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A Supreme Court Bench of Justices UU Lalit and Vineet Saran has dismissed tax refund claims of 4,759 crores by Vodafone Idea Ltd against the Income tax department and has allowed only a refund of 733 crores.
For the assessment year of 2014-15, Vodafone had filed Income Tax Return (ITR) and claimed refund of 1,532 crores. Next, for the assessment year of 2016-17, the company claimed a refund of 1,128 crores and for assessment year 2017-18, a refund of 743 crores was sought against the ITR filed.
Vodafone Idea Ltd, then approached the Delhi High Court stating that that there "was complete inaction on part of the IT department in processing the ITRs filed by Vodafone and in issuing appropriate refund to Vodafone."
However, the department denied allegations of deliberate omission to refund amounts aggregating to Rs.4,759 crores along with applicable interest and stated that income tax returns were not processed under Section 143(1).
"The assessment years under consideration were picked up for scrutiny under Section 143(3) and there is a prima facie likelihood of a substantial demand being raised by the Income Tax Department, as has been done earlier in Vodafone's earlier case. Further, the revenue submitted that in Vodafone's own case for the AY 2011-12 wherein the returned loss was Rs. 33,93,397 and subsequently, the income determined by the Assessing Officer was Rs.546,64,25,250/-," argued the IT department.
Income tax department had stated that the ITRs of the appellant "raised multiple issues like Transfer Pricing Adjustment, Capitalization of Licence Fees, 3G Spectrum Fees, Asset Restoration Cost Obligation including the effect of amalgamation of group entities which required thorough scrutiny and determination."
The Delhi High Court in December 2018 dismissed the writ filed by Vodafone.
The Supreme Court case arose when the Delhi HC judgment was challenged by Vodafone claiming refund.
The two judge bench of the Supreme Court has held that in respect of Assessment Years ending on 31st March 2017 or before, if a notice was issued in conformity with the requirements stated in sub-section (2) of Section 143 of the Income Tax Act, it "shall not be necessary to process the refund under sub-section (1) of Section 143 of the Act and that the requirement to process the return shall stand overridden."
The Court held that as per the IT Act, the guiding principle is to ensure that the income is not under-stated or the loss is not over-stated, or the tax is not under paid in any manner.
"Upon issuance of notice, the assessee is entitled to produce evidence in support of his case. After hearing the assessee and considering the evidence so produced, by an order in writing, assessment of total income or loss is to be made,"
The Court has however ruled that 733 crores for assessment year 2014-15 be refunded, but set aside all other claims and asked the IT department to wrap up all other pending proceedings.
"Insofar as AY 2014-15 is concerned, final assessment order passed under Section 143(3) of the Act indicates that the appellant is entitled to refund of Rs.733 Crores within four weeks from today subject to any proceedings that the Revenue may deem appropriate to initiate in accordance with law," the Supreme Court ruled.
Vodafone was represented by Senior Advocate JD Mistry who were briefed by company's long term legal advisors, DMD Advocates. Senior Partners of DMD, Anuradha Dutt, Fereshte D Sethna and Vijayalakshmi Menon advised Vodafone.
Income Tax Department was represented by Zoheb Hossain.