Case Note & Summary
The petitioner, Hindustan Unilever Ltd., filed a writ petition under Article 226 of the Constitution of India challenging an order dated 23 August 2024 passed by the Deputy Commissioner of Income-tax (International Taxation) under Section 201(1) and (1A) of the Income-tax Act, 1961. The impugned order raised a demand of Rs.962,75,14,624/- for non-deduction of tax at source (TDS) under Section 195 of the Act on the acquisition of the India-specific Health Food Drink Intellectual Property (India HFD IP) of the Horlicks brand from foreign non-resident group entities of GlaxoSmithKline Plc. The petitioner paid Rs.3045.14 crores (EUR 375.6 million) to Horlicks Ltd., a British company, under an Assignment Deed dated 1 April 2020. The Assessing Officer held that the trademark was a capital asset situated in India, and the payment was liable to capital gains tax, making the petitioner an assessee-in-default for non-deduction of TDS. The petitioner contended that the acquisition did not involve transfer of a capital asset in India under Section 9(1)(i) and relied on the Delhi High Court's decision in CUB PTY Ltd. v. Union of India, which held that no TDS obligation arises in such cases. The petitioner also argued that the impugned order was barred by limitation as it was passed beyond one year from the initiation of proceedings on 28 February 2023, relying on the decision in Director of Income Tax (International Taxation) v. Mahindra and Mahindra Limited. The respondents, represented by the Additional Solicitor General, opposed the petition on the ground of alternate remedy, submitting that the petitioner has an efficacious remedy of appeal under Section 253 of the Act before the Commissioner of Income-tax (Appeals). The court, after hearing both sides, held that the writ petition is not maintainable as the petitioner has an efficacious alternate remedy. The court observed that the impugned order is a detailed 179-page order involving factual adjudication, and the appellate forum is better suited to examine the issues. The court dismissed the petition, leaving it open to the petitioner to pursue the statutory remedy of appeal. The court did not express any opinion on the merits of the case, including the applicability of the territoriality principle or the limitation issue.
Headnote
A) Constitutional Law - Writ Jurisdiction - Alternate Remedy - Income-tax Act, 1961, Section 253 - The court declined to entertain a writ petition under Article 226 of the Constitution of India challenging an order under Section 201(1) and (1A) of the Income-tax Act, 1961, holding that the petitioner has an efficacious alternate remedy of appeal before the Commissioner of Income-tax (Appeals) under Section 253. The court observed that the issues raised involve factual adjudication and the impugned order is a detailed 179-page order, making the appellate forum more appropriate. (Paras 11-13) B) Income Tax - Tax Deduction at Source - Territoriality Principle - Income-tax Act, 1961, Sections 195, 201 - The court noted the petitioner's contention that the acquisition of a trademark registered in India from a non-resident does not attract capital gains tax under Section 9(1)(i) and thus no TDS obligation under Section 195, relying on Delhi High Court's decision in CUB PTY Ltd. However, the court did not decide this issue on merits due to the availability of alternate remedy. (Paras 9-10, 12) C) Income Tax - Limitation - Section 201 Proceedings - Income-tax Act, 1961, Section 201 - The petitioner argued that the impugned order was barred by limitation as it was passed beyond one year from the initiation of proceedings on 28 February 2023, relying on Mahindra and Mahindra Limited. The court did not adjudicate this issue on merits. (Para 10)
Issue of Consideration
Whether the writ petition challenging an order under Section 201(1) and (1A) of the Income-tax Act, 1961 raising a demand for non-deduction of tax at source on acquisition of a trademark from a non-resident should be entertained when an alternate remedy of appeal is available.
Final Decision
The court dismissed the writ petition, holding that the petitioner has an efficacious alternate remedy of appeal under Section 253 of the Income-tax Act, 1961. The court did not express any opinion on the merits of the case and left it open to the petitioner to pursue the statutory remedy.
Law Points
- Alternate remedy
- Territoriality principle
- Tax deduction at source
- Capital gains
- Intellectual property rights
- Limitation for passing order under Section 201
