Premier Solar Power Tech Gets Double Taxation Relief as Telangana High Court Allows Petition

The Telangana High Court has ruled that the Income Tax Department cannot retain tax collected twice on the same income, granting relief to Premier Solar Power Tech Private Limited in a case of double taxation amounting to Rs 6.85 crore. A Division Bench of Justices P. Sam Koshy and Narsing Rao Nandikonda held that the power of revision under Section 264 of the Income Tax Act, 1961, is wide enough to correct such mistakes regardless of whether they were committed by the assessee.

Background of the Case

Premier Solar Power Tech was engaged in engineering, procurement, and construction of solar power projects. It was awarded a contract by NLC India Limited for a 100 MW solar project. The project faced delays, and the company charged liquidated damages of Rs 16.04 crore in its books for the assessment year 2020-21. Subsequently, as the claim was settled, the company reversed part of the provision amounting to Rs 9.79 crore and offered it to tax for the assessment year 2021-22. This included Rs 6.85 crore. However, the Assessing Officer, while completing the scrutiny for assessment year 2020-21, disallowed the same Rs 6.85 crore, resulting in the amount being taxed twice.

The petitioner had already paid the tax arising from the disallowance and approached the Principal Commissioner under Section 264 seeking correction. The application was rejected on the ground that the Intimation for 2021-22 was neither erroneous nor prejudicial, and that the assessee could have filed a revised return. The company then moved the High Court.

Arguments Advanced

The petitioner, represented by Karan Talwar, argued that Section 264 does not require an "error apparent on record" and can be invoked even for mistakes committed by the assessee. Citing the Bombay High Court in Swaminarayan Mandir Trust and the Gujarat High Court in S.R. Koshti , it was submitted that the Commissioner is duty-bound to grant relief against over-assessment. The petitioner further relied on a Division Bench judgment of the Telangana High Court in BSCPL Infrastructure Ltd. , which held that double taxation violates Article 265 of the Constitution.

The Revenue, represented by Kamasuni Sudhakar Reddy, contended that Section 264 cannot be used to grant relief against a voluntary act of the assessee, that there was no double taxation as the two events were distinct, and that the Intimation was correct.

Legal Analysis by the Court

The Court examined the scope of Section 264(1) and noted that it confers wide power on the Commissioner to revise any order not prejudicial to the assessee. It categorically held that the source of the error—whether from the assessee or the Department—is immaterial. What matters is whether the assessee has suffered prejudice.

The Bench observed that the Revenue's argument that no revised return was filed is untenable, as Section 264 is designed precisely to provide a remedy when the time for filing a revised return has expired. It also rejected the distinction between "disallowance" and "voluntary reversal" as semantic, noting that the same sum of Rs 6.85 crore had been taxed twice.

Relying on BSCPL Infrastructure Ltd. , the Court emphasized that Article 265 prohibits levy or retention of tax without authority of law, and that permitting the Revenue to retain the double-collected amount would amount to " unjust and undue enrichment of the exchequer."

Key Observations

"The authorities discussed hereinabove make it clear that the source of the error whether traceable to the assessee or to the Department is wholly immaterial to the exercise of power under Section 264; what is material, is the existence of prejudice to the assessee and the consequent duty of the Commissioner to correct it."

"The inevitable consequence of this mechanical rejection has been that the Government continues to retain tax collected twice over on one and the same sum of Rs. 6,85,02,377/-, a state of affairs that results in nothing short of unjust and undue enrichment of the exchequer at the cost of the petitioner."

"Section 264, by contrast, occupies an entirely opposite field: it is a ' beneficial and remedial provision engrafted for the protection of the assessee'."

Decision of the Court

The High Court set aside the impugned order dated 27 March 2026 and remanded the matter to the Principal Commissioner for fresh consideration on merits. The Court directed the authority to examine the petitioner's claim in light of the observations made and to decide the application within twelve weeks. The writ petition was allowed with no order as to costs.

This ruling reinforces the principle that tax authorities cannot take advantage of an assessee's inadvertence and must correct over-assessment even if the mistake originates from the taxpayer. It provides a significant check against double taxation and upholds the constitutional guarantee under Article 265.