TaxTMI 
TaxTMI 
2023 (9) TMI 111
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....1(1A) read with Section 195 of the Income Tax Act, 1961 (briefly 'the Act' hereinafter). 3. Petitioner before us is a pharmaceutical company incorporated in the year 1984 and is engaged in the business of manufacture and sale of pharmaceutical products. It is also engaged in research and development of drug products. Activities of the petitioner are undertaken through three core businesses viz., pharmaceutical services and active ingredients, global generics and proprietary products. 4. It is stated that petitioner had entered into a Trademark Assignment Agreement (TAA) with two foreign companies viz., USB Farchim SA, Switzerland (for short 'USB Switzerland') and USB Biopharma SPRL, Belgium (for short 'USB Belgium') for purchase of certain trademarks for identical territories including India. It is stated that petitioner had paid an amount of Rs. 115,04,00,000.00 to USB Switzerland and an amount of Rs. 244,16,00,000.00 to USB Belgium during the financial year 2015-2016 relevant to the assessment year 2016-2017 for purchase of the said trademarks. 4.1. A survey operation under Section 133A of the Act was carried out in the corporate office premises of the petitioner at Hyde....
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....ucted at source by the petitioner, interest would have to be levied @ 1% for the period for which the tax deduction was not made. Accordingly, the total tax payable by the petitioner after adding the interest was quantified at Rs. 55,55,18,964.00. 7. It is stated that consequent upon passing of the impugned order, Additional Commissioner of Income Tax (International Taxation), Hyderabad initiated penalty proceedings under Section 271C of the Act vide show cause notice dated 21.12.2018. 8. It is in the above circumstances that the writ petition came to be filed seeking the relief as indicated above. 8.1. This Court vide order dated 15.02.2019 noted that two important issues arise for consideration in the writ proceedings; firstly, whether the period of limitation stipulated in Section 201(3) of the Act would apply to the petitioner especially when the same uses the expression 'a person resident in India'; and secondly, the impact of double taxation avoidance agreement. In the meanwhile, respondent No. 1 was directed not to take any coercive action against the petitioner. 9. It was thereafter that respondent No. 1 has filed counter-affidavit as well as an interlocutory ap....
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....01.2016. Ultimately, order under Section 201(1) of the Act came to be passed on 14.12.2018 i.e., within three years. Therefore, in such circumstances, it cannot be said that the order passed under Section 201(1) of the Act was passed belatedly or was beyond limitation. 10.6. Thereafter, respondent No. 1 has also pleaded on the merits of the case in respect of which we are of the view that the same may not be gone into at this stage. 11. In the hearing held on 13.12.2022, this Court had referred to its earlier order passed on 15.02.2019 and also the fact that respondent No. 1 had filed interlocutory application for vacating the stay order. However, this Court took the view that instead of hearing the interlocutory application, it would be more appropriate to hear the writ petition itself. It was thereafter that the writ petition was heard. 12. Mr. Deepak Chopra, learned counsel for the petitioner at the outset submitted that objection of respondent No. 1 regarding maintainability of the writ petition on the ground of non-availing of alternative remedy provided under the statute is wholly untenable. He submits that petitioner has raised a fundamental question as to whether t....
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....the harsh consequences, such a proceeding entails. 12.3. Learned counsel therefore, submits that the impugned order having been passed on 14.12.2018, the show cause notice being issued on 20.01.2016, is well beyond the reasonable period and therefore, the same should be set aside. 13. Per contra, Ms. K. Mamata Choudary, learned Senior Standing Counsel of the Income Tax Department representing respondent No. 1 reiterated the preliminary objection that an order passed under Section 201(1) is an appealable order under Section 246A of the Act before the Commissioner of Income Tax (Appeals). Thus, petitioner has got an adequate and efficacious alternative remedy. Without availing such adequate and efficacious alternative remedy, petitioner has straightaway approached this Court under Article 226 of the Constitution of India and has sought for quashing of the impugned order both on the point of limitation as well as on merit. This, she submits, is impermissible and on this ground itself, the writ petition is liable to be dismissed. 13.1. On the point of limitation, learned Senior Standing Counsel has drawn the attention of the Court to Section 201(1) of the Act including the var....
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....5. At the outset, we may advert to some of the relevant provisions of the Act having a bearing on the lis. 16. Section 4 of the Act deals with charge of income tax. As per sub-section (1) thereof, where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions (including provisions for the levy of additional income tax) of the Act in respect of the total income of the previous year of every person. Sub-section (2) clarifies that in respect of income chargeable under sub-section (1), income tax shall be deducted at source or paid in advance, where it is so deductible or payable under any provision of the Act. 17. Sub-section (1) of Section 195 says that any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in Section 194LB etc.,) or any other sum chargeable under the provisions of the Act (not being income chargeable under the head 'salaries'), shall at the time of credit of such income to the account of the payee or at the time....
