My client's New Zealand company filed Indian returns and paid tax believing its place of effective management was in India, and New Zealand has since taxed the same income. Can it get the Indian tax back?
Yes, on these facts. The Madras High Court quashed the order refusing rectification and refund, holding that CBDT Circular No. 8 of 2017 — under which section 6(3)(ii) does not apply to a company with turnover or gross receipts of Rs 50 crore or less in a financial year — is binding on the Department, so the company was not liable to Indian tax at all and the tax it had paid ought to have been refunded, with the Court adding that tax paid in excess must be refunded notwithstanding the procedure in section 155(14A) where the income was taxed in a foreign country.
Decided by the High Court (C. Saravanan J) on 2026-06-25, reported as W.P.No.19206 of 2023 (Madras High Court); reserved 2 March 2026, pronounced 25 June 2026. It bears on section 6(3), section 6(3)(ii), section 155(14A), section 143(1), section 143(3), section 154, section 90, section 90(2), section 91, section Rule 128 of the Income Tax Act 1961, in Residence & Treaty Benefit, Refunds, Interest & Condonation and How Tax Law Is Read matters.
This is the first decision the library carries in which a High Court applies the Rs 50 crore POEM threshold, and it does two useful things. It treats the threshold circular as binding on the Department rather than as guidance, which means a small foreign company outside the threshold has an answer to a POEM assessment on the circular alone, without arguing the substance of where its decisions were made. And it holds that a voluntary and mistaken return does not conclude the matter: the Assessing Officer had refused relief on the footing that the residential status was 'completely voluntary' and that the Department could not suo motu reverse its stand after a completed scrutiny assessment, and the Court rejected that. The Court also read section 155(14A) generously, describing it as both substantive and procedural so that the benefit should enure to the assessee notwithstanding procedural impediments, and added the wider proposition that the tax authorities are not concerned with tax that is not due to them as revenue. Two limits should be stated honestly. The Court's reasoning is not internally smooth — at paragraph 41 it says that since the petitioner was managed from India during the period in dispute it was liable to Indian tax, and at paragraph 45 it says the petitioner was not liable in view of the circular; the operative conclusion is the second. And the Court did not decide whether section 155(14A) in terms covered the case, resting the relief partly on that section and partly on the broader refund principle.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Kern Enterprise Limited was incorporated in New Zealand on 14 April 2015 as a subsidiary of an Indian company, Kern Logistics Private Limited, Chennai, to carry on logistics, warehousing and freight forwarding business in New Zealand. Believing that its place of effective management was in India, it filed Indian returns of income for AY 2017-18 to AY 2020-21 — revised returns on 1 November 2018 for the first two years, 26 September 2019 and 16 December 2020 for the others — returning losses in each year but paying tax aggregating Rs 56,63,100. The returns were processed, one under section 143(3) on 31 March 2019 and the others under section 143(1) between December 2020 and September 2021. Its only income was interest on fixed deposits with its New Zealand bankers, on which the bank had withheld tax at 10 per cent. By communication dated 17 November 2021 the Inland Revenue Department of New Zealand told the company that, being incorporated and registered in New Zealand, it was a resident there and liable on its worldwide income under section YD2(a) of the New Zealand Income Tax Act 2007; the company then paid NZD 64,867 in New Zealand. It sought refund of the Indian tax, invoking section 155(14A) read with rule 128. An earlier writ petition, W.P.No.8479 of 2023, resulted in a direction on 23 March 2023 that the Assessing Officer hear the company and pass orders. By order dated 12 May 2023 the Deputy Commissioner rejected the claim, holding that the residential status had been adopted voluntarily, that the Department could not suo motu reverse its stand after completing scrutiny, that section 155(14A) was not applicable, and that the company should approach the New Zealand authorities for treaty relief. That order was challenged in this writ petition.
The writ petition was allowed. The impugned order was quashed and the matter remitted to the respondent to refund the tax paid for the assessment years in question together with interest in accordance with law, the exercise to be completed within three months from receipt of a certified copy of the order, with no costs (paragraphs 58 to 60). The Court held that in view of CBDT Circular No. 8 of 2017 dated 23 February 2017 — under which clause (ii) of section 6(3) does not apply to a company having turnover or gross receipts of Rs 50 crore or less in a financial year, with effect from 1 April 2017 and therefore for AY 2017-18 onwards — and the binding character of Board circulars on the Department, the petitioner was not liable to tax and the tax paid ought to have been refunded (paragraphs 44 and 45).
