UDAY UMESH LALIT, J. - (1.) Leave granted.
(2.) This appeal arises out of the final judgment and order dated 19.08.2019 passed by the High Court of Delhi at New Delhi in Writ Petition No.686 of 2017.
(3.) The facts leading to the filing of the present appeal, in brief, are as under: (a) Out of opening share capital of 25,68,700 shares held by its sole shareholder and holding company Genpact India Investment, Mauritius, the appellant bought back 2,50,000 shares in May 2013 at the rate of Rs.32,000/- per share for a total consideration of Rs.800 crores. (b) On 10.05.2013, Chapter XIIDA consisting of Sections 115QA, 115QB and 115QC was inserted in the Income Tax Act, 1961 (hereinafter referred to as 'the Act') by the Finance Act, 2013 which came into effect from 01.06.2013. Section 115QA as it stood prior to the amendment which came into effect on 01.06.2016 was to the following effect: "Section 115QA: Tax on distributed income to shareholders - ­ (1) Notwithstanding anything contained in any other provision of this Act, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount of distributed income by the company on buy-back of shares (not being shares listed on a recognised stock exchange) from a shareholder shall be charged to tax and such company shall be liable to pay additional income-tax at the rate of twenty per cent on the distributed income. Explanation.-For the purposes of this section,- (i) "buy-back" means purchase by a company of its own shares in accordance with the provisions of section 77A of the Companies Act, 1956 (1 of 1956); (ii) "distributed income" means the consideration paid by the company on buy-back of shares as reduced by the amount which was received by the company for issue of such shares. (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on the distributed income under sub-section (1) shall be payable by such company. (3) The principal officer of the domestic company and the company shall be liable to pay the tax to the credit of the Central Government within fourteen days from the date of payment of any consideration to the shareholder on buy- back of shares referred to in sub-section (1). (4) The tax on the distributed income by the company shall be treated as the final payment of tax in respect of the said income and no further credit therefor shall be claimed by the company or by any other person in respect of the amount of tax so paid. (5) No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the income which has been charged to tax under sub- section (1) or the tax thereon." The Explanation in relation to "buy back" was, however, amended and with effect from 01.06.2016, it reads as:- "(i) "buy-back" means purchase by a company of its own shares in accordance with the provisions of any law for the time being in force relating to companies;" (c) On 10.09.2013, a scheme for arrangement was approved by the High Court of Delhi in Company Petition No.349 of 2013. Pursuant thereto, the appellant bought back another tranche of 7,50,000 shares at the rate of Rs.35,000 per share for a total consideration of Rs.2,625 crores from said Genpact India Investment, Mauritius. (d) In the income tax return filed on 28.11.2014 by the appellant for the assessment year 2014-15, "Details of tax on distributed profits of domestic companies and its payment" were given in "Schedule DDT" where the details of aforesaid transactions were given but the liability to pay any tax was denied. A notice under Section 143(2) of the Act was issued to the appellant on 03.09.2015 seeking further explanation, pursuant to which requisite details were furnished. (e) The matter was thereafter considered and an assessment order was passed by the first respondent on 31.12.2016. As many as 10 additions were made by the first respondent, one of them being in respect of liability under Section 115QA of the Act. Since we are concerned in this appeal only with the issue with regard to liability under Section 115QA, we need not deal with other issues. f) As regards the issue in question, the submissions advanced on behalf of the appellant-assessee were noted as under: "Vide Letter dated 28.12.2016, the assessee has submitted that the buy back of shares has been done in pursuance of scheme of arrangement under Section 391 of the Companies Act, 1956 approved by Hon'ble High Court of Delhi and in such manner that the same is not a buy back in terms of the Section 115QA of the Act." g) The matter was dealt with by the first respondent as under: "The submission of the assessee was considered but was not found acceptable as it has no substance. Before discussing the facts of the case and argument in support of the revenue it is also important to understand the background of the Section 115QA. Section 115QA was inserted by Finance Act, 2013 to counter the tax avoidance practice mainly adopted by Indian subsidiaries to distribute income to shareholders to Mauritius based Holding company under the garb of Buyback of shares. Under Income Tax Act, buyback of shares is taxable u/s 46A in the hands of shareholders. However, taking the benefit of Article 13 of India-Mauritius DTAA, which provides for capital gain arising on transfer of shares of Mauritius resident taxable in that country and under Mauritius tax laws capital gain is totally exempt, entire transaction used to escape the tax net. Thus to plug this loop hole in the statute, Section 115QA is introduced to provide that where shares are bought back at a price higher than the price at which those shares were issued then, balance amount will be treated as distribution of income to shareholder and Tax@20% will be payable by the Company. Section 115QA is applicable only to domestic unlisted companies. The provisions of Section 115QA have been introduced as part of Chapter XIIA as an anti- avoidance measure as also with an intent to widen the tax base in India. The explanatory Memorandum made it clear that the object is to curb tax avoidant practice of unlisted companies resorting to buy-back of shares in lieu of payment of income to shareholders and which is taxable in India. Buy back tax is attracted on amounts distributed by the company on buy-back of its own shares. Section 115QA overrides all the sections of the Act and it is a separate charging section which taxes amount distributed on buy back of shares." Rejecting the submission advanced on behalf of the appellant, the first respondent thus held that over and above nine heads under which additions were made, the appellant-assessee was also liable to pay tax at the rate of 20% in terms of Section 115QA of the Act in respect of distributed income of Rs.2,625 crores. h. It may be mentioned that insofar as those nine additions made by