Gujarat High Court
Halar Ship And Freight Forwarders Pvt. ... vs Income Tax Officer (International ... on 19 September, 2022
Author: N.V.Anjaria
Bench: N.V.Anjaria, Bhargav D. Karia
C/SCA/19599/2021 ORDER DATED: 19/09/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 19599 of 2021
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HALAR SHIP AND FREIGHT FORWARDERS PVT. LTD.
Versus
INCOME TAX OFFICER (INTERNATIONAL TAXATION)
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Appearance:
MR. TUSHAR HEMANI, SR. ADV. WITH MS VAIBHAVI K PARIKH(3238) for
the Petitioner(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 2
NOTICE SERVED BY DS for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 19/09/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) In the facts and circumstances of the case and having regard the request and consent of the learned advocates for the parties, the petition was taken up for final consideration.
1.1 Rule, returnable forthwith. Learned advocate Mr. Varun Patel waives service of Rule on behalf of the respondent authorities.
1.2 Heard learned senior advocate Mr. Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioner and learned advocate for the respondent.
2. What is prayed in this petition filed under Article 226 of the Page 1 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022 C/SCA/19599/2021 ORDER DATED: 19/09/2022 Constitution is to direct the respondent income-tax authorities to release the refund of the income tax amount to the petitioner in respect of the Assessment Year 2011-2012.
3. Stating the relevant facts, weeding out unnecessary details, the petitioner, a shipping agent, acted on behalf of one M/s. OK Marine PTE Limited, a Singapore based company, in relation to a vessel named "M. V. Mercury Triumph". The petitioner filed return of income under section 172(3) of the Income Tax Act, 1961, on 30.3.22011 of the above vessel. The income tax officer passed assessment order dated 29.12.2011 whereby freight tax on freight earned by the freight beneficiary, that is M/s. OK Marine PTE Limited in respect of the voyage of the above vessel came to be determined at Rs. 5,58,852/-. The appeal preferred before the appellate authority against the said authority came to be dismissed on 15.5.2013. The Assessing Officer addressed letter dated 4.3.2014 calling upon the petitioner to pay the said outstanding amount and stated that failure would entail recovery proceedings. The petitioner paid the amount under protest from its own bank account.
3.1 In Appeal bearing ITA No. 318 of 2013, the issue came to be decided in favour of the petitioner by order dated 26.9.2017 and the amount of Rs. 5,58,852/- paid under protest as above, was directed to be refunded to the petitioner. The petitioner addressed letter dated 23.10.2017 requesting the Assessing Officer to pass necessary orders in light of the decision in appeal stating inter alia that the amount was paid under protest, submitting the challans and giving detailed break-up of the payment aggregating to Rs. 5,58,852/-
Page 2 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022C/SCA/19599/2021 ORDER DATED: 19/09/2022 3.2 The Assessing Officer passed an order giving effect to the decision
in appeal revising the freight tax computed at Nil. The petitioner again requested the Assessing Officer to release the refund. However, the Assessing Officer by letter dated 14.2.2018 informed the petitioner refusing to refund on the following grounds, (i) demand was reduced to NIL for the Vessel in question vide Appeal effect order dated 21.12.2017,
(ii) tax payments were made in the PAN of the freight beneficiary, (iii) Jurisdiction over the PAN of freight beneficiary was with some another officer therefore refund could not be issued.
3.3 The petitioner lodged grievance on the on-line portal of the department and after failing to receive any response, by letter dated 11.09.2018 brought the facts to the notice of the Deputy Commissioner of Income Tax, Circle 2, New Delhi who was the Assessing Officer of the freight beneficiary. Yet another letter of grievance was addressed on 11.2.2019.
3.4 While asserting that the refund should be given to it as an agent of the freight beneficiary, the petitioner stated to the competent authority in the aforesaid letters inter alia that, (i) the freight beneficiary did not have any objection against granting of refund of Rs. 5,58,852/- for the Assessment Year 2011-12 in relation to demand raised in the case of the petitioner as an agent; (ii) such demand was paid by the petitioner from its own bank account, (iii) such amount was not reimbursed by the freight beneficiary to the petitioner, (iv) tax was paid by the petitioner from its own bank account in the PAN of the freight beneficiary and (v) on receipt of appellate order, amount is required to be refunded to the petitioner.
