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2024 (3) TMI 546 - HC - Income TaxRectification u/s 154 - refund of taxes paid in foreign country - rectification of returns and refund of taxes as paid under protest by invoking Section 154 - HELD THAT - As per circular dated 17.11.1971, an assessee is entitled to seek rectification pursuant to interpretation of law by the Hon'ble Apex Court. Further, as rightly contended by the learned Senior Counsel for the petitioner in the case of ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED 2021 (3) TMI 138 - SUPREME COURT as held determination of the AAR in Citrix Systems (AAR) 2012 (2) TMI 258 - AUTHORITY FOR ADVANCE RULINGS does not state the law correctly and is thus set aside and any ruling on the more expansive language contained in the explanations to Section 9(1)(vi) of the Income Tax Act would have to be ignored if it is wider and less beneficial to the assessee than the definition contained in the DTAA, as per section 90(2) of the Income Tax Act read with explanation 4 thereof, and Article 3(2) of the DTAA. Further, the expression copyright has to be understood in the context of the statute which deals with it, it being accepted that municipal laws which apply in the Contracting States must be applied unless there is any repugnancy to the terms of the DTAA . Thus held taxes paid by the petitioner under protest deserves to be refunded by rectifying the income tax returns filed by the petitioner pursuant to the order of Advance Rulings Authority. Respondent no. 1 clearly fell in error in passing the impugned order rejecting the applications filed by the petitioner and consequently, the impugned order deserves to be set-aside and the rectification applications deserves to be allowed by directing refund of taxes paid by the petitioner. Rectification application allowed.
Issues involved:
The issues involved in this case are the quashing of an impugned order, rejection of rectification applications under Section 154 of the Income Tax Act, 1961, and the consequent refund of taxes paid under protest. Quashing of Impugned Order: The petitioner sought the quashing of the impugned order dated 18.05.2023, which rejected the petitioner's rectification applications. The petitioner had filed its returns for the assessment years 2017-18, 2018-19, and 2019-20 and paid taxes under protest after the claim was rejected by the Authority for Advance Rulings (Income Tax), New Delhi. The order of the Authority was challenged before the Hon'ble Apex Court, and subsequently, the AAR order was overruled. The petitioner then filed rectification applications seeking a refund of taxes paid under protest, which were rejected by respondent no. 1 based on the premise that Section 154 of the I.T. Act was not applicable. The Court held that the impugned order deserved to be set aside, and the rectification applications deserved to be allowed for the refund of taxes paid by the petitioner. Rectification Applications under Section 154: The petitioner filed rectification applications for the assessment years after the order of the Hon'ble Apex Court overruled the AAR order. The petitioner sought a refund of taxes paid under protest by invoking Section 154 of the Income Tax Act, 1961. The petitioner relied on a Circular dated 17.11.1971 issued by the Central Board of Direct Tax, which stated that rectification action under Section 154 was permissible in law when there was a subsequent interpretation of law by the Apex Court. The respondents erroneously rejected the rectification applications, contending that Section 154 was not applicable to the case. The Court held that the rectification applications should be allowed, and the taxes paid by the petitioner deserved to be refunded. Applicability of Section 154 of I.T. Act: The respondents opposed the rectification applications, citing the judgment of the Hon'ble Apex Court in the case of COMMISSIONER OF INCOME TAX V. KESHRI METAL (P) LTD. They argued that since there was no error apparent on the face of the income tax returns originally filed by the petitioner, Section 154 should not be invoked. The Court, however, noted that the Hon'ble Apex Court had expressly overruled the AAR order in the petitioner's case and held that the taxes paid under protest should be refunded by rectifying the income tax returns filed by the petitioner. Judgment: The Court allowed the petition, set aside the impugned order, and directed the concerned respondents to refund the taxes paid under protest along with applicable interest back to the petitioner within two months from the date of receipt of the order. The Court emphasized that the rectification applications deserved to be allowed based on the circular and the judgment of the Hon'ble Apex Court, which overruled the AAR order in the petitioner's case.
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