2008 (3) TMI 18 - HC - Income Tax

Appropratio of amount paid in excess - Assessee has paid Rs. 52.79 crores in 1998 towards TDS for the period 1988-89 to 1997-98. Later the final liability was determined lower than this amount - Appropratio of excess amount by the assessee can not be denied as it would be amount to enrishing itself.

Issues Involved:
1. Liability for deduction of tax at source on salaries paid to expatriate employees.
2. Entitlement to refund of taxes and interest paid for FY 1988-89 to 1994-95.
3. Credit for taxes and interest already paid for FY 1995-96 to 1997-98.
4. Validity of the Power of Attorney used to file the appeal.

Detailed Analysis:

1. Liability for Deduction of Tax at Source on Salaries Paid to Expatriate Employees:
The Assessee, a non-resident company incorporated in Japan, had a liaison office in Delhi. While there was no dispute regarding the deduction of tax at source for local staff, the issue arose concerning expatriate employees who received salaries both in India and Japan. The Assessee initially did not deduct tax at source for certain payments made to expatriate employees in Japan. Following a survey under Section 133A of the Income Tax Act, 1961, the Assessee agreed to pay the due taxes and interest without any demand from the Revenue.

2. Entitlement to Refund of Taxes and Interest Paid for FY 1988-89 to 1994-95:
The Tribunal concluded that the demand for the financial years 1988-89 to 1994-95 was barred by time, having been made beyond a reasonable period of four years. This conclusion became final, and the issue was not directly addressed in this judgment. The Tribunal declined to answer the question of refund entitlement since an identical question was pending determination in the Court.

3. Credit for Taxes and Interest Already Paid for FY 1995-96 to 1997-98:
The core issue was whether the Assessee was entitled to credit for the taxes and interest amounting to Rs.14,88,61,518/- paid in December 1998 for the financial years 1995-96 to 1997-98. The Tribunal decided in favor of the Assessee, stating that the Revenue should grant credit for the amount already paid. The Tribunal noted that the CIT (A) rejected the plea for adjustment on three grounds, which were found to be baseless. The Tribunal emphasized that the State cannot recover or hold back any tax except in accordance with the law, and denying the credit would result in unjust enrichment of the State.

4. Validity of the Power of Attorney Used to File the Appeal:
The Revenue raised a preliminary objection regarding the maintainability of the appeal, arguing that the Power of Attorney executed by the Assessee was invalid. The Tribunal found that the Power of Attorney was executed in accordance with Japanese law and was duly notarized and authenticated. The Court dismissed this objection, stating that the finding of the Tribunal on the competency of the person filing the appeal was a finding of fact and not perverse.

Conclusion:
The Tribunal's decision to grant credit for the amount of Rs.14,88,61,518/- already paid by the Assessee towards tax and interest for the financial years 1995-96 to 1997-98 was upheld. The Court dismissed the appeal, emphasizing that no substantial question of law arose for consideration. The Revenue was directed to deposit the assessed counsel's fee of Rs.10,000/- within four weeks. The appeal was dismissed with costs, and the matter was listed for compliance on 3rd May 2008.

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