Fcbulka Advertising Pvt Ltd. Vs ACIT (Bombay High Court)
Conclusion: High Court highlighted that a final order must follow proper adjudication and AO’s satisfaction under Section 237. Since the communication lacked clarity and was not a final determination of entitlement, the Court quashed the rejection of an excess Dividend Distribution Tax (DDT) refund claimed under the India-Mauritius Tax Treaty and directed the tax authorities to take a final decision within eight weeks.
Held: Assessee was engaged in advertising and marketing in India and was a subsidiary of ACSL Mauritius. It also held shares in FCB Interface Communications Pvt Ltd. For AY 2018–19, it declared a dividend of ₹205.17 crore to ACSL Mauritius and paid DDT of ₹27.47 crore at 20.358% under Section 115-O. Later, it claimed the DDT was wrongly paid at a higher rate. As per the India-Mauritius Tax Treaty, the rate should have been 5%. On 10 October 2018, it requested a refund of ₹20.73 crore by writing to the tax department, stating that the return form had no option to claim this refund. Department replied on 29 November 2018, and assessee kept following up for the refund with interest. But no further response came. Revenue rejected the refund, saying the 2018 reply was not a valid order under the Act. It asked assessee to file a rectification under Section 154 or claim refund under Section 237 with documents. Assessee then filed the present writ petition challenging the rejection and seeking a refund with interest. The Division Bench addressed three main issues in the petition: (i) the validity of the communication dated 16 June 2022, (ii) the legal status of the communication dated 29 November 2018, and (iii) whether a writ of mandamus should be issued for the refund of Rs. 20,73,06,062/- based on the 29 November 2018 communication. The communication dated 16 June 2022 rejected the refund claim, stating that the 29 November 2018 communication was not a statutory order and pointing out procedural errors by assessee. It also argued that assessee was not entitled to a refund under the India-Mauritius Tax Treaty. It was found that assessee was not given an opportunity to address the rejection’s reasons, violating natural justice principles. It also observed that the rejection focused on procedural issues rather than addressing the refund claim’s merits. Consequently, the High Court set aside the 16 June 2022 communication, agreeing that it was not a final rejection. The bench then turned to the legal status of the 29 November 2018 communication, which did not specify the section under which it was issued. While this did not automatically disqualify it as a statutory order, the Court found it to be a preliminary communication. It mentioned the refund amount but noted that further processing was needed. High Court highlighted that a final order must follow proper adjudication and AO’s satisfaction under Section 237. Since the communication lacked clarity and was not a final determination of entitlement, the Court ruled it was not a statutory order. In conclusion, the bench determined that a writ of mandamus could not be issued based solely on the 29 November 2018 communication. It quashed the 16 June 2022 communication, confirmed that the 29 November 2018 communication could not be treated as a final refund decision, and directed the first Respondent to make a final decision on the refund within eight weeks, after hearing assessee. If assessee was found entitled to the refund, interest would be granted from 10 October 2018 until the refund was issued, with no delay attributable to assessee.
