Madras High Court
Vedanta Limited vs The Deputy Commissioner Of Income Tax on 29 August, 2025
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
1 W.A.(MD)NO.373 and Batch of 2023
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
RESERVED ON : 11.08.2025
PRONOUNCED ON : 29.08.2025
CORAM
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
AND
THE HON'BLE MR.JUSTICE K.RAJASEKAR
W.A.(MD)Nos.373, 374, 375, 413, 414 and 415 of 2023
AND
C.M.P.(MD)Nos.4105, 4111, 4112, 4114, 4117, 4118, 4513, 4514,
4516, 4517, 4522, 4523, 14413, 14416, 14415, 14414, 14418,
14419, 14420, 14421, 14422, 14423, 14424, 14425, 14542,
14543, 14544, 14545, 14546 & 14547 of 2023
Vedanta Limited,
(Successor of Strerlite Industries (India) Ltd.,)
1st Floor, “C” Wing, Unit 103, Corporate Avenue,
Atul Projects, Chakala, Andheri(East),
Mumbai – 400 093,
Maharashtra.
The present address:-
SIPCOT Industrial Complex,
Madurai Bypass Road,
Tuticorin – 628 002. ... Appellant / Petitioner
in all writ appeals
Vs.
1. The Deputy Commissioner of Income Tax,
(International Taxation),
No.207, VP Rathinasamy Nadar Road,
C.R.Building, Bibikulam,
Madurai – 625 002.
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2 W.A.(MD)NO.373 and Batch of 2023
2. The Commissioner of Income Tax (International Taxation),
4th Floor, Tower-1, BSNL Building,
16, Greams Road, Chennai – 600 006.
... Respondents/Respondents
in all writ appeals
Prayer in WA(MD) 373 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8270 of 2017
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 374 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.11831 of 2019
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 375 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.7939 of 2022
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 413 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8269 of 2017
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 414 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8344 of 2021
dated 24.02.2023 on the file of this Court and allow the writ appeal.
Prayer in WA(MD) 415 of 2023 : Writ Appeal filed under Clause 15
of Letters Patent, to set aside the order in W.P.(MD)No.8351 of 2021
dated 24.02.2023 on the file of this Court and allow the writ appeal.
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3 W.A.(MD)NO.373 and Batch of 2023
in all cases : -
For Appellant : Mr.R.V.Easwar, Senior Counsel
for Mr.G.Baskar.
For Respondents : Mr.N.Dilipkumar, Standing counsel.
***
COMMON JUDGMENT
(By G.R.SWAMINATHAN, J.) These writ appeals are directed against the common order dated 24.02.2023 made in W.P.(MD)Nos.11831 of 2019, 7939 of 2022, 8269 and 8270 of 2017 and 8344 and 8351 of 2021.
2. The assessee is the appellant in all these appeals. The following table captures the relevant details:- 3/20
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3.The appellant company is engaged in the business of mining and exploration of metals and oil and natural gas. During the relevant financial years commencing from 2009-2010 to 2014-2015, the appellant entered into a Consultancy Agreement and Representative Office Agreement with Vedanta Resources Public Limited Company (VRPLC) which is a non-resident entity. For the services rendered by VRPLC, remuneration was paid by the appellant without deducting tax at source. Treating the appellant as an assessee in default in terms of Section 201(1) of the Income Tax Act 1961, show cause notices were issued in respect of the assessment years commencing from 2010-2011 to 2015-16 on various dates. After receiving the appellant's reply, final orders were also passed on various dates and demands were raised. Challenging the same, the appellant filed the aforementioned writ petitions.
4.The prime ground of attack was that the orders passed under Sections 201 and 201(1A) are time-barred. According to the appellant, final order could not have been passed beyond a period of four years from the end of the relevant financial years. The learned 4/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 5 W.A.(MD)NO.373 and Batch of 2023 Single Judge rejected the said contention and held that such an order can be passed anytime within 7 years. The learned Single Judge made it clear that the issue of limitation alone had been decided and that the merits of the matter have not been gone into. Liberty was given to the appellant to file statutory appeals. Aggrieved by the same, these writ appeals have been filed.
