2023 (4) TMI 1217 - HC - Income Tax

Seeking for a direction to the respondents to grant ex-post facto approval to the Foreign Direct Investment (FDI) received by the petitioner from two foreign companies

Summary

Issues involved:
The issues involved in the judgment are related to seeking ex-post facto approval for Foreign Direct Investment (FDI) received from foreign companies, rejection of multiple applications by the Foreign Investment Promotion Board (FIPB) and the Department for Promotion of Industry and Internal Trade (DPIIT), communication of reasons for rejection, and the delay in considering the petitioner's application on merits.

Ex-post facto approval application:
The petitioner filed a petition under Article 226 of the Constitution of India seeking direction to grant ex-post facto approval for FDI received from two foreign companies. The petitioner allotted warrants to the foreign companies, which were converted into equity shares. Despite multiple applications for approval, the FIPB rejected them citing reasons related to the source of funds and evidence of investments from known sources of income by investors.

Change in authority and rejection of applications:
The FIPB was abolished, and the power to grant approval for foreign investment was transferred to the DPIIT. The petitioner filed a fourth application in accordance with the new Standard Operating Procedure (SOP) but faced rejection without reasons provided. The petitioner approached the court for communication of rejection reasons, which were later communicated, stating that the proposal was rejected due to a sub-judice matter with the Income Tax Appellate Tribunal (ITAT).

Judicial review and direction for fresh consideration:
The ITAT upheld the order passed by the Commissioner of Income Tax (Appeals), acknowledging the legitimacy of the investors and transactions. The petitioner sought relief from the court due to the DPIIT's hyper-technical approach in rejecting the proposal. The court directed the Competent Authority to consider the petitioner's application on merits, emphasizing that none of the previous rejection orders addressed the application's substance. The court instructed the petitioner to file an application through the National Single Window System (NSWS) for a fresh review within two weeks.

Delay and future course of action:
The court highlighted the prolonged delay in considering the petitioner's application, directing the Competent Authority to decide within three months. Failure to comply may result in the responsible officer's personal presence being called upon. The petition was disposed of, with the petitioner retaining the option to file for revival if the order is not implemented.

Separate Judgment:
No separate judgment was delivered by the judges in this case.