2015 (2) TMI 1392 - AT - Income Tax

Tribunal Rectifies Order on Income Taxation, Aligns with Special Bench for 1997-98, Upholds Assessee's Favorable Ruling.

The Tribunal allowed the assessee's miscellaneous application for rectification of the order in ITA No. 1711/Mum/2004 for AY 1997-98, concerning the ... Rectification of mistake - not following the decision of Special bench in order [2014 (11) TMI 725 - ITAT MUMBAI] - Income taxable in India - HELD THAT:- Admittedly, the Ld A.R had placed reliance on the decision rendered by the Special bench in the case of Clifford Chance [2013 (6) TMI 544 - ITAT MUMBAI] at the time of hearing which was not considered. There should not be any dispute that the decision rendered by the Special bench should be preferred over to the decision of the Division bench. Hence, the impugned order of the Tribunal suffers from the mistake apparent from record in not following the decision of Special bench and hence the same requires to be corrected. The issue regarding the quantum of income attributable to Permanent Establishment is discussed in paragraph 12 of the order. Miscellaneous application filed by the assessee is allowed. Issues:Rectification of order regarding taxation of income attributable to Permanent Establishment.Analysis:The assessee filed a miscellaneous application seeking rectification of the order passed in ITA No. 1711/Mum/2004 for the assessment year 1997-98. The issue revolved around the taxation of income where only a part of the services was performed in India. The AO held the entire income as taxable in India, while the Ld CIT(A) ruled that only the income related to services rendered in India through the Permanent Establishment is taxable. The revenue appealed to the Tribunal against the Ld CIT(A)'s decision. The assessee's counsel pointed out that a similar issue was decided against the assessee in AY 1995-96 by a co-ordinate bench of the Tribunal, but a subsequent decision by a Special bench favored the assessee in a different case. Despite this, the Tribunal's order followed the earlier decision and did not consider the Special bench's ruling, leading to a mistake apparent from the record.Upon hearing both parties and reviewing the record, the Tribunal acknowledged the reliance placed on the Special bench's decision in the case of Clifford Chance. The Tribunal recognized that the decision of the Special bench should take precedence over the Division bench's decision. Consequently, the Tribunal found an error in its order for not following the Special bench's decision, necessitating a correction. The issue of the quantum of income attributable to the Permanent Establishment was discussed, leading to the deletion of a paragraph and insertion of a new one aligning with the Special bench's decision.The revised paragraph directed the assessing officer to assess the income in line with the Special bench's decision, which favored the assessee. The Tribunal upheld the Ld CIT(A)'s decision based on the Special bench's ruling, rejecting the revenue's grounds on the issue. Ultimately, the miscellaneous application filed by the assessee seeking rectification was allowed by the Tribunal. The order was pronounced in open court on 20th Feb 2015.