Citrix Systems Asia Pacific Proprietary Limited V. Deputy Commissioner of Income Tax International Tax Circle 1(1) and The Principal Commissioner of Income-Tax-1

WP/24032/2023

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The case involves Citrix Systems Asia Pacific Proprietary Limited, which challenged the order of the Deputy Commissioner of Income Tax rejecting its rectification applications for the assessment years 2017-18, 2018-19, and 2019-20. The petitioner had initially paid taxes under protest following an unfavorable ruling by the Authority for Advance Rulings (AAR), which was later overturned by the Supreme Court. The petitioner sought a refund through rectification applications under Section 154 of the Income Tax Act, 1961, citing a mistake apparent from the record due to the change in legal interpretation by the Supreme Court. The respondents opposed the applications, arguing that there was no error apparent on the face of the record. The High Court, referencing a circular from the Central Board of Direct Taxes and the Supreme Court's judgment, ruled in favor of the petitioner, allowing the refund of taxes paid.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 797814 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-02-2024
• Assessment Year: misc
• Other Referred Cases: ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED V. THE COMMISSIONER OF INCOME TAX & ANR, COMMISSIONER OF INCOME TAX V. KESHRI METAL (P) LTD.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Mistake apparent from the records; Rectification Application; Refund of taxes; Advance Rulings Authority
• Section: 154

