Rejection of revision application u/s 264 in favor of assessee: A beneficial provision of Income Tax Act.

Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

Reported as:

2024 (1) TMI 614 - MADRAS HIGH COURT

1. Background: The petitioner is challenging an order dated 28.03.2022, in which its application for revision under Section 264 of the Income Tax Act, 1961, was rejected. The petitioner is engaged in the IT and IT-enabled services business.

2. Income Tax Return: The petitioner filed its return of income for the assessment year 2018-2019 on 29.11.2018, admitting a total income of Rs. 12,65,47,680/-. During that financial year, the petitioner declared and paid a dividend of Rs. 59,12,76,400/- to its holding company, which is incorporated in Mauritius. The petitioner paid Dividend Distribution Tax (DDT) of Rs. 12,03,69,962/- on this dividend.

3. Double Taxation Avoidance Agreement (DTAA): The petitioner later realized that it is entitled to the benefit of the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius, specifically, the concessional rate specified in Article 10(2) of the relevant DTAA.

4. Grounds for Rejection: The revision application under Section 264 of the Income Tax Act was rejected on the grounds that the petitioner could have filed a revised return or an appeal under Section 248 of the Income Tax Act.

5. Legal Arguments: The petitioner's counsel argued that the time limit for filing a revised return had expired when the petitioner realized it could have availed the benefit under Section 90 of the Income Tax Act. Additionally, it was argued that Section 248 of the Income Tax Act is inapplicable to a case where DDT was computed at a higher rate.

6. Court's Decision: The court found that the rejection was not based on the merits of the application but on the grounds that alternative remedies could have been pursued. It stated that when a statute prescribes a remedy, the petitioner cannot be denied the benefit of availing of such remedy merely because an alternative remedy may be available. The court ruled that the first ground of rejection was untenable and that Section 248 was clearly inapplicable to the case.

7. Order: The court quashed the impugned order and remanded the matter for reconsideration on merits by the Principal Commissioner of Income Tax. A fresh order on merits was to be issued within a period of three months from the date of receipt of the court's order.

The key issues involved in this legal document include the interpretation of the Income Tax Act, the applicability of the Double Taxation Avoidance Agreement, and the rejection of the revision application based on available remedies. The implication is that the petitioner will have another opportunity to have its case reconsidered by the Principal Commissioner of Income Tax, and the impact would depend on the outcome of that reconsideration.

Full Text:

2024 (1) TMI 614 - MADRAS HIGH COURT