The Court set out section 6(3) and its Explanation and held that sub-section (6) of section 6 applies only to natural persons and not to a company, so a company's residence turns on section 6(3)(ii) alone (paragraphs 38 to 40). It recorded that the petitioner had paid tax in India under an impression that its place of effective management was in India (paragraph 43), and then applied Circular No. 8 of 2017, holding that the Board's circulars are binding on the Department and that on the strength of the circular the petitioner was not liable to tax (paragraphs 44 and 45). Turning to the machinery, the Court set out section 155(14A) and the Finance Bill 2017 explanation of it, noting that it was intended to give effect to rule 128 and applies from AY 2018-19, and that where foreign tax credit was denied because the foreign tax was in dispute and the dispute is later settled, the Assessing Officer must rectify on the assessee furnishing proof of settlement, evidence of discharge and an undertaking (paragraphs 46 to 48). It read the proviso as requiring the credit for the disputed tax to be allowed for the year in which the income is offered or assessed to tax in India, observing that there cannot be double taxation on the same income (paragraph 49). It then went further: the tax authorities are not concerned with tax that is not due to them as revenue and are only required to collect tax due and payable, so tax paid in excess has to be refunded notwithstanding the procedure in section 155(14A) if the income was taxed in a foreign country (paragraph 51), and section 155(14A) being both substantive and procedural, its benefit should enure to the assessee notwithstanding procedural impediments (paragraph 52). The Court supported the conclusion with section 90 and section 90(2) (paragraphs 53 and 54), Article 51A of the Constitution (paragraph 55), Article 23 of the India-New Zealand treaty on elimination of double taxation (paragraph 56), and the principle in Commissioner of Sales Tax, U.P. v. Auriaya Chamber of Commerce, Allahabad that procedures are handmaids of justice and not its mistress (paragraph 57).
Needless to state, the Circulars of the Board are binding on the Department.
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Handle my notice → Ask a CA on WhatsAppYes, on these facts. The Madras High Court quashed the order refusing rectification and refund, holding that CBDT Circular No. 8 of 2017 — under which section 6(3)(ii) does not apply to a company with turnover or gross receipts of Rs 50 crore or less in a financial year — is binding on the Department, so the company was not liable to Indian tax at all and the tax it had paid ought to have been refunded, with the Court adding that tax paid in excess must be refunded notwithstanding the procedure in section 155(14A) where the income was taxed in a foreign country. This was decided by the High Court (C. Saravanan J) and bears on section 6(3), section 6(3)(ii), section 155(14A), section 143(1), section 143(3), section 154, section 90, section 90(2), section 91, section Rule 128 of the Income Tax Act 1961. It is reported as W.P.No.19206 of 2023 (Madras High Court); reserved 2 March 2026, pronounced 25 June 2026. This is the first decision the library carries in which a High Court applies the Rs 50 crore POEM threshold, and it does two useful things. It treats the threshold circular as binding on the Department rather than as guidance, which means a small foreign company outside the threshold has an answer to a POEM assessment on the circular alone, without arguing the substance of where its decisions were made. And it holds that a voluntary and mistaken return does not conclude the matter: the Assessing Officer had refused relief on the footing that the residential status was 'completely voluntary' and that the Department could not suo motu reverse its stand after a completed scrutiny assessment, and the Court rejected that. The Court also read section 155(14A) generously, describing it as both substantive and procedural so that the benefit should enure to the assessee notwithstanding procedural impediments, and added the wider proposition that the tax authorities are not concerned with tax that is not due to them as revenue. Two limits should be stated honestly. The Court's reasoning is not internally smooth — at paragraph 41 it says that since the petitioner was managed from India during the period in dispute it was liable to Indian tax, and at paragraph 45 it says the petitioner was not liable in view of the circular; the operative conclusion is the second. And the Court did not decide whether section 155(14A) in terms covered the case, resting the relief partly on that section and partly on the broader refund principle. If it applies to you, the first step is this: Where a foreign company has been assessed on POEM, check its turnover or gross receipts for the financial year first: on Circular No. 8 of 2017 as reproduced by the Court, section 6(3)(ii) does not apply to a company with turnover or gross receipts of Rs 50 crore or less, from 1 April 2017 and therefore for AY 2017-18 onwards.
