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TMI Blog2005 (10) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... lopments made by the collaborator relating to the actual process, methods, technical information and know-how for the manufacture and sale of expandable sytrene polymers. In consideration of the above, amongst others, in terms of article 3.1 of the collaboration agreement, BASF India Limited, the assessee, was required to pay a running royalty at 2 per cent, on the domestic net sale price of the agreement product manufactured in excess of the capacity of 3,576 metric tonnes after the date of the start up. The royalty was payable within 60 days from the end of 30th June and 31st December of each calendar year during the currency of the agreement. For the period from January 1, 1999, to June 30, 1999, the royalty was remitted and tax of Rs. 2,73,242 was deducted and claimed to have been deposited on August 17, 1999. Thereafter, the assessee realised that during the period the production was not in excess as contemplated in the contract and, therefore, claimed refund of the royalty which was, subsequently, received in the month of January, 2000. The assessee, therefore, had sought refund of the TDS amount of Rs. 2,73,242 paid by it. The Assessing Officer vide his order dated July 14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular No. 769 (see [1998] 232 ITR (St.) 25) with immediate effect, i.e., from April 20, 2000, will have a prospective effect. He submits that Circular No. 790 dated April 20, 2000, (see [2000] 243 ITR (St.) 58) would apply to applications for refund which were made after issuance of the said circular. He placed reliance on the judgment of this court in Unit Trust of India v. P.K. Unny [2001] 249 ITR 612; wherein it has been held that it is well-settled that the withdrawal of the circulars cannot operate retrospectively since they are in the nature of instructions and/or guidelines for the benefit of the Department. Mr. Jasani further submits that Circular No. 769 (see [1998] 232 ITR (St.) 25) gave a right to the deductor of tax at source to claim refund in certain circumstances. According to him, to receive refund is a substantive right and, therefore, the subsequent withdrawal of the circulars cannot prejudicially affect the substantive right of the petitioners to claim refund in accordance with the circular which was already in force at the time when the claim for refund was made by the petitioners. He placed reliance on the Full Bench judgment of the Kerala High Court in CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was not entitled to the same and has returned the same to the petitioners. The Board has opined that where income does not accrue to the non-resident the tax deducted belongs to the deductor and the amount deposited to the credit of the Government cannot be said to be tax. In this view of the matter, he submits that in the present case at hand there is no dispute that the income did not belong to the non-resident as such the tax deducted at source belongs to the petitioners. In his submission, if the amount credited to the Government cannot be said to be a tax, then the same cannot be retained by the Government. That the authority below, therefore, was not justified in rejecting the claim of refund made by the petitioners in view of Circular No. 790 (see [2000] 243 (St.) 58). According to him, the petitioners ought to have been granted refund as they were entitled to the same even under Circular No. 790 (see [2000] 243 ITR (St.) 58) referred to hereinabove. Without prejudice to the above, Mr. Jasani further submits that the Revenue has been granting refund in case the tax has been wrongly deducted at source even though there was no liability to do so. In his submission, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him to claim refund of the excess tax paid in the course of assessment proceeding. Similarly, if, he has by mistake or inadvertence or on account of ignorance, included in his income any amount which was exempted from payment of income-tax or was not income within the contemplation of law, he may likewise bring it to the notice of the assessing authority, who, if satisfied, may grant appropriate relief. Mr. Jasani further submits that it is well-settled that no tax can be levied except with the authority of law as enjoined by article 265 of the Constitution of India. The Central Board of Direct Taxes has opined in Circular No. 790 (see [2000] 243 ITR (St.) 58) that the amount paid by the assessees like petitioners is not a tax and, therefore, the same cannot be retained by the respondents. He pressed into service the judgment of this court in Nirmala L. Mehta v. A. Balasubramaniam, CIT [2004] 269 ITR 1 wherein it was held that there could not be any estoppel, against the statute. Article 265 of the Constitution in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief to which he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been filed within the time allowed, no refund is permissible. He, thus, submits that the petition is liable to be dismissed. Learned counsel for the Revenue also sought to contend that Circular No. 790 (see [2000] 243 ITR (St.) 58) deals with the procedural aspects as such it should not be treated to have prospective operation. Consideration: Having heard rival parties, this petition can be disposed of on a narrow consideration without going to the larger issue raised by the petitioners based on interpretation of article 265 or 300A of the Constitution. The petitioners vide application dated February 6, 2000, approached the Assessing Officer to seek adjustment or refund of the amount of tax deducted at source ("TDS") amounting to Rs. 2,73,242 and relied upon Circular No. 769 (see [1998] 232 ITR (St.) 25) issued by the Central Board of Direct Taxes in this regard. The said circular had an effect of directing the Department, after taking prior approval of the Chief Commissioner concerned, to return to the person responsible for deducting the tax at source from payments to the non-resident independent of the provision of the Income-tax Act in the following cases: (i) after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Direct Taxes can operate with retrospective effect. This court in the case of Unit Trust of India v. P.K. Unny [2001] 249 ITR 612, to which one of us (Daga, J.) is a party, observed: "It is well-settled that the withdrawal of circulars cannot operate retrospectively. In that sense, circulars under section 119 do not constitute law. They are in the nature of instructions and/or guidelines. Therefore, the communication dated January 29, 2001, will operate prospectively and not retrospectively ..." The Full Bench of the Kerala High Court in CIT v. B.M. Edward, India Sea Foods [1979] 119 ITR 334 was dealing with the case where the assessee, an individual, was a partner in the firm. He was also a partner in another firm along with his wife. For the assessment year 1971-72, the business of the firm in which the assessee's wife was also a partner ended in a loss. In the assessment for the earlier years, the income of the wife in the firm of which she was a partner was included in the assessee's own income and assessed together under section 64 of the Act. For the assessment year 1971-72, the assessee's claim that the loss incurred by, or debited to, his wife's account, should simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the Full Bench of the Kerala High Court in CIT v. B.M. Edward, India Sea Foods [1979] 119 ITR 334, the Andhra Pradesh High Court held that the circulars which are in force during the relevant assessment years are the circulars that have to be applied and the subsequent circulars either withdrawing or modifying the earlier circulars have no application. In the above view of the law laid down by the Andhra Pradesh High Court in consonance with the law laid down by the Kerala High Court, we have no hesitation to come to the conclusion that the application moved by the petitioners for refund was liable to be considered in accordance with Circular No. 769 (see [1998] 232 ITR (St.) 25) issued by the Central Board of Direct Taxes as the circumstances for refund referred to therein are liable to be held applicable to the facts of the case at hand in its true letter and spirit. Having said so, we need to consider one more contention raised by the Revenue that Circular No. 790 dated April 20, 2000 (see [2000] 243 ITR (St.) 58), being procedural one has a retrospective operation; as such the said circular will be applicable to the refund application moved by the petitioners. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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