In a recent ruling, the Madras High Court condoned a Singaporean Company’s income tax return delay for refund claims citing genuine hardship caused the delay, and ordered the petitioner to pay Rs. 50,000 for each petition to the Tamil Nadu State Legal Services Authority.
Tiong Woon Project & Contracting Pte. Ltd., the petitioner is a Singapore-based company involved in turnkey construction projects in India. The petitioner filed delayed income tax returns for Assessment Years (AY) 2012-13 and 2013-14 seeking the condonation of delay to claim tax refunds.
The petitioner had initially approached the Authority for Advance Rulings (AAR) regarding its tax liability in India, believing that filing returns could lead to rejection by the AAR under Section 245(R)(2) of the Income Tax Act.
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The petitioner claimed delays were due to a bona fide belief that filing returns might impact the pending AAR decision. The additional delay was caused by difficulties in obtaining a digital signature certificate from a foreign director.
The petitioner company sought refunds of Rs. 1,02,61,480 for AY 2012-13 and Rs. 2,80,15,691 for AY 2013-14 due to substantial TDS deductions. After the CBDT rejected the application for condonation, the petitioner appealed to the High Court of Madras.
The petitioner’s counsel argued that it did not file income tax returns because it believed this would lead to the rejection of its applications pending before the AAR, citing Section 245(R)(2) of the Income Tax Act.
The petitioner’s counsel invoked Section 119(2)(b) of the Income Tax Act, arguing that the delay in filing returns should be condoned to avoid genuine hardship. The petitioner cited past court decisions where “genuine hardship” was interpreted liberally, especially in cases without malafide intent.
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The respondent’s counsel argued that filing a tax return does not hinder an application to the AAR, referencing the Supreme Court ruling in the case of Sin Oceanic Shipping ASA Norway v. Authority for Advance Rulings. They contended that the petitioner’s belief was misplaced.
The respondents pointed out that, unlike in AY 2014-15, the petitioner’s AAR applications for AY 2012-13 and AY 2013-14 were filed after the due dates for return submissions, weakening the petitioner’s stance about avoiding AAR rejection by delaying filing.
Justice Senthilkumar Ramamoorthy noted that Section 119(2)(b) of the Income Tax Act allows condonation of delay if it helps avoid genuine hardship. Given the substantial tax deductions made at the source and the petitioner’s refund claims, the court accepted that denying the condonation could result in financial hardship for the petitioner.
The court criticized the CBDT’s decision, which heavily relied on an unrelated Supreme Court ruling (Sin Oceanic Shipping ASA Norway v. Authority for Advance Rulings) that was passed by consent, not interpretation, and did not fully address the petitioner’s genuine hardship claim.
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Therefore, the court condoned the delay in filing tax returns considering it a case of genuine hardship. The court ordered the petitioner to pay Rs. 50,000 in costs for each petition to the Tamil Nadu State Legal Services Authority. The court directed the Assessing Officer to process the returns after confirming compliance with the conditional order.
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