Setback for KFA: SC upholds 2011 order

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New Delhi | Published: April 7, 2015 1:31:08 AM

The tax department had in Nov-Dec 2011 demanded around R302 cr towards TDS and R70 cr as interest for assessment years 2010-13. The demand was raised following searches conducted on the premises of the airline

In a major setback to Vijay Mallya-led Kingfisher Airlines (KFA), the Supreme Court on Monday upheld the 2011 assessment order of the income tax department asking the company to remit around Rs 372 crore tax deducted at source (TDS) from the salaries of its employees and other payments.

While upholding the Karnataka High Court’s last July order, a bench headed by Justice Ranjan Gogoi rejected the cash-strapped and grounded airlines’ appeal which contended that the amount due is much less than the demand made by the department and it was not given reasonable and sufficient opportunity to present its case before notices were issues by the revenue department.

The department had in November-December 2011 demanded around Rs 302 crore towards TDS and Rs 70 crore as interests for assessment years 2010-13. The demand was raised following searches conducted on the premises of the airline.

The grounded carrier said the HC had directed the assessing authority to give it an opportunity to produce various documents, including documents to show payment of tax by its employees. However, the HC while directing so failed to appreciate that the documents were in possession of the Revenue and the details should have been accessed by the Revenue before any order was passed against it, the company said.
Besides, “the HC ought not to have interfered with the findings arrived at by the ITAT when such findings were not held to be perverse,” the appeal stated.

According to senior counsel AM Singhvi, appearing for the defunct airline, the HC also erred in interfering with the Income Tax Appellate Tribunal (ITAT) order that remanded the matter back to the ACIT on the grounds that the orders were in breach of the principles of natural justice.

Both the department and Mallya’s company had filed cross-appeals in the HC.

The HC had pointed out that the company, after admitting the liabilities on receipt of notices from the assessing officer, had sought more time to make payments for the reason that the company was facing serious financial difficulties.

The court also noticed that the company’s head, Mallya, himself had written letters to the department in this regard. “At no point the liability was in dispute…,” the HC observed while declaring the assessment as ‘valid’ one.

However, the HC had given four months to the company to submit necessary documents as sought by the assessing officer while asking the department to adjust the payments, already received, towards the total demand.

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