2000 (12) TMI 41 - HC - Income Tax

Summary

Issues:
1. Refund of income-tax paid by a partner in a firm under the Kar Vivad Samadhan Scheme (KVSS).
2. Interpretation of the circular regarding tax benefits for partners of a registered firm under KVSS.
3. Application of statutory provisions and circular in determining eligibility for tax refund.

Analysis:

Issue 1: Refund of income-tax under KVSS
The petitioner, a partner in a firm, sought a refund of income-tax paid for asst. yrs. 1987-88 to 1989-90 after the firm settled a dispute under the KVSS by paying 35% of the disputed income. The petitioner claimed refund based on tax paid earlier on income derived from the firm. The application for refund was rejected by the Department, leading the petitioner to approach the High Court for relief.

Issue 2: Interpretation of circular on tax benefits
The petitioner's counsel argued that the circular under the KVSS indicated that partners need not pay additional tax on their share of income if the firm settles the dispute under the scheme. The circular aimed to address the disadvantage faced by firms paying taxes at concessional rates before 1993-94. The petitioner contended that tax paid by the firm under KVSS should be considered as tax payable by both the firm and its partners, entitling partners to a refund.

Issue 3: Application of statutory provisions and circular
The respondent's counsel argued that the KVSS applied only to tax arrears, as defined in the statute. The circular clarified that when a firm and all its partners file declarations for a specific assessment year, taxes are paid at 35% of the disputed income. Since the partners had already paid their tax dues before March 31, 1998, no arrears were due from them. The High Court examined the relevant provisions of the KVSS and the circular, concluding that the petitioner was not entitled to a refund as there were no tax arrears for the relevant assessment years.

In the judgment, the High Court dismissed the petition, emphasizing that the KVSS aimed to recover tax arrears from assessees with pending disputes. Since no proceedings were pending between the petitioner and the Department for the assessment years in question, and the partners had paid their tax dues before the specified date, the petitioner was not eligible for a refund. The Court found no merit in the petitioner's claim and summarily dismissed the petition with costs.