Facts of the Case

The petitioner, Genpact India Private Limited, challenged an assessment order dated 31 December 2016 passed under Section 143(3) of the Income Tax Act for AY 2014–15. The dispute primarily concerned a tax demand raised under Section 115QA relating to buyback of shares.

The company had bought back 10 lakh equity shares from its Mauritius-based shareholder through a scheme of arrangement approved by the Delhi High Court under Section 391 of the Companies Act, 1956.

The Revenue alleged that the transaction was a colourable device to evade buyback distribution tax. Conversely, the petitioner contended that the transaction was not a “buyback” under Section 77A and thus fell outside the ambit of Section 115QA as it stood at the relevant time.

Issues Involved

  1. Whether the writ petition under Article 226 is maintainable despite the availability of an alternative statutory remedy under Section 246A of the Income Tax Act.
  2. Whether the demand under Section 115QA forms part of the assessment order or constitutes a separate independent demand.
  3. Whether buyback under a court-approved scheme of arrangement falls within the scope of Section 115QA (pre-amendment).
  4. Whether the assessment order is invalid if passed in the name of a non-existent entity (post-merger issue).

Petitioner’s Arguments

  • The demand under Section 115QA was not part of “total income” and hence not appealable under Section 246A.
  • Buyback occurred pursuant to a scheme under Section 391 of the Companies Act and not under Section 77A, hence outside Section 115QA applicability (pre-2016 amendment).
  • Amendment to Section 115QA in 2016 (expanding scope of buyback) is prospective and cannot apply retrospectively.
  • The issue involves pure question of law, justifying writ jurisdiction.
  • Assessment order is invalid as it was passed against a non-existent entity post-merger (relying on Maruti Suzuki case).

Respondent’s Arguments

  • Writ petition is not maintainable due to existence of an efficacious alternative remedy under Section 246A.
  • The demand under Section 115QA is an integral part of the assessment order under Section 143(3).
  • The transaction was structured to bypass restrictions under Section 77A and avoid tax liability.
  • Revenue agreed not to enforce demand if matter is relegated to appellate authority.

Court’s Findings / Order

  • The Delhi High Court held that the demand under Section 115QA forms an integral part of the assessment order and is therefore appealable.
  • The Court reiterated the principle that writ jurisdiction should not be exercised when an effective alternative remedy exists, except in exceptional circumstances.
  • The case did not fall under exceptions such as lack of jurisdiction, violation of natural justice, or constitutional challenge.
  • The petitioner was directed to file an appeal before the Commissioner of Income Tax (Appeals).
  • Revenue assured:
    • No objection on limitation
    • No coercive recovery till disposal of appeal

Final Order:
The writ petition was disposed of with liberty to file appeal before CIT(A), and no opinion was expressed on merits.

Important Clarifications

  • Section 115QA demand cannot be treated as independent from assessment order.
  • Availability of statutory appeal is a strong bar against writ jurisdiction unless exceptional grounds exist.
  • Issues like interpretation of tax provisions can be examined by appellate authorities.
  • Even delay (3 years in this case) is not sufficient to bypass statutory remedy if safeguards are provided.
  • Validity of assessment against non-existent entity can be raised before appellate authority.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2019:DHC:4034-DB/SMD19082019CW6862017.pdf

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