2016 (11) TMI 1390 - HC - Income Tax

Adjustment of provisions of the Income Tax Act against benefit availing under the scheme - Interpretation to Section 184 and 187 of the Income Declaration Scheme, 2016 - claim adjustment of the Tax Deduction at Source and amounts deposited and advance tax amounts deposited with the Income Tax Authorities for the period it has applied for under the Scheme - Held that - An interim measure the petitioner should be permitted to deposit what according to it is the liability due working out to 25% net amounts payable under the Scheme. This determination, it goes without saying, would permit the petitioner to adjust the amounts deposited earlier towards TDS/ advance tax subject to the final outcome. In other words, in case the petitioner finally does not succeed and fails in its submissions that the TDS/ advance tax were adjustable, the application would automatically stand rejected.

Summary

Issues:
Interpretation of Section 184 and 187 of the Income Declaration Scheme, 2016 regarding adjustment of Tax Deduction at Source and advance tax amounts deposited with the Income Tax Authorities.

Analysis:
The petitioner in this case contended that their interpretation of Section 184 and 187 of the Income Declaration Scheme, 2016 entitled them to claim adjustment of the Tax Deduction at Source and advance tax amounts deposited with the Income Tax Authorities for the relevant period. Due to inter se disputes between directors and shareholders, the petitioner's accounts could not be audited, leading to non-filing of returns. Consequently, they applied for the Scheme for the assessment years 2010-11 to 2016-17. The Income Tax Authorities demanded 25% of the total amount payable, which was ?19.60 crores, with a deadline for depositing ?4.9 crores by 30.11.2016.

The respondents argued against the petitioner's interpretation, citing the non-obstante clause in Section 184(1) to assert that the income declared under the Scheme would be treated separately, and adjustments under the Income Tax Act, 1961 would not benefit the assessee availing the Scheme. After considering the submissions, the Court decided that as an interim measure, the petitioner should be allowed to deposit what they deemed as the liability due, which is 25% of the net amounts payable under the Scheme. This decision would enable the petitioner to adjust the amounts deposited earlier towards TDS/advance tax, pending the final outcome. If the petitioner fails in their argument that TDS/advance tax were adjustable, the application would be rejected automatically.

The Court's ruling permitted the petitioner to proceed with the deposit as an interim measure, allowing for adjustment of amounts deposited earlier towards TDS/advance tax, subject to the final decision on the matter. The case was listed for further proceedings on 31.01.2017 under the direction of the Court Master for necessary action.