2023 (12) TMI 934 - HC - Income Tax

Appeals Dismissed Due to Delay; 430-Day Extension Granted but Merits Not Contested Per SC Decision.

The court condoned a 430-day delay in re-filing the appeal by the appellant/revenue, allowing the applications subject to exceptions. Regarding the merits ... Income taxable in India - 15 percent of the revenue generated from the bookings made within India were attributable to the Permanent Establishment (PE) - HELD THAT:- The coordinate bench, in AY 2006-07 [2022 (9) TMI 311 - DELHI HIGH COURT], had sustained the said conclusion and had gone on to hold that no substantial question of law arose for its consideration. It is this decision that was affirmed by the Supreme Court, with the dismissal of the SLP as noted hereinabove. Tribunal via the impugned order, did not rule on the merits of the case for AYs 2007-08 to 2010-11. Revenue, in the instant appeals, has not proposed a question on merits, perhaps, having regard to the aforementioned judgment of the Supreme Court as well as the decision of the Tribunal on the narrow issue of limitation. Tribunal, in the instant case, had dismissed the appeal of the appellant/revenue on the ground of limitation for the AYs in issue, i.e., AYs 2008-09 and 2010-11.The reason given by the Tribunal for dismissal, on merits, was that the final assessment order was barred by limitation, as per Section 153 of the Income-tax Act Appellant’s/revenue’s plea that the provisions of Section 144C of the Act would come into play was repelled by the Tribunal for the reason that framing a draft assessment order was not required for the periods in issue, and therefore, the non-obstante clause under Section 144C of the Act would not override Section 153 of the Act. Since on merits the matter stands closed, in our view, these appeals need not be entertained vis-à-vis the questions proposed by the appellant/revenue as they have, in a sense, been rendered academic. ISSUES PRESENTED AND CONSIDERED 1. Whether condonation of delay in re-filing appeals (delay of 430 days) should be granted where the Court intends to decide the appeals on merits. 2. Whether the Tribunal was correct in dismissing revenue's appeals for the assessment years in question on the ground of limitation under Section 153 of the Income-tax Act. 3. Whether the non-obstante provision in Section 144C of the Income-tax Act overrides the limitation bar in Section 153, having regard to the requirement (or absence) of framing a draft assessment order for the periods in question. 4. Whether the substantive question as to attribution of 15% of India-generated revenue to the Permanent Establishment (PE) of the taxpayer remains open for the assessment years in issue, given an earlier coordinate bench decision (for a related assessment year) affirmed by the Supreme Court. ISSUE-WISE DETAILED ANALYSIS Issue 1: Condonation of delay (430 days) Legal framework: The Court may condone delay in filing or re-filing appeals where sufficient cause is shown or where it intends to decide the appeals on merits. Precedent treatment: The Court applied its discretion consistently with practice of condoning delay where merits are to be considered and no prejudice is shown. Interpretation and reasoning: The Court, noting its intention to decide the appeals on merits, exercised discretion to condone the delay of 430 days in re-filing. No detailed explanation of the appellant's cause for delay is recorded; the condonation is granted subject to just exceptions to enable adjudication on merits. Ratio vs. Obiter: Ratio - the Court's condonation is operative in the case at hand; Obiter - no general rule established beyond the exercise of discretion. Conclusion: Delay of 430 days in re-filing the appeals is condoned to permit adjudication on merits (applications disposed accordingly). Issue 2: Dismissal by the Tribunal on limitation grounds (Section 153) Legal framework: Section 153 prescribes limitation for making a final assessment order; an assessment barred by limitation cannot be sustained. Precedent treatment: The Tribunal dismissed the revenue's appeals on the ground that the final assessment orders for the years in question were barred by limitation under Section 153; the Court accepts the Tribunal's finding on limitation as recorded in the impugned order (see Issue 4 cross-reference as to why merits were not considered). Interpretation and reasoning: The Tribunal concluded that because the final assessments were time-barred under Section 153, the appeals on merits could not be entertained. The Court notes that the Tribunal did not rule on merits for the assessment years in issue as the limitation bar precluded such a ruling. Ratio vs. Obiter: Ratio - where a final assessment order is barred by limitation under Section 153, an appeal on merits cannot be sustained; Obiter - no further elaboration on exceptions or alternative routes was provided. Conclusion: The Tribunal's dismissal of appeals on the ground that the final assessment orders were time-barred under Section 153 is accepted as the operative reason for not deciding merits for the assessment years before it. Issue 3: Interaction of Section 144C (non-obstante clause) with Section 153 limitation Legal framework: Section 144C contains a non-obstante clause that can make it operative notwithstanding other provisions; however its applicability depends on whether framing a draft assessment order under the scheme is required for the period in question. Precedent treatment: The Tribunal rejected the revenue's plea that Section 144C would override Section 153, reasoning that framing a draft assessment order was not required for the periods in issue; therefore the non-obstante clause could not displace the limitation bar. Interpretation and reasoning: The Court records the Tribunal's finding that for the assessment years in question no draft assessment order under the relevant scheme was required; consequently Section 144C did not operate to negate the operation of Section 153. The Court does not disturb this reasoning given the absence of merits being argued (see Issue 4). Ratio vs. Obiter: Ratio - where the statutory scheme does not require framing a draft assessment order, the non-obstante clause in Section 144C will not override the limitation bar in Section 153; Obiter - the Court does not formulate a broader principle beyond the facts before it. Conclusion: Section 144C does not displace Section 153 in the present facts because the scheme's threshold condition (framing a draft assessment order) was absent; hence limitation remains dispositive. Issue 4: Effect of prior coordinate bench decision and Supreme Court affirmation on merits (attribution of 15% revenue to PE) Legal framework: Where a higher court has decided an identical legal issue in a taxpayer's favor or against the revenue, subsequent controversies bearing on the same issue may be concluded by applying that precedent unless distinguishable. Precedent treatment: A coordinate bench had previously sustained the conclusion that 15% of India-generated revenue was attributable to the PE for a related assessment year; that decision was affirmed by the Supreme Court, which dismissed the special leave petition, noting that issues had been considered and held against the revenue by affirming the High Court judgment. Interpretation and reasoning: The learned senior standing counsel for the revenue conceded that, as to merits, the Supreme Court's decision concerning the related assessment year governs the present appeals. Given that concession and the Tribunal's limitation-based dismissal, the Court treated the substantive dispute over attribution as effectively closed or rendered academic insofar as the appeals before it are concerned. Ratio vs. Obiter: Ratio - the prior coordinate bench decision affirmed by the Supreme Court is binding insofar as the same substantive issue arises and no distinguishing features are present; Obiter - the Court does not expand on the scope of the 15% attribution principle beyond noting it 'holds the field' for the facts involved. Conclusion: The substantive question of attributing 15% of India-generated revenue to the PE has been effectively resolved against the revenue by earlier decisions (coordinate bench and Supreme Court); consequently, and coupled with the Tribunal's limitation finding, the appeals need not be entertained on merits and are closed as academic. Disposition and Cross-References 1. The Court condoned delay in re-filing the appeals to enable adjudication on merits (Issue 1). 2. Notwithstanding condonation, the Tribunal's dismissal on limitation grounds under Section 153 (Issue 2), and its conclusion that Section 144C does not override Section 153 where no draft assessment order was required (Issue 3), mean the Tribunal did not and need not decide merits for the assessment years before it. 3. Given the binding effect of the prior coordinate bench decision affirmed by the Supreme Court on the substantive PE attribution issue (Issue 4), the Court concluded that the appeals were academic and closed them accordingly.