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2019 Supreme(Mad) 1136
IN THE HIGH COURT OF JUDICATURE AT MADRAS
K. KALYANASUNDARAM, J.
Cognizant (Mauritius) Limited, Cybercity, Ebene, Mauritius & Another - Appellant
Versus
The Deputy Commissioner of Income Tax, International Taxation 1(1), Chennai & Another - Respondent
W.P.Nos. 1244 & 1245 of 2018 & W.M.P.Nos.1553 & 1554 of 2018 & W.M.P.Nos. 6060 & 6061 of 2018
Decided On : 25-06-2019
For the Petitioners:Gopal Subramanium, Senior Advocate, Srinath Sridevan, Advocate.
For the Respondents: G. Rajagopalan, Additional Solicitor General Assisted by Karthik Ranganathan, Senior Standing Counsel for Income Tax Department.
The existence of an efficacious alternative remedy under a statute bars the maintainability of a writ petition under Article 226 of the Constitution of India.
Headnote:
WRIT PETITION - Maintainability - Alternative remedy - Income Tax Act, 1961 - Section 144C - Draft Assessment Order - Violation of principles of natural justice - Arms Length Price - Fair Market Value - Retrospective operation of statutes - Maintainability of Writ Petitions.
Fact of the Case:
The petitioners, shareholders of Cognizant Technology Solutions India Private Limited (CTSIPL), challenged the Draft Assessment Orders passed by the respondent under Section 143(3) read with Section 144C(1) of the Income Tax Act, 1961, alleging violation of principles of natural justice and contravention of Section 92CA(4) of the Act. The petitioners contended that the Transfer Pricing Officer had determined the Arms Length Price and the Assessing Officer had no power to differ from the Transfer Pricing Officer.
Finding of the Court:
The Court held that the Writ Petitions were not maintainable as the petitioners had an efficacious alternative remedy of filing objections before the Dispute Resolution Panel under Section 144C of the IT Act or filing an appeal against the final assessment orders before the Commissioner of Income Tax (Appeals) under Section 246A of the IT Act. The Court further held that there was no violation of principles of natural justice as the petitioners were provided with ample opportunity to file their objections and replies to the show-cause notices.
Issues: 1. Whether the Writ Petitions were maintainable in light of the alternative remedies available to the petitioners under the Income Tax Act, 1961? 2. Whether there was a violation of principles of natural justice in the passing of the Draft Assessment Orders?
Ratio Decidendi: 1. The Court held that the Writ Petitions were not maintainable as the petitioners had an efficacious alternative remedy of filing objections before the Dispute Resolution Panel under Section 144C of the IT Act or filing an appeal against the final assessment orders before the Commissioner of Income Tax (Appeals) under Section 246A of the IT Act. The Court relied on the principle that courts should not entertain writ petitions when there are alternative statutory remedies available to the petitioners. 2. The Court held that there was no violation of principles of natural justice as the petitioners were provided with ample opportunity to file their objections and replies to the show-cause notices. The Court noted that the petitioners had appeared before the respondent on several occasions and had submitted their materials and replies.
Final Decision: The Court dismissed the Writ Petitions as not maintainable, with liberty to the petitioners to raise all the issues before the Dispute Resolution Panel within two weeks from the date of the judgment.
(Prayer: Writ Petition filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorarified Mandamus to call for the records of the first respondent, pertaining to the order dated 31.12.2017, on the file of the first respondent, styled as "draft assessment order" issued for Assessment Year 2014-15, and quash the same, and consequently direct the first respondent to pass a fresh assessment order in conformity with the order bearing Order No.ITBA/TPO/F/92CA3/2017-18/1007519415(1), dated 01.11.2017, issued by the Transfer Pricing Officer (Assistant Commissioner of Income Tax - TPO Circle 1(1), Chennai.
Writ Petition filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorarified Mandamus to call for the records of the first respondent, pertaining to the order dated 31.12.2017, on the file of the first respondent, styled as "draft assessment order" issued for Assessment Year 2014-15, and quash the same, and consequently direct the first respondent to pass a fresh assessment order in conformity with the order bearing Order No.ITBA/TPO/F/92CA3/2017-18/1007519415(1), dated 01.11.2017, issued by the Transfer Pricing Officer (Assistant Commissioner of Income Tax - TPO Circle 1(1), Chennai.)
Since these Writ Petitions raise common issues, they are disposed of by a common order.
2. The petitioners are Companies incorporated under laws of Mauritius and United States of America respectively. The petitioners are the shareholders in Cognizant Technology Solutions India Private Limited [In short "CTSIPL"]. As on 31.03.2013, the Mauritius Company owned 1,39,93,649 shares and the American Company was owning 39,60,000 shares in CTSIPL.
3. These Writ Petitions have been filed for issuance of Writ of Certiorarified Mandamus to quash the draft assessment order passed by the respondent under Section 143 (3) read with Section 144 C(1) of the Income Tax Act, 1961, dated 31.12.2017 and for a direction to pass fresh assessment in conformity with the order bearing F.No.C-101/TPO-1, AY.2014-15, dated 31.10.2017, issued by the Transfer Pricing Officer (Joint Commissioner of Income Tax - TP01), Chennai and the order bearing No.ITBA/TPO/F/92CA3/2017-18/1007519415(1), dated 01.11.2017, issued by the Transfer Pricing Officer (Assistant Commissioner of Income Tax - TPO Circle 1(1), Chennai, respectively.
4. According to the petitioners, during the year 2013 CTSIPL had substantial cash surplus, for which, there was no immediate requirement for the Company. The buy-back of shares was in the best interest of shareholders and hence, CTSIPL identified buy-back of shares under Section 77A of the Companies Act, 1956.
5. The petitioners would state that since all the shareholders of CTSIPL were non-residents, the buy-back had to be done in accordance with the regulations farmed by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 ["FEMA"]. The RBI Circular on Foreign Direct Investment ["FDI"], dated 02.07.2012 stipulates conditions for an Indian Company intending to buy-back shares from non-resident shareholders. In accordance with the Circular, CTSIPL ascertained valuation of its shares through SEBI registered Category-I Merchant Banker and the price per share of the Company, based on the valuation undertaken using the Discounted Free Cash Flow ["DCF"] method, was Rs.23,915.10. The Board of Directors of CTSIPL resolved that the shares could be bought by CTSIPL at the value of Rs.23,915/- per share under Section 77 A of the Companies Act.
6. The petitioners would claim that CTSIPL completed the buy-back of shares on 22.05.2013 and the non-resident shareholders received their consideration in accordance with the relevant regulations under FEMA and the Companies Act. The Reserve Bank of India has accepted the said value and the Form FC-TRS was duly filed with the Authorized
