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Shree Krishna Woolen Mills Pvt. Ltd. filed a miscellaneous application under Section 254(2) of the Income Tax Act, 1961, seeking recall of an earlier Tribunal order that dismissed their appeal regarding the taxability of interest received on compensation for a fire incident. The Tribunal had previously ruled that the interest received was a revenue receipt and thus taxable. The assessee argued that the Tribunal had erred in fact and law, leading to a mistake apparent from the record. However, the Tribunal, referencing the Supreme Court's decision in CIT vs Reliance Telecom Ltd., held that the powers under Section 254(2) do not extend to revisiting the merits of the case and dismissed the application.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 299398 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
28-02-2023
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
G
Next Hearing Date
01-12-2022
Assessment Year
2012-2013
Appeal Filed On
27-10-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER, AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER M.A. no.308/Mum./2022 IN ITA no.7373/Mum./2017 (Assessment Year : 2012–13) M/s. Shree Krishna Woolen Mills Pvt. Ltd., Krishna Mill Compound, Behand Sonapur, Bhandup (West), Mumbai 400 078 PAN – AABCS9353GN ................ Applicant (Original Appellant) v/s Income Tax Officer Ward–15(3)(2), Mumbai ................Respondent (Original Respondent) Assessee by : Shri M. Subramaniam Revenue by : Shri Soumendu Kumar Das Date of Hearing – 02/12/2022 Date of Order – 01/03/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. By way of this miscellaneous application filed under section 254(2) of the Income Tax Act, 1961 ("the Act"), the assessee seeks recall of the order dated 05/04/2022, passed under section 254(1) of the Act by the coordinate bench of the Tribunal in assessee’s appeal being ITA no.7373/Mum./2017, for the assessment year 2012-13. Shree Krishna Woolen Mills Pvt. Ltd. M.A. no.308/Mum./2022 Page | 2 2. During the hearing, the learned Authorised Representative (“learned AR”) by referring to the submissions made in the miscellaneous application submitted that the coordinate bench of the Tribunal proceeded on erroneous and incorrect facts, which resulted in a mistake apparent from the record. The learned AR further submitted that the coordinate bench did not discuss fully and properly the decisions of the Hon’ble jurisdictional High Court as well as the coordinate bench of the Tribunal, which also results in a mistake apparent from the record requiring rectification under section 254(2) of the Act. 3. On the contrary, the learned Departmental Representative (“learned DR”) vehemently opposed the admission of the present miscellaneous application and submitted that the coordinate bench of the Tribunal after considering all the aspects of the matter rendered its decision and dismissed the appeal filed by the assessee. 4. We have considered the rival submissions and perused the material available on record. The issue before the coordinate bench of the Tribunal, in assessee’s appeal, was pertaining to addition on account of interest received by the assessee over and above the amount of compensation determined pursuant to the Hon’ble Supreme Court’s direction. From the perusal of the record, we find that the fire incident took place at company’s factory premises causing huge damage to the building, plant and machinery, stock, etc. and the loss was claimed with the United India Insurance Co Ltd. The Hon’ble National Consumer Disputes Redressal Commission directed the insurance company to pay a sum of Rs. 2,83,39,608 along with interest @10% per annum from 6 months after the date of fire i.e. 01/06/1989 till the date of payment of Shree Krishna Woolen Mills Pvt. Ltd. M.A. no.308/Mum./2022 Page | 3 compensation. The Hon’ble Supreme Court confirmed the order passed by the Hon’ble Commission. Pursuant to the above, the assessee received an amount of Rs.2,83,39,608 towards loss of stock, and plant & machinery and an amount of Rs.4,88,19,661 being the interest calculated @10% per annum from 6 months from the date of fire. It is undisputed that the assessee offered for taxation the sum of Rs.2,83,39,608 towards loss of stock and plant & machinery. The amount of Rs.4,88,19,661 received as interest over and above the amount of Rs.2,83,39,608 as compensation was treated as revenue receipt in the hands of the assessee and taxed accordingly. The learned CIT(A) dismissed the appeal filed by the assessee. In further appeal, the coordinate bench of the Tribunal vide order dated 05/04/2022 dismissed the appeal filed by the assessee. 5. As per the assessee, the coordinate bench of the Tribunal has proceeded on erroneous facts and has also not discussed fully and properly the decisions cited, which resulted in a mistake apparent from the record. 6. We find that the Co–ordinate Bench, vide order dated 05/04/2022, observed as under: “7. We have heard both the parties and perused all relevant material available on record. It is pertinent to note that in order to decide whether the receipt is capital or income/revenue receipt, the receipt has to be examined from a commercial point of view and also has to be examined what character of the receipt is in the hands of the receiver. One test for ascertaining as to whether what was received was a capital receipt or a revenue receipt is to find out whether the assessee suddenly changed the link of income/receipt with the profit making apparatus, that was transferred. The taxability of an amount would depend upon the nature and character of the receipt at the initial stage. If the amounts are initially not taxable, they cannot be taxed despite the magnitude of the accumulation and despite its appropriation by the assessee to his own credit subsequently. In the present case the assessee has given a treatment of these receipts in the initial period when the fire broke as revenue Shree Krishna Woolen Mills Pvt. Ltd. M.A. no.308/Mum./2022 Page | 4 receipts and claimed business loss accordingly. The decisions cited by the ld. A.R are factually different as the compensation received by the parties therein were not in respect of any business activities and there was no business damage of such. In commercial world, in respect of business exigencies the compensation specially in respect of damage to properties through fire or any other activities, the businessman ensures his business equipment as well as assets. While claiming the compensation, the assessee was very well aware about the business loss and has given a treatment of the receipts as revenue receipts. Thus, the colour of the receipts in respect of the interest received on compensation amounts to a revenue receipt and thus, the assessing officer as well as the CIT(A) has rightly given the finding of making the said additions to the income of the assessee. Thus, the appeal of the assessee is dismissed.” 7. Section 254(2) of the Act provides that the appellate tribunal may with a view to rectify any “mistake apparent from the record” amend the order passed under section 254(1) of the Act. The term “mistake apparent from the record” has been the subject matter of interpretation before various courts including the Hon’ble Supreme Court. We find that the Hon’ble Supreme Court in CIT vs Reliance Telecom Ltd., [2022] 440 ITR 1 (SC), observed as under: “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.” (emphasis supplied) 8. The Hon’ble Supreme Court further held that if the assessee was of the opinion that the order passed by the Tribunal was erroneous, either on facts or in law, in that case, the only remedy available to the assessee was to prefer the appeal before the High Court. Further, the recall of the order will result in the review of the earlier order passed by the coordinate bench, which has been held by Hon’ble Courts to be not permissible under section 254(2) of the Act. Therefore, respectfully following the decision of the Hon’ble Supreme Court in Shree Krishna Woolen Mills Pvt. Ltd. M.A. no.308/Mum./2022 Page | 5 Reliance Telecom Ltd. (supra), we are of the considered opinion that the relief sought by the assessee by way of the present miscellaneous application is completely outside the ambit of section 254(2) of the Act since the same will result in revisiting the view taken earlier by the coordinate bench of the Tribunal. Thus, in view of our aforesaid findings, we find no merits in the present miscellaneous application filed by the assessee. Accordingly, the same is dismissed. 9. In the result, the miscellaneous application by the assessee is dismissed. Order pronounced in the open Court on 01/03/2023 Sd/- B.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 01/03/2023 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai
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