Judgement Text

" - 1 - NC: 2024:KHC:7488 WP No. 24032 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF FEBRUARY, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 24032 OF 2023 (T-IT) BETWEEN: CITRIX SYSTEMS ASIA PACIFIC PROPRIETARY LIMITED, LEVEL 23, 100 MOUNT STREET, NORTH SYDNEY NEW SOUTH WALES 2060, AUSTRALIA REPRESENTED HEREIN BY ITS MANAGER-ACCOUNTING, MR. ARUN KARKERA, COMPANY INCORPORATED UNDER THE LAWS OF AUSTRALIA …PETITIONER (BY SRI. T. SURYANARAYANA, SENIOR COUNSEL FOR SMT. MANASA ANANTHAN, ADVOCATE AND: 1. DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAX CIRCLE 1(1), BMTC BUILDING, 6TH BLOCK, 80 FT ROAD, KORAMANGALA, BANGALORE - 560 095. 2. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-1 BMTC BUILDING, 6TH BLOCK, 80 FT. ROAD, KORAMANGALA, BANGALORE - 560 095. …RESPONDENTS (BY SRI. E.I. SANMATHI, ADVOCATE) Digitally signed by V KRISHNA Location: High Court of Karnataka - 2 - NC: 2024:KHC:7488 WP No. 24032 of 2023 THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO A) QUASHING THE ORDER DATED 18/05/2023 BEARING NO. ITBA/COM/F/17/2023- 24/1052949386(1) (ANNEXURE-S) PASSED BY THE R1 UNDER SECTION 154 OF THE ACT, REJECTING THE PETITIONERS RECTIFICATION APPLICATIONSS FILED FOR THE ASSESSMENT YEARS 2017-18, 2018-19 AND 2019-20. AND ETC. THIS PETITION, COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER In this petition the petitioner seeks quashing of the impugned order at Annexure-S dated 18.05.2023 and for other reliefs. 2. Heard the learned Senior Counsel appearing for the petitioner and learned counsel appearing for respondents and peruse the material on record. 3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior Counsel invited my attention to Annexure-A, the order passed by the Authority for Advance Rulings (Income Tax), New Delhi, whereby the claim of the petitioner was rejected by the Authority. In pursuance of the same, the petitioner filed its returns for the assessment year 2017-18, 2018-19 and 2019-20 and paid taxes under protest in view of the Rulings of aforesaid Authority. The said order of AAR having been challenged by the petitioner - 3 - NC: 2024:KHC:7488 WP No. 24032 of 2023 before the Hon'ble Apex Court in the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED V. THE COMMISSIONER OF INCOME TAX & ANR Civil Appeal No.8733- 8734/2018 DATED 02.03.2021 the AAR order was expressly overruled. 4. It is submitted that subsequent to order of Hon'ble Apex Court, the petitioner filed rectification applications for the aforesaid assessment year and sought for refund of taxes paid under protest by invoking Section 154 of the Income Tax Act, 1961 (for short, 'I.T. Act'). In this context, reliance was also placed upon the Circular dated 17.11.1971 issued by the Central Board of Direct Tax, whereunder the respondents have stated that subsequent interpretation of law by the Apex Court to constitutes a mistake apparent from the records and rectification action under Section 154 of I.T. Act was permissible in law. 5. Learned Senior Counsel appearing for the petitioner submits that, despite the aforesaid facts and circumstances, respondent no.1 has erroneously passed the impugned order rejecting the petitioner's rectification applications on erroneous premise that Section 154 of I.T. Act was not applicable to the facts - 4 - NC: 2024:KHC:7488 WP No. 24032 of 2023 of the instant case and as such, the petitioner is before this Court by way of the present petition. 6. Per contra, learned counsel appearing for respondents in addition to opposing the petitioner's rectification applications submits that, in the light of judgment of Hon'ble Apex Court in the case of COMMISSIONER OF INCOME TAX V. KESHRI METAL (P) LTD., reported in (1999) 9 SCC 165 submits that since there is no error apparent on the face of record in the income tax returns originally filed by the petitioner, the question of invoking Section 154 of I.T. Act and seeking rectification and consequent refund would not arise in the facts of the instant petition, which is liable to be dismissed. It is also submitted that respondents have filed R.P.No.1422-1497/2021 seeking review of aforesaid judgment of Hon'ble Apex Court and on this ground also, the present petition is liable to be dismissed. 7. A perusal of the impugned order will indicate that main ground on which the Trial Court has rejected the rectification applications by coming to the conclusion that Section 154 of the I.T. Act was not applicable to the applications filed by the petitioner. In this context, it is relevant to state that as per circular dated - 5 - NC: 2024:KHC:7488 WP No. 24032 of 2023 17.11.1971, an assessee is entitled to seek rectification pursuant to interpretation of law by the Hon'ble Apex Court. Further, as rightly contended by the learned Senior Counsel for the petitioner in the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED (supra), the Hon'ble Apex Court at paragraph No.100 has held as under: \"Also, any ruling on the more expansive language contained in the explanations to Section 9(1)(vi) of the Income Tax Act would have to be ignored if it is wider and less beneficial to the assessee than the definition contained in the DTAA, as per section 90(2) of the Income Tax Act read with explanation 4 thereof, and Article 3(2) of the DTAA. Further, the expression \"copyright\" has to be understood in the context of the statute which deals with it, it being accepted that municipal laws which apply in the Contracting States must be applied unless there is any repugnancy to the terms of the DTAA. For all these reasons, the determination of the AAR in Citrix Systems (AAR) (supra) does not state the law correctly and is thus set aside\". 8. As is clear from the aforesaid judgment, the Hon'ble Apex Court has expressly overruled the order of Advance Rulings Authority in respect of the Citrix Systems i.e., petitioner and consequently, taxes paid by the petitioner under protest deserves - 6 - NC: 2024:KHC:7488 WP No. 24032 of 2023 to be refunded by rectifying the income tax returns filed by the petitioner pursuant to the order of Advance Rulings Authority. 9. A perusal of the material on record will also indicate that it was only after the order was passed by the Advance Rulings Authority, the petitioner filed its returns and paid taxes, that too under protest. It is also an undisputed fact that, it is only after said order of Advance Rulings Authority being reversed by the Hon'ble Apex in the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED (supra) that the petitioner filed instant rectification applications seeking rectification of returns and consequently refund of taxes paid by the petitioner. Under these circumstances and in the light of the circular referred to supra and the judgment of the Apex Court, I am of the considered opinion that respondent no.1 clearly fell in error in passing the impugned order rejecting the applications filed by the petitioner and consequently, the impugned order deserves to be set-aside and the rectification applications deserves to be allowed by directing refund of taxes paid by the petitioner. 10. Insofar as the judgment of Hon'ble Apex Court in the case of KESHRI METAL (P) LTD (supra) is concerned, the same - 7 - NC: 2024:KHC:7488 WP No. 24032 of 2023 did not arise out of any order passed subsequently by the Hon'ble Apex Court and as such the said judgment is not applicable to the facts of the instant case. 11. In the light of the above, I proceed to pass the following: ORDER (i) The petition is hereby allowed. (ii) The impugned order dated 18.05.2023 is hereby set-aside. The rectification applications Annexures-N, P & Q are hereby allowed. (iii) The concerned respondents are directed to refund the tax of Rs.15,49,87,083/-, Rs.11,83,29,527/- and Rs.13,61,19,086/- together with applicable interest back to the petitioner within a period of two months from the date of receipt of copy of the order. Sd/- JUDGE NMS/List No.: 1 Sl No.: 19 "