Madras High Court
Vedanta Limited vs The Deputy Commissioner Of Income Tax on 29 August, 2025
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
1 W.A.(MD)NO.373 and Batch of 2023
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
RESERVED ON : 11.08.2025
PRONOUNCED ON : 29.08.2025
CORAM
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
AND
THE HON'BLE MR.JUSTICE K.RAJASEKAR
W.A.(MD)Nos.373, 374, 375, 413, 414 and 415 of 2023
AND
C.M.P.(MD)Nos.4105, 4111, 4112, 4114, 4117, 4118, 4513, 4514,
4516, 4517, 4522, 4523, 14413, 14416, 14415, 14414, 14418,
14419, 14420, 14421, 14422, 14423, 14424, 14425, 14542,
14543, 14544, 14545, 14546 & 14547 of 2023
Vedanta Limited,
(Successor of Strerlite Industries (India) Ltd.,)
1st Floor, “C” Wing, Unit 103, Corporate Avenue,
Atul Projects, Chakala, Andheri(East),
Mumbai – 400 093,
Maharashtra.
The present address:-
SIPCOT Industrial Complex,
Madurai Bypass Road,
Tuticorin – 628 002. ... Appellant / Petitioner
in all writ appeals
Vs.
1. The Deputy Commissioner of Income Tax,
(International Taxation),
No.207, VP Rathinasamy Nadar Road,
C.R.Building, Bibikulam,
Madurai – 625 002.
1/20
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2 W.A.(MD)NO.373 and Batch of 2023
2. The Commissioner of Income Tax (International Taxation),
4th Floor, Tower-1, BSNL Building,
16, Greams Road, Chennai – 600 006.
... Respondents/Respondents
in all writ appeals
Prayer in WA(MD) 373 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8270 of 2017
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 374 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.11831 of 2019
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 375 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.7939 of 2022
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 413 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8269 of 2017
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 414 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8344 of 2021
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 415 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8351 of 2021
dated 24.02.2023 on the file of this Court and allow the writ appeal.
2/20
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3 W.A.(MD)NO.373 and Batch of 2023
in all cases : -
For Appellant : Mr.R.V.Easwar, Senior Counsel
for Mr.G.Baskar.
For Respondents : Mr.N.Dilipkumar, Standing counsel.
***
COMMON JUDGMENT
(By G.R.SWAMINATHAN, J.)
These writ appeals are directed against the common order
dated 24.02.2023 made in W.P.(MD)Nos.11831 of 2019, 7939 of
2022, 8269 and 8270 of 2017 and 8344 and 8351 of 2021.
2. The assessee is the appellant in all these appeals. The
following table captures the relevant details:-
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3.The appellant company is engaged in the business of mining
and exploration of metals and oil and natural gas. During the relevant
financial years commencing from 2009-2010 to 2014-2015, the
appellant entered into a Consultancy Agreement and Representative
Office Agreement with Vedanta Resources Public Limited Company
(VRPLC) which is a non-resident entity. For the services rendered by
VRPLC, remuneration was paid by the appellant without deducting
tax at source. Treating the appellant as an assessee in default in
terms of Section 201(1) of the Income Tax Act 1961, show cause
notices were issued in respect of the assessment years commencing
from 2010-2011 to 2015-16 on various dates. After receiving the
appellant's reply, final orders were also passed on various dates and
demands were raised. Challenging the same, the appellant filed the
aforementioned writ petitions.
4.The prime ground of attack was that the orders passed under
Sections 201 and 201(1A) are time-barred. According to the
appellant, final order could not have been passed beyond a period of
four years from the end of the relevant financial years. The learned
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Single Judge rejected the said contention and held that such an order
can be passed anytime within 7 years. The learned Single Judge
made it clear that the issue of limitation alone had been decided and
that the merits of the matter have not been gone into. Liberty was
given to the appellant to file statutory appeals. Aggrieved by the
same, these writ appeals have been filed.
