Apparent factual mistake under section 254(2) justified recall where expatriate salary deduction assumptions affected treaty analysis.

The Tribunal treated the assessee's objections as mistakes apparent from the record under section 254(2) because the earlier order proceeded on an unsupported factual assumption that expatriate salaries deputed for ONGC drilling contracts had been claimed as deductions under section 44BB. That mistaken premise affected the conclusion that Article XIV(2)(c) of the treaty was not satisfied. As the errors were factual and went to the basis of the earlier reasoning, recall was considered appropriate rather than a merits-based review, and the matter was directed to be heard afresh.

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Issues: Whether the Tribunal's earlier order suffered from apparent factual mistakes warranting recall under section 254(2), and whether the misconception regarding deduction of expatriate salaries while applying section 44BB affected the conclusion on Article XIV(2)(c) of the treaty.

Analysis: The order records that the assessee pointed out multiple factual errors in the earlier decision, particularly that salaries of expatriates deputed for the ONGC drilling contracts had not in fact been claimed as deductions while computing the profits of the permanent establishment. The earlier reasoning proceeded on the basis of a deeming assumption that all expenses, including those salaries, were necessarily allowed under the presumptive regime of section 44BB. The Tribunal found that this factual premise was unsupported by the record and that the resulting conclusion on non-fulfilment of Article XIV(2)(c) required reconsideration. Since the errors were treated as mistakes apparent from the record and not as a review on merits, recall was considered appropriate.

Conclusion: The Tribunal held that the order dated 14-7-2005 should be recalled and the appeal should be heard and decided afresh.

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