TMI Blog2023 (9) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... not technically a TDS amount . Moreover, since it is also confirmed by this Court that the amount paid to DAVY was not chargeable to tax in India, Respondents insistence on Petitioner paying that amount was not in accordance with law and the amount so paid over must be refunded to Petitioner. HELD THAT:- Once the appellant succeeds in the Appeal, the Revenue Authorities must proceed on the basis that the Appellant did not have any obligation to make the payment. Thus the amount wrongly deducted or paid to the Revenue Authorities where it was not required to be paid would become refundable to Appellant. Of course, that is subject to the condition that the person receiving the payment has not claimed credit for the same or is not claiming credit for the same. It is indisputable that for the past over 13 years neither Kvaerner nor DAVY has claimed any amount from the Revenue Authorities under the issue at hand. Moreover, Kvaerner, who is the successor-in-interest of DAVY has also addressed its no objection to Respondent No. 1 conveying that the amount can be returned or refunded to Petitioner. As in appropriate cases Revenue Authorities must grant refund and/or return the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri, Senior Advocate, with Madhur Agrawal Fenil Bhatt, i/b. Atul K. Jasani, Advocate. For the Respondents-Revenue : Mr. Akhileshwar Sharma, with Shipla Goel, Advocate. ORAL JUDGMENT: (PER K. R. SHRIRAM, J) 1. Petitioner had set up a Gas-based Sponge Iron Plant in India for which it entered into a Foreign Technical Collaboration Agreement dated 22nd October 1989 ( agreement ) with one M/s. Davy Mckee Corporation ( DAVY ) and another party. Under the agreement, DAVY agreed to render to Petitioner outside India certain engineering and other related services in relation to the project. Petitioner also entered into another agreement (Supervisory Agreement) with DAVY to provide certain supervisory services to Petitioner in India. Under the agreement DAVY was to deliver to Petitioner the necessary design, drawing and data with respect to the Sponge Iron Plant outside India. DAVY also agreed to train outside India, certain number of employees of Petitioner in order to make available to such employees technical information, scientific knowledge, expertise, etc. for commissioning, operation and maintenance of the Plant. 2. Petitioner agreed to pay a sum of US ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d nil income for the consideration received by them under the agreement on the ground that the income received by DAVY from Petitioner neither accrues in India nor is received in India and hence not chargeable to tax in India. Assessment order dated 30th November 1992 for Assessment Year 1990-91 and 16th March 1993 for Assessment Year 1991-92 in the assessment of DAVY came to be passed whereby Respondent No. 4-ACIT, Circle-12(2) held that the amount earned by DAVY under the agreement was chargeable to tax in India. Accordingly, the withholding tax that Petitioner paid was adjusted towards DAVY s tax liability. 5. DAVY challenged both the assessment orders before the Commissioner of Income Tax (Appeals). Thereafter, Petitioner, along with DAVY, filed Writ Petition No. 448 of 1994 in this Court challenging the constitutional validity of the provisions of Section 9(1)(vii) of the Act, the assessment orders for Assessment Year 1990-91 and 1991-92 in the case of DAVY and the taxability of the amount received by DAVY under the agreement under Section 9(1) (vii) of the Act. By an order dated 5th May 2010, this Court was pleased to hold that the assessment orders passed by Respondents N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of TDS is in addition to the full consideration under the agreement and the withholding tax liability was that of Petitioner. It is also Petitioner s case that the order giving effect to this Hon ble Court s order should be passed in the case of DAVY, but the refund of TDS deposited should be given to Petitioner. Petitioner also submitted that in view of the no objection given by DAVY to Petitioner to receive the refund from the Department, Department has to only accept the no objection from DAVY (through Kvaerner) and handover the refund amount to Petitioner. 