2018 (9) TMI 1889 - AT - Income Tax

Rectification of mistake u/s 254 - Claim of deduction u/s 80-IA(4)(ii) - nature of the business of the assessee - HELD THAT - The claim of the assessee is based upon the meaning for description of internet service providers (ISP). The assessee also relied upon the meaning of the service interpreted by Wikipedia website. The internet services are generally by intermediaries by (a) acquiring the right to use of bandwidth acquiring/setting up the necessary hardware/infrastructure and making the bandwith acquired as per point (a) to outsiders/ customers by using equipments as per point. In brief the controversy has been decided by the AO as well as the CIT and even Hon ble ITAT on the basis of said letter dated 25.11.2009 which nowhere leads correct definition of the nature of the business. The assessee has mentioned in its form no. 3CA and 3CD about the nature of business of internet service provider and network and support service. The assessee has charged the service tax from its client which nowhere falls within the ambit of trade. The assessee also issued TDS certificate to the applicant wherein the tax deducted at source u/s 194J of the Act on fees in profession of taken services to its customer which cannot be treated as trade of bandwidth. On appraisal of the documents on record and considering of the contention of the assessee we are of the view that the nature of the business of the assessee has not been properly interpreted and it requires proper interpretation. Whether in the circumstances the issue is liable to be recalled or not? - If an order has been passed by the Tribunal on the basis of misconception and misapprehension therefore the order does not fall within the ambit of review so undoubtedly it can be recalled in view of the provision of Section 254(2) of the Act. We also find support of law settled in the case of H. H. Maharaja Martant Singh Vs. CIT 1987 (10) TMI 383 - MADHYA PRADESH HIGH COURT SHAKUNTALA RAJESHWAR 1986 (3) TMI 74 - DELHI HIGH COURT therefore in view of the said circumstances we recall the order dated 22.07.2017 vis- -vis issue of claim of deduction u/s 80IA of the Act of deciding afresh in accordance with law. Miscellaneous application filed by the assessee is hereby allowed.

Summary

Issues:
Claim of deduction u/s 80-IA(4)(ii) of the Act denied based on wrong understanding of facts - Whether the order passed by the Hon'ble ITAT is liable to be recalled in the interest of justice?

Analysis:
The judgment deals with a Miscellaneous Application moved by the assessee regarding the denial of the claim of deduction under section 80-IA(4)(ii) of the Act. The application contended that the denial was based on a wrong understanding of facts by the Hon'ble Tribunal. The assessee, a company incorporated in 2000, was granted approval to provide internet services and related activities. The Department of Telecommunication also granted a license for providing internet services. The assessee claimed a deduction under section 80-IA (4)(ii) of the Act, which was denied on the grounds that the assessee was merely a trader in bandwidth, purchasing from various ISPs and selling to others. The assessee argued that its services were not in the nature of trading and that the order denying the claim was based on a wrong interpretation of facts. The assessee's business activities, as per its filings and services provided, did not align with the characterization of a trader. The Tribunal considered the interpretation of the nature of the business and concluded that the order was based on a misconception and misapprehension. Citing legal precedents, the Tribunal recalled the order and decided to reexamine the claim of deduction under section 80-IA of the Act in accordance with the law.

The Tribunal's decision was based on a thorough analysis of the documents on record, the nature of the assessee's business activities, and the legal provisions governing the deduction under section 80-IA of the Act. The Tribunal observed that if an order is passed based on misconception and misapprehension, it can be recalled under Section 254(2) of the Act. The Tribunal also referred to legal precedents, including judgments by the Hon'ble Madhya Pradesh High Court and the Delhi High Court, to support the decision to recall the order and reevaluate the claim of deduction. Ultimately, the Tribunal allowed the miscellaneous application filed by the assessee, indicating that the order denying the claim of deduction under section 80-IA of the Act was to be reconsidered in light of the proper interpretation of the nature of the assessee's business activities.

In conclusion, the judgment highlights the importance of a correct interpretation of facts and legal provisions in determining the eligibility for deductions under the Income Tax Act. The Tribunal's decision to recall the order and reexamine the claim of deduction under section 80-IA of the Act underscores the significance of ensuring that judgments are based on a proper understanding of the nature of business activities and compliance with relevant legal requirements.