Madras High Court stays I-T demand notices on Dishnet, Aircel Wireless

Vastavam web: The Madras High Court on Wednesday kept in abeyance the notices issued by the Income Tax department to Dishnet Wireless Ltd and Aircel Ltd of Aircel for payment of Rs 32.24 crore and Rs 7.54 crore respectively for the year 2010-11 towards non-deduction of TDS on the payment of foreign remittances. Hearing petitions from the two Chennai-based group companies, Justice T Raja directed the I-T department to keep in abeyance the March 31 proceedings consequent to the demand notices issued on March 2 till the disposal of their applications for bankruptcy pending before the National Company Law Tribunal (NCLT) bench.

He issued the interim order after going through the affidavits filed by Aircel and Dishnet and the counter by the Assistant Commissioner of Income Tax, International Taxation. Also, following the bankruptcy proceedings, their employees were leaving the companies and more time was needed to comply with the notice, they said adding this was also intimated to the I-T department.

Besides, the companies contended that the I-T department by its July 19, 2010 order had authorised them to make payments outside India without deduction of tax at source under section 195 of the Income Tax Act. Based on this only, the remittance of foreign payments were made without TDS. Also, the transaction between the companies and the non-resident operators was one of sales transfer and involved no element of fee for technical services or royalty. It cannot be considered an income on which tax to be deducted at source, they contended.

They claimed that the I-T department without considering these facts and without affording an opportunity of hearing had proceeded in a hasty manner, adding the demand notices were liable to be set aside. He directed the I-T authorities to keep the impugned proceedings arising out of the demand notice in abeyance till the disposal of the matter pending before NCLT.