2015 (3) TMI 981 - AT - Income Tax

Rectification in the order of the Tribunal sought - Disallowance u/s 40(a)(ia) - Tribunal has not followed the judgment of CIT vs. Vector Shipping Services (P) Ltd. 2013 (7) TMI 622 - ALLAHABAD HIGH COURT and has taken a contrary view while rejecting the claim of the assessee - Held that - The view expressed or the ratio laid down by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports 2012 (4) TMI 290 - ITAT VISAKHAPATNAM has been overruled. Therefore, it cannot be said that since the Hon'ble Jurisdictional High Court has approved the view taken by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports , the same has to be followed by the Tribunal situated within the jurisdiction of Hon'ble Allahabad High Court. Had the impugned issue been examined and adjudicated by the Jurisdictional High Court, it would have been respectfully followed by the Tribunal irrespective of the fact that contrary view have been expressed by the different High Courts. The Hon'ble Jurisdictional High Court has not examined the impugned issue at all and simple passing reference was made with regard to the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports and the relief was granted to the assessee on merit. Therefore, the ratio laid down in the case of Merilyn Shipping & Transports , which has been suspended by Hon'ble Andhra Pradesh High Court has not been approved by the Hon'ble Allahabad High Court. Therefore, subordinate judicial forum are not required to follow the ratio order laid down in the case of Merilyn Shipping & Transports (supra), as it was overruled by the other High Court. The scope of section 254(2) of the Act has been explained through various judicial pronouncements and it has been repeatedly held that the order of the Tribunal under section 254(2) of the Act can only be rectified when there is an error apparent on the record. If the order is passed having examined all the aspects, the same cannot be reviewed under the garb of rectification. When we speak of amendment or rectifying the mistake the earlier order can never be recalled by the Tribunal. The earlier order must hold the field and the mistake can be rectified or amended can be made to the order. The Tribunal cannot, in law and facts, recall and destroy its final order as a whole with a view to rectify the same order under section 254(2) of the Act. The action of the Tribunal actually amounts to review of its earlier order and that power to review is not available to the Tribunal. See CIT Vs. Prahlad Rai Todi 2001 (7) TMI 111 - GAUHATI High Court . Thus we are of the considered view that the Tribunal has given a specific finding on the impugned issue after taking into account various judicial pronouncements. Therefore, no error is crept in the order of the Tribunal and accordingly we reject the Miscellaneous Application. - Decided against assessee.

Summary

Issues Involved:
1. Rectification under Section 254(2) of the Income-tax Act, 1961.
2. Application of the judgment in CIT vs. Vector Shipping Services (P) Ltd.
3. Scope and limitations of Section 254(2) of the Income-tax Act.

Detailed Analysis:

1. Rectification under Section 254(2) of the Income-tax Act, 1961:
The assessee sought rectification of the Tribunal's order dated 11.4.2014, arguing that the Tribunal failed to follow the judgment of the Hon'ble jurisdictional High Court in CIT vs. Vector Shipping Services (P) Ltd., which was approved by the Hon'ble Apex Court. The assessee contended that an error had crept into the Tribunal's order as it took a contrary view.

2. Application of the judgment in CIT vs. Vector Shipping Services (P) Ltd.:
The Tribunal noted that while adjudicating the issue, it had considered the judgment of the Hon'ble jurisdictional High Court in the case of Vector Shipping Services (P) Ltd., the Special Bench of the Tribunal in M/s Merilyin Shipping & Transports vs. ACIT, and other judgments from different High Courts. The Tribunal observed that the Hon'ble High Court in Vector Shipping Services (P) Ltd. made a passing reference and did not raise the impugned issue. The Tribunal concluded that the Hon'ble High Court did not examine whether disallowance under Section 40(a)(ia) could be made only for amounts payable as on 31st March of the relevant year. The Tribunal also noted that the Special Bench's decision in Merilyn Shipping & Transports was stayed by the Hon'ble Andhra Pradesh High Court and was not approved by the jurisdictional High Court.

3. Scope and limitations of Section 254(2) of the Income-tax Act:
The Tribunal emphasized that the scope of Section 254(2) is limited to rectifying arithmetical or clerical errors apparent on the record. It cannot be used to review or modify an order based on reappraisal of facts or legal positions. The Tribunal cited various judicial pronouncements, including the Hon'ble Apex Court and High Courts, to support this view. It was held that if an order is passed after examining all aspects, it cannot be reviewed under the guise of rectification. The Tribunal concluded that there was no apparent error in its order and dismissed the Miscellaneous Application.

Conclusion:
The Tribunal dismissed the assessee's Miscellaneous Application, holding that the scope of Section 254(2) is very limited and does not allow for review or modification of an order unless there is an apparent error. The Tribunal found that its original order was passed after considering all relevant judgments and legal positions, and thus, no rectifiable error existed.