Case Note & Summary
The appellant, Genpact India Private Limited, a domestic unlisted company, bought back shares from its sole shareholder, Genpact India Investment, Mauritius, in two tranches: 2,50,000 shares in May 2013 for Rs.800 crores, and 7,50,000 shares on 10.09.2013 for Rs.2,625 crores pursuant to a scheme of arrangement approved by the Delhi High Court under Section 391 of the Companies Act, 1956. Section 115QA was inserted by the Finance Act, 2013, effective from 01.06.2013, imposing a 20% tax on distributed income from buy-back of unlisted shares. The provision defined 'buy-back' by reference to Section 77A of the Companies Act, 1956. The appellant filed its income tax return for AY 2014-15, disclosing the buy-back but denying tax liability. The Assessing Officer passed an assessment order on 31.12.2016, including a demand under Section 115QA. The appellant filed a writ petition before the Delhi High Court, which was dismissed on the ground of alternate remedy. The Supreme Court granted leave and allowed the appeal, holding that the buy-back under a scheme of arrangement was not covered by Section 115QA as it stood prior to the amendment, and the High Court should have entertained the writ petition as the assessment was without jurisdiction.
Headnote
A) Income Tax - Buy-back of shares - Section 115QA of the Income Tax Act, 1961 - Interpretation - The issue was whether buy-back of shares under a scheme of arrangement approved by the High Court under Section 391 of the Companies Act, 1956, is covered by Section 115QA as it stood prior to the amendment effective from 01.06.2016. The Supreme Court held that the pre-amendment provision, which defined 'buy-back' by reference to Section 77A of the Companies Act, 1956, did not cover buy-backs under a scheme of arrangement. The subsequent amendment expanding the definition was not retrospective. (Paras 3-5)
B) Income Tax - Alternate remedy - Maintainability of writ petition - The High Court dismissed the writ petition on the ground that an alternate remedy of appeal was available. The Supreme Court held that the High Court should have entertained the writ petition as the issue involved a pure question of law regarding the interpretation of Section 115QA, and the assessment order was without jurisdiction. (Paras 6-8)
Issue of Consideration
Whether the buy-back of shares by the appellant pursuant to a scheme of arrangement approved by the High Court under Section 391 of the Companies Act, 1956, falls within the ambit of Section 115QA of the Income Tax Act, 1961, as it stood prior to the amendment effective from 01.06.2016, and whether the High Court was justified in dismissing the writ petition on the ground of alternate remedy.
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the Delhi High Court, and quashed the assessment order to the extent it imposed tax under Section 115QA of the Income Tax Act, 1961, holding that the buy-back under a scheme of arrangement was not covered by the provision as it stood prior to the amendment.
Law Points
- Interpretation of Section 115QA
- Buy-back of shares
- Scheme of arrangement under Companies Act
- Non-obstante clause
- Retrospective amendment
- Alternate remedy
Case Details
2019 LawText (SC) (11) 76
Civil Appeal No. 8945 of 2019 (Arising out of SLP(C) No.20728 of 2019)
Genpact India Private Limited
Deputy Commissioner of Income Tax & Anr.
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Nature of Litigation
Civil appeal against the judgment of the Delhi High Court dismissing a writ petition challenging an assessment order under the Income Tax Act, 1961, regarding tax on buy-back of shares.
Remedy Sought
The appellant sought to quash the assessment order to the extent it imposed tax under Section 115QA of the Income Tax Act, 1961.
Filing Reason
The appellant challenged the assessment order on the ground that the buy-back of shares was pursuant to a scheme of arrangement approved by the High Court under Section 391 of the Companies Act, 1956, and not under Section 77A, and thus not covered by Section 115QA as it stood prior to the amendment.
Previous Decisions
The Delhi High Court dismissed the writ petition on the ground of alternate remedy, without deciding the merits.
Issues
Whether the buy-back of shares under a scheme of arrangement approved by the High Court under Section 391 of the Companies Act, 1956, falls within the ambit of Section 115QA of the Income Tax Act, 1961, as it stood prior to the amendment effective from 01.06.2016.
Whether the High Court was justified in dismissing the writ petition on the ground of alternate remedy when the assessment order was allegedly without jurisdiction.
Submissions/Arguments
The appellant argued that the buy-back was under a scheme of arrangement under Section 391 of the Companies Act, 1956, and not under Section 77A, and thus not covered by Section 115QA as it stood prior to the amendment. The subsequent amendment expanding the definition was not retrospective.
The Revenue argued that the buy-back was covered by Section 115QA, and the appellant had an alternate remedy of appeal, so the writ petition should not be entertained.
Ratio Decidendi
The pre-amendment Section 115QA defined 'buy-back' by reference to Section 77A of the Companies Act, 1956, and did not cover buy-backs under a scheme of arrangement under Section 391. The subsequent amendment expanding the definition was not retrospective. Therefore, the assessment order imposing tax under Section 115QA was without jurisdiction.
Judgment Excerpts
Section 115QA was inserted by Finance Act, 2013 to counter the tax avoidance practice mainly adopted by Indian subsidiaries to distribute income to shareholders to Mauritius based Holding company under the garb of Buyback of shares.
The provisions of Section 115QA have been introduced as part of Chapter XIIA as an anti-avoidance measure as also with an intent to widen the tax base in India.
Procedural History
The appellant filed its income tax return for AY 2014-15 on 28.11.2014. A notice under Section 143(2) was issued on 03.09.2015. The Assessing Officer passed an assessment order on 31.12.2016, including a demand under Section 115QA. The appellant filed a writ petition before the Delhi High Court, which was dismissed on 19.08.2019 on the ground of alternate remedy. The appellant then filed a special leave petition before the Supreme Court, which was converted into a civil appeal.
Acts & Sections
- Income Tax Act, 1961: 115QA, 115QB, 115QC, 143(2), 143(3), 46A
- Companies Act, 1956: 77A, 391
- Finance Act, 2013:
