In a major relief to Ericsson India Private Limited, the Delhi High Court has directed the income tax department to release a refund of approx.. Rs. 349 crores, held that a transaction, being revenue neutral does not affect the interests of the revenue.
The assessee-Company approached the High Court stating that an amount equivalent to approximately Rs. 214 crores which is still locked up with the them. The assessee contended that the AO has not taken into account the financial wherewithal of the petitioner–assessee. It was claimed that, at present, its net worth, as on 31.03.2021, is nearly Rs. 1873.80 crores.
Justice Rajiv Shakdher and Justice Jasmeet Singh held that it is not as if the petitioner/assessee is not offering unearned revenue for tax; it is only on account of accounting policy followed consistently that unearned revenue is offered for tax in the year in which services are rendered and/or goods are sold.
“Thus, the transaction, in effect, being revenue neutral, it does not affect the interest of revenue,” the division bench said.
The Court further noted that the upshot of the aforesaid discussion is that the estimation made by the AO that because there is a likelihood of the petitioner–assessee having to bear a tax liability of Rs. 500 crores in AY 2018-19, and, therefore, the refund sought of Rs. 349,41,45,020/- ought to be denied, is not founded on rational and cogent grounds.
“Given the aforesaid facts and circumstances, in any event, the respondents– revenue are secure, if not for more amount, at least for Rs. 214 crores towards refund, which is the amount that remains locked up; on which, we are told, no decision has been taken by the respondents–revenue as yet. The respondents–revenue will release Rs. 349,41,45,020 crores to the petitioner-assessee i.e., the refund claimed for AY 2018-19,” the Court said.
ERICSSON INDIA PRIVATE LIMITED vs ASSISTANT COMMISSIONER OF INCOME TAX, NEW DELHI & ANR.
CITATION: 2022 TAXSCAN (HC) 219
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