Sheladia Associates Inc V. Assistant Director of Income Tax

WP/25500/2024

AI Insights

The case involves Sheladia Associates Inc., which challenged a TDS certificate issued under Section 197 of the Income Tax Act, 1961, by the Assistant Director of Income Tax. The certificate allowed for a lower deduction rate, whereas the petitioner sought a 'NIL' deduction rate. The petitioner argued that no taxable event occurred in India, referencing a previous case where a similar issue was resolved in their favor. However, the court distinguished the current case from the previous one, noting the different nature of the contracts involved and the activities conducted. The court upheld the decision-making process of the tax authorities, emphasizing that the judicial review was limited to the decision-making process and not the decision itself.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 752699 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 10-12-2024
• Assessment Year: misc
• Other Referred Cases: Sheladia Associates Inc. v. Assistant Director of Income Tax, National Petroleum Construction Co. v. Deputy Commissioner of Income Tax, Goel Cargo (P.) Ltd. v. Commissioner of Income Tax, Bachan Singh v. Union of India, Kalinga Mining Corp. v. Union of India
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: VIJHAY PUNNA
• Assessee Lawyers: SWAROOP
• Keywords: Income Tax; TDS Certificate; Writ of Certiorari; Writ of Mandamus; NIL rate TDS deduction
• Section: 197; 195(2); 151 CPC

