Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ has given 5 days to Telecom Service Providers to file a joint affidavit with respect to their proposal to secure the amount, which is to be paid against AGR dues. The matter will now be taken up on June 18, 2020.

The issues that are to be considered are:

  • reasonable time-frame
  • how to ensure the payment of the amount even within that time-frame
  • what kind of securities, undertakings and guarantees should be furnished to ensure that the amount is paid by the Telecom Service Providers

It was also brought into Court’s notice that how the demand was raised on the basis of it’s judgment with respect to Public Sector Undertakings when the licences were different and the judgment never dealt with the issue of Public Sector Undertakings and their agreements are quite different. Noticing that the licences are different, the Court asked the Department of Telecom reconsider the demand that has been sprung, within three days, and on the next date of hearing report the compliance of the action taken on the basis of this order.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393, the Court had refused  to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers and had said,

“The definition of revenue has been taken in a broad, comprehensive, and inclusive manner to pose fewer problems of interpretation, and exclusion of certain items was avoided.”

[In re Mandar Deshpande, 2020 SCC OnLine SC 501, order dated 11.06.2020]

Also read:

In a big blow to the Telecom Sector, SC refuses to change AGR definition

Case BriefsSupreme Court

Supreme Court: In some relief to the financially stressed telecom giant Vodafone Idea, the bench of UU Lalit and Vineet Saran, JJ has directed a tax refund of Rs.733 Crores to the company within 4 weeks. The Court also directed the Income Tax department to conclude the proceedings initiated pursuant to notice under sub-section (2) of Section 143 of the Act in respect of AY 2016-17 and 2017-18 as early as possible.

Background of the case

Vodafone Idea had, however, sought Rs 4,759.07 crore in tax refund from for Assessment Years 2014-15, 2015-16, 2016-17 and 2017-18. The IT Department had, however, withheld the returns on account of multiple issues like Transfer Pricing Adjustment, Capitalization of Licence Fees, 3G Spectrum Fees, Asset Restoration Cost Obligation including the effect of amalgamation of group entities which required thorough scrutiny and determination. It had argued that processing any refunds, in light of pending special audit, scrutiny and tax demands of more than Rs 4,700 crore, will be prejudicial to the interest of the revenue department.

Vodafone Idea, on the hand, argued that after the lapse of the one-year period, by reason of second proviso to Section 143 (1), the right to claim refund is vested in any assessee. This is independent of the Revenue’s power to issue a scrutiny notice under Section 143 (2), for which the period of limitation is longer. However, if the Assessing Officer does not issue any notice, or intimation, if the assessee can claim refund, that right is a statutorily vested one if, within the said period of one year, a reasoned order is not made under Section 143 (1D) within the said one year period.

On relevance of non-obstante clause under Section 143 (1D)

The Court explained that the power under sub-section (1) of Section 143 of the Act is summary in nature designed to cause adjustments which are apparent from the return while that under sub-sections (2) and (3) is to scrutinize the return and cause deeper probe to arrive at the correct determination of the liability of the assessee. It further said that if the power under sub-section (2) of Section 143 of the Act is initiated in a manner known to law, there cannot be any insistence that the processing under sub-section (1) of Section 143 be completed and refund be made before the scrutiny pursuant to notice under sub-section (2) of Section 143 is over.

It, however, going into the legislative intent behind introduction of the non-obstate clause under Section 143 (1D), said that the intent to have the general principle emanating from subsection (1) of Section 143 overridden, in case where the proceedings are initiated pursuant to notice under sub-section (2) of the Act, gets more pronounced and emphasized by use of non-obstante clause in sub-section (1D).

It explained,

“irrespective of some change in the text of said provision which was sought to be introduced by Finance Act 2016 and not accepted by Finance Act, 2017, the legislative intent is clear from the expression, “… the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2)” and by use of non-obstante clause.”

The bench, further, said that though the period for which it would not be necessary to process the return was sought to be specified by Finance Act, 2016, mere absence of such period in the provision as it stands today, makes no difference.

“As against the general principle which mandates an action in a particular manner, when an exception is to be carved out, the relevant provisions stipulate “it shall not be necessary” to adhere to and follow the manner mandated by such general principle; and if the contingency contemplated by such exception arises, the general principle is to stand overridden.”

On whether separate intimation to the assessee is mandatory or not

On the issue whether any intimation is required to be given to the assessee that because of initiation of proceedings pursuant to notice under sub-section (2) of Section 143 of the Act processing of return in terms of sub-section (1) of Section 143 of the Act, would stand deferred, he bench held that a separate intimation was neither contemplated by the statute nor would it achieve any purpose. It said,

“the issuance of notice under sub-section (2) of Section 143 is enough to trigger the required consequence.”

The Court explained that the  processing of return in terms of subsection (1A) of Section 143 of the Act is to be done through centralized processing and the scope of processing under subsection (1) of Section 143 of the Act is purely summary in character. Once deeper scrutiny is undertaken and the matter is being considered from the perspective whether there is any avoidance of tax in any manner, issuance of notice under sub-section (2) itself is sufficient indication.

“Sub-section (1D) of Section 143 of the Act does not contemplate either issuance of any such intimation or further application of mind that the processing must be kept in abeyance. It would not, therefore, be proper to read into said provision the requirement to send a separate intimation.”

[Vodafone Idea Ltd. v. Assistant Commissioner, Income Tax Circle 26 (2), 2020 SCC OnLine SC 418 , decided on 29.04.2020]