2016 (5) TMI 1357 - HC - Income Tax

Waiver of interest under Section 220 (2) seeked - rejection of claim on the ground that the Petitioner failed to show that it had suffered genuine hardship - Held that - The fact that the Assessee is a part of DuPont , a global conglomerate which had in 2011 37.96 billion in net sales and 6.253 billion as operating profit , cannot be said to be an irrelevant factor in considering whether any genuine hardship was undergone by the Petitioner. Further, in comparison to the profitability of the Petitioner over the years, the amount paid by it towards interest under Section 220 (2) of the Act was merely 0.004 billion (approx). In the circumstances, the conclusion arrived at by the CIT that no genuine hardship can be said to have been caused to the Petitioner cannot be said to be an erroneous exercise of discretion by the CIT. It was a plausible view to take and does not call for interference by this Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution.

Summary

Issues:
1. Waiver of interest under Section 220 (2) of the Income Tax Act, 1961 based on genuine hardship.

Analysis:
The judgment involved a writ petition seeking to quash an order by the Commissioner of Income Tax (International Taxation) rejecting the application for waiver of interest under Section 220 (2) of the Income Tax Act, 1961. The petitioner, a branch office of a US corporation engaged in contract research activities, claimed exemption as agricultural income, which was disputed by the Assessing Officer. The appeal process resulted in partial relief, with the Income Tax Appellate Authority remanding the matter for profit attribution based on transfer pricing. The petitioner invoked the Mutual Agreement Procedure under the India-US Double Taxation Avoidance Agreement, leading to finalization of assessments and payment of taxes with interest. The application for interest waiver was denied on the grounds of no genuine hardship to the petitioner.

The petitioner argued that genuine hardship should be assessed beyond financial aspects, citing precedents emphasizing various factors like accumulated loss, liabilities, and financial position. The petitioner contended that all conditions under Section 220 (2A) were met, justifying consideration of the application on its merits. However, the court found no error in the Commissioner's decision, emphasizing the three conditions for genuine hardship under the Act: causing genuine hardship, default beyond control, and cooperation in recovery proceedings. The court held that payment of interest exceeding the tax amount did not automatically imply genuine hardship, considering the petitioner's association with a profitable global conglomerate and the relatively small interest paid compared to profits.

Ultimately, the court upheld the Commissioner's decision, noting that the petitioner's financial standing and the proportion of interest paid did not establish genuine hardship warranting interest waiver. The court found the Commissioner's decision reasonable and declined to interfere, dismissing the writ petition without costs.