Judgement Text

"[ 3430 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (SPecial Original Jurisdiction) TUESDAY HE TENTH DAY OF DECEMBER TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE DR. JUSTICE G.RADHA RANI WRIT PETITION NO: 25500 0F 2024 Between: SheladiaAssociateslnc,l5S25ShadyGroveRoad,Suitel00'.Rockville'lVlD zosso, -usn. nepieslntlo- uy itd cenerat Manager (Accounts and Administration), Ir/r. Shaiiu Sebastian ...PET|TIONER AND .1 . Assistant Director of lncome Tax, office of ADIT (lNT TAXN)-2 HYD, Aayakar Bhavan, HYderabad - 500004 2. Joint Commissioner oiln\"or\" Tax, (lnternational Taxation), Aayakar Bhavan, Hvderabad - 500004 s. ij'.il; \"1l\"aii,-rrrtinistrv of Finance, Department of Revenue' Rep'' by its - S\"\"ietr.V (Revenue), North Block -New Delhi - 110001 ...RES'ONDENTS Petition under Artlcle 226 of the constitution of lndia praying that in the circumstances stated in the affidavit fileci therewith, the High Court may be pleasedtoissueaWritordirectionorordermoreparticularlyinthenatureofaWrit of Certiorarified fvlandamus, calling for the records and quashing the lmpugned orderdatedog.o8.2o24,bearingDlNandorderNosot2o072o24l629673and Request Number. 625673 for the Financial Year 2024-25 ' passed by the 1st Respondent under Section '197 of the lncome Tax Act, 1961 lmpugned Order and theconsequentTDScertificatedatedog.os.2024grantedbythe,lstRespondent issuedattherateofg.6percentasbeingillegal,arbitrary'inexcessofthelst Respondent's jurisdiction and in violation of established Principles of Natural Justice and directing the 1st Respondent to grant the Petitioner Company a NIL rate TDS deduction certificate under Section '197 of the lncome Tax Act' 1961 ' lA NO: 1 OF 2024 Petition under section '151 cpc praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be preased to dispense with the firing of certified copy of rmpugned order dated og.oB.2024, bearing DIN and order No sor2oo72o24r62g6?3 and Request Number. 629613 for the FinanciarYear 2024-zs, pending disposar of the main writ petition. lA NO: 2 OF 2024 Petition under Section '1s1 cpc praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be preased to direct the l st Respondent to permit the petitioner to receive payments under the Joint Venture Agreernent dated 28.06.20 21 and 02.a1 .2024 between the petitronei and MIS lntercontinenta consurtants & Technocrats prrvate Limited without any Tax Deducted at Sourcer in rndia under Section 1g5 or any other provisions of the lncome Tax Act, '1961 . counsel for the petitioner: sRr swARoop M.v FoR sRr MyrRr TNDUKURU counsel for the Respondent Nos.1 & 2: sRr vrJHAy K puNNA, sgr.rron sC Counset for the Respondent No.3: a*, oor,t?Xll?* ^rmo*, or. SOLICITOR GENERAL OF INDIA The Court made the following: ORDER THE HONOURABLE SRI JT'STICE SUJOY PAUL AND THE HONOI'RABLE DR. JUSTICE G.RADHA RANI V'RIT PETITION No.25soo oF 2024 ORDER: (per Hon'ble Justice Suiog Poul) Sri Swaroop M.V, learned counsel appears for the petitioner and Sri Vijhay K Punna, learned Senior Standing Counsel for Income Tax Department, appears for respondent Nos'1 and 2' 2. With the consent, hnallY heard' 3. In this petition liled under Article 226 of the Constitution of India, the challenge is mounted to the certihcate dated Og 'Oa'2O24 (Annexure P.2) issued under Section 197 of the Income Tax Act' 1961 (for short \"the Act'). 4.Theadmittedfactsbetweenthepartiesarethatthepermanent establishment at Hyderabad preferred an application under Section 195(2) of the Act for issuance of the certi{icate' The certilicate was prayed for \"NIL\" deduction, whereas, the impugned certihcate' so granted, was for lower deduction' present petition is filed. Assailing the certificate, the 5. The principle ground of attack to this certihcate is based on a previous adjudication by Division Bench of this Court in Sheladirr Associateslnc.v.AssistcntDirectoroJlncomeTaxandothef, decided on 25.01.2024. karned counsel for the petitioner submits that in the said case, the Financial Yeals in question were 2023-24 ' r ( r.18328 of2023 2 The petitioner Company was same, whose branch office is situated at Hyderabad, but, entire construction/engineering activiq. in the said case was carried out in Bangladesh. Since, a certihcate under Section 797 r>f the Act was the subjecl matter of challenge in the earlier round of litigation, this Court after hearing the parties, came to hold that ro taxable event had taken place within the territory of India and therefore, the certificate was set aside. 6. Learned counsel for the petitioner fairly submittecl that when an applicatiorL under Section 195(2) of the Act was preferred in the instant case, the petitioner has not informed and.relied on the previous round of adjudication in W.p.No. 1832g of 2023. yet, it is strenuously contended that if the clauses of contract in the instant case are examined in jr,rxtaposition to the relevant clauses, which became subje<:t matter of consideration in W.p.No.lg32g of 2023, it will be clear that no taxable activit5r/event has taken place within the territory of this country and therefore, the certificate for \"NIL\" deduction shorrld have been issued. 7. Per contra, iearned Senior Standing Counsel for lncome Tax Department submits that in the counter it is made clear that the contract, which was subject matter of adjudication in the previous round was relzrting to \"lndependent Engineering Services,,, whereas, the contract in hand relates to \"Consultation Services\". from this. it is submitted that possibility of income in India Section 5(2) of the Act cannot be ruled out_ To eiaborate, it is tted that while exercising the power under Section 197 of the Apart under submi I I r. tr / 3 Act, the authority was reQuired to undertake a limited exercise' This point is covered by a judgment of High Court of Delhi in National petroleum construction co. v. Deputg comtnissioner of Income Tox2, whereinit was held that the A\"\".