Income Tax Appellate Tribunal - Mumbai
Sulzer India Ltd., vs Department Of Income Tax on 20 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES, 'E', SPECIAL BENCH
BEFORE S/SHRI D. MANMOHAN, V.P.,
DINESH KUMAR AGARWAL, JM AND P.M. JAGTAP. AM.
M.A. No. 135/Mum/2011
Arising out of ITA No. 2944 & 2871/Mum/2007
(Assessment Year 2003-04)
Dy. Commissioner of Income M/s Sulzer India Limited,
Tax - 8(3), Sulzer House,
2204, 2nd Floor, Baner Road, Aundh,
Aayakar Bhavan, V/s PUNE - 411 007.
M.K. Marg, PAN: AAACS7876U
Mumbai - 400 020.
Applicant Respondent
Date of Hearing : 20-7-2012
Date of Pronouncement : 03-8-2012
Applicant by : Shri B. Jayakumar
Respondent by : Shri S.E. Dastur
Shri Niraj Sheth
O R D E R
PER DINESH KUMAR AGARWAL (JM) This Misc. Application filed by the Revenue is directed against the order passed by the Tribunal in ITA No. 2944 and 2871/Mum/2007 for the A.Y. 2003-04 dtd. 10-11-2010 reported in (2010) 6 ITR (Trib) 604 (Mumbai) [SB].
2. In the Misc. Application dtd. 28-2-2011 it has been stated by the Revenue as under:-
"The Hon'ble 'E' Bench - Special Bench of the Income Tax Appellate Tribunal, Mumbai has passed a common order in the above mentioned case on 10-11-2010 in assessee's appeal being ITA No. 2944/Mum/2007 & Revenue's Appeal being ITA No. 2871/Mum/2007 for A.Y. 2003-04. On perusal of the same, it is found that the said order is liable to be rectified u/s 252(2) of the Income Tax Act, 1961 as it suffers from a large number of mistakes as follows;
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2. It is evident from the order dated 10-11-2010 of the Hon'ble Special Bench that the President has constituted the Special Bench to hear and decide the following question in accordance with law;
"Whether in the facts and circumstances of the case, the remission of deferred sales tax liability is chargeable to tax as business income of the assessee u/s 41(1) being remission of trading liability or the same is exempt from tax as capital receipt being remission of loan liability."
2.1 It was suggested by the learned Sr. Counsel for the assessee that the question should be redrafted to read as follows:-
"Whether on the facts and circumstances of the case and in law, the sum of Rs.4,14,87,985/- has rightly been charged to tax under Section 41(1) of the Income Tax Act, 1961?"
2.2 The Hon'ble Special Bench has stated that it finds force in the submissions of the learned Sr. Counsel that the Question needs to be re- drafted because the present Question before the Hon'ble Special Bench stands with the presumption that it is a case of remission and the learned Sr. Counsel has stressed that most of his arguments will be on the facts of the case that no remission at all is involved and consequently there is no benefit envisaged by Section 41(1)(a) of the Act. The Hon'ble Special Bench has also noted that the learned CIT(DR) has stated that the Question referred to the Special Bench, which is borne out from the records, may be decided without any change. The Hon'ble Special Bench has, however, not noted the reasons given by the CIT (DR) for his submissions and has accordingly not dealt with the objections. Surprisingly, in the order, the Hon'ble Special Bench has stated that instead of the original Question of Law, the following Question should be considered by the Special Bench;
"Whether on the facts and in the circumstances of the case and in law, the sum of Rs.4,14,87,985/- being the difference between the payment of net present value of Rs.3,37,13,393/- against the future value of Rs.3,37,13,393/- against the future liability of Rs.7,52,O1,378/- has rightly been charged to tax under Section 41(1) of the Income Tax Act, 1961?"
2.3 The action of the Special Bench of considering a totally new Question is not as per law since it was constituted and mandated to hear and decide, the Question referred to it by the Hon'ble President. The Special Bench is a creation of the President and its powers are limited to deciding the Question referred to it by the Hon'ble President. The Special Bench cannot usurp the power of framing and deciding the Question, which power is only with the President u/s.255(3) of the Income Tax Act, 1961. A look at the changed Question also shows that the entire factual matrix as found by the lower authorities i.e. Assessing Officer, CIT (Appeals) and Division Bench of the ITAT (which had proposed the Question to the President), and the facts, as examined by the Hon'ble President, on the basis of which the Question was referred to the Special Bench has been changed. It is outside the scope of the Special Bench to 3 MA 135/Mum/2011 frame a Question for decision on its own. The Special Bench has committed a mistake which is apparent from the records.
2.4 Further, the original Question referred by the Hon'ble President contained a finding of fact that there was both a remission of deferred Sales Tax liability as well as benefit which had accrued to the assessee. The only issue which was to be decided by the Hon'ble Special Bench was, whether such remission was chargeable to tax as business income of the assessee u/s.41(1) being remission of trading liability or the same was exempt from tax as capital receipt being remission of loan liability as claimed by the assessee before all the lower authorities. The Question was to be answered in the above factual matrix. The whole Question and issue has been changed by the Special Bench, which it is not empowered to do under the provisions of the Act. This is a mistake apparent from records. The Honble Special Bench should, therefore, recall its order and pass fresh orders on the Question referred to it by the Hon'ble President. 2.5 The Hon'ble Special Bench has also committed a mistake in not incorporating the submissions of the CIT (DR) on the above issue objecting to the change of Question requested by the learned Sr. Counsel for the assessee and in not dealing with such objections.
2.6 Further, even the changed Question was never formulated in the course of the hearing. The changed Question has appeared for the first time only in the order passed by the Hon'ble Special Bench.
3. In para 75 of the order, it has been held by the Hon'ble Special Bench that from the definition and equation of PV and FV, it is clear that the present value of a future sum is the same. This concept of NPV and FV as applied by the Hon'ble Special Bench in the context of the case, is not correct in view of the facts on record as well as the arguments of the learned CIT(DR) which have not been considered at all by the Hon'ble Special Bench although the same have been incorporated in the order. If the arguments of the CIT (DR) are considered, it will be clear that the finding of the Hon'ble Special Bench is not correct.
4. In para 76 of the order, the Hon'ble Special Bench has stated as under;
"... the assessee had collected total amount of Rs.7,52,01,378/- towards sales tax during the year 1989-90 to 2001-02. It was treated as a loan liability payable after 12 years in six annual / equal installments and thus, the assessee treated the said liability as unsecured loans in its books of account."
The above statement of the Hon'ble Special Bench is factually incorrect since it is an admitted position of the assessee that it had applied for conversion of deferred sales tax liability into interest-free loan liability only in the year 2002. If the application for conversion itself was made in the year 2002, the question of treating the amount as loan liability in the books by the assessee does not arise. The Hon'ble Bench has also not considered the arguments of the learned CIT(DR) on this issue.
