VODAFONE ROAMING SERVICES SARL vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE INTERNATIONAL TAX 3 1 1, DELHI & ANR.

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W.P.(C)/8592/2023HC DelhiDLHC01024224202304 July 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MR. JUSTICE GIRISH KATHPALIA4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court set aside the impugned draft assessment order dated 24.05.2023. The Court directed the Assessing Officer (AO) to pass a fresh draft assessment order. In doing so, the AO is mandated to take into account the petitioner's reply dated 12.10.2022. Furthermore, the AO must grant a personal hearing to the authorized representative of the petitioner, for which a notice specifying the date and time of the hearing will be issued. The AO is also directed to address all contentions raised by the petitioner in its reply dated 12.10.2022, as well as those mentioned in the writ petition. The Court did not decide on the merits of the taxability of the income or the classification as royalty, as the matter was disposed of on procedural grounds. The ratio decidendi is that procedural fairness, including consideration of assessee's submissions and providing an opportunity for hearing, is paramount before passing assessment orders.

What were the facts?

The petitioner, Vodafone Roaming Services SARL, a tax resident of Luxembourg, filed a writ petition challenging notices and orders issued by the Assistant Commissioner of Income Tax. The revenue asserted that the petitioner failed to file a return for AY 2014-15 and did not offer income of Rs. 2,44,85,873/- earned from cellular roaming services provided to Tata Tele Services Ltd. for tax. The revenue considered this income as royalty under Section 9(1)(vi). The petitioner contended that no part of the income accrued or arose in India and was thus not chargeable to tax, explaining why no return was filed. The petitioner also claimed its reply dated 12.10.2022 to notices under Section 148A(b) and Section 148 was not considered by the Assessing Officer (AO) in the draft assessment order under Section 144C(1). Additionally, the petitioner claimed it was not served with a statutory notice under the proviso to Section 144.

What were the issues?

1. Whether the Assessing Officer erred in passing the draft assessment order under Section 144C(1) without considering the petitioner's reply dated 12.10.2022, which addressed notices under Section 148A(b) and Section 148? 2. Whether the Assessing Officer erred in passing the draft assessment order without serving a statutory notice as required by the proviso to Section 144 of the Income Tax Act, 1961? Assessee's contentions: The petitioner argued that its substantive reply dated 12.10.2022, submitted in response to notices under Section 148A(b) and Section 148, was not considered by the AO while passing the draft assessment order under Section 144C(1). Furthermore, the petitioner contended that it was not served with the statutory notice required under the proviso to Section 144 of the Act. Revenue's contentions: The revenue asserted that the petitioner failed to file a return for AY 2014-15 and did not offer income of Rs. 2,44,85,873/- from roaming services provided to Tata Tele Services Ltd. for taxation, considering it as royalty under Section 9(1)(vi). The revenue's stance on the procedural issues regarding the petitioner's reply and notice under Section 144 is not explicitly recorded in detail, beyond Mr. Chawla's statement that the petitioner's response ought to have been considered.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148A(b),Section 148A(d),Section 148,Section 142(1),Section 144C(1),Section 9(1)(vi),Section 144

AI-generated summary — verify with the full judgment below

W.P.(C) 8592/2023 Page 1 of 4

$~1 * IN THE HIGH COURT OF DELHI AT NEW DELHI

Decision delivered on: 04.07.2023 + W.P.(C) 8592/2023 & CM Nos.32646-47/2023

VODAFONE ROAMING SERVICES SARL ..... Petitioner Through: Ms Fereshte D. Sethna, Mr Mrunal Parekh, Mr Mohit Tiwari and Mr Abhishek Chauhan, Advs.

versus

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE INTERNATIONAL TAX 3 1 1, DELHI & ANR. ..... Respondents Through: Mr Aseem Chawla, Sr Standing Counsel with Ms Pratishtha Chaudhary and Mr Aditya Gupta, Advs. for R-1/Revenue.

