TMI Blog2019 (10) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... llant submits they might militate against the appellant as substantive findings on merit. If that is the case, the appeal to be filed would be of a mere formality. Thus, the learned single Judge, in our considered view, ought not to have gone into the merits of the case. The first finding rendered by the learned single Judge is to the effect that the transactions are not mere buying back of shares but granting dividend to the shareholders. Secondly, it was held that there is no need to follow any procedure towards adjudication while invoking Section 115-O of the Act. Having given the aforesaid findings, the writ petition was accordingly dismissed. This is in our considered view cannot be sustained in the eye of law. They are not mere observations but findings on merit both on fact and law. In such view of the matter, we are of the view that the learned single Judge was not right in going to the merit while granting liberty to file an appeal. A submission is also made raising doubt over the maintainability of the appeal under Section 246-A of the Act. We have no hesitation in holding that the appeal is maintainable. The very case of the respondent is that the appellant ough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the return filed by it. 3. The respondent sought for certain details of the remittances made by the appellant to its overseas shareholders. The appellant sent its reply while furnishing the details sought for. Anticipating that the respondent would treat the transaction as that of the defendant, the appellant filed an application before the Authority of Advance Ruling ('AAR') under Section 245Q of the Income Tax Act, 1961, warranting a ruling on the amount received by its shareholders in lieu of the shares bought back. 4. The respondent issued the impugned order dated 22.03.2018 inter alia holding that the transactions made in pursuant to the buy back arrangement effected as consequence to the approval of the Scheme requires to be taxed under Section 115-O of the Income Act on the premise that it would constitute dividend and not capital gain. As a consequence thereon, the bank accounts of the appellant were freezed. Challenging the order dated 22.03.2018, the appellant has filed a writ petition in W.P.No.7354 of 2018 raising various grounds. In pursuant to the conditional interim order granted, the appellant paid a sum of ₹ 495 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.Heard Mr.Gopal Subramanian, learned Senior Counsel for Mr.Srinath Sridevan, learned Counsel appearing for the appellant and Mr.G.Rajagopalan, Additional Solicitor General of India, assisted by Mr.Karthik Ranganathan, for the respondent-State and perused the records. 6.The learned Senior Counsel appearing for the appellant made the following submissions: The order impugned cannot be sustained in the eye of law, Section 115-O of the Income Tax Act, 1961, cannot be invoked unilaterally and without adjudication by treating the transactions as that of dividend, which would not come within the purview of Section 2(22)(d) of the Income Tax Act, 1961(hereinafter referred to the Act ). As the buy back Arrangement of Scheme was approved by the Court that it is not open to the respondent to review it. There has to be a harmonious construction of Sections 2(22)(d) and 10(34A), 46A and 115QA of the Act. There was no prior notice issued to the appellant before passing the impugned demand and therefore, there is a violation of the principles of natural justice. The transactions would come within the purview of Section 46A of the Act alone. Section 115-O of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act which speaks of a deemed default. It is a mandate of law. As admittedly the appellant has bought back more shares than the one permissible under law, Section 115-O of the Act stands attracted. The approval of the Scheme will not bind the respondent. This Court was only acting as a Company Court. There is no need to go through the process involved under Section 143(1) of the Act. The affidavit filed by the respondent will have to be seen in the context and that is order not the show cause notice but a final one. The order only mandates the appellant to pay the requisite amount. That is the reason why it was followed by freezing of the accounts. One has to see the over all conduct of the appellant. Certainly, the provision 2(22)(d) would attract as this involves reduction of capital. The learned single Judge was pleased to hold that the appeal if filed would be disposed of after affording opportunity of sufficient hearing and the observation made are only prima facie in nature. Therefore, the appeal deserves to be dismissed, especially when the statutes provide for alternative remedy, which is to be exhausted. In support of his contention, the learned Additional Solicitor Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f distribution of profit made by the Company. Hence, in my opinion there is no need for issuance of notice before making a demand under Section 115 O of the Act. It is to be noted that unless the law requires, the Assessing Officer need not issue notice before making a demand under Section 115 O of the Act. The parliament in its wisdom brought amendments to the Finance Act and inserted Section 115 O to 115 Q with effect from 01.06.1997 (Special Provisions) to achieve an object. If any other view is taken, then the Special Provisions under Chapter XIV would become redundant and it would be opening a pandoras box. ............ 