Income Tax Appellate Tribunal - Mumbai
Nikholas Piramal (I) Ltd , vs Assessee on 5 February, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" BENCH, MUMBAI
BEFORE SHRI D.K. AGARWAL, JM &
SHRI R.K. PANDA, AM
M.A. No. 571/Mum/2009
Arising out of I.T.A. No. 4379/Mum/2005
(Assessment year 1997-98)
M/s. Nicholas Piramal India Ltd. Vs. Jt. CIT, Range 8
(Successor in business of Rhone- Mumbai
Poulenc (I) Ltd.)
4th Floor, Piramal Tower Annexe,
Ganpatrao Kadam Marg, Lower
Parel, Mumbai-400 013
PAN: AAACN4538P
Appellant Respondent
Appellant by: Mr. J.P. Bairagra
Respondent by: Mr. P.C. Morya
ORDER
Date of hearing: 05.02.2010
Date of order: 17.02.2010
PER R.K. PANDA, AM:
The assessee through this Miscellaneous Application (MA) requests the Tribunal to rectify/recall the grounds of appeal No. 2 in assessee's appeal vide I.T.A. No. 4379/Mum/2005 on the ground that the order was passed by the Tribunal without considering the correct facts, arguments and distinguishable facts of the case relied on and without considering and discussing the various decisions of the Tribunal, jurisdictional High Court and of the Hon'ble Supreme Court cited before the Tribunal in the shape of written submissions as well as arguments.
2. Facts of the case, in brief, are that the Assessing Officer in the assessment order disallowed marketing know-how expenditure amounting to Rs.2.70 crores treating the same as 2 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== capital expenditure as against revenue expenditure treated by the assessee on the ground that the same had been incurred in connection with the acquisition of a new line of business.
3. In appeal the CIT(A) following the decision in the case of Jonas Woodhead & Sons (India) Ltd. vs. CIT reported in 224 ITR 342 and the decision of the Hon'ble Madras High Court in the case of CIT vs. W.S. Insulators of India Ltd., reported in 243 ITR 348 held that the sum of Rs.2.70 crores incurred by the assessee on account of transfer of generic business, market know-how and non-competition agreement is capital in nature. He accordingly upheld he order of the Assessing Officer. When the matter came to the Tribunal, the Tribunal vide order dated 11th June, 2009 upheld the order of the CIT(A) and dismissed the ground raised by the assessee.
4. The learned counsel for the assessee referring to page 7 of the order of the Tribunal referred to the following observation of the Tribunal:
"The three separate agreements dated 27.1.1997 between the assessee company and M/s. Max India Ltd. bifurcating the consideration of Rs.3.25 crores into three parts for acquisition of three different rights is not only afterthought but also seems to be self-serving document".
5. Referring to page 4 of the Paper Book the learned counsel for the assessee drew the attention of the Bench to clause 5 of MOU dated 9.11.1996 where it has been mentioned that the said purchase consideration of Rs.3.25 crores is divided into three heads and which read as under:
"5. Purchase consideration
(i) Purchase consideration for the sale/assignment of the Brands, Generic Business, the related technical 3 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== and marketing know-how by Max India in favour of RPIL, shall be as follows:
a) an amount of Rs.270 lakhs (Rupees Hundred Seventy Lakhs only) payable for RPIL to Max India for providing marketing know-how;
b) an amount of Rs. 5 lacs (Rupees Five Lacs only) payable for RPIL to Max India for providing Technical know-how.
c) an amount of Rs.50 lacs (Rupees Fifty Lacs only) payable by RPIL to Max India for sale/assignment of the Brands."
6. He accordingly submitted that the Tribunal while deciding the issue has not considered the correct facts as it is very clear that bifurcation of the consideration into three parts is done in MOU itself and not as per the three agreements entered subsequently to give effect to the terms of the MOU.
