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TMI Blog2025 (5) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... dvertisement and Communication Services (Mauritius) Limited (ACSL Mauritius). Additionally, the Petitioner serves as the holding company of FCB Interface Communications Private Limited, which is incorporated in India. (ii) During the previous year relevant to the AY 2018-2019, Petitioner declared and paid a dividend of Rs. 205,17,52,200/- to its shareholder ACSL Mauritius. The Petitioner paid Dividend Distribution Tax (DDT) of Rs. 27,47,97,292/- under Section 115-O of the Income Tax Act, 1961 (the Act) at an effective rate of 20.358%. (iii) Subsequently, the Petitioner claims to have realized that DDT paid at 20.358% was erroneous since, as per Article 10 (2) of the Treaty between India and Mauritius, they should have paid tax @ 5% only. (iv) Therefore, on 10 October 2018, claim for refund of excess DDT was made by a letter addressed to Respondent No. 1. In the said letter, the Petitioner submitted that they were liable to pay DDT as per India-Mauritius Tax Treaty @ 5% only, however, they have paid DDT @ 20.358% and, therefore, they are entitled to claim refund of the excess DDT of Rs. 20,73,06,062/-. The Petitioner also stated that Form ITR-VI does not have any provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by any authority. He challenges the communication dated 16 June 2022 on the ground that no statutory orders are required for determining refund under Section 237 of the IT Act. He strongly refuted the grounds mentioned in the impugned communication for denying the implementation of the communication dated 29 November 2018. He submitted that Respondent No. 1 cannot direct the Petitioner to make an application under Section 154 of the IT Act for rectification of the letter dated 29 November 2018. He submitted that the letter dated 10 October 2018 is an application for Section 237 of the IT Act or, alternatively, Article 265 of the Constitution of India. 5. Mr. Mistri also submitted that the Petitioner is entitled to the refund since under the Treaty between India and Mauritius, the Petitioner was required to pay DDT @ 5% only and not @ 20.358%. He submitted that the submission on merits is being made only in response to the Respondents' reply during the hearing. He, however, maintains that it is too late for the revenue to challenge the entitlement of the Petitioner after having determined the refund by letter dated 29 November 2018. He submitted that the revenue today cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and Commentaries to submit that the Petitioners are not entitled to the refund of the excess DDT by taking recourse to the Treaty. 9. Mr Singh placed reliance on the decision of Godrej & Boyce Mfg. Co. Ltd. vs DCIT (2010) 194 taxman 203 (Bombay) in support of his submissions on the Petitioner's disentitlement to claim such a refund. Mr. Singh also relied upon the decision of the Hon'ble Supreme Court in the case of Union of India Vs Azadi Bachao Andolan (2003) 132 Taxman 373 (SC) and Karnataka High Court's decision in the case of CIT Vs R.M. Muthaiah (1993) 202 ITR 508 (KAR). Mr. Singh also placed reliance on the Commentaries on the Interpretation of the Treaty and submitted that the Petitioners are not entitled to claim a refund of the DDT. Mr. Singh also relied upon the decision of this Court in the case of Tata Communications Transformation Services Ltd. Vs Assistant Commissioner of Income-tax (2022) 137 taxmann.com 2 (Bombay) and submitted that since the claim is not made in the return as per the requirement of Section 239 of the IT Act, the Petitioner is not entitled to the refund of the DDT. 10. Mr Singh further submitted that the communication dated 29 Novem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to file a return of income and claim such refund, which according to him, was the only mode allowable under Section 237 read with Sections 237 and 239 read with Rule 41 of the Income Tax Rules. He submitted that even on merits, the Petitioner was not entitled to any refund under the Double Tax Avoidance Agreement between India and Mauritius. He emphasised Article 10 of the India-Mauritius Tax Treaty and relied on the decisions of Godrej & Boyce Mfg. Co. Ltd. (supra) and Azadi Bachao Andolan (supra) in support of his contentions. 15. At the outset, we are unsure whether it is open to the Revenue or Mr. Singh to urge reasons or grounds other than those reflected in the impugned communication dated 16 June 2022 to support the said impugned communication. Normally, the validity of such communications would have to be tested on the grounds or reasons reflected therein and not by grounds added or supplemented through affidavits or oral contentions when a challenge is raised to such communications. 16. We state our uncertainty because an argument was made on behalf of the revenue that even the impugned communication dated 16 June 2022 may not be a statutory order rejecting the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded by the communication dated 29 November 2018, does not independently decide one way or the other on the merits of the Petitioner's claim for refund. Even the supplemented grounds urged in the revenue's affidavit or by Mr. Singh during the arguments mainly concern alleged non-compliance with procedural requirements or the non-citation of statutory provisions. But there is no examination of the refund claim on merits by adverting to the transaction and the corresponding provisions of the treaty by which they were governed. 22. At this stage, considering the order we propose to make, we refrain from delving deeply into contentious issues affecting the merits or demerits of the refund claim. Such issues, according to us, must initially be examined by the fact-finding authorities under the IT Act and not this Court exercising judicial review. When exercising powers of judicial review, this Court is mainly concerned with the decision-making process rather than the decision itself. 