Kern Enterprise Limited was incorporated in New Zealand on 14 April 2015 as a subsidiary of an Indian company, Kern Logistics Private Limited, Chennai, to carry on logistics, warehousing and freight forwarding business in New Zealand. Believing that its place of effective management was in India, it filed Indian returns of income for AY 2017-18 to AY 2020-21 — revised returns on 1 November 2018 for the first two years, 26 September 2019 and 16 December 2020 for the others — returning losses in each year but paying tax aggregating Rs 56,63,100. The returns were processed, one under section 143(3) on 31 March 2019 and the others under section 143(1) between December 2020 and September 2021. Its only income was interest on fixed deposits with its New Zealand bankers, on which the bank had withheld tax at 10 per cent. By communication dated 17 November 2021 the Inland Revenue Department of New Zealand told the company that, being incorporated and registered in New Zealand, it was a resident there and liable on its worldwide income under section YD2(a) of the New Zealand Income Tax Act 2007; the company then paid NZD 64,867 in New Zealand. It sought refund of the Indian tax, invoking section 155(14A) read with rule 128. An earlier writ petition, W.P.No.8479 of 2023, resulted in a direction on 23 March 2023 that the Assessing Officer hear the company and pass orders. By order dated 12 May 2023 the Deputy Commissioner rejected the claim, holding that the residential status had been adopted voluntarily, that the Department could not suo motu reverse its stand after completing scrutiny, that section 155(14A) was not applicable, and that the company should approach the New Zealand authorities for treaty relief. That order was challenged in this writ petition. The matter was decided on 2026-06-25 by the High Court (C. Saravanan J). On those facts the High Court held as follows. The writ petition was allowed. The impugned order was quashed and the matter remitted to the respondent to refund the tax paid for the assessment years in question together with interest in accordance with law, the exercise to be completed within three months from receipt of a certified copy of the order, with no costs (paragraphs 58 to 60). The Court held that in view of CBDT Circular No. 8 of 2017 dated 23 February 2017 — under which clause (ii) of section 6(3) does not apply to a company having turnover or gross receipts of Rs 50 crore or less in a financial year, with effect from 1 April 2017 and therefore for AY 2017-18 onwards — and the binding character of Board circulars on the Department, the petitioner was not liable to tax and the tax paid ought to have been refunded (paragraphs 44 and 45).
The Court set out section 6(3) and its Explanation and held that sub-section (6) of section 6 applies only to natural persons and not to a company, so a company's residence turns on section 6(3)(ii) alone (paragraphs 38 to 40). It recorded that the petitioner had paid tax in India under an impression that its place of effective management was in India (paragraph 43), and then applied Circular No. 8 of 2017, holding that the Board's circulars are binding on the Department and that on the strength of the circular the petitioner was not liable to tax (paragraphs 44 and 45). Turning to the machinery, the Court set out section 155(14A) and the Finance Bill 2017 explanation of it, noting that it was intended to give effect to rule 128 and applies from AY 2018-19, and that where foreign tax credit was denied because the foreign tax was in dispute and the dispute is later settled, the Assessing Officer must rectify on the assessee furnishing proof of settlement, evidence of discharge and an undertaking (paragraphs 46 to 48). It read the proviso as requiring the credit for the disputed tax to be allowed for the year in which the income is offered or assessed to tax in India, observing that there cannot be double taxation on the same income (paragraph 49). It then went further: the tax authorities are not concerned with tax that is not due to them as revenue and are only required to collect tax due and payable, so tax paid in excess has to be refunded notwithstanding the procedure in section 155(14A) if the income was taxed in a foreign country (paragraph 51), and section 155(14A) being both substantive and procedural, its benefit should enure to the assessee notwithstanding procedural impediments (paragraph 52). The Court supported the conclusion with section 90 and section 90(2) (paragraphs 53 and 54), Article 51A of the Constitution (paragraph 55), Article 23 of the India-New Zealand treaty on elimination of double taxation (paragraph 56), and the principle in Commissioner of Sales Tax, U.P. v. Auriaya Chamber of Commerce, Allahabad that procedures are handmaids of justice and not its mistress (paragraph 57). In the words reproduced by the source cited on this page: "Needless to state, the Circulars of the Board are binding on the Department." The decision followed or applied Commissioner of Sales Tax, U.P. v. Auriaya Chamber of Commerce, Allahabad 1986 (3) SCC 50 — relied upon for the proposition that procedures are handmaids of justice.
