IBM INDIA PRIVATE LIMITED V. THE DEPUTY COMMISSIONER OF INCOME TAX

WP/19673/2023

AI Insights

The case involves IBM India Private Limited, which filed a writ petition against various income tax authorities seeking a refund of Rs. 380,39,86,658. This amount was determined refundable by the Joint Commissioner of Income-Tax for the assessment year 2013-14 following orders from the Income-Tax Appellate Tribunal and the Dispute Resolution Panel. However, the refund was not processed as it was adjusted against demands for the assessment year 2010-11, which were under dispute. The court examined whether the adjustment of the refund was legally permissible and whether the petitioner was given adequate notice of such adjustment. The court concluded that the adjustment was not justified and directed the immediate refund to the petitioner.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 769704 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-10-2023
• Assessment Year: misc
• 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: Assessment Year 2013-14; Demand Adjustment; Income Tax Refund; Rectification Order; Order of the Tribunal
• Section: 143(3); 254; 144(C)(5)

Judgement Text

" - 1 - NC: 2023:KHC:36084 WP No. 19673 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF OCTOBER, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 19673 OF 2023 (T-IT) BETWEEN: IBM INDIA PRIVATE LIMITED A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956, HAVING OFFICE AT NO. 12, SUBRAMANYA ARCADE-1, BANNERGHATTA MAIN ROAD, BANGALORE-560 029, REPRESENTED HEREIN BY ITS COUNTRY TAX LEADER, MR. SHANKAR RAMJEE. …PETITIONER (BY SRI. T. SURYANARAYANA, SENIOR ADVOCATE FOR MS. TANMAYEE RAJKUMAR.,ADVOCATE) AND: 1. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1)(3), BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BANGALORE-560 095. 2. THE COMMISSIONER OF INCOME TAX BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BANGALORE-560 095. Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2023:KHC:36084 WP No. 19673 of 2023 3. ASSISTANT DIRECTOR OF INCOME-TAX CENTRALISED PROCESSING CENTRE, INCOME TAX DEPARTMENT, 1ST FLOOR, PRESTIGE ALPHA NO. 48/1, 48/2, BERATENAAGRAHARA BEGUR, HOSUR ROAD, UTTARAHALLI HOBLI, BENGALURU-560 100. 4. THE DIRECTORATE GENERAL OF INCOME TAX (SYSTEMS) CENTRAL BOARD OF DIRECT TAXES, MINISTRY OF FINANCE, NEW DELHI-110 001. …RESPONDENTS (BY SRI.E.I. SANMATHI., ADVOCATE) THIS WP IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECTING THE RESPONDENTS TO FORTHWITH REFUND AN AMOUNT OF RS. 380,39,86,658/- DUE TO THE PETITIONER PURSUANT TO THE ORDER DATED 28/02/2023 (ANNEXURE-J) PASSED BY R1 ON GIVING EFFECT TO THE ORDER OF THE TRIBUNAL, ALONG WITH APPLICABLE INTEREST. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has sought for the following reliefs: “For direction to the Respondents to forthwith refund an amount of Rs.380,39,86,658/- due to the petitioner - 3 - NC: 2023:KHC:36084 WP No. 19673 of 2023 pursuant to the order dated 28.02.2023 [Annexure-J] passed by 1st Respondent on giving effect to the order of the Tribunal, along with applicable interest”. Sri T. Suryanarayana, the learned Senior Counsel for the petitioner, and Sri E. I. Sanmathi, the learned counsel for the respondents, are heard for final disposal of the petition in the light of this undisputed facts. 2. The petitioner, after the orders of the Income-Tax Appellate Tribunal on 31.07.2020 in IT(TP)A No.725/Bang/2018, has the advantage of the Assessing Officer’s Remand Report dated 31.03.2022 under the provisions of Section 143(3) read with Section 254 of the Income Tax Act, 1961 [for short, ‘the IT Act’], the directions of the DRP dated 31.10.2022 under the provisions of Section 144 C(5) read with Section 254 of IT Act and the order dated 28.02.2023 by the Assessing Officer under Section 143(3) read with Section 254 of IT Act. Further, the - 4 - NC: 2023:KHC:36084 WP No. 19673 of 2023 Joint Commissioner of Income-Tax (OSD), Circle – 3(1)(1), Bengaluru has determined that a sum of Rs.380,39,86,658/- is refundable to the petitioner for the assessment year 2013-14. The petitioner has thereafter submitted an application on 01.06.2023 [Annexure-M], and after this submission, the Joint Commissioner of Income-Tax (OSD), Circle 3(1)(1), Bengaluru, as an Officer attached to the Deputy Commissioner of Income Tax, has addressed a Communication dated 22.03.2023 to the Deputy Commissioner of Income Tax (International Taxation). 