23. Therefore, examining the matter from the above perspectives, and for the reasons discussed above, we are satisfied that the impugned communication dated 16 June 2022 must be set aside. We answer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order aforesaid- a) An assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment; b) the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee. 246A. (1) Any assessee [or any deductor] [or any collector] aggrieved by any of the following orders (whether made before or after the appointed day) may appeal to the Commissioner (Appeals) against - ...... (i) an order made under section 237;" 28. Mr Mistri would elevate the communication dated 29 November 2018 to the status of a statutory order recording the AO's satisfaction under section 237, stating that the refund was conclusively due to the Petitioner, while Mr Singh refutes this altogether. 29. Section 237 of the IT Act provides that if a person "satisfies" the Assessing Officer that the amount of tax paid by him exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. In the instant case, the Petitioner made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and dealt with, so that all aspects could be pointed out and considered. In this case, the order at least tentatively supports the Assessee, but the shoe could as well be on the other foot on some other occasion. On perusal of the communication dated 29 November 2018 and on considering the circumstances in which it was made, we find it challenging to elevate it to the status of a statutory order recording the satisfaction contemplated by Section 237 of the IT Act. 33. Article 265 of the Constitution of India also provides that no tax shall be levied or collected except by authority of law. The phrase "authority of law" would mean liability/entitlement as per the Act. This would contemplate that before a person can be entitled to a refund, the Assessing Officer must satisfy that such an entitlement is in accordance with the provisions of the IT Act, and there must be a final determination of the correctness of the claim for refund. Based upon an inconclusive or tentative opinion of an AO, no breach of Article 265 can be alleged or established. 34. The communication dated 29 November 2018 in the first paragraph states that the claim of refund has been considered by Respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic reading of the entire communication dated 29 November 2018, what appears to have been said by Respondent No. 1 is that the determination of refund is based on preliminary verification and is subject to further processing. The communication dated 29 November 2018 appears to be akin to an interlocutory/ preliminary order wherein a prima facie view is expressed by Respondent No. 1 on the issue of refund. However, the communication dated 29 November 2018 cannot be treated as a final and conclusive determination of the entitlement of the Petitioner to the refund. This is because Respondent No. 1 states that on preliminary verification, the refund is determined at Rs. 20,73,06,062/-, and further it states that the same would be taken up for processing. 38. The sentence "the claim has been examined and found correct" cannot be read in isolation de hors the subsequent statement, which states that the refund due on preliminary verification is determined at Rs. 20,73,06,062/- and the same would be taken up for processing. 39. Communication dated 29 November 2018 should have been followed up by Respondent No. 1 by issuing a final and conclusive order. In this instance, Respondent No. 1 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination culminating in a final "order" under Section 237 of the IT Act admitting the entitlement to a refund of the excess DDT. However, we disagree with the reasoning in the impugned communication dated 16 June 2022 which states that since there is no mention of the Section in the communication dated 29 November 2018, the same does not constitute an order. Mere non-mentioning of any section would not mean that a communication finally determining the rights and liabilities of an Assessee cannot be treated as an order. However, there is no final determination in the instant case, and therefore, the essential attribute of a conclusive order is missing. 43. We agree with Mr. Mistri, learned counsel for the Petitioner, that the issue of whether DDT is covered by the provisions of the Double Taxation Avoidance Agreement is pending in the cases of other Assessee before various forums across the country, including this Court. Therefore, it would not be appropriate for us to delve into this issue for the first time and embark upon deciding the issues of eligibility or entitlement to a refund under the treaty for the first time. 44. We have not dealt with case laws relied upon by both par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member that discretion is exercised on equitable principles. If, upon quashing an impugned order, another illegal order, ultra vires, or inequitable revives, then the Court is not bound to exercise its discretion and permit such illegal, ultra vires, or inequitable order to prevail or revive. While we do not suggest that the impugned communication dated 29 November 2018 is unlawful or ultra vires, we are satisfied that the communication dated 29 November 2018 is neither a statutory order nor a final determination on the refund issue. Therefore, upon quashing of the impugned communication dated 16 June 2022, we cannot immediately issue a writ of mandamus for refund by relying entirely on the communication dated 29 November 2018. 50. The third issue is determined accordingly in the above terms. 51. Therefore, the communication dated 16 June 2022 must be quashed and set aside for all the above reasons. However, the communication dated 29 November 2018 cannot be treated or elevated to the status of a final and conclusive determination of the Petitioner's entitlement to a refund. No mandamus can be issued based entirely or solely on the said communication. 52. Therefore, we dispo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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