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5. In para 77 of the order, the Hon'ble Special Bench has held as under;
"The revenue has placed no material on record to show that the present value (NPV) of a future sum is not the same or in the process of calculation of present value of a future sum there is any conversion gain to the assessee. It is also not the case of the revenue that there is no such conversion provided under the BST Act, or the Table provided for determination of NPV is not applicable in the case of the assessee. In the absence thereof it is not possible for us to accept the contention of the ld. DR that there was a remission or cessation of the trading liability."
The above position taken by the Hon'ble Bench is not correct in view of the elaborate arguments and submissions made by the learned CIT(DR) which have been incorporated in para 43 to 45 of the order itself. Since the material and arguments were already on record, the Hon'ble Special Bench ought to have considered it, but it failed to do so. It has also erred in ignoring the material which is available on record. The Hon'ble Special Bench has, therefore, committed a mistake in holding that the Revenue has placed no material to show that the net present value (NPV) of a future sum is not the same or in the process of calculation of present value of a future sum there is a conversion gain to the assessee, which is a mistake apparent from the records.
6. In para 104 of the order, the Honbie Special Bench has held as under;
"... to invoke the provisions of Section 41(1) of the Act, the first requirement is as to whether in the assessment of the assessee, an allowance or deduction has been made in respect of loss, expenditure or the trading liability incurred by the assessee. ..."
In the said para, it has been mentioned that the benefit of deduction was allowed for the purpose of Section 43B of the Act only and not under any other provisions of the Act. However, the Hon'ble Special Bench has gone to hold that the first requirement of Section 41(1) has not been fulfilled in the facts of the present case. Section 43B is a part of the Act itself. Once the Hon'ble Special Bench has held that the benefit of deduction has been allowed u/s.43B, the only finding of the Bench, as per its own admission, and as per settled law, should have been that the first requirement of Section 41(1) has been fulfilled. The finding of the Special Bench on this issue constitutes mistake apparent from the records.
7. In para 105 of the order, the Hon'ble Special Bench has given its finding as under;
"... In the case before us, we find that the sales tax collected by the assessee during the years 1989-1990 to 2002-2002 amounting to Rs.7,52,01,378/- was treated by the State Government as a loan liability payable after 12 years in six annual / equal installments."
It is respectfully submitted that this finding of the Hon'ble Special Bench is incorrect one in view of the admitted position of the assessee that it was 5 MA 135/Mum/2011 only the assessee company who had itself converted its trading liability into a loan liability. In the facts and circumstances of the case, it is not the State Government which has treated the Sales Tax collected by the assessee amounting to Rs.7,52,01,378/- or any other sum as a loan liability as there is no documentary evidence to that effect on record. Further, if the State Government had treated the Sales Tax collected as a loan liability, what was the necessity of the assessee for making an application of treating the deferred sales tax liability into loan in the year 2002.
8. It is respectfully submitted that the discussion in para 108 of the order relates to the provision of Section 63 of the Indian Contracts Act, which was never a subject matter of discussion before the Hon'ble Tribunal. Since this provision was not a subject-matter of any discussion or argument by the Appellant or the Respondent in the above matter and since the said provisions has been invoked to support the case of the assessee, principles of natural justice demand that the Department ought to have been given an opportunity to present its case on the said provision. Even the finding of the Hon'ble Special Bench on this issue shows that in the case of the assessee, remission did take place.
9. In para 107 of the order, the Hon'ble Bench has rightly mentioned that the ld.CIT(DR) has put great emphasis on the Notes to Accounts which have been reproduced in para 43 at page 43 of the order wherein the assessee itself has used the expression 'remission'. However, in para 105 at page 90 of the order, the Hon'ble ITAT has concluded as under;
"... Further there is no iota of evidence to show that there has been any remission or cessation of liability by the State Government. Thus, one of the requirements spelt out for the applicability of section 41(1)(a) has not been fulfilled in the facts of the present case."
It is most respectfully submitted that this finding of the Hon'ble Bench is self- contradictory and perverse. As discussed above, the evidence has already been furnished by the Revenue which has been rightly mentioned by the Hon'ble Bench in para 43 of the order. Further, the CIT (DR) has also made elaborate arguments to show that both remission and cessation had taken place and, which has been incorporated in paras 43 to 46 of the order. But the Hon'ble Special Bench has failed to consider the arguments and evidences at all.
10. The Hon'ble Special Bench has held that the assessee can be deemed to have converted its deferred sales tax liability into a loan liability. This is against the facts and material available on record. The assessee has itself admitted that it had applied for conversion of deferred sales tax liability into interest-free loan liability in 2002. It has also admitted that it has not complied with its procedures and provisions required for such conversion. It was also an admitted position of the assessee that no conversion of deferred sales tax liability into loan had taken place and SICOM had not sanctioned loan equivalent to the amount of deferred sales tax liability. Further, the prepayment of the deferred sales tax liability as per the amended 4th proviso to Section 38 itself proves that the prepayment was of deferred sales tax liability and not of any loan liability. The issue was discussed in detail in the course of the hearing. However, 6 MA 135/Mum/2011 the Special Bench has failed to consider the arguments and submissions on record. They have also not given any reason as to why the submissions are not worth even considering. All evidences on record unequivocally show that the assessee had never converted its deferred sales tax liability into a loan liability. It also prepaid only its deferred sales tax liability and accepted the prepayment of only the deferred sales tax liability and not loan liability. The Hon'ble Special Bench also failed to take notice of the Certificate issued by the Sales Tax authorities, which is on record, and was discussed in detail in the course of the arguments, which unequivocally evidences the fact that what was prepaid was deferred sales tax liability and not loan liability.
However, the Hon'ble Bench has erroneously applied the 'deeming' provision as regards the assessee's unilateral act of treating its trading liability into a loan liability whereas there is no such 'deeming' provision in law. The Hon'ble Special Bench has also completely failed to consider the ratio of the decision relied upon and discussed by the CIT (DR) in the case of Southern Technologies Limited vs. Jt.CIT (2010) 320 ITR 577 (SC). The Honble Special Bench has also completely failed to consider the arguments of the CIT (DR) on this issue.
