Facts of the Case

The petitioner, Unitech Wireless (Tamil Nadu) Pvt. Ltd., filed a settlement application before the Income Tax Settlement Commission concerning Assessment Years 2012–13 to 2016–17.

The Commission rejected the application vide order dated 06.10.2017 on two primary grounds:

  1. The petitioner allegedly failed to meet the minimum tax liability threshold of ₹10 lakhs.
  2. The Commission held that it lacked jurisdiction to adjudicate transfer pricing issues under Chapter X of the Act.

The petitioner contended that it had already deposited additional tax amounting to ₹1.41 crore and had offered to withdraw excessive deductions claimed in its returns. It also argued that its business operations had ceased following cancellation of telecom licenses pursuant to the Supreme Court’s 2G judgment, and subsequently the business had been transferred.

Issues Involved

  1. Whether the Settlement Commission erred in rejecting the application for not meeting the prescribed tax liability threshold.
  2. Whether the Commission was justified in declining jurisdiction over transfer pricing issues.
  3. Whether relevant documents and evidence submitted by the petitioner were ignored, leading to an erroneous decision.

Petitioner’s Arguments

  • The petitioner fulfilled the threshold requirement by depositing additional tax exceeding ₹10 lakhs.
  • The Commission failed to consider material evidence such as audited financial statements, settlement application, and supporting affidavits.
  • The business had been discontinued and transferred to another entity; hence, claims relating to losses and depreciation were no longer applicable.
  • Transfer pricing adjustments made by the Transfer Pricing Officer (TPO) had already been accepted, making the issue no longer contentious.
  • The Commission misdirected itself in law by rejecting the application without proper examination of records.

Respondent’s Arguments

  • The Revenue contended that the assessment proceedings could continue before the Assessing Officer.
  • It was argued that the petitioner’s submissions could be adequately examined during regular assessment proceedings rather than through settlement.

Court’s Findings / Order

  • The Settlement Commission’s rejection was based on two grounds which required reconsideration in light of documents placed on record.
  • Evidence suggested that the petitioner’s business had ceased operations following cancellation of telecom licenses and transfer of business.
  • If business operations had indeed stopped, the petitioner could not carry forward losses and depreciation, which was a relevant factor for determining tax liability.
  • The objection regarding transfer pricing jurisdiction did not survive, as the petitioner had accepted the adjustments made by the TPO.

Final Order

  • The impugned order dated 06.10.2017 was set aside.
  • The matter was remanded to the Interim Board (successor to the Settlement Commission) for fresh examination on merits.
  • The Board was directed to independently assess the case without being influenced by prior observations of the Court.

Important Clarifications

  • Acceptance of transfer pricing adjustments by the assessee can render jurisdictional objections irrelevant in settlement proceedings.
  • Settlement applications must be evaluated considering all material evidence, especially financial statements and operational status of the business.
  • The threshold requirement under Section 245C must be assessed substantively, not mechanically.
  • The Court emphasized procedural fairness and proper appreciation of evidence by quasi-judicial authorities.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS19092023CW98092017_151320.pdf


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