A division bench of the Delhi High Court has quashed the re-assessment proceedings against Vodafone Luxembourg 5 S A R L by noting that there is a contradiction in reasons stated by the Revenue in the reassessment notice and theproceedingsbefore the High Court.
The assessee contended that the impugned order and notices have been issued contrary to the settled legal position that where a foreign assessee has earned interest income on rupee denominated bonds issued by an Indian company as specified under Section 194LD of the Act, such income would be chargeable to tax at a concessional rate of five percent, and by virtue of Section 115A(5), such foreign entity would not be required to file a return of income in India under Section 139(1) of the Act.
The department, on the other hand, contended that the petitioner’s case has been selected for reassessment only on the ground that the respondents has doubted as to whether interest was received by thepetitioner-assessee on rupee denominated bonds issued by an Indian company or a dollar denominated bonds issued by an Indian company.
The division bench of the High Court comprising Justice Manmohan and Justice Dinesh Kumar Sharma observed that the paper book reveals that petitioner’s case was selected for re-assessment on the ground that petitioner’s case was flagged in the Non-filers Monitoring System (NMS).
“Consequently, there is a contradiction between the reason given by the respondent in the reassessment notice and the defence taken by the respondent in the present proceeding,” the Court said.
“Keeping in view the aforesaid, this Court quashes the impugned order and notices mentioned hereinabove and permits the respondent-revenue to issue a fresh re-assessment notice in accordance with law. The rights and contentions of all the parties are left open,” the Court added.
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