It was decided by the High Court on 2026-06-25 and is reported as W.P.No.19206 of 2023 (Madras High Court); reserved 2 March 2026, pronounced 25 June 2026. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 6(3), section 6(3)(ii), section 155(14A), section 143(1), section 143(3), section 154, section 90, section 90(2), section 91, section Rule 128, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition was allowed. The impugned order was quashed and the matter remitted to the respondent to refund the tax paid for the assessment years in question together with interest in accordance with law, the exercise to be completed within three months from receipt of a certified copy of the order, with no costs (paragraphs 58 to 60). The Court held that in view of CBDT Circular No. 8 of 2017 dated 23 February 2017 — under which clause (ii) of section 6(3) does not apply to a company having turnover or gross receipts of Rs 50 crore or less in a financial year, with effect from 1 April 2017 and therefore for AY 2017-18 onwards — and the binding character of Board circulars on the Department, the petitioner was not liable to tax and the tax paid ought to have been refunded (paragraphs 44 and 45). It arises in Residence & Treaty Benefit, Refunds, Interest & Condonation and How Tax Law Is Read matters, on section 6(3), section 6(3)(ii), section 155(14A), section 143(1), section 143(3), section 154, section 90, section 90(2), section 91, section Rule 128 of the Income Tax Act 1961, and was decided by C. Saravanan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not treat a return filed on a mistaken view of residence as an admission; the Court granted relief where the company had itself filed as a resident and paid tax under that impression. Where the foreign tax authority has subsequently asserted residence and taxed the same income, put that communication on the record — here the Inland Revenue Department of New Zealand's letter of 17 November 2021 was the trigger for the rectification claim. Frame the claim under section 155(14A) read with rule 128 where foreign tax credit was denied because the foreign tax was in dispute and the dispute has since been settled, and file within six months from the end of the month in which the dispute is settled, with evidence of settlement, evidence of payment and the prescribed undertaking. Where section 155(14A) does not fit precisely, plead the wider ground the Court accepted — that tax paid in excess has to be refunded notwithstanding the procedure in section 155(14A) if the income was taxed in a foreign country — and support it with section 90(2) and the elimination-of-double-taxation article of the relevant treaty. Ask for interest along with the refund; the Court remitted the matter with a direction to refund the tax together with interest in accordance with law, to be completed within three months.
Searched for later treatment; none was found. That is not the same as a source affirming it. Two searches, nothing found. The citedby search on the doc id is empty. A name search returns two results: this judgment and the same company's earlier Madras High Court matter of 6 June 2023. No later decision has adopted, doubted or distinguished the holding that CBDT Circular No. 8 of 2017 — under which s.6(3)(ii) does not apply to a company with turnover or gross receipts of Rs 50 crore or less in a financial year — entitled the petitioner to rectification and refund. No writ appeal or special leave petition was traced, and the judgment is under three months old, so a Letters Patent Appeal would not yet be time-barred. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Three things the reader should know. (1) The judgment is internally inconsistent: paragraph 41 states that the petitioner, having been managed from India during the period in dispute, was liable to Indian tax, while paragraph 45 states that the petitioner was not liable in terms of the Board's clarification. The relief granted follows paragraph 45. (2) The text of CBDT Circular No. 8 of 2017 is stated here only as the Court reproduced it at paragraph 44; this pass could NOT open the circular itself — the departmental circular listing page renders no entries to a fetch, and several slug patterns for the circular's own page returned 404 — so the circular's own wording has not been read. The threshold is now corroborated on a second and unrelated bench: the Nagpur Tribunal in Ajay Maheshwari v ACIT, Circle 2(1), Nagpur, order dated 19 May 2026, records the same clarification by 'CBDT Circular No. 08 of 2017 dated 23.02.2017' that POEM provisions shall not apply to a foreign company having turnover or gross receipts of Rs. 50 crores or less in a financial year. This verification pass again failed to open the circular at source; the /w/ landing-page slugs for Circular 8/2017 return 404. (3) There is a date oddity in the record: paragraph 5 says the company was incorporated on 14.04.2015 while paragraph 16 records the New Zealand authority's letter as saying it was incorporated on 15.04.2015; nothing turns on it. The tabulated years in paragraph 6 run from AY 2017-18 to AY 2020-21, whereas the prayer and paragraph 1 describe the claim as for AY 2016-17 to 2020-21; the tabulation and the four assessments in paragraph 7 are the years actually before the Court. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was allowed. The impugned order was quashed and the matter remitted to the respondent to refund the tax paid for the assessment years in question together with interest in accordance with law, the exercise to be completed within three months from receipt of a certified copy of the order, with no costs (paragraphs 58 to 60). The Court held that in view of CBDT Circular No. 8 of 2017 dated 23 February 2017 — under which clause (ii) of section 6(3) does not apply to a company having turnover or gross receipts of Rs 50 crore or less in a financial year, with effect from 1 April 2017 and therefore for AY 2017-18 onwards — and the binding character of Board circulars on the Department, the petitioner was not liable to tax and the tax paid ought to have been refunded (paragraphs 44 and 45).
TaxSphere, “Kern Enterprise Ltd v Deputy Commissioner of Income Tax”, https://taxnotice.vittsphere.com/caselaw/case/kern-enterprise-v-dcit-poem-circular-8-2017-refund/ (validity last checked 2026-09-08)
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