The Karnataka High Court held that entertaining of Writ Petition involves discretion of the Court and there being no inflexible rule acting as a bar to entertaining of Writ Petition even where alternative remedy is available.
Facts
The petitioner is stated to have taken term loans and working capital loans from Banks and had entered into an One Time Settlement (OTS) with the Banks, whereby portion of the interest charged by the Bank and also part of the principal amount stood waived. While petitioner had offered the waiver of interest to assessment, however, the waiver of the principal amount of term loans and working capital loans was treated to be a capital receipt and was not subjected to tax. The subject matter of dispute relates to the Assessment Year 2006-2007.
Submissions
Sri E.I.Sanmathi, learned counsel appearing for the Revenue has objected to the maintainability of the Writ Petition contending that the effect of rectification of the order would result in a fresh original order as against which there is a remedy available under Section 260A of the I.T. Act to the High Court against the order passed by the Appellate Tribunal.
Issues for Consideration
- Whether as against the order passed in Miscellaneous Petition under Section 254(2) of I.T. Act in light of the remedy of appeal being available under Section 260A of I.T. Act, the Writ Petition could be entertained?
- Whether the law laid down in Mahindra and Mahindra (supra) if taken note of, would result in benefit in the form of waiver of loan being construed as monetary benefit and not covered by Section 28(iv) of the I.T. Act?
Decision
The single judge bench of Justice S. Sunil Dutt Yadav observed that under section 260A of the I.T. Act, an appeal lies to the High Court from “every order passed in appeal by the Appellate Tribunal”, if the High Court is satisfied that the case involves a substantial question of law.
The bench noted that the petitioner contended that the rectification application was filed under Section 254(2) of the I.T. Act ought to have been allowed in its entirety in light of the law laid down by the Apex Court in Mahindra and Mahindra, wherein the Apex Court has held that waiver of loan constituted a benefit in the shape of money which was outside the purview of Section 28(iv) of I.T. Act.
The court said that the conclusion cannot be relied upon as laying down the rule of non-maintainability of Writ Petition where an alternative remedy of appeal is provided under a statute. The observations reproduced above would clearly indicate that the entertaining of Writ Petition is a matter of discretion and appropriateness.
It was further stated that the entertaining of a Writ Petition in the presence of a statutory alternative remedy is a matter of appropriateness indicating existence of discretion in the Court while recognizing the exceptions for entertaining such Writ Petitions even where an alternative remedy exists.
The court held that entertaining of Writ Petition involves discretion of the Court and there being no inflexible rule acting as a bar to entertaining of Writ Petition even where alternative remedy is available.
“The recent amendment to Section 28 of I.T. Act vide Finance Bill 202317, wherein the legislature has included ‘benefit’ even in form of ‘cash’ arising from business or profession as being chargeable to income tax. Such amendment substantiates the interpretation of the Apex Court in Mahindra and Mahindra, wherein it was concluded that the ‘benefit’ not being “other than in the shape of money” i.e., ‘benefit’ in form of ‘cash‘ would fall outside the ambit of Section 28(iv) of the I.T. Act by proposing the present amendment”, the court observed.
Case title: M/s. I.G. Petrochemicals Ltd. v/s The Income-tax Appellate Tribunal
Citation: WRIT PETITION No.20579 OF 2022 (T-IT)