7. Referring to page 8 of the Tribunal's order, he submitted that the Tribunal has relied on the decision of the Hon'ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. (supra) which was relied on by the CIT(A) and held that the ratio of the decision of the Hon'ble Supreme Court applies to the case of the assessee. However, while giving this finding the Tribunal has not at all considered the written note submitted on behalf of the assessee company wherein at page 12 it has been clearly pointed out that the said decision which was also relied on by the CIT(A) is not at all applicable on the facts of the assessee's case since the facts of the assessee company are entirely different. Referring to para 10 of the order of the Tribunal where the Tribunal has relied on the decision of Hon'ble Madras High Court in the case of WS Insulators (India) Ltd. (supra) and in the case of Tamil Nadu Dairy Development Corporation Ltd. vs. CIT reported in 239 ITR 142 and 4 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== Chelpark Co. Ltd. vs. CIT reported in 191 ITR 249, he submitted that the Tribunal while upholding the finding of the CIT(A) has not considered the contention of the assessee given at page 14 of the written note wherein the various clauses of the MOU were mentioned and the decision of Hon'ble A.P. High Court in the case of Coromandel Fertilizers Ltd. vs. CIT, reported in 148 ITR 546 was relied on. Referring to various decisions as mentioned in the MA, he submitted that the Tribunal while dismissing the ground has not considered and discussed the arguments of the assessee company given in the written note though reference was made in the last para at page No. 5 of the order. He submitted that the various decisions relied on by the assessee were directly on the issue. However, the Tribunal while deciding the issue has completely ignored the various distinguishable features brought on record by the learned counsel for the assessee. Referring to the order of the Hon'ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. (supra), he submitted that the Hon'ble Supreme Court in the said decision has held that 25% of the sum paid as royalty by the assessee to the Insurance company is to be disallowed as capital expenditure and balance 75% be allowed as revenue expenditure. However, in the instant case the Tribunal while rejecting the claim of the assessee by relying on the above decision has not allowed 75% of Rs.2.70 crores as revenue expenditure. He submitted that a decision cannot be partly followed. Either it has to be followed in full or not followed but cannot be followed in part.
8. Referring to the decision of Hon'ble Supreme Court in the case of ACIT vs. Saurashtra & Kutch Stock Exchange reported in 305 ITR 227, he submitted that rectification of an order stems from the fundamental principle that justice is above all. It is exercised to remove the error and disturb the finality. Referring to the decision of the Hon'ble Supreme Court in the case of Honda 5 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== Siel Power Products Ltd. vs. CIT reported in 295 ITR 466 he submitted that the Hon'ble Supreme Court in the said decision has held that non consideration of materials on record amounts to mistake apparent from record. Referring to the decision of the Tribunal in the case of Jayendra P. Jhaveri vs. ITO vide M.A. No. 814/Mum/08 arising out of I.T.A. No. 68/Mum/04 and C.O. No. 166/Mum/07 order dated 2nd April, 2009, he submitted that the Tribunal in the said decision has held that non consideration of the decision cited constitutes an error apparent on record and hence order passed by the Tribunal was recalled. Referring to the decision of the Tribunal in the case of Mohan Meakin Ltd. reported in 89 ITD 179 (Delhi) (TM) he submitted that non-consideration of a judgement cited before the Tribunal constitutes a mistake apparent from record within the meaning of section 254(2) of the Act. Referring to the decision of the Tribunal in the case of B. Karamchand Piarelal reported in 91 ITD 398 (ASR)(TM) he submitted that in the said decision the Tribunal while deciding the appeal has not considered the judgement cited by the assessee which has bearing on point in issue. It was accordingly held appropriate for the Tribunal to recall its order for fresh hearing. Relying on a host of other decisions, as per the MA, he submitted that since the Tribunal has decided the issue on wrong appreciation of facts and without considering the submission of the assessee that the decisions relied on by the CIT(A) are not applicable to the facts of the present case and ignoring the various decisions relied on by the assessee and not relying on the decision of the Hon'ble Supreme Court in full, therefore, a mistake has crept in the order of the Tribunal and hence the order of the Tribunal to this extent should be recalled.
9. The learned DR, on the other hand, submitted that the Tribunal has considered all material facts and decided the issue against the assessee. Therefore, there is no mistake apparent from 6 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== record so as to recall the order of the Tribunal. It is only assumption by the learned counsel for the assessee. He submitted that the learned counsel for the assessee through this MA is trying to ask the Tribunal to review its own order which is not permissible under the law. He accordingly submitted that the MA filed by the assessee should be dismissed.
