2017 (6) TMI 730 - HC - Income Tax

Waiver of interest under Section 220 (2) - whether the Petitioner failed to show that it had suffered genuine hardship ? - Held that - As rightly noted by the CIT, the mere fact that the interest was 1.5 times the tax by itself does not have any relevance for determining whether the Assessee was suffering from any genuine hardship . 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. - Decided against assessee.

Summary

Issues:
1. Application for waiver of interest under Section 220 (2) of the Income Tax Act, 1961 was rejected by the Commissioner of Income Tax (International Taxation) on the ground of failure to show genuine hardship.

Analysis:
1. The petitioner, a branch office of a US corporation engaged in Contract Research Activities, sought to quash the order rejecting its application for waiver of interest under Section 220 (2) of the Income Tax Act. The background revealed a dispute regarding the classification of income as agricultural or business, leading to tax assessments and appeals.

2. The Assessing Officer treated the petitioner as a Permanent Establishment, attributing income from research activities. Appeals resulted in partial relief, with a portion of income classified as agricultural. Subsequent proceedings involved transfer pricing methods and Mutual Agreement Procedure under the India-US Double Taxation Avoidance Agreement.

3. The petitioner applied for waiver of interest under Section 220 (2A) citing genuine hardship, cooperation in proceedings, and circumstances beyond control. The rejection by the Commissioner was challenged, arguing that the petitioner met the conditions for waiver and citing relevant legal precedents.

4. The court considered the conditions under Section 220 (2A) for waiver, emphasizing genuine hardship, circumstances beyond control, and cooperation. The petitioner's argument that interest payment and bank guarantee costs exceeded the tax amount was countered by the Commissioner's assessment of the petitioner's financial position within the global conglomerate.

5. The court upheld the Commissioner's decision, noting the petitioner's minimal interest payment compared to the conglomerate's profits. The court found the Commissioner's conclusion on genuine hardship reasonable, leading to the dismissal of the writ petition without costs.

This detailed analysis covers the issues raised in the legal judgment, outlining the background, arguments presented, relevant legal principles, and the court's decision in a comprehensive manner.