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2017 (3) TMI 1185 - HC - Income TaxDisallowing adjustment of tax deducted at source against the tax payable on the undisclosed income declared by it under the Voluntary Disclosure of Income Scheme under the Finance Act, 1997 - Held that - Undisclosed income declared under the Voluntary Disclosure of Income Scheme under the Finance Act, the payment of the tax under the Scheme of 1997 Act was in terms of the declaration made by the petitioner on 31st December, 1997. In its declaration, no claim for the Tax Deducted at Source under the 1961 Act being treated as tax paid under the Scheme was made by the petitioner. Further, it is pertinent to note that the letter dated 31st March, 1998 has been filed by the petitioner with the Commissioner of Income Tax, not along with the proof of payment of tax under the Scheme but separately and only after the proof of payment had been submitted to the Revenue. Further, the communication does not in terms states that the petitioner reserves its rights to claim refund nor does it state that the right to refund is subject to the result of the petition. The payment could not have been made under protest as the payment had already been made prior to addressing the above letter dated 31st March, 1998. The Petitioners who seek an equitable relief in Writ, should have been more forthright in its communication to the Revenue. This conduct on the part of the Petitioner is an attempt on the part of the Petitioner to secure the benefit of the Scheme i.e. Protection (insulation) from prosecution and penalty under the 1961 Act, and at the same time challenge the payment made under the Scheme of 1997 Act. Thus, we find no reason to allow the petition also on the above ground. In the above view, on the basic issue of law, we hold that the payment of tax under the Scheme of 1997 Act is not payment of tax under the 1961 Act. Thus, adjustment as sought of the tax paid as TDS under the 1961 Act to reduce the tax payable under the Scheme of 1997 Act is not permissible. Therefore, we have not examined the secondary issue raised viz appropriate interpretation of the Scheme of 1997 Act, proceeding on the premise that it is the same tax under both the Acts.
Issues Involved:
1. Legality of the impugned communication dated 18th March, 1998, and the Circular dated 25th July, 1997, issued by the CBDT. 2. Whether tax deducted at source (TDS) under the Income Tax Act, 1961, can be adjusted against the tax payable on undisclosed income declared under the Voluntary Disclosure of Income Scheme (VDIS) of 1997. Detailed Analysis: 1. Legality of the Impugned Communication and Circular: The petitioner challenged the communication dated 18th March, 1998, issued by the Commissioner of Income Tax, Mumbai, which rejected the petitioner’s request to adjust TDS against the tax payable on undisclosed income declared under the VDIS of 1997. The rejection was based on CBDT Circular No. 755 dated 25th July, 1997, which explicitly stated that tax payable in respect of disclosed income would not be adjusted by the tax deducted at source earlier in respect of that income. The court noted that the impugned communication did not consider the provisions under Sections 64 and 66 of the VDIS of 1997 and merely relied on the CBDT Circulars. 2. Adjustment of TDS Against Tax Payable Under VDIS: The court examined whether the tax payable under the VDIS of 1997 could be considered the same as the tax payable under the Income Tax Act, 1961. It was determined that the VDIS of 1997 is a distinct and separate statute from the 1961 Act, with different subject matters and rates of tax. The VDIS of 1997 charges tax on voluntarily disclosed income, which had not been disclosed under the 1961 Act, at a flat rate, whereas the 1961 Act charges tax on the total income of the previous year at progressive rates. Therefore, the court concluded that the tax payable under the VDIS of 1997 is not the same as the tax payable under the 1961 Act, and thus, the benefit of TDS under the 1961 Act cannot be availed to pay the tax under the VDIS of 1997. The court also referred to Section 66 of the VDIS of 1997, which requires the declarant to provide proof of payment of tax payable under the scheme, not under the 1961 Act. Additionally, the court noted that the declaration filed by the petitioner on 31st December, 1997, did not claim any credit for TDS under the 1961 Act. The court further examined the decision of the Calcutta High Court in Sushila Devi Mohata v/s. CIT, which allowed the adjustment of TDS against the tax payable under a similar voluntary disclosure scheme. However, the court found that the Calcutta High Court had not considered the difference in the charging provisions of the two Acts and rendered its decision sub silentio. Conclusion: The court held that the tax payable under the VDIS of 1997 is not the same as the tax payable under the Income Tax Act, 1961. Therefore, the adjustment of TDS under the 1961 Act to discharge the tax payable under the VDIS of 1997 is not permissible. The court dismissed the petition, stating that the payment of tax under the VDIS of 1997 is indeed a different obligation from the tax payable under the 1961 Act, and no adjustment of TDS could be allowed.
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