Mufg Bank Ltd Vs CIT (Delhi High Court)
Delhi High Court held that assessee is free to settle any appeal under Direct Tax Vivad se Vishwas Act, 2020 and is not required to settle all the pending appeals filed by the respondent-revenue for an assessment year.
Facts- The primary issue that arises for consideration in the present case is whether an assessee is free to settle any appeal under the Direct Tax Vivad se Vishwas Act, 2020 (“DTVSV Act”) and is not required to settle all the pending appeals filed by the respondents-revenue for an assessment year.
Conclusion- ‘Consequently, the contention of the respondents-revenue that the option is available to the petitioner only in a case where there are cross appeals arising from the same order is incorrect as FAQ-19 in unequivocal terms indicates that the assessee has an option to choose the appeals to be settled under the DTVSV Act and there is no obligation on the petitioner to settle all the appeals filed by the assessee for a particular assessment year.
Keeping in view the aforesaid, this Court is of the view that an assessee is free to settle any appeal under the DTVSV Act and is not required to settle all the pending appeals filed by the respondent-revenue for an assessment year.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The primary issue that arises for consideration in the present case is whether an assessee is free to settle any appeal under the Direct Tax Vivad se Vishwas Act, 2020 (“DTVSV Act”) and is not required to settle all the pending appeals filed by the respondents-revenue for an assessment year.
RELEVANT FACTS
2. The relevant facts of the present case are that the Petitioner is a banking company incorporated under the laws of Japan and carries on the banking business in India through branches in various cities. The return of income filed by the petitioner was selected for scrutiny assessment and a final assessment order dated 29th October, 2010 under Section 143 read with Section 144C of the Income Tax Act, 1961 (for short ‘Act’) was passed by the Assessing Officer for the Assessment Year 2007-08 making various adjustments to the total income of the Petitioner.
3. The Petitioner challenged the assessment order by filing an appeal before the Tribunal which was disposed of vide order dated 19th September, 2014 deciding the various issues as under:
a. Salary to expatriate employees – allowed in favour of petitioner-assessee.
b. Deferred Guarantee Commission – allowed in favour of petitioner-assessee.
c. Interest received by HO/overseas branches – allowed in favour of petitioner- assessee.
d. Deduction for interest paid to HO/overseas branches – allowed in favour of petitioner- assessee.
e. Interest received from HO/overseas branches – decided against the petitioner- assessee.
f. Applicability of Section 11 5JB to foreign banks – allowed in favour of petitioner- assessee.
g. Taxability of ECB Interest – remanded back.
h. Rate of tax – decided against the petitioner-assessee
4. The Petitioner challenged the order of the Tribunal on issues (e), (g) & (h) above and the Respondent-Department challenged the order of the Tribunal on issues (a), (b), (c), (d), (f) & (g) above by filing an appeal before this Court. By an order dated 13th March, 2015 the appeal of the Petitioner was admitted by this Court on issues (e) & (h) and the remand by the Tribunal on issue (g) was modified. And, by an order dated 08th April, 2016, the appeal of the Respondent-Department on issues (a), (b), (c), (d), (f) & (g) was dismissed by this Court.
5. On 28th July, 2016, the Assessing Officer passed an assessment order in the remand proceeding holding that the ECB interest earned by the Petitioner is taxable under the Act and levied interest under Section 234B and 234D of the Act. The Petitioner challenged the assessment order dated 28th July, 2016 by filing an appeal before the Tribunal.
6. On 01st December, 2017, the Supreme Court issued notice in the Special Leave Petition (“SLP”) filed by the Respondent-Department wherein the order of this Court dated 08th April, 2016, dismissing the Respondent-Department’s appeal, was challenged on issues (a) & (f).
7. On 16th September, 2019, the Tribunal passed an order allowing the appeal of the Petitioner against the order dated 28th July, 2016 passed in remand proceeding and deleted the addition made by the Assessing Officer on account of ECB interest and levy of interest under Section 234D of the Act.
8. On 17th March, 2020, the DTVSV Act was passed by the Parliament which allowed the assessee’s to settle any dispute pending before the Tribunal, High Court, Supreme Court or before any authorities under the Act.
9. On 08th December, 2020, the Petitioner filed an application under DTVSV Act to settle the deemed appeal of the Department against the order of the Tribunal dated 16th September, 2019.
10. On 14th December, 2020, the Respondent-Department issued a show-cause notice proposing to reject the application filed by the Petitioner as the Petitioner was not settling the Respondent-Department’s SLP pending in the Supreme Court for the same assessment year. On 16th December, 2020, the Petitioner filed its response and submitted that there is no compulsion to settle the dispute pending in the Supreme Court for Assessment Year 2007-08 as under the DTVSV Act, an applicant could settle one of various litigations that was pending with an appellate authority and it was not necessary to settle all the appeals for a particular assessment year.
