IN HIGH COURT OF DELHI AT NEW DELHI 12 W.P. (C) 686/2017 & CM 29390/2019 GENPACT INDIA PRIVATE LIMITED Petitioner Through: Mr S. Ganesh, Senior Advocate with Mr Rishi Agrawala, Mr Karan Luthra and Ms Aarushi Tiku, Advocates. versus DEPUTY COMMISSIONER OF INCOME TAX & ANR. Respondents Through: Mr Zoheb Hossain, Senior Standing Counsel for Revenue/R-1 with Mr Deepak Garg, Additional CIT, Range- 10. Mr Dev P. Bhardwaj, Central Govt. Standing Counsel for R-2 with Ms Anubha Bhardwaj, Advocate. CORAM: JUSTICE S.MURALIDHAR JUSTICE TALWANT SINGH ORDER 19.08.2019 Dr. S. Muralidhar, J.: 1. Aggrieved by one portion of assessment order concerning alleged liability of Petitioner (hereafter Assessee ) under Sections 115-QA and 115-QB of Income Tax Act, 1961 ( Act ) in impugned assessment order dated 31st December, 2016 passed by Assessing Officer ( AO ) (Respondent No. 1), Assessee has approached this Court with present petition under Article 226 of Constitution of India. Along with petition, application being CM No.3141/2017 was filed seeking W.P.(C) 686/2017 Page 1 of 16 interim directions to restrain Respondents from enforcing demand in terms of impugned order. 2. By impugned assessment order, inter alia, demand was sought to be created under Section 115-QA of Act in relation to Assessee buying back 10 lakhs equity shares out of opening share capital of 25,68,700 shares from M/s. Genpact India Investment, Mauritius ( GII ) in two phases in May and October, 2013. case of Revenue was that scheme adopted to buyback such shares was colourable device to evade buyback distribution tax liability under Act. case of Assessee on other hand was that buyback of shares was pursuant to scheme of arrangement under Section 391 of Companies Act, 1956 ( CA ) approved by High Court of Delhi. This would, therefore, not be buyback under Section 77-A CA for purposes of Section 115QA of Act, as it stood at relevant time. 3. At outset, it requires to be noticed that impugned order of assessment was passed under Section 143 (3) of Act for Assessment Year ( AY ) 2014-15. said impugned assessment order deals with certain other issues, apart from issue concerning demand under Section 115 QA of Act. As regards other issues, Assessee preferred statutory appeal under Section 246-A of Act before Commissioner of Income Tax (Appeals) [ CIT (A) ]. Court is informed that Assessee succeeded in said appeal and against order of CIT (A), Revenue has filed appeal, which is stated to be pending before Income Tax Appellate Tribunal ( ITAT ). W.P.(C) 686/2017 Page 2 of 16 4. As far as present petition is concerned, when it was first listed for hearing on 25th January 2017, while directing notice to be issued in present petition, this Court in application for interim relief being CM No.3141/2017 passed following order: CM No.3141/2017 6. Issue notice. Mr. Asheesh Jain, Advocate accepts notice for respondent No.l while Mr. Dev P. Bhardwaj, Advocate accepts for respondent No. 2. 7. applicant/petitioner claims interim order to suspend demand made by Income Tax Authorities to tune of Rs.812 crores by their order dated 31.12.2016. It is contended on behalf of petitioner that demand is premised upon Assessment Officer's (AO) determination that levy under Section 115QA of Finance Act, 2013 [(as existing prior to its amendment) hereinafter to be referred as 'the Act'] applied. It is pointed out that levy - by virtue of Section 115QA (1) and (2) of Act is confined to, what is defined as 'buy-back' under Explanation (i) to Section 115QA (1). Elaborating on this, it is argued that non obstante clause, which changed definition as well as charging provision under, Section 115QA, confines levy only to transactions that are covered by it. solitary nature of transactions covered is buy-back in terms of Section 11A of Companies Act, 1956. It was submitted that in all other instances where buy-back arrangements are resorted to in accordance law, such as for approval of scheme of compromise and arrangement under Section 391 of Companies Act, levy would not apply. 8. Learned counsel relied upon order of this Court in GENPACT India (CP No. 349/2013, decided on 10.09.2013) where identical argument was urged by Regional Director of Income Tax, who contended that buy-back was contrary to law as it was meant to circumvent provisions of Section 11A of Companies Act. This Court had, it is pointed out, overruled submission. Likewise, W.P.(C) 686/2017 Page 3 of 16 applicant relied upon judgment of Capgemini India (P) Ltd (Co. Scheme Petition No 434 of 2014, decided by Bombay High Court on 28.04.2015). 9. Learned counsel for Revenue, appearing on advance notice, has opposed petition on ground of interim relief arguing that alternative remedy under Section 250 is available. It is submitted that though levy, is special one, forms part of Income Tax Act and, therefore, AO's order is appealable. It is argued on merits that restrictive nature of Section 77A, which places fetters upon company, is sought to be circumvented, by petitioner, through buy- back arrangements. This clearly is not permissible because nature of buyback far exceeds stipulations, that has been ever applied to petitioner had it proceeded under Section 77A of Companies Act. In these circumstances, being devise, Revenue was entitled to ignore it and subject transactions to levy. 10. Prima facie, in this Court's opinion, non-obstante clause in Section 115QA of Act restricts nature of levy to transactions defined by provision itself. transactions defined are those covered by Section 11A of Companies Act. Significantly, Parliamentary intent to cover all manners of share acquisition by Company of its own shares, is evident from subsequent amendment to Section 115QA of Act, when it explained meaning of 'buy-back' in First Explanation by not alluding merely to Section 11A of Companies Act but all other provisions of law. That this provision was not given retrospective effect, in this Court's opinion, further strengthens petitioner's submissions. 11. In view of these prima facie reasons, Court is of opinion that impugned demand to tune it seeks to recover levy under Section 115QA of Act should not be enforced till next date of hearing. It is so directed. 12. List on 28.03.2017. W.P.(C) 686/2017 Page 4 of 16 13. copy of this order be given dasti to parties. 5. In response to notice in present petition, counter affidavit dated 30th June, 2017 was filed by Respondent, in which preliminary objection was raised regarding maintainability of petition. It was submitted that alternative efficacious remedy was available to Assessee under Act against impugned order. On 30 th August, 2017, adjournment was sought on behalf of Respondents stating that Additional Solicitor General of India ( ASG ) had been engaged and that he was in some difficulty. While directing case to be listed on 25th October, 2017 at 2.15 pm for hearing, this Court made interim order dated 25 th January, 2017 absolute during pendency of petition. 6. Thereafter, petition kept getting adjourned for one reason or other and could not be taken up for hearing. Even on 22nd May, 2019 and 3rd July, 2019, adjournments were sought by Respondent stating that ASG, who had to appear on their behalf was in some difficulty. 7. In rejoinder filed to counter affidavit on issue of maintainability of petition, it is contended by Assessee that since Court had already heard matter at some length on two occasions, and thereafter entertained writ petition , it is clear that Court intended to decide matter on merits. It is further submitted that matter raises pure question of law regarding interpretation of Section 115QA of Act and that this Court should decide said question as it will impact number of other Assessees as well. W.P.(C) 686/2017 Page 5 of 16 8. In meanwhile, Revenue filed CM No. 29390/2019 praying that this Court should pass order on maintainability of writ petition and dismiss it on ground of availability of alternative remedy. 9. Mr S. Ganesh, learned Senior Counsel appearing for Assessee, first submitted that there was no alternative remedy available to Assessee as far as demand created under Section 115 QA of Act was concerned. According to him although this portion of demand formed part of impugned assessment order under Section 143 (3) of Act, it was actually simply added (or as he put it stapled ) to assessment order. He insisted that that is how order creating demand under Section 115 QA of Act should be viewed. 10. To substantiate above plea, Mr. Ganesh referred to Section 2 (45) of Act which defines total income to mean total amount of income refer to under Section 5 of Act, computed in manner laid down in this Act and Section 143 (3) of Act which again refers to assessment order being passed in respect of total income of Assessee. It is contended that while Section 246-A of Act talks of appeal of assessment order under Section 143 (3) of Act being appealable one, as far as impugned assessment order is concerned, portion concerning alleged liability of Petitioner under Section 115-QA of Act, is in fact separate demand not relatable to main assessment order for forming part of it. Referring to Section 115-QA of Act, Mr. Ganesh insists that amount chargeable thereunder is in addition to total income and, therefore, that portion of impugned assessment order W.P.