MODERN THREADS INDIA LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE facts giving rise to this petition under article 226 of the Constitution of India briefly stated are that the petitioner Modern Threads (India) P. Ltd., is a company incorporated and registered under the Companies Act, 1956, having its registered office at A-4, Vijay Path, Tilak Nagar, Jaipur. THE said company is a public limited company engaged in the manufacture of synthetic yarn, woollen yarn, etc. For manufacturing of the aforesaid goods, the company is alleged to have entered into an agreement with Technimont, S.P.A. Milan of Italy, for the supply of technical know-how and basic process engineering documentation on December 15, 1995. As per the terms of the agreement, the petitioner has agreed to pay 300 lakhs US dollars to the foreign collaborator for the supply of technical know-how and 35 lakhs US dollars for the supply of basic process engineering documentation. THE said agreement is also alleged to have been approved by the Government of India, vide letter dated March 27, 1996, It has been further averred that subsequently some amendments were made in the original agreement and even the amendments made subsequently were also approved by the Government of India, vide letter dated July 15, 1996. It has been further averred that the petitioner-company filed an application under Section 195(2) of the Income-tax Act, 1961 (hereinafter referred to as the "Act 1961"), before the Assessing Officer, the Deputy Commissioner of Income-tax, Special Range II, Jaipur, on October 29, 1996, to determine the taxability of income under the head technical know-how fees and basic process engineering fees and also for NOC to remit the first instalment of the same. THE Assessing Officer, vide order dated December 20, 1996, rejected the aforesaid application and the copy of the order was received by the petitioner on December 23, 1996. THE petitioner feeling aggrieved against the aforesaid order preferred an appeal before the Commissioner of Income-tax (Appeals) under Section 248 of the Act, 1961. A photocopy of the same has been annexed as annexure-2 to the writ petition. Along with the appeal, the petitioner also filed an application under Section 119 of the Act, 1961, to review the order passed by the Deputy Commissioner of Income-tax (Appeals) praying therein that the order passed by the Assessing Officer under Section 195(2) of the Act, 1961, dated December 20, 1996, may be quashed and permission may be given to the petitioner to remit technical know-how fees and basic process engineering documentation fee without deduction of income-tax or in the alternative pending the application permission may be given to the petitioner to remit the first instalment of 75 lakhs US dollars as technical know-how fees and 10.5 lakhs US dollars for basic process engineering documentation fee subject to deferment of payment of tax till the decision of the application or first appeal whichever is earlier as an interim relief. THE petitioner was informed, vide letter dated December 27, 1996, by the Chief Commissioner of Income-tax, Rajasthan, Jaipur, that necessary instructions in the matter had been issued to the Assessing Officer. A photocopy of the said letter has been filed as annexure-3 to the writ petition. After receipt of the aforesaid letter, the petitioner is alleged to have contacted the Assessing Officer who directed the petitioner to give a personal guarantee of the chairman of the company in favour of the Income-tax Department, Jaipur, and also undertaking to discharge the income-tax liability pursuant to an order under Section 195 of the Act, 1961. Accordingly, the personal guarantee of the chairman and an undertaking was submitted. Photocopies of the personal guarantee and the undertaking were filed as annexure-4 and annexure-5, respectively, to the writ petition. After the personal guarantee and undertaking were given by the chairman of the company, the Deputy Commissioner of Income-tax (Assessment) Special Range II, Jaipur, issued a no objection certificate, which runs as under:

(2.) THE Deputy Commissioner of Income-tax (Assessment), Special Range II, Jaipur, vide letter dated December 30, 1996, directed the petitioner to pay TDS demand arising due to the remittance of 75+10.5 US dollars before March 15, 1997, in case the petitioner-company is unable to obtain a favourable decision from the Commissioner of Income-tax (Appeals) or a favourable decision from the Central Board of Direct Taxes by March 15, 1997, and also advised the petitioner company that on failure to pay the same, interest will be charged as per rules. A photocopy of the said letter is filed as annexure-6 to the writ petition. THE Commissioner of Income-tax (Appeals), Rajasthan II, Jaipur, vide order dated March 11, 1997, upheld the order of the Deputy Commissioner of Income-tax (Assessment) Special Range-II, Jaipur, but allowed the appeal directing the assessing authority to exclude the tax payment to be made by the petitioner on the remittance to the foreign collaborator. THE petitioner feeling aggrieved by the order dated March 11, 1997, passed by the Commissioner of Income-tax (Appeals) preferred an appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, along with a stay application. It is not disputed that the appeal as well as the stay application filed by the petitioner are still pending before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur. In the meantime, the petitioner has been served with the letter dated March 14, 1997, whereby, the petitioner-company has been directed to deposit TDS payment on account of remittance of USD 75 lakhs plus USD 10.5 lakhs to Technimont S.P.A. Italy, immediately. After receipt of the aforesaid demand letter, the petitioner has approached this court under article 226 of the Constitution of India for staying the recovery against the petitioner and restraining the respondents not to press the recovery till the disposal of the appeal/stay application filed by the petitioner before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur. It is well-settled that once the petitioner has availed of an alternative remedy of filing second appeal before the Tribunal which has not been decided as yet, the petitioner cannot be permitted to invoke the extraordinary writ jurisdiction of this court without waiting for the result of the appeal filed by him before the Tribunal. It is also settled that even if the stay application is rejected pending appeal filed by the petitioner, normally, this court should not interfere against the order passed on the stay application unless the order is wholly arbitrary or per se illegal but there are certain special facts on the basis of which learned counsel for the petitioner has vehemently urged that in the special facts and circumstances of the case, this court may invoke its power under extraordinary writ jurisdiction. THE facts which have been brought to the notice of the court by learned counsel for the petitioner, are contained in Taxman Vol. 90, January 4, 1997, Part I, page 31. In this magazine, there are two representations made by the Rajasthan Tax Consultants Association for ; (i) posting of the Judicial Member at Jaipur Bench, and (ii) Setting up one more Bench for the State of Rajasthan at Jaipur or Jodhpur. I consider it proper to incorporate the peculiar facts of the aforesaid representations in extenso, which runs as under :