Dismissed

Metal Industries Ltd. v. Hindustan Petroleum Corporation Limited

Kerala HC1 Nov 2022WA/1076/2022

Case brief

AI extract

What is this about?

This intra-court appeal challenged the Single Judge's dismissal of a writ petition against tax collection at source under Section 206CCA. The applicant argued that only defaults in the current year should count. The Division Bench held that Section 206CCA(3) includes earlier defaults in filing returns.

What did the court decide?

The writ appeal against the Single Judge's judgment dismissing the writ petition is dismissed.

Metal Industries Ltd. Vs Hindustan Petroleum Corporation Limited — Income Tax | Kerala HC (2022)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE S.V.BHATTI

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THE HONOURABLE MR.JUSTICE BASANT BALAJI

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TUESDAY, THE 1^ST DAY OF NOVEMBER 2022 / 10TH KARTHIKA, 1944

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WA NO. 1076 OF 2022

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AGAINST THE JUDGMENTWP(C) 22942/2022 OF HIGH COURT OF KERALA

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APPELLANT/S:

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METAL INDUSTRIES LTD, SHORANUR, KULAPPULLY ROAD, SHORANUR, PIN-679122 REPRESENTED BY ITS MANAGING DIRECTOR, MR.M.K. LAKSHMINARAYANAN, PIN - 679122

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BY ADVS. ANIL D. NAIR; TELMA RAJU EDATHARA VINEETA KRISHNAN; P.K.BIJU

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RESPONDENT/S:

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1 HINDUSTAN PETROLEUM CORPORATION LIMITED PETROLEUM HOUSE, REGISTERED OFFICE, 17 JAMSHEDJI TATA ROAD,MUMBAI , PIN - 400020

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2 THE INCOME TAX OFFICER WARD-1 & TPS, PALAKKAD-678 001 (IMPLEADED AS ADDL. R2 AS PER ORDER DATED 22.07.2022 IN I.A. NO.01/2022 IN W.P.C). , PIN - 678001

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3 CENTRAL BOARD OF DIRECT TAXES (TPL DIVISION) GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, REPRESENTED BY ITS SECRETARY (SUO MOTU IMPLEADED AS ADDL.R3 AS PER ORDER DATED 26.7.2022) , PIN - 678001

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W.A. No.1076/2022

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BY ADVS. SRI. ANTONY DOMINIC, SC, HINDUSTAN PETR CHRISTOPHER ABRAHAM; Gopikrishnan Nambiar M K.JOHN MATHAI(J-212); JOSON MANAVALAN(J-526) KURYAN THOMAS(K/131/2003); PAULOSE C. ABRAHAM(MAH/58/2006) RAJA KANNAN(K/356/2008)

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THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 01.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.A. No.1076/2022

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J U D G M E N T

S.V. Bhatti, J.

The writ petitioner is the appellant. The parties are referred to as arrayed in the writ petition. The petitioner, aggrieved by the judgment dated 02.08.2022 in W.P.(C) No.22942/2022 has filed the instant intra-Court appeal. The petitioner prayed for the following reliefs:

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“(i) call for the records leading to collection of tax collected at source at 5% under See.206CCA for the financial year 2022-23 vide Exhibit P2 and P3 and quash the same by issuing a writ of certiorari:

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(ii) pending hearing and final disposal of the Writ Petition, this Hon'ble Court be pleased to grant stay of operation of Sec.206CCA to the Petitioner to the extent of supplies being lifted from the Respondent.

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(iii) issue such other and further reliefs as this Hon'ble Court may deem fit and proper in the interest of justice.”

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W.A. No.1076/2022

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The issue centers around the amendment made to

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Section 206 CCA of the Income Tax Act by the Finance Act 2022. The Central Board of Direct Taxes (CBDT) issued Circular 10/2022 dated 17.05.2022 on the methodology to be followed in determining ‘Specified Person’ for the purposes of Section 206CCA of the Income Tax Act. The learned Single Judge, in detail, adverting to the circumstances leading to the filing of the writ petition, the amendment to Section 206CCA by the Finance Act 2022, and the CBDT Circular dated 17.05.2022, dismissed the writ petition. Hence the appeal.

