2018 (9) TMI 2010 - AT - Income Tax

Rectification u/s 254 - non-adjudication of the real dispute under consideration - capital gain computation - JV entered - HELD THAT - Due to the takeover of LAND by a USA- based company, the applicant exercised its option to sell all the shares of the JVCo to the other partner. Section 2(14) defines that 'capital asset' means property of any kind held by an assessee, whether or not connected with his business or profession. How transfer has taken place in the above case. In this context reference has been made to the waiver agreement dated 15.06.2006 between the applicant and LAND. At the time of entering the JVA, the applicant had put 50% financial stake in JVCo and was also actively involved and the business activity of the said JVCo. The right was bestowed, in lieu of, or on the consideration of such financial and managerial and HRD investment by the applicant in JVCo. We have discussed the same at para 7.5.3 of the impugned order. The applicant had acquired this right of first refusal, the date it entered into the JVA. Therefore, the applicant had not acquired this right from any previous owner. All the more, it is an important right which enables the applicant as well as the other JV partner to carry on the business. Therefore, the cost of acquisition of such a right shall be nil as per the provisions of section 55(2)(a) of the Act. Thus, we arrived at a finding that the same is chargeable as short term capital gains because the applicant had exercised its option to sale its rights on 08.05.2006 i.e. within 12 months of the JVA dated 27.05.2005. The applicant has not pointed out any mistake aparent from the record. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. In fact, not a single error in the impugned order has been pointed out by the applicant. What the applicant wants is a review of the order passed by the Tribunal. The Tribunal is a creature of the statute. The Tribunal cannot review its own decision unless it is permitted to do so by the statute. The Hon'ble Supreme Court has held in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji 1970 (3) TMI 163 - SUPREME COURT that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication. It is a settled law that the Tribunal has no power to review its order in the garb of section 254(2).

Summary

Issues Involved:
1. Recall of ITAT order dated 16.12.2016.
2. Nature of receipt: Capital or Revenue.
3. Cost of acquisition and computation of capital gains.
4. Applicability of section 55(2) of the Income-tax Act.
5. Alleged mistakes apparent from the record.
6. Tribunal's power to review its order under section 254(2) of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Recall of ITAT order dated 16.12.2016:
The applicant sought the recall of the ITAT order dated 16.12.2016, arguing that the Tribunal's decision was based on mistakes apparent from the record. The applicant contended that the Tribunal's findings were contrary to the facts and involved inherent contradictions.

2. Nature of receipt: Capital or Revenue:
The applicant argued that the amount of ?2,10,75,000 received from LAND was compensation for the breach of the Joint Venture Agreement (JVA) and should be considered a capital receipt, not chargeable to income-tax under the Income-tax Act. The Tribunal had previously held that this amount was chargeable as capital gains, which the applicant disputed.

3. Cost of acquisition and computation of capital gains:
The applicant contended that the rights conferred by clauses 8.6 and 8.7 of the JVA had no cost of acquisition, leading to the failure of the computation machinery for capital gains. The Tribunal, however, had determined that the cost of acquisition of the right to carry on any business was nil as per section 55(2) of the Act, thereby justifying the capital gains charge.

4. Applicability of section 55(2) of the Income-tax Act:
The Tribunal held that the right of first refusal, which enabled the applicant to carry on business, had a cost of acquisition of nil under section 55(2) of the Act. This finding was central to the Tribunal's decision to charge capital gains on the amount received by the applicant.

5. Alleged mistakes apparent from the record:
The applicant pointed out several alleged mistakes in the Tribunal's order, including the incorrect identification of the capital asset, the erroneous interpretation of the transfer, and the misapplication of relevant case law. The Tribunal reviewed these contentions but found no apparent mistakes that warranted a recall of the order.

6. Tribunal's power to review its order under section 254(2) of the Income-tax Act:
The Tribunal emphasized that it does not have the power to review its own orders under section 254(2) of the Act. The Tribunal can only rectify mistakes that are apparent from the record, which must be obvious and not subject to debate. The Tribunal cited various judicial precedents, including the Hon'ble Supreme Court's decision in T.S. Balaram, ITO v. Volkart Bros., to support this position.

Conclusion:
The Tribunal concluded that the applicant had not demonstrated any mistake apparent from the record that would justify recalling the order dated 16.12.2016. The Tribunal's findings on the nature of the receipt, the cost of acquisition, and the applicability of section 55(2) were upheld. The Tribunal dismissed the Miscellaneous Application, reiterating its limited power to rectify mistakes under section 254(2) and its inability to review its own decisions. The order was pronounced in the open court on 07/09/2018.