The Joint Commissioner of Income Tax, Special Range-6, Bangalore V. M/s Sasken Communication Technologies Limited, Bangalore

MA 11/BANG/2020

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2553 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH ITAT BENGA LU RU
• Assessee Lawyers: SUDHEENDRA B R
• Keywords: Business income
• Section: 254(2); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER MP NO. 11/BANG/2020 [ IN IT(TP)A 550/BANG/2016 ] ASSESSMENT YEAR: 2011 - 12 THE JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE-6, BANGALORE. VS. M/S SASKEN TECHNOLOGIES LTD., NO. 139/25, AMARJYOTHI LAYOUT, RING ROAD, DOMLUR, BANGALORE 560 071. PAN: AAEC S 6424R APPELLANT RESPONDENT APPELLANT BY : SHRI B.R. RAMESH , ADDL . CIT(DR)( ITAT), BENGA LU RU. RESPONDENT BY : SHRI , SUDHEENDRA B.R., ADVOCATE DATE OF HEARING : 28.02 .2020 DATE OF PRONOUNCEMENT : 18 .0 3 . 2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS A MISCELLANEOUS PETITION FILED BY THE RE VENUE U/S. 254(2) OF THE INCOME-TAX ACT, 1961 [THE ACT] PRAYING FOR RECT IFICATION OF ORDER DATED 28.6.2019 PASSED IN MP NO.38/BANG/2019. 2. ONE OF THE ISSUE THAT AROSE IN THE AFORESAID APP EAL WAS WITH REGARD TO CLAIM OF ASSESSEE FOR DEDUCTION U/S. 10A/10AA OF THE ACT OF INCOME DERIVED BY WAY OF ROYALTY. THE TRIBUNAL HAD REJECT ED THE CLAIM OF ASSESSEE. THE ASSESSEE FILED MP NO.38/BANG/2019 AGAINST THE O RDER OF TRIBUNAL AND MP NO. 11/BANG/2020 PAGE 2 OF 5 THIS ASPECT WAS DISCUSSED BY THE TRIBUNAL IN PARAS 9 & 10 OF ITS ORDER DATED 28.6.2019 AS FOLLOWS:- 9. THE NEXT ASPECT POINTED OUT IN THIS MP IS WITH REGARD TO THE TRIBUNAL'S ORDER IN EXCLUDING ROYALTY INCOME FR OM THE BUSINESS INCOME FOR THE PURPOSE OF ALLOWING DEDUCTI ON U/S. 10A OF THE ACT. IT HAS BEEN POINTED OUT THAT THE TRIBUN AL IN ITS ORDER IN PARA 15.5 & 15.6 HAD COME TO THE CONCLUSION THAT RO YALTY INCOME HAD NO DIRECT NEXUS WITH INDUSTRIAL UNDERTAKING, TH E PROFITS OF WHICH WERE ELIGIBLE FOR DEDUCTION U/S. 10A AND THER EFORE THEY WERE NOT TO BE INCLUDED AS PART OF THE BUSINESS INC OME WHILE ALLOWING DEDUCTION U/S. 10A OF THE ACT. IT WAS THE CONCLUSION OF THE TRIBUNAL IN THE ORDER THAT THERE IS NO MATERIAL BROUGHT ON RECORD SHOWING THAT THE IPRS, THE USE FOR WHICH ROY ALTY INCOME WAS GENERATED, WERE IPRS DEVELOPED BY INDUSTRIAL UN DERTAKING WHICH CLAIMED DEDUCTION U/S. 10A OF THE ACT. IN THE MP, THE ASSESSEE HAS POINTED OUT THAT EVEN THE AO IN THE OR DER OF ASSESSMENT HAS TREATED THE ROYALTY INCOME AS BUSINE SS INCOME AND NOT INCOME FROM OTHER SOURCES. IT WAS ALSO SUBMITTE D THAT NEITHER THE AO NOR THE DRP DISPUTED THIS POSITION. IT WAS T HE ONLY CASE OF REVENUE THAT ROYALTY INCOME WAS NOT DIRECTLY DERIVED FROM EXPORT BUSINESS OF STPI/SEZ UNIT AND HENCE IT WAS EXCLUDED FROM THE BUSINESS INCOME WHILE COMPUTING DEDUCTION U/S. 10A/10AA OF THE ACT. IN THE LIGHT OF SUCH UNDISPUTE D POSITION, THE TRIBUNAL OUGHT NOT TO HAVE REJECTED THE PLEA OF ASSESSEE IN THIS REGARD. 