2016 (12) TMI 1288 - HC - Income Tax

Petitioner granted tax exemption under Income Tax Act; court orders refund with interest

The court held that the petitioner was entitled to exemption under section 10(8) of the Income Tax Act, 1961, as the remuneration received for duties in ... Revision before the Commissioner u/s 264 against in intimation u/s 143(1) - Refund - Exemption of income u/s 10(8) claimed - whether there was no assignment of duties as such in terms of section 10(8) and that under the Agreement between the United States of America and the Indian government there was no specific exemption of salary from tax, therefore, as the prerequisites mentioned in section 10 (8) are not satisfied, the petitioner was held to be disentitled to the claim raised? - Held that:- The return was processed under section 143(1) of the Act 1961, thereafter the assessee was advised that the income which had been taxed was in fact exempt under Section 10(8) of the Act, therefore, she filed a revision petition under Section 264 which has been dismissed, although for different reasons, but now before the writ court the same argument is being raised on behalf of the Department, as had been raised before the Jammu & Kashmir High Court. In view of the above discussion the contention of Shri Mishra, as noted hereinabove, have no legal basis and are accordingly rejected. In the Delhi High Court judgement in Vijay Gupta's case (2016 (3) TMI 977 - DELHI HIGH COURT ) this plea was specifically raised, but repelled by observing that the use of the expression 'any order' under section 264 would imply that the section does not limit the power to correct the errors committed by the subordinate authorities, but could even be exercised where the errors are committed by assessees. It would even cover the situations where the assessee, because of an error, has not put forth a legitimate claim at the time of filing the return and the error is subsequently discovered and is raised for the first time in an application under section 264. The Delhi High Court held that the intimation under Section 143(1) is regarded as an 'order' for the purposes of Section 264 of the Act. In view of the above, the remuneration paid by the AVSC to the assessee- petitioner was clearly exempt under section 10(8) of the Act 1961 and as the exemption had not been claimed in the income tax return for the assessment year 1998-99, 1999-00 and 2000-01 erroneously and in ignorance of the legal provision, the same is liable to be refunded. The plea raised by Shri Mishra based on Section 297 etc. is nothing but a technicality, which cannot be allowed to come in the way of refund of an amount which otherwise was not taxable under the Act 1961, in view of Article 265 of the Constitution of India, and the reasons mentioned hereinabove as also section 240 of the Act 1961. In this context it is also relevant to mention that the revisional authority has not dismissed the revision petition on the ground that it is not maintainable, therefore, the objections raised in this regard by Sri Mishra are not tenable for this reason also. In fact the revisional authority has consciously condoned the delay in filing the revision and has decided the same on merits, al beit, on a misreading and misconstruction of the provisions of law as also the documents on record. It is not out of place to mention that in similar circumstances the Commissioner (Appeals) has allowed a similar claim for refund for duties assigned to one Sri B P Singh in connection with the same agreement and the same employer i.e. AVSC. A copy of the judgement passed in the appeal is annexed as Annexure-8 to the writ petition, therefore, for this reason also there was no occasion for the revisional authority to take a different view in the matter. The order of the Commissioner passed under section 264 is accordingly quashed. As the petitioner has been litigating since the year 2003 i.e. for past 13 years, there is no justification for remanding the matter back to the revisional authority, as it would only perpetuate her agony, especially as this court has already recorded the reasons hereinabove entitling her to the relief claimed, therefore, the assessing authority or whosoever is competent in this regard is directed to refund the amount of tax deducted from source by the employer from the petitioner's remuneration for the assessment years 1998-99, 1999-00 and 2000-01 with interest at the rate of 6% per annum after modifying the intimation under section 143(1), if necessary. Issues Involved:1. Whether the petitioner was entitled to exemption under section 10(8) of the Income Tax Act, 1961.2. Whether the Commissioner of Income Tax erred in rejecting the petitioner’s revision under section 264 of the Income Tax Act, 1961.3. Whether the petitioner could claim refund of tax deducted at source for the assessment years 1998-99, 1999-00, and 2000-01 through a revision petition under section 264.4. Whether the revisional authority under section 264 could consider fresh evidence not available before the assessing officer.5. Whether the intimation under section 143(1) is an 'order' revisable under section 264.Issue-wise Detailed Analysis:1. Entitlement to Exemption under Section 10(8):The petitioner, a member of the U.P. Provincial Medical Services Cadre, was assigned to duties with the AVSC under a project funded by the USAID, pursuant to an agreement between the Government of India and the Government of the United States. The court found that the petitioner was assigned duties in India in connection with a Cooperative Technical Assistance Programme, and the remuneration received for these duties was covered under section 10(8) of the Income Tax Act, 1961. The agreement between the two governments exempted such remuneration from taxation. The court concluded that the petitioner was entitled to the exemption under section 10(8).2. Error in Rejecting the Revision under Section 264:The court held that the Commissioner of Income Tax had misconstrued the provisions of section 10(8) and the relevant agreement. The Commissioner’s conclusion that the petitioner was not assigned duties as required under section 10(8) was based on a misreading of the documents. The court emphasized that the provision does not require the original employer (Government of U.P.) to assign the duties. The duties assigned by AVSC under the USAID-funded project were sufficient to satisfy the requirements of section 10(8).3. Claim for Refund through Revision Petition:The court rejected the contention that the petitioner could not claim a refund through a revision petition under section 264. It referred to judicial precedents, including the Supreme Court's decision in C.I.T. v. Shelly Products, which held that an assessee could bring to the notice of the assessing officer any income mistakenly included in their return. The court emphasized that no tax shall be levied or collected except by the authority of law (Article 265 of the Constitution of India). Therefore, the petitioner was entitled to a refund of the tax deducted at source.4. Consideration of Fresh Evidence by Revisional Authority:The court held that the revisional authority under section 264 has wide powers and can consider fresh evidence not available before the assessing officer. It cited various judicial precedents, including the Gujarat High Court's decision in C. Parikh and Co. v. CIT, which stated that the Commissioner could entertain new grounds not urged before the lower authorities while exercising revisional powers. The court found that the Commissioner erred in not considering the fresh evidence presented by the petitioner.5. Intimation under Section 143(1) as an 'Order':The court addressed the contention that an intimation under section 143(1) is not an 'order' revisable under section 264. It referred to the Delhi High Court's decision in Vijay Gupta’s case, which held that an intimation under section 143(1) is regarded as an 'order' for the purposes of section 264. The court concluded that the revisional powers under section 264 are very wide and include the power to correct errors committed by the assessee or the assessing officer.Conclusion:The court quashed the order of the Commissioner passed under section 264 and directed the assessing authority to refund the tax deducted at source from the petitioner’s remuneration for the assessment years 1998-99, 1999-00, and 2000-01 with interest at the rate of 6% per annum. The writ petition was allowed in the aforesaid terms.