Subex Technologies Ltd V. The Assistant Commissioner of Income-Tax (International Taxation), Circle-2(1)

WP/17005/2016

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The case revolves around the petitioner, M/s Subex Technologies Ltd, challenging the orders and notices issued by the Assistant Commissioner of Income-Tax (International Taxation) under Section 201(1) and Section 156 of the Income Tax Act, 1961. These orders and notices were related to tax assessments for the year 2008-2009 concerning payments made to a non-resident. The primary legal question was whether the actions taken by the tax authorities were within a reasonable time frame, particularly in light of the absence of a specific time limit in the law prior to its amendment in 2009. The court referenced a previous decision which held that a reasonable period for such actions is four years, and applied this reasoning to quash the impugned orders and notices.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 798722 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-01-2023
• Assessment Year: misc
• Other Referred Cases: The Director of Income-Tax, International Taxation and Another vs. The Executive Engineer, BWSSB
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ARAVIND
• Assessee Lawyers: K K CHYTHANYA; SHARATH
• Keywords: Assessment Year; Certiorari; Certiorari; Income Tax; Non-Resident; Legal Limitation
• Section: 201; 201(1); 156

Judgement Text

" - 1 - WP No. 17005 of 2016 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF JANUARY, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 17005 OF 2016 (T-IT) BETWEEN: M/S SUBEX TECHNOLOGIES LTD NO.81, PANATHUR VILLAGE, BOGANAHALLI ROAD, BANGALORE EAST TALUK, VARTHUR HOBLI, BANGALORE-560103 (REPRESENTED BY ITS DIRECTOR SRI.GANESH VENKATA RAMANAN KANGEYAM, S/O SRI.SUNDARAM VENKATA RAMANAN, AGED ABOUT 53 YEARS,) …PETITIONER (BY SRI. K.K.CHYTHANYA, SENIOR ADVOCATE A/W SRI. SHARATH S., ADVOCATE) AND: 1. THE ASSISTANT COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION), CIRCLE-2(1) ROOM NO.440, 4TH FLOOR, BMTC BUILDING, 80 FT ROAD, Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA - 2 - WP No. 17005 of 2016 6TH BLOCK, KORAMANGALA, BENGALURU-560095 …RESPONDENT (BY SRI. ARAVIND K V.,ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE, THE IMPUGNED ORDER PASSED UNDER SEC.201(1) OF THE INCOME - TAX ACT, 1961 DATED 15.02.2016 AT ANNEX-A; QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE, THE IMPUGNED NOTICE OF DEMAND ISSUED UNDER SEC.156 OF THE ACT, DATED 15.02.2016 AT ANNEX- B; QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE, THE IMPUGNED NOTICE DTED 03.02.2015 ISSUED UNDER SEC.201 OF THE ACT AT ANNEX-C AND ETC. THIS PETITION, COMING ON FOR HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has impugned the order dated 15.02.2016 under Section 201(1) of the Income Tax Act, - 3 - WP No. 17005 of 2016 1961 (for short, ‘the Act, 1961’) (Annexure – A), the consequential Notice of Demand dated 15.02.2016 under Section 156 of the Act, 1961 (Annexure – B) and the Show Cause Notice dated 03.02.2015 under Section 201 of the Act, 1961 (Annexure – C). 2. Sri. K.K.Chythanya, the learned Senior counsel for the petitioner and Sri. K.V.Aravind, the learned Standing counsel for the respondent, are heard on merits of the petition in the light of the following question: “Whether even after the amendment to include sub- section (3) to Section 201 of the Income-tax Act, 1961, the division bench decision of this Court in The Director of Income-Tax, International Taxation and Another vs. The Executive Engineer, BWSSB reported in 2020-TIOL-1448- HC-KAR-IT stipulating that where no limitation is prescribed, the statutory authorities must initiate action within a reasonable time and such reasonable time would be 4[four] years, must apply.” - 4 - WP No. 17005 of 2016 3. Sri. K.K.Chythanya submits that the indisputable facts are that the impugned order relates to the assessment year 2008-2009 in respect of the payment made to a non-resident and the impugned order is on 15.02.2016, way beyond four [4] years. The order even if any, should have been within four [4] years which would end on 31.03.2013. While emphasizing that the assessment year relates to the regime prior to the amendment of Section 201(3) of the Act, 1961 by the Finance Act, 2009 and therefore, a period when no limitation was contemplated even in the case of payment to residents, Sri. K.K.Chythanya argues that the Division Bench in The Director of Income-Tax, International Taxation and Another Vs. The Executive Engineer, BWSSB [supra] has held that the reasonable period for initiation of proceedings for orders under Section 201 of the Act, 1961 would be four [4] years. - 5 - WP No. 17005 of 2016 4. Sri. K.K.Chythanya argues that the proposition as enunciated by the Division Bench in the aforesaid decision must apply in full force in the present case as such order relates to payments to a non- resident. Sri. K.K.Chythanya relies upon paragraph No.9 of the aforesaid judgment of the Division Bench which reads as under: “9. In view of aforesaid enunciation of law, it is axiomatic that reasonable period for initiation of proceedings in respect of the Assessment years in question, at the time where no limitation was prescribed has been held to be four years. It is not in dispute that in the instance case, the proceedings under Section 201(1) and 201(1A) of the Act have been initiated after a period of four years. Therefore, the same cannot be held to be initiated within the reasonable time and consequently, the proceedings cannot be sustained in the eye of law.” 5. Sri. K.V.Aravind submits that this Court will have to make a distinction in the present case for three fold reasons. He submits that firstly, as of the date of the impugned order dated 15.02.2016, Section 201 of - 6 - WP No. 17005 of 2016 the Act, 1961 is amended not once but twice and intentionally excluding any time limit for payment to non-resident. Secondly, with the intention of the Parliament being clear and categorical, the rule of reasonable period for initiation should not be invoked. Thirdly and crucially, in the case on hand before the Division Bench, both the assessment year and the order were prior to the amendment, but in the present case, though the assessment year is prior to the amendment, the order is after the amendment. 6. This Court, on a careful consideration of the rival submissions, is of the considered view that the rule of reasonable period for initiation of proceedings under Section 201 of the Act, 1961 as enunciated by the Division Bench in the aforesaid decision must apply in the present case because of two indisputable facts viz., the assessment year is prior to the amendment and the decision is in the case of payment made to a non- resident. This is because the enunciation by the - 7 - WP No. 17005 of 2016 Division Bench in the aforesaid decision is also in a case where these factors were predominant. 7. Further, nothing is brought on record for this Court to opine that merely because the assessment order is post the amendment, the law as it stood on the day of the assessment order must apply notwithstanding the clear enunciation by the Division Bench of this Court in the backdrop of the aforesaid predominant factors. The question whether the Legislature with the amendment has deliberately excluded a time-line in the case of payments to a non- resident and therefore, the enunciation as aforesaid should, or not be applied, must be considered in an appropriate case. Hence, on the aforesaid short ground, the petitioner must succeed with the question being answered in its favour. As such, the following - 8 - WP No. 17005 of 2016 ORDER The petition is allowed, and the impugned order and the Notice of Demand dated 15.02.2016 (Annexures - A and B) and the Show Cause Notice dated 03.02.2015 (Annexure – C) are quashed. Sd/- JUDGE nv "