High Court Of Madras
Smt. Ramaa Sivaram vs. Chief Commissioner Of Income Tax & Anr.
Section 237, 240
Mrs. Chitra Venkataraman, J.
Writ Petn. No. 2504 of 2010
12th March, 2010
Counsel Appeared :
K. Soundararajan, for the Petitioner : Patti B. Jegannathan, for the Respondents
JUDGMENT
Mrs. Chitra Venkataraman, J. :
The petitioner has sought for quashing of the order dt. 21st Jan., 2010, by writ of certiorarified mandamus and to direct the second respondent to refund the amount of Rs. 25,28,196 along with interest admissible thereon.
A reading of the order under challenge shows that the CIT considered the claim of the petitioner as regards the assessability in respect of perquisite value of stock options allotted to the petitioner as an employee of Infosys Technologies Ltd., Bangalore. The petitioner submitted that they were covered by the Employees Stock Option (ESOP) Scheme of the company, consequently, deduction of TDS on the allotment is bad in law.
It is seen that the employer-company had paid the demand of Rs. 49,52,35,650 under s. 201(1) of the IT Act, 1961, along with interest at Rs. 4,82,85,475 under s. 201(1A) of the IT Act based on the demand raised by the Asstt. CIT, TDS, Bangalore, on 7th Oct., 1993, for failure to deduct tax at source in respect of perquisite value of stock options allotted to its employees who were covered by the ESOP Scheme of the company and the company recovered the tax from the employees concerned. Aggrieved by the said course of action, the company has preferred an appeal before the CIT(A)-IV followed by a further appeal to the Tribunal, which allowed the appeal filed by the company holding that allotting of shares to employees did not amount to a perquisite, attracting a liability under the Act to deduct tax at source. The Department challenged the order before the High Court and subsequently to the Supreme Court, which were decided against the Department and reported in CIT vs. Infosys Technologies Ltd. (2008) 214 CTR (SC) 293 : (2008) 1 DTR (SC) 330 : (2008) 297 ITR 167 (SC). Based on these developments, the petitioner filed a revised return on 16th June, 2003, after expiry of the time under s. 139(5) of the IT Act. Hence, the AO treated it as non est in the eye of law and did not issue any refund as claimed by the assessee.
4. By order dt. 7th Jan., 2010, the CIT pointed out that as per the orders of the Tribunal, Bangalore, dt. 28th June, 2002, the demand of TDS in respect of perquisite value of stocks under the ESOP Scheme was held to be bad in law. The decision of the apex Court in CIT vs. Infosys Technologies Ltd. (supra) confirmed the legal position as regards the assessability of the perquisite value of stocks under the ESOP Scheme. The CIT directed the first respondent to consider the request of the petitioner. In the circumstances, the condonation as regards the refund was considered by the CIT only to direct the first respondent to decide the issue. The first respondent although accepted the stand of the petitioner, yet held that the amount collected from Infosys Technologies Ltd. should be refunded only to that company and the employees of the company should approach the company to get their refund along with the interest in the circumstances, the CIT pointed out even if the refund has to be allowed, the petitioner would not be entitled to any interest on the refund amount as per the Board’s Instruction No. 3 of 2006 was not fair. Consequently, following similar cases, the CIT held that the employees shall approach the employer to receive the refund of tax with interest. The first respondent held that the assessee and the similarly placed employees have to seek help from the employer to get the refund along with interest.
Learned counsel appearing for the petitioner placed reliance on the decision of the Karnataka High Court dt. 6th Aug., 2009, in Writ Petn. No. 11044 of 2009 [reported as S. Thigarajan vs. Asstt. CIT & Ors. (2010) 229 CTR (Kar) 47 : (2009) 30 DTR (Kar) 277—Ed.], wherein under similar circumstances, the Karnataka High Court considering the entirety of the claim in the light of the orders of the High Court and the Supreme Court directed refund of the amount. Insofar as the claim of interest is concerned, the Karnataka High Court pointed out that no interest is admissible on belated refund claim.
On notice, the first respondent filed a counter. The learned senior standing counsel appearing for the respondents pointed out that as the petitioner did not file the refund claim on time, the question of refund as per s. 240 of the IT Act did not arise. The counter states that as the petitioner did not pay the tax and the company alone paid the same, the question of refund to the petitioner did not arise. They further contended that the decision of the Karnataka High Court did not apply to the case. In the circumstances, the question of refund of amount deducted by way of TDS does not arise. If the tax was not paid by the petitioner as an individual, but by her company, in response to the demand by the IT Department, the question of refund to the petitioner does not arise. Heard the learned counsel appearing for the petitioner and the learned senior standing counsel appearing for the respondents. It is not denied by the respondents that on account of the claim made by the Department, the employer had paid the tax in respect of the ESOP Scheme applicable to the petitioner. With the liability on the company thus set aside, rightly, the petitioner made a claim for refund of the tax deducted to the account of the petitioner. Having regard to the fact that the assessability of the allotment of perquisite value of stock option was held as not justified and not in accordance with law, the question of retention of the tax collected by way of TDS for and on behalf of the individual assessee at the hands of the Revenue does not arise. The respondents do not deny the fact as regards the petitioner being an employee of the company, the allotment made had been subjected to tax by the Revenue and the TDS received from the company. When the liability itself stood cancelled, it is rather ironical that the respondents should contend that the question as to whether the payment by the employer was in accordance with the provisions of law, a debatable issue.
In the circumstances, agreeing with the view expressed by the Karnataka High Court in Writ Petn. No. 11044 of 2009 dt. 6th Aug., 2009 (supra), the order passed by the first respondent stands set aside. As far as the interest aspect is concerned, the first respondent is directed to refund the amount with interest payable as per the provisions of the Act. The writ petition is allowed. No costs. Consequently, Misc. Petn. No. 1 of 2010 is closed.
[Citation : 322 ITR 586]