11. The Hon'ble Special Bench has erroneously held that NPV is equal to future value without assigning any reason for the same and without considering the detailed arguments of the learned CIT (DR) at all on this issue. It has also applied the concept of NPV and FV erroneously without considering the arguments of the CIT(DR). It has also failed to take note of the fact that NPV and FV are related to the assets of the State Government lying with the assessee. As far as the assessee is concerned, its liability, as per its own admission and as reflected in its books of accounts, was Rs.7.52 crore and not Rs.3.37 crore. The amount of Rs.3.37 crore was the NPV i.e. the present worth of the assets of the State Government as per its own calculation, which the State Government was to receive in the future as per the deferral Scheme. This important fact, which is available on records, has been omitted to be considered by the Hon'ble Special Bench. The detailed submissions of the CIT (DR) on this issue have not been considered at all by the Hon'ble Special Bench. The Hon'ble Special Bench has also not given any finding as to how and why the submissions made by the CIT (DR) cannot be accepted and are not relevant. Further, as stated earlier, the liability of the assessee is its current / present liability as admitted by the assessee itself in its books of accounts and Balance Sheet. This present liability was only to be discharged at different future dates as per the 'Package of Incentives' framed by the State Government. The CIT (DR) has raised a question in his submissions, whether, in absence of the amendment brought in the Sales Tax Act, the assessee could have prepaid its liability of Rs.7.52 crore by paying a mere Rs.3.37 crore. The Hon'ble Bench has not only not answered this question, it has completely omitted to even consider it while passing the order. Further, provisions of Sales Tax Act itself show that the NPV is different from the actual liability of the assessee. This was brought to the notice of the Special Bench but the Special Bench has completely ignored the submission and not considered it. The NPV of the assets of the State Government is not the same as the present liability of the assessee, which is elementary economics.
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12. The Hon'ble Special Bench has incorporated the submissions made by the CIT (DR) in its order. However, perusal of the order makes it clear that his submissions have been totally omitted to be considered by the Bench. Non-consideration of the arguments of the CIT (DR) makes the order liable to be rectified u/s.254(2) of the Income Tax Act, 1961. In view of these submissions, it is respectfully submitted that the Hon'ble ITAT's order dated 10.11.2010 requires to be reconsidered. PRAYER -
In view of the aforesaid facts, it is humbly prayed that the Hon'ble ITAT may recall its order dated 10.11.2010 in assessee's Appeal being ITA No.2944/Mum/2007 & Revenue's Appeal being ITA No.2871/Mum/2007 for A.Y 2003-04 and rectify the same after taking into account the aforementioned facts."
3. At the time of hearing the ld. D.R. while reiterating the same plea stated in the Misc. Application further submits that the Hon'ble President, ITAT had constituted the Special Bench to hear and decide the following question in accordance with law:-
"Whether on the facts and circumstances of the case, the remission of deferred sales tax liability is chargeable to tax as business income of the assessee u/s 41(1) being remission of trading liability or the same is exempt from tax as capital receipt being remission of loan liability."
During the course of hearing it was suggested by the ld. Sr. Counsel for the assessee that the question should be re-drafted as follows:-
"Whether in the facts and circumstances of the case and in law, the sum of Rs. 4,14,87,985/- has rightly been charged to tax under Section 41(1) of the Income Tax Act, 1961."
However, the Special Bench of the Tribunal after considering the arguments of both the sides, surprisingly, re-drafted the question as under:-
"Whether on the facts and circumstances of the case and in law, the sum of Rs. 4,14,87,985/- being the difference between the payment of net present value of Rs. 3,37,13,393/- against the future value of Rs. 3,37,13,393/- against the future liability of Rs. 7,52,01,378/- has rightly been charged to tax under section 41(1) of the Income Tax Act, 1961."
8 MA 135/Mum/2011 He further submits that the action of the Special Bench to consider a totally new question is not as per law since it was constituted and mandated to hear and decide the question referred to it by the Hon'ble President, ITAT. He further submits that the powers of the Special Bench are limited to decide the question referred to it by the Hon'ble President, ITAT. The Special Bench cannot usurp the power of framing and deciding the question, which power is only with the President u/s 255(3) of the Act. He further submits that a look at the changed question also shows that the entire factual matrix as found by the lower authorities i.e. the A.O. and CIT(A) and Division Bench of the Tribunal, which had proposed the question to the Hon'ble President and the facts as examined by the Hon'ble President on the basis of which the question was referred to the Special Bench has been changed. It is outside the scope of the Special Bench to frame a question for decision on its own. Thus the Special Bench has committed a mistake which is apparent from the record. In support, the reliance was also placed on the decision of the Special Bench of the Tribunal in Dy. Commissioner of Income Tax vs. Padam Prakash (HUF) (2007) 104 ITD 1 (Delhi [SB] and in Dy. Commissioner of Income Tax vs. Oman International Bank SAOG (2006) 100 ITD 285 (Mum)[SB] to contend that the opinion of the Third Member is equivalent to the decision of the Special Bench having a same force of binding nature. He further submits that in the case of Dynavision Ltd. vs. ITAT (2008) 171 Taxman 486(Mad.), it has been held that the Third Member must confine himself to order of reference; he has no right to go beyond the scope of reference in a matter of difference of opinion between Members of Bench and has no right to 9 MA 135/Mum/2011 enlarge, restrict, modify and/or formulate any question of law on his own on difference of opinion referred to by Members of Tribunal. In the light of the above decisions, the ld. D.R. submits that the Special Bench has committed a mistake in framing a question on its own, therefore, the order passed by the Special Bench of ITAT be rectified.
4. With regard to other issues raised in the Misc. Application (supra), the ld. D.R. submits that the objections have been elaborately discussed in the Misc. Application filed by the Revenue and the same be rectified in accordance with the provisions of section 254(2) of the Act and for this proposition, the reliance was also placed on the following decisions:-
(i) Lachman Dass Bhatia Hingwala (P.) Ltd. vs. Assistant Commissioner of Income Tax (2011) 196 Taxman 563 (Del)[FB] : (2011) 330 ITR 243 (Del) [FB],
(ii) Honda Siel Power Products Ltd. vs. CIT (2007) 165 Taxman 307[SC] : (2007) 295 ITR 466 (SC), and
(iii) CIT vs. Ramesh Chand Modi (2001) 116 Taxman 123 (Raj.) :
(2001) 249 ITR 323 (Raj.) He, therefore, submits that the order passed by the Special Bench of the Tribunal be suitably rectified.
5. On the other hand, the ld. Sr. Counsel for the assessee, at the outset, submits that there is no mistake in the order of the Special Bench of the Tribunal.
6. With regard to the issue regarding formulation of question by the Special Bench of the Tribunal, the ld. Sr. Counsel for the assessee refers to section 255(3) of the Act to submit that U/s 255(3) it has been inter alia provided that "the President may, for disposal of any particular case, 10 MA 135/Mum/2011 constitute a Special Bench consisting of three or more Members, one of whom shall necessarily be a Judicial Member and one Accountant Member". At this stage the ld. Sr. Counsel for the assessee refers the key words provided in the said section i.e. "disposal of any particular case" and submits that while constituting the Special Bench, the President has power to modify the question if the question does not cover the entire aspect of the matter. He further submits that during the course of hearing it has been noted by the Special Bench of the Tribunal in para 2 of the order that the ld. counsel for the assessee has suggested that the question should be re-drafted to read as follows:-
"Whether on the facts and circumstances of the case and in law, the sum of Rs. 4,14,87,985/- has rightly been charged to tax under Section 41(1) of the Income Tax Act, 1961."
