TaxTMI 
TaxTMI 
2014 (8) TMI 631
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....ading to this petition are : (i) Respondents Nos. 2 to 11 are part of the Star group of companies which is owned by News Corporation of United States of America. Respondents Nos. 2 and 5 to 10 are incorporated in British Virgin Islands while respondents Nos. 3 and 4 are incorporated in the United Arab Emirates. All the respondents have their principal place of management at Hong Kong. Respondents Nos. 6 to 11 (channel companies) are the owners and operators of television channels. These channel companies own their brand and logo, while telecasting in India and by constant advertisement have become household names in India. (ii) For operation of the channel companies, the programmes meant for telecasting are prepared in India either by themselves or acquired from other entities such as STAR India P. Ltd (SIPL) which is incorporated in India. As the programmes from the channel companies are to be telecast in India, the programmes are interspersed with advertisement placed by the advertisers. The channel companies in turn, inter alia enter into contract with companies for hiring of transponders. The cable operators in India for a prescribed fee charged by SIPL are allowed to downloa....
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....rtime" for failure to deduct tax under section 40(a)(i) of the Act. This disallowance was carried in appeal to the Income-tax Appellate Tribunal (the Tribunal). On January 18, 2006, the Tribunal by its order confirmed the order of the Assessing Officer and upheld the disallowance of the claim for expenditure in respect of payments made to the channel companies. (vi) Respondent No. 2-STAR Ltd. being aggrieved by the order dated January 18, 2006, filed an appeal in this court being Income-tax Appeal No. 43 of 2006. The above appeal has been admitted on April 4, 2006, and is awaiting final disposal. (vii) For the assessment years 2001-02 to 2004-05, the Assessing Officer of respondent No. 2-STAR Ltd. followed the order for the assessment year 2000-01. Respondent No. 2, i.e., STAR Ltd. has filed appeals and the same are pending in appeal. (viii) Consequent to the above orders, in June, 2004, the Income-tax Officer issued notice under section 148 of the Act to the channel companies requiring them to file their returns of income. The channel companies in response filed their return of income, showing nil income on the ground that their income is not chargeable to tax in India. However....
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....11 Star Asia Region F2. A. Y. 2005-06 and 2006-07. (xiii) Thereafter, the petitioner filed its return on May 17, 2007, under the erstwhile section 245D(1) of the Act, opposing the admission of application for settlement filed by respondents Nos. 2 to 11. On June 1, 2007, the provisions of Chapter XIX-A of the Act dealing with the settlement was amended by the Finance Act, 2007. Consequently, the above application for settlement filed by respondents Nos. 2 to 11 were deemed to have been allowed to be proceeded with under the amended provisions of section 245D(2A) of the Act, subject to payment of additional taxes along with interest thereon on the income disclosed in such application on or before July 31, 2007. (xiv) On August 9, 2007, in response to the query from the Commission, the petitioner indicated the position with regard to the payment of taxes and interest in respect of each of respondents Nos. 2 to 11. This was indicated on the basis of the additional income disclosed in their application for settlement to the Commission. (xv) On August 24, 2007, the petitioner submitted his report to the Commission under the amended section 245D(2B) of the Act. In hi....
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....e been admitted for consideration in these cases by the High Court of Mumbai and the matters are sub judice before them ? (iii) Whether, on the facts and in the circumstances of these cases, the Settlement Commission should adjudicate upon issues, which are purely legal, whether or not they involve complexities of investigation ?" (xvii) Thereafter, on August 29, 2007, the Chairman of the Commission passed a further order in partial modification of its earlier order dated August 21, 2007, as under : (a) The Special Bench as constituted under the said order, shall in addition to the issues delineated thereunder consider all such issues as would be relevant for passing order under section 245D(2C) of the Income-tax Act in the said Star group of cases as to the validity ; or, otherwise ; of the applications filed in all those cases and shall pass appropriate orders in respect of these applications. (b) The date and place for sitting of the Special Bench will be August 29, 2007, at the Income-tax Settlement Commission, Additi....
