Case Law Details
Sumitomo Mitsui Financial Group Inc Vs CIT (Delhi High Court)
Introduction: In a recent judgment, the Delhi High Court delivered a significant ruling in the case of Sumitomo Mitsui Financial Group Inc vs. CIT. The court quashed an order passed by an officer on the grounds of lacking jurisdiction. This article provides a detailed analysis of the case and its implications.
Detailed Analysis: The case revolved around the challenge laid by the petitioner against an order dated November 28, 2022, passed under Section 124 of the Income Tax Act, 1961, as well as notices dated June 10, 2022, and September 22, 2022, issued under Section 201(1)/(1A) of the Act. Additionally, an order dated November 28, 2022, passed under Section 201(1)/(1A) of the Act, along with a demand notice of the same date under Section 156 of the Act were also under scrutiny.
The petitioner, represented by Mr. Porus Kaka, argued that the order was fundamentally flawed in terms of jurisdiction. Specifically, it was contended that jurisdiction had already been exercised by the Deputy Commissioner of Income Tax, International Tax Circle 4(2)(2), Mumbai, in relation to the transaction in question. This transaction pertained to a Share Purchase Agreement dated July 6, 2021, where the petitioner acquired a 74.9% equity stake in Fullerton India Credit Company Ltd. from two Singapore-based companies.
The petitioner further asserted that all necessary statutory approvals, including those from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI), had been obtained before and after the transaction. To substantiate the claim of jurisdiction in Mumbai, the petitioner referred to specific documents in the case file.
The court acknowledged that the matter required a thorough examination and issued notice accordingly. Mr. Ruchir Bhatia, the learned senior standing counsel, accepted notice on behalf of the revenue authorities.
It’s noteworthy that in one of the writ petitions, apart from the official respondents, two other parties, Angelica Investment Pte. Ltd. and Fullerton Financial Holdings Pte. Ltd. (the sellers of the shares), were also involved. They accepted notice and were given the opportunity to file counter-affidavits.
During the proceedings, the court ordered a stay on the operation of the impugned orders and notices pending further directions. The counsels for the parties were directed to submit written submissions before the next hearing.
Conclusion: After hearing the arguments from both sides, the Delhi High Court upheld the contention put forth by the petitioner. The court ruled that the impugned order could not have been passed by the concerned officer due to a lack of jurisdiction in the matter. As a result, the order dated November 28, 2022, under Section 124 of the Income Tax Act, along with the related notices and demand notice, were set aside. With this judgment, all consequential proceedings in the case are expected to collapse, allowing the parties involved to proceed as per legal advice.
This case highlights the critical importance of jurisdiction in tax matters and reinforces the principle that orders issued by officers without proper jurisdiction can be challenged successfully in the courts. Parties must always act in accordance with the law and relevant approvals, as demonstrated in this case.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. We had heard the arguments in the above-captioned matters, albeit, briefly on 14.12.2022, the broad contours of the case were etched out. For the sake of convenience, the relevant parts of the order dated 14.12.2022 is extracted hereafter:
“2. Via the aforementioned writ actions, challenge is laid by the petitioner to the order dated 28.11.2022 passed under Section 124 of the Income Tax Act, 1961 [in short “Act”], as well as the notices dated 10.06.2022 and 22.09.2022 issued under section 201(1)/(1A) of the Act, and the order dated 28.11.2022 passed under section 201(1)/(1A) of the Act, along with demand notice dated 28.11.2022 passed under section 156 of the Act.
2.1. For the sake of convenience, the aforementioned orders will be collectively referred to as impugned orders unless the context requires otherwise.
3. Mr Porus Kaka, learned senior counsel, who appears on behalf of the petitioner, says that the order is completely flawed in law.
3.1. Inter alia, it is submitted, that in respect of the transaction in issue, which concerns a Share Purchase Agreement dated 06.07.2021 by the writ petitioner to acquire 74.9% equity stake in a company based in India i.e., Fullerton India Credit Company Ltd. [in short “FICCL”] jurisdiction has already been exercised by the Deputy Commissioner of Income Tax, International Tax Circle 4(2)(2), Mumbai.
4. To be noted, 74.9 % equity stake has been bought by the petitioner from two Singapore based companies i.e., Angelica Investments Pte. Ltd. and Fullerton Financial Holdings Pte. Ltd.
5. It is also Mr Kaka’s submission, that all statutory approvals were taken both before and after before and after [sic: before and after] the subject transaction was entered into by the petitioner. In this context, refence [sic: reference] is made to the approval granted by Reserve Bank of India (RBI) and Competition Commission of India (CCI).
6. That jurisdiction is exercised by the aforesaid officer, who is located in Mumbai, is sought to be established by placing reliance on the document appended on page 261 of the case file.
6.1. In this regard, our attention has also been drawn to page 479 of the case file.
7. In our view, the matter requires examination.
8. Accordingly, issue notice.
8.1 Mr Ruchir Bhatia, learned senior standing counsel, accepts notice on behalf of respondent nos.1 and 2/revenue.
9. Counter-affidavit will be filed within four weeks from today.
9.1 Rejoinder thereto, if any, be filed before the next date of hearing.
10. To be noted, insofar as W.P.(C) 17048/2022 is concerned, apart from the official respondents, two other respondents i.e., Angelica Investment Pte. Ltd. and Fullerton Financial Holdings Pte. Ltd. are arrayed as parties.
10.1 They are, as noticed above, the sellers of the shares in issue.
10.2 These parties have been arrayed as respondent nos.3 and 4.
11. Mr Mukesh Butani accepts notice on behalf of respondent nos.3 & 4 in W.P.(C) 17048/2022.
12. Respondent nos. 3 and 4 are also given liberty to file counter-affidavit(s) within the same timeframe as indicated above i.e., four weeks.
13. In the meanwhile, the operation of the impugned orders and notices shall remain stayed till further directions of the Court.
14. Counsel for the parties will file their written submissions, not exceeding three pages each, at least five days before the next date of hearing.
15. List the matters on 26.04.2023.”
2. Having heard the learned counsels for the parties, we are persuaded to accept the contention advanced on behalf of the petitioner that the impugned order could not have been passed by the concerned officer, as he had no jurisdiction in the matter.
2.1 Mr Venkatraman, learned Additional Solicitor General (ASG), who appears on behalf of the respondents/revenue, cannot but accept this position.
3. Accordingly, the impugned order dated 28.11.2022, passed under Section 124 of the Income Tax Act, 1961 [in short “Act”], as well as impugned notices dated 10.06.2022 and 22.09.2022, issued under Section 201(1)/(1A) of the Act, and the order dated 28.11.2022, passed under section 201(1)/(1A) of the Act along with demand notice of even date, i.e., 28.11.2022, passed under Section 156 of the Act are set aside.
3.1 Having said so, all the consequential proceedings will, quite obviously, collapse.
4. Parties will be free to take the next steps in law advised.
5. The above-captioned writ petitions are disposed of in the aforesaid terms.
6. Pending application shall also stand closed.
7. Parties will act based on the digitally signed copy of the order.
