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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. SHRIRAM, FIRDOSH P. POONIWALLA, JJ.
The Bombay Dyeing and Manufacturing Co. Ltd. – Petitioner
Versus
H.D. Trivedi, Deputy Commissioner of Income Tax – Respondent
Writ Petition No. 2537 of 1999
Decided On : 14-07-2023
Tax Arrears - KVSS - Section 90, Section 91, Finance Act - [KVSS] - [Tax Arrears] - [Section 90, Section 91, Finance Act] - The court discussed the legality and validity of the orders passed by Respondent no. 2 determining the amount of tax payable by the Petitioner pursuant to a declaration filed under the Kar Vivadh Samadhan Scheme, 1998 (“KVSS”) introduced by Finance (No. 2) Act, 1998 (“Finance Act”). The court analyzed the computation of disputed tax and income under the KVSS, and the determination of tax arrears and tax payable under the scheme. The key legal provisions discussed were Section 90 and Section 91 of the Finance Act, which define the procedure for determining tax arrears and disputed tax under the KVSS. The court's decision was influenced by the interpretation of these provisions in calculating the disputed tax and the amount payable under the KVSS.
Fact of the Case:
The Petitioner challenged the legality and validity of the orders passed by Respondent no. 2 determining the amount of tax payable by the Petitioner pursuant to a declaration filed under the Kar Vivadh Samadhan Scheme, 1998 (“KVSS”) introduced by Finance (No. 2) Act, 1998 (“Finance Act”). The Petitioner had filed a Writ Petition challenging the validity of Section 115J of the Income Tax Act, 1961 and the manner in which Respondents ought to apply the said Section in the matter of working out the set off of brought forward depreciation and investment allowance. The Petitioner filed an Appeal to the Commissioner of Income tax (Appeals) and also filed an application for rectification. The Petitioner decided to take advantage of the KVSS to put an end to the disputes. Respondent no. 2 issued a Certificate determining the tax arrears and computed the tax payable under KVSS. The Petitioner challenged the computation and sought rectification, which was rejected by Respondent no. 2. The Petitioner paid the disputed tax and filed a Writ Petition challenging the orders passed by Respondent no. 2.
Finding of the Court:
The court found that the calculation made by Respondent no. 2 in determining the disputed tax and the amount payable under the KVSS was in consonance with the provisions of the Finance Act. The court dismissed the Writ Petition and discharged the Rule issued by the Court, with no order as to costs.
Issues: The issues involved in the case were the legality and validity of the orders passed by Respondent no. 2 determining the amount of tax payable by the Petitioner under the KVSS, the computation of disputed tax and income, and the rejection of the Petitioner's rectification application.
Ratio Decidendi: The court held that the calculation made by Respondent no. 2 in determining the disputed tax and the amount payable under the KVSS was in consonance with the provisions of the Finance Act. The court also emphasized that the Petitioner cannot take advantage of its own wrong and claim that the interest which has been paid to it should not be reduced while computing the disputed tax.
Final Decision: The Writ Petition was dismissed and the Rule issued by the Court was discharged, with no order as to costs.
JUDGMENT :
FIRDOSH P. POONIWALLA, J.
1. The present Writ Petition challenges the legality and validity of the orders passed by Respondent no. 2 determining the amount of tax payable by the Petitioner pursuant to a declaration filed under the Kar Vivadh Samadhan Scheme, 1998 (“KVSS”) introduced by Finance (No. 2) Act, 1998 (“Finance Act”). In particular, the Petitioner has challenged the Certificate dated 25.02.1999 issued by Respondent no. 2 in terms of sub-section (1) of Section 90 of the Finance Act, Order dated 17.03.1999 passed by Respondent no. 2 rejecting the Petitioner’s Rectification Application and a Certificate dated 02.08.1999 issued by Respondent no. 2 under Section 90(2), read with Section 91, of the Finance Act.
2. The Petitioner is a public limited company which carries on the business interalia of manufacture and sale of textiles. The Petitioner had filed a Writ Petition in this Court, being Writ Petition No. 2007 of 1991, wherein it had challenged interalia the validity of Section 115J of the Income Tax Act, 1961 (“the Act”), the validity of CBDT Circular No. 495 dated 22.09.1987 and the manner in which Respondents ought to apply the said Section in the matter of working out the set off of brought forward depreciation and investment allowance. In the said Writ Petition, Rule was issued by this Court on 26.06.1991. While issuing Rule, this Court passed an interim order whereunder the Petitioner was permitted to pay advance tax or self assessment tax and/or file its return of income in accordance with the third interpretation given in the said Writ Petition to the provisions of Section 115J of the Act. Further, the Respondents were permitted to proceed with the assessment but could not serve any notice of demand on the Petitioner pending further orders in the said Writ Petition. Interest under Sections 234A. 234B and 234C of the Act as well as additional tax under section 143(1A) of the Act were to be paid in accordance with the third interpretation set out in the Petition. The Petitioner was also to furnish a bank guarantee of a nationalised bank for 50% of differential tax less advance tax and tax deducted at source for Assessment Year 1991-92 on the basis of the difference between the interpretation of Section 115J as per the said Circular No. 495 dated 22.09.1987 issued by the Central Board of Direct Taxes and the third interpretation, which bank guarantee was to be furnished within three months from the date of the determination and which was so furnished.
3. On 20.12.1991, the Petitioner filed its Return of Income for Assessment Year 1991-92. The Petitioner returned a nil income and on account of the Advance Tax of Rs.4,51,50,000/- paid and the tax deducted at source of Rs.1,01,74,620/- the Petitioner claimed a refund of Rs.5,53,24,620/- in the Return as filed on 20.12.1991.
4. Respondent no. 1 processed the Return filed on 20.12.1991 and made an intimation under section 143(1)(a). Respondent no. 1, by his letter dated 11.06.1992, intimated to the Petitioner that the total tax, including interest under section 234B was determined at Rs.19,23,82,029/- and after allowing for credit of advance tax and tax deducted at source aggregating to Rs.5,47,97,545/- a sum of Rs.13,75,84,484/- was payable and accordingly, a demand was raised. The Petitioner was called upon to furnish a bank guarantee for a sum of Rs.6,87,92,242/- being 50% of the said demand.
5. The Petitioner, by its letter dated 27.11.1992, applied for rectification of certain errors. The said application was disposed by an Order dated 31.12.1992 made under section 154 of the Act. Respondent no. 1 determined the total income at Rs.6,51,19,488/- and the tax payable thereon at Rs.3,59,45,957/-. After giving credit for advance tax of Rs.4,51,50,000/- and tax deducted at source of Rs.96,47,545/-, aggregating to Rs.5,47,97,545/-, a refund of Rs.1,88,51,588/-
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