Cognizant Technology Solutions India Pvt. Limited Vs DCIT (Supreme Court)
Conclusion: Whether assessee’s purchase of its own shares, which was not in accordance with sec.77A of the Companies Act, would amount to dividends within the meaning of sec.2(22)(d) or 2(22)(a), and consequently, liable for tax u/s. 115-O in the hands of the assessee company. Whether the company had failed to remit the taxes within the stipulated period, the company was ‘deemed to be an assessee in default’, u/s. 115-Q. Whether assessee company was required to remit the taxes (calculated @ 15% of the total payments of Rs.19415,62,77,269/- to the shareholders, and surcharge etc as per the Act) along with the interest payable u/s. 115-P of the Act, immediately, failing which the department would proceed with the collection and recovery of the taxes, including coercive steps, as per the provisions of the Act should be decided on merits by the concerned authority within two months from today without being influenced, in any way, by any of the observations made by the High Court and Supreme Court.
Held: Assessee-company was engaged in the business of development of computer software and related services. In the Financial Year 2016-17, assessee approached the High Court with a Scheme of Arrangement and Compromise of the Companies Act, 1956 to buy-back its shares. High Court sanctioned the Scheme pursuant to which assessee purchased 94,00,534 shares at a price of Rs.20,297/- per share from its four shareholders and made a total remittance of Rs.19,080 crores approximately. Thereafter, assessee made statutory filing under Form 15 CA after obtaining requisite certificate from a Chartered Accountant in Form 15CB furnishing details of remittances made to non-residents. A letter was received by assessee from the Deputy Commissioner of Income Tax, Large Taxpayer Unit-1, Chennai in connection with non-payment of tax on the remittances made to the non- residents, in Financial Years 2015-16 and 2016-17. In the present case, assessee’s purchase of its own shares, which was not in accordance with sec.77A of the Companies Act, would amount to dividends within the meaning of sec.2(22)(d) or 2(22)(a), and consequently, liable for tax u/s. 115-O in the hands of the assessee company. Further, since the company had failed to remit the taxes within the stipulated period, the company was ‘deemed to be an assessee in default’, u/s. 115-Q. Therefore assessee company was required to remit the taxes (calculated @ 15% of the total payments of Rs.19415,62,77,269/- to the shareholders, and surcharge etc as per the Act) along with the interest payable u/s. 115-P of the Act, immediately, failing which the department would proceed with the collection and recovery of the taxes, including coercive steps, as per the provisions of the Act. An application was preferred by the appellant on 20.03.2018 before the Authority for Advance Ruling (AAR) under Section 245Q of the Act seeking a ruling on the issue whether the appellant was liable to pay tax on buy-back of its shares under Section 115QA or Section 115-O or any other provision of the Act. Assessee filed a Writ Petition in the High Court submitting inter alia that while the issue was pending before the AAR under Section 245Q, in view of the bar provided under Section 245RR, the matter could not have been considered. It was also submitted that assessee was never put to notice whether it would be liable under Section 115-O. It was further submitted that all the while the Department was only soliciting information which assessee had readily furnished and at no stage assessee was put to notice that its liability would be determined in any manner. It was held that the communication dated 22.03.2018 should be treated as a show cause notice calling upon assessee to respond with regard to the aspects adverted to in said communication; assessee should be entitled to put in its reply and place such material, on which it sought to place reliance, within 10 days from today; assessee should thereafter be afforded oral hearing in the matter; the matter should thereafter be decided on merits by the concerned authority within two months from today; pending such consideration, as also till the period to prefer an appeal from the decision on merits is not over, the interim order passed by the Single Judge of the High Court on 03.04.2018 and as affirmed by this Court vide its order dated 14.10.2019, shall continue to be in operation; and the amount of Rs.495,24,73,287/- deposited towards payment of tax and the amount of Rs.2806,40,15,294/- which stood deposited and invested in the form of Fixed Deposit Receipts shall be subject to the decision to be taken by the concerned Authority on merits or to such directions as may be issued by the Appellate Authority. The merits of the matter should be gone into independently by the concerned authorities without being influenced, in any way, by any of the observations made by the High Court and this Court.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
