2017 (1) TMI 1761 - HC - Income Tax

Determination of the levy under Section 115QA - buy-back under Explanation (i) to Section 115QA (1) - petitioner claims an interim order to suspend the demand made - as per revenue nature of the buyback far exceeds the stipulations, that has been ever applied to the petitioner had it proceeded under Section 77A of the Companies Act. In these circumstances, being a devise, the Revenue was entitled to ignore it and subject the transactions to levy - HELD THAT - The non-obstante clause in Section 115QA of the Act restricts the nature of the levy to the transactions defined by the provision itself. The transactions defined are those covered by Section 77A of the Companies Act. Significantly, the Parliamentary intent to cover all manners of share acquisition by the Company of its own shares, is evident from a subsequent amendment to Section 115QA of the Act, when it explained the meaning of buy-back in the First Explanation by not alluding merely to Section 77A of the Companies Act but all other provisions of law. That this provision was not given retrospective effect, in this Court s opinion, further strengthens the petitioner s submissions. In view of these prima facie reasons, the Court is of the opinion that the impugned demand to the tune it seeks to recover levy under Section 115QA of the Act should not be enforced till the next date of hearing. It is so directed. List on 28.03.2017.

Summary

Issues:
Interpretation of Section 115QA of the Finance Act, 2013 regarding the levy on buy-back transactions under the Companies Act, 1956.

Analysis:
The petitioner sought an interim order to suspend a demand of ?812 crores by the Income Tax Authorities based on the Assessment Officer's determination under Section 115QA of the Finance Act, 2013. The petitioner argued that the levy only applies to transactions defined as 'buy-back' under Explanation (i) to Section 115QA (1) and that other buy-back arrangements, such as those under Section 391 of the Companies Act, should not be subject to the levy. The petitioner relied on previous court judgments to support this argument.

The Revenue opposed the petition, citing the availability of an alternative remedy under Section 250 for appeal against the AO's order. They contended that the buy-back arrangements exceeded the stipulations of Section 77A of the Companies Act, and therefore, the transactions were subject to levy. The Revenue argued that the nature of the buy-back arrangements was a devise to circumvent the restrictions of Section 77A.

The Court analyzed the provisions of Section 115QA and noted that the levy is restricted to transactions defined by the provision itself, specifically those covered by Section 77A of the Companies Act. The Court highlighted the Parliamentary intent to cover all share acquisition manners by a company of its own shares. The Court found that the subsequent amendment to Section 115QA expanded the definition of 'buy-back' beyond Section 77A to include all other provisions of law. The Court opined that the provision not having retrospective effect supported the petitioner's submissions.

Based on these reasons, the Court directed that the impugned demand seeking to recover levy under Section 115QA should not be enforced until the next date of hearing. The case was listed for further proceedings on a specified date, and a copy of the order was provided to the parties for reference.