2015 (11) TMI 1744 - HC - Income Tax

Revision u/s 263 - Held that - Appellate Commissioner, vide its order dated 01.03.2006, has, after considering the evidence, accepted the status of the assessee to be that of non-resident Indian and thus, gave a categorical finding that the consultancy fees earned outside India would thus become non-taxable. The filing of certificate under Section 80RRA of the Act was not found to be relevant in view of the non-taxability of the consultancy fees. A categorical finding of fact was recorded b y the Appellate Commissioner that the fact remains that the consultancy fees received by the appellant is earned outside India This finding of fact has not been challenged by the revenue in appeal. The order of the Assessing Officer passed on 11.01.2005 had merged with the order of the Appellate Commissioner dated 01.03.2006. Once such a categorical finding of fact has been recorded, and a conclusion arrived at by the Appellate Commissioner with regard to the consultancy fees having been received by the assessee, which was earned outside India, we are of the view that the same would be a concluded finding of fact, which could be set aside only in an appeal, if the said order was challenged before the Tribunal. Reasoning is a process of conclusion, and once such a conclusion has been arrived at and had become final, the same could not be upset by invoking the provisions of Section 263 of the Act, which could only be invoked, if the order of the Assessing Officer was erroneous insofar as it was prejudicial to the interest of the revenue. In the present case, the order passed by the Assessing Officer could not be said to be in any way prejudicial to the interest of the revenue, as the findings were all given in favour of the revenue, which may have been set aside by the Appellate Commissioner, for the reasons given in the appellate order, which had become final, as the same was not challenged in further appeal by the revenue. Invoking of the revisional powers under Section 263 by the Commissioner of Income Tax (International Taxation) was wholly without jurisdiction - Decided in favour of assessee

Summary

Issues:
1. Tax exemption claim on consultancy fees earned outside India.
2. Status determination of non-resident Indian.
3. Rejection of deduction claimed under Section 80RRA of the Act.
4. Validity of revisional order under Section 263 of the Act.

Analysis:

Issue 1: Tax exemption claim on consultancy fees earned outside India
- The appellant-assessee worked as a Managing Director in Hong Kong and also as a consultant for an American company, earning consultancy fees of Rs. 47,62,999. The claim of tax exemption on this income was disputed by the tax authorities.
- The Appellate Commissioner determined the appellant's status as a non-resident Indian and held that the consultancy fees earned outside India were not taxable. This decision was accepted by the Revenue.
- The Assessing Officer later passed an order subjecting the entire consultancy income to tax. The subsequent appeals by the assessee were dismissed.
- The High Court found that the Assessing Officer had considered the nature of the consultancy fees received by the assessee. The Appellate Commissioner's finding that the consultancy fees were earned outside India was conclusive and could only be challenged in an appeal.
- The Court held that the revisional order under Section 263 was without jurisdiction as the initial order was not prejudicial to the revenue's interest.

Issue 2: Status determination of non-resident Indian
- The Appellate Commissioner determined the appellant's status as a non-resident Indian based on evidence, which was not challenged by the revenue in appeal.
- The Court emphasized that once a categorical finding of fact is recorded and becomes final, it cannot be overturned through revisional powers unless prejudicial to the revenue's interest.

Issue 3: Rejection of deduction claimed under Section 80RRA of the Act
- The Appellate Commissioner found the consultancy fees earned outside India to be non-taxable, making the filing of certificate under Section 80RRA irrelevant.
- The Court reiterated that the conclusive findings of the Appellate Commissioner could only be challenged in an appeal and not through revisional powers.

Issue 4: Validity of revisional order under Section 263 of the Act
- The Court held that invoking revisional powers under Section 263 by the Commissioner was without jurisdiction as the initial order was not prejudicial to the revenue's interest.
- The questions related to the jurisdiction of the Commissioner to revise the order under Section 263 were answered in favor of the assessee.

Conclusion:
- The appeal was allowed in favor of the assessee, and the questions related to tax liability on consultancy fees earned outside India were addressed conclusively. The Court emphasized the importance of finality in findings of fact and limitations on revisional powers under the Act.