Case Law Details
Technip India Ltd. Vs. Asst. CIT (ITAT Chennai)
The words used in section 254(2) are ‘shall make such amendment, if the mistake is brought to its notice’. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that Tribunal can recall the entire order and pass a fresh decision. That would amount to a review of the entire order and that is not permissible under Income Tax Act. The power to rectify a mistake under section 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the Income Tax Act. Thus, what it could not do directly could not be allowed to be done indirectly. The Tribunal meticulously mentioned arguments of assessee’s counsel, the points raised, relevant case-law relied on by the assessee and after considering the arguments of the assessee’s counsel passed the order. As such, the assessee wants to review the order of the Tribunal in the instant case under section 254(2) of the Act which is not permissible under ITAT Rules. After considering the totality of facts and the circumstances of the case, we are of the view that the arguments by the learned AR of the assessee are devoid of any merit and hence the same are rejected.
Full Text of the ITAT Order is as follows:-
By these Miscellaneous Petitions, the assessee seeks recall of the order of the Tribunal in ITA Nos. 1330, 1331 & 1333/Mds/2015, date 22-7-2016.
2. The learned AR submitted that the assessee came in appeal before the Tribunal and raised various grounds. As far as the issue of dis allowance under section 40(a)(i) on bandwidth connectivity charges for non-deduction of TDS from the said payment is concerned, the learned AR submitted that the Tribunal vide para 8.2 has dismissed the contention of the assessee relying on the decision of the Madras High Court in the case of Verizon Communications Singapore Pte Ltd. v. ITO (2014) 361 ITR 575 (Mad). Further, the learned AR submitted that the Madras High Court and the Tribunal has applied the Explanation (vi) to section 9(1) which was introduced in 2012 with effect from 1-6-1976. Even though such retrospective amendment will be applicable in the case of non-resident assessee, as in the case of Verizon Communications Singapore Pte Ltd. (supra) before the Jurisdictional High Court, the same cannot be applied to the case of the deductor/payer, who could not anticipate such amendment for deduction of tax at source and hence cannot be considered as assessee- in-default. Therefore, according to him, dis allowance under section 40(a)(i) of the Act cannot be made for non-deduction of tax at source from payment for bandwidth charges.
2.1 The learned AR further submitted that the Tribunal has not dealt with the following decisions relied on by the assessee and the provisions of Article 26(iv) of the DTAA between India and France :–
1. Sterling Abrasive Ltd. v. Asst. CIT (2011) 44 SOT 652 (Ahd.)
2. Channel Guide India Ltd. v. Asst. CIT (2012) 139 ITD 49 (Mum.)
3. Asstt.CIT v. Ajit Ramakant Phatarpekar (2015) 154 ITD 144 (Panaji-Trib.)
4. Rajasree Motors (P.) Ltd. v. Asst. CIT [IT Appeal No. 535 (Coch.) of 2014, dt. 8-5-2015]
5. Dy. CIT v. Hofincons Info tech & Industrial Services (P.) Ltd. (2015) 152 ITD 249 (Chennai-Trib.)
According to the AR dis allowance of expenditure cannot be made in the hands of the Indian Payee for non-deduction of tax and the corresponding payment of the resident is not subject to tax under the Indian Income Tax Act.
2.2 Further, the learned AR submitted that the provision of section 194J provided for deduction of tax at source for royalty. In the case of plant and machinery only with effect from 13-7-2006. Therefore, as per the provisions of Double Taxation Agreement, royalty paid to Finance Company cannot be disallowed in the hands of the Indian Company prior to 13-7-2006. As all the assessment years in question fall within the due dates, payment of royalty cannot be disallowed in the case of the assessee. To support his view, the learned AR relied on the following decisions which were not considered by the Tribunal :–
1. Millennium Info com Technologies Ltd. v. Asst. CIT (2009) 117 ITD 114 (Delhi)
2. Herbalife International India (P.) Ltd. v. Asst. CIT (2006) 101 ITD 450 (Delhi)
3. SMS Demag (P.) Ltd. v. Dy. CIT (2010) 38 SOT 496 (Delhi)
2.3 In respect of technical services rendered by non-resident outside India, the learned AR submitted that in the course of assessee, rendering services outside India, fee became taxable only with the amendment to section 9(2) by the Finance (No.2) Act, 2010 prior to that fees for technical services rendered by non-resident outside India was not taxable in India. Hence, the dis allowance of fees for technical services prior to the year of amendment of section 9(2) would not be taxable in India. According to him, the assessee relied on the following decisions which was not dealt with by the Tribunal :–
1. Metro & Metro v. Addl. CIT (2014) 147 ITD 207 (Agra-Trib.)
2. United Helicharters (P.) Ltd. v. Asst. CIT (2013) 60 SOT 58 (Mum.-Trib.)
Therefore, the learned AR prayed that the order of the Tribunal may be recalled.
