2023 (8) TMI 159 - HC - Income Tax

Rectification of mistake u/s 154 - subject income being inadvertently shown under the wrong head - Taxability of income in India - income received by assessee for the services rendered to an Indian company - HELD THAT - It is not the case of the appellant/revenue that the subject income, i.e., the income received by the respondent/assessee for the services rendered to an Indian company, i.e., HSIPL, was taxable. The benefit of Article 121 of India-USA Double Taxation Avoidance Agreement in short, Indo-USA DTAA was available to the respondent/assessee. The rectification had been ordered by the CPC with respect to two other group companies, i.e., Heidrick and Struggles Pvt. Ltd. Singapore, Heidrick and Struggles Pvt. Ltd. UK, in similar circumstance, via order dated 27.02.2020 and 30.01.2020, respectively. CBDT s Circular No. 14/1955 dated 11.04.1955 was applicable in the instant case, which, inter alia, casts a duty on the officers of the appellant/revenue to draw the attention of the assessee towards any relief that may be available to them, which the assessee may have inadvertently omitted to claim. Having regard to the aforesaid, we are of the view that the Tribunal has taken a just view in consonance with the provisions of the Act and the aforementioned circular issued by the CBDT. Undoubtedly, the appellant/revenue can seek to levy tax only on income which falls within the ambit of the Act. Merely because the respondent/assessee placed the income under a wrong head, cannot possibly make it amendable to imposition of tax.

Summary

Issues involved:
1. Condonation of delay in re-filing the appeal.
2. Whether rectification application concerning income shown under the wrong head can be dealt with under Section 154 of the Income Tax Act, 1961.

Condonation of Delay:
An application was moved on behalf of the appellant/revenue seeking condonation of a 180-day delay in re-filing the appeal. The delay was acknowledged, and the application was disposed of accordingly.

Rectification Application Issue:
The appeal in question pertained to the Assessment Year 2018-19 and challenged an order passed by the Income Tax Appellate Tribunal. The central issue was whether the Tribunal could overturn the view taken by the Commissioner of Income Tax (Appeals) and the Assessing Officer regarding the rectification sought by the petitioner for income inadvertently shown under the wrong head. The respondent/assessee's income from services rendered to an Indian company was initially categorized under "Income from Other Sources." Despite the petitioner's rectification application being rejected by the Centralized Processing Centre, Bengaluru, and the CIT(A) upholding the decision, the Tribunal allowed the appeal. The Tribunal emphasized that the income was not chargeable to tax as per the India-USA Tax Treaty, and the rectification had been granted in similar circumstances for other group companies. Additionally, the CBDT's Circular No. 14/1955 emphasized the duty of revenue officers to assist taxpayers in claiming entitled reliefs. The Tribunal's decision aligned with the Act and the circular, emphasizing that tax can only be levied on income falling within the Act's scope, and misreporting income does not warrant taxation. No substantial question of law was found, and the appeal was closed accordingly.