He further submits that the Special Bench of the Tribunal after hearing both the parties considered it fair and reasonable that the following question should be re-drafted to cover all aspect of the matter to decide the issue :
"Whether on the facts and circumstances of the case and in law, the sum of Rs. 4,14,87,985/- being the difference between the payment of net present value of Rs. 3,37,13,393/- against the future liability of Rs. 7,52,01,378/- has rightly been charged to tax under section 41(1) of the Income Tax Act, 1961."
He further submits that the above question framed by the Special Bench of the Tribunal is almost the same as re-drafted by the ld. Sr. Counsel for the assessee except the working of the sum of Rs. 4,14,87,985/- being the difference between the payment of net present value against the future liability. He further submits that the question drafted by the Special Bench 11 MA 135/Mum/2011 of the Tribunal in which the Hon'ble President of the Tribunal was also a party does not require fresh reference to the President of the Tribunal. He further submits that since the question drafted by the Special Bench of the Tribunal is within the four corners of the original question having the applicability or non-applicability of the same provision of section 41(1) of the Act, therefore, the plea of the Department that question framed by the Special Bench of the Tribunal without giving any opportunity to the parties must be rejected and for this proposition the reliance was also placed on the decision of the Special Bench of the Tribunal in National Thermal Power vs. Inspecting Assistant Commissioner (1988) 24 ITD 1 (Del) [SB] wherein it has been held that the entire appeal is open before the Special Bench, and is not confined to the question framed. He further submits that in Saipem S.P.A. vs. DCIT (2003) 86 ITD 572 (Delhi) it has been held that before a Special Bench and a Division Bench, it is the hearing on the question posed and the grounds raised, respectively, and the entire issue is open before the Bench. In the light of the above, the ld. Sr. Counsel for the assessee submits that the decisions relied on by the ld. D.R. in Padam Prakash (HUF) (supra) and Oman International Bank SAOG (supra) are on different issue i.e. the opinion of the Third Member is equivalent to the decision of the Special Bench and not on the issue of framing of a new question by the Special Bench and the decision in Dynavision Ltd. (supra) relied on by the ld. D.R. is on the power of the Third Member, therefore, all the three decisions relied on by the ld. D.R. are on different issue and not on the issue before us and hence not applicable.
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7. With regard to the other alleged factual mistakes pointed out by the ld. D.R., the ld. Sr. Counsel for the assessee after reading last eight lines of para 77 of the Tribunal order (supra) submits that the Tribunal after considering the entire material including the arguments of both sides, provisions of section 41(1) of the Act and the provision of the section 38 of the Bombay Sales Tax Act, 1959, has decided the issue in favour of the assessee. On the issue that the arguments advanced by the ld. D.R. in certain paras have not been considered by the Tribunal, the ld. Sr. Counsel for the assessee submits that failure by the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on record and for this proposition, the reliance was also placed on the decision of the Hon'ble Bombay High Court in CIT vs. Ramesh Electric & Trading Co. (1994) 77 Taxman 43 (Bom) : (1993) 203 ITR 497 (Bom). He, therefore, submits that there is no mistake in the order passed by the Tribunal and, therefore, the Misc. Application filed by the Revenue be rejected with cost.
8. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the Revenue has filed the Misc. Application mainly on three issues ie. (i) that the Special Bench of the Tribunal has formulated the new question which was not referred by the President of the Tribunal while constituting the Special Bench u/s 255(3) of the Act, (ii) that the Special Bench of the Tribunal has not considered certain arguments of the ld. D.R. while adjudicating the issue in paras 75,76,77,104,105 and 107 etc., and (iii) that the Special 13 MA 135/Mum/2011 Bench of the Tribunal without giving any opportunity of being heard has considered the provisions of section 63 of the Indian Contract Act.
9. As regards the framing of question by the Special Bench of the Tribunal, we find that the Division Bench while hearing the appeal observed that there are divergence of opinion expressed by two Benches of the Tribunal on the similar issue, therefore, the Division Bench has considered it necessary to refer to the Hon'ble President, ITAT to constitute Special Bench to resolve the issue by deciding the following question:-
"Whether in the facts and circumstances of the case, the remission of deferred sales tax liability is chargeable to tax as business income of the assessee u/s 41(1) being remission of trading liability or the same is exempt from tax as capital receipt being remission of loan liability."
10. The Hon'ble President, ITAT after considering the proposal of the Division Bench of the Tribunal has constituted the Special Bench to hear the appeal and proposed question:- (emphasis supplied) "Whether in the facts and circumstances of the case, the remission of deferred sales tax liability is chargeable to tax as business income of the assessee u/s 41(1) being remission of trading liability or the same is exempt from tax as capital receipt being remission of loan liability." Thereafter, the ld. Sr. Counsel for the assessee has suggested that the question should be redrafted to read as under:-
"Whether on the facts and circumstances of the case and in law, the sum of Rs. 4,14,87,985/- has rightly been charged to tax under Section 41(1) of the Income Tax Act, 1961."
The Special Bench after hearing both the parties and keeping in view the provision of section 41(1) and the recent decision of the Hon'ble jurisdictional High Court in SI Group India Ltd. vs. ACIT (2010) 192 Taxman 91 (Bom) has considered that the question framed does not cover the entire aspect of the matter, therefore, in order to bring out the issue 14 MA 135/Mum/2011 which requires decision more clearly within the parameters of the issue involved has framed the following question keeping in mind the provisions of section 255(3) of the Act as follows:-
"Whether on the facts and circumstances of the case and in law, the sum of Rs. 4,14,87,985/- being the difference between the payment of net present value of Rs. 3,37,13,393/- against the future liability of Rs. 7,52,01,378/- has rightly been charged to tax under section 41(1) of the Income Tax Act, 1961."
11. However, the Revenue in the Misc. Application (supra) has stated that the following question has been considered by the Tribunal:
"Whether on the facts and circumstances of the case and in law, the sum of Rs. 4,14,87,985/- being the difference between the payment of net present value of Rs. 3,37,13,393/- against the future value of Rs. 3,37,13,393/- against the future liability of Rs. 7,52,01,378/- has rightly been charged to tax under section 41(1) of the Income Tax Act, 1961." (emphasis supplied)
12. On comparison of the question noted by the Revenue and framed and answered by the Special Bench of the Tribunal, we find that there is a mistake in the wordings of the question mentioned by the Revenue inasmuch as the highlighted portion of the question mentioned by the Revenue does not exist in the question framed by the Special Bench of the Tribunal (supra) , therefore, the prime objection raised by the Revenue that, surprisingly, the question has been framed by the Special Bench of the Tribunal is contrary to the facts of the present case.
