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TMI Blog2024 (9) TMI 1570X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact and law arise for consideration in the present proceedings in testing the impugned order on its merits, which would include applicability of the principles of territoriality as recognized by Toyota Jidosha Kabushiki Kaisha [ 2017 (12) TMI 1886 - SUPREME COURT] - Also the petitioner s contention relying on the decision in Cub Pty Limited [ 2016 (7) TMI 1094 - DELHI HIGH COURT] when it recognizes principles of situs of the Trade Mark being of the ownership of the foreign entity, whether would apply in the facts of the present case, and more particularly on examining the different clauses / terms and conditions of the agreement, so as to be considered that the situs fell outside India, are issues which can be effectively gone into by the Appellate Authority, for appropriate findings of fact to be recorded and thereafter the issue being tested on the principles of law as laid down in the different decisions being relied on behalf of the parties. We may also observe that this is certainly not a case where the Assessing Officer has conferred upon himself a jurisdiction which is not vested in him in law, in passing the impugned order, so that the Court needs to hold that the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n acceptable proposition. As decided in Kharghar Co-op. Housing Societies Federation Ltd., through General Secretary Anr. vs. Municipal Commissioner, Panvel Municipal Corporation Ors [ 2023 (4) TMI 1241 - BOMBAY HIGH COURT] Court had held that it may not be appropriate for the Writ Court to short circuit or circumvent statutory procedures and it is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require a recourse to Article 226 of the Constitution be permitted. Insofar as the issue of limitation is concerned, it appears to be an admitted position that Section 201 ipso facto has not provided for any limitation of one year. We may also refer to the decision of the Division Bench of the Telangana High Court, which considered the decision of this Court in Mahindra Mahindra Limited [ 2014 (7) TMI 265 - BOMBAY HIGH COURT] as also the decision of Bharti Airtel Limited Vs. Union of India [ 2016 (12) TMI 1601 - DELHI HIGH COURT] wherein the Division Bench held that the legislature has consciously not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax/Assessing Officer to the petitioner calling upon the petitioner to furnish a detailed note of the nature of transaction qua the foreign remittance. Between the period October, 2022 and January, 2023, multiple notices under section 133 (6) were issued seeking details of the transactions. Such notices were duly responded by the petitioner and also at times, seeking extension of time. 3. It is the case of the petitioner that on 28 February, 2023, a notice under section 201 of the Act was issued to the petitioner inter alia recording that in connection with the proceedings under section 201 of the Act for the assessment year in question (AY 2021-22) the petitioner should submit details, namely, the valuation report from Ernest Young (E Y) about the valuation of 375 million Euro for FY 2020-21 on the trademark of Horlicks brand pertaining to India . The petitioner was also called upon to show cause as to why such trademark Horlicks should not be considered as a capital asset situated in India, basis the above valuation report of E Y at the time of sale. The petitioner has stated that thereafter various notices were issued under section 201 read with Section 133 (6) of the Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74. 6. The petitioner has contended that another notice dated 27 March, 2023 under section 201 of the Act was issued by the Deputy Commissioner to the petitioner granting additional time to make submissions on or before 12 April, 2024. On 8 April, 2024, the petitioner filed a reply clarifying that no additional time was sought by the petitioner as petitioner s submissions were already on record. 7. It is on the aforesaid conspectus, the Deputy Commissioner of Income-tax passed the impugned order dated 23 August, 2024 under section 201 of the Act wherein it is held that the purchase of intellectual property India HFD IP was sale of an intellectual property (asset) situated in India liable to be taxed as capital gains. The petitioner was treated as an assessee-in-default for non-deduction of tax and accordingly a demand of Rs. 962,75,14,624/- was raised which was payable by 21 September, 2024. Consequent to such demand, on 4 September, 2024, a notice under section 271C of the Act was issued to the petitioner initiating penalty proceedings for non-deduction of TDS. 8. In the aforesaid circumstances, the present petition has been filed assailing the impugned order dated 23 August, 2024 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be on 28 February 2023 when a notice under Section 201 was issued to the petitioner. It is submitted that the limitation of one year is held to be reasonable period by the Income Tax Appellate Tribunal in the case of Mahindra and Mahindra Limited, which came to be accepted by this Court in the decision of Director of Income Tax (International Taxation) Vs. Mahindra and Mahindra Limited 2014 SCC OnLine Bom 693 . It is therefore Mr. Mistri s submission that the petition needs to be admitted and interim relief is required to be granted. 11. On the other hand, Mr. N. Venkatraman, learned Additional Solicitor General has opposed the admission of the petition and the interim reliefs as prayed by the petitioner. At the outset, Mr. Venkatraman would submit that the Writ Petition ought not to be entertained as the petitioner has an efficacious alternate remedy of an appeal under Section 253 of the Income Tax Act. In support of such submission Mr. Venkatraman would submit that the issues as raised by the petitioner would require determination of several aspects involving adjudication on facts and law, and such enquiry can be effectively gone into in the appellate proceedings. It is submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Article 226 of the Constitution ought not to be exercised. Accordingly, Mr. Venkatraman has submitted that the petition be dismissed. 