5.The learned Senior Counsel appearing for the appellant
reiterated all the contentions set out in the grounds of appeals. He
pointed out that the payments made to the foreign entity were in lieu
of the management services rendered by it. The appellant's file is
with the international taxation circle of the department. The
appellant had informed the department in their returns that tax had
not been deducted at source on account of the double taxation treaty
between India and UK. In fact, the department was fully aware of the
nature of the transactions. It is not as if such payments had been
made for the first time to the foreign entity. On earlier occasions, the
department never disputed the stand of the appellant that what was
paid to the foreign entity was only for management services which
did not require deduction of tax at source, and the payments made
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were allowed as expenditure. But in respect of the aforesaid financial
years, the department took the stand that what was paid was fee for
technical services and hence, the tax ought to have been deducted at
source. The learned Senior Counsel would strongly contend that
during the relevant time, since no limitation period was prescribed in
the statute in respect of payments made to non-residents, courts
have been holding that the order under Sections 201 and 201A
cannot be passed beyond a period of four years.
6.The learned Senior counsel relied on the following case laws:-
(1) (2007) 1 SCC 584 (ESI Corpn. Vs. C.C.Santhakumar).
(2) (2006) 3 SCC 74 (Transmission Corpn. of A.P. Ltd. and
others Vs. Sri Rama Krishna Rice Mill).
(3) (2004) 11 SCC 364 (Commissioner of Customs, Kandla Vs.
Essar Oil Ltd., and Others).
(4) (2002) 1 SCC 134 (Veerayee Ammal Vs. Seeni Ammal).
(5) (AIR1969 SC 1297) (State of Gujarat Vs. Patel Raghav
Natha & Ors).
(6) (2007) 11 SCC 363) (State of Punjab Vs. Bhatinda
District Coop. Milk Producers Union Ltd.).
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(7) (2020 (374) E.L.T. 15 (Mad). (J.Sheik Parith Vs.
Commissioner of Customs).
(8) (1997) 6 SCC 71 (Mohamad Kavi Mohamad Amin Vs.
Fatmabai Ibrahim).
(9) (2007) 295 ITR 136 (Mad) (M.Srinivasa Rao Vs. ACIT)
(10) (2009) 316 ITR 303 (Delhi) (CIT Vs. Goyal M.G.Gases (P)
Ltd.,)
(11) (2017) 291 CTR 254 (Delhi) (Bharti Airtel Ltd., Vs.
UOI).
(12) 2008 (305) ITR 137 (Delhi) (CIT Vs. NHK Japan
Broadcasting Corporation).
(13) (2016) 385 ITR 436 (Delhi) (Vodafone Essar Mobile
Services Ltd., Vs. Union of India).
(14) (2015) 372 ITR 684 (Delhi) (CIT Vs. C.J.International
Hotels Pvt. Ltd.)
(15) (2010) 323 ITR 230 (Delhi) (CIT Vs. Hutchision Essar
Telecom Ltd.)
(16) (2014) 365 ITR 560 (Bombay) (Director of Income Tax
Vs. Mahindra & Mahindra Ltd.)
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(17) (2015) 371 ITR 314 (AP) (CIT Vs. U.B. Electronic
Instruments Ltd.,)
(18) (2016) 384 ITR 77 (Karnataka) (CIT Vs. Bharat Hotels
Ltd.,)
(19) (2016) 389 ITR 654 (Gujarat) (CIT (TDS) Vs. Anagram
Wellington Assets Management Co. Ltd.,)
(20) (2012) 345 ITR 552 (Himachal Pradesh) (CIT Vs. Satluj
Jal Vidyut Nigam Ltd.,)
(21) (2017) 397 ITR 305 (Allahabad) (Mass Awash (P) Ltd.,
Vs. CIT)
(22) (2014) 365 ITR 548 (Calcutta) (Bhura Exports Ltd., Vs.
ITO (TDS))
(23) (2012) 340 ITR 219 (Punjab & Haryana) (Income Tax
Vs. H.M.T. Ltd.,)
Written arguments were filed on behalf of the assessee and we were
taken through it also.
