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

MA 97/BANG/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8666 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-11-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-10-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 18-09-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Capital asset; Business income; Capital receipt; Set aside; Capital Gains
• Section: 2(14); 254(2); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND MS. S. PADMAVATHY, ACCOUNTANT MEMBER MP No.97/Bang/2022 (in ITA No.2546/Bang/2019) Assessment Year : 2016-17 M/s. Sasken Technologies Limited, No.139/25, Ring Road, Domlur, Bengaluru-560071. PAN : AAECS 6424 R Vs. JCIT, Special Range – 6, Bengaluru. APPELLANT RESPONDENT Appellant by:Shri.Padam Chand Khincha, CA Respondent by :Shri. Gudimella VP Pavan Kumar, JCIT(DR)(ITAT), Bengaluru Date of hearing:28.10.2022 Date of Pronouncement:11.11.2022 O R D E R Per N. V. Vasudevan, Vice President: This is a Miscellaneous Petition (MP) filed by the Assessee under section 254(2) of the Income Tax Act, 1961 (Act) praying for rectification of certain alleged apparent errors in the order of the Tribunal dated 16.3.2022 in the aforesaid appeal. 2. One of the issues that was decided by the Tribunal in the appeal filed by the assessee in the order dated 16.03.2022 was as to whether the sale of Intellectual Property Rights (IPRs) gave rise to income in the form of capital gain or income from other sources or was a capital receipt not liable to tax at all. The Tribunal in paragraphs 20 to MP No.97/Bang/2022 (in ITA No.2546/Bang/2019) Page 2 of 5 22 of the order dated 16.03.2022 held that the sale of IPR by the assessee gave rise to income chargeable under the head “Income from Business”. 3. In this MP, it has been pointed out on behalf of the assessee that while giving its conclusion in para 22, the Tribunal had concluded that the independently own IPR and foreground information that were subject matter of transfer partakes the character of stock in trade for companies like that of the assessee and was not a capital asset within the meaning of section 2(14) of the Act and therefore the sum received by the assessee cannot fall within the ambit of head “Income from Capital Gain”. It has been further pointed out that the above conclusion drawn by the Tribunal was neither a case made out by the AO or the case made out by the CIT(A). The case of the AO was that income from sale of IPR was business income based on the decision of the Tribunal in the case of Bosch Ltd. The AO held that the IPR was created in the normal course of business. In the earlier years, the revenue from the licensing of such IPR's was offered to tax as business income. Merely receipt of a lumpsum amount on assignment cannot alter its nature from being business income to capital gains. This conclusion was seconded by the Hon'ble CIT(A) and it was held that the amount received on assignment of IPR's constituted royalty under the Act. It has been contended that treating the IPRs as an inventory/stock-in-trade of the assessee was not deliberated upon and hence did not emanate from the order of the AO or the CIT(A). None of the lower authorities, even in the slightest, did not treat the IPR to be an inventory/stock-in- trade. It has further been submitted that even in the notes for arguments filed, the IPRs being in the nature of stock-in-trade was neither question nor commented upon by any of the authorities below. It has also been submitted that even in the submissions made by the DR, it was only submitted that pooling of an asset and consequently sharing equally and undivided does not amount to transfer within the meaning of section 2(47) of the Act. It has been further MP No.97/Bang/2022 (in ITA No.2546/Bang/2019) Page 3 of 5 submitted that the ITAT in giving its finding has to restrict itself to the grounds raised before the Tribunal. Such grounds should arise from the facts as found by the taxing authorities which has a bearing on the tax liability on the assessee. The jurisdiction of the Tribunal does not extend to questions which is not the subject of dispute at any stage of the proceedings. It has also been contended that the final conclusions of the Tribunal have been influenced by incorrect facts and therefore it is a mistake which requires to be corrected in exercise of powers under section 254(2) of the Act. 4. The Learned Counsel for the assessee reiterated the stand of the assessee as contained in the MP. Learned DR submitted that the assessee in the form of a MA is virtually seeking a review of the Tribunal’s order. Under section 254(2) of the Act, the Tribunal does not have power to review its own order. Learned DR submitted that the conclusions of the Tribunal arose from the arguments as set out in the order of the Tribunal and cannot be said a mistake apparent in the order of the Tribunal. 5. We have carefully considered the rival submissions. In paragraph 21 of the Order of the Tribunal, the Tribunal has dealt with the arguments of the learned Counsel for the assessee that the assessee was not in the business of buying and selling of IPRs and was only engaged in creating and exploiting IPRs. It is in this context that the Tribunal rendered its finding that the sum received by the assessee under the arbitration award partakes the character of stock-in-trade for companies such as the assessee and was not a capital asset within the meaning of section 2(14) of the Act. It cannot therefore be said that the question whether the IPRs constitute part of stock-in-trade of business with the assessee or not did not transpire in the course of hearing before the Tribunal. MP No.97/Bang/2022 (in ITA No.2546/Bang/2019) Page 4 of 5 6. The other contentions raised in the MP are nothing but an attempt to seek review of the Order of the Tribunal which is not permissible. The law is well settled that the Tribunal does not have power to review its own orders and in exercise of powers u/s.254(2) of the Act, cannot do review its own orders. The Hon’ble Supreme Court in Commissioner of Income Tax vs. Reliance Telecom Limited, Civil Appeal No.7110 of 2021 dated 03rd December, 2021 reported as (2021) 323 CTR (SC) 873 on the scope of powers u/s.254(2) of the Act held as under:- “4. In the present case, a detailed order was passed by the ITAT when it passed an order on 6- 9-2013, 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 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 6-9-2013. Therefore, as such, the order passed by the ITAT recalling its earlier order dated 6-9-2013 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 6-9-2013 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. MP No.97/Bang/2022 (in ITA No.2546/Bang/2019) Page 5 of 5 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.” 7. In the light of the law as laid down by the Hon’ble Supreme Court, we are of the view that there is no mistake apparent on the face of the order warranting rectification u/s.254(2) of the Act. Accordingly, the M.P. is dismissed. 8. In the result, the MP is dismissed. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- (S. PADMAVATHY) (N. V. VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT Bangalore, Dated : 11.11.2022. /NS/* Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.