2014 (7) TMI 595 - AT - Income Tax

Rectification of order u/s 154 of the Act Error apparent on record - Receipt from Serum institute taxable in India or not Article 7 Indo-UK DTAA Held that - The proceedings u/s 154 has been initiated on the application filed by the assessee, pointing out the mistake in the quantum of the receipts taken in the original assessment order - the addition which has been made in the rectification proceedings u/s 154 cannot be sustained - in the quantum proceedings, the CIT(A) has held that no income has been received by the assessee, which is taxable in India and against this order no subsequent appeal has been preferred by the Department in this year - the addition made by the AO in the proceedings u/s 154 is highly debatable and is beyond the scope of rectification u/s 154 - an error which has to be established by a long drawn process of reasoning on points where there may be considerable two opinions, then it can hardly be said to be erroneous apparent on the face of the record thus, there was no merit in the grounds raised by the Revenue. Interest u/s 234B of the Act Held that - CIT(A) has held that in the quantum order passed u/s 143(3), for the same assessment year, he has already held that levy of interest u/s 234B cannot be levied - this is beyond the scope of the proceedings under section 154, but also the same is covered in DIT v/s NGC Networks Asia LLC, 2009 (1) TMI 174 - BOMBAY HIGH COURT - thus, there was no merit in the grounds raised by the Revenue Decided against Revenue.

Summary

Issues involved:
1. Taxability of receipts from Serum Institute for services rendered outside India.
2. Validity of the addition made by the Assessing Officer under section 154 without issuing a notice.
3. Allowability of interest under section 234B.

Issue 1: Taxability of receipts from Serum Institute for services rendered outside India:
The appellant, a UK-based partnership firm providing professional services to clients with operations in India, contested the addition of receipts from Serum Institute in its total income. The Commissioner (Appeals) ruled in favor of the appellant, excluding the amount from total income based on the principle that only income related to services rendered in India is taxable in India. The Tribunal emphasized that the services were provided outside India, thus not subject to taxation in India. The Departmental Representative argued that such receipts should be taxable in India, but the Tribunal upheld the Commissioner's decision, citing the lack of show cause notice for income enhancement and the debatable nature of the taxability issue.

Issue 2: Validity of the addition made by the Assessing Officer under section 154 without issuing a notice:
The Assessing Officer rectified the receipts, but without issuing a notice, enhanced the assessment by including an omitted amount from Serum Industries India Ltd. The Tribunal found this action in violation of section 154, which requires notice and a hearing for assessment enhancement. Moreover, as the Commissioner (Appeals) had already ruled that no taxable income was received by the appellant for services provided outside India, and the Department did not appeal against this decision, the Tribunal deemed the addition highly debatable and beyond the scope of rectification under section 154.

Issue 3: Allowability of interest under section 234B:
The Commissioner (Appeals) had previously held that interest under section 234B could not be levied for the same assessment year. The Tribunal noted that this issue was beyond the purview of section 154 proceedings and was supported by a decision of the Jurisdictional High Court. Consequently, the Tribunal dismissed the grounds raised by the Revenue regarding the allowability of interest under section 234B.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing the inapplicability of tax on receipts for services rendered outside India, the procedural irregularity in enhancing the assessment without notice, and the inadmissibility of levying interest under section 234B. The judgment highlighted the importance of following due process and considering the debatable nature of taxability issues in such cases.