7.Per contra, the learned Standing counsel appearing for the
department submitted that the order of the learned Single Judge is
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well reasoned and that it does not call for interference. He pointed
out that Section 201 has been amended from time to time and as the
Section stood when the impugned orders were passed, the limitation
was seven years with respect to residents and that therefore, the
reasonable time to pass an order with respect to non-residents
cannot be lesser than this period. He also pointed out that the writ
petition ought to have been dismissed on the ground that the
assessee did not exhaust the appeal remedy. He relied on the
following case laws:-
(i) (2024) 469 ITR 46(SC) ( Union of India Vs. Rajeev Bansal)
(ii)(2023) 155 taxmann.com 97 (Telangana) (Dr.Reddys
Laboratories Ltd., Vs. Deputy Commissioner of Income Tax)
(iii) (2024) 158 taxmann.com 163 (Telangana) The
Commissioner of Income Tax Vs. Idea Cellular Ltd.
(iv) (2014) 47 taxmann.com 82 (Allahabad) (Jagran
Prakashan Ltd. Vs. Deputy Commissioner of Income-Tax (TDS).
He prayed for dismissal of these writ appeals.
8.We carefully considered the rival contentions and went
through the materials on record. As per Section 195 of the Income
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Tax Act, an obligation is cast on a person making payment to a
foreign company to deduct tax at source under certain
circumstances. Section 201 of the Act sets out the consequence of
failure to deduct tax and provides that such a person shall be deemed
to be an assessee in default. According to the Department, the
assessee failed to carry out this statutory obligation and hence, they
should be deemed to be an assessee in default. The learned Senior
Counsel for the assessee made it clear that he is contesting the
impugned orders only on the ground of limitation and not on merits.
9.It is not in dispute that during the relevant period, while
specific periods were prescribed in respect of deductions to be made
from the residents, no such period was prescribed in respect of non-
residents. The stand of the department is that since no limitation has
been prescribed in the latter case, Courts should not prescribe any
ceiling period. We cannot accept such a contention. The position
has been amply made clear in the recent decision of the Hon'ble
Supreme Court reported in (2022) 19 SCC 188 (Union of India V.
CITI Bank). It was held therein as follows:-
“19. It is a settled proposition of law that when the
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proceedings are required to be initiated within a particular
period provided under the statute, the same are required to be
initiated within the said period. However, where no such period
has been provided in the statute, the authorities are required to
initiate the said proceeding within a reasonable period. No doubt
that what would be a reasonable period would depend upon the
facts and circumstances of each case. ”
10.The High Courts of Delhi, Bombay, Calcutta, Karnataka as
well as Madras have been holding that an order under Section 201 of
the Act has to be passed within a reasonable period. The Hon'ble
Division Bench of the Karnataka High Court in the decision reported
in (2024) 167 Taxmann.com 134 (Karnataka) (Nilgiri Diary Farm
(Pvt) Ltd vs ITO) following its earlier decision in CIT vs Bharat
Hotels (2016) 384 ITR 77 held that to pass an order under Section
201(1) and / or Section 201(1A) in respect of non-residents, four
years would be the limitation or reasonable time. The Hon'ble
Division Bench of the Delhi High Court in Bharti Airtel Ltd Vs UOI
(2017) 291 CTR 254, following its earlier decision in Vodafone
Essar Mobile Services Limited vs UOI (2016) 385 ITR 436 took the
same view. The decision of Hon'ble Bombay High Court in DIT
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(International Taxation) v. Mahindra & Mahindra Ltd. [2014] 48
taxmann.com 150/225 Taxman 306 is also on the same lines.
However the Hon'ble Division Bench of the Allahabad High Court in
Mass Awash Pvt Ltd vs CIT (2017) 397 ITR 305 declined to
prescribe any limitation for exercising power under Sections 201(1)
and 201(1A) and held that an order has to be passed within a
reasonable time and what would be reasonable will have to be
construed depending on the facts of each case.
