Vedanta Ltd v Asst. Commissioner of Income Tax & ors 18-WP439-17.doc Santosh IN HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO.439 OF 2017 Vedanta Limited, No.20, Sesa Ghor, EDC Complex, Patto, Panaji, Goa-403 001 Petitioner versus 1 ASST. COMISSIONER OF INCOME TAX Circle (1), Aayakar Bhavan, EDC Complex, Patto, Panaji, Goa 403001. 2 PRINCIPAL COMISSIONER OF INCOME TAX Aayakar Bhavan, EDC Complex, Patto, Panaji, Goa 403001. 3 JOINT COMISSIONER OF INCOME TAX Range 1, Aayakar Bhavan, EDC Complex, Patto, Panaji, Goa 403001. Respondents PPEARANCES FOR PETITIONER Mr PJ Pardiwala, Senior Advocate, with RG Ramani FOR RESPONDENTS Mr K Aravinda, Senior Standing Counsel Page 1 of 6 19th September 2017 Vedanta Ltd v Asst. Commissioner of Income Tax & ors 18-WP439-17.doc CORAM : GS PATEL & NUTAN D SARDESSAI, JJ DATED : 19th September 2017. ORAL JUDGMENT (per G.S. Patel J) 1. Rule, returnable forthwith. Respondents waive service. By consent, taken up for hearing and final disposal forthwith. 2. petition is directed against order dated 24th March 2017 of Assistant Commissioner of Income Tax, Circle 1(1), Panaji. By this order ACIT, Respondent No.1, rejected Petitioner s application for permission under Section 281 of Income Tax Act, 1961. 3. We have heard learned Counsel for Petitioner and Revenue. Mr. Pardiwala for Petitioner has drawn our attention to provisions of Section 281. It is clear that this is section that is meant to protect interest of Revenue, and, specifically to guard against fraudulent transfers designed to defeat recovery by revenue. There are almost exactly parallel provisions in Companies Act. Section 281 of Income Tax Act reads thus : SECTION 281 CERTAIN TRANSFERS TO BE VOID (1) Where, during pendency of any proceedings under this Act or after completion thereof, but before service of notice under rule 2 of Second Schedule, any assessee creates charge on, or parts with possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his Page 2 of 6 19th September 2017 Vedanta Ltd v Asst. Commissioner of Income Tax & ors 18-WP439-17.doc assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by assessee as result of completion of said proceeding or otherwise: Provided that such charge or transfer shall not be void if it is made (i) For adequate consideration and without notice of pendency of such proceeding or, as case may be, without notice of such tax or other sum payable by assessee; or (ii) With previous permission of Assessing Officer. (2) This section applies to cases where amount of tax or other sum payable or likely to be payable exceeds five thousand rupees and assets charged or transferred exceed ten thousand rupees in value. Explanation: In this section, assets means land, building, machinery, plant, shares, securities and fixed deposits in banks, to extent to which any of assets aforesaid does not form part of stock-in-trade of business of assessee. (Emphasis added) 4. We are here required to examine impugned order in context of sub-clause (ii) of proviso to sub-Section (1). section is asset-specific and transfer- or charge-specific. section demands, above all, precision. application is for prior permission to create charge or effect transfer in respect of defined asset. Such application cannot be disposed of by resorting to Page 3 of 6 19th September 2017 Vedanta Ltd v Asst. Commissioner of Income Tax & ors 18-WP439-17.doc generalities ( likelihood , huge demands , might be revoked , etc). There is no room in considering application under Section 281 for response that is speculative, predicated on imponderables and unknowns such as litigation outcomes, or on suppositions that all stay orders obtained by assessee are bound to be vacated and assessee s appeals lost. Nothing in our experience suggests this to be remotely true. 5. We have considered Mr. Pardiwala s submission in regard to tenability of impugned order. We agree with him that it cannot be sustained for precise reasons we have outlined, and which we find unacceptable. There is no discussion on merits of any particular application, proposed transfer or individual asset. 6. Hence, keeping contentions of both sides open, and without rendering decision on merits of application by Petitioner, we will set aside impugned order and direct 1st Respondent to consider Petitioner s application afresh, uninfluenced by previous order and subject to certain conditions that we will set out hereafter. 7. 1st Respondent will consider Petitioner s application (including subsequent correspondence) under Section 281 de novo by 17th November 2017 (we have extended time because of intervening Diwali holidays). 1st Respondent will indicate whether he requires any clarifications or further documents or materials from Petitioner. If so, this will be communicated in writing by 17th November 2017. Petitioner will have until 15th Page 4 of 6 19th September 2017 Vedanta Ltd v Asst. Commissioner of Income Tax & ors 18-WP439-17.doc December 2017 to respond and forward necessary material. Petitioner will not seek extensions of time. On material that is finally made available to 1st Respondent, 1st Respondent will dispose of application under Section 281 by 12th January 2018. We have somewhat extended these timelines, and we have done so in order to ensure that there is no room for complaint on either side regarding inadequacy of time. 8. Finally we trust that both sides will have regard to not only Section 281, but also provisions of Circular No.4/2011 dated 19th July 2011 setting out guidelines for grant of prior permission under Section 281. 9. We will note at this stage Mr Pardiwala s submission that Petitioner has available assets in excess of Rs.80,000 crores of which roughly assets of Rs.49,000 crores assets have some form of encumbrance on them, while remaining are not so encumbered. We have noted this not with view to predetermine 1st Respondent s decision, but to assist 1st Respondent in more precisely formulating and identifying information and documentation that he requires, and also to draw attention to wording of Section 281 and circular. Therefore, once Petitioners application specifies asset, its value and nature of proposed transaction or charge, it will be for 1st Respondent to assess why that particular asset or transaction should or should not be denied permission. At cost of repetition, it will not be open to 1st Respondent to generally say that no proposed transaction or charge over any asset, though unencumbered, can be permitted because there is possibility of another demand, or on Page 5 of 6 19th September 2017 Vedanta Ltd v Asst. Commissioner of Income Tax & ors 18-WP439-17.doc account of vagaries of litigation, etc. What section and circular require of 1st Respondent is to ensure that known claims of revenue are sufficiently secured, and circular itself provides ample guidelines how this is to be achieved or done. 10. Rule is made partly absolute in these terms. There will be no order as to costs. NUTAN D. SARDESSAI J. G. S. PATEL J. Page 6 of 6 19th September 2017 Vedanta Limited v. Asst. Commissioner of Income-tax, Circle (1), Goa/ Principal Commissioner of Income-tax, Goa/ Joint Commissioner of Income-tax, Range 1, Goa