INCOME TAX OFFICER, WARD-2(1)(1), BENGALURU V. G. TEX INC, BENGALURU

MA 64/BANG/2024

AI Insights

The case involves M/s. G. Tex Inc., which faced reassessment for the assessment year 2011-12 due to non-deduction of TDS on overseas commission payments. The Income Tax Officer (ITO) disallowed the expenditure under section 40(a)(i) of the Income Tax Act, 1961. The CIT(A) initially allowed the appeal of the assessee, which was later upheld by the ITAT. The revenue's miscellaneous petition sought a review of the ITAT's decision, arguing that the commission income's accrual in India was not conclusively established. However, the ITAT dismissed the petition, emphasizing that it could not revisit the merits of the case under section 254(2).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314619 (ITAT-BANGALORE)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Other Referred Cases: CIT vs. Toshoku Limited [125 ITR 525(SC)], DCIT, Circle 2(1)(1), Ahmedabad Vs. M/s.Gujrat4Microwax Pvt. Ltd, ITO Ward 26(1), New Delhi vs. Kulbeer Singh, Hon'ble ITAT Kolkata in the case of M/S, Bengal Tea & Fabrics Ltd. vs. DCIT, Circle -4
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARITHIVEL V.
• Assessee Lawyers: SHEETAL BORKAR
• Keywords: Reassessment proceedings; TDS; Competent authority; Permanent establishment
• Section: 147; 148; 143(3)

