2023 (7) TMI 695 - HC - Income Tax

Benefits under KVSS - Determining the amount of tax payable by the Petitioner pursuant to a declaration filed under the Kar Vivadh Samadhan Scheme, 1998 ( KVSS ) - Settlement of tax payable - HELD THAT - Under the provisions of section 88(a)(i) of the Finance Act, on the basis of the tax arrears / disputed tax, the disputed income of the assessee has to be worked out, and, in order to claim benefits under KVSS, the assessee, if it is a company or a firm, has to pay taxes at the rate of thirty-five per cent of the disputed income so worked out. In order to arrive at the disputed tax, the total assessed tax for that particular year would have to be worked out, and, from the same, the taxes which may have been paid by the assessee have to be deducted. That disputed tax has to be total tax determined and payable but which remains unpaid, as per the provisions of Section 88(f), tax which remains unpaid as on the date of making declaration. To calculate tax which remains unpaid, it is obvious that, whilst deducting from the total assessed tax the tax already paid, effect would have to be given to any refund issued by the Revenue to the Assessee and to any interest paid thereon by the Revenue to the Assessee. If effect is not given to the said Refund and interest paid by the Revenue to the Assessee, then the figure of disputed tax which would be arrived at would not be tax which remained unpaid. Respondent no. 2, whilst calculating the disputed tax, has correctly taken the assessed tax and deducted the tax paid by the Petitioner by way of advance tax and tax deducted at source after deducting therefrom a sum which had been paid to the Petitioner by way of refund and interest under section 143 (1)(a) of the Act. After deducting the said sum from the tax paid Respondent no. 2 has correctly arrived at the figure as the amount of tax paid. After deducting the said amount from the said sum, Respondent no. 2 has correctly calculated the disputed tax and, on the basis of the said sum, has correctly worked out the amount payable by the Petitioner under the KVSS. In our view, the said calculation made by Respondent no. 2 is in consonance with the provisions of the Finance Act and cannot be faulted. While considering this argument of the Petitioner, it is important to keep in mind the fact that the Revenue refunded tax to the Petitioner, and paid interest thereon, because the Petitioner had not disclosed and calculated tax properly. This being the situation, the Petitioner cannot take advantage of its own wrong and claim that the interest which has been paid to it should not be reduced while computing the disputed tax. We are not inclined to entertain such an argument at all, and, in any case, definitely not whilst exercising our Writ Jurisdiction.

Summary

Issues Involved:
1. Legality and validity of orders determining tax payable under the Kar Vivadh Samadhan Scheme, 1998 (KVSS).
2. Correctness of tax and interest calculations under KVSS.
3. Whether the refund and interest should be deducted from the tax paid for computing disputed tax.

Summary:

1. Legality and Validity of Orders:
The Petitioner challenged the Certificate dated 25.02.1999, Order dated 17.03.1999 rejecting the Rectification Application, and Certificate dated 02.08.1999 issued by Respondent no. 2 under the KVSS. The Petitioner, a public limited company, had filed a declaration under KVSS to settle tax disputes for Assessment Year 1991-92. Respondent no. 2 issued a Certificate determining tax arrears at Rs. 17,84,62,709/- and computed the tax payable under KVSS at Rs. 8,88,11,635/-. The Petitioner contended that the calculation was incorrect as it deducted the refund and interest received under Section 244A from the tax paid.

2. Correctness of Tax and Interest Calculations:
The Petitioner argued that only the tax refund of Rs. 1,93,76,497/- should be deducted, not the interest of Rs. 56,29,680/-. The Respondents maintained that the total refund amount, including interest, should be deducted from the tax paid. The Court upheld the Respondents' calculation, stating that the total assessed tax minus the tax paid, including any refunds and interest, determines the disputed tax.

3. Deduction of Refund and Interest:
The Court concluded that to calculate the disputed tax, the total assessed tax must be reduced by the tax paid, including any refunds and interest received. The Court found that the Respondents correctly deducted the refund and interest from the advance tax and tax deducted at source to arrive at the disputed tax. The Court emphasized that the Petitioner could not benefit from its own error in calculating the tax and that the interest paid by the Revenue should also be deducted.

Conclusion:
The Court dismissed the Writ Petition, upholding the Respondents' calculations and determining that the disputed tax and the amount payable under the KVSS were correctly computed. The Rule issued by the Court was discharged, and no order as to costs was made.