11.Thus the overwhelming weight of authority is that an order
under Sections 201 and 201(1A) of the Act will have to be passed
within a reasonable period of time in respect of non-residents. The
learned single Judge is right in his opinion that the concept of
reasonable period cannot be confined to a strait-jacket formula and
that it appears to be a dynamic concept. This is evident from the fact
that in respect of the deductions pertaining to resident Indians, the
limitation period is being varied from time to time. Till 01.04.2010,
no specific limitation period was prescribed. By way of Finance
(No. 2) Act, 2009, with effect from April 1, 2010, sub-sections (3) and
(4) along with provisos were inserted, the relevant extract of which
read as under:
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"(3) No order shall be made under sub-section (1) deeming a
person 'to be an assessee in default for failure to deduct the whole
or any part of the tax from a person resident in India, at any time
after the expiry of—
(i) two years from the end of the financial year in which the
statement is filed in a case where the statement referred to in
section 200 has been filed ;
(ii) four years from the end of the financial year in which
payment is made or credit is given, in any other case:”
This was amended in the year 2012 with retrospective effect from
01.04.2010 and the four years period was enhanced to six years.
With effect from 01.10.2014, it became seven years. This was the
position which prevailed when the impugned orders were passed.
12.The learned Single Judge opined that “the reasonable
period” for passing order under Section 201(1) of the Act deeming a
person to be an “assessee in default” for failure to deduct taxes in
respect of payments to non-residents shall also be seven years from
the end of the financial year in which the payment is made or credit
given w.e.f 01.04.2010. Reason has also been given for taking such a
view. It is well settled that the law of limitation is a procedural law
and it is to be retrospectively applied subject to certain exceptions.
The law of limitation that is in vogue on the date of the
commencement of the action governs it (vide (2019) 11 SCC 633). It
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is equally well settled that if during the running of limitation, there is
an amendment extending the period, the Amendment Act will apply.
In the cases on hand, the earliest financial year is 2009-10. The
limitation period was originally four years and then extended to six
years w.e.f 01.04.2010. As per this, the limitation period would
expire only on 31.03.2016. Even before the expiry of this period,
another amendment came w.e.f 01.10.2014 extending the period to
seven years. That is why, the learned Single Judge took the view that
the reasonable period for non-residents should also be seven years.
13.We are not in agreement with the aforesaid view. This is for
two reasons. The expression “reasonable” implies a kind of fluidity.
Reasonableness is the antithesis of rigidity. When a particular
period, whether four years or seven years, is taken as the ceiling for
passing an order under Section 201 of the Act in respect of payments
made to non-residents, it means that the said period has been
prescribed as the limitation period. Conceptually, it ceases to be a
reasonable period. What is reasonable period has to be determined
with reference to the facts of that particular case. It cannot be
prescribed for all categories of cases.
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14.As rightly highlighted by the learned Senior Counsel
appearing for the assessee, the number of transactions pertaining to
non-residents would be very small compared to that of residents.
The task of gathering information in the case of non-residents is also
comparatively less arduous. Therefore, the period of limitation in the
case of non-residents cannot be greater than what has been
prescribed in the case of residents.
15.Looked at from this perspective, if at all, while seven years
can be the outer limit, it cannot become the touchstone to test all the
impugned orders on that basis. In respect of the assessment years
2010-11 and 2011-12, show cause notices were issued in Feb/March
2017. Final orders were passed on 31.03.2017. Good enough !. But
in respect of the assessment years 2012-13 and 2013-14, show cause
notices were issued only on 31.01.2018. While final order was
passed in one case on 28.03.2019, in the other, final order was passed
only on 22.03.2021. Show cause notices for the other two
assessment years were issued only on 01.03.2021. The appellant is
the assessee in respect of all the six assessment years. The subject
matter is the same in respect of all the impugned orders. The
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recipient in all the cases is also the same entity. Since payment to
overseas entity is involved, the assessee falls under the International
Taxation Circle. Nothing stopped the department from issuing
notices in respect of the assessment years commencing from
2012-13 to 2015-16 when they issued show cause notice on
08.02.2017 for the first time for the AY 2011-12. Even if seven years
is taken as the yardstick, while it is possible to save the orders dated
31.03.2017 on that ground, the same logic cannot obviously be
extended to the orders passed in respect of the other assessment
years. There is no earthly reason as to why simultaneous action was
not initiated in respect of all the assessment years in Feb 2017 itself.
