2021 (7) TMI 1272 - HC - Income Tax

Revision u/s 264 - HELD THAT - As respondent has dismissed the petitioner s revision petition without giving any reason on merits, except stating that the petition was premature, as according to the learned Commissioner, the Revenue still had time to file an appeal against judgment in the case of M/s Giesecke and Devrient India Pvt. Ltd. 2020 (10) TMI 750 - ITAT DELHI . As it is apparent that the learned Commissioner has neither applied its mind to the controversy at hand nor passed a reasoned order. Accordingly, the impugned order dated 31st March, 2021 is set aside and the matter is remanded back to the respondent-PCIT, Delhi-7 for passing a reasoned order within six weeks after giving an opportunity of hearing to the petitioner. This Court clarifies that it has not expressed any opinion on merits of the controversy. All rights and contentions of the parties are left open. In the event the petitioner is aggrieved by the decision of the respondent, it shall be open to the petitioner to file appropriate proceedings in accordance with law, if permissible.

Summary

Issues:
Challenge to order under Section 264 of the Income Tax Act, 1961 for assessment year 2016-17; Refund of excess tax due to incorrect deduction rate under India Japan Double Taxation Avoidance Agreement (DTAA); Failure of respondent to give a finding on merits while dismissing revision petition.

Analysis:
The petitioner challenged an order passed by the respondent-PCIT under Section 264 of the Income Tax Act, 1961, for the assessment year 2016-17. The petitioner, a subsidiary of a Japanese corporation, remitted dividends to its holding company with tax deducted at 20.35% instead of the beneficial rate of 10% under the India Japan DTAA. The petitioner sought a refund of the excess tax paid due to this error. The petitioner argued that the respondent was obligated to provide a finding on the excess tax issue while deciding the revision petition. The petitioner relied on various judgments, including ITAT and High Court decisions, to support this contention.

The respondent, through its counsel, contended that the matter pertained to a period when the Dividend Distribution Tax regime under Section 115-O was in place. Under this regime, the tax on distributed profits was to be borne by the distributing company, and dividends received by shareholders were exempt from tax. The respondent argued that the rate of tax under Section 115-O of the Income Tax Act should apply, not the rate under the DTAA, as it was more beneficial to shareholders. The respondent further cited a Supreme Court case to support this position.

The Court observed that the respondent had dismissed the petitioner's revision petition without providing a reasoned decision on the merits. The respondent stated that the petition was premature as the Revenue still had time to appeal against a related ITAT judgment. The Court found that the respondent had not applied its mind to the issue and had not passed a reasoned order. Consequently, the Court set aside the impugned order and remanded the matter back to the respondent for a reasoned decision within six weeks after giving the petitioner an opportunity to be heard. The Court clarified that it had not expressed any opinion on the merits of the case and left all rights and contentions open for both parties. If the petitioner remained dissatisfied with the respondent's decision, they could pursue further legal remedies.

In conclusion, the Court disposed of the writ petition, directing the order to be uploaded on the website and forwarded to the respective counsels via email.