09 July 2024 Income Tax >> Tax Laws  

In a significant ruling of M/s. TML Business Services Ltd., Pune v/s The Deputy Commissioner of Salex Tax, Pune & Others, the High Court addressed a petition filed under Article 226 of the Constitution of India, concerning the refund of tax for the financial year 2011-2012. The petitioner, a vehicle trading entity, sought a refund amounting to Rs. 10,69,89,606 along with interest, following a series of tax assessments and adjustments by the tax authorities.

Background of the Case:

The petitioner had previously faced an assessment order for the year 2010-2011, which initially demanded Rs. 17,76,93,422. After a lengthy appeals process, the amount was reduced to Rs. 14,00,74,890. For the subsequent year, 2011-2012, a fresh assessment demanded ?9,67,02,366. However, an appeal for this year was successful, resulting in a substantial refund.

In March 2019, the Maharashtra government introduced the "Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2019" to facilitate the settlement of outstanding dues. The petitioner expressed interest in utilizing this scheme for the prior year’s demands, explicitly requesting that the refund from 2011-2012 not be adjusted against the older dues.

Key Developments:

Despite the petitioner’s communication, the tax authorities adjusted the refund against the demand for 2010-2011, asserting that the required payment under the settlement scheme was less than what the petitioner had already paid. This decision sparked a legal challenge, leading to a writ petition that culminated in a remand for the authorities to reconsider the matter with a hearing. Subsequently, the refund application was rejected on the grounds that the refund had been improperly adjusted. The petitioner maintained that the adjustment was unauthorized, as the settlement amount had already been settled, and thus, there was no outstanding demand.

Court's Analysis:

The High Court critically examined the actions of the tax authorities. It noted that on the date of the refund adjustment, the petitioner had fully complied with the settlement scheme, making the adjustment both illegal and unfounded. Furthermore, evidence presented by the petitioner indicated that the refund had been approved prior to the adjustment order. The Court emphasized the principle that state authorities cannot retain excess amounts collected without lawful justification, asserting that such actions would contravene Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by authority of law.

Conclusion and Orders:

In light of the findings, the High Court ruled in favor of the petitioner, ordering the tax authorities to refund Rs. 10,69,89,606, along with interest calculated at 6% per annum from June 1, 2019, until the payment date. Additionally, the Court directed that the amount paid under the settlement scheme for the year 2010-2011 be treated as settled in full, further solidifying the petitioner’s position. This case underscores the complexities surrounding tax regulations and the importance of clear communication between taxpayers and authorities, highlighting the legal recourse available to taxpayers when faced with unjust adjustments. The Court’s decision not only rectifies a financial oversight but also reinforces the principle of lawful tax collection in India.

  MAHARASHTRA SETTLEMENT OF ARREARS OF TAX, INTEREST, PENALTY OR LATE FEE ACT, 2019    Constitution of India, 1950