11. Mr Mistri also submitted that Petitioner had jointly approached this Court with DAVY challenging the orders of assessment passed by Respondent No. 4 and the order in appeal passed by CIT(A). He pointed out that this Court had already held that the income by way of fees for technical services paid by Petitioner to DAVY was not liable to income tax under the Act and the income received by DAVY cannot be deemed to have arisen or accrued in India because the services under the agreement were not rendered within India. Mr. Mistri submitted that the consequence of the order would be that the income under the agreement woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to give benefit of an order passed in the case of one assessee to another assessee; (d) Since Petitioner had paid the tax as TDS on behalf of DAVY and DAVY in its return of income filed for AY 1990-91 and 1991-92 had claimed the credit of such TDS deposited by Petitioner on behalf of DAVY, Petitioner was not entitled to refund of the TDS deposited and, therefore, no effect could be given to the order of this Court in the case of Petitioner; (e) In accordance with Section 199 of the Act credit can only be given to DAVY; (f) The effect of the order of this Court can be given only in the case of DAVY and hence Respondents cannot refund the TDS deposited by Petitioner on behalf of DAVY to Petitioner as there is no provision in the Act for the same. 15. On 11th March 2014, when this Court was pleased to issue rule, the Court also passed an elaborate order. It will be useful to reproduce the said order which reads as under: 1. Rule. 2. By this petition under Article 226 of the Constitution of India, the Petitioner has challenged the order dated 24 August 2012 of Respondent No. 1- Assistant Commissioner of Income Tax, 6(3), Mumbai declining to grant th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement were chargeable to tax in India. Accordingly, the withholding tax paid by the Petitioner was adjusted towards Davy's tax liability arising on account of Respondents holding that the receipt by Davy under the BEAT agreement is taxable in India; (d) Aggrieved by the above assessment orders dated 30 November 1992 and 16 March 1993 respectively, Davy filed appeals before Commissioner of Income Tax (Appeals). We are informed that the Commissioner of Income Tax (Appeals) dismissed the appeals. The Petitioner and Davy thereafter filed Writ Petition No. 448 of 1994 before this Court on 27 January 1994 challenging: (i) the constitutional validity of the provisions of Section 9(1)(vii) of the Income Tax Act, 1961 ( the Act ); and (ii) the assessment orders for the A.Ys. 1990- 91 and 1991-92 dated 30 November 1992 and 16 March 1993 respectively; (e) At the hearing of Writ Petition No. 448 of 1994, the challenge to the constitutional validity of Section 9(1)(vii) of the Act was not pressed but the Court adjudicated other controversites and rendered its judgment on 5 May 2010. The operative part of the judgment read as under: 17. Examined on this test, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf. In such circumstances, it is clear that you are not entitled for refund of the TDS deposited by you on behalf of Davy and no effect to the order of the Hon'ble High Court can be given in your case. 4. Aggrieved by the above communication, Mr. Mistry, learned Senior Advocate appearing on behalf of the Petitioner submitted that the Petitioner had to pay the withholding tax under protest in view of the stand of Revenue in the order dated 5 December 1989 that the amount payable by the Petitioner to Davy under BEAT agreement was taxable in India. This resulted in the Petitioner paying amounts aggregating Rs.5.54 crores to the Revenue out of its funds under protest, in December-1989 and in September-1990, as tax deducted at source. It is submitted that once this Court holds by order dated 5 May 2010 that the income by way of fees for technical services paid by the Petitioner to Davy under the BEAT Agreement was not liable to Indian Income Tax, then the amounts paid by the Petitioner out of its own funds as withholding tax, becomes refundable to the Petitioner. The counsel also invites our attention to the letter given by Kvaerner U.S. Inc. who is the successor in intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Davy in accordance with Section 199 of the Act, credit can only be given to Davy and the benefit of the order of this Court rendered on 5 May 2010 can only be given to Davy who had filed its return of income for the A.Y. 1990-91 and 1991-92. It is, therefore, submitted that the Petitioner cannot claim refund of tax deducted at source which was deposited by the Petitioner on behalf of Davy, as there is no provision in the Act for the same. Besides, attention of the Court was also invited to Section 195A of the Act. It is further stated that Davy has been assessed with ITO3(1)(4), Mumbai to whom the matter has been forwarded for taking necessary action. The said officer had issued notice to Davy, however, Davy was not available at the address. It is submitted that the Petitioner has no locus standi to claim refund on behalf of Davy. Learned counsel for Respondents also places on record a copy of letter dated 30 December 2013 issued by ITO 3(1)(4) to Davy. 7. In rejoinder, learned counsel for Petitioner points out that the letter dated 30 December 2013 sent by ITO 3(1)(4) was sent on the following address: To, The Principal Officer, Davy McKee Corporation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014. 