5.The learned Senior Counsel appearing for the appellant reiterated all the contentions set out in the grounds of appeals. He pointed out that the payments made to the foreign entity were in lieu of the management services rendered by it. The appellant's file is with the international taxation circle of the department. The appellant had informed the department in their returns that tax had not been deducted at source on account of the double taxation treaty between India and UK. In fact, the department was fully aware of the nature of the transactions. It is not as if such payments had been made for the first time to the foreign entity. On earlier occasions, the department never disputed the stand of the appellant that what was paid to the foreign entity was only for management services which did not require deduction of tax at source, and the payments made 5/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 6 W.A.(MD)NO.373 and Batch of 2023 were allowed as expenditure. But in respect of the aforesaid financial years, the department took the stand that what was paid was fee for technical services and hence, the tax ought to have been deducted at source. The learned Senior Counsel would strongly contend that during the relevant time, since no limitation period was prescribed in the statute in respect of payments made to non-residents, courts have been holding that the order under Sections 201 and 201A cannot be passed beyond a period of four years.
6.The learned Senior counsel relied on the following case laws:-
(1) (2007) 1 SCC 584 (ESI Corpn. Vs. C.C.Santhakumar). (2) (2006) 3 SCC 74 (Transmission Corpn. of A.P. Ltd. and others Vs. Sri Rama Krishna Rice Mill).
(3) (2004) 11 SCC 364 (Commissioner of Customs, Kandla Vs. Essar Oil Ltd., and Others).
(4) (2002) 1 SCC 134 (Veerayee Ammal Vs. Seeni Ammal). (5) (AIR1969 SC 1297) (State of Gujarat Vs. Patel Raghav Natha & Ors).
(6) (2007) 11 SCC 363) (State of Punjab Vs. Bhatinda District Coop. Milk Producers Union Ltd.). 6/20
https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 7 W.A.(MD)NO.373 and Batch of 2023 (7) (2020 (374) E.L.T. 15 (Mad). (J.Sheik Parith Vs. Commissioner of Customs).
(8) (1997) 6 SCC 71 (Mohamad Kavi Mohamad Amin Vs. Fatmabai Ibrahim).
(9) (2007) 295 ITR 136 (Mad) (M.Srinivasa Rao Vs. ACIT) (10) (2009) 316 ITR 303 (Delhi) (CIT Vs. Goyal M.G.Gases (P) Ltd.,) (11) (2017) 291 CTR 254 (Delhi) (Bharti Airtel Ltd., Vs. UOI).
(12) 2008 (305) ITR 137 (Delhi) (CIT Vs. NHK Japan Broadcasting Corporation).
(13) (2016) 385 ITR 436 (Delhi) (Vodafone Essar Mobile Services Ltd., Vs. Union of India).
(14) (2015) 372 ITR 684 (Delhi) (CIT Vs. C.J.International Hotels Pvt. Ltd.) (15) (2010) 323 ITR 230 (Delhi) (CIT Vs. Hutchision Essar Telecom Ltd.) (16) (2014) 365 ITR 560 (Bombay) (Director of Income Tax Vs. Mahindra & Mahindra Ltd.) 7/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 8 W.A.(MD)NO.373 and Batch of 2023 (17) (2015) 371 ITR 314 (AP) (CIT Vs. U.B. Electronic Instruments Ltd.,) (18) (2016) 384 ITR 77 (Karnataka) (CIT Vs. Bharat Hotels Ltd.,) (19) (2016) 389 ITR 654 (Gujarat) (CIT (TDS) Vs. Anagram Wellington Assets Management Co. Ltd.,) (20) (2012) 345 ITR 552 (Himachal Pradesh) (CIT Vs. Satluj Jal Vidyut Nigam Ltd.,) (21) (2017) 397 ITR 305 (Allahabad) (Mass Awash (P) Ltd., Vs. CIT) (22) (2014) 365 ITR 548 (Calcutta) (Bhura Exports Ltd., Vs. ITO (TDS)) (23) (2012) 340 ITR 219 (Punjab & Haryana) (Income Tax Vs. H.M.T. Ltd.,) Written arguments were filed on behalf of the assessee and we were taken through it also.
