2021 (4) TMI 1197 - AT - Income Tax

Rectification u/s 254 - denial of deduction u/s 80-IA on interest on Income Tax refund and interest earned by the assessee on Fixed Deposits (FDs) held with the bank - HELD THAT - We find that that the circumstances under which deposits were kept with the bank were duly noted in para 5.4 as well as in para 7 of the order. The argument that FDR would have direct nexus with assessee s business activities and therefore, the same should be treated as part and parcel of the business activities was duly taken note of in para 7 of the order. However, the point of dispute was not the circumstances under which the deposits were held by the assessee and whether the same were part parcel of business activities. The same is evident from the fact that Ld. AO, in all the years, had accepted interest on FDR as Business Income only. Rather the point of dispute was whether the assessee was eligible for deduction on interest on FDR within four corners of Sec. 80-IA or not. In fact, the assessee has claimed deduction u/s 80-IA even on interest on Income Tax refund which is ultimately assessed as Income from Other Sources . Therefore, the fact that FDRs were kept out of commercial expediency and the same was part and parcel of business activities was not under dispute. The assessee claimed deduction u/s 80-IA on interest on FDRs which was assessed as Business Income and also claimed similar deduction on interest on Income Tax Refund which was assessed as Income from other sources . Therefore, the first agreement would not convince us to alter the order, in any manner. So far as the case laws are concerned, the decision of Hon ble Apex Court in Liberty India Ltd. 2009 (8) TMI 63 - SUPREME COURT was rendered on 31/08/2009 and it was concerned with deduction of DEPB Credit / duty drawback in the context of Sec.80-IB read with Sections 80-I and 80- IA. A principle was laid down therein that the words derived from is narrower connotation as compared to the words attributable to and by using the words derived from , the parliament intended to cover sources not beyond the first degree. During the course of hearing of the appeal, Ld. Sr. Counsel primarily relied upon the decision of Hon ble Delhi High Court in CIT V/s Eltek SGS (P) Ltd. 2008 (2) TMI 17 - DELHI HIGH COURT which was rendered on 19/02/2008 However, following Liberty India, the decision of Hon ble Delhi High Court in Eltek SGS stood reversed by Hon ble Apex Court on 2010 (3) TMI 1255 - SC ORDER Therefore, the ratio of this decision rendered by Hon ble Delhi High Court and other decisions, which followed this decision, was no longer applicable. Lastly, the two decisions of Hon ble Rajasthan High Court and Hon ble Madras High Court have been cited for the first time during the hearing of this application. These decisions are from non jurisdictional High Court and the same were not cited during the hearing of the appeal. Therefore, non consideration of these decisions would not make the order erroneous which would call for any interference in terms of mandate of Section 254(2). We find that the provisions of Section 254(2) have narrow application and envisage rectification of mistakes which are apparent from record. There is power to rectify but not to review the order. The arguments of Ld. Sr. Counsel, if accepted, would amount to review of the order which is impermissible.

Summary

Issues Involved:
- Recall/rectification of Tribunal order dated 28/05/2020 for Assessment Year 2012-13 regarding denial of deduction u/s 80-IA on interest income.
- Consideration of critical facts related to business obligations and interest income from Fixed Deposits (FDs).
- Application of case laws including decisions of Hon'ble Supreme Court and High Courts.
- Interpretation of Sec. 80-IA for deduction on interest income.
- Application of natural justice principles and fair trial/hearing.
- Review of the order under Section 254(2) of the Income Tax Act.

Detailed Analysis:

1. Recall/Rectification of Tribunal Order:
The assessee sought recall/rectification of the Tribunal order due to the denial of deduction u/s 80-IA on interest income. The argument was based on the business obligation to replace cranes and the disputed tariff collected from customers, which necessitated parking funds in FDs. The contention was that the interest income had a direct link to the core business activities, making it eligible for deduction.

2. Consideration of Critical Facts:
The Tribunal noted the circumstances under which deposits were kept with the bank, acknowledging the nexus between FDs and business activities. However, the dispute centered around the eligibility of the assessee for deduction on interest income under Sec. 80-IA. The Tribunal highlighted that the nature of the deposits was not in question, as the interest income was claimed as both 'Business Income' and 'Income from Other Sources.'

3. Application of Case Laws:
Various case laws were cited during the hearing, including decisions of the Hon'ble Supreme Court and High Courts. The Tribunal analyzed the relevance of these precedents, emphasizing the reversal of certain decisions by higher courts and the inapplicability of outdated rulings. The arguments based on case laws were scrutinized to determine their compatibility with the current legal framework.

4. Interpretation of Sec. 80-IA:
The interpretation of Sec. 80-IA for claiming deduction on interest income was a crucial aspect of the case. The Tribunal examined the legislative intent behind the provision and assessed whether the interest income from FDs could be considered as part of the eligible deductions under the section. The arguments presented by both parties were evaluated in light of the statutory provisions.

5. Application of Natural Justice Principles:
The application of natural justice principles and fair trial/hearing was raised by the assessee, highlighting the need for an opportunity to rebut certain decisions not cited during the initial proceedings. The Tribunal considered whether the failure to provide such an opportunity amounted to a violation of established principles of fair trial and natural justice.

6. Review under Section 254(2):
The Tribunal deliberated on the scope of Section 254(2) concerning the rectification of mistakes apparent from the record. It clarified that the provision allowed for rectification but not a review of the order. The arguments presented by the Sr. Counsel were scrutinized to determine if they amounted to a review, which was deemed impermissible under the law.

In conclusion, the Tribunal dismissed the application for recall/rectification of the order, finding no reason to interfere based on the arguments presented and the legal principles governing the case.