2015 (2) TMI 314 - AT - Income Tax

Rectification of mistake - Mistake either of fact or of law - The Revenue, vide its instant applications, has impugned the tribunal's finding with regard to the non-applicability of section 40A(2)(b) - Held that - The first appellate authority had clearly held that the assessee, the payee, ICICI Cap. Services Ltd., and ICICI Bank Ltd. are related concerns, to which the provision of section 40A(2)(b) are clearly applicable. The said finding could only be disturbed or reversed on some factual basis, which we find as absent. There is, accordingly, no basis for the tribunal to have held that section 40A(2)(b) would apply qua the impugned payment/s to ICICI Capital Services Ltd. (I-Caps), which thus cannot be said to be on a firm basis. It is trite law that no court or tribunal can, vide its action or non action, cause prejudice to any party before it. There has thus occurred a mistake in terms of section 254(2) of the Act. We may at this stage also clarify that we are not going by the certificate by ICICI Equity Fund and the order by the hon'ble court being now produced before us by the Revenue in-as-much as the same were not before the tribunal, nor have been shown to us as having formed part of the tribunal's record. We accordingly admit the said mistake, recalling the impugned order for deciding the question of the applicability of section 40A(2)(b) in terms of the said provision. For A.Y. 2003-04, the tribunal, vide its' order dated 20.08.2010, issues no specific finding in the matter. Rather, it proceeds to discuss the issue on merits, issuing definite findings of fact per para 22 of its order, which have since been held by the hon'ble high court as not giving rise to any substantial question of law. However, to the extent it endorses the findings by the tribunal for A.Y. 2002-03, i.e., when it states that the tribunal (for A.Y. 2002-03) has considered all the aspects of the matter, it stands inflicted with the same infirmity as observed by us for A.Y. 2002-03, i.e., qua the legal issue raised by the Revenue per its instant applications. We, accordingly, hold the payee company as a specified person u/s. 40A(2)(b) of the Act for the relevant years. This order is to read be along with the impugned orders by the tribunal, and shall to the extent inconsistent therewith, prevail.

Summary

Issues Involved:
1. Whether there has been a mistake of fact or law in the impugned order regarding the applicability of section 40A(2)(b) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1:
The primary issue in this case was whether there was a mistake in the tribunal's finding concerning the applicability of section 40A(2)(b) of the Income Tax Act. The Revenue contended that the tribunal erred in holding that the assessee did not fall under section 40A(2)(b) based on shareholding. The tribunal's finding was based on the shareholding in the assessee-company, but substantial interest under section 40A(2)(b) is determined by beneficial ownership of shares with voting power. The tribunal's conclusion was deemed incorrect as it did not consider the shareholding of ICICI Trusteeship Services Ltd., which held almost all the capital and voting power in the assessee-company. The tribunal's decision was considered a mistake as it did not provide a valid basis for the non-application of section 40A(2)(b). The impugned orders were recalled for this limited purpose to rectify the mistake regarding the legal issue raised by the Revenue.

The tribunal also examined the shareholding details and relationships between the assessee and ICICI entities. It was established that both the assessee and the payee companies were wholly owned subsidiaries of ICICI Bank Ltd., making them related parties under section 40A(2)(b). The provision of section 40A(2)(a) was deemed applicable for the relevant years regarding the disputed payments. The tribunal clarified that its decision was specifically for rectifying the mistake related to the legal issue of section 40A(2)(b) and passed an amended order to address this issue. The decision of the tribunal in the impugned orders remained unchanged after this analysis.

In conclusion, the judgment addressed the mistake of fact or law in the tribunal's finding regarding the applicability of section 40A(2)(b) of the Income Tax Act, ensuring that the legal provisions were correctly applied based on the shareholding and relationships between the relevant parties involved in the case.