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SUPREME COURT OF INDIA
(From the High Court of Judicature at Bombay)
M.R. SHAH, B.V. NAGARATHNA, JJ.
Commissioner of Income Tax (IT-4), Mumbai – Appellant
Versus
M/s Reliance Telecom Limited – Respondent
With
Commissioner of Income Tax (IT-4), Mumbai – Appellant
Versus
M/s Reliance Communications Limited – Respondent
Civil Appeal Nos. 7110, 7111 of 2021
Decided On : 03-12-2021
Income Tax Act, 1961 – Section 254(2) – Recall of appellate order – While allowing application under Section 254(2) of Act and recalling its earlier order, ITAT has re-heard entire appeal on merits as if ITAT was deciding appeal against order passed by C.I.T. – In exercise of powers under Section 254(2) of Act, Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of Act with a view to rectifying any mistake apparent from record only – Powers under Section 254(2) of Act are akin to Order XLVII Rule 1 CPC – While considering application under Section 254(2) of Act, Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits – Powers under Section 254(2) of Act are only to rectify/correct any mistake apparent from record – If Assessee was of opinion that order passed by ITAT was erroneous, either on facts or in law, in that case, only remedy available to Assessee was to prefer the appeal before High Court, which as such was already filed by Assessee before High Court, which Assessee withdrew after order passed by ITAT recalling its earlier order – Order passed by ITAT recalling its earlier order which has been passed in exercise of powers under Section 254(2) of Act is beyond scope and ambit of powers of Appellate Tribunal conferred under Section 254 (2) of Act – Order passed by ITAT recalling its earlier order is unsustainable, which ought to have been set aside by High Court – Merely because Revenue might have in detail gone into merits of case before ITAT and merely because parties might have filed detailed submissions, it does not confer jurisdiction upon ITAT to pass order de hors Section 254(2) of Act – Impugned common judgment and order passed by High Court as well as common order passed by ITAT recalling its earlier order quashed and set aside – Original orders passed by ITAT passed in respective appeals preferred by Revenue restored. (Paras 3.2, 4, 6 and 7)
Facts of the case:
Feeling aggrieved and dissatisfied with the impugned common judgment and order dated 08.08.2017 passed by the High Court of Judicature at Bombay in Writ Petition No. 1432/2017 and Writ Petition No. 1406/2017, by which the High Court has dismissed the aforesaid writ petitions preferred by the Commissioner of Income Tax (IT-4), Mumbai and has confirmed the order passed by the Income Tax Appellate Tribunal, Bench at Mumbai dated 18.11.2016 passed in Miscellaneous Application Nos. 261/M/2014 and 419/M/2013, by which ITAT in exercise of powers under Section 254(2) of the Income Tax Act has recalled its earlier order dated 06.09.2013 passed in ITA No. 5096/Mum/2008 and ITA No. 837/Mum/2007, Revenue has preferred the present appeals.
Findings of Court:
Considering the fact that the Assessee had earlier preferred appeal/s before the High Court challenging the original order passed by ITAT dated 06.09.2013, which the Assessee withdrew in view of subsequent order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013, if Assessee/s prefers/prefer appeal/s before the High Court against the original order dated 06.09.2013 within a period of six weeks from today, same may be decided and disposed of in accordance with law and on its/their own merits and without raising any objection with respect to limitation.
Result : Appeals allowed.
JUDGMENT :
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned common judgment and order dated 08.08.2017 passed by the High Court of Judicature at Bombay in Writ Petition No. 1432/2017 and Writ Petition No. 1406/2017, by which the High Court has dismissed the aforesaid writ petitions preferred by the Commissioner of Income Tax (IT-4), Mumbai (hereinafter referred to as the ‘Revenue’) and has confirmed the order passed by the Income Tax Appellate Tribunal, Bench at Mumbai (hereinafter referred to as the ‘ITAT’) dated 18.11.2016 passed in Miscellaneous Application Nos. 261/M/2014 and 419/M/2013, by which the ITAT in exercise of powers under Section 254(2) of the Income Tax Act (hereinafter referred to as the ‘Act’) has recalled its earlier order dated 06.09.2013 passed in ITA No. 5096/Mum/2008 and ITA No. 837/Mum/2007, the Revenue has preferred the present appeals.
2. The facts leading to the present appeals in a nutshell are as under. For the sake of convenience, the facts in Civil Appeal No. 7110 of 2021 arising from Special Leave Petition (Civil) No. 13963/2018 in the case of M/s Reliance Telecom Limited (hereinafter referred to as the ‘Assessee’) are narrated. The facts in another appeal are similar except that the assessee is different, but with respect to same group of companies.
2.1 That the Assessee entered into Supply Contract dated 15.06.2004 with Ericsson A.B. Assessee filed an application under Section 195(2) of the Act before the Assessing Officer, to make payment to the nonresident company for purchase of software without TDS. It was contended by the Assessee that it was for the purchase of software and Ericsson A.B. had no permanent establishment in India and in terms of the DTAA between India and Sweden and USA, the amount paid is not taxable in India.
2.2 The Assessing Officer passed an order dated 12.03.2007 rejecting the Assessee’s application holding that the consideration for software licensing constituted under Section 9(1)(vi) of the Act and under Article 12(3) of the DTAA is liable to be taxed in India and accordingly directed the assessee to deduct tax at the rate of 10% as royalty.
2.3 The Assessee after deducting the tax appealed before the Commissioner of Income Tax (Appeals). CIT vide order dated 27.05.2008 held in favour of the Assessee. Revenue appealed before the ITAT and by a detailed judgment and order dated 06.09.2013, the ITAT allowed the Revenue’s appeal by relying upon the judgments/decisions of the Karnataka High Court and held that payments made for purchase of software are in the nature of royalty. Against the detailed judgment and order dated 06.09.2013 passed by the ITAT, the Assessee filed miscellaneous application for rectification under Section 254(2) of the Act. Simultaneously, the Assessee also filed the appeal before the High Court against the ITAT order dated 06.09.2013.
2.4 That vide common order dated 18.11.2016, the ITAT allowed the Assessee’s miscellaneous application filed under Section 254(2) of the Act and recalled its original order dated 06.09.2013. Immediately, on passing the order dated 18.11.2016 by the ITAT recalling its earlier order dated 06.09.2013, the Assessee withdrew the appeal preferred before the High court, which was against the original order dated 06.09.2013.
2.5 Feeling aggrieved and dissatisfied with the order passed by the ITAT allowing the miscellaneous application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, the Revenue preferred writ petition before the High Court. By the impugned common judgment and order, the High Court has dismissed the said writ petitions. Hence, the Revenue is before this Court by way of present appeals.
3. We have heard Shri Balbir Singh, learned Additional Solicitor General of India appearing on behalf of the Revenue and Shri Anuj Berry, learned Advocate appearing on behalf of the Resolution Professional of the respondent-company. At this stage, it is required to be noted that th
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