TaxTMI 
TaxTMI 
2021 (3) TMI 1207
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.... sale by the petitioner of shares of an Indian company and which payment was not chargeable to tax in India in terms of Article 13(4) of the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius; (ii) the ITR of the petitioner was selected for scrutiny assessment and a notice dated 22nd September, 2019, under Section 143(2) of the Act, was received by the petitioner; (iii) on 25th November, 2019, an intimation under Section 143(1) of the Act was issued to the petitioner, determining a refund of approximately Rs. 249.39 crores to be due to the petitioner along with applicable interest; and, (iv) however inspite of intimation dated 25th November, 2019 and several reminders of the petitioner, till the date of filing of the petition, refund had not been received by the petitioner. 2. The petition came up before this Court first on 19th June, 2020 and thereafter before this Bench on 23rd June, 2020, when it was the contention of the senior counsel for the petitioner that no order under Section 241A of the Act, for retention of the aforesaid amount, had been passed. Per contra, the counsel for the respondents, appearing on advance notice, stated that it was mentioned ....
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....he assesse company is a GBL1 company registered under the laws of Mauritius. It has no assets or Bank account in India. From the return of income and financial accounts submitted with the return of income it appears that investment in these companies i.e. SBI Cards and Payment Services Private Limited, were the only investment made by the assesse company. 5. Since the Company never filed return of income earlier, the A.O. did not have much information about the assesse company. Before issuing the refund of Rs. 226 Crore it was the duty of the AO to ascertain the genuineness of the assessee's claim that capital gains was not taxable in India. In view of this the AO sent a mail to the assesse seeking certain information like source of investment in SBI Cards and Payment Services Private Limited, utilization of the sale proceeds and copies of the Copies of Balance sheet & P & L A/c for AY 2015-16,2016-17,2017-18 & 2018-19. From the AO's proposal it appears that the asessee did not submit these details but filed a writ petition in Delhi High Court seeking direction for issuance of the refund which is pending. Subsequently, assessee has furnished AFS for the period ending D....
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....routine administrative expenditure. Sources of investment in SBI Cards and Payment Services Private Limited have not been provided by the assesse nor the assesse explained utilization of sale proceeds. 10. From the Financial statements of the assesse it appears the assesse has spent US$ 40,000,000/- out of sale proceeds of shares on buyback of it's shares, and further paid dividend of US Dollar 305,000,000/- which means the money must have gone to the parent company i.e. GE Capital International Holdings Limited U.K. Further the proposal of AO states that the assessee company has paid out entire cash inflow on sale of shares immediately after sale. It no longer holds any asset anywhere in the world including India. 11. From these fact prima facie it appears that the parent company, ie GE Capital International Holdings Limited floated the assesse company in Mauritius with the sole purpose of making investment in Indian Companies namely SBI Cards and Payment Services Private Limited and with an objective not to pay any tax in India on Capital Gains which would have arisen on sale of investment in Indian Companies. Thus it appears that the assesse company has bee....
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....ice of scrutiny assessment. The Proviso to Section 143(2) prohibits issuance of notice under Section 143(2) after the expiry of six months from end of financial year in which ITR is furnished. As per Section 143(1D) of the Act, on issuance of notice under Section 143(2), the processing underway of ITR under Section 143(1) shall not be necessary. However vide Proviso to Section 143 (1D), Section 143(1D) does not apply to any ITR furnished from assessment year commencing on or after 1st April, 2017; thus, notwithstanding issuance of notice under Section 143(2), processing of ITR under Section 143(1) continues i.e. intimation under Section 143(1)(d) has to be generated and refund so determined to be granted. However Section 241A, inserted with effect from 1st April, 2017 i.e. at the same time when Proviso aforesaid to Section 143(1D) was inserted, provides as under: "241A Withholding of refund in certain cases. -- For every assessment year commencing on or after the 1st day of April, 2017, where refund of any amount becomes due to the assessee under the provisions of sub-section(1) of section 143 and the Assessing Officer is of the opinion, having regard to the fact that a no....
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....ra, though does not expressly say so, but from a reading thereof it follows that since intimation under Section 143(1)(d) of refund is to be generated on or before expiry of one year from end of financial year in which ITR is made, the order under Section 241A also has to be made within the same time. We may add that though the second proviso to Section 143(1) only lays down time limit for intimation and not for refund but since refund is to be made promptly, the grant of refund cannot be beyond that. Axiomatically it follows that order under Section 241A of withholding refund also has to be before the last date for refund. 11. In the facts of the present case, the order under Section 241A thus had to be before 31st March, 2020 and the order dated 15th July, 2020 is beyond that date. 12. The counsels were heard on 23rd September, 2020, 9th October, 2020 and 4th December, 2020, when orders were reserved. The contentions of the counsels are on two aspects. Firstly, on the timing of the order under Section 241A of the Act and secondly qua the reasons stated in the order under Section 241A aforesaid, with: A. the senior counsel for the petitioner contending, that (i) as ....
