M/S REDINGTON DISTRIBUTION PVT. LTD. vs. THE DEPUTY COMMISSIONER OF INCOME-TAX

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WP/30344/2019HC KarnatakaKAHC01020530201902 February 2022Bench: S SUNIL DUTT YADAV5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, without entering into the merits of the case, decided to set aside the impugned order dated 17.12.2018 (Annexure-'B'). The Court found merit in the petitioner's plea for a fresh opportunity and the contention regarding the impact of the Supreme Court's judgment in Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax. The proceedings were restored to the stage immediately after the post-issuance of the notice under Section 148 of the Act. The petitioner was granted liberty to participate in the proceedings and raise all available contentions, including those based on the aforementioned Supreme Court ruling. The petitioner undertook to file its return of income within 30 days of the order's release, which would be considered filed within time. All contentions of both parties were kept open.

What were the facts?

The petitioner, M/s. Redington Distribution Pvt. Ltd., a Singapore-incorporated company, received consideration for software/licence sales from M/s. Wipro Limited for Assessment Year 2010-11. Believing it was not taxable in India, the petitioner did not file a return. The Deputy Commissioner of Income-tax (International Taxation) construed the payments as royalty, treating the income as escaped income. A notice under Section 148 of the Income Tax Act was issued. The petitioner claims it did not receive this notice, only a notice dated 05.09.2018 sent to its holding company, M/s. Redington (India) Limited, to which it replied. The Assessing Officer's stance was based on the High Court's judgment in CIT v. Samsung Electronics Ltd. The petitioner argued that a recent Supreme Court judgment in Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax requires a re-examination of the issue.

What were the issues?

1. Whether the order passed by the respondent dated 17.12.2018 under Section 143(3) read with Section 147 and 144 of the Income Tax Act, 1961, for the assessment year 2010-11, is liable to be quashed? The Assessee (Petitioner) argued that it did not receive the notice under Section 148 and subsequent notices. It contended that the matter needs to be relooked into in light of the Supreme Court's latest judgment in the case of Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax, which potentially alters the position of law regarding the taxability of such payments. The Assessee sought a fresh opportunity to present its case. The Revenue (Respondent) did not record any specific arguments in the judgment. However, its action of passing an order under Section 143(3) read with 147 and 144 indicates its position that income had escaped assessment and the petitioner was liable to tax in India.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 144,Section 148

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF FEBRUARY 2022 BEFORE THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV WRIT PETITION No.30344/2019 (T-IT) BETWEEN: M/S. REDINGTON DISTRIBUTION PVT. LTD., NO.60, ROBINSON ROAD, #12-02, BEA BUILDING SINGAPORE - 068 892 REP. BY ITS HEAD OF FINANCE AND ACCOUNTS P.S. JAYAPRAKASH.

… PETITIONER (BY SRI VIKRAM, ADVOCATE FOR SMT. VANAJA M.R., ADVOCATE) AND: THE DEPUTY COMMISSIONER OF INCOMET-TAX (INTERNATIONAL TAXATION) CIRCLE-2(1) 6TH BLOCK, 80 FEET ROAD KORAMANGALA BENGALURU - 560 034.

… RESPONDENT (BY SRI K.V. ARAVIND, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED ORDER PASSED BY THE RESPONDENT DATED 17.12.2018 UNDER SECTION 143(3) READ WITH 147 & 144 THE ACT FOR THE ASSESSMENT YEAR 2010-11 VIDE ANNEXURE-B AND ETC. THIS WRIT PETITION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:

2 ORDER The petitioner has sought for issuance of writ of certiorari to quash the impugned order passed by the respondent dated 17.12.2018 under Section 143 (3) r/w 147 and 144 of the Income Tax Act, 1961 ("the Act", for short) for the assessment year 2010-11 and has sought for other appropriate reliefs. 2. The petitioner is stated to be a private company incorporated under the laws of Singapore and has received certain consideration for the sale of software/licences relating to development of software from M/s.Wipro Limited. It is further submitted that as the petitioner bonafide believed that it was not taxable in India, it did not file return of income for the assessment year 2010-11. However, it is stated that the respondent has construed the payments to be royalty and was of the stand that the income of the petitioner was to be treated as escaped income for the assessment year 2010-11 and has issued notice under Section 148 of the Income Tax Act.

3 3. The petitioner submits that it has not received such notice nor further notice. It is further submitted that the petitioner had received only notice dated 05.09.2018 sent to the Holding Company M/s. Redington (India) Limited for which petitioner has replied and furnished correct address. 4. It is submitted that the stand of the Assessing Officer was on the basis of the judgment of this court in CIT v. Samsung Electronics Ltd. reported in 320 ITR 209 and that in light of the latest judgment of the Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax reported in [2021] 125 taxmann.com 42 (SC) the matter requires to be relooked into. 5. Taking note of the plea of the petitioner that fresh opportunity needs to be given and also the contention regarding latest judgment of the Apex Court in the case of Engineering Analysis Centre (supra), without entering into the merits of the issue, it would meet the ends of justice in setting aside the order at Annexure-'B' and

4 restoring the proceedings to the stage immediately after post-issuance of notice under Section 148 of the Act. 6. Accordingly, the assessment order at Annexure-'B' is set aside. The matter is relegated as observed above. The petitioner is at liberty to participate in the proceedings and raise all further contentions available to the petitioner including regarding position of law as emanating from the case of Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax reported in [2021] 125 taxmann.com 42 (SC). 7. Accordingly, the petition is disposed off subject to the above observations. All contentions of the parties are kept open. 8. The petitioner undertakes to file the return pursuant to the notice under Section 148 of the Act. If the same is filed within a period of 30 days from the date of release of this order, the same could be taken as filed within time.

5 Accordingly, the petition is disposed off, in light of the discussion made above. Sd/- JUDGE Np/-

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