Income-tax refunds can not be adjusted by the department against outstanding dues of Service-tax:
Writ file decided in favour of Assessee
This is the ruling given by Telangana High Court vide order Dat ed 28th April, 2021 in the case of Sew Infrastructure Limited Vs Director General of GST. The case will be highly useful on similar issues where Income-tax department in making illegal adjustments against outstanding dues.
In the present case, an interesting issue arose where the applicant was liable to a substantial amount of Income-tax refund and simultaneously had filed an application for settlement of dispute relating to service tax under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019’ (for short, ‘SVLDRS’).
However, due to Covid 19, the applicant could not pay the dues within the due date of the scheme in view of the refunds under the Income-tax Act having been withheld due to garnishee order passed by the Income-tax department on account of the service tax dues as communicated to it by the service tax department.
The applicant having failed to convince the authorities to adjust the dues under the SVLDRS scheme against the income-tax refund approached the high court under Article 226 challenging the said inaction and the high court following several landmark Supreme Court rulings allowed the writ by holding that
1. The SVLDRS Scheme has to be given a liberal interpretation and not a narrow interpretation.
2. The Garnishee order once issued can be modified to take into account the reduced liability under the service tax law due to the SVLDRS Scheme.
3. In a provision of a taxing statute, a construction which results in equity rather than injustice, should be adopted.
4. The Assessing Officer can adjust the Income Tax refund due to an assessee only against Income Tax dues, and not towards any other dues of an assessee such as Service Tax dues under the Finance Act, 1994.
The copy of the order is as under :
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