10. WE HAVE CONSIDERED THE SUBMISSION OF THE ID. CO UNSEL FOR THE ASSESSEE, WHO REITERATED THE STAND OF THE ASSES SEE AS CONTAINED IN THE MP. AS RIGHTLY SUBMITTED BY THE ID. COUNSEL FOR THE ASSESSEE, THE TRIBUNAL HAS PROCEEDED ON AN ERRONEOU S ASSUMPTION THAT ROYALTY INCOME WAS NOT IN RESPECT OF IPRS GENE RATED BY INDUSTRIAL UNDERTAKING, WHEREAS THE REVENUE AUTHORI TIES DID NOT DISPUTE THIS POSITION; NOR WAS THIS THE BASIS OF TH EIR REFUSING TO TREAT ROYALTY INCOME FORMING PART OF BUSINESS INCOM E. THE REVENUE AUTHORITIES PROCEEDED ON THE BASIS THAT THI S WAS NOT PART OF EXPORT INCOME AND THEREFORE EXCLUDED THE SAME FR OM THE BUSINESS INCOME. THERE IS, THEREFORE, A MISTAKE APP ARENT ON THE FACE OF RECORD CALLING FOR INTERFERENCE U/S. 254(2) OF THE ACT. WE THEREFORE RECALL THE ORDER OF TRIBUNAL FOR THE LIMI TED PURPOSE OF MP NO. 11/BANG/2020 PAGE 3 OF 5 ADJUDICATING GROUND NO.14 OF THE GROUNDS OF APPEAL OF THE ASSESSEE. 3. IN THIS MP, THE REVENUE HAS PRAYED THAT THIS ORD ER OF TRIBUNAL SHOULD BE RECALLED FOR THE FOLLOWING REASONS:- 4. THIS DECISION OF THE TRIBUNAL RECALLING ITS OR IGINAL ORDER IS NOT ACCEPTABLE. AS DISCUSSED IN THE PRECEDING PARAS , THE AO IN HIS ASSESSMENT ORDER HAS CLEARLY BROUGHT OUT THIS FACT THAT THE ROYALTY INCOME WAS NOT ATTRIBUTABLE TO THE BUSINESS INCOME OF THE ASSESSEE AND THEREFORE TAXED AS INCOME FROM OTHER S OURCE AND ACCORDINGLY REDUCED IT FROM THE COMPUTATION OF DEDU CTION U/S. 10A/10AA. THIS ACTION OF THE AO WAS ALSO UPHELD BY THE DRP. TRIBUNAL HAD IN DETAIL DISCUSSED THE ISSUE IN ITS O RIGINAL ORDER AND HAD RELIED UPON VARIOUS CASE-LAWS AND DECIDED ON TH E ISSUE. THERE WERE NO ERRORS APPARENT IN THE ORIGINAL ORDER OF TH E TRIBUNAL FOR AN MP TO BE ADMITTED ON THIS ISSUE. 5. SINCE, THIS BEING MISTAKE APPARENT FROM RECORDS, IT IS PRAYED THAT THE INSTANT ORDER OF THE MAY BE RE CALL ED AND THE ORIGINAL ORDER BE RE-INSTATED. 4. THE LD. DR READ THE ORIGINAL ORDER OF THE TRIBUN AL AND SUBMITTED THAT THERE WAS NO MISTAKE IN THE ORDER OF TRIBUNAL. THE BENCH POINTED OUT THAT THE MA IS FILED WITH REFERENCE TO THE ORDER PASSED IN MP NO.38/BANG/2019 AND THEREFORE THE REVENUE OUGHT TO POINT OUT THE AP PARENT ERRORS IN THAT ORDER, RATHER THAN READING THE ORDER OF TRIBUNAL. 5. THE LD. DR SUBMITTED THAT IN THE ORIGINAL ORDER, THE TRIBUNAL HAS DEALT WITH ALL THE ASPECTS OF THE ISSUE BEFORE IT. IT WA S POINTED OUT BY THE BENCH THAT THE ORDER OF TRIBUNAL IN MP NO.38/BANG/2019 WA S PASSED ON THE REASONING THAT IT WAS NEITHER THE CASE OF AO NOR TH E DRP THAT ROYALTY INCOME IN QUESTION WAS GENERATED BY ALLOWING USER O F IPRS DEVELOPED BY THE INDUSTRIAL UNDERTAKING WHICH CLAIMED DEDUCTION U/S. 10A OF THE ACT. 6. THE LD. DR WAS ASKED TO POINT OUT AS TO WHETHER THIS ASPECT WAS DISCUSSED BY THE AO/DRP, BUT HE COULD NOT POINT OUT FROM THE ORDER OF MP NO. 11/BANG/2020 PAGE 4 OF 5 AO/DRP ABOUT THE BASIS OF DISALLOWANCE OF DEDUCTION ON ROYALTY INCOME BY THE REVENUE AUTHORITIES. 