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TMI Blog2013 (10) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... not denied. The Joint Secretary (respondent no. 3), the competent Indian Authority, has filed an affidavit that MAP proceedings are pending. The petitioner already having invoked the Double Taxation and Prevention of Fiscal Evasion Treaty in accordance with procedure prescribed by MAP, the forcible appropriation of Rs.26,26,87,000/-from the petitioner's bank account is a blatant violation of this inter governmental treaty. The arbitrary nature of the impugned notices and actions becomes apparent from the fact that vide letter dated 25.03.2013, the petitioner was asked to confirm whether MAP has been admitted. By way of the same letter, the officer recorded that intimation is being sought from Joint Secretary (FT&TR 1) to confirm whether MAP has been admitted, but in the same breath, the letter goes on to record that no intimation has been received. Even, if it is presumed, though, not accepted, that MAP was not "admitted", notice dated 25.03.2013, required the respondents to wait for confirmation from the Joint Secretary, before proceeding to forcibly appropriate this amount. The contents of the letters and notices have been found to be false as the Joint Secretary has confirmed, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against respondent no. 2. It is further submitted that as per Clause-2 of the bank guarantee, if the tax payer does not renew the bank guarantee, the bank is obliged to serve a written notice upon the Government, 60 days prior to the expiry of the bank guarantee. The fact that no such notice was issued by the bank and the bank has instead addressed a letter dated 25.03.2013, reiterating the validity of the bank guarantee, there is no question of the bank guarantee having expired. If the bank guarantee had, as asserted by the respondents, expired on 28.02.2012, it is rather surprising that they waited for an year, i.e., the end of financial year 2012-13, to adopt coercive procedure. It is further submitted that as the affidavit filed by respondent no. 3 has clearly established that there is no provision for admission of MAP, which is pending consideration, the action of respondent no. 2, in appropriating the petitioner's money is illegal and should, therefore, be set aside with a direction to the respondents to restore the amount to the petitioner, with interest. Counsel for the respondent submits, by reference to averments in the reply and orders passed by respondent no. 2, on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the stay order does not entitle the petitioner to any relief much less to assert that money has been wrongly appropriated or that it should be returned to the petitioner. It is further argued that letter issued by the Citi Bank, is vague as it only confirms that bank guarantee No.5679063528, dated 04.03.2009 was issued, on behalf of the petitioner in favour of the revenue. The letter is silent on the expiry/continuance of the bank guarantee. It is prayed that as the action of the respondent is bonafide and in accordance with law, the present petition should be dismissed. It would be appropriate, at this stage, to make a brief reference to the rejoinder filed by the petitioner, to the reply filed by respondent no.2, wherein it is pleaded that the bank guarantee furnished on 16.03.2009 did not expire on 28.02.2012 and is valid till date. It is also averred that City Bank had vide letter dated 25.03.2013, intimated to the respondents that the bank guarantee is currently valid. We have heard counsel for the parties, perused the pleadings and proceed to narrate the facts. The petitioner is a subsidiary of Motorola Solutions International Capital LLC, USA and Motorola Solutions Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diary, admittedly, invoked MAP for assessment year 2005-06 by filing an application, dated 28.01.2009, before the competent authority in the USA. The invocation of MAP was brought to the notice of the Indian competent authority i.e., the Joint Secretary (FT & TR-1), CBDT. The Joint Secretary, arrayed as respondent no.3 has admitted the pendency of MAP proceedings. The petitioner filed an application for stay before the Assistant Commissioner of Income Tax, Bangalore. Vide order dated 22.02.2009, the petitioner was required to deposit Rs. 4 Crores in two instalments, of Rs.2 Crores each and till such time as the MAP application is not decided, to furnish a bank guarantee, before 16.03.2009. Order dated 22.02.2009 reads as follows:- "3. The assessee requested to stay the balance amount till the application filed before the Board under Mutual Agreement Procedure on 11.02.2009 and the required Bank Guarantee is produced by the company vide petition filed on 20.02.2009. The assessee's request is considered. Subject to the payment of the tax as per the above instalments, the assessee will not be deemed an 'Assessee in default' for the balance amount of demand ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; (Now K/a Motorola Solutions India Pvt. Ltd.) 415/2, Mehrauli Gurgaon Road, Gurgaon-122001. Sir/madam, Sub:- Request to deposit the outstanding demand in your case for A.Y 2003-04, A.Y. 2004-05 and 2005-06-Reg. From perusal of records, it is seen that there is a demand of Rs.27.15 Cr. is outstanding in your case for above A.Y's. The assessment records of this case were received from DCIT, circle 12(1), Bangalore on 06.12.2010. As per the Dossier folder, it has been stated that a MAP application has been filed by you before Hon'ble CBDT, New Delhi. However, since it was not clear from their letter whether request for suspension of collection of outstanding taxes under MAP has been admitted or not by the Indian Competent Authority in terms of para 4 of Instruction No. 10/2007, which is a condition precedent to suspend collection of taxes, a letter has been written to the Competent Authority (i.e. Joint Secretary (FT&TR I) on 25.03.2013 requesting to intimate whether the request of the assessee for suspension of collection of outstanding taxes has been admitted in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 requesting the assessee to deposit the outstanding demands for the captioned assessment years. In this regard, the company submits as follows:- 1. For all the captioned years, the company has already furnished bank guarantees (BG) and invoked MAP in accordance with the Indo-US treaty law. We understand that one bank guarantee for a sum of Rs. 9 Crores is already in your files. A confirmation from our bankers (City Bank) to the effect that the second bank guarantee for Rs. 17.63 Crores is also continuing in your favour is enclosed as Annexure-1 to this petition. In view of the above, the requisite bank guarantees issued by the company in accordance with Indo-US treaty law have always been in place and part of your records. 