M/S COGNIZANT GLOBAL SERVICES V. DEPUTY COMMISSIONER

WP/20336/2017

AI Insights

In this writ petition, M/s Cognizant Global Services Private Limited challenged an order from the Deputy Commissioner of Income Tax (TDS) and the Assistant Commissioner of Income Tax (TDS), which was issued under Sections 201[1] and 201[1A] of the Income Tax Act, 1961. The petitioner argued that the initiation of these proceedings was beyond the prescribed period and that the actions taken were not applicable as the necessary TDS deductions had been made and filed as required under Section 200 of the Income Tax Act. The court's decision to quash the order and restore the proceedings for reconsideration was based on the need to re-evaluate the specific defenses provided by the petitioner.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 691867 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 13-01-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Finance No.2 Act 2014
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: RAVI RAGHAVAN
• Keywords: Disallowance; Income Tax; Limitation; Tax payment; TDS; Provisions for Expenditure
• Section: 201(1); 40(a)(ia); 201(1A); 201(3); 200

Judgement Text

" - 1 - WP No. 20336 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF JANUARY, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 20336 OF 2017 (T-IT) BETWEEN: M/S COGNIZANT GLOBAL SERVICES PRIVATE LIMITED, 5TH FLOOR, LEVEL 06, BLOCK A LAKEVIEW, BAGAMANE TECHNOLOGY PARK C V RAMAN NAGAR, BANGALORE-560093, REPRESENTED BY ITS DIRECTOR SHRI R CHANDRASEKARAN. ... PETITIONER (BY SRI.RAVI RAGHAVAN, ADVOCATE) AND : 1 . DEPUTY COMMISSIONER OF INCOME TAS (TDS) & 1(1) BANGALORE 4TH FLOOR, HMT BHAVAN NO. 59 BELLARY ROAD BANGALORE – 560 032. 2 . THE ASST. COMMISSIONER OF INCOME - TAX (TDS) - 1(1) BANGALORE 4TH FLOOR, HMT BHAVAN NO.59, BELLARY ROAD560032. ... RESPONDENTS (BY SRI.K.V. ARAVIND, ADVOCATE) Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA - 2 - WP No. 20336 of 2017 THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO INTERPRETING PROVISIONS OF SEC. 201(3) OF THE INCOME TAX ACT, PRIOR TO ITS SUBSTITUTION VIDE THE FINANCE NO.2 ACT 2014 WITH EFFECT FROM 01.10.2014 IN SUCH A MANNER AS TO RENDER THE AMENDMENT PROSPECTIVE AND NOT APPLICABLE TO THE PETITIONER'S CASE WHICH WAS ALREADY TIME- BARRED AS ON 31.3.2013; ISSUE A WRIT OF CERTIORARI OR ANY OTHER WRIT, ORDER OR DIRECTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA QUASHING THE IMPUGNED ORDER DATED 31.3.2017 AND RELATED NOTICES AT ANNEX-A. THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING: O R D E R The petitioner has called in question the order dated 31.03.2017 issued under Section 201[1] and 201[1A] of the Income Tax Act,1961. The petitioner’s grievance with the impugned order is on two counts. Firstly, on the count that the initiation of the proceedings under Section 201 of the Income Tax Act with the consequential under Section 201(1A) is beyond the prescribed period. Secondly, on the - 3 - WP No. 20336 of 2017 count that though the petitioner had claimed certain amounts as provisions for expenditure, they were disallowed. Consequentially such amount is offered for tax and tax paid but with the later payment made towards expenses, deductions are made and TDS Statement is filed. As such, no action could be taken under the aforesaid provisions. 2. Sri Ravi Raghavan, the learned Counsel for the petitioner, on the first count submits that the relevant financial years would be 31.03.2010 and 31.03.2011 and if action had to be taken under Section 201, it had to be within two years from the end of these respective financial years. On the second count Sri Ravi Raghavan reiterates that the petitioner had filed returns claiming certain amounts as provisions for expenditure, but this claim was disallowed. Consequentially, the petitioner has offered such amount for tax and paid tax. In - 4 - WP No. 20336 of 2017 continuation, Sri Ravi Raghavan further reiterates that as and when the payments are actually made to the vendor, the deductions have been made and statements of TDS filed as required under Section 200 of the Income-Tax Act. 3. Sri K.V.Arvind, learned counsel for the respondent, points out that though the petitioner responded to the show cause notice issued inter alia by its reply dated 03.03.2007 specifically contending that the return of income filed under section 40(a)(ia) of the Income Tax Act is suo motu disallowed and the same cannot be considered as the amount covered under Chapter XVII-B of the Income Tax Act so as to raise a TDS demand under Section 201 with levy of interest under Section 201(1A) thereof, the first respondent has recorded thus: “4. For want of exact details of date of booking and nature of the said expenditure in assessee’s books of accounts, the following - 5 - WP No. 20336 of 2017 parameters are adopted in order to arrive at interest u/s 201(1A) of the Act. i) The expenditure of Rs.2,95,68,582/- was debited in the books in the month of March of the Financial Year relevant to the Assessment Year for which disallowance is made. ii) The expenditure falls within the purview of tax deduction at the rate of 10% under Chapter XV-IIB of the Act.” Sri K.V.Aravind submits that in the light of the specific defense taken by the petitioner and the conclusion, it would be indisputable that the first respondent has not considered either the disallowance or the payment of tax after the provisioned amount is offered as income with later payments or subsequent deduction and statement of TDS. 4. When queried Sri K.V. Arvind submits that the question of limitation could be left open to be - 6 - WP No. 20336 of 2017 agitated by the petitioner upon the first respondent reconsidering the factual assertions to decide whether indeed the petitioner would be liable for consequences under sections 201 and 201(1A) of the Income Tax Act. In rejoinder, Sri Ravi Raghavan submits that if there is determination of fact and an opinion that the petitioner cannot be saddled with the consequences under section 201 and 201(1A) of the Income Tax Act, there would be no occasion for the petitioner to seek for a decision on the question of limitation and as such, the petition could indeed be disposed of setting aside the impugned order dated 31.03.2017 (Annexure-A) leaving open the question of limitation to be adjudicated before this Court if there is a cause after the decision on remand. 5. In the light of these submissions, the petition stands disposed of quashing the order of the first respondent dated 31.3.2017 in No. - 7 - WP No. 20336 of 2017 BLRF00763A/ 201(1)/ DCIT (TDS)/C-1(1) /2016-17 restoring the proceedings for reconsideration in the light of the petitioner’s specific defense that upon the expenses being suo motu disallowed under Section 40(a)(ia) of the Income Tax Act they are offered as income and tax paid, as also its further case that as and when the payments are made, deductions are effected and statement of TDS filed. It would be needless to observe that the question of limitation is left open to be considered if there is cause for the same. The petitioner without further notice, shall appear before the first respondent on 20.02.2023. SD/- JUDGE NV "