28. In the light of the decisions referred supra and the order passed by this Court in C.P.No.102 of 2016, and also the reasons stated for purchasing the shares under the Scheme of Arrangement under Sections 391 to 393 of the Companies Act, prima-facie I find no merit in the contention of the learned Senior Counsel for the petitioner that the shares purchased pursuant to the order of the Company Court would be a capital gain and not to be treated as dividend. 10.4. Having given the aforesaid findings, the writ pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freezing alone requires to be questioned. The further question as to whether the order under challenge violates the principles of natural justice or requisite procedure contemplated under the Act is a matter for consideration before the Appellate Authority. The learned single Judge has rightly observed that the appeal can be entertained and decided on merit as the appellant has already deposited a sum of ₹ 495 crores. 12.We would like to reiterate the legal position involving invocation of the extraordinary jurisdiction of this Court by placing reliance upon the judgment of a Division Bench of this Court in the Joint Commissioner of Income Tax, Media Range and others Vs. Kalanithi Maran and another (2014 (3) Law Weekly 846) in in which one of us is a party (MMSJ) wherein law laid down by the Apex Court in Commissioner of Income Tax and others Vs. Chhabil Dass Agarwal, ((2014) 1 SCC 603), has been noted of. The following paragraphs would be apposite. 12. While holding so, we are quite aware that the jurisdiction vested with High Court under Article 226 of the Constitution of India can be exercised in a given case. In other words, the restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the recent judgment of the Supreme Court referred above. Considering the jurisdiction of this Court under Article 226 of the Constitution of India, it has been held therein in the following manner: 10. In the instant case, the only question which arises for our consideration and decision is whether the High Court was justified in interfering with the order passed by the assessing authority under Section 148 of the Act in exercise of its jurisdiction under Article 226 when an equally efficacious alternate remedy was available to the assessee under the Act. 15. The Supreme Court, while considering the said issue, has also taken into consideration the decision rendered in G.K.N. Driveshafts (India) Limited Vs. Income-tax Officer, ((2003) 1 SCC 72 = 259 ITR 19(SC)). In this connection, it is apposite to refer paragraph No.12 of the said decision, which reads as follows:- 12. The Constitution Benches of this Court in K.S. Rashid and Sons vs. Income Tax Investigation Commission, (AIR 1954 SC 207); Sangram Singh vs. Election Tribunal, Kotah, (AIR 1955 SC 425); Union of India vs. T.R. Varma, (AIR 1957 SC 882); State of U.P. vs. Moh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court adverted to the rule of self-imposed restraint that the writ petition will not be entertained if an effective remedy is available to the aggrieved person and observed: (AIR p. 1423, para 7). 7. The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up. 13. In Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 this Court observed: (SCC pp. 440-41, para 11) 11. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .B. Gandhi v. Gopi Nath and Sons, 1992 Supp (2) SCC 312; Whirlpool Corpn. v. Registrar of Trade Marks, (1998) 8 SCC 1; Tin Plate Co. of India Ltd. v. State of Bihar, (1998) 8 SCC 272; Sheela Devi v. Jaspal Singh, (1999) 1 SCC 209 and Punjab National Bank v. O.C. Krishnan, (2001) 6 SCC 569) 14. In Union of India vs. Guwahati Carbon Ltd., (2012) 11 SCC 651, this Court has reiterated the aforesaid principle and observed: (SCC p.653, para 8) 8. Before we discuss the correctness of the impugned order, we intend to remind ourselves the observations made by this Court in Munshi Ram v. Municipal Committee, Chheharta, (1979) 3 SCC 83. In the said decision, this Court was pleased to observe that: (SCC p. 88, para 23). 23. when a revenue statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be sought in that forum and in that manner, and all the other forums and modes of seeking [remedy] are excluded. 13. We also do not find any error in the order of the learned single Judge with respect to the deposit made during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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