Facts of the Case

The petitioner, MUFG Bank Ltd., a foreign banking company operating in India, was subjected to assessment proceedings for AY 2007–08 under Sections 143 read with 144C of the Income Tax Act. Various additions were made by the Assessing Officer.

The Income Tax Appellate Tribunal partly allowed the appeal in favour of the assessee and partly against it. Both the assessee and the revenue filed cross appeals before the High Court, and certain issues also reached the Supreme Court via Special Leave Petition.

Subsequently, the assessee opted to settle a specific dispute under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act), relating to ECB interest. However, the Department rejected the application on the ground that the assessee had not opted to settle all pending appeals for the same assessment year, including the SLP pending before the Supreme Court.

Issues Involved

  1. Whether an assessee is required to settle all pending disputes/appeals for a particular assessment year under the DTVSV Act.
  2. Whether partial settlement of disputes (appeal-wise) is permissible under the scheme.
  3. Whether the unit of settlement under the DTVSV Act is an assessment year or an individual appeal/writ/SLP.

Petitioner’s Arguments

  • The DTVSV Act treats each appeal, writ, or SLP as a separate dispute, not the entire assessment year.
  • Sections 3 and 4 allow filing declaration for any appeal, indicating flexibility.
  • CBDT Circular No. 9/2020 (FAQs 36 & 40) supports that an assessee may choose to settle only one appeal or multiple appeals selectively.
  • The dispute relating to ECB interest arose from a separate remand proceeding, making it independent of other issues.
  • The Department cannot compel settlement of unrelated matters pending before different forums.

Respondent’s Arguments

  • The assessment year is the unit of settlement, and all disputes arising therein must be resolved together.
  • FAQ Nos. 11 and 14 of CBDT Circular prohibit partial settlement of disputes.
  • The assessee cannot “pick and choose” issues and must settle entire litigation for that year.
  • Since the SLP was pending before the Supreme Court for the same AY, it should have been included in the settlement.

Court’s Findings / Judgment

  • The Court held that the DTVSV Act is a beneficial/remedial legislation, not a strict taxing or exemption statute, and must be interpreted liberally.
  • The unit of settlement is an appeal, writ, or SLP, and not the assessment year.
  • The use of the term “any appeal” clearly allows selective settlement.
  • FAQ-19 explicitly provides that an assessee can settle one or more appeals independently, even within the same assessment year.
  • The issues in different appeals were distinct and unconnected, hence there was no obligation to settle all.

Court Order / Final Decision

  • The rejection order of the Department was set aside.
  • The Department was directed to reconsider the declaration filed by the assessee under the DTVSV Act.
  • Any consequential refund was to be processed within eight weeks.

Important Clarifications by the Court

  • DTVSV Act is a beneficial statute, hence requires purposive and liberal interpretation.
  • Appeal-wise settlement is permissible; full-year settlement is not mandatory.
  • CBDT FAQs must be read harmoniously and cannot override statutory provisions.
  • Independent disputes arising from different proceedings need not be compulsorily clubbed.
  • The judgment clarifies that “pick and choose” is barred within a single appeal, but not across different appeals.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH25112022CW39732021_203601.pdf

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