2021 (2) TMI 763 - HC - Income Tax

Refund claim on Fringe benefit tax value as per Section 115 WD(4) paid in excess - petitioner took the stand that the value of contribution to statutory pension fund cannot be considered as a perquisite and therefore, cannot be regarded as fringe benefit under the Income Tax Act - petitioner remembered that they had erroneously paid FBT for the year 2007-08 - request for refund rejected - Power and jurisdiction of the first respondent in entertaining the claim of refund - CIRCULAR 9/2015 F.NO.312/22/2015-OT states that any claim of refund exceeding ₹ 50.00 lakhs shall be considered by the Board - The learned standing counsel pointed out that this Court had invoked Section 119 of the Income Tax Act in favour of the petitioner. But then, the circular issued by the board circumscribes the power and jurisdiction of the first respondent in entertaining the claim of refund. The petitioner seeks refund to the tune of more than two crores. Therefore, according to him, if all all the claim could have been considered only by the Board not by the first respondent.this circular talks of an outer time limit for entertaining the refund application. When the circular states that a claim for refund will not be entertained beyond six years from the end of the assessment year for which the claim is made, that will have to be given a strict application. HELD THAT - We find the contentions of the learned standing counsel to be sustainable - we are not in a position to interfere with the order impugned in the writ petition. Also note that the first respondent has not at all taken note of the spirit of my order dated 12.06.2019 - if the petitioner was not liable to be pay any fringe benefit tax, then, the department ought to have refunded the same. The income tax department being an arm of the State is bound by the constitutional mandate enshrined in Article 14 of the Constitution of India. In other words, the department is bound by the principles of fairness and reasonableness. As conscious that any taxing statute will have to be construed strictly and there is no scope for applying equitable principles. But the case on hand is not one of tax liability. As per the legal position that is presently prevailing, the petitioner was not at all liable to have made any payment of FBT in respect of contribution towards Superannuation Fund. In fact, the case on hand turns less on the maintainability of the claim for refund, but more on the lawfulness of the department in retaining the amount paid by the petitioner without any corresponding legal liability. The circular issued by the Central Board of Direct Taxes is no doubt binding on the authorities including the first respondent. But then, a constitutional court is not bound by such a circular. Section 119 of the Act also does not have any limitation. We permit the the petitioner to file an appropriate application before the Central Board of Direct Taxes. Since as on date there is absolutely no tax liability on the part of the petitioner herein, the said application will be entertained without reference to limitation. CBDT will pass orders on the petitioner's application thereon within a period of twelve weeks.

Issues:
1. Interpretation of the Income Tax Act regarding fringe benefit tax on contribution to statutory pension fund.
2. Maintainability of the revision petition under Section 264 of the Act.
3. Application of Circular 9/2015 issued by the Central Board of Direct Taxes on refund claims.
4. Jurisdiction of the first respondent in entertaining refund claims exceeding a specified amount.
5. Constitutional mandate of fairness and reasonableness in tax matters.
6. Binding nature of circulars issued by the Central Board of Direct Taxes on tax authorities.
7. Consideration of equitable principles in tax matters.
8. Authority of a constitutional court in interpreting tax laws.

Analysis:
1. The petitioner, a banking company, challenged an adverse order regarding fringe benefit tax on the contribution to a statutory pension fund. The Income Tax Appellate Tribunal allowed the appeal, holding the contribution outside the ambit of FBT. The department challenged this decision, leading to subsequent refund claims and legal proceedings.

2. The petitioner filed a revision petition under Section 264 of the Act after realizing an erroneous payment of FBT for the year 2007-08. The Principal Commissioner rejected the petition as not maintainable, prompting the petitioner to file a writ petition, which was initially allowed by the Court, remitting the matter for fresh orders.

3. The impugned order dated 07.08.2019 was based on Circular 9/2015 issued by the Central Board of Direct Taxes, which sets guidelines for condonation of delay in filing refund claims. The circular limits the authority of tax officials based on the claimed amount and time frame for refund applications.

4. The Court acknowledged the binding nature of the circular on the first respondent but emphasized the constitutional mandate of fairness and reasonableness in tax matters. While recognizing the limitations imposed by the circular, the Court permitted the petitioner to file an application before the Central Board of Direct Taxes for refund, irrespective of the limitation, due to the absence of current tax liability.

5. The Court highlighted the importance of upholding fairness and reasonableness in tax matters, stressing that the department should refund amounts paid without legal liability. It differentiated between tax liability and the lawfulness of retaining payments, emphasizing the need for equitable considerations in such cases.

6. The Court clarified that while circulars issued by tax authorities are binding on officials, a constitutional court is not bound by them. It asserted its authority to interpret tax laws independently and directed the petitioner to approach the Central Board of Direct Taxes for resolution, subject to the outcome of pending departmental appeals.

7. The judgment concluded by disposing of the writ petition, allowing the petitioner to seek a refund from the Central Board of Direct Taxes without limitations, contingent upon the resolution of the pending departmental appeal. It clarified that no interest would be payable by the department in this scenario.

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