2019 (7) TMI 612 - HC - Income Tax

Application for waiver of income tax - reference before BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 - mandate to the Income Tax Department to grant the tax concession requested by the petitioner company - request to allow to carry forward the loss beyond the statutory period - HELD THAT - In the context of income tax concession, in para 2.1 of the said scheme, the reference was made to the Department s letter dated 15.2.2012 stating that the company had not quantified its tax liability in the projected statement and that the reliefs sought by the company can be considered only after the details are received from the company. In this context, the Board noted that at an appropriate place, the words to consider have already been prefixed. The combine reading of para 2 and 2.1 of the said scheme would clearly bring about the purpose and intent of use of the said expression to consider . In the context of state tax, the Board clearly noted the stand of the State Government that there is no policy of the State Government to waive the taxes. The Board was, however, of the opinion that the expression to consider would enable the company to claim such benefits if in future, the Government policy changes. The scheme did not contain any mandate to the Income Tax Department to grant the tax concession requested by the petitioner company. Firstly, the Department had objected to any concession being granted. Secondly, before the Board, it was pointed out that without quantification, the Revenue would not be in a position to give any concession and thirdly, in this respect, the scheme envisaged only to consider the request for tax concession. We, therefore, cannot accept the contention of the petitioner that under the scheme, the direction was issued to the Income Tax Department to grant the benefit and that all that was left to be done was to compute the benefit. The facts in case of Tube Investments of India 2012 (1) TMI 35 - MADRAS HIGH COURT court has held that the scheme should be read as a whole and that the authority was therefore bound to grant such benefit. From the judgment, it is not clear whether the Income Tax Department had opposed granting of any such concession to the company when the scheme under SICA was being framed. In the present case, as noted, the Income Tax Department had objected to any tax waiver being granted in favour of the company. Petition dismissed

Issues Involved:
1. Rejection of the petitioner’s application for waiver of income tax under a scheme by the Board for Industrial and Financial Reconstruction (BIFR).
2. Interpretation of the term "to consider" in the context of the scheme.
3. Binding nature of the scheme on the Income Tax Department.
4. Applicability of Section 19 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
5. Previous objections raised by the Income Tax Department.

Issue-wise Detailed Analysis:

1. Rejection of the petitioner’s application for waiver of income tax under a scheme by the Board for Industrial and Financial Reconstruction (BIFR):
The petitioner challenged an order dated 2.11.2017, rejecting their application for waiver of income tax under a scheme framed by the BIFR. The petitioner company, which was making consistent losses, had filed a reference before BIFR under SICA in 2002. The BIFR proceedings led to the formulation of a Draft Rehabilitation Scheme by IDBI. The scheme included clauses for income tax waivers, which were later sanctioned by BIFR on 15.2.2012. However, the Income Tax Department refused to accept the request for tax waivers, citing the company’s improving financial condition and lack of necessity for such relief.

2. Interpretation of the term "to consider" in the context of the scheme:
The term "to consider" was critically analyzed in the judgment. The BIFR had prefixed "to consider" to the reliefs sought by the petitioner, implying that the granting of tax waivers was not mandatory but subject to the Department's discretion. The court noted that the expression "to consider" indicated a possibility rather than a directive, reflecting the Department's stance that without quantification of tax liability, no concessions could be granted.

3. Binding nature of the scheme on the Income Tax Department:
The petitioner argued that the directions in the scheme were binding on the Income Tax Department. The court, however, highlighted that the Department had raised objections during the scheme's preparation and had not given consent for the tax waivers. According to Section 19 of SICA, the scheme would only bind the Department if it had consented to the provisions. The court concluded that the scheme did not mandate the Department to grant the tax concessions, thus, the Department was not bound by the scheme's directions.

4. Applicability of Section 19 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA):
Section 19 of SICA was pivotal in the judgment. It outlines that any waiver or concession under a scheme must receive consent from the relevant authority, and only then would it be binding. The court emphasized that the Department's objection to the tax waivers, communicated in a letter dated 13.1.2012, meant that the scheme could not enforce such waivers without the Department's consent. The court underscored that the scheme's binding nature was contingent on the consent of the parties required to provide financial assistance.

5. Previous objections raised by the Income Tax Department:
The court took into account that the Income Tax Department had consistently objected to the tax waivers throughout the scheme's formulation process. The Department had communicated its objections and the lack of quantified tax liability from the petitioner, which hindered the granting of any concessions. The court noted that the scheme's language, specifically the use of "to consider," reflected the Department's reservations and did not impose a binding directive for tax waivers.

Conclusion:
The court dismissed the petition, concluding that the scheme did not mandate the Income Tax Department to grant the tax concessions requested by the petitioner. The objections raised by the Department and the interpretation of "to consider" indicated that the scheme's provisions were not binding without the Department's consent. The court found no merit in the petitioner’s claim for tax waivers under the BIFR scheme.

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