10. We have considered the rival submissions made by both the sides. We find the Tribunal while deciding the issue against the assessee has relied on the decision of the Hon'ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. (supra) which was relied on by the CIT(A). However, we find the assessee at the time of hearing of the appeal before the Tribunal has distinguished the above decision and has cited various other decisions including the decision of Hon'ble Supreme Court in the case of Madras Auto Service Pvt. Ltd. reported in 223 ITR 468 (SC) and the decision of the jurisdictional High Court in the case of CIT vs. Hede Consultancy Pvt. Ltd. & Anr. reported in 258 ITR 383 which according to the assessee are directly on the issue. Although these decisions were cited by the assessee during the course of hearing as well as mentioned in the written submissions filed by it, however, we find the Tribunal while deciding the issue has inadvertently not at all considered the above decisions. We further find merit in the submission of the learned counsel for the assessee that the decision in the case of Jonas Woodhead & Sons (India) Ltd. (supra) which was relied on by the CIT(A) and followed by the Tribunal has not been considered in its entirety. We find the Hon'ble Supreme Court in the said decision has held that a part of the expenditure (25%) as capital expenditure and the balance part (75%) as revenue expenditure whereas in the instant case the entire expenditure has been treated as capital in nature. Therefore, we find merit in the submission of the learned counsel for the assessee that either a decision has to be accepted in full or 7 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== rejected in full but cannot be accepted partly and therefore, to this extent a mistake has crept in the order of the Tribunal which requires rectification.
11. We find the Hon'ble Supreme Court in the case of Honda Siel Power Products Ltd. (supra) at page 472 has held as under:
"Scope of the power of rectification As stated above, in this case we are concerned with the application under section 254(2) of the 1961 Act. As stated above, the expression "rectification of mistake from the record" occurs in section 154. It also finds place in section 254(2). The purpose behind the enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its order dated September 10, 2003, allowing the rectification application has given a finding that Samtel Color Ltd. (supra) was cited before it by the assessee but through oversight it had missed out the said judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal is to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record.
"Rule of precedent" is an important aspect of legal certainty in rule of law. That principle is not obliterated by section 254(2) of the Income-tax Act, 1961. When prejudice results from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or the Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. In the present case, the Tribunal was justified in exercising its powers under section 254(2) when it was pointed out to the Tribunal that the judgment of the co-ordinate Bench was placed before the Tribunal 8 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== when the original order came to be passed but it had committed a mistake in not considering the material which was already on record. The Tribunal has acknowledged its mistake, it has accordingly rectified its order. In our view, the High Court was not justified in interfering with the said order. We are not going by the doctrine or concept of inherent power. We are simply proceeding on the basis that if prejudice had resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error then the Tribunal would be justified in rectifying its mistake, which had been done in the present case.
Conclusion For the aforestated reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal allowing the rectification application filed by the assessee is restored. Consequently, the appeal is allowed with no order as to costs."
12. Since the various decisions relied on by the learned counsel for the assessee which according to him are directly on the issue have been inadvertently not considered and since the assessee during the course of hearing of the appeal has distinguished the decisions relied on by the CIT(A) which have been followed by the Tribunal but without considering the distinguishable features pointed out by the learned counsel for the assessee and since the decision of the Hon'ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. has not been followed in its entirety, therefore, in our opinion and in view of the decision of Hon'ble Supreme Court in the case of Honda Siel Power Products (supra) a mistake has crept in the order of the Tribunal which requires rectification u/s. 254(2) of the Act. We, therefore, deem it proper to recall grounds of appeal No. 2 of the assessee's appeal in I.T.A. No. 4379/Mum/05 for fresh adjudication. The Registry is directed to refix the hearing of the appeal for the limited purpose of deciding grounds of appeal No. 2 in assessee's appeal in normal 9 M.A. No. 571/Mum/2009 M/s. Nicholas Piramal India Ltd..
====================== course. We hold and direct accordingly. The MA filed by the assessee is accordingly allowed.
13. In the result, the MA filed by the assessee is allowed.
Order pronounced on 17th February, 2010.
Sd/- Sd/-
(D.K. AGARWAL) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
MUMBAI, dated 17th February, 2010
Copy to:
(1) The Appellant,
(2) The Respondent,
(3) The CIT(A)-XIX, Mumbai,
(4) The CIT, City-7, Mumbai,
(5) The DR, 'I' Bench, ITAT, Mumbai.
//True Copy//
BY ORDER
ASSISTANT REGISTRAR
ITAT, Mumbai Benches, Mumbai
tprao