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....ttlement Commission will not adjudicate on issues which are purely legal. Issue No. 4 : We have to decide the fourth issue to bring the proceedings to a conclusion and the same is answered as below : "We are satisfied that there are complexities of investigations of various issues which require finalization. Complex facts are involved for decision. Considering the entire proceedings including the further offer of additional income made by the applicants taking the total offer of additional income to Rs. 150 crores, the Special Bench decided not to pass any order declaring the applications as invalid." (xx) On September 14, 2007, respondents Nos. 2 to 11 in a communication addressed to the Commission disclosed the distribution of additional income of Rs. 150 crores between respondents Nos. 2 to 11. The additional income offered by respondents Nos. 2 to 11 cumulatively aggregated to Rs. 1,398,37 crores for the assessment years 2000-01 to 2006-07. Mr. Pinto, learned counsel appearing for the petitioner, in support of the petition, submits as under : (a) The impugned order dated September 11, 2007, of the Commission allo....
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.... the Settlement Commission. (d) The application for settlement before the Commission is to be accompanied by payment of taxes and interest. Further, in terms of the provisions to section 245C of the Act, the proof of payment of such tax and interest on the income disclosed must also be attached to the application. In this case, admittedly, on March 5, 2007, when the application for settlement was filed by respondents Nos. 2 to 11, the tax payable in respect of additional amount of Rs. 150 crores was not paid into the treasury as the same was declared subsequently only on September 10, 2007. Consequently, the application for settlement did not satisfy the statutory requirement of the proviso to section 245C(1) of the Act to be a valid application. (e) The application for settlement filed by respondents Nos. 2 to 11 is not maintainable, as no new source of income has been declared by the respondents in their applications before the Settlement Commission. The petitioners were always aware of the two streams of revenue/income available to the respondent, namely, advertisement and subscription. In view of the above, as no new source of income has been disclosed, the application for set....
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..... 150 crores as income was being made only with an intention to buy peace and avoid protected litigation. (iii) It was further submitted that the reliance upon the decision of the apex court in the matter of Ajmera Housing Corporation (supra) is inappropriate considering the fact involved in this case. The reliance by the petitioner on the decision of the apex court in Ajmera Housing Corporation (supra) is inappropriate for the reason that the observations being relied upon are in the nature of obiter. Further, the observations of the Supreme Court were made in the context of facts existing in Ajmera Housing Corporation (supra). In particular, he submits that there were multiple disclosures by Ajmera Housing Corporation (supra) by revising their annexure filed along with their applications. In these applications filed by the respondents, there has been no revision to the annexure to the statement of facts. Besides, in Ajmera's case, additional income of Rs. 11.41 crores was disclosed by Ajmera on its own account and not as an evidence of good faith as in this case on a suggestion by the Commission. The additional offer of Rs. 150 crores was only made to buy peace and avoid pro....
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....r section 245C(1) of the Act, existed at all times relevant to this petition, i.e., both before and after the amendment to Chapter XIX-A of the Act on June 1, 2007. It is submitted that the application filed by the respondents on March 5, 2007, did make a full and true disclosure of tax and interest payable along with proof of its payment. The further amount of Rs. 150 crores disclosed by the respondents before the Commission was an amount disclosed out of a desire to put a quietus to the disputes with the Revenue. This is evident from the fact that the application dated September 10, 2007, wherein it was declared by the respondents that the disclosure in their application represents true and full disclosure of its income. Therefore, tax and interest payable on the further amount of Rs. 150 crores was an additional amount over and above the amount which represented the true and full disclosure for the purposes of making an application under section 245C of the Act. (viii) The requirement for making an application for settlement before the Commission is not conditional upon the application declaring a new source of income. Attention was drawn to section 245C of the Act wherein the ....
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....e of section 245-I of the Act and section 32M of the Central Excise Act, 1944. This is because the final orders of the Commission are conclusive. However our court in Hassan Ali Khan v. Settlement Commission [2008] 299 ITR 127 (Bom) has held even the orders passed at the stage of admission have very limited scope to be interfered with in writ proceedings. Thus, it cannot be disputed that the court would be slow to exercise its power of judicial review from orders of the Commission interim or final unless there has been a basic flaw in the decision-making process which would include ignoring the statutory provisions. Therefore, while exercising the power of judicial review, even from an interim order, we would be concerned with examining whether or not, the impugned order of the Commission has been passed in accordance with the statutory provisions of the Act and is not ex facie unsustainable in law. Keeping in mind the above boundaries prescribed by the apex court, we shall now consider the objections of the petitioner to the impugned order dated September 11, 2007, of the Commission. In this case, the primary objection of the petitioner as urged before us is that the application ....
