Facts of the Case

The petitioner, Vodafone Essar Mobile Services Limited, filed writ petitions seeking to challenge the constitutional validity of the proviso to Section 201(3) of the Income Tax Act, 1961, inserted by the Finance (No.2) Act, 2009, effective from 1st April 2010. The challenge was aimed at testing the vires of the proviso, which deals with liability to deduct tax at source in certain circumstances. The petitioner sought interim protection from coercive actions by the tax authorities pending a fresh writ petition.

Issues Involved

  1. Constitutional validity of the proviso to Section 201(3) of the Income Tax Act, 1961.
  2. Interim protection against coercive measures by the tax authorities.
  3. Liberty to file fresh writ petition with grounds already raised in the current petitions.

Petitioner’s Arguments

  • The petitioner requested permission to withdraw the current writ petitions with liberty to file a fresh petition challenging the proviso.
  • Emphasized that the constitutional validity of the proviso must be considered in light of earlier decisions:
    • Commissioner of Income Tax Vs. NHK Japan Broadcasting Corporation [2008] 305 ITR 137 (Delhi)
    • Commissioner of Income Tax Vs. Hutchison Essar Telecome Ltd., [2010] 323 ITR 230 (Delhi)
  • Sought continuation of interim orders preventing coercive actions for 15 days to file the fresh petition.

Respondent’s Arguments

  • Respondents did not oppose the withdrawal but were requested to refrain from taking coercive steps regarding the impugned demand for 15 days, ensuring the petitioner had time to file a fresh petition.

Court Order / Findings

  • The Court accepted the withdrawal of the writ petitions with liberty to file a fresh petition.
  • Directed that the respondent will not take any coercive steps to recover the impugned demand, if any, for a period of 15 days from the date of the order (28th November 2011).
  • Allowed the petitioner to raise the same grounds and contentions in the fresh petition.

Important Clarifications

  • The order does not adjudicate the merits of the constitutional challenge.
  • Interim protection is strictly temporary (15 days) to allow filing of the fresh writ petition.
  • References to earlier cases establish a precedent for challenges to Section 201(3) proviso:
    • NHK Japan Broadcasting Corporation [2008] 305 ITR 137
    • Hutchison Essar Telecome Ltd., [2010] 323 ITR 230

Link to download the order https://delhihighcourt.nic.in/app/case_number_pdf/2011:DHC:17121-DB/SKN28112011CW18802011_170224.pdf

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