14. On Mr. Mistri s submission on the tenor and irresponsible language used by the Deputy Commissioner in commenting on the decision of the Delhi High Court in CUB PTY Ltd. (supra), Mr. Venkatraman would submit that there cannot be any justification to such observations. He agrees that apart from being totally unwarranted, such observations wholly lacked propriety. He is apologetic about such observation made by the Deputy Commissioner. He submits that departmentally, a strict view of such observations would be taken. It is also his submission that however this ought not to be a ground, for an otherwise detailed and well reasoned order, to be interfered by the Court in the present proceedings, as according to him the impugned order is an extensive order, on the issues as involved. It is submitted that if at all the petitioner is aggrieved by the same, an appropriate remedy for the petitioner is to avail of a statutory appeal. Analysis and Conclusion 15. We have heard learned counsel for the parties. With their assistance, we have also perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provides for assignability of Trade Mark to contend that Section 38 begins with a non-obstante clause to the effect notwithstanding anything in any other law to the contrary a registered trade mark shall, subject to the provisions of Chapter V (Assignment and Transmission), be assignable and transmissible, whether with or without the goodwill of the business concerned and in respect either of all the goods or services . It is thus his submission that the trademark in question as dealt / acquired by the petitioner necessarily was an intellectual property available for sale in India attracting the provisions of the Income Tax Act, whereunder the petitioner was liable to deduct tax at source in purchasing such property. It is hence submitted that such acquisition squarely fell within the provisions of Section 9 (1) (i) read with Section 195 of the Act. According to him, as admittedly there was a non-compliance of the TDS obligation, rightly action under Section 201 of the Act was initiated against the petitioner. 19. It is Mr. Venkataraman s submission that the effect of the provisions of the Trademark Act and such asset being available in the Country for its sale was not the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough its mark within a particular territorial jurisdiction in a more subtle form which can best be manifested by the following illustrations, though they arise from decisions of Courts which may not be final in that particular jurisdiction. 38. The next exercise would now be the application of the above principles to the facts of the present case for determination of the correctness of either of the views arrived at in the two-tier adjudication performed by the High Court of Delhi. Indeed, the trade mark Prius had undoubtedly acquired a great deal of goodwill in several other jurisdictions in the world and that too much earlier to the use and registration of the same by the defendants in India. But if the territoriality principle is to govern the matter, and we have already held it should, there must be adequate evidence to show that the plaintiff had acquired a substantial goodwill for its car under the brand name Prius in the Indian market also. The car itself was introduced in the Indian market in the year 2009-2010. The advertisements in automobile magazines, international business magazines; availability of data in information-disseminating portals like Wikipedia and online B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndants in the Delhi High Court. Consequently, even if we are to disagree with the view of the Division Bench of the High Court in accepting the defendant s version of the origin of the mark Prius , the eventual conclusion of the Division Bench will, nonetheless, have to be sustained. We cannot help but also to observe that in the present case the plaintiff s delayed approach to the Courts has remained unexplained. Such delay cannot be allowed to work to the prejudice of the defendants who had kept on using its registered mark to market its goods during the inordinately long period of silence maintained by the plaintiff. (emphasis supplied) 20. Considering the issues as involved and the contentions as urged on behalf of the parties, we are of the opinion that necessarily mixed issues of fact and law arise for consideration in the present proceedings in testing the impugned order on its merits, which would include applicability of the principles of territoriality as recognized by the Supreme Court in Toyota Jidosha Kabushiki Kaisha (Supra). Also the petitioner s contention relying on the decision in Cub Pty Limited (supra) of the Delhi High Court when it recognizes principles of situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainly, if the Assessing Officer was to exercise jurisdiction not vested in him or in a patently illegal manner or ex facie contrary to the substantive provisions of the Income Tax Act, then certainly following the well settled principles of law as laid down in catena of judgments of the Supreme Court, the Court would unhesitatingly interfere in writ proceedings. However, the petitioner s contention that the Deputy Commissioner in view of the decision of the Delhi High Court in CUB Pty Ltd. (supra) ought to have held that the transaction in question fell outside the purview of the Income Tax Act, as the seller of the trade mark was a foreign entity, is certainly a debatable issue on applicability of the legal principles vis-a-vis the substantive provisions of the Act. This cannot be said to be an issue determining the substantive jurisdiction of the Dy. Commissioner as conferred under the provisions of the Act to initiate an action under Section 201. It would be a question, merely as to whether the principles of law in a given decision, were applicable in the facts and circumstances of the case, and more particularly when it is vehemently contested on behalf of the Revenue that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court in Income-Tax Officer, Lucknow vs. M/s. S.B. Singar Singh Sons Anr. (1976) 4 SCC 325, this Court had held that it may not be appropriate for the Writ Court to short circuit or circumvent statutory procedures and it is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require a recourse to Article 226 of the Constitution