(C) 686/2017 Page 6 of 16 should be treated as separate order against which no appeal was provided for under Act. 11. Mr Ganesh also referred to decisions in Paradip Port Trust v Sales Tax Officer 1998 (4) SCC 90; Whirlpool Corporation v. Registrar of Trade Marks [1998) 8 SCC 1; Siemens Ltd v State of Maharashtra (2006) 12 SCC 33; Aircel Ltd. v Commercial Tax Officer (2016) 70 taxman 274 (SC) and decision of Gujarat High Court in Vishwanath Engineers v Assistant Commissioner of Income Tax (2013) 352 ITR 549 (Guj) to urge that mere existence of efficacious alternative remedy under Act would not preclude this Court from entertaining present writ petition which according to him involved short question of interpretation of Section 115-QA of Act. 12. On merits, Mr Ganesh submitted that demand was sought to be created under Section 115-QA of Act in relation to Assessee buying back 10 lakhs equity shares out of share capital of 25,68,700 shares from M/s Genpact India Investment, Mauritius ( GII ) in two phases in May and October, 2013 but it was not buy back under Section 77 of CA. buyback was pursuant to scheme of arrangement under Section 391 of CA which was approved by High Court of Delhi. He referred to fact that prior to its amendment with effect from 1 st June, 2016, Explanation 1 to Section 115-QA clarified that for purposes of said section buyback meant purchase by company of its own shares in accordance with provisions of Section 77-A of CA. amendment to Explanation 1 by Finance Act 2016, substituted words Section 77-A of Companies W.P.(C) 686/2017 Page 7 of 16 Act, 1956 with words any law for time being in force relating to companies. This amendment was expressly made effective only from 1st June, 2016. Accordingly, it is submitted that entire demand created under Section 115-QA of Act in respect of above buyback of its own shares from GII was unsustainable in law. 13. additional point raised on merits by Mr Ganesh, which admittedly is not pleaded in writ petition, is based on recent decision dated 25th July, 2019 of Supreme Court in CA No. 5409/2019 [Pr. Commissioner of Income Tax, New Delhi v Maruti Suzuki India Limited 2019 (10) SCALE 21]. Elaborating this point, Mr Ganesh pointed out that in impugned assessment order, name of Assessee was shown Genpact India (Now merged with Genpact India - Private Limited', PAN: AABCE446JB) whereas assessment was framed in name of entity which did not exist as of date of order since it stood merged with Genpact India Private Limited ( GIPL ). Even PAN number in column No.3 was shown as AAACG9163H , which was admittedly different from PAN number of GIPL. It is accordingly contended that entire assessment order under Section 143 (3) of Act would be bad in law and to extent it includes demand under Section 115-QA of Act, it would be unsustainable in law. 14. Mr Zoheb Hossain, learned Senior Standing Counsel for Revenue, on other hand, submitted, that petition is not maintainable and that Revenue would straightway concede that it was in fact appealable order under Section 246-A of Act. Referring to decisions in Director W.P.(C) 686/2017 Page 8 of 16 General of Police, Central Reserve Police Force, New Delhi v P.M Ramalingam (2009) 1 SCC 193; Authorized Officer, State Bank of Travancore v Mathew K.C. (2018) 3 SCC 85 and CIT v. Chhabil Dass Agarwal (2013) 357 ITR 357 (SC), Mr. Hossain submitted that this Court ought not to entertain present writ petition when Assessee had efficacious alternative remedy of appeal before CIT (A) under Section 246-A of Act. 15. On merits, Mr. Hossain submitted that issue was not confined to interpretation of Section 115-QA of Act. He submitted that if Assessee had gone in appeal before CIT (A) then Revenue could have been in position to defend demand raised by AO in impugned assessment order under Section 115-QA by referring to Section 2(22) (d) of Act read with proviso to (vii) thereto. He further submitted on instructions from Mr Deepak Garg, Additional CIT, Range-10, who was present in Court that Revenue would not raise any issue regarding limitation if Assessee was to be relegated to CIT (A). Further, Revenue would be agreeable to impugned demand not being enforced till disposal of said appeal. 16. At outset, Court would first like to deal with submissions of Mr Ganesh that impugned demand raised under Section 115-QA of Act should not be construed as forming part of impugned assessment order and that it is something separate from it. While it is true that demand under Section 115-QA of Act would be in addition to total income, fact of matter is that in present case it forms integral W.P.