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2025 (1) TMI 1356 - HC - Income TaxRectification of mistake - competent authority of the Department has exercised its power to declare that in view of Section 199 the deduction of TDS made on payment and paid to the Central Government by principal would be treated as income/receipt of the assessee company - Since the assessee had not shown the said amount of income it has been held that the assessee would not get credit of the entire TDS rather the credit of TDS has to be restricted only in view of the provisions u/s 199 of the Act of 1961 read with Rule 37BA of the Income Tax Rules. HELD THAT - This Court allows learned counsel for the petitioner(s) to withdraw both the writ applications with liberty to prefer a duly constituted appeal before the Appellate Authority within a period of thirty days from today. Since the writ applications were filed on 06.07.2021 and 16.06.2021 respectively as per the date of registration available on the record we are of the considered opinion that the period spent by the petitioner(s) before this Court would be liable to be taken into consideration for exclusion while counting the period of limitation.
ISSUES PRESENTED and CONSIDERED
The primary legal issues considered by the Court involved: (i) Whether the orders passed under Section 154 read with Section 143(1) of the Income Tax Act, 1961, as reflected in Annexures '8' and '10', were valid and within jurisdiction. (ii) Whether the petitioner was entitled to a full credit of TDS under Section 199 of the Income Tax Act, 1961, and the implications of Rule 37BA of the Income Tax Rules on such credit. (iii) The availability and appropriateness of the appellate remedy under Section 246A of the Income Tax Act, 1961, for challenging the impugned orders. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity and Jurisdiction of Orders under Section 154 and Section 143(1) The petitioner challenged the orders passed under Section 154 read with Section 143(1) of the Income Tax Act, 1961, arguing that they were without jurisdiction. The Court considered the legal framework under these sections, which allows for rectification of mistakes apparent from the record by the tax authorities. The orders in question involved the determination of TDS credit entitlement, which the Department based on the income not disclosed by the petitioner. The Court noted that the competent authority had exercised its powers under these sections to hold that the TDS deducted and paid to the Central Government should be treated as the income of the assessee, which was not disclosed in the returns. The Court did not delve into the merits of this determination, as the issue was primarily procedural at this stage. Issue (ii): Entitlement to Full TDS Credit and Rule 37BA The petitioner argued for full credit of TDS under Section 199 of the Income Tax Act, 1961, while the Department restricted this credit based on Rule 37BA of the Income Tax Rules. The petitioners initially sought to challenge the vires of Rule 37BA but later chose not to press this issue. Consequently, the Court did not address the constitutionality of Rule 37BA. The Department's position was that the credit of TDS should be restricted as the petitioner did not disclose the income in question. The Court acknowledged the Department's interpretation but did not provide a substantive ruling on this point due to the procedural posture of the case. Issue (iii): Availability and Appropriateness of Appellate Remedy The Court considered the availability of an appeal under Section 246A of the Income Tax Act, 1961, as an alternative remedy. The Department's counsel highlighted that the impugned orders were appealable, and the petitioner had an equally efficacious remedy available through the appellate process. The petitioner, upon understanding the availability of this remedy, sought to withdraw the writ applications with the liberty to pursue an appeal. The Court agreed to this request, acknowledging that the appellate process was the appropriate forum for addressing the substantive issues raised. SIGNIFICANT HOLDINGS The Court did not make substantive legal determinations on the merits of the issues due to the procedural decision to allow the petitioner to withdraw the writ applications and pursue an appeal. However, the Court's decision included the following key procedural holdings: - The Court granted the petitioner's request to withdraw the writ applications with the liberty to file an appeal before the Appellate Authority within thirty days. - The Court recognized that the time spent in pursuing the writ applications would be excluded from the limitation period for filing an appeal, ensuring that the petitioner was not prejudiced by the time spent in the High Court. In conclusion, the Court facilitated the withdrawal of the writ applications to allow the petitioner to pursue an appeal, thereby not making any substantive rulings on the legal issues presented. The procedural posture of the case emphasized the importance of exhausting available appellate remedies before seeking judicial intervention.
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