THE COMMISSIONER OF INCOME T vs. M/S REDINGTON (INDIA) LTD

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TCA/32/2017HC Madras25 March 2021Bench: Hon`ble Mr Justice M.DURAISWAMY6 pages
AI SummaryRemanded

What did the High Court hold?

The High Court did not decide the substantial questions of law due to subsequent developments. The Court noted that the assessee had availed the benefit under the Direct Tax Vivad Se Vishwas Act, 2020, by filing Forms 1 & 2. Consequently, the appeal was disposed of on this ground, with the Department 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. In such an event, the Registry was directed to entertain a Miscellaneous Petition for Restoration without insisting on a delay condonation application. The substantial questions of law were left open.

What were the facts?

The Commissioner of Income Tax, Chennai (Revenue) filed a Tax Case Appeal under Section 260A of the Income Tax Act, 1961, against an order dated 26.06.2015 passed by the Income Tax Appellate Tribunal, Madras "D" Bench. The appeal pertains to Assessment Year 2007-08 and challenges the Tribunal's decision regarding the assessee, M/s. Redington (India) Ltd. The appeal was admitted on substantial questions of law. During the pendency of the appeal, the Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020, for the resolution of disputed tax. The assessee informed the High Court that they had filed requisite Forms 1 & 2 under Section 4 of this Act.

What were the issues?

The High Court was to decide five substantial questions of law: 1. Whether the Tribunal was right in allowing the assessee's claim for license fees paid to its Associate Enterprise (AE) for trademarks, especially when the AEs were not the registered owners. 2. Whether the Tribunal's allowance of the trademark claim was proper, given the assessee used the trademarks since 1993 and the AEs were formed only in 2005. 3. Whether the Tribunal's deletion of additions for corporate bank guarantees given by the assessee to its AEs was proper, on the ground that it was not an international taxation issue. 4. Whether the Tribunal's finding that it was not an international transaction was perverse, considering Section 92B of the Income Tax Act was amended to include guarantees as international taxation. 5. Whether the Tribunal was right in allowing 100% depreciation on temporary structures, contrary to the consistent ruling of 10% for the earlier Assessment Year 2006-07 in the assessee's own case. The Revenue argued that the AEs were not registered owners of trademarks and were formed much later than the assessee's use of the trademarks. The Revenue also contended that guarantees should be considered international transactions, especially after the amendment to Section 92B, and that the depreciation claim on temporary structures violated the rule of consistency. The assessee's arguments are not explicitly detailed but are implied by their success before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 260A,Section 92B,Section 4

AI-generated summary — verify with the full judgment below

Tax Case No.32 of 2017 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.32 of 2017 The Commissioner of Income Tax, Chennai. ... Appellant Vs.

M/s.Redington (India) Ltd., SPL Guindy House, 95, Mount Road, Guindy, Chennai – 600 032. ... Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras "D" Bench, dated 26.06.2015 passed in I.T.A.No.1743/Mds/ 2011. For Appellant : Mr.T.Ravi Kumar, Senior Standing Counsel For Respondent : Mr.R.Venkatanarayanan for M/s.Subbaraya Aiyar Page 1/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.32 of 2017 J U D G M E N T (Delivered by M. DURAISWAMY, J) This appeal filed by the Department under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 26.06.2015 passed by the Income Tax Appellate Tribunal, Madras "D" Bench, Chennai ('the Tribunal' for brevity) in I.T.A.No.1743/Mds/ 2011 for the Assessment Year 2007-08. 2.The above appeal was admitted on the following Substantial Questions of Law: “1)Whether on the facts and in the circumstances of the case, the Tribunal was right in allowing the claim of the assessee in relation to trade mark, license fee paid to its Associate Enterprise especially when the AE were not the registered owner of the trade mark? 2)Is not the finding of the Tribunal bad in allowing the claim relating to trade marks especially when assessee has been using the same from 1993 onwards and the associated enterprises were formed only in the year 2005? Page 2/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.32 of 2017 3)Whether the finding of the Tribunal is proper by deleting the additions made on account of corporate bank guarantee given by the assessee to its AEs on the ground that it is not an international taxation?

4)Is not the finding of the Tribunal perverse by holding that it is not an international transaction especially when Sec.92 B of the Income Tax Act had been amended by Finance Act, 2012 with effect from 01.04.2012 included guarantee as an international taxation? 5)Whether the Tribunal was right in holding that the depreciation on temporary structure is to be allowed at 100% when the same issue for the earlier year was decided at 10% only in the assessee's own case for the assessment year 2006-07 which is against the rule of consistency?” 3. We have heard Mr.T.Ravi Kumar, learned senior standing counsel for the appellant/ Revenue and Mr.R.Venkatanarayanan, learned Counsel for the respondent/assessee. 4. It may not be necessary for this Court to decide the Substantial Question of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Page 3/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.32 of 2017 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. 5.We are informed by the learned counsel for the respondent/ assessee that the assessee has already filed the requisite Forms – 1 & 2 on 29.12.2020 under Section 4 of the Act. 6. 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 Page 4/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.32 of 2017 decision to the assessee at the earliest. As observed, the assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration 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 made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders. 7. With this observation, the Tax Case Appeal stands disposed of with the aforementioned liberty and consequently, the Substantial Questions of Law are 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 "D" Bench Page 5/6 https://www.mhc.tn.gov.in/judis/ Tax Case No.32 of 2017 M. DURAISWAMY, J. and T.V. THAMILSELVI, J. va Tax Case Appeal No.32 of 2017

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

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