LSI INDIA RESEARCH AND DEVELOPMENT PRIVATE LIMITED vs. ASSISTANT DIRECTOR OF INCOME TAX

WP/15960/2024HC KarnatakaKAHC01033315202425 July 2024Bench: S SUNIL DUTT YADAV6 pages

AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that the adjustment of the refund order for AY 2014-15 towards the demand for AY 2017-18 was illegal and without authority of law. The Court reasoned that once an order of stay was granted for the demand of AY 2017-18, and the petitioner had complied with the condition of paying 20% of the disputed demand, the refund due for AY 2014-15 could not be adjusted against that demand. The Court referred to Office Memos that mandate granting a stay upon such deposit, indicating the assessing officer has no discretion in the matter. The interim order of stay for AY 2017-18 was passed prior to the adjustment, making the impugned action wholly illegal. The Court directed the third respondent to refund Rs. 17,48,45,320/- along with applicable interest within eight weeks. The prayer for refund of Rs. 9,50,32,320/- (balance refund for AY 2014-15) was not pressed as it had already been refunded.

What were the facts?

The petitioner, LSI India Research and Development Private Limited, filed a writ petition before the High Court of Karnataka seeking a direction to the respondents to refund Rs. 17,48,31,871/-. This amount represented a refund determined for Assessment Year (AY) 2014-15, which the petitioner alleged was erroneously adjusted towards a demand for AY 2017-18. The petitioner stated that an order giving effect to the refund for AY 2014-15 was passed on 24.01.2024, amounting to Rs. 26,98,64,191/-. For AY 2017-18, a demand was raised, and an appeal was filed after paying 20% of the demand. An order of stay was granted on 10.08.2021, which was subsequently extended. The petitioner contended that despite the stay order, the refund for AY 2014-15 was adjusted against the AY 2017-18 demand.

What were the issues?

1. Whether the adjustment of the refund due for AY 2014-15 towards the demand for AY 2017-18 was legally permissible, given that an order of stay was in effect for the AY 2017-18 demand? Assessee's Contention: The petitioner argued that the adjustment was illegal and without authority of law because a stay order was in place for the demand of AY 2017-18. They relied on Office Memos dated 29.02.2016 and 31.07.2017, which stipulate that upon payment of 20% of the disputed demand, the assessing officer shall grant a stay of the demand till the disposal of the appeal, leaving no discretion. Revenue's Contention: The judgment does not record any specific arguments made by the revenue.

AI-generated summary — verify with the full judgment below

Before: SMT TANMAYEE RAJKUMAR., ADVOCATE)

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NC: 2024:KHC:29365 WP No. 15960 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF JULY, 2024 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 15960 OF 2024 (T-IT) BETWEEN: 1. LSI INDIA RESEARCH AND DEVELOPMENT PRIVATE LIMITED A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 S1, WIPRO ELECTRONIC CITY SEZ DODDATHOGUR VILLAGE, BEGUR HOBLI, ELECTRONIC CITY, BANGALORE 560 100 REPRESENTED HEREIN BY ITS DIRECTOR MR. JIJU GEORGE … PETITIONER (BY SRI.T. SURYANARAYANA, SENIOR ADVOCATE FOR SMT TANMAYEE RAJKUMAR., ADVOCATE) AND: 1. ASSISTANT DIRECTOR OF INCOME TAX CENTRALIZED PROCESSING CENTER, INCOME-TAX DEPARTMENT BENGALURU KARNATAKA - 560 500 2. DIRECTOR GENERAL OF INCOME TAX (SYSTEMS) ARA CENTRE, GROUND FLOOR E-2, Digitally signed by PRAKASH N Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:29365 WP No. 15960 of 2024 JHANDEWALAN EXTENSION, NEW DELHI - 110 055 3. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -4(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA BANGALORE - 560 095 4. THE PRINCIPAL COMMISSIONER OF INCOME TAX -2 5TH FLOOR, BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, KORAMANGALA BANGALORE - 560 095 … RESPONDENTS (BY SRI. E.I. SANMATHI., ADVOCATE) THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PRAYING TO i) DIRECT THE RESPONDENTS TO FORTHWITH REFUND AN AMOUNT OF RS. 17,48,31,871/- BEING REFUND DETERMINED FOR THE ASSESSMENT YEAR 2014-15 ERRONEOUSLY ADJUSTED TOWARDS THE DEMAND FOR THE ASSESSMENT YEAR 2017-18, ALONG WITH APPLICABLE INTEREST AND ETC.

THIS PETITION, COMING ON FOR PRELIMINARY HEARING THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S SUNIL DUTT YADAV

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NC: 2024:KHC:29365 WP No. 15960 of 2024 ORAL ORDER

The petitioner has sought for issuance of directions to respondents to forthwith refund an amount of Rs.17,48,31,871/- being the refund determined for the assessment year 2014-15 erroneously adjusted towards the demand for the assessment year 2017-18 along with applicable interest.

Though the relief is sought for refund of an amount of Rs.9,50,32,320/- being the balance refund due to the petitioner for the assessment year 2014-15, the said prayer is not pressed in light of the submission that the said amount has been refunded.

Learned Senior Counsel appearing for the petitioner submits that as regards assessment year 2014- 15, the petitioner was entitled for refund in terms of the order giving effect insofar as an amount of Rs.26,98,64,191/- which order was passed on 24.01.2024. It is submitted that insofar as assessment year 2017-18,

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NC: 2024:KHC:29365 WP No. 15960 of 2024 the demand was raised after the assessment order was passed which was taken up in appeal. After paying the amount of 20%, order of stay was also passed on 10.08.2021 at Annexure-G.

It is submitted that despite such order of stay as regards demand for the assessment year 2017-18, refund amount due to the petitioner for the year 2014-15 was adjusted towards such demand. Accordingly, it is submitted that petitioner is entitled for refund of the amount adjusted towards his refund order which effectively stood stayed which order of stay was extended. The above facts are not in dispute.

The refund order at Annexure-B could not have been adjusted once there is an order of stay as regards the demand for the assessment year 2017-18. The receipt at Annexure-F indicates demand of 20% of filing of appeal. If that were to be so, the adjustment of refund towards the demand for the assessment year 2017-18 is without

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NC: 2024:KHC:29365 WP No. 15960 of 2024 authority of law considering that there was an order of stay as against such demand in light of the appeal.

In terms of the Office Memo No.404/72/93-ITCC dated 29.02.2016 and subsequently followed by O.M.No.404/72/93-ITCC dated 31.07.2017, it is clear that once demand of 20% of the disputed demand (15% of the disputed amount in terms of earlier O.M.No.29.02.2016 was enhanced to 20% in the notification on 31.07.2017) is paid, the assessing officer "shall grant stay" of the demand till disposal of appeal. In light of such demand the assessing officer has no discretion once the deposit is made.

Noticing the interim order of stay at Annexure-G was passed prior to adjustment, the impugned action of adjustment of demand would be wholly illegal.

Accordingly, the third respondent is directed to refund an amount of Rs.17,48,45,320/- within a period of eight weeks with applicable interest.

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NC: 2024:KHC:29365 WP No. 15960 of 2024

Accordingly, the petition is disposed off. Sd/- (S SUNIL DUTT YADAV) JUDGE NP

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