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TMI Blog2022 (8) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... oner was passed by this Court in Company Petition No.59/1994. Prior to the winding up order in 1987, the petitioner was assessed for Income Tax AY 1984-85 at Rs.89,53,788/-. Accordingly, in 2006, the Department of Income Tax moved Company Application no.857/2006 under Rule 9 of the Companies (Court) "Rules, 1959 read with Section 178 of the Income Tax Act" before this Court praying for directions to attach rent received/receivable for adjusting towards the payment of Income Tax dues of the petitioner. However, this application was dismissed as not being pressed. 3. On 5th November 2015, the Liquidator requested the respondent-CIT to inform about the status of demand outstanding against the petitioner under Income Tax Act and Wealth Tax Act. On 27th November, 2015, ITO Ward-14(I) informed that the total demand for AYs 1984-85 to 1999-2000 amounted to Rs.19,06,496/- and the Wealth Tax to Rs.8,88,652/-, totalling as Rs.27,95,148/-. On 17th December, 2015, this Court directed the liquidator to release this amount in favour of the Department and granted liberty to the Liquidator to seek waiver of interest and penalty. 4. While the CIT accorded waiver of penalties on 28th March, 2016 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the Forms filed by the petitioner under the VSV Act. 8. The respondent-CIT filed a counter affidavit stating inter alia that the Co. Appl. 577/2019 filed by the petitioner against the order of rejection of waiver application, was primarily a petition under the Companies Act and not an 'appeal' within the meaning of VSV Act. It was further pointed out in the counter affidavit that the reasons for rejecting were available in e-filing database and stated as under: "FAQ-13 does not treat waiver applications as appeals, therefore writ against that are also not appeals for VSV purpose." 9. It was contended by the CIT that Section 2 (1) (a) of the VSV Act defines 'appellant' and Section 2 (1) (h) defines the 'disputed interest' and that neither was the petitioner an appellant nor its case was of disputed interest for the purposes of VSV Act. For this purpose, the CIT quotes the Central Board of Direct Taxes (CBDT) Circular No.9/2020 issued under the VSV Act clarifying that only the disputes relating to Income Tax Act are covered under the VSV Act and that interest waiver applications are not "appeals" under the VSV Act. The CIT further clarified that at the time of rejection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner, was as good as an appeal and therefore, comes within the purview of 'disputed interest' as defined in Section 2 (1) (h) of VSV Act. The relevant provisions: 13. Since the dispute between the parties relates to the scope and applicability of certain provisions of VSV Act and the Income Tax Act, it would be useful to extract those relevant provisions for convenient reference: Income Tax Act, 1961 ● Section 220 (2): If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent. for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid: ● Section 220 (2A): Notwithstanding anything contained in sub-section (2), the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may reduce or waive the amount of interest paid or payable by an assessee under the said subsection if, he is satisfied that- (i) payment of such amount has caused or would caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nated authority in such form and verified in such manner as may be prescribed. (2) Upon the filing the declaration, any appeal pending before the Income Tax Appellate Tribunal or Commissioner (Appeals), in respect of the disputed income or disputed interest or disputed penalty or disputed fee and tax arrear shall be deemed to have been withdrawn from the date on which certificate under subsection (1) of section 5 is issued by the designated authority. (3) Where the declarant has filed any appeal before the appellate forum or any writ petition before the High Court or the Supreme Court against any order in respect of tax arrear, he shall withdraw such appeal or writ petition with the leave of the Court wherever required after issuance of certificate under sub-section (1) of section 5 and furnish proof of such withdrawal alongwith the intimation of payment to the designated authority under sub-section (2) of section 5. (4) Where the declarant has initiated any proceeding for arbitration, conciliation or mediation, or has given any notice thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same meanings respectively as assigned to them in those Acts. Companies (Court) Rules, 1959 156. Interest On any debt or certain sum, payable at a certain time or otherwise whereon interest is not reserved or agreed for, and which is overdue at the date of the winding-up order, or the resolution as the case may be, the creditor may prove for interest at a rate not exceeding four per cent per annum up to that date from the time when the debt or sum was payable, if the debt or sum is payable by virtue of a written instrument at a certain time, and if payable otherwise, then from the time when a demand in writing has been made, giving notice that interest will be claimed from the date of demand until the time of payment. Analysis: 14. Gravamen of the petitioner's case is that the declaration under Form I & II requesting for settlement of their tax arrears relating to disputed interest ought to have been resolved under the VSV Act since they fell within the scope of Section 3 read with Section 2(1) (h) and 2 (1) (o). The CIT however was also relying on definitional sections to contend that while tax arrears included disputed interest but the disputed interest was only in a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i v. CIT, Mumbai XXV And Ors. , (2007) 7 SCC 434, held forth on this principle and which is instructive in this context as under: 22. In Francis Bennion's Statutory Interpretation, purposive construction has been described in the following manner: "A purposive construction of an enactment is one which gives effect to the legislative purpose by- (a) following the literal meaning of the enactment where that meaning is in accordance with the legislative purpose (in this Code called a purposive and literal construction), or (b) applying a strained meaning where the literal meaning is not in accordance with the legislative purpose (in the Code called a purposive and strained construction)." (Reference is also made to Bombay Dyeing & Mfg. Co. Ltd. (3) v. Bombay Environmental Action Group [(2006) 3 SCC 434] and National Insurance Co. Ltd. v. Laxmi Narain Dhut [(2007) 3 SCC 700].)" Fourthly, even as per the Statement of Objects and Reasons to the VSV Act, which is extracted below for convenience, the intent was to include all sorts of disputes even if pending before the Commissioner of Income Tax or the courts. The intent of the legislature was clearly to have an expansive inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in respect of tax, interest, penalty, fee etc. would come within the purview of a 'dispute' which would enable a party to approach the department for a resolution under the VSV Act. It may be useful to refer to a decision by the Hon'ble High Court of Bombay in Sadruddin Tejani v. ITO & Anr. (2021) SCC Online Bombay 567; (2021) 434 ITR 474 wherein it was held that "the VSV Act is a beneficial legislation for both the Revenue and the tax payer". Fifthly, even this Court in Shyam Sunder Sethi v. Pr. Commissioner of Income Tax-10 and Others 2021 SCC OnLine Del 3113 has set aside a similar order of rejection based upon an FAQ under the VSV Act, as bad in law. 17. Accordingly, attempt by the CIT to exclude a genuine disputant of tax liability, like the petitioner, from the possibility of settlement under the VSV Act is extremely hyper-technical. The interest as demanded under Section 220 (2A) which is 1% for every month of the period of delay as opposed to an application of Rule 154 of the Companies Court Rules which provides for an interest ceiling at the rate of 4% interest for companies in liquidation, is a huge statutory benefit given to companies in liquidation. It cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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