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- 1 - IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF JULY 2022
BEFORE
THE HON’BLE MR. JUSTICE M.I.ARUN
WRIT PETITION No.11722 OF 2022 (T-IT)
BETWEEN:
M/S MCML ECI JOINT VENTURE
C-9, INDUSTRIAL ESTATE
YELHANKA, BENGALURU – 560 064
NOW KNOWN AS CEIBA ECI JV
REP. BY ITS MEMBER
SRI. GOTTIPATI LAKSHMANA KUMAR
(JOINT VENTURE)
M/S ECI ENGINEERING & CONSTRUCTIONS CO. LTD. NO.1-10-44/2/1 BEGUMPET POST, HYDERABAD REP. BY ITS DIRECTOR SRI.K.AJAY, (REGISTERED PVT. LTD. COMPANY) REGISTERED BY INCORPORATED COMPANIES ACT 1956
M/S MCML SYSTEMS PVT. LTD.
NO.C9, KSIIDC INDUSTRIAL ESTATE
YELAHANKA NEW TOWN
BANGALORE – 560 064
NOW MERGED WITH CEIBA
ECC PVT. LTD. REP. BY ITS
DIRECTOR, SRI. GOTTIPATI
LAKSHMANA KUMAR
(REGISTERED PVT. LTD.COMPANY) REGISTERED BY INCORPORATED COMPANIES ACT 1956
... PETITIONERS
(BY SRI.ARAVIND V. CHAVAN, ADV.)
- 2 - AND:
INCOME TAX OFFICER
WARD-6(3)(4), 4TH FLOOR
BMTC BUILDING, 80 FEET ROAD
KORAMANGALA 6TH BLOCK
BANGALORE – 560 095
PRL. COMMISSIONER OF INCOME TAX-6
4TH FLOOR, BMTC BUILDING
80 FEET ROAD, KORAMANGALA
6TH BLOCK, BANGALORE – 560 095
COMMISSIONER OF INCOME TAX (APPEALS)-6
ROOM NO.753, BMTC BUILDING, 7TH FLOOR
KORAMANGALA 6TH BLOCK, BANGALORE – 560 095
TAX RECOVERY OFFICER-1
BMTC BUILDING, 80 FEET ROAD
KORAMANGALA 6TH BLOCK
BANGALORE – 560 095
COMMISSIONER OF INCOME TAX (APPEALS)
NATIONAL FACELESS APPEAL CENTRE
ROOM NO.245-A, NORTH BLOCK
NEW DELHI – 110 001
... RESPONDENTS (BY SRI. E. I. SANMATHI, ADV.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE APPELLATE COMMISSIONER R-3 TO DECIDE THE APPEAL FILED BY THE P1 CHALLENGING THE ASSESSMENT ORDER IN RESPECT OF THE ASSESSMENT YEAR 2013-14 WHICH HAS BEEN REMANDED BACK BY THE TRIBUNAL FOR FRESH ADJUDICATION.
THIS WRIT PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:
- 3 - O R D E R
The case of the petitioners is that petitioner Nos.2 and 3 are companies registered under the Companies Act, 1956 and together formed a joint venture in the name and style of M/s. MCML ECI Joint Venture, which is petitioner No.1 and the said joint venture was able to procure a contract from Indian Railways. The consideration received from the said contract has been sought to be taxed at the hands of petitioner No.1. Aggrieved by the same and contending that petitioner No.1 does not constitute an association of person and cannot be taxed and that the consideration received by petitioner No.1 has been completely distributed between petitioner Nos.2 and 3 as per the joint venture agreement and that it is petitioner Nos.2 and 3 who are liable to be taxed, the petitioners raised a dispute and it culminated in proceedings before the jurisdictional Income Tax Appellate Tribunal bearing No.ITA No.2280/BANG/2018. The dispute pertains to the income liable to be taxed for the assessment year 2013-2014. The Income Tax Appellate Tribunal after considering the case of the petitioners was pleased to remand the matter back to the jurisdictional
- 4 - Commissioner of Income Tax (Appeals)-6 by its order dated 03.04.2019. Since then, the matter is pending before the Commissioner of Income Tax (Appeals)-6. Thereafter, on 04.03.2022, the respondent No.4 has raised a demand vide Annexure – J to the writ petition which reads as under:- “Sir/Madam/M/s, Subject: Proceedings under Second Schedule of Income-tax Act – Letter
Sub: Recovery of Income-Tax arrears in the case of your own for the A.Y’s.2012- 13, 2013-14, 2014-15 and 2016-17- PAN-AABAM1277H Request for payment of 20% of the demand.
Ref: This office letter dated: 20.01.2022 and your reply dated 18.02.2022.
************ Please refer to be above. You are hereby requested to pay at least 20% of the outstanding demand of Rs.11,75,60,171/- on or before 14.03.2022, to avoid further coercive action to recover the same, since you have preferred an appeal against the order passed u/s 143(3) by the AO.”
Aggrieved by the same, the instant writ petition is filed.
- 5 - 2. It is contended by the petitioners that petitioner No.1 is not an association of person and is not subject to tax as per law. The consideration received from Indian Railways has been distributed between petitioner Nos.2 and 3 and they are liable to tax and it is erroneous to tax petitioner No.1 for the Assessment Year 2013-2014 and that when the matter was pending before Commissioner of Income Tax (Appeals)-6, respondent No.4 ought not to have issued the impugned demand. On the said grounds it is prayed that the impugned demand letter dated 04.03.2022 bearing DIN & Letter No.ITBA/COM/F/17/2021- 22/1040372402(1) vide Annexure – J to the writ petition issued by the respondent No.4 be set aside.
Per contra, learned counsel appearing for the respondents submits that though the matter is pending before the Commissioner of Income Tax (Appeals)-6, what is demanded is only 20% of the amount which is reasonable and that the interest of the revenue needs to be protected otherwise the State Machinery cannot function and if the petitioners were to ultimately succeed, the amount to be paid by them as per the demand would be adjusted for
- 6 - future transactions or refunded as the case may be. On the said grounds, it is prayed that the writ petition may be dismissed.
The Income Tax Appellate Tribunal has remanded the matter back to the Commissioner of Income Tax (Appeals)-6, respondent No.3 herein, on 03.04.2019 itself. For reasons best known to him, he is yet to decide the said matter. It is only upon examining the case of the petitioners by respondent No.3, it can be concluded whether petitioner No.1 is an association of person, who is liable to tax or not. Under the circumstances, it is not appropriate for respondent No.4 to demand 20% of the alleged dues as late as in the year 2022 and the same is liable to be set aside. Hence, the following:- ORDER (i) The demand of respondent No.4 as against petitioner No.1 bearing DIN & Letter No.ITBA/COM/F/17/2021-22/1040372402(1) dated 04.03.2022 vide Annexure – J to the writ petition is hereby set aside.
- 7 - (ii) Respondent No.3 – Commissioner of Income Tax (Appeals)-6 is hereby directed to dispose of the case of the petitioners as expeditiously as possible. (iii) It is hereby made clear that no opinion has been expressed on merits of the case and it is for respondent No.3 to take a decision in accordance with law without being influenced by any of the observations made herein above. (iv) It is also made clear that petitioners will have to pay such tax as determined by respondent No.3 subject to further challenges if any and the petitioners shall not be entitled to claim the benefit of limitation in this regard. (v) The writ petition is disposed of accordingly.
Sd/-
JUDGE
MH/-