11. On 29th January, 2021, the application was rejected by the Respondent-Department on the ground that the Petitioner is settling part of the appeal and ought to have also settled the Respondent-Department’s SLP pending in the Supreme Court for the same assessment year. In this regard, the Respondents relied on FAQ Nos.7, 11, 14 and 36 issued by the CBDT vide Circular No .7/2020 dated 22nd April, 2020 which are reproduced herein below:-
“Question No. 7.If assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO. Can he avail the Vivad se Vishwas with respect to such additions?
Answer: If an appellate authority has set aside an order (except where assessment is cancelled with a direction that assessment is to be framed de novo) to the file of the AO for giving proper opportunity or to carry out fresh examination of the issue with specific direction, the assessee would be eligible to avail Vivad se Vishwas. However, the appellant shall also be required to settle other issues, if any, which have not been set aside in that assessment and in respect of which either appeal is pending or time to file appeal has not expired. In such a case disputed tax shall be the tax Ryour attle At a Ticcluding surcharge and cess) which would have been payable had the addition in respect of which the order was set aside by the appellate authority was to be repeated by the AO.
In such cases while filling the declaration form, appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner (Appeals).
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Question No.11 In case where disputed tax contains qualifying tax arrears as also non-qualifying tax arrears (such as, tax arrears relating to assessment made in respect of undisclosed foreign income):
(i) Whether assessee is eligible to the Vivad se Vishwas itself?
(ii) If eligible, whether quantification of disputed tax can exclude/ignore non-qualifying tax arrears?
Answer: If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to file declaration under Vivad se Vishwas. There is no provision under Vivad se Vishwas to settle part of a pending dispute in relation to an appeal or writ or SLP for an assessment year. For one pending appeal, all the issues are required to be settled and if any one of the issues makes the declaration invalid, no declaration can be filed.
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Question No.14. Whether assessee can avail of the Vivad se Vishwas for some of the issues and not accept other issues?
Answer: Refer to answer to question no 11. Picking and choosing issues for settlement of an appeal is not allowed With respect to one order, the appellant must chose to settle all issues and then only he would be eligible to file declaration.”
12. Accordingly, the present writ petitions were filed by the Petitioner challenging the aforesaid rejection of the application filed under DTVSV Act vide order dated 29th January, 2021.
ARGUMENTS ON BEHALF OF THE PETITIONER
13. Learned senior counsel for the Petitioner submitted that the DTVSV Act treats an appeal and an SLP for the same assessment year as a separate dispute for the purpose of settlement under the Act. He stated that this position is evident from the provisions of Section 2(1)(j) read with Section 2(1)(a) of DTVSV Act, which consider each appeal as a separate dispute for the purpose of computing disputed tax under the Act. He pointed out that the definition of “dispute” under Rule Ð 2(b) of the Direct Tax Vivad se Vishwas Rules, 2020 (for short ‘DTVSV Rules’) considers an appeal or an SLP as a separate dispute for the purpose of Rules 9, 10 and 11 in relation to computation of disputed tax in certain situations. He also emphasised that Sections 3 and 4 of the DTVSV Act allows an assessee to file a declaration for any appeal or an SLP which is pending before an appellate authority and does not require the assessee to file a declaration for all the appeals pending for an assessment year and after the settlement of the dispute, only such appeal is to be withdrawn for which the application was made by an assessee. In support of his contention, he relied on Circular No.9/2020 dated 22nd April, 2020 issued by CBDT. The relevant portion of the said Sections, Rules and Circular referred to hereinabove are reproduced hereinbelow:-
“2. Definitions.-(1) In this Act, unless the context otherwise requires,-
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(j) “disputed tax” in relation to an assessment year or financial year, as the case may be, means, the income-tax, including surcharge and cess (hereafter in this clause referred to as the amount of tax) payable by the appellant under the provisions of the Income-tax Act, 1961 (43 of 1961), as computed hereunder:-
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(o) “tax arrear” means,-
(i) the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax; or
(ii) disputed interest; or
(iii) disputed penalty; or
(iv) disputed fee,
as determined under the provisions of the Income-tax Act;
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3. Amount payable by declarant.—Subject to the provisions of this Act, where a declarant files [under the provisions of this Act on or before such date as may be notified], a declaration to the designated authority in accordance with the provisions of section 4 in respect of tax arrear, then, notwithstanding anything contained in the Income-tax Act or any other law for the time being in force, the amount payable by the declarant under this Act shall be as under, namely:–