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Mr Anil D Nair appearing for the petitioner, argues that the judgment under appeal, to begin with, is erroneous because the judgment adopted the methodology or construction suggested by the CBDT Circular dated 17.05.2022. The question urged by the petitioner is that, according to Section 206CCA, the petitioner can file the return on or before 31.10.2022, which has

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W.A. No.1076/2022

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been extended till 07.11.2022. Once the return of income for the

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Financial Year 2021-22 is filed during the Assessment Year 202223, the petitioner cannot be treated as a ‘Specified Person’, and the deduction of a higher rate for the commission or omission in filing the return for earlier Assessment Years shall not be reckoned for determining whether the petitioner is a ‘Specified Person’ or not.

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Mr Christopher Abraham appearing for the Department, argues that the contention now put forward by the petitioner is completely misplaced. The very purpose of the amendment is to reduce the period from two years to one year, and an assessee becomes a ‘Specified Person’ if the obligation cast by Sub-section (1) of Section 139 has not been complied with and the period provided under Section 139(1) of the Act stood expired. In other words, the argument of Mr Christopher Abraham is that the filing of the income tax return for the

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W.A. No.1076/2022

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Financial Year 2021-22 within the time i.e., on or before 07.11.2022, is no reason to exclude the petitioner from the list of ‘Specified Person’ in any of the preceding Financial Years/Assessment Years where the petitioner is in default in filing the return. Admittedly, the petitioner has not filed returns within the period stipulated under Sub-section (1) of Section 139 of the Income Tax Act. The construction now sought to be commended to this Court, if accepted, would defeat the language and the purpose of the amendment introduced through the Finance Act 2022. He prays for dismissing the appeal.

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We have taken note of the rival contentions, and a very short point of consideration arises in the appeal: Whether the period specified in Section 206CCA(3) is limited to the current Assessment Year or takes within its fold the default arising on account of non-filing of return in terms of Sub-

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W.A. No.1076/2022

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section (1) of Section 139 of the Income Tax Act? The Section is

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excerpted in the judgment under appeal. Though it is repetitive, for comprehensive understanding, the applicable

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Section is reproduced hereunder:

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“ Special provision for collection of tax at source for nonfilers of income-tax return.

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206CCA . (1) Notwithstanding anything contained in any other provisions this Act, where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person [****] from a specified person, the tax shall be collected at the higher of the following two rates, namely:

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(i) at twice the rate specified in the relevant provision of the Act; or

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(ii) at the rate of five percent.

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(2) If the provisions of section 206CC is applicable to a specified person, in addition to the provisions of this section, the tax shall be collected at higher of the two rates provided in this section and in section 206 CC.

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(3) For the purposes of this section, "specified person" means a person who has not "[furnished the return of income for the assessment year relevant to the previous year immediately

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W.A. No.1076/2022

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preceding the financial year in which tax is required to be collected, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year:] (emphasis supplied)

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Provided that the specified person shall not include a nonresident who does not have a permanent establishment in India. Explanation.-For the purposes of this sub-section, the expression "permanent establishment" includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.”

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6. According to Sub-section (3) of Section 206CCA, the

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consequence is attracted the moment the return of income under Sub-section (1) of Section 139 has not been filed within

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the time limit, or the petitioner/assessee allowed the time to expire. The Sub-section does not say that the Sub-section is applicable only to the Financial Year 2021-22 and to the corresponding Assessment Year 2022-23. It is in this

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W.A. No.1076/2022

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background that the CBDT Circular throws light on the preparation of the list of ‘Specified Person’. We are unable to accept the argument now put forward by Mr Anil D Nair that the earlier defaults shall not be taken into consideration for including the petitioner in the ‘Specified Person’ list. Section 206CCA(3) is clear, and through interpretation, the meaning assignable to the expression is that it takes within its fold earlier defaults as well.

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For the above additional reasons and by expressing agreement with the reasons recorded by the learned Single Judge, the appeal is liable to be dismissed. Accordingly dismissed. No order as to costs.

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Sd/S.V.BHATTI

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JUDGE Sd/BASANT BALAJI JUDGE

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jjj

Metal Industries Ltd. v. Hindustan Petroleum Corporation Limited

Case brief

What is this about?

What did the court decide?

Metal Industries Ltd. v. Hindustan Petroleum Corporation Limited

Case brief

What is this about?

What did the court decide?

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