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Supreme Court of India
Commissioner Of Income Tax (It)4 vs M/S. Reliance Telecom Ltd. on 3 December, 2021Author: M.R. Shah
Bench: M.R. Shah, B.V. Nagarathna
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7110 OF 2021
Commissioner of Income Tax (IT-4),
Mumbai …Appellant
Versus
M/s Reliance Telecom Limited …Respondent
WITH
CIVIL APPEAL NO. 7111 OF 2021
Commissioner of Income Tax (IT-4),
Mumbai …Appellant
Versus
M/s Reliance Communications Limited …Respondent
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
Signature Not Verified
Digitally signed by
DEEPAK SINGH
No. 1406/2017, by which the High Court has dismissed the aforesaid writ
Date: 2021.12.03
15:43:56 IST
Reason:
petitions preferred by the Commissioner of Income Tax (IT-4), Mumbai
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(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 non-
resident 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 & USA, the amount paid is not
taxable in India.
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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
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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
petition/s. Hence, the Revenue is before this Court by way of present
appeal/s.
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 the respondent-company/companies – respective
assessees currently are undergoing corporate insolvency resolution
process and the Resolution Professional is appointed. We have heard
learned counsel for the Resolution Professional of the respondent-
assessee.
3.1 We have considered the order dated 18.11.2016 passed by the
ITAT allowing the miscellaneous application in exercise of powers under
Section 254(2) of the Act and recalling its earlier order dated 06.09.2013
as well as the original order passed by the ITAT dated 06.09.2013.
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3.2 Having gone through both the orders passed by the ITAT, we are of
the opinion that the order passed by the ITAT dated 18.11.2016 recalling
its earlier order dated 06.09.2013 is beyond the scope and ambit of the
powers under Section 254(2) of the Act. While allowing the application
under Section 254(2) of the Act and recalling its earlier order dated
06.09.2013, it appears that the ITAT has re-heard the entire appeal on
merits as if the ITAT was deciding the appeal against the order passed
by the C.I.T. In exercise of powers under Section 254(2) of the Act, the
Appellate Tribunal may amend any order passed by it under sub-section
(1) of Section 254 of the Act with a view to rectifying any mistake
apparent from the record only. Therefore, the powers under Section
254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering
the application under Section 254(2) of the Act, the Appellate Tribunal is
not required to re-visit its earlier order and to go into detail on merits.
The powers under Section 254(2) of the Act are only to rectify/correct
any mistake apparent from the record.
4. In the present case, a detailed order was passed by the ITAT when
it passed an order on 06.09.2013, by which the ITAT held in favour of the
Revenue. Therefore, the said order could not have been recalled by the
Appellate Tribunal in exercise of powers under Section 254(2) of the Act.
If the Assessee was of the opinion that the order passed by the ITAT was
erroneous, either on facts or in law, in that case, the only remedy
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available to the Assessee was to prefer the appeal before the High
Court, which as such was already filed by the Assessee before the High
Court, which the Assessee withdrew after the order passed by the ITAT
dated 18.11.2016 recalling its earlier order dated 06.09.2013. Therefore,
as such, the order passed by the ITAT recalling its earlier order dated
06.09.2013 which has been passed in exercise of powers under Section
254(2) of the Act is beyond the scope and ambit of the powers of the
Appellate Tribunal conferred under Section 254 (2) of the Act.
Therefore, the order passed by the ITAT dated 18.11.2016 recalling its
earlier order dated 06.09.2013 is unsustainable, which ought to have
been set aside by the High Court.
5. From the impugned judgment and order passed by the High Court,
it appears that the High Court has dismissed the writ petitions by
observing that (i) the Revenue itself had in detail gone into merits of the
case before the ITAT and the parties filed detailed submissions based on
which the ITAT passed its order recalling its earlier order; (ii) the
Revenue had not contended that the ITAT had become functus officio
after delivering its original order and that if it had to relook/revisit the
order, it must be for limited purpose as permitted by Section 254(2) of
the Act; and (iii) that the merits might have been decided erroneously but
ITAT had the jurisdiction and within its powers it may pass an erroneous
order and that such objections had not been raised before ITAT.
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6. None of the aforesaid grounds are tenable in law. Merely because
the Revenue might have in detail gone into the merits of the case before
the ITAT and merely because the parties might have filed detailed
submissions, it does not confer jurisdiction upon the ITAT to pass the
order de hors Section 254(2) of the Act. As observed hereinabove, the
powers under Section 254(2) of the Act are only to correct and/or rectify
the mistake apparent from the record and not beyond that.
Even the observations that the merits might have been decided
erroneously and the ITAT had jurisdiction and within its powers it may
pass an order recalling its earlier order which is an erroneous order,
cannot be accepted. As observed hereinabove, if the order passed by
the ITAT was erroneous on merits, in that case, the remedy available to
the Assessee was to prefer an appeal before the High Court, which in
fact was filed by the Assessee before the High Court, but later on the
Assessee withdrew the same in the instant case.
7. In view of the above and for the reasons stated above, the
impugned common judgment and order passed by the High Court as
well as the common order passed by the ITAT dated 18.11.2016
recalling its earlier order dated 06.09.2013 deserve to be quashed and
set aside and are accordingly quashed and set aside. The original
orders passed by the ITAT dated 06.09.2013 passed in the respective
appeals preferred by the Revenue are hereby restored.
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8. Considering the fact that the Assessee had earlier preferred
appeal/s before the High Court challenging the original order passed by
the ITAT dated 06.09.2013, which the Assessee withdrew in view of the
subsequent order passed by the ITAT dated 18.11.2016 recalling its
earlier order dated 06.09.2013, we observe that if the 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, the 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.
9. Both the appeals are accordingly allowed in the aforesaid terms.
However, there shall be no order as to costs.
………………………………….J. [M.R. SHAH]
NEW DELHI; ………………………………….J.
DECEMBER 03, 2021. [B.V. NAGARATHNA]
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