7.Per contra, the learned Standing counsel appearing for the department submitted that the order of the learned Single Judge is 8/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 9 W.A.(MD)NO.373 and Batch of 2023 well reasoned and that it does not call for interference. He pointed out that Section 201 has been amended from time to time and as the Section stood when the impugned orders were passed, the limitation was seven years with respect to residents and that therefore, the reasonable time to pass an order with respect to non-residents cannot be lesser than this period. He also pointed out that the writ petition ought to have been dismissed on the ground that the assessee did not exhaust the appeal remedy. He relied on the following case laws:-
(i) (2024) 469 ITR 46(SC) ( Union of India Vs. Rajeev Bansal)
(ii)(2023) 155 taxmann.com 97 (Telangana) (Dr.Reddys Laboratories Ltd., Vs. Deputy Commissioner of Income Tax)
(iii) (2024) 158 taxmann.com 163 (Telangana) The Commissioner of Income Tax Vs. Idea Cellular Ltd.
(iv) (2014) 47 taxmann.com 82 (Allahabad) (Jagran Prakashan Ltd. Vs. Deputy Commissioner of Income-Tax (TDS).
He prayed for dismissal of these writ appeals.
8.We carefully considered the rival contentions and went through the materials on record. As per Section 195 of the Income 9/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 10 W.A.(MD)NO.373 and Batch of 2023 Tax Act, an obligation is cast on a person making payment to a foreign company to deduct tax at source under certain circumstances. Section 201 of the Act sets out the consequence of failure to deduct tax and provides that such a person shall be deemed to be an assessee in default. According to the Department, the assessee failed to carry out this statutory obligation and hence, they should be deemed to be an assessee in default. The learned Senior Counsel for the assessee made it clear that he is contesting the impugned orders only on the ground of limitation and not on merits.
9.It is not in dispute that during the relevant period, while specific periods were prescribed in respect of deductions to be made from the residents, no such period was prescribed in respect of non- residents. The stand of the department is that since no limitation has been prescribed in the latter case, Courts should not prescribe any ceiling period. We cannot accept such a contention. The position has been amply made clear in the recent decision of the Hon'ble Supreme Court reported in (2022) 19 SCC 188 (Union of India V. CITI Bank). It was held therein as follows:-
“19. It is a settled proposition of law that when the 10/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 11 W.A.(MD)NO.373 and Batch of 2023 proceedings are required to be initiated within a particular period provided under the statute, the same are required to be initiated within the said period. However, where no such period has been provided in the statute, the authorities are required to initiate the said proceeding within a reasonable period. No doubt that what would be a reasonable period would depend upon the facts and circumstances of each case. ”
10.The High Courts of Delhi, Bombay, Calcutta, Karnataka as well as Madras have been holding that an order under Section 201 of the Act has to be passed within a reasonable period. The Hon'ble Division Bench of the Karnataka High Court in the decision reported in (2024) 167 Taxmann.com 134 (Karnataka) (Nilgiri Diary Farm (Pvt) Ltd vs ITO) following its earlier decision in CIT vs Bharat Hotels (2016) 384 ITR 77 held that to pass an order under Section 201(1) and / or Section 201(1A) in respect of non-residents, four years would be the limitation or reasonable time. The Hon'ble Division Bench of the Delhi High Court in Bharti Airtel Ltd Vs UOI (2017) 291 CTR 254, following its earlier decision in Vodafone Essar Mobile Services Limited vs UOI (2016) 385 ITR 436 took the same view. The decision of Hon'ble Bombay High Court in DIT 11/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 12 W.A.(MD)NO.373 and Batch of 2023 (International Taxation) v. Mahindra & Mahindra Ltd. [2014] 48 taxmann.com 150/225 Taxman 306 is also on the same lines. However the Hon'ble Division Bench of the Allahabad High Court in Mass Awash Pvt Ltd vs CIT (2017) 397 ITR 305 declined to prescribe any limitation for exercising power under Sections 201(1) and 201(1A) and held that an order has to be passed within a reasonable time and what would be reasonable will have to be construed depending on the facts of each case.
