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2019 (2) TMI 336 - HC - Income TaxApplication for settlement of cases - scope of the term related person in the specified person - The Director of the petitioner-Company is having 100% interest in the business or profession of the specified person - Validity of application filed by the petitioner-Company under Section 245C(1) as it has not fulfilled the conditions prescribed under Section 245C(1) - Held that - The bare perusal of definition of substantial interest, as per clause (a) of clause (vi) of Explanation to Section 245(1) of the Act, 1961 clearly reveals that a share holder should carry not less than 20% of the voting power of a Company. Clubbing of share holding by different share holders to make it 20% of having substantial interest, is not permissible under the law. The submission of the petitioner that the relevant provisions need to be suitably read down to hold the petitioner-Company being covered under the expression, is wholly without substance. This court also does not agree to the submission of learned counsel for the petitioner that alternatively, the case of the petitioner-Company will fall under clause (vi)(A) of Explanation of clause (1)(a) of Section 245C as the petitioner- Company is covered by the expression of any person who carries on a business or profession in which the specified person i.e. Shri Ram Jashandas Bhatia holds substantial interest, this court finds that the submission is wholly without any substance and even the provisions of Section 13 of the General Clauses Act to read singular as plural for the term person used under clause (B) of Explanation, cannot be construed in the manner, as has been canvassed. This court finds that the Delhi High Court in the case of Rockland Hotels Ltd. Vs. Income Tax Settlement Commission, Principal Bench and Ors. 2015 (10) TMI 1904 - DELHI HIGH COURT and other connected writ petitions has interpreted the entire Section 245C of the Act, 1961 dealing with the applications for settlement of the cases. Order of settlement commission sustained - Decided against the assessee.
Issues Involved:
1. Validity of the petitioner's application under Section 245C(1) of the Income Tax Act, 1961. 2. Interpretation of "related person" and "substantial interest" under Section 245C(1) of the Income Tax Act, 1961. 3. Applicability of clauses (iv), (v), and (vi) of the explanation to Section 245C(1) of the Income Tax Act, 1961. 4. Legislative intent and interpretation of taxing statutes. Issue-wise Detailed Analysis: 1. Validity of the petitioner's application under Section 245C(1) of the Income Tax Act, 1961: The petitioner-Company challenged the order dated 03.01.2018 by the Income Tax Settlement Commission, which declared the application under Section 245C(1) of the Income Tax Act, 1961, as "invalid." The application was rejected on the grounds that it did not meet the conditions prescribed under Section 245C(1), specifically the requirement that the income tax payable on the additional income disclosed should exceed ?50 Lakhs for a "specified person" and ?10 Lakhs for related applicants. 2. Interpretation of "related person" and "substantial interest" under Section 245C(1) of the Income Tax Act, 1961: The petitioner argued that it qualifies as a "related person" to the "specified person" under clause (v) of explanation (a) to Section 245C(1), claiming that the Directors of the petitioner-Company have a substantial interest in the business or profession of the specified person. The Settlement Commission, however, held that the petitioner did not qualify as a "related person" under the relevant clauses and that substantial interest was lacking. 3. Applicability of clauses (iv), (v), and (vi) of the explanation to Section 245C(1) of the Income Tax Act, 1961: The petitioner contended that its case falls under clause (v) of the explanation, which pertains to a company, firm, association of persons, or Hindu undivided family of which a director, partner, or member has a substantial interest in the business or profession of the specified person. The Settlement Commission and the respondents argued that the petitioner's case is governed by clause (vi), which is more specific to situations where a specified person being an individual has a substantial interest in the business or profession of another person. 4. Legislative intent and interpretation of taxing statutes: The court emphasized that taxing statutes must be strictly interpreted. The interpretation adopted by the Settlement Commission was deemed correct, as it adhered to the legislative intent and the specific provisions of the Act. The court rejected the petitioner's argument for clubbing the shareholding of different directors to meet the 20% substantial interest requirement, stating that the legislature did not provide for such clubbing. Judgment: The court upheld the decision of the Settlement Commission, finding no substance in the petitioner's submissions. The court concluded that the petitioner-Company did not meet the criteria under clause (v) or (vi) of the explanation to Section 245C(1) and dismissed the writ petition. The court also referenced the Delhi High Court's judgment in Rockland Hotels Ltd. Vs. Income Tax Settlement Commission, which supported the strict interpretation of the provisions and the requirement of substantial interest. The court found no illegality in the impugned order dated 03.01.2018 and dismissed the petition with no costs.
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