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....2019, was till 31st March, 2020; (vi) the issuance of an order under Section 241A of the Act, so long as issued before the outer limit provided in the second proviso to Section 143(1) of the Act, cannot be challenged on the ground of delay; (vii) because of the national lockdown on 22nd March, 2020, Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 dated 31st March, 2020 extending the time limits, wherever prescribed under the Act, till 30th June, 2020 and thereafter till 31st December, 2020 and yet thereafter till 31st March, 2021 was promulgated; (viii) the petitioner, prior to the ITR for the assessment year 2018-19, had not filed any ITR in India; no ITR was filed even while acquiring shares in the Indian company; that there was/is thus nothing available with the respondents to know the state of affairs of the petitioner and the respondents are in the dark and though asked the petitioner on 16th June, 2019 for annual financial statements of last four years, to verify the source of funds for acquisition of shares and the application of funds after receipt of sale proceeds, for the purposes of assessment, but complete particulars have not been provided; (....
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....cated in a proceeding under Article 226 of the Constitution of India and the remedy under the subject statute, i.e. the Income Tax Act should be permitted to take course; (xxi) the AO is a Tribunal of exclusive jurisdiction and cannot be prevented from enquiry; reliance is placed on Union of India v. Tata Engineering and Locomotive Co. Ltd. (1997) 8 SCC 730; (xxii) the refund sought by the petitioner by way of this petition is inextricably linked to the assessment proceedings underway under Section 143(2) of the Act and no refund can be ordered till conclusion of the proceedings; (xxiii) the AO seized of the matter will consider all the arguments as raised by the petitioner here; and, (xxiv) the respondents did not even know of the sale and learnt of it only on ITR being filed by the petitioner. C. the senior counsel for the petitioner, in rejoinder arguing, that (i) Section 241A of the Act requires reasons to be recorded in writing; (ii) if the reasons are found to be untenable, the order under Section 241A of the Act can be set aside; (iii) the contention of the counsel for the respondents that the petitioner is not submitting the requisite information is fallacious; the....
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....ective management but such amendment is prospective and would not apply to the subject sale of shares, accrual of capital gains wherefrom is the subject matter of issue; (xviii) Supreme Court in Azadi Bachao Andolan supra rejected the motivation theory; (xix) as per Azadi Bachao Andolan supra, merely because the sale proceeds are transferred to another country, would not make the Mauritian entity not the holding entity of the shares; (xx) the tax payer is entitled to arrange its affairs in a manner most beneficial to it; (xxi) the petitioner never showed itself to be carrying on any business in Mauritius and has openly claimed itself to be an overseas business corporation; (xxii) Azadi Bachao Andolan supra was specifically in issue in Vodafone International Holdings BV supra; (xxiii) in Vodafone India Ltd. supra also there was a tier of several companies; (xxiv) the entire attempt of the department is to block the refund admittedly due to the petitioner, by raising a bogey of petitioner having a huge tax liability; (xxv) the respondents admit that the petitioner is incorporated in Mauritius but say that it is not genuinely registered; (xxvi) according to the laws of Mauritius, over....
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.... of Certain Provisions) Ordinance supra and notification issued thereunder and thus it cannot be said that owing the said order being not issued before 31st March, 2020, any right accrued to the petitioner for receiving refund. II. The real question agitated and to be decided is, whether the order under Section 241A of the Act is liable to be quashed. III. The challenge by the petitioner to the said order is not premised on the ground of, the order making authority not having jurisdiction/authority to issue such order or on the ground of any other jurisdictional infirmity in the said order or on the ground of grant of such refund not likely to adversely affect the revenue. It is not in dispute that the petitioner, a foreign entity, has no other asset whatsoever from which the tax liability, if any ultimately found due, can be recovered. The petitioner impugns the order on the ground, that the question of grant of refund likely to adversely affect the revenue does not arise because the petitioner has no tax liability and no tax is recoverable from the petitioner. IV. We have wondered, whether in a challenge to an order under Section 241A of the Act, it is ....
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....venue does not arise, this Court has to conclusively hold that the petitioner has no tax liability in India. Once it is so held, there will be nothing left to be determined in the assessment underway pursuant to notice under Section 143(2) of the Act. VIII. The AO and the Principal Commissioner, in exercise of powers under Section 241A, are required to take a prima facie view of the outcome of the assessment pursuant to notice under Section 143(2). They are also the authorities vested with the power of assessment. The authority vested with the power of final determination is the best authority to take a prima facie view. Moreover, the statute provides statutory remedies in the form of appeals, against the final determination by such authority. In such statutory scheme, under Section 260A, appeal lies to the High Court against orders of the Income Tax Appellate Tribunal. A determination of tax liability in a challenge to an order under Section 241A would set at naught the entire statutory scheme of assessment and appeals, ultimately to this Court, opening the doors to every assessee to whom a notice under Section 143(2) of the Act is issued, to approach this Court contendin....