The SC remands back the matter - demand of over Rs. 2000 Crores for fresh consideration by the Income Tax authorities - in view of concession by counsels to do so and peculiar facts and circumstances.
- 09:00Supreme Court of India
Justice U U Lalit, Justice Indu Malhotra & Justice Hemant Gupta
The SC {COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LIMITED v. DEPUTY COMMISSIONER OF INCOME TAX LARGE TAX PAYER UNIT 1} in the present case, which involves tax demand calculated @ 15% of the total payments of Rs.19415,62,77,269/- to the shareholders, and surcharge etc as per the Act along with the interest payable u/s. 115-P of the Act, disposed of the appeal, on the consent of both the parties i.e. the revenue as well as assessee. The relevant part is reproduced below:
"18. In the peculiar facts and circumstances of the present case, while disposing of this Appeal, we direct:-
a) The communication dated 22.03.2018 shall be treated as a show cause notice calling upon the appellant to respond with regard to the aspects adverted to in said communication;
b) The appellant shall be entitled to put in its reply and place such material, on which it seeks to place reliance, within 10 days from today;
c) The appellant shall thereafter be afforded oral hearing in the matter;
d) The matter shall thereafter be decided on merits by the concerned authority within two months from today;
e) Pending such consideration, as also till the period to prefer an appeal from the decision on merits is not over, the interim order passed by the Single Judge of the High Court on 03.04.2018 and as affirmed by this Court vide its order dated 14.10.2019, shall continue to be in operation; and
f) The amount of Rs.495,24,73,287/- deposited towards payment of tax and the amount of Rs.2806,40,15,294/- which stands deposited and invested in the form of Fixed Deposit Receipts shall be subject to the decision to be taken by the concerned Authority on merits or to such directions as may be issued by the Appellate Authority."
In the present case, the appellant was engaged in the business of development of computer software and related services. In the Financial Year 2016-17, the appellant approached the High Court with a Scheme of Arrangement and Compromise under Sections 391 to 393 of the Companies Act, 1956 to buy-back its shares. The High Court sanctioned the Scheme on 18.04.2016 in Company Petition No.102 of 2016, pursuant to which the appellant purchased 94,00,534 shares at a price of Rs.20,297/- per share from its four shareholders and made a total remittance of Rs.19,080 crores approximately.
The communication dated 22.03.2018 was received by the appellant on or about 26.03.2018 and soon thereafter the bank accounts of the appellant were attached by the Income Tax Department, which is reproduced below:
“18. Thus, the payments made to the shareholders, under purchase of shares through the scheme of “arrangements and compromise”, is a dividend within the meaning of section 2(22)(d)/2(22)(a) of the Act, requiring to remit the taxes in to the government account u/s. 115-O of the Act. Further, since the company has failed to remit the taxes within the stipulated period, the company is ‘deemed to be an assessee in default’, u/s. 115-Q of the Act. Therefore the assessee company is required to remit the taxes (calculated @ 15% of the total payments of Rs.19415,62,77,269/- to the shareholders, and surcharge etc as per the Act) along with the interest payable u/s. 115-P of the Act, immediately, failing which the department will proceed with the collection and recovery of the taxes, including coercive steps, as per the provisions of the Act.”
The appeal was disposed of in above terms by the SC, while treating the said communication dated 22/03/2018 as show cause notice, for deciding the matter afresh by the authorities below.