2018 (9) TMI 1889 - AT - Income Tax

Tribunal reconsiders denial of deduction under Income Tax Act, emphasizes correct interpretation of facts and law

Reach Network India P. Ltd. Versus ACIT-9 (3) Mumbai

Reach Network India P. Ltd. Versus ACIT-9 (3) Mumbai - TMI Issues:Claim of deduction u/s 80-IA(4)(ii) of the Act denied based on wrong understanding of facts - Whether the order passed by the Hon'ble ITAT is liable to be recalled in the interest of justiceRs.Analysis:The judgment deals with a Miscellaneous Application moved by the assessee regarding the denial of the claim of deduction under section 80-IA(4)(ii) of the Act. The application contended that the denial was based on a wrong understanding of facts by the Hon'ble Tribunal. The assessee, a company incorporated in 2000, was granted approval to provide internet services and related activities. The Department of Telecommunication also granted a license for providing internet services. The assessee claimed a deduction under section 80-IA (4)(ii) of the Act, which was denied on the grounds that the assessee was merely a trader in bandwidth, purchasing from various ISPs and selling to others. The assessee argued that its services were not in the nature of trading and that the order denying the claim was based on a wrong interpretation of facts. The assessee's business activities, as per its filings and services provided, did not align with the characterization of a trader. The Tribunal considered the interpretation of the nature of the business and concluded that the order was based on a misconception and misapprehension. Citing legal precedents, the Tribunal recalled the order and decided to reexamine the claim of deduction under section 80-IA of the Act in accordance with the law.The Tribunal's decision was based on a thorough analysis of the documents on record, the nature of the assessee's business activities, and the legal provisions governing the deduction under section 80-IA of the Act. The Tribunal observed that if an order is passed based on misconception and misapprehension, it can be recalled under Section 254(2) of the Act. The Tribunal also referred to legal precedents, including judgments by the Hon'ble Madhya Pradesh High Court and the Delhi High Court, to support the decision to recall the order and reevaluate the claim of deduction. Ultimately, the Tribunal allowed the miscellaneous application filed by the assessee, indicating that the order denying the claim of deduction under section 80-IA of the Act was to be reconsidered in light of the proper interpretation of the nature of the assessee's business activities.In conclusion, the judgment highlights the importance of a correct interpretation of facts and legal provisions in determining the eligibility for deductions under the Income Tax Act. The Tribunal's decision to recall the order and reexamine the claim of deduction under section 80-IA of the Act underscores the significance of ensuring that judgments are based on a proper understanding of the nature of business activities and compliance with relevant legal requirements.