13. In National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC) it has been observed and held as under (Page 386 placitum C & D) :-
"The Tribunal has framed as many as five questions while making a reference to us. Since the Tribunal has not examined the additional grounds raised by the assessee on the merits, we do not propose to answer the questions relating to the merits of those contentions. We reframe the 15 MA 135/Mum/2011 question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows :
"Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same ?"
14. In Steel Authority of India Ltd. vs. CIT (2012) 206 Taxman 574 (Del) it has been observed and held as under (Page 582 para 11) :-
"Since the substantial questions of law framed do not cover this aspect, we have considered it appropriate to frame the following substantial question of law, in addition to the questions already framed: -
"Whether in the facts of the present case waiver of loan would result in reduction of actual cost under Section 43(1) of the Income Tax, 1961?"
15. In National Thermal Power vs. Inspecting Assistant Commissioner (1988) 24 ITD 1 (Delhi) [SB] it has been observed and held as under(Para 4):
".........The second objection about the framing of question too is based on a misunderstanding about the scope of the controversy which existed at the back of the brief ground of appeal. The question referred for the consideration of the larger Bench highlights the various aspects including its factual background on which the assesses based its claim that the sum of Rs. 1,07,29,848 was not income at all. The stand of the Revenue is also reflected in the question when reference is made to the assessability of the aforementioned amount under the head 'Income from other sources'. The question is framed in order to enable the possible interveners to understand the issue or the range of controversy going to be considered by the Special Bench, so that they could assist the Bench by placing their views on the issue concerned. However the entire appeal is open before the Special Bench, and is not confined to the question framed like a question of law framed and referred to the High Court u/s 256 of the Income-tax Act, 1961. We overrule the preliminary objections of the Revenue."
16. In Saipem S.P.A. vs. Dy. Commissioner of Income tax (2003) 86 ITD 572 (Delhi) it has been observed and held as under (para 8):
"At the outset, a distinction has to be drawn between the proceedings before a Special Bench, a Division Bench and lastly those before a Third Member pursuant to a reference under section 255(4). In the first two, it is the hearing on the question posed and the grounds raised respectively and the entire issue is open before the Bench whereas in the last the hearing is primarily with reference to the views expressed by the two ld. Members constituting the Division Bench and where admittedly there has been a 16 MA 135/Mum/2011 difference of opinion among them and the role of the Third Member is limited to acting as a "referee" as he is precluded in law from expressing a "third opinion" and he has to agree with one view or the other. This "restraint" is not there in the hearings before the Special Bench or the Division Bench where the Tribunal after hearing the parties can express its opinion taking into account the facts of the case as also the legal position thereto."
17. Applying the ratio of the above decisions to the issue involved in the present case we find that the issue before the Special Bench was as to whether the remission of deferred sales tax liability is chargeable to tax as business income of the assessee u/s 41(1) of the Act or the same is exempt for tax as capital receipt being remission of loan liability. Since in the original question there was no mention of the amount in dispute as pointed out by the ld. Sr. Counsel of the assessee in the question drafted by him and to avoid further controversy in the matter and to understand the issue or the range of controversy as a whole, the Special Bench of the Tribunal, in which the Hon'ble President, ITAT was also a party and also keeping in view that in the reference it has been mentioned by the Hon'ble President, ITAT that "to hear the appeal and proposed question", has deemed it appropriate to elaborate the question containing the amount of addition in dispute and break up thereof as to whether the same is chargeable to tax u/s 41(1) of the Act and also in order to bring out the point which requires determination more clearly, has considered to reframe the question covering the original question in full, which at the cost of repetition is as follows:
"Whether on the facts and in the circumstances of the case and in law, the sum of Rs.4,14,87,985/- being the difference between the payment of net present value of Rs.3,37,13,393/- against the future liability of Rs.7,52,,01,378/- has rightly been charged to tax under section 41(1) of the Income tax Act, 1961."
17 MA 135/Mum/2011 In this view of the matter, we are of the view that there is no mistake in the order of the Tribunal in reframing the question which is within the parameters of the reference made by the Hon'ble President, ITAT and the original question.
18. As regards the decisions relied on by the ld. D.R. in Padam Prakash (HUF) (supra) and Oman International Bank SAOG (supra) for the proposition that the sanctity of Third Member decision and the Special Bench decision is of the same nature, we are of the view that there is no quarrel on the principle laid down by the Special Bench of the Tribunal in the above cases. However, the case before us the issue is with regard to the framing of question which has been framed within the parameters of the reference made by the Hon'ble President, ITAT and the original question, therefore, the decisions relied on by the ld. D.R. are distinguishable and not applicable to the facts of the present case.
19. As regards the decision in Dynavision Ltd. (supra) it has been held as under (Headnote) :
"The order of reference to the Third Member shall contain the difference of opinion between the Members of the Bench. The President or the Third Member has no right to go beyond the scope of reference and he has to consider only the difference of opinion stated by the Members of the Bench. Section 255(4) does not vest such power with the President or the Third Member. He has also no right to formulate the question of his own. Framing the question on his own goes beyond the jurisdiction. The Third Member must confine himself to the order of reference. Therefore, he has no right to enlarge, restrict, modify and/or formulate any question of law on his own on the difference of opinion referred to by the Members of the Tribunal. In the instant case, the Judicial Member and the Accountant Member had the difference of opinion and formulated the questions. [Para 9]"
18 MA 135/Mum/2011
20. In the case before us, such issue is not involved and as such, the decision relied on by the ld. D.R. is distinguishable and not applicable to the facts of the present case.
21. In this view of the matter the Revenue's objections mentioned in paras 2, 2.1, 2.2, 2.3, 2.4, 2.5 and 2.6 of the Misc. Application (supra) are outside the scope of provisions of section 254(2) of the Act and hence the same are, therefore, rejected.