3. The learned DR, on the other hand, submitted that the Tribunal has followed the judgment of the jurisdictional High Court while passing its order, which is binding. Therefore, according to him, there is no prima facie case for recall as prayed for by the assessee. Further, the learned DR submitted that the issues raised by the assessee does not fall under the ambit of the phrase ‘mistake apparent from record’ but are ‘debatable’. Further, the learned DR submitted that the assessee admits that Explanation (vi) to section 9 introduced with retrospective effect from 1-6-1976 is applicable to a non-resident assessee (as in the case of Verizon). However, in the present case, the assessee paid monies to ‘equant’ a French company which is a non-resident. Further, the learned D.R. submitted that once it is accepted that Explanation (vi) to section 9(1) is applicable to a non-resident, the natural corollary is applicability of TDS provisions and consequently, for failure to deduct tax at source, dis allowance under section 40(a)(i) was correctly made by the assessing officer and confirmed by the Commissioner (Appeals) and the Tribunal is justified in dismissing the assessee’s appeal. According to the learned DR, section 194J(1)(c) refers to ‘royalty’ paid to a ‘resident’ and not to non-resident and therefore, the assessee’s reference to section 194J in its Misc. Petition has no relevance, because the recipient is non-resident. Consequently, the argument that all assessment years in appeal falls prior to 13-7-2006, when the word ‘royalty’ was inserted into section 194J and therefore, cannot be disallowed under section 40(a)(i), does not hold water.
3.1 According to the learned DR, the issue regarding ‘fee for technical services’ is concerned, Explanation to section 9, is with retrospective effect from 1976 and therefore, applicable for all the assessment years under appeal. As far as Article 26 of the DTAA between India France is concerned, the learned DR, submitted that it is a deeming provision and has limited applicability (for the purpose of determining the taxable profits or taxable capital of such enterprise) and has no relevant vis-a-vis TDS provisions. According to him, the points raised by the assessee in the Misc. Petition cannot be considered as ‘mistakes apparent from record’ and are ‘debatable’ and hence, fall outside the purview of section 254 of the Act and consequently, it is liable to be dismissed.
4. We have heard both the parties and perused the material on record. In the present case, the Tribunal after taking the due care and considering all the relevant materials on record, had taken a conscious decision and decided the issue raised by assessee against it.
4.1 The scope and ambit of application of section 254(2) is very limited. The same is restricted to rectification of mistakes apparent from the record. The order passed by the Tribunal under section 254(1) is the effective order so far as the appeal is concerned. Any order passed under section 254(2) either allowing the amendment or refusing to amend gets merged with the original order passed. The order as amended or remaining un-amended is the effective order for all practical purposes. An order under section 254(2) does not have existence de hors the order under section 254(1). Recalling of the order is not permissible under section 254(2). Recalling of an order automatically necessitates rehearing and re-adjudication of the entire subject-matter of appeal. The dispute no longer remains restricted to any mistake sought to be rectified. Power to recall an order is prescribed in terms of Rule 24 of the ITAT Rules, 1963, and that too only in case where the assessee shows that it had a reasonable cause for being absent at a time when the appeal was taken up and was decided ex-parte. Judged in the above background the order passed by the Tribunal is indefensible.
5. The words used in section 254(2) are ‘shall make such amendment, if the mistake is brought to its notice’. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that Tribunal can recall the entire order and pass a fresh decision. That would amount to a review of the entire order and that is not permissible under Income Tax Act. The power to rectify a mistake under section 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the Income Tax Act. Thus, what it could not do directly could not be allowed to be done indirectly. The Tribunal meticulously mentioned arguments of assessee’s counsel, the points raised, relevant case-law relied on by the assessee and after considering the arguments of the assessee’s counsel passed the order. As such, the assessee wants to review the order of the Tribunal in the instant case under section 254(2) of the Act which is not permissible under ITAT Rules. After considering the totality of facts and the circumstances of the case, we are of the view that the arguments by the learned AR of the assessee are devoid of any merit and hence the same are rejected.
6. In the result, the Miscellaneous Applications filed by the assessee are dismissed.c