Page 3 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022C/SCA/19599/2021 ORDER DATED: 19/09/2022 3.5 Not only the above facts and aspects were pointed out to the
authorities, the petitioner submitted indemnity bond dated 27.2.2019 to undertake to indemnify Assessing Officer on account of any loss or claim arising out of the refund of the said amount, if granted to the petitioner. The petitioner also drew attention of the income tax authorities by addressing letter about the instructions in relation to "modification in approval process for issue of paper refunds and manual order upload functionality in OTBA module". It may be stated with relevance that the said modification in the approval process inter alia mentions that many requests were received from the field seeking permission to refund manually because in certain categories and in certain situation, the uploading facility was not catering to the need.
3.6 One of such category was mentioned to be the "refund to the "representative assessee of the non-resident". It was stated in the said instructions that the list was only illustrative only and any other situation where refund cannot be issued through system may be considered for manual issue by filed formation . In other words, it was contemplated that where on-line process was not possible, such situation may be answered by giving refund by accepting the applications manually.
3.7 Though, several requests were made by the petitioner for refund and repeated reminders were sent, finally case of the petitioner appears to be closed by the authorities on 2.12.2020 on the ground that no challan was getting reflecting in PAN of the petitioner and no payment made, therefore any refund application was also not pending. It is in light of the Page 4 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022 C/SCA/19599/2021 ORDER DATED: 19/09/2022 above facts and grievance that the petitioner has filed this petition seeking the prayers for refund of the tax paid by it.
4. Learned advocate for the petitioner submitted that the petitioner acted as an agent of the assessee and could be granted refund amount. He submitted that when there was no objection from M/s. OK Marine PTE Limited, if the refund being given to the petitioner on its behalf, there was no good reason for the department to refuse to issue the refund order.
4.1 Contesting the petition, affidavit-in-reply was filed on behalf of the respondent, on the basis of which it was submitted by learned advocate for the respondent that the petitioner herein had filed during the assessment year 2011-2012 return of income tax on behalf of the assessee freight beneficiary- M/s. OK Marine PTE Limited, Singapor, in relation to the Vessel and the tax was determined to be payable by the assessee. The assessee had filed appeal before the Commissioner of Income Tax (Appeals) against the order of assessment, which was rejected. However, further appeal before the Tribunal came to be allowed on 21.12.2017 and assessee was held entitled to refund of the tax paid. It was contended that since it was M/s. OK Marine PTE Limited which had paid the tax, the refund could have been given to the said party only and any entity other than the assessee having different PAN, could not be paid the refund amount. It was contended that even if the petitioner had paid the amount out of is pocket, it was the matter between both of them -the principal and agent. It was thus contended that the department rightly did not entertain the request of the petitioner for refund of the tax.
5. The compass of the controversy show that the dispute is about Page 5 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022 C/SCA/19599/2021 ORDER DATED: 19/09/2022 deciding the refund entitlement. There is no dispute that the assessee who had paid the tax became entitled to refund of the tax amount by virtue of judgment and order of the Income Tax Appellate Tribunal. It is undisputed that the petitioner herein Halar Ship and Freight Forwarders Pvt. Ltd. was shipping agent of the freight beneficiary-the assessee M/s. OK Marine PTE Limited. For the purpose of filling of return of income on behalf of the said freight beneficiary for the Vessel, the petitioner acted as a agent-representative.
5.1 The petitioner was eventually treated as the assessee when the return of income under section 172(3) of the Act was filed. The Income Tax Officer concerned passed order determining the tax and the appeal was preferred. The proceedings before the Income Tax Officer and subsequent appellate proceedings including upto the Tribunal were in the name of the petitioner herein, who acted as an agent of the freight beneficiary. The appellate Tribunal has held that the appellant is entitled to refund for the refund of the tax.
5.2 As far as the claim of the petitioner that it should be given refund, certain facts and aspects became material and decisive. The entitlement to refund is not in dispute. The petitioner admittedly has capacity of agent of the freight beneficiary-the principal. The agent has acted on behalf of the principal in all the proceedings. The tax was paid by the petitioner on behalf of the principal. The copies of details of the payment of tax etc. are on record which was submitted to the authorities by the petitioner claiming the refund on behalf of the principal.
