COMMISSIONER OF INCOME TAX (IT-4), MUMBAIversusM/S RELIANCE TELECOM LIMITED

616                       [2021]
               SUPREME COURT     9 S.C.R. 616
                              REPORTS                         [2021] 9 S.C.R.


A           COMMISSIONER OF INCOME TAX (IT-4), MUMBAI
                                          v.
                     M/S RELIANCE TELECOM LIMITED
                          (Civil Appeal No. 7110 of 2021)
B                              DECEMBER 03, 2021
               [M. R. SHAH AND B. V. NAGARATHNA, JJ.]
             Income Tax Act, 1961: s.254(2) – Scope of – Held: In exercise
      of powers under s.254(2) of the Act, the Appellate Tribunal may
      amend any order passed by it under sub-section (1) of s.254 of the
C
      Act with a view to rectifying any mistake apparent from the record
      only – Therefore, the powers under s.254(2) of the Act are akin to
      Or. XLVII r.1 CPC – While considering the application under s.254(2)
      of the Act, the Appellate Tribunal is not required to re-visit its earlier
      order and to go into detail on merits – Powers under s.254(2) of the
D     Act are only to rectify/correct any mistake apparent from the record
      – Code of Civil Procedure, 1908 – Or. XLVII r.1.
            Allowing the appeals, the Court
            HELD: 1.1 The order passed by the ITAT recalling its
      earlier order is beyond the scope and ambit of the powers under
E     Section 254(2) of the Act. While allowing the application under
      Section 254(2) of the Act and recalling its earlier order, it appears
      that the ITAT has re-heard the entire appeal on merits as if the
      ITAT was deciding the appeal against the order passed by the
      C.I.T. In exercise of powers under Section 254(2) of the Act, the
F     Appellate Tribunal may amend any order passed by it under sub-
      section (1) of Section 254 of the Act with a view to rectifying any
      mistake apparent from the record only. Therefore, the powers
      under Section 254(2) of the Act are akin to Order XLVII Rule 1
      CPC. [Para 3.2][619-G-H; 620-A-B]
G           1.2 If the Assessee was of the opinion that the order passed
      by the ITAT was erroneous, either on facts or in law, in that case,
      the only remedy available to the Assessee was to prefer the appeal
      before the High Court, which as such was already filed by the
      Assessee before the High Court, which the Assessee withdrew

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                                         616
  COMMISSIONER OF INCOME TAX (IT-4), MUMBAI v. M/S                       617
           RELIANCE TELECOM LIMITED

after the order passed by the ITAT recalling its earlier order.          A
[Para 4][620-C-E]
      2. From the impugned judgment and order passed by the
High Court, it appears that the High Court has dismissed the
writ petitions by observing that (i) the Revenue itself had in detail
gone into merits of the case before the ITAT and the parties filed       B
detailed submissions based on which the ITAT passed its order
recalling its earlier order; (ii) the Revenue had not contended
that the ITAT had become functus officio after delivering its
original order and that if it had to relook/revisit the order, it must
be for limited purpose as permitted by Section 254(2) of the Act;
and (iii) that the merits might have been decided erroneously            C
but ITAT had the jurisdiction and within its powers it may pass
an erroneous order and that such objections had not been raised
before ITAT. None of the aforesaid grounds are tenable in law.
Merely because the Revenue might have in detail gone into the
merits of the case before the ITAT and merely because the parties        D
might have filed detailed submissions, it does not confer
jurisdiction upon the ITAT to pass the order de hors Section
254(2) of the Act. [Paras 5 and 6][620-F-H; 621-A-B]
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.7110 of
2021.                                                                    E
      From the Judgment and Order dated 08.08.2017 of the High Court
of Judicature at Bombay in Writ Petition No.1432 of 2017.
        With
        Civil Appeal No.7111 of 2021                                     F
      Balbir Singh, ASG, Zoheb Hossain, Shyam Gopal, Himanshu Satija,
Ms. Meela Patel, C. K. Sharma, Kush Chaturvedi, Raj Bahadur Yadav,
Advs. for the Appellant.
     Anuj Berry, Chaitanya Safaya, Ms. Sayaree Basu Mallik, E. C.
Agrawala, Advs. for the Respondent.                                      G
        The Judgment of the Court was delivered by
        M. R. SHAH, J.
     1. Feeling aggrieved and dissatisfied with the impugned common
judgment and order dated 08.08.2017 passed by the High Court of          H
618            SUPREME COURT REPORTS                          [2021] 9 S.C.R.


A     Judicature at Bombay in Writ Petition No. 1432/2017 and Writ Petition
      No. 1406/2017, by which the High Court has dismissed the aforesaid
      writ petitions preferred by the Commissioner of Income Tax (IT-4),
      Mumbai (hereinafter referred to as the ‘Revenue’) and has confirmed
      the order passed by the Income Tax Appellate Tribunal, Bench at Mumbai
      (hereinafter referred to as the ‘ITAT’) dated 18.11.2016 passed in
B
      Miscellaneous Application Nos. 261/M/2014 and 419/M/2013, by which
      the ITAT in exercise of powers under Section 254(2) of the Income Tax
      Act (hereinafter referred to as the ‘Act’) has recalled its earlier order
      dated 06.09.2013 passed in ITA No. 5096/Mum/2008 and ITA No. 837/
      Mum/2007, the Revenue has preferred the present appeals.
C           2. The facts leading to the present appeals in a nutshell are as
      under. For the sake of convenience, the facts in Civil Appeal No. 7110
      of 2021 arising from Special Leave Petition (Civil) No.13963/2018 in the
      case of M/s Reliance Telecom Limited (hereinafter referred to as the
      ‘Assessee’) are narrated. The facts in another appeal are similar except
D     that the assessee is different, but with respect to same group of
      companies.
            2.1 That the Assessee entered into Supply Contract dated
      15.06.2004 with Ericsson A.B. Assessee filed an application under Section
      195(2) of the Act before the Assessing Officer, to make payment to the
E     non-resident company for purchase of software without TDS. It was
      contended by the Assessee that it was for the purchase of software and
      Ericsson A.B. had no permanent establishment in India and in terms of
      the DTAA between India and Sweden & USA, the amount paid is not
      taxable in India.

F            2.2 The Assessing Officer passed an order dated 12.03.2007
      rejecting the Assessee’s application holding that the consideration for
      software licensing constituted under Section 9(1)(vi) of the Act and under
      Article 12(3) of the DTAA is liable to be taxed in India and accordingly
      directed the assessee to deduct tax at the rate of 10% as royalty.

G           2.3 The Assessee after deducting the tax appealed before the
      Commissioner of Income Tax (Appeals). CIT vide order dated
      27.05.2008 held in favour of the Assessee. Revenue appealed before
      the ITAT and by a detailed judgment and order dated 06.09.2013, the
      ITAT allowed the Revenue’s appeal by relying upon the judgments/
      decisions of the Karnataka High Court and held that payments made for
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  COMMISSIONER OF INCOME TAX (IT-4), MUMBAI v. M/S                            619
     RELIANCE TELECOM LIMITED [M. R. SHAH, J.]

purchase of software are in the nature of royalty. Against the detailed       A
judgment and order dated 06.09.2013 passed by the ITAT, the Assessee
filed miscellaneous application for rectification under Section 254(2) of
the Act. Simultaneously, the Assessee also filed the appeal before the
High Court against the ITAT order dated 06.09.2013.
      2.4 That vide common order dated 18.11.2016, the ITAT allowed           B
the Assessee’s miscellaneous application filed under Section 254(2) of
the Act and recalled its original order dated 06.09.2013. Immediately, on
passing the order dated 18.11.2016 by the ITAT recalling its earlier order
dated 06.09.2013, the Assessee withdrew the appeal preferred before
the High court, which was against the original order dated 06.09.2013.
                                                                              C
       2.5 Feeling aggrieved and dissatisfied with the order passed by
the ITAT allowing the miscellaneous application under Section 254(2) of
the Act and recalling its earlier order dated 06.09.2013, the Revenue
preferred writ petition before the High Court. By the impugned common
judgment and order, the High Court has dismissed the said writ petition/
s. Hence, the Revenue is before this Court by way of present appeal/s.        D

       3. We have heard Shri Balbir Singh, learned Additional Solicitor
General of India appearing on behalf of the Revenue and Shri Anuj
Berry, learned Advocate appearing on behalf of the Resolution
Professional of the respondent-company. At this stage, it is required to
be noted that the respondent-company/companies – respective assessees         E
currently are undergoing corporate insolvency resolution process and
the Resolution Professional is appointed. We have heard learned counsel
for the Resolution Professional of the respondent-assessee.
      3.1 We have considered the order dated 18.11.2016 passed by
the ITAT allowing the miscellaneous application in exercise of powers         F
under Section 254(2) of the Act and recalling its earlier order dated
06.09.2013 as well as the original order passed by the ITAT dated
06.09.2013.
       3.2 Having gone through both the orders passed by the ITAT, we
are of the opinion that the order passed by the ITAT dated 18.11.2016         G
recalling its earlier order dated 06.09.2013 is beyond the scope and ambit
of the powers under Section 254(2) of the Act. While allowing the
application under Section 254(2) of the Act and recalling its earlier order
dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal
on merits as if the ITAT was deciding the appeal against the order passed
                                                                              H
620             SUPREME COURT REPORTS                              [2021] 9 S.C.R.


A     by the C.I.T. In exercise of powers under Section 254(2) of the Act, the
      Appellate Tribunal may amend any order passed by it under sub-section
      (1) of Section 254 of the Act with a view to rectifying any mistake
      apparent from the record only. Therefore, the powers under Section
      254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering
      the application under Section 254(2) of the Act, the Appellate Tribunal is
B
      not required to re-visit its earlier order and to go into detail on merits.
      The powers under Section 254(2) of the Act are only to rectify/correct
      any mistake apparent from the record.
              4. In the present case, a detailed order was passed by the ITAT
      when it passed an order on 06.09.2013, by which the ITAT held in favour
C     of the Revenue. Therefore, the said order could not have been recalled
      by the Appellate Tribunal in exercise of powers under Section 254(2) of
      the Act. If the Assessee was of the opinion that the order passed by the
      ITAT was erroneous, either on facts or in law, in that case, the only
      remedy available to the Assessee was to prefer the appeal before the
D     High Court, which as such was already filed by the Assessee before the
      High Court, which the Assessee withdrew after the order passed by the
      ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013.
      Therefore, as such, the order passed by the ITAT recalling its earlier
      order dated 06.09.2013 which has been passed in exercise of powers
      under Section 254(2) of the Act is beyond the scope and ambit of the
E     powers of the Appellate Tribunal conferred under Section 254 (2) of the
      Act. Therefore, the order passed by the ITAT dated 18.11.2016 recalling
      its earlier order dated 06.09.2013 is unsustainable, which ought to have
      been set aside by the High Court.
             5. From the impugned judgment and order passed by the High
F     Court, it appears that the High Court has dismissed the writ petitions by
      observing that (i) the Revenue itself had in detail gone into merits of the
      case before the ITAT and the parties filed detailed submissions based on
      which the ITAT passed its order recalling its earlier order; (ii) the Revenue
      had not contended that the ITAT had become functus officio after
G     delivering its original order and that if it had to relook/revisit the order, it
      must be for limited purpose as permitted by Section 254(2) of the Act;
      and (iii) that the merits might have been decided erroneously but ITAT
      had the jurisdiction and within its powers it may pass an erroneous order
      and that such objections had not been raised before ITAT.

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  COMMISSIONER OF INCOME TAX (IT-4), MUMBAI v. M/S                             621
     RELIANCE TELECOM LIMITED [M. R. SHAH, J.]

       6. None of the aforesaid grounds are tenable in law. Merely             A
because the Revenue might have in detail gone into the merits of the
case before the ITAT and merely because the parties might have filed
detailed submissions, it does not confer jurisdiction upon the ITAT to
pass the order de hors Section 254(2) of the Act. As observed
hereinabove, the powers under Section 254(2) of the Act are only to
                                                                               B
correct and/or rectify the mistake apparent from the record and not
beyond that.
      Even the observations that the merits might have been decided
erroneously and the ITAT had jurisdiction and within its powers it may
pass an order recalling its earlier order which is an erroneous order,
cannot be accepted. As observed hereinabove, if the order passed by            C
the ITAT was erroneous on merits, in that case, the remedy available to
the Assessee was to prefer an appeal before the High Court, which in
fact was filed by the Assessee before the High Court, but later on the
Assessee withdrew the same in the instant case.
       7. In view of the above and for the reasons stated above, the           D
impugned common judgment and order passed by the High Court as
well as the common order passed by the ITAT dated 18.11.2016 recalling
its earlier order dated 06.09.2013 deserve to be quashed and set aside
and are accordingly quashed and set aside. The original orders passed
by the ITAT dated 06.09.2013 passed in the respective appeals preferred        E
by the Revenue are hereby restored.
       8. Considering the fact that the Assessee had earlier preferred
appeal/s before the High Court challenging the original order passed by
the ITAT dated 06.09.2013, which the Assessee withdrew in view of the
subsequent order passed by the ITAT dated 18.11.2016 recalling its earlier     F
order dated 06.09.2013, we observe that if the Assessee/s prefers/prefer
appeal/s before the High Court against the original order dated 06.09.2013
within a period of six weeks from today, the same may be decided and
disposed of in accordance with law and on its/their own merits and without
raising any objection with respect to limitation.
                                                                               G
    9. Both the appeals are accordingly allowed in the aforesaid terms.
However, there shall be no order as to costs.

Devika Gujral                                               Appeals allowed.

                                                                               H