2007 (3) TMI 412 - AT - Income Tax

Summary

Issues Involved:
1. Rectification/recalling of the Tribunal's order.
2. Taxability under section 176(3A) of the I.T. Act, 1961.
3. Consideration of US Model Convention and OECD Model Commentary.
4. Requirement of a Permanent Establishment (PE) in the year of income receipt.
5. Set off of unabsorbed depreciation and current year's depreciation.

Detailed Analysis:

Rectification/Recalling of the Tribunal's Order:
The assessee requested rectification or recalling of the Tribunal's order for the assessment year 2001-02, arguing that the Tribunal had not determined the applicability of section 176(3A) of the I.T. Act, 1961. The Tribunal found no mistake apparent from the record and upheld its previous decision, emphasizing that the Tribunal's findings were based on a conscious decision and not errors apparent from the record.

Taxability under Section 176(3A) of the I.T. Act, 1961:
The Tribunal observed that the issue of applicability of section 176(3A) was not relevant, as the assessee was carrying on its business of dredging contracts at various sites in India during the relevant assessment year 2001-02. The Tribunal noted that there was no condition in the DTAA between India and the Netherlands requiring a PE in the year of income receipt for taxability.

Consideration of US Model Convention and OECD Model Commentary:
The Tribunal held that the US Model Convention was not relevant and that the OECD Model Commentary, although similar to the provisions of the Treaty with the Netherlands, did not alter the Tribunal's findings. The Tribunal had considered the relevant articles of the DTAA between India and the Netherlands and concluded that the existence of a PE in the year of income receipt was not required.

Requirement of a Permanent Establishment (PE) in the Year of Income Receipt:
The Tribunal found that there was no requirement for a PE to be in existence in India in the year of receipt of income for taxability. The Tribunal recorded that the assessee had a PE in India in earlier assessment years and that the income received in the assessment year 2001-02 was attributable to the PE. Additionally, the Tribunal noted that the assessee was carrying on dredging contracts at various sites in India during the relevant period, indicating the presence of a PE.

Set off of Unabsorbed Depreciation and Current Year's Depreciation:
The Tribunal addressed the issue of set off of unabsorbed depreciation and current year's depreciation against the assessed income of 2001-02. The Tribunal directed the Assessing Officer to verify whether the assessee had claimed these losses against world income in the Netherlands and to consider the applicability of CBDT Circular No. 22, dated 29-7-1944. The Tribunal substituted paragraph 16 of its previous order to direct the Assessing Officer to decide the issue afresh in accordance with the law after considering the CBDT circular.

Conclusion:
The Tribunal dismissed the assessee's miscellaneous application regarding the rectification of the order, finding no mistake apparent from the record. However, it allowed the substitution of paragraph 16 of its previous order to direct the Assessing Officer to re-examine the issue of set off of unabsorbed depreciation and current year's depreciation, considering the CBDT circular. The Tribunal emphasized that its decisions were based on a conscious review of the relevant laws and facts, and any errors alleged by the assessee did not constitute mistakes apparent from the record.