Unmesh Gujarathi
Sprouts News Exclusive
The Delhi High Court has quashed an income tax reassessment notice issued against Maruti Suzuki India Ltd. (MSIL) for the Assessment Year (AY) 2009-10, ruling that the notice was time-barred and based on a mere “change of opinion” rather than fresh evidence. The Bench of Justices Yashwant Varma and Ravinder Dudeja delivered the verdict on February 21, 2024.
• Sprouts News Exclusive: Court Rules in Favor of Maruti Suzuki
The case revolved around a reassessment notice issued by the Deputy Commissioner of Income Tax (DCIT) on April 1, 2016, concerning four key issues:
– Permanent Establishment (PE) of Suzuki Motor Corporation (SMC): Alleged failure by MSIL to deduct Tax Deducted at Source (TDS) on payments made to SMC.
– Taxation of Share Transactions: DCIT contended that share transactions should be treated as business income rather than capital gains.
– Disallowance of Deductions under Section 35(2AB): Sought to disallow research and development expense deductions claimed by MSIL.
– Warranty Provisions: Argued that these should be considered contingent liabilities and disallowed.
MSIL challenged the reassessment notice, contending that it was issued beyond the statutory deadline of March 31, 2016, and that all relevant facts had been fully disclosed during the original assessment.
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• Sprouts News Exclusive: Key Reasons for Quashing the Notice
The Court ruled in favor of MSIL on the following grounds:
– Time-Barred Reassessment: The notice, issued on April 1, 2016, was beyond the statutory deadline of March 31, 2016. The Court relied on its ruling in Suman Jeet Agarwal v. ITO, which held that a notice is considered “issued” only when dispatched, not merely generated.
– Full and True Disclosure: The Court found that MSIL had already disclosed all relevant facts in the original assessment, and no fresh material had surfaced to justify reopening the case.
– Change of Opinion: The reassessment was deemed invalid as it was based on a different interpretation of the same set of facts, which the Court ruled was insufficient for reassessment under Section 147 of the Income Tax Act.
– Lack of Independent Application of Mind: The Court observed that the Assessing Officer (AO) had relied on findings from AY 2010-11 without independently evaluating the facts for AY 2009-10.
• Legal Representation and Verdict
MSIL was represented by Senior Advocate Ajay Vohra, along with Advocates Vaibhav Kulkarni and Udit Naresh from Vaish Associates. The Income Tax Department was represented by Senior Standing Counsel Shlok Chandra, alongside Advocates Naincy Jain, Madhavi Shukla, and Sushant Pandey.
The Court ruled in MSIL’s favor, striking down the reassessment notice and reinforcing the principle that tax authorities cannot reopen assessments without fresh evidence.
Unmesh Gujarathi
sproutsnews.com