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2014 (11) TMI 216 - AT - Income TaxRectification of mistake u/s 254(2) Whether non-consideration of the clause 3.4 of the cost sharing agreement by the Tribunal amounts to mistake apparent from the record Held that - the Tribunal has considered the agreement as a whole and not in piece meal - As far as arriving at the wrong conclusion in concerned, it does not constitute mistake apparent from record - under the provisions of section 254(2) of the Act it is not permissible for the assessee to contend that the appellate order was vitiated on the ground that the Tribunal failed to discuss all the contentions raised by counsel before it and to give reasons for coming to the conclusion which it did - If assessee finds an order defective on this ground, the remedy lay elsewhere, and not by way of a Miscellaneous Application - the Income-tax Appellate Tribunal is a creature of the statute and it is not been vested with the review jurisdiction by the statute creating it - The Tribunal does not have any power to review its own judgments or orders - What assessee desires is review of the order passed on in the garb of rectification application - The language of section 254(2) of the Act is very clear. The foundation for exercising the jurisdiction is with a view to rectify any mistake apparent on the record and the object is achieved by amending any order passed by it - aseessee wants reappraisal of the entire case - It is not possible under the provisions of section 254(2) of the Act also in Commissioner Of Income-Tax Versus Ramesh Electric And Trading Co. 1992 (11) TMI 32 - BOMBAY High Court it has been held that the power of rectification u/s. 254(2) of the Act, cannot be exercised on failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion because it is an error of judgment and not an error apparent on the record. The Tribunal had arrived at the conclusion after considering all the facts and circumstances of the case - for reimbursement there was no need to deduct tax at all, but whether in a particular payment there was reimbursement or not was to be proved by the assessee - the assessee had not led the evidence, inspite of the specific query, to prove that the payments did not have profit element - there is no mistake in the order of the Tribunal that could be rectified as per the provisions of section 254(2)of the Act Decided against assessee.
Issues Involved:
1. Applicability of Section 40(a)(ia) of the Income Tax Act. 2. Whether the payments made by the assessee were pure reimbursements or not. 3. Whether the Tribunal failed to consider specific clauses of the cost-sharing agreement. 4. Whether there was a mistake apparent from the record as per Section 254(2) of the Income Tax Act. Detailed Analysis: 1. Applicability of Section 40(a)(ia) of the Income Tax Act: The core issue was whether the provisions of Section 40(a)(ia) of the Income Tax Act were applicable to the payments made by the assessee. The Tribunal had previously upheld the disallowance made by the Assessing Officer (AO) and the First Appellate Authority (FAA), amounting to Rs. 10.90 Crores, under Section 40(a)(ia). The Tribunal concluded that the payments made under the heads Staff Cost, Advertising and Promotional Expenses, and Other Miscellaneous Expenses were not pure reimbursements and thus required tax deduction at source as per Section 194C. 2. Whether the payments made by the assessee were pure reimbursements or not: The assessee argued that the payments to Pfizer Limited were exact reimbursements of the cost of identified personnel without any markup, as per the cost-sharing agreement. However, the Tribunal found that there was no clear evidence or documentation to substantiate that the payments were pure reimbursements. The Tribunal noted that the agreement mentioned estimation of expenses, and the assessee failed to provide sufficient material to prove the absence of profit in the payments. The Tribunal emphasized that it is the AO's duty to determine the nature of payments, and the assessee had not produced any positive evidence to prove that the payments were not embedded with profit. 3. Whether the Tribunal failed to consider specific clauses of the cost-sharing agreement: The assessee contended that the Tribunal had not considered Clause 3.4 of the cost-sharing agreement, which stated that the basis of cost sharing was an exact reimbursement of the proportional time and cost of the identified personnel without any markup. The Tribunal, however, clarified that it had considered the agreement as a whole and not in a piecemeal manner. The Tribunal also referred to a similar case of Bayer Material Sciences Pvt. Ltd., where the facts were found to be different, and the Tribunal had concluded that the payments were not pure reimbursements. 4. Whether there was a mistake apparent from the record as per Section 254(2) of the Income Tax Act: The assessee filed a Miscellaneous Application under Section 254(2) of the Act, claiming that there were mistakes in the Tribunal's order. The Tribunal, however, held that non-consideration of an argument or arriving at a wrong conclusion does not constitute a mistake apparent from the record. The Tribunal referred to various judgments, including those of the Hon'ble Delhi High Court and the Hon'ble Karnataka High Court, which held that an error of judgment or failure to consider an argument does not fall under the category of apparent mistakes. The Tribunal emphasized that Section 254(2) does not confer the power to review its earlier order or reappreciate evidence. Conclusion: The Tribunal concluded that there was no mistake apparent from the record in its previous order. The Tribunal had considered all the facts and circumstances of the case and had adjudicated the appeal based on the evidence presented. The assessee's Miscellaneous Application was dismissed, and the Tribunal upheld the original order, confirming the applicability of Section 40(a)(ia) and the requirement for tax deduction at source for the payments in question. Order Pronouncement: The order was pronounced in the open court on 31st October 2014.
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