the aforesaid assessment order by the first respondent are concerned, an appeal was filed by the appellant. We have been apprised that the appeal was decided in favour of the appellant but further challenge at the instance of the Revenue is under consideration. As regards the issue concerning tax under Section 115QA, the appellant filed Writ Petition (Civil) No.686 of 2017 in the High Court submitting, inter alia, that the order passed by the first respondent was without jurisdiction as buy back of shares in the instant case was in pursuance of the scheme of arrangement approved by the High Court. i) The matter came up before the High Court on 25.01.2017 when a preliminary objection was raised that alternate and efficacious remedy of filing an appeal was available. While issuing notice it was observed by the High Court: "Prima facie, in this Court's opinion, the non-obstante clause in Section 115QA of the Act restricts the nature of the levy to the transactions defined by the provision itself. The transactions defined are those covered by Section 77A of the Companies Act. Significantly, the Parliamentary intent to cover all manners of share acquisition by the Company of its own shares, is evident from a subsequent amendment to Section 115QA of the Act, when it explained the meaning of 'buy-back' in the First Explanation by not alluding merely to Section 77A of the Companies Act but all other provisions of law. That this provision was not given retrospective effect, in this Court's opinion, further strengthens the petitioner's submissions. In view of these prima facie reasons, the Court is of the opinion that the impugned demand to the tune it seeks to recover levy under Section 115QA of the Act should not be enforced till the next date of hearing. It is so directed. List on 28.03.2017." j) The matter thereafter came up on 30.08.2017 when the interim order dated 25.01.2017 was made absolute. k) When the matter was taken up after completion of pleadings, it was submitted on behalf of the Revenue that since the remedy of appeal was available to the appellant, the Writ Petition may not be entertained. On the other hand, it was submitted by the appellant that the demand raised under Section 115QA could not be considered as forming part of the assessment order passed by the first respondent and it must be something separate from the order of assessment. The submission was, however, rejected by the High Court observing as under: "At the outset, the Court would first like to deal with the submissions of Mr. Ganesh that the impugned demand raised under Section 115QA of the Act should not be construed as forming part of the impugned assessment order and that it is something separate from it. While it is true that the demand under Section 115QA of the Act would be in addition to the total income, the fact of the matter is that in the present case it forms an integral part of the impugned assessment order under Section 143(3) of the Act. Reading the assessment order as a whole, it is plain to the Court that this demand under Section 115QA of the Act is in addition to demands under other issues, all of which form part of the impugned assessment order. In fact, paragraph 11 of the impugned assessment order, which gives the computation of the total taxable income, includes the demands raised under all heads and it includes the demand under Section 115QA of the Act. Therefore, it is not possible for this Court to read this part of the order separate from the rest of the assessment order." l) On the issue whether the Writ Petition be entertained in the face of availability of an alternate remedy, the High Court considered relevant case law touching upon the issue and observed: "23. The question regarding the interpretation of Section 115QA of the Act, as it stood at the relevant time, can definitely be gone into by the CIT (A). Further, this Court has in fact not expressed any view yet on the maintainability of the petition, although as rightly pointed out the matter was heard on this aspect earlier as well. The fact remains that the Respondent raised the objection at the first available opportunity. Due to reasons noted hereinbefore, the issue could not be decided till now. It would, however, not be correct to state that this Court has impliedly overruled such an objection and decided to hear the petition on merits. 24. The Court also notes in this context that the Assessee has in fact succeeded in its appeal before the CIT (A) on other issues arising out of the same impugned assessement order and it is the Revenue which is now in appeal before the ITAT. There is no reason why this one other issue arising from the impugned assessment order cannot also be examined by the CIT (A)." m) The High Court also recorded certain concessions made on behalf of the Revenue and disposed of the Writ Petition by its Judgment and Order dated 19.08.2019 with following directions: "(i) The Court declines to entertain this writ petition under Article 226 of the Constitution against the impugned demand raised by the Revenue by way of the impugned assessment order under Section 115QA of the Act against the Assessee. (ii) The Assessee is granted an opportunity to file an appeal under Section 246-A of the Act before the CIT (A) to challenge the impugned assessment order only insofar as it creates a demand under Section 115QA of the Act. (iii) If such an appeal is filed within ten days from today, it will be considered on its own merits and a reasoned order disposing of the appeal will be passed by the CIT (A) on all issues raised by the Assessee, not limited to the issues raised in the present petition as well as on the response thereto by the Revenue in accordance with law. (iv) The reasoned order shall be passed by the CIT (A) not later than 31st October, 2019. It will be communicated to the Petitioner within ten days thereafter. For a period of two weeks after the date of such communication of order, the demand under the impugned assessment order, if it is affirmed by the CIT (A) in appeal, will not be enforced against the Assessee. (v) The Court places on record the statement of the Revenue that it will not raise any objection before the CIT (A) as to the maintainability of such an appeal and as to the appeal being barred by limitation. The Court also takes on record the statement of the Revenue that it will not enforce the demand in terms of the impugned assessment order till the disposal of the above appeal. All of the above is subject to the Assessee filing the appeal before the CIT (A) within ten days from today. (vi) It is made clear that this Court has not expressed any view whatsoever on the contentions of either party on the merits of the case." ;