11.Thus the overwhelming weight of authority is that an order under Sections 201 and 201(1A) of the Act will have to be passed within a reasonable period of time in respect of non-residents. The learned single Judge is right in his opinion that the concept of reasonable period cannot be confined to a strait-jacket formula and that it appears to be a dynamic concept. This is evident from the fact that in respect of the deductions pertaining to resident Indians, the limitation period is being varied from time to time. Till 01.04.2010, no specific limitation period was prescribed. By way of Finance (No. 2) Act, 2009, with effect from April 1, 2010, sub-sections (3) and (4) along with provisos were inserted, the relevant extract of which read as under:
12/20
https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 13 W.A.(MD)NO.373 and Batch of 2023 "(3) No order shall be made under sub-section (1) deeming a person 'to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of—
(i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed ;
(ii) four years from the end of the financial year in which payment is made or credit is given, in any other case:” This was amended in the year 2012 with retrospective effect from 01.04.2010 and the four years period was enhanced to six years.
With effect from 01.10.2014, it became seven years. This was the position which prevailed when the impugned orders were passed.
12.The learned Single Judge opined that “the reasonable period” for passing order under Section 201(1) of the Act deeming a person to be an “assessee in default” for failure to deduct taxes in respect of payments to non-residents shall also be seven years from the end of the financial year in which the payment is made or credit given w.e.f 01.04.2010. Reason has also been given for taking such a view. It is well settled that the law of limitation is a procedural law and it is to be retrospectively applied subject to certain exceptions. The law of limitation that is in vogue on the date of the commencement of the action governs it (vide (2019) 11 SCC 633). It 13/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 14 W.A.(MD)NO.373 and Batch of 2023 is equally well settled that if during the running of limitation, there is an amendment extending the period, the Amendment Act will apply. In the cases on hand, the earliest financial year is 2009-10. The limitation period was originally four years and then extended to six years w.e.f 01.04.2010. As per this, the limitation period would expire only on 31.03.2016. Even before the expiry of this period, another amendment came w.e.f 01.10.2014 extending the period to seven years. That is why, the learned Single Judge took the view that the reasonable period for non-residents should also be seven years.
13.We are not in agreement with the aforesaid view. This is for two reasons. The expression “reasonable” implies a kind of fluidity. Reasonableness is the antithesis of rigidity. When a particular period, whether four years or seven years, is taken as the ceiling for passing an order under Section 201 of the Act in respect of payments made to non-residents, it means that the said period has been prescribed as the limitation period. Conceptually, it ceases to be a reasonable period. What is reasonable period has to be determined with reference to the facts of that particular case. It cannot be prescribed for all categories of cases.
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14.As rightly highlighted by the learned Senior Counsel appearing for the assessee, the number of transactions pertaining to non-residents would be very small compared to that of residents. The task of gathering information in the case of non-residents is also comparatively less arduous. Therefore, the period of limitation in the case of non-residents cannot be greater than what has been prescribed in the case of residents.
15.Looked at from this perspective, if at all, while seven years can be the outer limit, it cannot become the touchstone to test all the impugned orders on that basis. In respect of the assessment years 2010-11 and 2011-12, show cause notices were issued in Feb/March 2017. Final orders were passed on 31.03.2017. Good enough !. But in respect of the assessment years 2012-13 and 2013-14, show cause notices were issued only on 31.01.2018. While final order was passed in one case on 28.03.2019, in the other, final order was passed only on 22.03.2021. Show cause notices for the other two assessment years were issued only on 01.03.2021. The appellant is the assessee in respect of all the six assessment years. The subject matter is the same in respect of all the impugned orders. The 15/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 16 W.A.(MD)NO.373 and Batch of 2023 recipient in all the cases is also the same entity. Since payment to overseas entity is involved, the assessee falls under the International Taxation Circle. Nothing stopped the department from issuing notices in respect of the assessment years commencing from 2012-13 to 2015-16 when they issued show cause notice on 08.02.2017 for the first time for the AY 2011-12. Even if seven years is taken as the yardstick, while it is possible to save the orders dated 31.03.2017 on that ground, the same logic cannot obviously be extended to the orders passed in respect of the other assessment years. There is no earthly reason as to why simultaneous action was not initiated in respect of all the assessment years in Feb 2017 itself. Admittedly, by then, the assessment year 2015-16 had already ended. The moot question is why show cause notice in respect of the assessment years 2014-15 and 2015-16 were issued only on 01.03.2021. If seven years can be a reasonable period for the assessment year 2010-11 and 2011-12, it definitely cannot be a reasonable period for passing an order under Section 201 of the Act for the assessment years 2014-15 or 2015-16. In other words, seven years cannot be the reasonable for all the subject assessment years. 'One-size-fits-all' approach ill-fits the facts on hand. We have to 16/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 17 W.A.(MD)NO.373 and Batch of 2023 observe that the department did not conduct itself reasonably but for reasons best known to it, delayed things in respect of AY 2012-13 to 2015-16.