\"\"i.,g Officer while exercising its power under Section 197 of the Act' during tlte course of enquiry cannot undertake an exhamstive exercise to determine this issue conclusively. It is further submitted that the petitioner has not relied on the judgment of this Court of the previous round in his application hled under Section 195(2) of the Act' even otherwise, the said judgment was relating to a different contract and for a different nature of activity' The principle ol res-judicoto cannot be pressed into service for a subsequent year' which is also a principle laid down by Delhi High Court in National Petroleum Construction's case (suPra)' 8. The next reliance of learned Standing Counsel is on a Division Bench Judgment of High Court of Madhya Pradesh in Goel Cargo (P.) Ltd.v. Commissio net oJ Income'tc-r3 to bolster his submission that limited scope of judicial review in a case of this nature is to examine the 'decision making process' and not the decision' No fault can be found in the decision making process and therefore' interference maY be declined' g. karned counsel for the petitioner in his rejoinder submission reiterated thal if clauses of present contract are read and compared , taxmann.com 364 (Delhi) 61 taxmann.com 358 (Madhya Pradesh) I I II I I ,l 4 f.i.::, -..r 'il\" , with the clauses, whiCh were considered in the previous round of litigation, the Court may come to the same conclusion. 10 The parties conhned their arguments to the extent indicated above 1 1. We have bestowed our anxious consideration on the rival contentions arrd perused the record. 12. It is an admitted fact between the parties that the contract in the previous round of litigation was different and relating to a different natur.e of activity and it is equally admitted between the parties that the petitioner did not rely upon the previous judgment, while preferrir_.lg the application under Section 195(2) of the Act, which resulted with issuance of impugned certihcate under Section 197 of the Act. 13. We find force in the contention of learned Senior Standing Counsel that in exercise of writ jurisdiction, this Court is mainly concerned wittL the legality, validily and propriety of tl-rc decision making process:. The decision making process to be judged as per Section 195 rea:d. with Section l9Z of the Act. The Madhl.a pradesh High Court, whiie considering the ambit and scope of Section 197 of the Act, came to hold in the same line and opined that the correctness of decision making process can be subject matter of judicial review. lt could not be pointed out that in decision making process adopted by Assessing Officer, he has committed any breach of any statutory provision. He has foilowed the provision and issubd , 5 the certi{icate for lower deduction of tax' The petitioner is not remedy less. The petitioner can Iile a return and in due course' can ask for the refund of the tax paid over and above' the payable tax' 14. It will not be out of place to mention that although' in the previous round of litigation' this Court observed that the petitioner has an alternative remedy under Section 264 of tt,.e Act' However' a plain reading of Section 264 of the Act makes it clear that remedy can be availed only against an 'order'' Section 264(l) of the Act reads thus: \"264 l3l I the case of aly,-aldq other than an o1$er to which seclion 263 \"ppli\"\" p'\"ttdfi:# authority subordinate to him ' the Principal Chief Commislioner or Chief Comrnissioner or PrincipalCommissionero.^co..i\"\"io''ermay,eitherofhisown motion or on an apphcat lo\"\"[y''f'\" \"\"\"\"\"\"\"\" iot revision' call for the record of ,ny proctedit';'Ji;th* ot'--+**@ Iri* rr.\" i\".\" \"\"\"*\"a u''i -uy make such inquiry or cause such inquiry [o be made 'ii' - \"Ltittt to the provisions of this Act. mav pass such cltat' fr\"]t\"\"'-i\"i being an order prejudicial io *t\" \"=\"\"t\".\". as he thinks fit \" 15. The said remedy cannot be availed against a certificate issued under Sectio o 197 ol the Act' In view of language employed in Section 264, which was not considered in previous round' the earlier ordertotheextentofremedyisdistinguishable.Thus,wearenot relegating the petitioner to avail the remedy of revision' but' leaving it open for him to file return and at appropriate stage seek refund' We findnoflawinthedecisionmakingprocess.Thejudicialreview under Article 226 of the Constitution is not directed against the decision, but is mainly confrned to the decision making process (see I I ! { 6 (l Bachan Singh v. Unio of Indiaa). Reference may be made to the judgment of t he Supreme Court in ttre case of Kalinga Mining Corpn. V. Utrion of Indias, wherein it is held as under: \"6? It is by now well setfled that judicial review of the administrative action/quasi judicial irders passed by the Government is limited only to correcting the errors of law or fundament:rl procedural iequirements \"*t l\"t -.y lead to manifest injustice. When the conclusions of the authorit5z are based.on evidence, the same cannot be re-appreciated by ttre court in ex<_.rcise of its powers of judicial .eview. The court does not exercise the powers of an appellate court in exercise of its powers of judicial review. It is oniy in cases where either frndings recorded by the administrative/quasi judicial authority .r\" b.sJd on no evidence or are so perverse ihat no reasonable person would have reached such a conclusion on the basis of the material avarilable that the court would be justified to interfere in the decision. The scope of judicial ..\"i;; i; [mited to the dec-ision making process and. not to the decision itself, even if the same appears to be erroneous.\" (Emphasis Suppiied) 16. Since the decision making process, does not warrant any interference, we find no reason to interfere in the present matter. 17. Accordingly, the writ petition is dismissed with the aforesaid observations. No costs. Interlocutory applications, if any pending, shall also stand closed. l I i 2008(e) '(201s) 5scc 161 scc 252 //TRUE COPY// SD/- T. JAYASREE ASSrsrANr TG!!]'RAR SECiION OFFICER To '1 . One CC to SRI MYTRI INDUKURU,-Advo^cate [OP!C] i. 5;; d6 i; SHr ViLnAV k-punNA, sEftoB sqIgR rrD IoPUCI 5 6;; dd i; sRi cAor pnevEer'i (u-unn, Dv sollcrroR GENERAL oF INDIA [oPUC] Two CD CoPies 4 PSK. GJP i HIGH COURT DATED:1011212024 ORDER WP.No.25500 of 2024 DISMISSING THE WRIT PETITION WITHOUT COSTS. -i' ,i.i.o'\"' , .a. , ,l_ * Zt, c) !: r.) i..: t 0 I ,,AtJ 2025 ,.rss rcFrEL) i.....>: I ., I ! I I I / /t 30/z ,/z+ "