Admittedly, by then, the assessment year 2015-16 had already ended.
The moot question is why show cause notice in respect of the
assessment years 2014-15 and 2015-16 were issued only on
01.03.2021. If seven years can be a reasonable period for the
assessment year 2010-11 and 2011-12, it definitely cannot be a
reasonable period for passing an order under Section 201 of the Act
for the assessment years 2014-15 or 2015-16. In other words, seven
years cannot be the reasonable for all the subject assessment years.
'One-size-fits-all' approach ill-fits the facts on hand. We have to
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observe that the department did not conduct itself reasonably but for
reasons best known to it, delayed things in respect of AY 2012-13 to
2015-16.
16.We have found an easier way to resolve the issue. The
learned Single Judge had rightly observed that the period of
limitation has been varied from time to time. Section 201 had been
amended yet again. This time, the distinction between residents and
non-residents has been done away with. Both types of transactions
have been placed on the same footing. Limitation period is now six
years. This is the position w.e.f 01.04.2025. It is true that when the
impugned orders were passed, the statute had prescribed seven
years as limitation in respect of payments made to residents. For the
reasons indicated in the previous paragraph, we cannot reckon seven
years as the reasonable period for all the six assessment years. We
are, therefore, of the view that taking six years which is now the
statutorily mandated period can be taken as the reckoning yardstick.
17.We have to assign our reason as to why we are not accepting
the argument of the learned Senior Counsel for the assessee that four
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years must be taken as the limitation period. When it came to
determining what could be the reasonable period for the purpose of
passing order Under Section 201 in respect of non-residents, the
High Courts had taken inspiration from the period prescribed in
respect of the residents and held that the reasonable period in
respect of non-residents would also be four years. But almost all
those decisions were concerned with the assessment years prior to
2010-2011.
18.Coming to the facts on hand, it is seen that in respect of the
assessment year 2010-2011, the final order was passed on
31.03.2017. Six years has to be reckoned from 31.03.2010.
Therefore, the order dated 31.03.2017 impugned in WP(MD)No.8269
of 2017 is set aside. As regards the assessment year 2011-12,
31.03.2011 is the reckoning date. The order impugned in WP(MD)No.
8270 of 2017 was passed on the last date of limitation and is saved.
In respect of the remaining four assessment years, all the orders
impugned in WP(MD)Nos.11831 of 2019, 8344 of 2021, 8351 of
2021 & 7939 of 2022 were passed beyond six years from the
reckoning date. They are set aside.
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19.For the foregoing reasons, the impugned common order
dated 24.02.2023 is set aside expect in respect of WP(MD)No.8270
of 2017. W.A.(MD)Nos.374, 413, 414, 415 and 375 of 2023 are
allowed and W.A.(MD)No.373 of 2023 is dismissed. The assessee is
given liberty to file appeal before the authority against the order
impugned in W.P.(MD)Nos.8270 of 2017. If such an appeal is filed
within four weeks from the date of receipt of a copy of this order, the
appellate authority shall entertain the same and dispose it of on
merits. No costs. Consequently, connected miscellaneous petitions
are closed.
(G.R.SWAMINATHAN, J.) & (K.RAJASEKAR, J.)
29th August 2025
NCC : Yes / No
Index : Yes / No
Internet : Yes/ No
SKM
To:
1. The Deputy Commissioner of Income Tax,
(International Taxation),
No.207, VP Rathinasamy Nadar Road,
C.R.Building, Bibikulam, Madurai – 625 002.
2. The Commissioner of Income Tax (International Taxation),
4th Floor, Tower-1, BSNL Building,
16, Greams Road, Chennai – 600 006.
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G.R.SWAMINATHAN,J.
AND
K.RAJASEKAR, J.
SKM
W.A.(MD)Nos.373, 374, 375,
413, 414 and 415 of 2023
29.08.2025
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