The Delhi High Court has ruled that an application under the Companies Act against the order rejecting the application for waiver of interest would fall within the scope of Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act).
The petitioner, Kapri International Pvt. Ltd a company for manufacture and export of readymade garments etc. On 1st May, 1995, a winding up order for the petitioner was passed by the Court in Company Petition No.59/1994. Prior to the winding up order in 1987, the petitioner was assessed for Income Tax AY 1984-85 at Rs.89,53,788/-.
The Court directed the liquidator to release the amounts in favour of the revenue department with respect to the outstanding tax liability of the assessee under the Income Tax Act, 1961 and the Wealth Tax Act, 1957.
The Bench consisting of Justices Mukta Gupta and Anish Dayal ruled that the VSV Act is not a taxing statute but one which provides a dispute resolution scheme for tax disputes and it was the intent of the legislature to include all sorts of disputes under the VSV Act, even if they were pending before the Commissioner of Income Tax or the courts.
The application of the assessee seeking waiver of interest was rejected by the Commissioner of Income Tax (CIT) and the assessee applied under the Direct Tax Vivad Se Vishwas Act, 2020 (VSV Act), for resolution of the disputed interest liability which was rejected by the Principal Commissioner of Income Tax (PCIT).
The revenue contended that theassessee’s application for waiver of interest, was primarily a petition under the Companies Act and thus, it was not an “appeal” within the meaning of the VSV Act.
It was contended by assessee that company application filed by it before the Delhi High Court, against the order of the CIT, comes within the purview of “disputed interest” as defined in Section 2 (1) (h) of VSV Act.
The Court ruled that Section 2 (1) (o) of the VSV Act, which defines “tax arrears”, includes distinct categories of arrears which are not cumulative but are in the alternative, i.e., disputed tax, disputed interest, disputed fee and disputed penalty.
The Bench while allowing the petition held that the attempt of the revenue department to exclude the case of the assessee from a possible settlement under the VSV Act was extremely hyper-technical, and set aside the order passed by the PCIT rejecting the declarations filed by the assessee under the VSV Act. The Court directed the PCIT to re-examine and reassess the declaration filed by the assessee and decide the matter on merits.
Mr Rajesh Jain and Mr V. Tiwari appeared for the petitioner and Mr Kunal Sharma, Ms Zehra Khan, and Mr S. Bhattacharyya appeared for the Respondent.
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