(C) 686/2017 Page 9 of 16 part of impugned assessment order under Section 143 (3) of Act. Reading assessment order as whole, it is plain to Court that this demand under Section 115-QA of Act is in addition to demands under other issues, all of which form part of impugned assessment order. In fact, Paragraph 11 of impugned assessment order, which gives computation of total taxable income, includes demands raised under all heads and it includes demand under Section 115-QA of Act. Therefore, it is not possible for this Court to read this part of order separate from rest of assessment order. 17. decisions cited by both sides appear to indicate that depending on facts of particular case, Supreme Court has expressed view that High Courts either should not have entertained writ petition under Article 226 of Constitution in face of availability of efficacious alternative remedy or that it should have entertained writ petition, notwithstanding availability of such remedy. For instance in CIT v. Chhabil Dass Agarwal (supra) where challenge was raised in writ petition to notice under Section 148 of Act and subsequent assessment order, Supreme Court, referring to its earlier decisions, observed as under: 15. Thus, while it can be said that this Court has recognized some exceptions to rule of alternative remedy, i.e., where statutory authority has not acted in accordance with provisions of enactment in question, or in defiance of fundamental principles of judicial procedure, or has resorted to invoke provisions which are repealed, or when order has been passed in total violation of principles of natural justice, proposition laid down in Thansingh Nathmal case, Titagarh Paper Mills case and other similar judgments that High W.P.(C) 686/2017 Page 10 of 16 Court will not entertain petition under Article 226 of Constitution if effective alternative remedy is available to aggrieved person or statute under which action complained of has been taken itself contains mechanism for redressal of grievance still holds field. Therefore, when statutory forum is created by law for redressal of grievances, writ petition should not be entertained ignoring statutory dispensation. 16. In instant case, Act provides complete machinery for assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by Revenue Authorities, and assessee could not be permitted to abandon that machinery and to invoke jurisdiction of High Court under Article 226 of Constitution when he had adequate remedy open to him by appeal to Commissioner of Income Tax (Appeals). remedy under statute, however, must be effective and not mere formality with no substantial relief. In Ram and Shyam Co. vs. State of Haryana, (1985) 3 SCC 267 this Court has noticed that if appeal is from Caesar to Caesar s wife existence of alternative remedy would be mirage and exercise in futility. 18. Liberty was granted to Assessee in aforementioned case to file appropriate appeal against order of reassessment. 19. On other hand, in Siemens Ltd v. State of Maharashtra (supra), demand of cess against Petitioner by means of show cause notice ( SCN ) was challenged in writ petition under Article 226 of Constitution of India before High Court of Bombay. Bombay High Court refused to entertain challenge to SCN by following short order: Challenge is to show cause notice issued by Corporation W.P.(C) 686/2017 Page 11 of 16 demanding certain payment of cess on value of goods imported from Aurangabad and Daman. Petitioners may file their reply to show cause notice and produce relevant documents within two weeks. In case order is adverse to petitioner no recovery shall be made for period of four weeks from date of service of order on petitioner. 20. On facts of case, Supreme Court was of view that authority issuing SCN had already formed opinion as regards liability of Assessee. It proceeded to observe as under: If in passing order respondent has already determined liability of appellant and only question which remains for its consideration is quantification thereof, same does not remain in realm of show cause notice. writ petition, in our opinion, was maintainable. 21. In Whirlpool Corporation v. Registrar of Trade Marks (supra), it was pointed out that: 15.Under Article 226 of Constitution, High Court, having regard to facts of case, has discretion to entertain or not to entertain writ petition. But High Court has imposed upon itself certain restrictions one of which is that if effective and efficacious remedy is available, High Court would not normally exercise its jurisdiction. But alternative remedy has been consistently held by this Court not to operate as bar in at least three contingencies, namely, where writ petition has been filed for enforcement of any of Fundamental Rights or where there has been violation of principle of natural justice or where order or proceedings are wholly without jurisdiction or vires of Act is challenged. 22. In present case while there is no challenge to constitutional validity of Section 115-QA of Act. impugned order is not challenged W.P.