Tax Act, 1961 and Rule 91(2) of the Income Tax Rules, 1962, in the facts of the present case, is required to be adjudicated upon. Such an adjudication process will necessarily involve the issue whether the claim of excess payment as made by the respondent no. 3 in the reply dated June 8, 2007 is correct or not. The parties had jointly approached the Income Tax authority to accept and assist in the implementation of the settlement decreed by the Hon ble Karnataka High Court. The parties have accepted that, the settlement co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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