22. As regard the objection of the Revenue in para 3 of the Misc. Application (supra) that in para 75 of the Tribunal order, the Special Bench has not considered the arguments of the ld. D.R., we find that first line of para 75 of the order starts with the submission of the ld. D.R. and for ready reference para 75 of the order is reproduced as under:
"According to Business Dictionary.com, submitted by the ld. DR, the definition of NPV reads as under :-
"Difference between the present value (PV) of the future cash flows from an investment and the amount of investment. Present value of the expected cash flows is computed by discounting them at the required rate of return (also called minimum rate of return). For example, an investment of $1,000 today at 10 percent will yield $1,100 at the end of the year; therefore, the present value of $1,100 at the desired rate of return (10 percent) is $1,000. The amount of investment ($1,000 in this example) is deducted from this figure to arrive at NPV which here is zero ($1,000-$1,000). A zero NPV means the project repays original investment plus the required rate of return. A positive NPV means a better return, and a negative NPV means a worse return, than the return from zero NPV. It is one of the two discounted cash flow (DCF) techniques (the other is internal rate of return) used in comparative appraisal of investment proposals where the flow of income varies over time."[http://www.
businessdictionary.com/definition/net-present-value- NPV.html] 19 MA 135/Mum/2011 According to Wikipedia the present value (PV) formula has four variables, each of which can be solved for:
1. PV is the value at time=0
2. FV is the value at time=n
3. i is the rate at which the amount will be compounded each period
4. n is the number of periods (not necessarily an integer)
5. Future value of a present sum The future value (FV) formula is similar and uses the same variables.
From the above definition and equation it is clear that the present value of a future sum is the same and if there is a difference i.e., positive NPV then the project repays original investment plus the required rate of return. In other words a positive NPV means a better return and negative NPV means a worse return, than the return from zero NPV meaning thereby the similar value of a future sum."
23. In this view of the matter, the objection raised by the Revenue is devoid of any merit and, hence, rejected.
24. As regards the objection of the Revenue in para 4 & 7 of the Misc. Application (supra) that the finding given by the Tribunal in para 76 & 105 of the Tribunal order are factually in-correct inasmuch as it is not correct to say that the State Government has treated the Sales tax collected by the assessee amounting to Rs. 7,52,01,378/- as a loan liability. In this regard we find that the Tribunal in para 76 & 105 has observed and held as under:-
"76. In the present case the assessee had collected total amount of Rs.7,52,01,378/- towards sales tax during the year 1989-90 to 2001-02. It was treated as a loan liability payable after 12 years in six annual/equal instalments and thus, the assessee treated the said liability as unsecured loans in its books of account."
20 MA 135/Mum/2011 "105. The other requirement of section 41(1) is that the assessee must have subsequently (i) obtained any amount in respect of such loss and expenditure or (ii) obtained any benefit in respect of such trading liabilities by way of remission or cessation thereof. In the case before us we find that the sales tax collected by the assessee during the years 1989-1990 to 2001-2002 amounting to Rs.7,52,01,378/- was treated by the State Government as a loan liability payable after 12 years in six annual/ equal instalments. Subsequently pursuant to the amendment made in the fourth proviso to section 38(4) of the BST Act, 1959 which provides that where an Entitlement Certificate has been granted to the eligible unit for availing of the incentives by way of deferment of sales tax etc. such eligible unit may in respect of the periods during which the said certificate is valid, at its option, prematurely pay in place of the amount of tax deferred by it an amount equal to the net present value of the deferred tax as may be prescribed and on making such payments, in the public interest, the deferred tax shall be deemed to have been paid. In the case before us the assessee has opted the offer of SICOM, an implementing agency of the State Government and repaid an amount of Rs.3,37,13,393/- to SICOM which according to the assessee represented the NPV of the future sum as determined and prescribed by SICOM. The said payment was made to SICOM on 30.12.2002 as per certificates dated 25.08.2003. It has already been demonstrated in para- 74 of this order that NPV is equivalent to Future Value of the sum. In other words, what the assessee was required to repay after 12 years in six annual/ equal instalments, the same was repaid by the assessee, in the public interest, as NPV is equivalent to the Future Value of the sum. Further there is no iota of evidence to show that there has been any remission or cessation of liability by the State Government. Thus, one of the requirements spelt out for the applicability of section 41(1)(a) has not been fulfilled in the facts of the present case."
25. The above finding of the Tribunal are based on the entries recorded in the books of the assessee, fourth proviso to section 38(4) of the BST Act, 1959 and the Certificate dtd. 25-8-2003 issued by SICOM and the provisions of section 41(1)(a) of the Act, therefore, in the absence of any material to show that there is any difference in the amount of loan or there is no such proviso to section 38(4) of the BST Act, 1959 or there is no such Certificate dtd. 25-8-2003, we are of the view that the objections raised by the Revenue are outside the scope of section 254(2) of the Act and accordingly the same are rejected.
26. As regards the objection of the Revenue in para 5 of the Misc. Application (supra) that the Tribunal while deciding the issue in para 77 of 21 MA 135/Mum/2011 its order has failed to consider the submission of the ld. D.R. , we find that the Tribunal after considering the arguments of the ld. D.R., incorporated in paras 22 to 47 appearing at page 20 to 49 of the Tribunal order has observed and held in para 77 as under:-
"Pursuant to the amendment made under sub-section(4) of section 38 of BST Act, 1959 by substituting the 4th proviso which provides for payment of Net Present Value (NPV) of deferred taxes under the package scheme of incentives which is as under :
"Provided also that, notwithstanding anything to the contrary contained in the Act or in the rules or in any of the Package Scheme of Incentives or in the Power Generation Promotion, Promotion Policy, 1998, the Eligible unit to whom an Entitlement Certificate has been granted for availing of the incentives by way of deferment of sales tax, purchase tax, additional tax, turnover tax or surcharge, as the case may be, may, in respect of any of the periods during which the said certificate is valid, as its option, prematurely pay in place of the amount of tax deferred by it an amount, equal to the net present value of the deferred tax as may be prescribed, and on making such payments, in the public interest, the deferred tax shall be deemed to have been paid."
The State Govt. has by notification No.STR-12.02/CR-102/taxation-1 dated 16.11.2002, introduced Rule 31D in the Bombay Sales Tax Rules, 1959 (BST Rules) laying down the procedure for determination of such NPV. The procedure for determination of NPV of the amount of deferred taxes having been published, the Deferral Units may exercise the option under 4th Proviso of sub-section 4 of section 38 of the BST Act, 1959 of pre-maturely repaying at NPV, the amount of deferred taxes. The Rule 31D of the BST Rules has been provided with a table and the notes below it for determination of NPV. For example the payment of BST Rs.27,903/- and CST Rs.70,171/- due on 1.5.2003 was deposited on 30.12.2002 i.e. four months before the due date, the discounted percentage of deferred tax to be paid as NPV was prescribed in said table as 96.4955% and accordingly the NPV amount of BST and CST was worked out to Rs.26,925/ and Rs.67,712/- respectively as per certificate dated 27.12.2002 appearing at page 191 of assessee's paper book and the same was paid on 30.12.2002 as per certificate dated 25.8.2003 appearing at page 188 of assessee's paper book . This amount was paid by the assessee as per offer made by the State Govt. who appointed the State Industrial & Investment Corporation of Maharashtra Limited (SICOM) for settlement of deferred sales tax liability by an immediate one time payment. Accordingly the assessee has paid an amount of Rs.3,37,13,393/- to SICOM which according to the assessee represented the NPV as determined by SICOM. The payment was made to SICOM on 30.12.2002 as per certificates dated 25.8.2003 appearing at page 188 and 207 of assessee's paper book. The revenue has placed no material on record to show that the present value 22 MA 135/Mum/2011 (NPV) of a future sum is not the same or in the process of calculation of present value of a future sum there is any conversion gain to the assessee. It is also not the case of the revenue that there is no such conversion provided under the BST Act, or the Table provided for determination of NPV is not applicable in the case of the assessee. In the absence thereof it is not possible for us to accept the contention of the ld. DR that there was a remission or cessation of the trading liability."