Mr Manish Kumar, Adv. for R-2.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MR. JUSTICE GIRISH KATHPALIA [Physical Hearing/Hybrid Hearing (as per request)] RAJIV SHAKDHER, J. (ORAL): CM No.32647/2023 1. Allowed, subject to just exceptions. W.P.(C) 8592/2023 & CM No.32646/2023 [Application filed on behalf of the petitioner seeking interim relief] 2. Issue notice. 2.1 Mr Aseem Chawla, learned senior standing counsel, accepts notice on behalf of the respondents/revenue. Signed By:VIPIN KUMAR RAI Signing Date:06.07.2023 11:27:24 Signature Not Verified

W.P.(C) 8592/2023 Page 2 of 4

3.

Given the direction that we propose to issue, Mr Chawla says that he does not wish to file a counter-affidavit, and he will argue the matter based on the record presently available with the court. 3.1 Therefore, with the consent of learned counsel for the parties, the matter is taken up for hearing and final disposal, at this stage itself. 4. This writ petition is directed against the following orders and notices: (i) Notice dated 02.06.2022 issued under Section 148A(b) of the Income Tax Act, 1961 [in short, “Act”]. (ii) Order dated 26.07.2022 passed under Section 148A(d) of the Act. (iii) Consequential notice dated 27.07.2022 issued under Section 148 of the Act. (iv) Notice dated 10.05.2023 issued under Section 142(1) of the Act. (v) Draft assessment order dated 24.05.2023 passed under Section 144C(1) of the Act. 5. The record shows that the petitioner is a tax resident of Luxemburg. 6. It is the respondent/revenue’s assertion that the petitioner failed to file a return for the Assessment Year (AY) in issue, i.e., AY 2014-15. 7. The respondents/revenue take the stand that the petitioner has not offered for levy of tax, income earned against cellular roaming services provided to an entity going by the name Tata Tele Services Ltd. 7.1 The said income has been pegged at Rs.2,44,85,873/-. 8. According to the respondents/revenue, the income received nothing but royalty, and thus, falls within the purview of Section 9(1)(vi) of the Act. 9. On the other hand, it is the petitioner’s stand that no part of the income received, accrued or arose in India. Signed By:VIPIN KUMAR RAI Signing Date:06.07.2023 11:27:24 Signature Not Verified

W.P.(C) 8592/2023 Page 3 of 4

9.1 In sum, the petitioner claims that the said income was not chargeable to tax in India, which is why no return was filed. 10. Besides this, it is the petitioner’s case that it had filed a substantive reply on 12.10.2022, not only vis-à-vis notice dated 02.06.2022 issued under Section 148A(b), but also the consequent notice issued under Section 148 of the Act dated 27.07.2022. 10.1 The petitioner claims that this reply has not been taken into account by the Assessing Officer (AO) while passing the impugned draft assessment order under Section 144C(1) of the Act. 11. It is also the petitioner’s case that it was not served with a statutory notice, as required under the proviso appended to Section 144 of the Act. 12. We may note that there is a reference to a notice dated 17.05.2023 in the draft assessment order, which was purportedly issued under the proviso appended to Section 144 of the Act. 13. Given the aforesaid circumstances, Mr Chawla says that, apart from anything else, the petitioner’s response dated 12.10.2022 ought to have been taken into account by the AO. 14. Having regard to the aforesaid circumstances, according to us, the best way forward would be to set aside the impugned draft assessment order. It is ordered accordingly. 15. Liberty is, however, granted to the AO to pass a fresh draft assessment order. 16. While passing fresh draft assessment order, the AO will take into account the reply dated 12.10.2022 filed by the petitioner. 17. Furthermore, the AO will grant personal hearing to the authorized Signed By:VIPIN KUMAR RAI Signing Date:06.07.2023 11:27:24 Signature Not Verified

W.P.(C) 8592/2023 Page 4 of 4

representative of the petitioner. 17.1 For this purpose, the AO will issue a notice setting forth the date and time of hearing. 18. Needless to add, the AO will deal with all the contentions raised by the petitioner in its reply dated 12.10.2022, and those which are adverted to in the instant writ petition. 19. The writ petition is disposed of, in the aforesaid terms. 20. Consequently, the pending interlocutory application shall stand closed. 21. Parties will act based on the digitally signed copy of the judgment.

RAJIV SHAKDHER, J

GIRISH KATHPALIA, J

JULY 4, 2023

Click here to check corrigendum, if any Signed By:VIPIN KUMAR RAI Signing Date:06.07.2023 11:27:24 Signature Not Verified

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