(C) 686/2017 Page 12 of 16 on ground that it is wholly without jurisdiction . What is sought to be urged is that point involved pure question of law concerning interpretation of Section 115-QA of Act and therefore this Court should entertain present writ petition. It is also urged that since Assessee had already been heard on more than one occasion by this Court, it should not have at stage of final hearing, be rejected only on ground of maintainability. 23. question regarding interpretation of Section 115-QA of Act, as it stood at relevant time, can definitely be gone into by CIT (A). Further, this Court has in fact not expressed any view yet on maintainability of petition, although as rightly pointed out matter was heard on this aspect earlier as well. fact remains that Respondent raised objection at first available opportunity. Due to reasons noted hereinbefore, issue could not be decided till now. It would, however, not be correct to state that this Court has impliedly overruled such objection and decided to hear petition on merits. 24. Court also notes in this context that Assessee has in fact succeeded in its appeal before CIT (A) on other issues arising out of same impugned assessment order and it is Revenue which is now in appeal before ITAT. There is no reason why this one other issue arising from impugned assessment order cannot also be examined by CIT(A). 25. Court is conscious that nearly three years have elapsed since passing of impugned assessment order. However, in view of W.P.(C) 686/2017 Page 13 of 16 statement made on behalf of Revenue that they would raise no objection regarding maintainability of appeal under Section 246A of Act before the CIT (A) and would also not raise any objection regarding limitation, Court sees no prejudice being caused to Assessee by being relegated to CIT (A). Most importantly, with Revenue agreeing not to enforce demand till conclusion of appellate proceedings before CIT (A), Assessee is not going to be inconvenienced. Moreover, this Court proposes to issue directions for time bound disposal of appeal by CIT (A). 26. On additional point raised by Mr. Ganesh on whether impugned assessment order was framed against entity which ceased to exist at time of passing of impugned order, on strength of decision of Supreme Court in Pr. Commissioner of Income Tax, New Delhi v Maruti Suzuki India Limited (supra), this Court leaves it open to Assessee to raise this issue in appeal before CIT (A). Likewise, although impugned assessment order does not refer to alternative plea of Revenue seeking to justify impugned demand with reference to Section 2 (22) (d) of Act, Court leaves it open to Revenue raise this issue before CIT (A). 27. Accordingly, writ petition is disposed of with following directions: (i) Court declines to entertain this writ petition under Article 226 of Constitution against impugned demand raised by Revenue by way of impugned assessment order under Section 115-QA of W.P.(C) 686/2017 Page 14 of 16 Act against Assessee. (ii) Assessee is granted opportunity to file appeal under Section 246-A of Act before CIT (A) to challenge impugned assessment order only insofar as it creates demand under Section 115 QA of Act. (iii) If such appeal is filed within ten days from today, it will be considered on its own merits and reasoned order disposing of appeal will be passed by CIT (A) on all issues raised by Assessee, not limited to issues raised in present petition as well as on response thereto by Revenue in accordance with law. (iv) reasoned order shall be passed by CIT (A) not later than 31st October, 2019. It will be communicated to Petitioner within ten days thereafter. For period of two weeks after date of such communication of order, demand under impugned assessment order, if it is affirmed by CIT (A) in appeal, will not be enforced against Assessee. (v) Court places on record statement of Revenue that it will not raise any objection before CIT (A) as to maintainability of such appeal and as to appeal being barred by limitation. Court also takes on record statement of Revenue that it will not enforce demand in terms of impugned assessment order till disposal of above appeal. All of above is subject to Assessee filing appeal before CIT (A) within ten days from today. W.P.(C) 686/2017 Page 15 of 16 (vi) It is made clear that this Court has not expressed any view whatsoever on contentions of either party on merits of case. 28. writ petition and pending application are disposed of with above directions. No costs. S. MURALIDHAR, J. TALWANT SINGH, J. AUGUST 19, 2019 rd W.P.(C) 686/2017 Page 16 of 16 Genpact India Private Limited v. Deputy Commissioner of Income-tax & Anr