TaxTMI 
TaxTMI 
2023 (9) TMI 495
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....VY to provide certain supervisory services to Petitioner in India. Under the agreement DAVY was to deliver to Petitioner the necessary design, drawing and data with respect to the Sponge Iron Plant outside India. DAVY also agreed to train outside India, certain number of employees of Petitioner in order to make available to such employees technical information, scientific knowledge, expertise, etc. for commissioning, operation and maintenance of the Plant. 2. Petitioner agreed to pay a sum of US $ 16,231,000/- net of Indian Income-tax, if any, leviable. In other words, it was agreed that if any withholding tax was required to be deducted, it will be borne by Petitioner and DAVY would be paid the net amount of US $ 16.23 millions. 3. Petitioner, by a letter dated 5th December 1989, sought from Assistant Commissioner of Income Tax ("ACIT"), Central Circle-I a 'No Objection Certificate' to facilitate remittance of the amount to DAVY without deduction of tax at source. Petitioner in its application informed the ACIT that the technical services specified in the agreement, having been rendered outside India and the fees required also to be paid outside India in foreign currency, the in....
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....Appeals). Thereafter, Petitioner, along with DAVY, filed Writ Petition No. 448 of 1994 in this Court challenging the constitutional validity of the provisions of Section 9(1)(vii) of the Act, the assessment orders for Assessment Year 1990-91 and 1991-92 in the case of DAVY and the taxability of the amount received by DAVY under the agreement under Section 9(1) (vii) of the Act. By an order dated 5th May 2010, this Court was pleased to hold that the assessment orders passed by Respondents No. 4 and 5 subjecting the income received by DAVY from Petitioner under the agreement dated 22nd October 1989 was not correct and Respondents were directed to pass fresh assessment orders excluding the income received by DAVY by way of fees for technical services from Petitioner under the agreement. 6. By a letter dated 1st July 2010, Petitioner called upon Respondent No. 1-ACIT, Circle 6(3) to pass an order giving effect to the order passed by this Court on 5th May 2010. Reminders were sent, but no action was forthcoming. 7. In the meanwhile, Kvaerner U.S. Inc., New Jersey, USA, which is the successor-in-interest to DAVY, by a letter dated 13th July 2012 addressed to Respondent No. 1 and Respon....
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.... No. 4 and the order in appeal passed by CIT(A). He pointed out that this Court had already held that the income by way of fees for technical services paid by Petitioner to DAVY was not liable to income tax under the Act and the income received by DAVY cannot be deemed to have arisen or accrued in India because the services under the agreement were not rendered within India. Mr. Mistri submitted that the consequence of the order would be that the income under the agreement would be excluded from the income of DAVY whereby it would become entitled to a refund of the tax deducted at source by Petitioner and if the amount is paid to DAVY, DAVY would remit such refund to Petitioner. Since DAVY is succeeded by Kvaerner and Kvaerner has issued its no objection to Respondents giving the refund amount to Petitioner, the tax ought to be paid to Petitioner. In the alternative, since the amount receivable by DAVY under the agreement is not chargeable to tax in India, the directions to Petitioner by the order dated 5th December 1989 to deduct tax at source was not in accordance with law and, therefore, the amount so deducted and paid must be repaid to Petitioner. 12. Section 248 of the Act w....
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....ovision in the Act for the same. 15. On 11th March 2014, when this Court was pleased to issue rule, the Court also passed an elaborate order. It will be useful to reproduce the said order which reads as under: "1. Rule. 2. By this petition under Article 226 of the Constitution of India, the Petitioner has challenged the order dated 24 August 2012 of Respondent No. 1- Assistant Commissioner of Income Tax, 6(3), Mumbai declining to grant the Petitioner's claim for refund pursuant to the order dated 5 May 2010 passed by this Court in Writ Petition No. 448 of 1994. 3. Brief facts leading to filing of this petition are as under. (a) On 22 October 1989, the Petitioner entered into a Foreign Technical Collaboration for Basic Engineering and Training Agreement ('BEAT Agreement') with Davy Mckee Corporation ('Davy') to set up a gas based Sponge Iron Plant in India. In terms of the BEAT agreement, Davy was to deliver to the Petitioner the designs, drawings and data with respect to the Sponge Iron Plant outside India besides training certain number of employees of the Petitioner outside India for commissioning, operation and maintenance of the Sponge Iron Plant. For the a....
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....ssment orders for the A.Ys. 1990- 91 and 1991-92 dated 30 November 1992 and 16 March 1993 respectively; (e) At the hearing of Writ Petition No. 448 of 1994, the challenge to the constitutional validity of Section 9(1)(vii) of the Act was not pressed but the Court adjudicated other controversites and rendered its judgment on 5 May 2010. The operative part of the judgment read as under: "17. Examined on this test, the income received by the Petitioner No. 2 cannot be deemed to have arisen or accrued in India because the services under the BEAT agreement were not rendered within India though the drawings, designs received from Petitioner No. 2 may have been utilized by the Petitioner No. 1 in India. The law requires both the conditions to be satisfied viz services rendered in India and utilized in India. For these reasons, we are of the view that the income by way of fees for technical services by the Petitioner is not liable to the Indian income tax under the Act. Consequently, petition is allowed and the assessment order made by the Respondent nos. 2 and 3 in original or in appeal subjecting the income received by the Petitioner No. 2 form Petitioner No. 1 under the BEAT agree....