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....son, principal officer or company unless the Income Tax Officer was satisfied that such person or principal officer or company as the case may be had wilfully failed to deduct or pay the tax. 18.3. Sub-section (2) thereof provided that where the tax had not been paid after it was deducted, it would be a charge upon all the assets of the person or the company as the case may be, referred to in sub-section (1). 18.4. Thus, we find that no limitation was prescribed for passing an order under sub-section (1) of Section 201 of the Act and also an order under the proviso to sub-section (1) of Section 201 of the Act. 18.5. By the Finance (No. 2) Act, 2009, which came into force w.e.f., 01.04.2010, sub-sections (3) and (4) were inserted in Section 201 of the Act after sub-section (2). Sub-sections (3) and (4) as were inserted read as follows: (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of (i) two years from the end of the financial year in which the statement is filed in a case where the statement ....
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....is given. (4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation I to section 153 shall so far as may apply to the time limit prescribed in sub-section (3). 18.10. Thus, as per sub-section (3) of Section 201 of the Act, no order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India at any time after expiry of seven years from the end of the financial year in which the payment is made or credit is given. 18.11. Since sub-section (4) of Section 201 of the Act refers to Section 153 of the Act, it would be apposite to briefly deal with the said provision. Section 153 of the Act deals with time limit for completion of assessment, reassessment and recomputation. Sub-section (3) thereof deals with a situation where a remand is made following an order by the Income Tax Appellate Tribunal under Section 254 of the Act or by the Commissioner under Sections 263 or 264 of the Act. In such a case, fresh assessment would have to be made by the assessing officer before expiry of nine months from the end of the financial year in which ....
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....ned notices were issued or the order under Section 201(1) of the Act was passed by the assessing officer on 31.03.1999, the statute did not provide for any limitation either in respect of a resident Indian or a non-resident Indian. 21. In CIT V. H.M.T. Limited (5 supra), which was an appeal by the revenue under Section 260A of the Act, one of the substantial questions of law before the Punjab and Haryana High Court was whether on the facts and in the circumstances of the case, Tribunal had erred in law in allowing the appeal of the assessee by holding that four years was a reasonable period to issue show cause notice under Section 201 of the Act by the assessing officer to the assessee though no such limitation was provided under Section 201 of the Act. This appeal pertained to the financial years 1994-95 to 1997-98 and the order under Section 201 (1)/(1A) of the Act was passed on 20.12.2005 when the statute did not provide for any limitation. 21.1. In the above context, Punjab and Haryana High Court followed the decision of the Supreme Court in Hindustan Times Limited v. Union of India AIR 1998 SC 688 wherein Supreme Court held that when the Legislature has not considered it....
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....al in Mahindra & Mahindra Limited (1 supra). Special Bench was of the view that even though no limitation is prescribed under Section 201(1) of the Act, nevertheless the order thereunder would have to be passed within a reasonable period. 23.1. We may mention that in that case, the assessment year under consideration was 1998-99 and the order under Section 201(1) of the Act was passed on 30.03.1999. 23.2. It was submitted before the Tribunal that a period of four years from the end of the relevant financial year would be reasonable for initiation of proceedings as well as passing of the order under Section 201(1) of the Act. Tribunal referred to different provisions of the Act, such as, Sections 147, 148, 149 and 153(2) and thereafter concluded that completion of proceedings under Section 201(1) of the Act i.e., passing of the order under the said provision has to be within one year from the end of the financial year in which proceedings under Section 201(1) of the Act were initiated. Same time limit for initiation and passing of order would also be valid for passing of order under Section 201(1A) of the Act. 23.3. As noticed above, the above matter pertains to the assessm....
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.... for passing of an order under Section 201(1) of the Act post the last amendment is seven years insofar a person resident in India is concerned. The present case covers the assessment year 2016-2017, which is well after the last of the amendments were made and when limitation period qua resident Indians is seven years. 27. We have also seen that the legislature has consciously not prescribed any time limit for an order under Section 201(1) of the Act insofar a non-resident is concerned; the reason being that if the deductee is a non-resident, it may not be administratively possible to recover the tax from the non-resident. Therefore, it would be wrong to read into Section 201(3) of the Act a period of limitation insofar non-resident is concerned; doing so would amount to legislating by the Court which is not permissible. 28. At the same time, it must also be kept in mind that even though there is no limitation prescribed by the statute, the order under Section 201(1) of the Act qua non-resident has to be passed within a reasonable period. 29. Now the question is, what is a reasonable period in the absence of any statutory limitation ? In our considered opinion, there canno....