27. In the absence of any material to show that the Tribunal has not considered any other argument of the ld. D.R. apart from the arguments mentioned in paras noted above, we are of the view that there is no apparent mistake in the order of the Tribunal in terms of provisions of section 254(2) of the Act and accordingly we reject the objection raised by the Revenue in this regard.
28. As regard the objection of the Revenue in para 6 of the Misc. Application (supra) that once the Tribunal has held the benefit of deduction has been allowed u/s 43-B of the Act, the finding of the Tribunal in para 104 of the order that first requirement of section 41(1) has not been fulfilled in the facts of the present case, is contrary which constitutes mistake apparent from record, we find that the Tribunal in para 104 after considering the provisions of section 43-B, CBDT Circular No. 496 dated 25-9-1987 and the decisions of the Hon'ble Apex Court has held that the first requirement of section 41(1) has not been fulfilled in the facts of the present case vide finding recorded in para 104 of the Tribunal order as under:-
"Having regard to the aforesaid law laid down by the Hon'ble Supreme Court and High Courts, we find that to invoke the provisions of section 41(1) of the Act, the first requirement is as to whether in the assessment of the assessee, an allowance or deduction has been made in respect of loss, expenditure or the trading liability incurred by the assessee. In the case of the present assessee the revenue's plea is that the assessee has obtained the benefit of deduction of sales tax liability u/s. 43 B of the Act as per 23 MA 135/Mum/2011 CBDT Circular No. 496 dated 25.9.1987. However, we find that in the said circular it has been clearly stated vide para 5 that "...the statutory liability shall be treated to have been discharged for the purposes of Section 43 B"(emphasis supplied). Thus, the benefit of deduction was allowed for the purpose of section 43 B of the Act only and not under any other provisions of the Act. There is no dispute that the Assessing Officer has also applied the aforesaid Board Circular while giving the benefit of deduction u/s. 43 B of the Act. It is settled law that the circulars are binding on the department vide number of decisions of the Hon'ble Apex Court [see in Navnit Lal C. Jhaveri vs. K.K. Sen, AAC (1965) 56 ITR 198(SC), Ellerman Lines Ltd. Vs. CIT (1971) 82 ITR 913 (SC), K.P. Varghese Vs. ITO (1981) 131 ITR 597 (SC) and UCO Bank Vs. CIT (1999) 237 ITR 889 (SC)]. It is also settled law that the Court cannot add words to statute or read words into it which are not there vide Union of India vs. Deoki Nandan Aggarwal (1992) Supp. 1 SCC 323 (80). The similar view has been reiterated recently in CIT vs. Tara Agencies (2007) 292 ITR 444 (SC). This being so we are of the view the first requirement of section 41(1) has not been fulfilled in the facts of the present case."
29. In view of the above, we find that there is no mistake in the order of the Tribunal under the provisions of section 254(2) of the Act and, therefore, we reject the plea of the Revenue in this regard.
30. As regards the objection of the ld. D.R. that the Tribunal in para 108 of the order has discussed the provisions of section 63 of the Indian Contract Act, 1872 which was never a subject matter of the discussion, we are of the view that the Tribunal after holding in the preceding paras i.e. upto paras 107 of the order that there was no remission of trading liability as per the provisions of section 41(1) of the Act has examined the issue from another angle in the light of provisions of section 63 of the Indian Contract Act, 1872 and has held that the provisions of section 41(1)(a) are not applicable. This exercise of the Tribunal is not beyond the question before the Special Bench of the Tribunal and, hence, there is no mistake. This view also finds support from the decision of the Hon'ble Delhi High Court in Geofin Investment (P) Ltd. vs. CIT & Ors., Writ Petition (Civil) No. 24 MA 135/Mum/2011 3744 /2011 dtd. 27-5-2011 wherein it has been observed and held as under:-
"...........While allowing the appeal, the tribunal also referred to another decision of ITAT, Mumbai, 'F' Bench, in the case of Macintosh Finance Estates Ltd. Vs. ACIT. Reliance and reference to reasons stated in Macintosh (supra) cannot be regarded as a mistake apparent from the record. It is not unusual or WPC 3744/2011 Page 2 of 3 abnormal for Judges or adjudicators to refer and rely upon judgments/decisions after making their own research."
31. Thus, we are of the view that there is no mistake in the order of the Tribunal and, hence, the plea taken by the Revenue is rejected.
32. As regards the objection of the Revenue in para 9 of the Misc. Application (supra) that the assessee itself has used the expression 'remission', and despite thereof, the Tribunal has held that there is no iota of evidence to show that there has been any remission or cessation of liability by the State Government, we find that the Tribunal in para 107 of its order has observed and held as under:-
"The ld. DR has put great emphasis on the notes to the accounts which have been reproduced by us in para-43 appearing at page-43 of this order wherein the assessee itself has used the expression 'remission' of the loan liability. However, the position in law is well settled that making of an entry or absence of an entry cannot determine rights and liabilities of parties. In other words, if the law does not lead to incurring of a liability, or does not lead to a corresponding right to insist for discharging such a liability any accounting practice (even if suggested by the Institute of Chartered Accountants of India) cannot lay down anything to the contrary. As held by the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT (1997) 227 ITR 172 (page 183):
"It is true that this court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. Accounting practice cannot override section 56 or any other provision of the Act As was pointed out by Lord Russell in the 25 MA 135/Mum/2011 case of B. S. C. Footwear Ltd. [1970] 77 ITR 857, 860 (CA), the income-tax law does not march step by step in the footprints of the accountancy profession."
33. In the absence of any material to show that the finding given by the Tribunal are contrary to the settled position of law that making of an entry or absence of an entry cannot determine rights and liabilities of the parties, we are of the view that the plea taken by the Revenue is devoid of any merit and accordingly the same is rejected.