16.We have found an easier way to resolve the issue. The learned Single Judge had rightly observed that the period of limitation has been varied from time to time. Section 201 had been amended yet again. This time, the distinction between residents and non-residents has been done away with. Both types of transactions have been placed on the same footing. Limitation period is now six years. This is the position w.e.f 01.04.2025. It is true that when the impugned orders were passed, the statute had prescribed seven years as limitation in respect of payments made to residents. For the reasons indicated in the previous paragraph, we cannot reckon seven years as the reasonable period for all the six assessment years. We are, therefore, of the view that taking six years which is now the statutorily mandated period can be taken as the reckoning yardstick.
17.We have to assign our reason as to why we are not accepting the argument of the learned Senior Counsel for the assessee that four 17/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm ) 18 W.A.(MD)NO.373 and Batch of 2023 years must be taken as the limitation period. When it came to determining what could be the reasonable period for the purpose of passing order Under Section 201 in respect of non-residents, the High Courts had taken inspiration from the period prescribed in respect of the residents and held that the reasonable period in respect of non-residents would also be four years. But almost all those decisions were concerned with the assessment years prior to 2010-2011.
18.Coming to the facts on hand, it is seen that in respect of the assessment year 2010-2011, the final order was passed on 31.03.2017. Six years has to be reckoned from 31.03.2010. Therefore, the order dated 31.03.2017 impugned in WP(MD)No.8269 of 2017 is set aside. As regards the assessment year 2011-12, 31.03.2011 is the reckoning date. The order impugned in WP(MD)No. 8270 of 2017 was passed on the last date of limitation and is saved. In respect of the remaining four assessment years, all the orders impugned in WP(MD)Nos.11831 of 2019, 8344 of 2021, 8351 of 2021 & 7939 of 2022 were passed beyond six years from the reckoning date. They are set aside.
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19.For the foregoing reasons, the impugned common order dated 24.02.2023 is set aside except in respect of WP(MD)No.8270 of 2017. W.A.(MD)Nos.374, 413, 414, 415 and 375 of 2023 are allowed and W.A.(MD)No.373 of 2023 is dismissed. The assessee is given liberty to file appeal before the authority against the order impugned in W.P.(MD)Nos.8270 of 2017. If such an appeal is filed within four weeks from the date of receipt of a copy of this order, the appellate authority shall entertain the same and dispose it of on merits. No costs. Consequently, connected miscellaneous petitions are closed.
(G.R.SWAMINATHAN, J.) & (K.RAJASEKAR, J.)
29th August 2025
NCC : Yes / No
Index : Yes / No
Internet : Yes/ No
SKM
To:
1. The Deputy Commissioner of Income Tax,
(International Taxation),
No.207, VP Rathinasamy Nadar Road,
C.R.Building, Bibikulam, Madurai – 625 002.
2. The Commissioner of Income Tax (International Taxation), 4th Floor, Tower-1, BSNL Building, 16, Greams Road, Chennai – 600 006.
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AND K.RAJASEKAR, J.
SKM W.A.(MD)Nos.373, 374, 375, 413, 414 and 415 of 2023 29.08.2025 20/20 https://www.mhc.tn.gov.in/judis ( Uploaded on: 04/09/2025 04:00:54 pm )