5.3 Furthermore, the freight beneficiary-the principal gave no Page 6 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022 C/SCA/19599/2021 ORDER DATED: 19/09/2022
objection to the petitioner agent receiving the refund of the tax on its behalf. This no objection was conveyed to the authorities. In the letter expressing no objection to the income tax officer concerned, it was stated inter alia thus, "1. We do not have any objection against your office in granting the refund arising out of the appeal effect for the A.Y. 2011-12 amounting to Rs. 5,58,882/- for which a demand was raised as an agent agianst the company (Halar Ship & Freight Forwarders Pvt. Ltd.). As requested though the demand has been paid by them from their bank account which we have not reimbursed to them since your office insisted the demand in our PAN and, therefore, they have paid that amount from their bank account in our PAN and now on receipt of an appellate order the amount is already required to be refunded to them and we do not have any objection in the matter.
2. As can be established from the copy of bark statement already placed on record by Halar Ship & Freight Forwarders Pvt. Ltd. that the payment has been made in our PAN from their bank account and they have borne the tax burden accordingly.
In view of the facts and circumstances stated above, we hereby convey our no objection for paying a refund of Rs. 5,58,852/- for the A.Y. 2011- 12 arising out of the appeal effect order passed by your office and further certify that the tax amounting to Rs. 5,58,852/- has been paid by them and we have not reimbursed the tax to Halar Ship & Freight Forwarders Pvt. Ltd., and, therefore, kindly note that we have not taken any credit of this amount in our regular assessment proceedings."
5.4 The Director of the petitioner company also filed indemnity bond also to indemnify the department to reimburse any loss or claim arising out of the issue of refund in the name of the petitioner. The interest of the department is thus protected by the indemnity bond. The no objection from the principal and the indemnity both are on record.
5.5 Provisions of section 172 of the Income Tax Act falls under Chapter XV, Part-H, pertaining to Profits of non-residents from Page 7 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022 C/SCA/19599/2021 ORDER DATED: 19/09/2022 occasional shipping business. Section 172 refers to shipping business of non-residents. As per the provisions of sub-section(3) of section 172, it is mandatory for the master of the ship before departure from any port in India of any such ship, to prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf on account of carriage of all passengers, livestock, mail or goods shipped at that port since the last arrival of the ship thereat. Proviso to sub-section(3) of section 172 of the Act reads as under :
"Provided that where the Assessing Officer is satisfied that it is not possible for the master of the ship to furnish the return required by this sub-section before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the Assessing Officer may, if the return is filed within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by the master as sufficient compliance with this sub-section."
5.6 On perusal of the aforesaid proviso, it is clear that the Assessing Officer may, if the return is filed within 30 days of the departure of ship by any other person on behalf of the master of the ship, deem the filing of the return by the person so authorised by Master as sufficient compliance with sub-section(3) of section 172. In facts of the case, the petitioner has filed such return and has also paid tax on behalf of the master of the ship in PAN account of the owner of the ship. Therefore, for all intent and purpose, the petitioner who has paid the amount of tax for and on behalf of the ship owner is entitled to get refund of the same in the same manner in which such tax is paid. It is not in dispute that even in the order giving the effect to the order of the Tribunal, the Assessing Officer has ordered to give credit of the pre-paid taxes after due verification in the name of Page 8 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022 C/SCA/19599/2021 ORDER DATED: 19/09/2022 the petitioner as an agent of M/s. OK Marine Pvt. Ltd, Singapore.
6. In view of the above aspects, it could not be said that the petitioner agent is not entitled to be issued the refund order. It would not be an irregularity if the refund amount is paid to the petitioner. Even the instructions of the department permits issuance of refund manually whenever required. The insistence on the part of the respondent authorities in not issuing the refund order to the petitioner agent and only to issue such refund to freight beneficiary-the principal, is pedantic and amounts to an arbitrary approach to the issue. The denial to issue the refund to the petitioner lacks rationale in the facts obtained as above.
6.1 As a result, the petition succeeds. The respondent is directed to release the tax refund amount with interest at the prescribed rate for the assessment year 2011-2012 to be paid to the petitioner who shall receive it acting as an agent of the freight beneficiary- M/s. OK Marine PTE Limited within four weeks from the date of receipt of the order.
7. The petition is allowed. Rule is made absolute.
Direct service is permitted.
(N.V.ANJARIA, J) (BHARGAV D. KARIA, J) C.M. JOSHI Page 9 of 9 Downloaded on : Sun Dec 25 02:08:58 IST 2022