7. BE THAT AS IT MAY, THE LD. COUNSEL FOR THE ASSES SEE HAS BROUGHT TO OUR NOTICE A DECISION OF THE HONBLE HIGH COURT OF KARNATAKA WHICH THE HIGH COURT TOOK THE VIEW THAT THERE CANNOT BE A MIS CELLANEOUS PETITION FILED U/S. 254(2) OF THE ACT AGAINST AN ORDER PASSED IN A MISCELLANEOUS PETITION U/S. 254(2) OF THE ACT. A COPY OF THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF PR. CIT V. SMT. ALPANA BHARATIYA IN ITA NO.847 OF 2018 DATED 25.3.2019 WAS FILED BEFORE US. THE FOLLOWING WERE THE RELEVA NT OBSERVATIONS OF THE HONBLE HIGH COURT:- 7. SECTION 253 OF THE ACT PROVIDES AN APPEAL TO THE APPELLATE TRIBUNAL, WHICH WOULD BE CONSIDERED UNDER SECTION 2 54 OF THE ACT. SECTION 254(1) CONTEMPLATES HEARING OF THE APP EAL BY THE APPELLATE TRIBUNAL AND PASSING OF THE ORDER THEREON . SUB-SECTION (2) OF SECTION 254 OF THE ACT WOULD EMPOWER THE TRI BUNAL TO RECTIFY ANY MISTAKE APART FROM THE RECORD, AMEND AN Y ORDER PASSED UNDER SUB-SECTION (1), IF THE MISTAKE IS BRO UGHT TO ITS NOTICE BY THE PARTIES TO THE PROCEEDINGS, WITHIN SI X MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER WAS PASSED. FROM A READING OF SUB-SECTION (2) OF SECTION 254, IT WOULD BE CLEAR THAT THE TRIBUNAL POSSESSES THE POWER TO RECTIFY ANY MIS TAKE APPARENT ON THE RECORD IN THE ORDER PASSED BY IT UNDER SUB-S ECTION (1). IF THE ORDER UNDER SUB-SECTION (2) OF SECTION 254 IS P ASSED, THE SAID ORDER WOULD NOT BE AVAILABLE FOR RECTIFICATION OF M ISTAKE AGAIN UNDER SECTION 254 (2) OF THE ACT. THE ORDER PASSED UNDER SECTION 254(2) CANNOT BE RECTIFIED NOR AMENDED BY INVOKING SUB-SECTION (2) OF SECTION 254 ONCE AGAIN. REPETITIVE APPLICATI ONS UNDER SECTION 254 (2) OF THE ACT ARE NOT PERMISSIBLE. IN THE CASE ON HAND ALSO, THE TRIBUNAL IN EXERCISE OF ITS POWER UN DER SUB-SECTION (2) OF SECTION 254 HAS RECTIFIED THE MISTAKE APPARE NT ON THE RECORD AND DELETED THE DOUBLE ADDITION OF INCOME IN RESPECT OF THE ASSESSEE. THEREAFTER, THE REVENUE AGAIN FILES AN AP PLICATION UNDER SUB-SECTION (2) OF SECTION 254 SEEKING RECTIFICATIO N OF THE ORDER PASSED UNDER SUB-SECTION (2) OF SECTION 254 WHICH I S NOT MAINTAINABLE. THE TRIBUNAL HAS RIGHTLY DISMISSED TH E MISC. MP NO. 11/BANG/2020 PAGE 5 OF 5 PETITION FILED BY THE REVENUE. THERE IS NO ERROR OR OMISSION IN THE ORDER PASSED BY THE TRIBUNAL. 8. IN VIEW OF THE AFORESAID DECISION OF THE HONBLE HIGH COURT, WE ARE OF THE VIEW THAT THE PRESENT MISCELLANEOUS PETITION IS MISCONCEIVED AND DESERVED TO BE DISMISSED IN LIMINE . 9. IN THE RESULT, THE MISCELLANEOUS PETITION BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF MARCH, 2020. SD/- SD/- ( A.K.GARODIA ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 18 TH MARCH, 2020. / DESAI S MURTHY / COPY TO: 1. AP PELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE