Bombay H.C : Whether the Tribunal was right in rejecting the rectification application under s. 254(2) of the IT Act on the ground that it was misconceived and not maintainable.

High Court Of Bombay

CIT vs. Tata Iron & Steel Co. Ltd.

Section 254(2)

Asst. Year 1985-86, 1986-87

S.H. Kapadia & A.P. Shah, JJ.

IT Appeal No. 211 of 2000

28th February, 2000

Counsel Appeared

R.V. Desai with J.P. Deodhar, for the Appellant : Dinesh Vyas with V.C. Tripathi, for the Respondent

JUDGMENT

BY THE COURT :

A short point arises for consideration, viz., whether the Tribunal was right in rejecting the rectification application under s. 254(2) of the IT Act on the ground that it was misconceived and not maintainable. The facts giving rise to this appeal are as follows : On 18th March, 1959, a Double Taxation Avoidance Agreement (DTAA) was entered into between the Government of India and the Federal Republic of Germany. This was notified on 13th Sept.,1960 under s. 49A of the IT Act, 1922, w.e.f. 1st April, 1958. The said agreement was ratified under the IT Act, 1961. Under the said agreement, royalties and fees for technical services were exempted from the Indian income-tax. However, the original agreement, dt. 18th March,1959, was amended by Protocol, dt. 28th June, 1984, by which royalties and fees for technical services paid to German companies were made taxable. This Protocol was ratified on 10th July, 1985. It was notified on 26th Aug., 1985. It was made applicable to the assessment yearcommencing on or after 1st April, 1984. However, prior to the date of the notification of the amended agreement on 26th Aug., 1985, the assessee had entered into agreements with three Companies of the Federal Republic of Germany on 29th Jan., 1982, 10th May, 1984, and during the financial year 1984-85. The assessee-company also made part payments towards fees to the said companies for technical services rendered. The payments were made during the financial years 1984-85 and 1985-86 relevant to asst. yrs. 1985-86 and 1986-87. The assessee claimed that the payments so made were exempt from Indian income-tax on the ground that the said agreements were entered into with German companies prior to the date of Notification (26th Aug., 1985). The AO disallowed the claim of the assessee. The decision was upheld by the appellate authority. Being aggrieved, the assessee filed an appeal to the

Tribunal which decided the issue in favour of the assessee by holding that payments made by the assessee to German companies were pursuant to the contracts executed before 10th July, 1985, when the amended agreement came to be ratified. Hence, the Tribunal allowed the appeal filed by the assessee. In this appeal, we are not concerned with the validity of that decision of the Tribunal, dt. 17th June, 1998 [reported as Tata Iron & Steel Co. Ltd. vs. Dy. CIT (1999) 62 TTJ (Mumbai) 17]. In fact, we may mention that the decision of the Tribunal, dt. 17th June, 1998, has never been challenged by the Department. However, on 22nd Jan., 1999, the Department moved a rectification application under s. 254(2) before the Tribunal, inter alia, on the ground that there was a mistake apparent from the record. By the impugned order dt. 24th May, 1999 [reported as CIT vs. Tata Iron & Steel Co. Ltd. (2000) 66 TTJ (Mumbai) 463] , the Tribunal rejected the said miscellaneous application for rectification on the ground that there was no such mistake apparent from the record. Hence, this appeal.

4. The application for rectification under s. 254(2) was made by the Department to the Tribunal on the ground that in its decision, dt. 17th June, 1998, the Tribunal had held that the date on which the amended agreement was ratified (10th July, 1985) the royalties and fees for technical services became taxable in India. It was submitted that despite arriving at the above conclusion the Tribunal had allowed deduction of the remittance made to German companies by the assessee on 30th Nov., 1985, and, therefore, the Department contended that the order needed to be rectified. By the impugned order, dt. 24th May, 1999, the Tribunal has held that there was no mistake apparent from the record as it had already ruled in its decision, dt. 17th June, 1998, that the amendment in the treaty would not apply to contracts executed before 10th July, 1985. We have gone through the facts of this case. We have seen the decision of the Tribunal, dt. 17th June, 1998. The said decision clearly lays down that the amendment will not apply to contract executed before 10th July, 1985. The decision, dt. 17th June, 1998, hasnever been challenged by the Department. Hence, this appeal is dismissed.

[Citation : 248 ITR 190]

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