The Division Bench of Bombay High Court, comprising Justice K.R. Shriram and Justice Firdosh P. Pooniwalla, recently emphasized the importance of accurately determining the disputed tax. The court noted that the total assessed tax for the relevant year must be calculated, and from that amount, the taxes already paid by the assessee should be deducted. The disputed tax, as per Section 88(f), refers to the total tax determined and payable that remains unpaid on the date of declaration.
Brief Facts:
The petitioner, Bombay Dyeing & Manufacturing Co. Ltd., a public limited company engaged in the textile business, challenged the legality and validity of orders passed by the respondent, H.D. Trivedi, Deputy Commissioner of Income Tax, Central Circle 8, under the Kar Vivad Samadhan Scheme, 1998 (KVSS). The petitioner contested the certificate issued by the respondent, rejecting its rectification application and determining the tax payable under the scheme.
Contentions of the Claimant:
The petitioner argued that it had filed a writ petition earlier, challenging the validity of Section 115J of the Income Tax Act, 1961, and Circular No. 495 dated 22.09.1987. During the pendency of the said petition, the court allowed the petitioner to pay taxes as per the third interpretation given in the writ petition. However, the respondent raised a demand based on a different interpretation of the tax provisions. The petitioner claimed that the tax paid by it should be calculated differently, and the interest amount should not be reduced from the disputed tax.
Contentions of the Respondent:
The respondent contended that the disputed tax under KVSS is calculated based on the total tax determined and payable, deducting the taxes already paid by the petitioner. The respondent maintained that the interest paid as part of the tax refund should be reduced while determining the tax paid by the petitioner. It was argued that the petitioner could not benefit from its incorrect calculations and claim interest separately.
Observations by the Court:
The court observed that the dispute revolves around the correct calculation of disputed tax under KVSS. It noted that the scheme provides for calculating disputed tax based on the total tax determined and payable, minus taxes already paid by the assessee. The court agreed with the respondent that interest paid as part of the tax refund should be reduced while determining the disputed tax.
Section 88(a)(i) of the Finance Act, which governs KVSS, clearly states that the disputed income should be calculated at 35% of the disputed income. The definition of disputed tax under Section 87(f) refers to the total tax determined and payable but remaining unpaid. This definition necessitates the deduction of taxes already paid by the assessee.
After carefully considering the submissions, the Bench found that the tax authority's calculations under the KVSS were in accordance with the provisions of the Finance Act and could not be faulted.
Furthermore, the Bench observed that the Revenue issued a tax refund to the petitioner and paid interest on it because the petitioner had not properly disclosed and calculated their tax liability.
In light of this, the High Court clarified that the petitioner could not exploit their errors and claimed that the interest, which had been paid to them, should not be reduced when computing the disputed tax. The court highlighted the importance of maintaining accurate and transparent tax records and emphasized that taxpayers must not benefit from their incorrect calculations.
The decision of the Court:
The court dismissed the Writ Petition, upholding the respondent's calculation of disputed tax under KVSS. It held that the interest paid to the petitioner as part of the tax refund should be reduced while determining the tax paid by the petitioner. The court emphasized that the petitioner cannot take advantage of its incorrect calculations and claim interest separately.
Case Name: The Bombay Dyeing & Manufacturing Co. Ltd v. H.D. Trivedi and Ors
Coram: Justice K.R. Shriram and Justice Firdosh P. Pooniwalla
Case No.: Writ Petition No. 2537 of 1999
Advocates of the Petitioners: Mr. Madhur Agrawal and Mr.Atul K. Jasani, Advocates.
Advocates of the Respondent: Mr. Suresh Kumar
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