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2010 (5) TMI 596 - AT - Income TaxWhether Assessee would be liable to deduct tax, in the situation Revenue never considered such receipts taxable in India. - Rectification of Order by Tribunal u/s 254(2) - Held that - payments made by the assessee were being considered as royalty,whether there was any permanent establishment in India or whether the receipts would be taxable in the hands of the recipient became irrelevant. This ruling was made on the basis of section 9(1)(vi). decided against Assessee. Regarding Rectification of Order. - Held that - the Tribunal has only got a limited power of rectifying a mistake which is apparent from the record itself and even an error of judgment is outside the ambit of section 254(2) of the Act. decided against Assessee.
Issues Involved:
1. Non-consideration of the argument that the payment to M/s. Menon Ltd., U.K., was not taxable. 2. Applicability of the Special Bench decision in Mahindra & Mahindra Ltd. v. Dy. CIT. 3. Non-consideration of the decision in Bovis Lend Lease (India) (P.) Ltd. v. ITO. 4. Whether non-consideration of a co-ordinate Bench decision constitutes a mistake apparent on record under section 254(2). 5. Obligation to deduct tax at source under section 195 and applicability of section 40(a)(i). Detailed Analysis: 1. Non-consideration of the argument that the payment to M/s. Menon Ltd., U.K., was not taxable: The assessee argued that the Revenue had accepted the income-tax return filed by M/s. Menon Ltd., U.K., and refunded the taxes, indicating that the payment was not taxable. The Tribunal noted this argument but did not consider it while deciding the issue. The Tribunal held that the payment made to M/s. Menon Ltd., U.K., was 'royalty' under Explanation 2 to clause (vi) of section 9(1) of the Act, and thus taxable in India. It concluded that the refund of TDS to M/s. Menon Ltd., U.K., did not alter the character of the payment as 'royalty'. 2. Applicability of the Special Bench decision in Mahindra & Mahindra Ltd. v. Dy. CIT: The assessee cited the Special Bench decision in Mahindra & Mahindra Ltd., which held that the prerequisite for application of section 195 and section 201 was that the amount paid to a non-resident must be chargeable to tax under the Act. The Tribunal considered this decision but concluded that since the payment was deemed as 'royalty' under section 9(1)(vi), it was chargeable to tax in India. The Tribunal emphasized that the decision in Mahindra & Mahindra Ltd. was not applicable as the income was deemed to accrue or arise in India. 3. Non-consideration of the decision in Bovis Lend Lease (India) (P.) Ltd. v. ITO: The assessee argued that the Tribunal did not consider the decision of the Bangalore Bench in Bovis Lend Lease (India) (P.) Ltd. The Tribunal found that the sum and substance of the decision in Bovis Lend Lease (India) (P.) Ltd. was considered in the impugned order, and thus there was no mistake apparent from the record. 4. Whether non-consideration of a co-ordinate Bench decision constitutes a mistake apparent on record under section 254(2): The assessee contended that non-consideration of a co-ordinate Bench decision was a mistake apparent on record. The Tribunal referred to the Supreme Court's decision in Honda Siel Power Products Ltd. and the Delhi Bench decision in Mohan Meakin Ltd., which held that non-consideration of a judgment cited or a co-ordinate Bench decision was a mistake apparent from record. However, the Tribunal concluded that it had considered the relevant decisions and statutory provisions, and thus there was no mistake apparent from the record. 5. Obligation to deduct tax at source under section 195 and applicability of section 40(a)(i): The Tribunal held that the payment made by the assessee to M/s. Menon Ltd., U.K., was 'royalty' and thus chargeable to tax in India. It emphasized that section 40(a)(i) was triggered when payment was made to a non-resident on which tax was not deducted under Chapter XVIIB. The Tribunal concluded that the assessee was obliged to deduct tax under section 195, and the failure to do so resulted in disallowance under section 40(a)(i). Conclusion: The Tribunal dismissed the miscellaneous petition of the assessee, holding that there was no mistake apparent from the record and that the order of the Tribunal was well reasoned and in conformity with the statutory provisions and relevant case law. The Tribunal emphasized that it did not have the power to review its order under the guise of rectification under section 254(2).
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