2. It would also be appreciated that the company had invoked the BG route as per treaty law way back in 2007(for AYs 2003-04 and 2004-05) and then again in 2009 (for AY 2005-06). These were duly accepted by the Department and have since continued to be in force in favour of the Revenue and for which the assessee has been incurring recurring charges to keep the BGs alive. In view of the above, it is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmation that the second bank guarantee of Rs. 17.63 crores (the relevant bank guarantee) is valid and continuing. It is further asserted that MAP application has been filed in accordance with the Indo-US treaty and is pending. The Citi Bank also addressed letter dated 25.03.2013, to the Assistant Commissioner, Income Tax Circle, Income Tax Dept, Ministry of Finance, Govt. of India, New Delhi, confirming the validity of the bank guarantee. After receipt of the letter, respondent no. 2, issued notice, dated 26.03.2013, under Section 226(3) of the Act, calling upon the petitioner to forthwith deposit Rs.26,26,87,000/- in favour of Deputy Commissioner of Income Tax, Circle-2, Gurgaon, followed by another notice dated 28.03.2013, under Section 226(3) of the Act, to the Standard Chartered Bank, i.e. the petitioner maintained its account requiring it to remit Rs.26,26,87,000/-. The bank issued a Demand Draft of Rs.26,26,87,000/- in favour of the revenue for assessment year 2005-06. The question that arises for adjudication from these facts is whether the revenue is justified in appropriating Rs.26,26,87,000/-from the account of the petitioner and as a corollary whether order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re provided vide Instruction No. 10/2007 dated 23.09.2007. It is clearly stated in paragraph 4 of the Instruction No. 10/2007, dated 23.10.2007, in a case involving Mutual agreement Procedure, a suspension of collection of tax is mandated only. (i) after obtaining a confirmation regarding pendency of MAP from the Foreign Tax and Tax Research Division of the Central Board of Direct Taxes and (ii) on receipt of a bank guarantee in the model draft format annexed to the MOU for an amount calculated in accordance with the manner indicated therein. 5. In light of the above discussion, the facts of the case for Assessment Year 2005-06 is stated herein under: (i) A MAP request in the case of M/s Motorola India Electronics Pvt. Ltd. (now merged with Motorola Solutions India Pvt Ltd.) for AY 2005-06 was received by the Indian Competent Authority from the US Competent Authority vide request dated 07.04.2009. (ii) After verifying all the conditions stated in paragraph 3 above, the MAP proceedings were taken as pending and subsequently MAP discussions were held by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arantee. The show cause notice, issued under Section 226(3) of the Act, does not refer to expiry of the bank guarantee as it is based upon failure to intimate "admission" of MAP. However, in proceedings in the office, the respondents pointedly referred to expiry of the bank guarantee. In response, the petitioner addressed letter dated 26.03.2013 (which we have already reproduced) specifically asserting that the bank guarantee is in force and Citi Bank has addressed letter dated 25.03.2013, confirming validity of the bank Guarantee. The letter addressed by Citi Bank, on 25.03.2013, reads as follows:- " Subject:- Confirmation for Issuance of Bank Guarantee No:5679063528 dated 04.03.2009. We hereby confirm that we have on 04.03.2009 issued Bank Guarantee No. 5679063528 for Rs. 17,63,46,462 (Rupees Seventeen Crores Sixty three Lakhs Forty Six Thousand Four Hundred and Sixty Two only) in your favour, which is valid in our records and has been issued on behalf of Motorola India Private Limited and Mr. Dheeraj Jain and Mr. Arun Yadav have signed this guarantee who are authorised to sign the guarantees on behalf of the Bank." The letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank further agrees that the guarantee herein contained shall remain in full force and effect from the date hereof, i.e., 4th March 2009, till 28th February 2012; and further agrees to renew this guarantee for another 3 years on the following terms: the bank will provide the government with written notice no later than 60 days prior to the expiration date of this bank guarantee if the taxpayer has not renewed the agreements between the assessee and the bank that underlie this bank guarantee for an additional period of 3 years. If the government does not receive a renewal of this bank guarantee or a substitute bank guarantee for the amounts of tax and interest in dispute prior to 30 days before the expiration date of this bank guarantee, the government may instruct the bank to pay the guaranteed amounts prior to expiration of the bank guarantee. 4. The obligation of the bank to the government under this bank guarantee will terminate upon the occurrence of any of the following for the taxable years in question: (1) The payment by the bank or the assessee to the government of the guaranteed amounts; (II) The payment by the assessee to the government of all amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not executed any document in favour of the bank with respect to the bank guarantee. The revenue does not allege the happening of any event referred to in Clause 4 of the Bank Guarantee. The Citi Bank has instead addressed a letter dated 25.03.2013, to the revenue, before the revenue appropriated the amount from the petitioner's account with Standard Chartered Bank, reiterating the validity of the bank guarantee. A reference to the letter, which we have already reproduced in a preceding paragraph of the judgment, cannot, as urged by counsel for the respondents, be read as a mere confirmation of issuance of the bank guarantee. A perusal of the letter reveals that the Citi Bank has clearly stated that the bank guarantee No.5679063528, dated 04.03.2009, for Rs. 17,63,46,462/- is valid in their records and has been issued on behalf of the "Motorola India Private Limited." It is not denied by the respondents that letter dated 25.03.2013, was received by the respondents before they appropriated money from the petitioner's account. It is, therefore, rather surprising as to how and why notices were issued, under Section 226(3) of the Act, treating the petitioner as an assessee in default an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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