Judgement Text

"MP No.64/Bang/2024 M/s. G. Tex Inc., Bengaluru IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER MP No.64/Bang/2024 (Arising out of ITA No.1129/Bang/2023) Assessment Year: 2011-12 ITO Ward-2(2)(1) Bangalore Vs. M/s. G. Tex Inc. No.19 & 29, Lashmi Sadan 2nd Cross, Nehru Nagar Sheshadripuram Bangalore 560 020 PAN NO : AABFG3420D APPELLANT RESPONDENT Assessee by : Dr. Sheetal Borkar, A.R. Revenue by : Sri Parithivel V., D.R. Date of Hearing : 25.04.2025 Date of Pronouncement : 07.05.2025 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: This miscellaneous petition u/s 254(2) of the Income Tax Act, 1961 (in short “The Act”) is filed by the revenue seeking rectification of the order of Tribunal dated 26.6.2024 in ITA No.1129/Bang/2023 for the assessment year 2011-12 on the following lines: 1. The assessee filed return of income for AY 2011-12 on 27.09.2011 declaring total income of -NIL. The assessment in the case of the assessee was completed u/s. 143(3) of the Income Tax Act, 1961 on 07.03.2013. Subsequently, it was noticed during the course of audit in the case that a sum of Rs.3,00,25,255/- was debited as overseas commission on which TDS as per Sec. 195(1) was not affected by the assessee. Hence, the expenditure needs to be disallowed u/s.40(a)(i) of the Income Tax Act, 1961. Thereafter, the proceedings u/s. 147 of the Act was initiated in the case after taking necessary approval of the competent authority and notice u/ s. 148 dated 03.06.2015 was issued to the assessee. The reassessment proceedings was concluded vide order u/ s. 143(3) rws 148 of the Act dated 31.12.2016, MP No.64/Bang/2024 M/s. G. Tex Inc., Bengaluru Page 2 of 5 wherein the expenditure of Rs.3,0(),25,255/- incurred towards commission was disallowed as per the provisions of Section 40(a)(i) of the Income Tax Act, 1961. 2. Aggrieved with the re-assessment order, the assessee filed appeal before the CIT(A). The Ld. CIT(A) allowed the appeal of the assessee relying on the decision of Hon’ble Supreme Court in the case of CIT vs. Toshoku Limited [125 ITR 525(SC)]. Aggrieved by the CIT(A) order the department filed the appeal before the Hon’ble ITAT vide ITA No. 1129/ Bang/ 2023 on the ground that “The appeal of the assessee was allowed without accepting the fact that assessee has claimed the expenses of Rs.3,00,25,255/- under the head payment of overseas commission in his Profit & Loss Account without having made any actual payment and thus the assessee has devised an arrangement to avoid payment of taxes in India. \" 3. The Hon’ble ITAT vide its order in ITA No. 1129/ Bang/ 2023, dated 26.06.2024 after considering the submission of the assessee and grounds of appeal raised by the department has confirmed the decision Of Ld. CIT(A), wherein the Ld. CIT(A) has placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Toshoky Limited [125 ITR 525(SC)l. Further, the ITAT has also placed reliance on the decision in the case of DCIT, Circle 2(1)(1), Ahmedabad Vs. M/s.Gujrat4Microwax Pvt. Ltd in ITA No. 2503/Ahd/2016, ITO Ward 26(1), New Delhi vs. Kulbeer Singh in ITA No. 5204/ Del/ 2014 and the decision of Hon’ble ITAT Kolkata in the case of M/S, Bengal Tea & Fabrics Ltd. vs. DCIT, Circle -4 in ITA No. 1667/K01/2016. The Hon’ble ITAT has held that, “The appellant has never made payment to the commission agents directly and in fact the commission amounts were paid by the Foreign buyer/purchaser on behalf of the appellant company and even commission agents are different and also belongs to various countries without having any PE in India, the provision of TDS itself will not attract in the appellant case. \" Prayer: \"Whether in the present facts and circumstances of the case, the Hon’ble ITAT did not err in not remanding the case back to AO rather than dismissing the appeal as the fact that commission income is accrued in India or not has not been examined and has never been conclusively established by the assessee before the ITAT.\" 2. Before us, ld. D.R. vehemently submitted that the Hon’ble ITAT erred in not remanding the case back to AO rather than dismissing the appeal, as the commission income is accrued in India or not has not been examined and has never been conclusively established by the assessee before the ITAT. MP No.64/Bang/2024 M/s. G. Tex Inc., Bengaluru Page 3 of 5 3. Ld. A.R. on the other hand strongly contended that the issue under consideration is already considered and decided by the this Tribunal and therefore, the Tribunal has no jurisdiction to review its earlier order and go into the details and merits of the case already decided and further submitted that through this MA, the ld. D.R. is seeking to review the impugned order passed by the Tribunal dated 26.6.2024 after due application of mind. 4. We have heard the rival submissions and perused the materials available on record. We find that the Tribunal in its order dated 26.06.2024 has considered all the relevant facts and passed a detailed reasoned order by relying on the judgement of Hon’ble Apex Court in the case of CIT Vs. Thoshoku Ltd. reported in 125 ITR 525 (SC). We have firmly given the findings that the overseas commission agents are non residents and also do not have any permanent establishments (PE) or dependent personal agencies in India and also the services are not rendered in India & therefore the commission income in the hands of the overseas commission agents is not chargeable to tax in India. Hence, we find no apparent error in the order of the Tribunal warranting any rectification on this ground. 4.1 Reliance is also placed on the Hon’ble Supreme Court in the case of Reliance Telecom Limited (2021) 133 taxmann.com 41 (SC) / (2022) 284 taxmann.com 517 (SC) wherein held as follows:- \"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 6-9-2013 as well as the original order passed by the ITAT dated 6- 92013. 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 6-9-2013 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 MP No.64/Bang/2024 M/s. G. Tex Inc., Bengaluru Page 4 of 5 earlier order dated 6-9-2013, 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 revisit 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. 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.” 4.2 Thus we are of firm opinion that section 254(2) of the Act can be invoked only with a view to rectifying any mistake apparent from record. The revenue cannot seek a review of the order passed by the Tribunal through a miscellaneous application u/s.254(2) of the Act, as held by the Hon’ble Supreme Court in the case of Reliance Telecom Limited (supra). We further clarify that if the revenue is of the opinion that the order passed by the Tribunal is erroneous either on facts or in law, in that case the only remedy available to the revenue is to prefer an appeal before the Hon’ble High Court. MP No.64/Bang/2024 M/s. G. Tex Inc., Bengaluru Page 5 of 5 5. Under the above-mentioned facts and circumstances, we do not find any error/mistake apparent on the face of record and therefore, we dismiss the miscellaneous petition filed by the revenue. 6. In the result, miscellaneous petition filed by the revenue is dismissed. Order pronounced in the open court on 7th May, 2025 Sd/- (Waseem Ahmed) Accountant Member Sd/- (Keshav Dubey) Judicial Member Bangalore, Dated 7th May, 2025. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore. "