DTVSV Act Is A Remedial Statute; Neither A Taxing Statute Nor Amnesty Act: Delhi High Court

The Delhi High Court has held that the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) is neither a taxing statute nor an amnesty act. It is a remedial or beneficial statute.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that any ambiguity in a taxing statute ensures the benefit of the assessee, but any ambiguity in the amnesty act or exemption clause in an exemption notification has to be construed in favor of the revenue. The amnesty or exemption has to be given only to those assesses who demonstrate that they satisfy all the conditions precedent for availing of the amnesty or exemption.

The court stated that the DTVSV Act, 2020, is a beneficial and corrective piece of legislation enacted by Parliament to reduce the number of cases pending, generate timely revenue for the government, provide certainty, and save resources that would have been spent on the lengthy litigation process. It is a statute that benefits the department because it recovers the taxes upfront rather than having to wait for success in the litigation, which is inherently uncertain. The DTVSV Act also provides a sop to an assessee by putting an end to the litigation and exempting the assessee from paying interest and penalties if they are imposed. The DTVSV Act also benefits society as it reduces litigation and acrimony, decongests the courts, and relieves the system of unnecessary burdens.

"The courts ought to give it "the widest operation" that its language will permit. The courts have only to see that the particular case is within the mischief to be remedied and falls within the language of the enactment. The words of such a statute must be construed so as "to give the most complete remedy which the phraseology will permit," so as "to secure that the relief contemplated by the statute shall not be denied to the class intended to be relieved," the court said.

The petitioner/assessee is a banking company incorporated under the laws of Japan that carries on the banking business in India through branches in various cities. The return of income filed by the petitioner was selected for scrutiny assessment, and a final assessment order under Section 143 read with Section 144C of the Income Tax Act, 1961, was passed by the Assessing Officer for the assessment year 2007-08, making various adjustments to the total income of the petitioner.

The petitioner filed an application under the DTVSV Act to settle the deemed appeal of the department against the order of the tribunal.

The respondent/department issued a show-cause notice proposing to reject the application filed by the petitioner as the petitioner was not settling the department's SLP pending in the Supreme Court for the same assessment year. The petitioner filed its response, arguing that there is no obligation to settle the dispute pending in the Supreme Court for Assessment Year 2007-08 because, under the DTVSV Act, an applicant could settle one of the various litigations pending with an appellate authority and it was not necessary to settle all of the appeals for a specific assessment year.

The application was rejected by the department on the ground that the petitioner was settling part of the appeal and ought to have also settled the department's SLP pending in the Supreme Court.

The petitioner contended that the DTVSV Act treats an appeal and an SLP for the same assessment year as a separate dispute for the purpose of settlement under the Act. As per Section 2(1)(j) read with Section 2(1)(a) of the DTVSV Act, which considers each appeal as a separate dispute for the purpose of computing disputed tax under the Act, Sections 3 and 4 of the DTVSV Act allow an assessee to file a declaration for any appeal or SLP that is pending before an appellate authority and do not require the assessee to file a declaration for all the appeals pending for an assessment year. After the settlement of the dispute, only the appeal for which the application was made is to be withdrawn.

The department contended that the DTVSV Act treats one assessment year as a whole, and therefore if issues arise out of one assessment year, the assessee is required to settle all such issues relating to that assessment year, which cannot be dissected at the choice of the assessee.

The department submitted that the unit for settlement of disputes under the DTVSV Act is an assessment year and not an appeal, a writ petition, or a special leave petition. The Department's submissions were based on the jurisdictional requirement of Section 2(j) of the DTVSV Act, which states that there must be disputed tax qua an assessment year and not issues relating to an assessment year.

The court relied on FAQ-19 issued by the CBDT in Circular No. 7/2020 dated April 22, 2020, which states that the assessee has the option to choose the appeals to be settled under the DTVSV Act and there is no obligation on the petitioner to settle all the appeals filed by the assessee for a particular assessment year.

The court ruled that an assessee is free to settle any appeal under the DTVSV Act and is not required to settle all the pending appeals filed by the respondent for an assessment year.

Case Title: MUFG Bank Versus CIT

Citation: 2022 LiveLaw (Del) 1122

Date: 25.11.2022

Counsel For Petitioner: Senior Advocate Percy Pardiwalla along with Advocates Nikhil Ranjan, Hiten Chande

Counsel For Respondent: Senior Standing Counsel Zoheb Hossain

Click Here To Read Order