2015 (9) TMI 1179 - AT - Income Tax

Rectification of mistake - whether dividend income can be taxed as income under the head Income from business ? - Held that - A mistake apparent from record means an obvious or patent mistake or a glaring and obvious mistake . Hotly debatable issues are excluded; hardly debatable issues are included. The issue may be complicated, yet the mistake may be simple. It is a mistake apparent from record. The test is not complexity of the issue but simplicity of the mistake.The question whether dividend income can be taxed as income under the head Income from business , in our considered view, is hardly debatable. See case of F.C. Sondhi & Company (Indi) Pvt. Ltd. vs. DCIT 2015 (9) TMI 1099 - ITAT AMRITSAR To perpetuate an error is no heroism. To rectify it is the compulsion of judicial conscience. In this, we derive comfort and strength from wise and inspiring words of Justice Bronson in Pierce vs. Delameter a Judge ought to be wise enough to know that he is fallible, and, therefore, ever ready to learn; great and honest enough to discard all mere pride of opinion and follow the truth wherever it may lead; and courageous enough to acknowledge his errors. See Distributors (Baroda) Private Limited Versus Union of India And Others 1985 (7) TMI 1 - SUPREME Court We are, therefore, unable to accept Revenue s contention that a considered opinion expressed by the Tribunal, after applying its mind to an issue in appeal, cannot be unsettled even if the mistake in the process of reasoning is a simple mistake apparent from record on which no two views are possible. Thus we recall both the orders passed by this Tribunal for fresh hearing in terms of the directions set out above

Summary

Issues Involved:
1. Whether the core arguments advanced by the assessee were brushed aside without adjudication.
2. Whether binding judicial precedents cited by the assessee were distinguished without specific reasons.
3. Scope of Tribunal's powers under section 254(2) regarding rectification of mistakes.
4. Whether the Tribunal erred in relying upon IRDA guidelines not mentioned in the Income Tax Act.
5. Interpretation of 'Keyman insurance policy' under Section 10(10D) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Core Arguments Brushed Aside:
The assessee argued that their core arguments were brushed aside without proper adjudication. The Tribunal acknowledged that the material facts and circumstances were the same as in the case of F.C. Sondhi & Company (India) Pvt. Ltd. vs. DCIT. The Tribunal decided to follow the precedent set in that case, indicating that the core arguments were not adequately considered initially.

2. Judicial Precedents Distinguished Without Reasons:
The assessee contended that the judicial precedents they cited were distinguished without specific reasons. The Tribunal noted that the previous order had dismissed these precedents by broadly stating that the IRDA circular clarified the position, without detailed reasoning. This was found to be a mistake apparent from the record, warranting rectification.

3. Scope of Tribunal's Powers Under Section 254(2):
The Tribunal referred to the scope of its powers under section 254(2), emphasizing that it can rectify mistakes apparent from the record, whether these mistakes are of law or fact. The Tribunal cited the Full Bench decision of the Punjab & Haryana High Court in R.A. Boga vs. AAC, which clarified that an 'obvious or patent mistake' could be rectified, regardless of the complexity of the issue. The Tribunal concluded that it had the authority to rectify the mistake in this case.

4. Reliance on IRDA Guidelines:
The Tribunal found that the reliance on IRDA guidelines, which were not mentioned in the Income Tax Act, was a mistake apparent from the record. The Explanation to Section 10(10D) did not reference these guidelines, and the Tribunal noted that judicial forums could not incorporate concepts not included in statutory provisions. The Tribunal referred to the Supreme Court's judgment in Tarulata Shyam vs. CIT, which stated that omissions in statutes could not be supplied by judicial interpretation.

5. Interpretation of 'Keyman Insurance Policy':
The Tribunal analyzed whether the Tribunal's previous interpretation of 'Keyman insurance policy' was correct. The previous order had relied on IRDA guidelines to define 'Keyman insurance policy,' but the Tribunal found that these guidelines were not relevant for income tax purposes. The Tribunal cited the written submissions of the assessee, which argued that the IRDA's scope was limited to regulating insurance business and did not extend to income tax matters. The Tribunal concluded that the previous interpretation was a mistake apparent from the record.

Conclusion:
The Tribunal recalled the order dated 21st April 2014 to adjudicate upon the plea that IRDA circulars should not influence the determination of whether premiums on insurance policies qualify as 'Keyman insurance policy' under Section 10(10D) of the Income Tax Act. The Tribunal noted that an earlier decision in Shri Nidhi Corporation Vs Additional CIT had not been considered and should be taken into account upon fresh consideration. As the core issue went to the root of the matter, other issues raised in the petition were not addressed.

Outcome:
Both rectification petitions were allowed, and the orders dated 29.04.2014 were recalled for fresh hearing based on the directions provided. The Tribunal's observations in the case of F.C. Sondhi & Company (India) Pvt. Ltd. applied mutatis mutandis to these cases as well.