TMI Blog2012 (8) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of Section 43 B”(emphasis supplied). Thus, the benefit of deduction was allowed for the purpose of section 43 B 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, thus it is settled law that the circulars are binding on the department - as the first requirement of section 41(1) has not been fulfilled in the facts of the present case deferred sales tax liability will not be chargeable to tax as business income of the assessee - no mistake in the order of the Tribunal under the provisions of section 254(2). As 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 - no material to show that the finding given by the Tribunal are contrary to the settled position of law - in favour of assessee. - ITA No. 2944 & 2871/Mum/2007 - - - Dated:- 3-8-2012 - D Manmohan, Dinesh Kumar Agarwal, J P Jagtap, JJ. For Appellant : Shri B Jayakumar For Respondent : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, 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 ₹ 4,14,87,985/- being the difference between the payment of net present value of ₹ 3,37,13,393/- against the future value of ₹ 3,37,13,393/- against the future liability of ₹ 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though 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 ₹ 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. 5. In para 77 of the order, the Hon ble Special Bench has held as under; The revenue has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 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 ₹ 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision 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 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and circumstances of the case and in law, the sum of ₹ 4,14,87,985/- being the difference between the payment of net present value of ₹ 3,37,13,393/- against the future liability of ₹ 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 ₹ 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 question which arises for our consideration in order to bring out the point which requires determination more clearly. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion 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 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. Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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] 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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 ₹ 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 ₹ 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 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. There is no quarrel on the principle of law laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
