2024 (7) TMI 1492 - HC - Income Tax

Attachment orders - additional affidavit on record pointing out specific financial constraints on its business operations on account of the interim order - Restraining repatriating royalty or dividend abroad during the pendency of the search assessment proceedings - application oved for modification of Clause 7(iv) in order 2022 (9) TMI 1150 - DELHI HIGH COURT - HELD THAT - We note that while restraining the petitioner-applicant from repatriating royalty and dividend abroad, we had reserved liberty to it to approach the Court in case the need so arise. Both learned senior counsels, submit that since more than two years have elapsed and the search assessment is yet to be completed, there exists no justification for the continuation of that condition. As submitted by learned senior counsels that repatriation of royalty is a contractual obligation and in the absence of any crystallized demand, the conditions as imposed by Clause 7 (iv) are liable to be lifted. The facts and circumstances warrant the applicant being permitted to repatriate Rs. 97 crores which represents the royalty subject to deduction of tax. The applicant is thus permitted to repatriate moneys payable towards royalty less TDS in the interim and till the matter is taken up for consideration again. We further direct the applicant to provide full and complete details in respect of the royalty repatriation which is proposed to be undertaken to the respondents. This we so provide since substantial deposits have already been made by the applicant and a demand is yet to be formulated. We also take into consideration the fact that Clause 7(iv) was clearly intended to be a temporary measure liable to hold the field till such time as the search assessment is completed. We had at that time proceeded on the premise that the assessment would conclude shortly or at least within a reasonable period of time. However, almost two years have passed since then. The assessee, thus, cannot be compelled to default on its contractual obligations. We consequently request the respondents to make all end eavours to ensure that the search assessment is completed with due expedition and preferably by 31 December 2024. The applicant petitioner shall render full cooperation towards that end. Insofar as the declaration of dividend and its pay-out is concerned, we defer consideration of that issue at this stage. Let the matter be called again to review progress on 14.02.2025

Summary

Issues:
1. Modification of Clause 7(iv) restraining repatriation of royalty or dividend abroad during search assessment proceedings.

Analysis:
The petitioner sought modification of Clause 7(iv) of the court's previous order, which prohibited repatriation of royalty or dividend abroad during the pendency of search assessment proceedings. The court had earlier directed the petitioner to secure the respondents with fixed deposit receipts and had imposed various conditions, including the restriction on repatriation. The respondents had failed to conclude the search assessments, and a significant amount was held pending finalization. The complexity of issues, transaction nature, and data size were cited as reasons for the delay in assessment completion. The petitioner's counsels argued that over two years had passed without completion, justifying the lifting of the repatriation restriction due to contractual obligations and absence of a crystallized demand.

The court, considering the circumstances, allowed the petitioner to repatriate Rs. 97 crores representing royalty subject to tax deduction, until further review. The petitioner was directed to provide full details of the proposed repatriation to the respondents. The court acknowledged the temporary nature of Clause 7(iv) and the expectation of prompt assessment completion, which had not materialized. Emphasizing the petitioner's compliance with contractual obligations and the need for the assessment to be finalized, the court urged the respondents to expedite the process, setting a target completion date of 31 December 2024. The petitioner was required to cooperate fully in this regard. The issue of declaring and paying out dividends was deferred for future consideration, with a review scheduled for 14.02.2025 to monitor progress in the case.