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TMI Blog2020 (3) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... s acceptable to the learned Senior Counsel for the appellant. Therefore, suggested that the appellant may file an affidavit of undertaking to withdraw the proceedings initiated by it before the AAR and the Department may also file an appropriate affidavit stating that it was willing to treat the communication dated 22.03.2018 as a show cause notice. An appropriate affidavit of undertaking to withdraw the proceedings initiated before the AAR has since then been filed by the appellant. The communication dated 22.03.2018 shall be treated as a show cause notice calling upon the appellant to respond with regard to the aspects adverted to in said communication. The appellant shall be entitled to put in its reply and place such material, on which it seeks to place reliance, within 10 days from today. X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial years 2015-16 and 2016-17. Date of Remittance Name of the non-resident company receiving the remittance Amount remitted (Rs.) Tax made on remittance (Rs.) 17.02.2016 Cognizant (Mauritius) Ltd. 335,36,38,361 Nil 19.05.2016 Cognizant (Mauritius) Ltd. 10761,03,91,036 Nil 19.05.2016 Cognizant Technology Solutions Corporation, USA 7511,40,61,859 810,73,37,402 19.05.2016 Market Rx Luc, USA 484,12,60,737 52,33,24,388 19.05.2016 CSS investment LLC, USA 323,69,24,966 34,95,01,528 Total 19415,62,76,959 898,01,63,318 The data available with the department shows that you have not deducted/paid any tax on the remittances made to M/s Cognizant (Mauritius) Ltd. on 17.02.2016 and 19.05.2016 whereas in the case of remittances to the concerns in USA, you have only deducted/paid tax @ 10% (plus surcharge & cess). In this regard, I request you to kindly furnish the following information: a) The dates and amounts of remittances to the non-residents during the FYs. 2015-16 & 2016-17, along with their residential status. b) The nature and purpose of the said remittances. Copies of the documents submitted to the RBI for obtaining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not: Even otherwise, provisions of sec. 2(22)(a) of the Act, which stipulate that any distribution to the shareholders is a dividend, if it is contended that it was not a case of reduction of capital. Provisions of sec.2(22)(a) are: S.2(22)(a): any distribution by a company of accumulated profits whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company; Once, the provisions of sec.2(22)(d) or 2(22)(a) are applicable, the distributor is required to pay tax u/s.115-O of the Act. In the present case, the assessee's purchase of its own shares, which is not in accordance with sec.77A of the Companies Act, will amount to dividends within the meaning of sec.2(22)(d) or 2(22)(a) of the Act, and consequently, liable for tax u/s. 115-O of the Act in the hands of the assessee company." After considering factual aspects it was stated :- "11. This clearly shows that, to the extent of face value (issued price), the paid-up share capital will be utilized and the balance will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the AAR under Section 245Q of the Act, in view of the bar provided under Section 245RR of the Act, the matter could not have been considered. It was also submitted that the appellant was never put to notice whether it would be liable under Section 115-O of the Act. It was further submitted that all the while the Department was only soliciting information which the appellant had readily furnished and at no stage the appellant was put to notice that its liability would be determined in any manner. 10. The Writ Petition came up before a Single Judge of the High Court on 03.04.2018 when following interim directions were issued:- "11. In my considered view the impugned proceedings has crystallized in the form of a demand for payment of tax, and if the petitioner has to be granted an interim protection till the writ petition is finally heard, the same has to be conditional and cannot be unconditional. Assuming without admitting the petitioner had to avail an appellate remedy under the Act and prays for appropriate interim orders before an appellate authority, then the appellate authority is entitled to grant an order of stay, which is invariably conditional on account of guideline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated for the remaining amount of taxes. The remittance of 15% of the tax demanded shall be retained in a separate account and shall abide by the orders to be passed in the writ petition." 11. The Single Judge by his decision dated 25.06.2019 dismissed the Writ Petition as not being maintainable and relegated the appellant to avail the remedy before the Appellate Authority under the Act. However, during the course of his decision, the Single Judge concluded that there was no need for issuance of any notice before making a demand under Section 115-O of the Act and the notice issued on 21.11.2017 calling for details whereafter meetings were convened, was quite adequate. He rejected the submission that there would be a bar in terms of Section 245RR of the Act. The Single Judge did not find any merit in the contention that the shares purchased pursuant to the order of the Company Court could not be treated as dividend. While relegating the appellant to avail the remedy before the Appellate Authority it was observed:- "33. … … the Appellate Authority shall take into account the amount deposited in pursuance of the order referred supra, while entertaining the appeal. Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner will unqualifiedly, without demur, furnish such security/fixed deposits to the satisfaction of the Registrar of the Hon'ble Court as this Hon'ble Court may be so pleased to direct." However, by order dated 14.10.2019, this Court observed:- "It is a matter of record that pursuant to order dated 03.04.2018 passed by the Single Judge of the High Court of Judicature at Madras in Writ Petition No.7354 of 2018, a sum of ₹ 2806,40,15,294/- stands deposited and invested in the form of fixed deposit receipts." It was then directed:- "Pending further consideration, the amount which is presently lying in deposit shall be maintained in the same form." 14. We heard Mr. Gopal Subramanium, learned Senior Advocate for the appellant and Mr. Zoheb Hossain, learned advocate for the Department. 15. It was submitted by Mr. Subramanium, learned Senior Advocate that the instant transaction would not come within the scope of Section 115-O of the Act. It was submitted that the appellant was never put to notice about the proposed determination in terms of Section 115-O of the Act; that the communication dated 22.03.2018 could not be said to have determined the liability of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Hon'ble Court." 18. In the peculiar facts and circumstances of the present case, while disposing of this Appeal, we direct:- a) The communication dated 22.03.2018 shall be treated as a show cause notice calling upon the appellant to respond with regard to the aspects adverted to in said communication; b) The appellant shall be entitled to put in its reply and place such material, on which it seeks to place reliance, within 10 days from today; c) The appellant shall thereafter be afforded oral hearing in the matter; d) The matter shall thereafter be decided on merits by the concerned authority within two months from today; e) Pending such consideration, as also till the period to prefer an appeal from the decision on merits is not over, the interim order passed by the Single Judge of the High Court on 03.04.2018 and as affirmed by this Court vide its order dated 14.10.2019, shall continue to be in operation; and f) The amount of ₹ 495,24,73,287/- deposited towards payment of tax and the amount of ₹ 2806,40,15,294/- which stands deposited and invested in the form of Fixed Deposit Receipts shall be subject to the decision to be taken by the concerned ..... 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