be permitted. The following observations as made by the Court are required to be noted, which reads thus: 29. About 59 years back, a three Judge Bench of the Supreme Court in the case of Shivram Poddar Vs. Income Tax Officer, Central Circle II, Calcutta and Anr. has held that resort to the High Court in exercise of its extraordinary jurisdiction conferred and recognized by the Constitution in matters relating to assessment, levy and collection of tax (in such case, income-tax) may be permitted only when questions of infringement of fundamental rights arise, and where on undisputed facts the taxing authorities are shown to have assumed jurisdiction which they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal which had arbitrarily refused to consider the same and record a finding thereon. This assumption, in our opinion, stood thoroughly discounted by the concomitant circumstances of the case, including the dilatory and questionable conduct of the assessee. This was therefore not a fit case for the exercise of its special jurisdiction under Article 226 by the High Court. 31. In Assistant Collector of Central Exicse, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. Ors.12 referring to the decision in Titaghur Paper Mills Co.Ltd. Vs. State of Orissa, the Supreme Court observed that Article 226 is not meant to short circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it, it may take recourse to Article 226 of the Constitution. It was held that the Court must have good and sufficient reason to by-pass the alternative remedy provided by statute. (emphasis supplied) 50. We f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit, by entertaining a petition under Article 226 of the Constitution, the machinery created under the statute to be by-passed, and will leave the party applying to it to seek resort to the machinery so set up. (emphasis supplied) 18. Echo of the aforesaid view is found in a later decision of the Supreme Court reported in ( 1983) SCC 2 433 [Titaghur Paper Mills Co.Ltd. Anr. Vs. State of Orissa and Ors.], arising out of the Orissa Sales Tax Act, 1947. Such enactment, quite similar to the MVAT Act, provided a hierarchy of authorities who could be approached for redress. Instead of pursuing the remedy thereunder, the writ jurisdiction of the Orissa High Court was invoked challenging orders of assessment. The law laid down therein is in the following terms: 6. We are constrained to dismiss these petitions on the short ground that the petitioners ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201 (1) are initiated. The High Court has not conclusively and categorically held that the Tribunal was correct in laying down such limitation when the legislature itself has not prescribed any limitation. We also have a quarrel on the proposition as to whether the Tribunal could at all prescribe and / or lay down any period of limitation, which is wholly within the domain of the legislature, when the legislature itself has not prescribed the same in Section 201. We may refer to the observations of the Division Bench in Mahindra and Mahindra Limited (Supra) which, in our opinion, would in no manner indicate that there is any specific approval to such observations of the Tribunal, so as to hold it to be an absolute position in law of such limitation being prescribed by the tribunal needs to be accepted as a statement of law. In fact, from the reading of the observations of the High Court, it appears that such issue was in fact left open and what has been recognized is that the powers under Section 201 are required to be exercised within a reasonable time. We note the observations of the Division Bench which reads thus : 35. Once same provisions are invoked in the present case, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der under Section 201 (1) of the Act post the last amendment is seven years insofar a person resident in India is concerned. The present case covers the assessment year 2016-2017, which is well after the last of the amendments were made and when limitation period qua resident Indians is seven years. 27. We have also seen that the legislature has consciously not prescribed any time limit for an order under Section 201 (1) of the Act insofar a non-resident is concerned; the reason being that if the deductee is a non-resident, it may not be administratively possible to recover the tax from the non-resident. Therefore, it would be wrong to read into Section 201 (3) of the Act a period of limitation insofar non-resident is concerned; doing so would amount to legislating by the Court which is not permissible. 28. At the same time, it must also be kept in mind that even though there is no limitation prescribed by the statute, the order under Section 201 (1) of the Act qua non-resident has to be passed within a reasonable period. 29. Now the question is, what is a reasonable period in the absence of any statutory limitation? In our considered opinion, there cannot be a straight jacket answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner in the impugned order, be expunged and after such deletion a fresh copy of the order be made available to the parties. We also warn the concerned officer to be extremely cautious and careful in future so as to remain within the limits of propriety, in the discharge of his quasi-judicial role, conferred under the provisions of the Income Tax Act. We also urge the learned ASG that in the larger interest of the officers of the Revenue and with a hope that such issues do not percolate in the orders being passed by the Officers of the Revenue, this concern needs to be taken up at the appropriate level of the Ministry, so that the limits of propriety, the tenor and language used by the officials in passing orders, and on understanding of the legal principles, is well inculcated in such officers, of the Revenue, by having regular training sessions. This more particularly, considering that such officers-in-discharge of their quasi-judicial powers are required to deal with legal issues, involving the applicability of the decisions rendered by different Courts. If we were not to make such observations so as to indicate the righteous and solemn path which needs to be followed by the Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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