2019 (4) TMI 1307 - AT - Income Tax

Rectification of mistake u/s 254 - non consideration of decision refereed - an assessee in default u/s 201(1) - HELD THAT - We agree that there is a mistake apparent from record and needs rectification by dealing with the case law relied upon by the assessee. Since considerable time has passed after hearing of the appeals, we are of the opinion that both the parties should be given sufficient opportunity of hearing. Therefore, we deem it fit and proper to recall the order of the Tribunal. Rectification of mistake u/s 254 - penalty u/s 271C - allowability of depreciation claimed on such non-compete fee - HELD THAT - In the assessee s own case for the A.Y 2008-09, wherein the issue of payment of non-compete fee was considered. We find that the assessee had claimed it to be an intangible asset and depreciation thereon or to allow it as deferred revenue expenditure and the AO had rejected the assessee s claim mainly on the ground that genuineness of the payment is not proved and that non-compete fee is not an intangible asset and therefore, depreciation thereon is not allowable. Tribunal had remitted the issue to the file of the AO for deciding afresh and also to decide the allowability of depreciation claimed on such non-compete fee. However, in the order of the Tribunal against the penalty u/s 271C for the A.Y 2008-09, it has been held that the contention of the assessee that the non-compete fee is the business expenditure of the assessee, has been upheld. This finding is thus an erroneous recording of facts and therefore, there is a mistake apparent from record.

Issues Involved:
1. Time limit for completion of proceedings under Section 201(1) and 201(1A) of the Income Tax Act.
2. Reasonable cause for non-deduction of tax at source on non-compete fee.
3. Period for which interest under Section 201(1A) is to be charged.
4. Levy of penalty under Section 271C of the Income Tax Act.
5. Omission to consider the ratio of decided cases cited by the applicant.

Issue-wise Detailed Analysis:

1. Time Limit for Completion of Proceedings under Section 201(1) and 201(1A):
The Tribunal addressed the issue of the time limit for initiation of proceedings under Section 201(1) of the Act in paragraphs 6 and 7 of its order. It was noted that the Tribunal erroneously held that the ground of appeal No.2 was allowed and mistakenly started paragraph 8 with "Ground No.3." The Tribunal rectified these errors by modifying the relevant paragraphs to accurately reflect the decision that the proceedings were barred by limitation. The Tribunal acknowledged the applicant's contention that the interest levied under Section 201(1A) was not within the time limit and agreed that this issue had not been adequately addressed in the original order.

2. Reasonable Cause for Non-deduction of Tax at Source on Non-compete Fee:
The Tribunal found that the Commissioner of Income Tax (Appeals) was not justified in holding that the appellant did not have a reasonable cause for not deducting tax at source on the non-compete fee. The appellant argued that the recipient of the non-compete fee did not have taxable income even after considering the non-compete fee as income and therefore requested not to deduct tax. The Tribunal noted that this issue was not adequately addressed in the original order and required further consideration.

3. Period for Which Interest under Section 201(1A) is to be Charged:
The Tribunal addressed the issue of the period for which interest under Section 201(1A) is to be charged. It was noted that the Commissioner of Income Tax (Appeals) had held that interest was leviable up to 13-10-2008, while the appellant argued that interest should only be levied up to 30-09-2008. The Tribunal found that this issue had not been adequately addressed in the original order and required further consideration.

4. Levy of Penalty under Section 271C:
The Tribunal addressed the issue of the levy of penalty under Section 271C of the Act. It was noted that the Tribunal had erroneously recorded that the requirement to make payment and the genuineness of the payment of non-compete fee had been adjudicated by the Tribunal in the assessee's own case for A.Y 2008-09. The Tribunal acknowledged that this finding was an erroneous recording of facts and required rectification. The Tribunal modified the relevant paragraph to reflect that the issue of the genuineness of the payment was directed to be verified by the Assessing Officer.

5. Omission to Consider the Ratio of Decided Cases Cited by the Applicant:
The Tribunal acknowledged that the applicant had relied on various judicial pronouncements to support their contention that the initiation of proceedings was beyond a reasonable period. The Tribunal agreed that the non-consideration of these case laws constituted a mistake apparent from the record. The Tribunal decided to recall the order and rectify the mistake by dealing with the case law relied upon by the applicant. The Tribunal directed that both the appeals be fixed for rehearing to provide both parties with a sufficient opportunity of hearing.

Conclusion:
The Tribunal allowed the miscellaneous applications filed by the assessee, acknowledging the mistakes apparent from the record in the original order. The Tribunal directed the appeals to be fixed for rehearing to address the issues raised by the assessee comprehensively. The order was pronounced in the open court on 18th April 2019.

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