In a setback to Kingfisher Airlines, the Karnataka High Court, on Wednesday, directed the company to deposit 50 per cent of the total amount of Rs.371 crore that the company is required to remit to the Income Tax Department as tax deducted at source (TDS) from its employees and payments made towards company expenses.

The High Court has also asked the company to furnish bank guarantee for the remaining amount

Though the Department claims that the total amount due is Rs.371 crore, the company has disputed this and has claimed that the amount payable is much less.

However, the Court has said that TDS already remitted by the company would be adjustable in computing the amount to be deposited.

A Division Bench, comprising Justice D. V. Shylendra Kumar and Justice B. Manohar, passed the interim order on the separate appeals filed by the Department and the company, challenging the May 25 order of the Tribunal.

The Tribunal, while allowing an appeal by the company against the demand to pay TDS amount, had said that the Department had issued notices without providing the company a reasonable and sufficient opportunity of being heard. The Tribunal had remanded the matter back to the Assessing Officer for fresh consideration.

The Tribunal also had said that it was not clear whether TDS was only in connection with the salary or also about other payments of expenses.

On appeals filed by the Department, a Division Bench of the High Court in June had passed the interim order, staying the operation of the Tribunal’s order. Subsequently, the company too filed appeals against the Tribunal order and another Division Bench granted stay in favour of the company.

The contentious issue dates back to December last, when the Departmentdemanded payment of Rs.371 crore as TDS from the company for assessment years 2010-11, 2011-12, and 2012-13, following analysis of records during search conducted in the company’s premises in Bangalore and other places. Later, the Department had attached the bank accounts of the company for some period during February, 2012, and had recovered some part of the amount, and subsequently the company itself had made some payments.

The Department’s claim has been that the company had illegally withheld the revenue payable to the government even after deducting the said amount from various sources, including by way of TDS.

The Court has adjourned further hearing on the appeals.

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