16. The Department has given effect to the order dated 5th May 2010 passed by this Court in Writ Petition No. 448 of 1994. As directed by this Court in its order dated 11th March 2014 in this Petition, the Income Tax Department has arrived at net amount refundable as on 6th August 2014 at Rs. 8,92,08,881/- for Assessment Year 1990-91 and Rs. 8,67,76,753/- for Assessment Year 1991-92 and after deducting TDS of Rs. 2,61,13,257/- for Assessment Year 1990-91 and Rs. 2,47,43,964/- for Assessment Year 1991-92, has deposited with the Prothonotary and Senior Master, High Court, Bombay, a sum of Rs. 6,30,95,624/- and Rs. 6,20,32,789/- for Assessment Years 1990-91 and 1991-92, respectively. These amounts have been invested by the Prothonotary and Senior Master in fixed deposit pursuant to an order dated 14th July 2014. The amount has continued to be invested in fixed deposit. 17. The indisputable position is that it has always been Petitioner s stand that the technical services specified under the agreement with DAVY was rendered outside India and the fees also were paid outside India in foreign exchange and the income imbedded in the said fees accrues and arises to DAVY outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as deductor. It is proposed to substitute section 248 so as to provide that where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income. It is therefore proposed to amend clause (a) of subsection (2) of Section 249 providing that where the appeal is under section 248, the prescribed time shall be counted from the date of payment of tax. This amendment is consequential in nature and will take effect from 1st June, 2007. 19. The memorandum explaining the provisions in Finance Bill 2007 reads as under: Provision of appeal a person denying liability to deduce tax. Under the existing provisions of section 248, it is provided that where any person has deducted and paid tax in accordance with the provisions of section 195 and 200 in respect of any sum chargeable under the Act, other than intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October 2007, the CBDT was conscious of situation where non-resident may not apply for refund which would put the resident deductor to genuine hardship as he would not be able to deduct and deposit as tax. The Circular states that where no income has accrued to the non-resident due to cancellation of contract or where income has accrued but no tax is due on that income or tax is due at a lesser rate the amount deposited to the credit of government to that extent under Section 145 cannot be said to be tax . The Circular further states that this amount can be refunded with prior approval of the Chief Commissioner of Income Tax or the Director General of Income Tax concerned, to the persons who deducted it from the payment to the non-resident under Section 195 of the Act. 23. In our view, the refusal of the Department to return the amount and retaining the same is unauthorized by law and would only amount to unjust enrichment by the Department on technical grounds. 24. The Apex Court in Commissioner of Income Tax v. Shelly Products (2003) 261 ITR 367 (SC). , as relied upon by Mr. Mistri, has held that where an assessee chooses to deposit by way of abundant caution advance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. [1971] 81 ITR 303 (Delhi), CIT v. Archana R. Dhanwatey [1982] 136 ITR 355 (Bom.). 32. If particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel. ( See Dy. CST v. Sreeni Printers [1987] 67 SCC 279. 33. This Court in the case of Nirmala L. Mehta v. A. Balasubramaniam, CIT [2004] 269 ITR 1 has held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply his mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field. 27. In the circumstances, the rule is made absolute in terms of prayer clauses (a) and (b) which read as under: a. this Hon'ble Court may be pleased to issue a writ of Certiorari, or a writ in the nature of Certiorari, or any other appropriate writ, order or direction under articl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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