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....t holds by order dated 5 May 2010 that the income by way of fees for technical services paid by the Petitioner to Davy under the BEAT Agreement was not liable to Indian Income Tax, then the amounts paid by the Petitioner out of its own funds as withholding tax, becomes refundable to the Petitioner. The counsel also invites our attention to the letter given by Kvaerner U.S. Inc. who is the successor in interest of Davy that it has no objection if the above amounts of the tax paid as tax deducted at source are paid to the Petitioner. It is submitted that under Clause 5.1 of the BEAT agreement between the Petitioner and Davy, it was specifically provided as under: "5.1 TAXES, CHARGES AND DUTIES: ... ... ... In the event that DAVY is able to obtain any tax credit in U.S.A. Or elsewhere in respect of tax paid in India as aforesaid by GRASIM, then DAVY shall refund to GRASIM an amount equivalent to such credit obtained. DAVY will provide GRASIM with a certificate issued by DAVY's auditors, of the amount so credited." In any case after the order of this Court dated 5 May 2010 quashing and setting aside the assessment orders, the Respondents were bound to pass fresh assessment....
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....s standi to claim refund on behalf of Davy. Learned counsel for Respondents also places on record a copy of letter dated 30 December 2013 issued by ITO 3(1)(4) to Davy. 7. In rejoinder, learned counsel for Petitioner points out that the letter dated 30 December 2013 sent by ITO 3(1)(4) was sent on the following address: "To, The Principal Officer, Davy McKee Corporation, C/o.Arthur Anderson & Co; 66, Maker Towers, 'F', Cuffe Parade, Mumbai-400005" It is submitted that Arthur Anderson & Co, was a Chartered Accountant's firm, and were Chartered Accountant of Davy. The said firm has been closed down in Mumbai and Davy had also merged with Kvaerner U,S, Inc. Hence, the Department has deliberately sent notice to an address which was not the address of Davy. The officer could have at the very least sent a notice to Davy at its address shown in the cause title of Writ Petition No. 448 of 1994. 8. Having heard the learned counsel for parties, we are of the view that when this Court in its order dated 5 May 2010 specifically directed the Respondents to pass fresh assessment orders excluding the income received by Davy for providing technical services to Petitione....
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....unt has continued to be invested in fixed deposit. 17. The indisputable position is that it has always been Petitioner's stand that the technical services specified under the agreement with DAVY was rendered outside India and the fees also were paid outside India in foreign exchange and the income imbedded in the said fees accrues and arises to DAVY outside India. There is no operation involved in the execution of the said agreement to take place within India. No activity was also carried out in India under the said agreement. The fees received by DAVY, therefore, are not taxable in India and consequently, no tax at source was required to be deducted out of the fees payable by Petitioner to DAVY. When Petitioner made these submissions and requested for issuance of a 'No Objection' Certificate by its letter dated 5th December 1989, it was the ACIT, Central Circle-I, who insisted that no objection would be issued only if Petitioner deposited 30% of the amount to be remitted to DAVY. The agreement between Petitioner and DAVY was that US $ 16.23 millions were to be paid net of tax and withholding tax, if any, by Petitioner to DAVY and hence Petitioner had no option but to deposit the ....
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....ions in Finance Bill 2007 reads as under: "Provision of appeal a person denying liability to deduce tax. Under the existing provisions of section 248, it is provided that where any person has deducted and paid tax in accordance with the provisions of section 195 and 200 in respect of any sum chargeable under the Act, other than interest and who denies his liability to make such deductions, may make an appeal to the Commissioner (Appeals) to be declared not liable to make such deductions. It is proposed to substitute section 248 so as to provide that where under an agreement or other arrangement, that tax deductible on any income other than interest, under section 195 is be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that on tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income." 20. In our view, the consequence of the above provisions is that once the appellant succeeds in the Appeal, the Revenue Authorities must proceed on the basis that the Appellant did not have any obligation to ma....
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....same is unauthorized by law and would only amount to unjust enrichment by the Department on technical grounds. 24. The Apex Court in Commissioner of Income Tax v. Shelly Products (2003) 261 ITR 367 (SC)., as relied upon by Mr. Mistri, has held that where an assessee chooses to deposit by way of abundant caution advance tax or self-assessment tax which is in excess of his liability on the basis of return furnished or by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income tax or is not an income within the contemplation of law, he can certainly make such claim before the concerned authority for refund and he must be given that refund on being satisfied that refund is due and payable. Non giving the refund, in our view, would be in breach of Article 265 of the Constitution of India which states, "no tax shall be levied or collected except by authority of law". In New India Industries Ltd & Anr. v Union of India & Anr. AIR 1990 Bom. 239. the Court held that taxes illegally levied must be refunded. The doctrine of unjust enrichment has to be applied after having regard to the facts of each case. 2....
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...." 27. In the circumstances, the rule is made absolute in terms of prayer clauses (a) and (b) which read as under: "a. this Hon'ble Court may be pleased to issue a writ of Certiorari, or a writ in the nature of Certiorari, or any other appropriate writ, order or direction under article 226 of the Constitution of India, calling for the records of the Petitioner's case so far as they relate the impugned order (Exhibit "P") refusing to pass an order giving effect to the order of this Hon'ble Court in WP No. 448 of 1994 and granting refund to the Petitioner and after going through and examining the question of the validity, propriety and legality thereof, be pleased to quash the impugned order; b. this Hon'ble Court may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the Respondents to (a) pass the orders giving effect to the order of this Hon'ble Court in Writ Petition No. 448 of 1994; (b) forthwith grant refund of tax along with interest in accordance with the law and as per the direction of the Hon'ble Supreme C....