2013 (7) TMI 584 - HC - Income Tax

Jurisdiction of BIFR - Scaling down of interest - Whether the income tax authorities are justified in stating that the order of BIFR, to the extent that it scaled down interest are beyond jurisdiction - Held that - Prior special law will prevail over a later and general law - It should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment - In the case of Section 32 SICA, the specific exclusion of two enactments, and the express reference to Section 72A of the Income Tax Act, to say that its provisions apply (by Section 32 (2)) manifest Parliamentary intention that provisions of SICA have to prevail over those of the Income Tax Act - Following decisions of Aswini Kumar Ghosh & Anr v. Arabinda Bose & Anr, 1952 (10) TMI 32 - SUPREME COURT and Mewar Sugar Mills Ltd. v. Chairman, Central Board of Direct Taxes & Anr 1998 (10) TMI 512 - DELHI HIGH COURT - Decided in favour of Assessee. Superseding jurisdiction - Whether Board of Direct Taxes views have primacy over that of BIFR - Held that - Income tax authorities were not given notice of remitting their matter back to BIFR and the order of BIFR reveals that it applied its mind, and granted limited concession only as regards reduction and waiver of interest - The larger pleas of the company towards income tax dues and concessions were denied by the BIFR - Having regard to these circumstances, and Section 32 of the Act as well as the Circular No. 683 of 1994 the failure of income tax authorities to inform the Director General would not result in the invalidity of BIFR s scheme - Period for operation of the limited concessions in the scheme has also apparently ended - In view of the concurrence of the other secured creditors, and implementation of the approved scheme, it would be inequitable and unjust to put the clock back, at the behest of the Income Tax authorities - Decided in favour of Assessee.

Summary

Issues Involved:
1. Validity of AAIFR's orders dated 01.04.2009 and 27.09.2012.
2. Jurisdiction of BIFR to waive or reduce statutory interest under the Income Tax Act.
3. Applicability of Section 32 of SICA over the Income Tax Act.
4. Compliance with principles of natural justice.
5. Estoppel and waiver principles against the Income Tax authorities.

Issue-wise Detailed Analysis:

1. Validity of AAIFR's Orders:
The petitioner challenged the AAIFR's orders that set aside a scheme formulated under SICA, which included waiver and deduction of interest under the Income Tax Act. The court found that the AAIFR's orders were not sustainable as they contradicted the principles of natural justice and the statutory framework under SICA.

2. Jurisdiction of BIFR to Waive or Reduce Statutory Interest:
The court examined whether BIFR had the authority to waive or reduce statutory interest mandated by the Income Tax Act. The court referred to Section 32 of SICA, which gives overriding effect to BIFR's orders and schemes over other laws, except for the Foreign Exchange Regulation Act and the Urban Land Ceiling Act. The court concluded that BIFR's orders prevailed over the Income Tax Act, thus validating the waiver of interest.

3. Applicability of Section 32 of SICA:
Section 32 of SICA provides that its provisions shall have effect notwithstanding anything inconsistent in any other law. The court emphasized the non-obstante clause in Section 32 and held that SICA's provisions, including BIFR's schemes, have precedence over the Income Tax Act. The court cited precedents to support this interpretation, reinforcing the legislative intent to prioritize SICA's rehabilitation schemes.

4. Compliance with Principles of Natural Justice:
The petitioner argued that the AAIFR's finding of contravention of natural justice principles was incorrect. The court noted that the Income Tax Department was aware of the BIFR's orders and had accepted them without objection, as evidenced by the assessing officer's letter and subsequent actions. The court concluded that the principles of natural justice were not violated.

5. Estoppel and Waiver Principles Against the Income Tax Authorities:
The petitioner contended that the Income Tax authorities were estopped from challenging BIFR's orders after having implemented them. The court agreed, noting that the Income Tax authorities had acted upon BIFR's orders, reducing the demands and acknowledging the scheme. The court held that it would be unjust and inequitable to allow the Income Tax authorities to retract their acceptance of BIFR's scheme.

Conclusion:
The court quashed the AAIFR's orders dated 01.04.2009 and 27.09.2012, restoring the BIFR's sanctioned scheme dated 30.11.2006. The court upheld the BIFR's authority to waive statutory interest under the Income Tax Act, emphasizing the overriding effect of Section 32 of SICA. The writ petition was allowed, and no costs were ordered.