3. The substance of this Communication is to give the status of the enforceability of the demand for the assessment years starting from 2005-06, and it is stated that the demands are not enforceable for all the years mentioned therein except insofar as the Assessment Years 2013-14, 2019-20 and 2021-22. As regards these assessment years, more specifically the subject assessment year 2013-14, it is stated that - 5 - NC: 2023:KHC:36084 WP No. 19673 of 2023 the proceedings are pending with the DRP [and in fact, the proceedings before the DRP is decided on 31.10.2022] and as regards the Assessment Years 2019-20 and 2021-22, it is stated that the demands are because of certain mismatch in prepaid taxes. 4. Sri T. Suryanarayana, relying upon the aforesaid circumstances, submits that there is no recoverable demand from the petitioner as of this date and therefore there would be no justification for refusing to give refund of the amount determined in the order dated 28.02.2023. Sri E. I. Sanmathi submits that the amount refundable for the subject assessment year has been adjusted towards demands that could be for the Assessment Year 2010-11 and therefore is not refunded. 5. Sri E. I. Sanmathi elaborates that there is a rectification order on 15.06.2018 for the Assessment year 2010-11, and with the petitioner calling in question the assessment order for this - 6 - NC: 2023:KHC:36084 WP No. 19673 of 2023 Assessment year [and another Assessment year] in the appropriate proceedings before the ITAT, the assessment orders are quashed, and the proceedings are restored on 18.07.2022 for reconsideration of certain issues. He further emphasizes that the proceedings are pending before the concerned DRP as of today and in the interregnum [in the year 2023] the refund payable for the Assessment Year 2013-14 has been adjusted towards what could be a possible demand for the Assessment Year 2010-11. However, when queried, Sri. E.I. Sanmathi submits that the refunds readjusted in the year 2023 is without notice to the petitioner. Sri.T.Suryanarayana, while submitting that there cannot be any readjustment without notice to the petitioner under the provisions of Section 245 of the IT Act, submits that in the peculiarities of this case, there cannot be any readjustment at all. These submissions are not controverted. - 7 - NC: 2023:KHC:36084 WP No. 19673 of 2023 6. The afore circumstances and the submissions establish that there is no recoverable demand from the petitioner as of today, and the readjustment is in anticipation of the conclusion of a particular proceeding in a possible manner without due process. At this stage, Sri E. I. Sanmathi submits that the Assessing Officer could give due credit to the amounts refundable in terms of the order dated 28.02.2023 when the Assessing Officer will have to pass Orders-to-Give-Effect to the directions by the DRP. However, he is not able to point out any provision in the statute or otherwise to justify the retention in the peculiarities of this case. In the absence of the statutory provisions or the enablement otherwise in law, the retention of the amount in anticipation of conclusion of the DRP proceedings, and to give credit to this amount while giving-effect to the orders thereafter cannot be accepted. - 8 - NC: 2023:KHC:36084 WP No. 19673 of 2023 7. There would be no justification for denying the petitioner the advantage of the refund. It is too salient that a levy cannot be unless it is with the authority of law and therefore, there has to be a direction to the first respondent to ensure that steps are taken to affect refund in terms of the order dated 28.02.2023 to the petitioner. The next question for consideration is the reasonable time that must be accorded to the first respondent in the circumstances of the case, and after hearing both Sri T. Suryanarayana and Sri. E. I. Sanmathi, this Court is of the considered view that the first respondent must be allowed six weeks from the date of receipt of certified copy of this order to extend the benefit of refund to the petitioner. Hence, the following: ORDER The petition is allowed. The first respondent is directed to identify and take all steps to refund to the petitioner a sum - 9 - NC: 2023:KHC:36084 WP No. 19673 of 2023 of Rs.380,39,86,658/- consequent to the Order dated 28.02.2023 within six [6] weeks from the date of receipt of a certified copy of this order. Sd/- JUDGE SA ct:sr "