M/S.REDINGTON (INDIA) LTD vs. THE ASSISTANT COMMISSIONER

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TCA/1159/2015HC Madras25 March 2021Bench: Hon`ble Mr Justice M.DURAISWAMY6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that it was not necessary to decide the substantial questions of law due to subsequent developments, specifically the enactment of the Direct Tax Vivad Se Vishwas Act, 2020. The assessee had filed the requisite Forms 1 & 2 under Section 4 of the Act on 31.12.2020. Consequently, the Tax Case Appeal was disposed of on the ground that the assessee had availed the benefit under the Vivad Se Vishwas Act. The Department was directed to process the application at the earliest. The assessee was granted liberty to restore the appeal if the decision under the Vivad Se Vishwas Act was not in their favour. The substantial questions of law were left open. No costs were awarded.

What were the facts?

The assessee, M/s. Redington (India) Ltd., filed an appeal before the High Court of Judicature at Madras against an order dated 02.05.2013 passed by the Income Tax Appellate Tribunal (ITAT), Madras "B" Bench. The appeal pertained to the Assessment Year 2006-07 and challenged the ITAT's decision on several substantial questions of law. The Revenue was represented by the Assistant Commissioner of Income Tax, Company Range – V, Chennai. The High Court admitted the appeal on specific substantial questions of law. However, the proceedings were impacted by the enactment of the Direct Tax Vivad Se Vishwas Act, 2020.

What were the issues?

The High Court was to decide four substantial questions of law: 1. Whether the Tribunal was correct in holding that expenditure on temporary structures was capital in nature and not revenue expenditure. 2. Whether the Tribunal was correct in holding that tax is deductible on gross royalty payments to Microsoft Corporation, not on the net amount after sales returns. 3. Whether tax is deductible on software price returned to Microsoft before the payment due date, in light of CBDT Circular No. 790 dated 20.04.2000. 4. Whether the Tribunal was correct in holding that tax is deductible on the sale of copyrighted articles (software), considering the sale consideration as business profits of the foreign company not taxable in India. The assessee argued that the expenditure on temporary structures was revenue expenditure. For the second and third issues, the assessee contended that tax should be deductible on the net amount after sales returns and that tax is not deductible on returned software price as per the circular. For the fourth issue, the assessee argued that the sale consideration constitutes business profits of the foreign company not taxable in India. The Revenue's contentions are not explicitly recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 260A,Section 4

AI-generated summary — verify with the full judgment below

Tax Case No.1159 of 2015 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 25.03.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMY AND THE HON'BLE MRS.JUSTICE T.V. THAMILSELVI Tax Case Appeal No.1159 of 2015 M/s.Redington (India) Ltd., SPL Guindy House, 95, Mount Road, Guindy, Chennai – 600 032.

... Appellant Vs.

The Assistant Commissioner of Income Tax, Company Range – V, Chennai – 600 034. ... Respondent

Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras "B" Bench, dated 02.05.2013 passed in I.T.A.No.2164/Mds/2010. For Appellant : Mr.R.Venkatanarayanan For Respondent : Mr.T.Ravi Kumar, Senior Standing Counsel Page 1/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.1159 of 2015 J U D G M E N T (Delivered by M. DURAISWAMY, J) This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 02.05.2013 passed by the Income Tax Appellate Tribunal, Madras “B” Bench, Chennai ('the Tribunal' for brevity) in I.T.A.No. 2164/Mds/ 2010 for the Assessment Year 2006-07. The above appeal was admitted on 09.12.2015 on the following Substantial Questions of Law for consideration: “1)Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenditure incurred towards temporary structure is capital in nature and not allowable as revenue expenditure? 2)Whether on the facts of the case, the Tribunal was right in law in holding that the tax is deductible on the gross royalty payments made to Microsoft Corporation and not on the net amount payable after considering the sales return? 3)Whether tax is deductible in respect of price of software returned to Microsoft even before the due date for payment of the price in view of CBDT Circular No.790 dated 20.04.2000? Page 2/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.1159 of 2015 4)Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that tax is deductible on the sale of copyrighted article (software) without appreciating that the sale consideration constitutes business profits of the foreign company not taxable in India?” 2. We have heard Mr.R.Venkatanarayanan, learned counsel for the appellant/assessee and Mr.T.Ravi Kumar, learned Senior Standing Counsel for the respondent/ Revenue. 3. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. Page 3/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.1159 of 2015 4. We are informed by the learned counsel for the appellant/ assessee that the assessee has already filed the requisite Forms - 1 & 2 on 31.12.2020 under Section 4 of the Act. 5. In the light of the fact that the assessee has already availed the benefit under the Act, no useful purpose would be served in keeping this appeal pending. At the same time, safeguarding the interest of the assessee in the event the order to be passed by the Department under the Act is not in favour of the assessee. Accordingly, the Tax Case Appeal stands disposed of on the ground that the assessee has already filed the requisite Forms – 1 & 2 and the Department shall process the application at the earliest in accordance with the said Act and communicate the decision to the assessee at the earliest. As observed, the assessee is given liberty to restore the appeal in the event the ultimate decision to be taken on the Forms filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request Page 4/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.1159 of 2015 made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders. 6. With this observation, the Tax Case Appeal stands disposed of with the aforementioned liberty and consequently, the Substantial Question of Law is left open. No costs. [M.D., J.] [T.V.T.S., J.] Index : Yes/No 25.03.2021 Internet : Yes

va To 1. Income Tax Appellate Tribunal, Madras "B" Bench 2.The Assistant Commissioner of Income Tax, Company Range – V, Chennai – 600 034. Page 5/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.1159 of 2015 M. DURAISWAMY, J. and T.V. THAMILSELVI, J. va Tax Case Appeal No.1159 of 2015

25.03.2021 Page 6/6 https://www.mhc.tn.gov.in/judis/

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