34. As regards the objection of the Revenue in para 10,11 and 12 of the Misc. Application (supra) that the finding recorded by the Tribunal are contrary to the facts and the submissions of the ld. D.R. have been totally omitted to be considered by the Bench, we find that in view of the reasoned finding recorded by the Tribunal in paras 73,74,75,76,77,104, 105,106,107, 108 & 109, there is no apparent mistake in the order of the Tribunal in terms of scheme of section 254(2) of the Act and, hence, the submissions of the Revenue in paras 10,11 and 12 of the Misc. Application (supra) are rejected.
35. As regards the non-consideration of the decision cited by the ld. D.R. in the case of Southern Technologies Limited vs. Jt. CIT (2010) 320 ITR 577 (SC) we find that the Tribunal in para 42 of its order has duly noted the above decision relied on by the ld. D.R. In the said decision the constitutional validity of the provisions of section 43-D and 36(1)(viia) of the Act was challenged before the Hon'ble Supreme Court. It has been held by Their Lordships that the provisions are found to be constitutionally valid in that they do not offend Article 19 of the Constitution of India.
26 MA 135/Mum/2011 There is no quarrel on the principle of law laid down by the Hon'ble Apex Court. However, the facts and the issue involved in the present case are entirely different, therefore, the decision relied on by the ld. D.R. is distinguishable and not applicable to the facts of the present case.
36. In Lachman Dass Bhatia Hingwala (P.) Ltd. (supra) relied on by the ld. D.R., it has been held (page 243-244 of (2011) 330 ITR 243 (Delhi) [FB] :
"..........The decision of the Supreme Court in Honda Siel Power Products Ltd. v. CIT [2007] 295 ITR 466is an authority for the proposition that the Tribunal in certain circumstances can recall its own order and section 254(2) of the Act does not totally prohibit so. Decisions which lay down the principle that the Tribunal under no circumstances can recall its order in entirety do not lay down the correct statement of law."
"The Tribunal, while exercising the power of rectification under section 254(2) of the Act, can recall its order in entirety if it is satisfied that prejudice has resulted to the party which is attributable to the Tribunal's mistake, error or omission and which error is a manifest error and it has nothing to do with the doctrine or concept of inherent power of review."
37. In Honda Siel Power Products Ltd. (supra) relied on by the ld. D.R., it has been held (headnote of (2007) 295 ITR 466 (SC) :
" Held, reversing the decision of the High Court, that in allowing the rectification application the Tribunal gave a finding that the earlier decision of a co-ordinate Bench was cited before it but through oversight it had missed the 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 under section 254(2) was to see that no prejudice was caused to either of the parties appearing before it. The rule of precedent was an important aspect of certainty in the rule of law, and prejudice had resulted to the assessee since the precedent had not been considered by the Tribunal. The Tribunal was justified in rectifying the mistake on record."
38. In Ramesh Chand Modi (supra) relied on by the ld. D.R. it has been held (Headnote of (2001) 249 ITR 323 [Raj.]) :
"Where the Tribunal fails to decide some of the questions raised before it inadvertently or by oversight, the only appropriate method of correcting such mistake is to recall the order and make a fresh order after affording 27 MA 135/Mum/2011 an opportunity of hearing to such party. In all such cases, ordinarily the court or Tribunal acts ex debito justitiae to prevent abuse of process even in the absence of any power.
Once a mistake on the face of the record is established what order should follow to correct that mistake shall always depend on the facts and circumstances required to rectify the mistake. If the mistake is one which requires determination of some undecided issue because it has not been decided though raised, the procedure that would follow the discovery of such mistakes is to recall the order and decide the case afresh or to decide that issue after affording an opportunity to the parties concerned and pass a fresh order in the light of finding on such issue. The order under section 254(2) of the Income-tax Act, 1961, is not confined to arithmetical or clerical mistakes, nor only to correct substantive mistakes but also procedural mistakes."
39. In CIT vs. Ramesh Electric and Trading Co. (1993) 203 ITR 497 (Bom) relied on by the ld. sr. Counsel for the assessee it has been held as under (page 497 placitum E) :-
"Under section 254(2) of the Income-tax Act, 1961, the Appellate Tribunal may, "with a view to rectifying any mistake apparent from the record", amend any order passed by it under sub-section (1) within the time prescribed therein. It is an accepted position that the Appellate Tribunal does not have any power to review its own orders under the provisions of the Act. The only power which the Tribunal possesses is to rectify any mistake in its own order which is apparent from the record. This is merely a power of amending its order. The power of rectification under section 254(2) can be exercised only when the mistake which is sought to be rectified is an obvious and patent mistake which is apparent from the record, and not a mistake which requires to be established by arguments and a long drawn process of reasoning on points on which there may conceivably be two opinions. Failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment. The Tribunal cannot, in the exercise of its power of rectification, look into some other circumstances which would support or not support its conclusion."
40. There is no quarrel with the principles enunciated in the aforesaid decisions. However, a mistake which requires to be established by arguments and a long drawn process of reasoning on points cannot be considered as a mistake apparent from record. This view also finds support from the decision of the Hon'ble Supreme Court in T.S. Balram, ITO vs. 28 MA 135/Mum/2011 Volkart Brothers And Others (1971) 82 ITR 50 (SC) wherein it has been observed as under:-
"A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record."
Therefore, the decisions relied on by the ld. D.R. are distinguishable and not applicable to the present case.
41. For the reasons as discussed above, we are of the view that there is no mistake in the order of the Tribunal which is also reported in (2010) 134 TTJ (Mumbai)[SB] 385 : (2010) 42 SOT 457 [Mum](SB) : (2010) 47 DTR Mumbai)[SB](Trib) 329. The Revenue not only wants review but also claims in para 6 of the Misc. Application (supra) that the issue ought to have been decided in favour of the Revenue which is not permissible under the scheme of the provisions of Section 254(2) of the Act and, hence, the Misc. Application (supra) filed by the Revenue inter alia stating that the order of the Special Bench of the Tribunal suffers from a large number of mistakes is, therefore, rejected.
42. In the result, the Misc. Application filed by the Revenue stands dismissed.
Order pronounced on 03-08-2012.
Sd/- sd/- sd/-
(P.M. JAGTAP) ( D. MANM OHAN) (DINESH KUMAR A GARWAL )
ACCOUNTANT M EMB ER VICE P RESIDE NT J UDICIAL ME MBER
Mumbai, Dated 3rd August. 2012.
29 MA 135/Mum/2011
RK.:
Copy to:
1. Appellant
2. Respondent
3. CIT , Concerned, Mumbai
4. CIT(A) - Concerned, Mumbai
5. DR "G' Bench
6. Guard file.
BY ORDER
ASSTT. REGISTRAR,
ITAT, MUMBAI