TaxTMI 
TaxTMI 
2020 (3) TMI 476
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal No.2063 of 2019. 3. The appellant is engaged in the business of development of computer software and related services. In the Financial Year 2016-17, the appellant approached the High Court with a Scheme of Arrangement and Compromise under Sections 391 to 393 of the Companies Act, 1956 to buy-back its shares. The High Court sanctioned the Scheme on 18.04.2016 in Company Petition No.102 of 2016, pursuant to which the appellant purchased 94,00,534 shares at a price of Rs. 20,297/- per share from its four shareholders and made a total remittance of Rs. 19,080 crores approximately. The details in that behalf were:- Shareholder Shares Purchased (No. of Shares) Consideration (Amount in Rs.) Tax deducted at Source (Amount in Rs.) Cognizant Technology Solutions Corporation ("CTS USA") 37,00,747 7511,40,61,859 810,73,37,402 MarketRx Inc (USA) 2,38,521 484,12,60,737 52,33,24,388 Cognizant (Mauritius) Limited (Mauritius) 53,01,778 10761,03,91,036 0 (Treaty benefit claimed) CSS Investments LLC, Delaware (USA) 1,59,478 323,69,24,966 34,95,01,528 Total 94,00,534 19080,26,38,598 898,01,63,318 According to the appellant, this buy-back of shar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns for deviation from the statutory requirement of tax, if any, or nondeduction/ non-payment, as the case may be." 6. The requisite details were furnished by the appellant vide letters dated 01.12.2017 and 05.12.2017 whereafter meetings were held between the officials of the appellant and the officers of the Department. Later, a communication was addressed by the Department to the appellant on 22.03.2018. After referring to the remittances made by the appellant to its four shareholders, it was stated:- "2. The company has not remitted any tax u/s. 115-O of the Act till date, even though the tax @ 15% u/s. 115-O is to be remitted into the central Govt. Account within 14 days from the date of payment to the shareholders. 3. The assessee company was under the impression that since its scheme of "arrangement and compromise" between the shareholders and the company, was in accordance with sec.391 to 393 of the Companies Act, and approved by the Court, the provisions of section 115-QA, 115-O or 2(22) of Income Tax Act are not applicable to its case. During the personal discussion between the company and the AO/JCIT/CIT (LTU), it was brought to the notice of the Company that: P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it amounts to extinguishment of the rights of the shareholder to the extent of reduction of share capital. Therefore, it is regarded as transfer under section 2(47) of the IT Act and would be chargeable to tax." Finally, it was concluded:- "18. Thus, the payments made to the shareholders, under purchase of shares through the scheme of "arrangements and compromise", is a dividend within the meaning of section 2(22)(d)/2(22)(a) of the Act, requiring to remit the taxes in to the government account u/s. 115-O of the Act. Further, since the company has failed to remit the taxes within the stipulated period, the company is 'deemed to be an assessee in default', u/s. 115-Q of the Act. Therefore the assessee company is required to remit the taxes (calculated @ 15% of the total payments of Rs. 19415,62,77,269/- to the shareholders, and surcharge etc as per the Act) along with the interest payable u/s. 115-P of the Act, immediately, failing which the department will proceed with the collection and recovery of the taxes, including coercive steps, as per the provisions of the Act." 7. Said communication dated 22.03.2018 was received by the appellant on or about 26.03.2018 and soon there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, this Court has interfered with such orders and reduced the amounts payable by the assessee and in certain other cases, where no stay has been granted by the authority and the assessee has approached the Court for grant of interim stay, the Court has imposed condition by directing payment of more than 20% of the demand. Therefore, the facts of each case have to be considered while granting interim order bearing in mind the interest of the assessee as well as safeguarding the interest of the Revenue. 12. Thus, considering the facts and circumstances of the case, there will be an order of interim stay of the impugned proceedings subject to the condition that the petitioner pays 15% of the tax demanded and furnishes a Bank Guarantee or security by way of Fixed Deposits for the remaining taxes (only), to be paid. For the purpose of complying with the above condition, the attachment of the Bank account in JP Morgan Chase Bank N.A., J.P. Morgan Tower, 8th Floor, Off C.S.T Road, Kalina, Santacruz East, Mumbai - 400 098 shall stand lifted forthwith. However, the attachment in respect of other Bank accounts viz., (a) State Bank of India, CAG Branch, Chennai. (b) Deutsche Bank, G....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 22.03.2018 and maintainability of an appeal challenging the same, it was observed:- "11. The learned Senior Counsel appearing for the appellant would submit that it is not known as to whether the impugned order dated 22.03.2018 is a show cause notice or final order. Though there appears to be some element of contradiction in the counter affidavit filed, the said order appears to be a final one. Now it is also the contention of the learned Additional Solicitor General that it is only a final order. We are also of the view that the further action taken would also indicate that the order under challenge was a final one. If it is only a show cause notice, then there is no need to challenge it and instead the consequential freezing alone requires to be questioned. The further question as to whether the order under challenge violates the principles of natural justice or requisite procedure contemplated under the Act is a matter for consideration before the Appellate Authority. The learned Single Judge has rightly observed that the appeal can be entertained and decided on merit as the appellant has already deposited a sum of Rs. 495 crores." 13. The view taken by the Division Bench ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Act to submit that in case the assesseecompany had not paid tax on distributed profits in accordance with the provisions of Section 115-O, the assessee-company would be deemed to be "an assessee in default" in respect of the amount of tax and all provisions relating to collection and recovery of income tax would apply. As an extension of the concept, it was submitted that the Department was justified in issuing the communication dated 22.03.2018 followed by attachment of the accounts of the appellant. 16. On the issue whether communication dated 22.03.2018 was in the nature of determination of the liability, both the learned counsel were heard at considerable length, at the end of which it was agreed by Mr. Zoheb Hossain, learned Advocate for the Department, that the communication dated 22.03.2018 could be treated as a show cause notice and the Department be permitted to conclude the issue within a reasonable time, provided the interim order passed by the Single Judge of the High Court on 03.04.2018 was continued. The course suggested by the learned counsel for the Department was acceptable to the learned Senior Counsel for the appellant. 17. It was, therefore, suggeste....