AI Drafter 
TaxTMI 
TaxTMI 
2019 (10) TMI 317
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....s 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 Rs. 495 crores. Out of the payable demand of Rs. 2806 crores. Thereafter, the writ petition filed was dismissed with liberty to the appellant to file an appeal. Th....
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....han, 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 the Act could only be applied when the facts are admitted. The respondent itself has taken a contrary stand in the counter affidavit on the question as to whether the impugned communication is one of show cause notice or a final order. If it is ....
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....d 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 General relied upon the following decision. (i) Sharif-ud-Din Vs. Abdul Gani Lone (AIR 1980 Supreme Court 303) 9.After hearing the learned counsel appearing for the parties, we deem it appropriate to decide as to whether the appeal requires to be decided on merit or not. In other words, this Court will have to....
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....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 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. 10.5. A submission is also made raising doubt over the maintainability of the appeal under ....
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.... 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 restriction is self-imposed and nothing else. There may be a case, where an assessment is sought to be reopened by an Officer, who is not competent to do so. Similarly, there may be cases, where on the face of it would appear that the reopening is barred by limitation or lacks inherent jurisdiction. To put it differently, in a case, where no adjudication is required on facts, then certainly jurisdiction of this Court under Article 226 of the Constitution of India can very well be invok....
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....dy 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. Mohd. Nooh, (AIR 1958 SC 86) and K.S. Venkataraman and Co. (P) Ltd. vs. State of Madras, (AIR 1966 SC 1089) have held that though Article 226 confers a very wide powers in the matter of issuing writs on the High Court, the remedy of writ is absolutely discretionary in character. If the High Court is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere, it can refuse to exercise its jurisdiction. The Court, in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach ....
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....on 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, the remedy provided by that statute only must be availed of. This rule was stated with great clarity by Willes, J. in Wolverhampton New Waterworks Co. v. Hawkesford, 141 ER 486 in the following passage: (ER p. 495) '... There are three classes of cases in which a liability may be established founded upon a statute. ... But there is a third class viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. ... The remedy provided by the statute must be followed, and it is not competent to the party to pursue th....
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..... 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 pendency of the interim order as erroneous. It is only an interim arrangement directed to be made pending the appeal. In such view of the mater, while upholding the direction of the learned single Judge with respect to the deposit and the liberty granted to file an appeal are accordingly upheld. However, the findings rendered on the nature of transaction and the scope under Section 115-O of the Act are accordingly set aside. The issue as to whether the impugned order should be preceded by a procedure involving adjudication and the requirement of violation of principles of natural justice are also left open to be decided in the appeal. Accordingly, the writ appeal stands allowed in p....