COMM. OF INCOME TAX DEHRADUN vs. READING and BATES EXPLORATION CO. AS AGENT OF TEMPLE

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ITA/213/2004HC UttarakhandUKHC01003070200508 May 2006Author: HON'BLE MR. JUSTICE P. C. VERMA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue regarding 'off period salary' was decided in favour of the Revenue by the Uttaranchal High Court in CIT vs. Sedco Forex International Drilling Co. Ltd. (2003) 264 ITR 320. However, the Supreme Court, in the case of Sedco Forex International Drill Inc. and Others vs. Commissioner of Income Tax, Dehradun and Another (JT 2005(9) SC 639), set aside the High Court's judgment. The Supreme Court ruled that the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961, amended by the Finance Act 1999, was prospective and could not be applied retrospectively to assessment years prior to 1999. Since the assessment year in the present case (1994-95) was prior to 1999, the assessee could not be taxed based on the law laid down by the Apex Court. Therefore, the appeal filed by the Revenue was dismissed, and the questions were answered in favour of the assessee and against the Revenue.

What were the facts?

The Revenue, Commissioner of Income Tax (CIT), Dehradun, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT), Delhi Benches. The ITAT had dismissed the Revenue's application for recalling its earlier consolidated order dated 16.07.2003, which was passed in various appeals (ITA Nos. 2410 to 2420/Del/98 and others) for the assessment year 1994-95. The Revenue sought recall of the ITAT's order to incorporate a subsequent judgment of the Uttaranchal High Court. The ITAT rejected the application, stating that a subsequent judgment does not constitute a mistake apparent from the record. The assessee is Reading & Bates Exploration Co., acting as an agent for Mr. Temple R.J.

What were the issues?

1. Whether the ITAT was justified in holding that its order did not suffer from a mistake apparent from the record, based on a subsequent judgment of the Uttaranchal High Court? (Question of law) 2. Whether a judgment of the Uttaranchal High Court, even if pronounced subsequently, is binding upon the ITAT on an issue arising from an order of an Assessing Officer functioning within the jurisdiction of the Uttaranchal High Court? (Question of law) 3. Whether the ITAT was right in holding that there was no scope for applying Section 254(2) of the Income Tax Act, 1961, under the facts and circumstances? (Question of mixed law and fact) Assessee's contentions: The ITAT was correct in dismissing the recall application because a subsequent judgment does not amount to a mistake apparent from the record, and Section 254(2) of the Act is not applicable for correcting such errors. The judgment of the Uttaranchal High Court, even if later, should be considered. The Revenue relied on the judgment of the Uttaranchal High Court in CIT vs. Sedco Forex International Drilling Co. Ltd. (2003) 264 ITR 320. Revenue's contentions: The Revenue argued that the ITAT's order suffered from a mistake apparent from the record due to the subsequent judgment of the Uttaranchal High Court, which was binding on the ITAT. They sought to have the ITAT's order amended to reflect this binding precedent. The Revenue also contended that Section 254(2) of the Act was applicable in this scenario.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 254(2),Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 213 of 2004

Commissioner of Income Tax, Dehradun ………… Appellant

Versus

Reading & Bates Exploration Co., as agent of Mr. Temple R.J.

….…Respondent Shri P. Maulekhi, ld. Standing counsel for the Revenue. Ms. Krishi Shukla, Advocate for the respondent.

Date: May 8, 2006

Coram: Hon. P.C. Verma, J. Hon. B.C. Kandpal, J.

Both the parties are ready to argue the matter today.

2.

This appeal has been filed by the Revenue under Section 260-A of the Income tax Act, 1961 (hereinafter will be referred to as the Act) challenging the impugned order dated 20.07.2004 passed by Income Tax Appellate Tribunal, Delhi Benches (C), New Delhi in M.A. No.109/Del/2004 (in ITA Nos.2410 to 2415/Del/98, 2366 to 2367/Del/98, 2370 to 2372/Del/98, 2374 to 2375/Del/98, 2377, 2379, 2381/Del/98, 2361 to 2364/Del/98, 2416, 2418 and 2420/Del/98) for the assessment year 1994-95, by which the Tribunal has dismissed the application of the appellant for recalling the order of the Tribunal decided in aforesaid appeal numbers. The questions framed in the memo of appeal for our consideration are as follows:-

A- Whether the ITAT was justified in holding that order of the Tribunal did not suffer from a mistake apparent form record on the basis of subsequent judgment of Uttaranchal High Court? B- Whether the judgment of Uttaranchal High Court, even if pronounced subsequently, is not binding upon the Tribunal on the issue arising from the order of an AO functioning within the jurisdiction of the Hon’ble Uttaranchal High Court? C- Whether the ITAT was right in holding that under the facts and circumstances of the case there was no scope of application of Section 254(2) of the Act?

3.

Brief facts of the case as narrated by the appellant are that assessee filed an appeal against the assessment order dated 15.01.1997 before the Commissioner (Appeals). The said appeal was dismissed by Commissioner of Income Tax (Appeals) dated 08.01.1998. Thereafter, the assessee filed an appeal before Income Tax Appellate Tribunal, Delhi Bench (B) Delhi which was decided in favour of the assessee. The issue under consideration was decided by this Court and the question was decided in favour of the department and against the assessee. The Revenue preferred a recall application with a request to amend its earlier consolidated order dated 16.07.2003 in ITA No.2410/Del/98 taking into account the Civil Appeal Nos.351-355 of 2005. The Hon’ble Apex Court in “Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another, JT 2005(9) SC 639” has held that since the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961 was amended by the Finance Act 1999 and was prospective, therefore, it could not be made applicable in the previous years i.e. to say that no retrospective effect can be given to the Explanation, if the assessment proceedings are pending after the said amendment and accordingly the judgment of Division Bench of this Court was set aside as the assessment year in dispute was prior to 1999. 6. In the present case also, the assessment year is prior to 1999, thus the assessee cannot be taxed in view of the law laid down by the Hon’ble Apex Court “Sedco Forex Rajeev Dang

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