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....which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the manner covered by the application." It further held that (page 657) : "A 'full and true' disclosure of income, which had not been previously disclosed by the assessee, being a pre-condition for a valid application under section 245C(1) of the Act, the scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against item No. 11 of the Form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application. In this regard, section 245C(3) of the Act which prohibits the withdrawal of an application once made under sub-section (1) of the said section is instructive inasmuch as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of section 245C of the Act ot....
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....jmera Housing (supra) is inapplicable to the present facts as they are very different from each other as would be evident from juxtaposing the facts of the two cases. (i) In Ajmera Housing (supra), the application for settlement had its origin in a search conducted on them while that is not so in the case of the respondents. (ii) In Ajmera's case, there were multiple disclosures with revision of annexure filed along with application, i.e., revision of receipts. While, in this case, there was no such application by revising of annexure or receipts. (iii) In Ajmera Housing (supra), there was no full and true disclosure of all facts regarding the receipts. However, in this case, there was full and true disclosure of all receipts and all facts in the very first application. (iv) In Ajmera's case, additional amount of Rs. 11.40 crores was made voluntarily by Ajmera Housing on its own account and unlike in this case, where the additional income of Rs. 150 crores was made only with a view to put an end to the dispute at the instance of the Commission. (v) CBDT Circular No. 742, dated May 2, 1996 (see [1996] 219 ITR (St.) 49), had provided that where India specific accounts we....
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....ir earlier application representing full and true disclosure of its income. This further amount was offered more as a gesture of bona fide/good faith as indicated above and with a desire to bring the dispute between the revenue and the respondents to an early end. In the above context, the additional offer of Rs. 150 crores of income in no way establishes that the original application did not contain a full and true disclosure of its income by the respondents. The petitioner before us has not led any evidence to show that there has not been a full and true disclosure by the respondents before the Commission of its income in its application dated March 5, 2007. In the context in which the additional offer of Rs. 150 crores was made and particularly the statements made in their application dated September 10, 2007, it cannot be said that there was a failure to make full and true disclosure of its income on the part of the respondents when they filed their application on March 5, 2007. This additional income offered does not disclose any variance from the manner in which the additional income had been earned. This also lends credence to the respondents' submission that the same w....
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....he issue cannot be postponed to the stage of final hearing under section 245D(4) of the Act, even though the requirement of making a true and full disclosure is a continuous requirement to be satisfied at all times in a settlement proceedings. Therefore, even post the stage of section 245(2C) of the Act, the Commission could throw out an application for failure to make a true and full disclosure therein. The difference in both the cases of the Division Bench referred to hereinabove from this case is that no additional income was offered as in this case, at the instance of the Commission with a view to end the dispute. Besides, in both the above cases, the decisions were rendered by the Commission at the stage of admission post Ajmera Housing Corporation (supra). We wish to reiterate that the law set out by the above two decisions of the Division Bench is the correct law. However, it is only in the peculiar facts and circumstances of this case, particularly the additional disclosure of income of Rs. 150 crores made at the instance/suggestion of the Commission, with a view to end litigation at the earliest, that we do not interfere with the order dated September 11, 2007, at this st....
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....(c) One more submission made on behalf of the petitioner was that the Commission had no jurisdiction to entertain the application as in terms of section 245C of the Act proof of payment of tax and interest must be attached to the application. In this case, the application for settlement was filed on March 5, 2007. Admittedly, the applications as filed on March 5, 2007, did not have proof of payment of tax and interest payable on the additional amount of income of Rs. 150 crores declared on September 10, 2007. This submission is not acceptable for the reason that the disclosure of additional income of Rs. 150 crores was, according to the respondents, only a goodwill measure so as to expedite the process of settlement of the dispute. This further income of Rs. 150 crores declared on September 10, 2007, did not in any way detract from their original application dated March 5, 2007, containing true and full disclosure of its income. In fact, if the Commission at the final hearing under section 245D(4) of the Act determines higher income, than that disclosed in the original application, the entire process will not be rendered bad only on account of failure to pay the tax along with the ....