DIRECT TAXES – Supreme Court

Research Team

  1. S. 40 (a)(iib) : Amounts not deductible- Gallonge fee , licence fee and shop rental (Kist) with respect to EL-9 and E.L -I licence granted will fall within the purview of section and hence disallowable – Surcharge on Sales tax and turnover tax is not fee or charge hence not disallowable. [S. 37(1))]

    Gallonage fee, license fee and shop rental payable by the assessee, which is a state government undertaking is not deductible. The exclusivity referred to in the section is not to be seen in terms of the number of entities which are covered by the policy but the nature of the undertakings which are covered. However, surcharge on sales tax and turnover tax are not disallowable under the section as the same is not a fee or a charge. (AY. 2014-15)

    Kerala State Beverages Manufacturing and Marketing Corporation Ltd. v. ACIT (2022) 440 ITR 492 / 209 DTR 257/ 324 CTR 209 (SC)

  2. S. 254(2) : Appellate Tribunal-Rectification of mistake apparent from the record – Powers under section 254(2) are only to rectify / correct any mistake apparent from record – Tribunal was not required to re-visit its original order and go in details on merits and completely recall its order. [S. 195(2)]

    The Appellate Tribunal upheld the order passed by the Assessing Officer on grounds that payments made for purchase of software were in nature of royalty and tax at source was to be deducted on such payment. The assessee filed a miscellaneous application for rectification under section 254(2) before the Tribunal. The assessee had also filed an appeal before the High Court. The Tribunal recalled its original order and passed an order in favour of the assessees. The revenue filed a writ petition against order of the Tribunal on miscellaneous application. The High Court dismissed said writ petition. Revenue approached the Supreme Court, held:

    The Tribunal recalling its earlier order is beyond the scope and ambit of the powers under section 254(2). While allowing the application under section 254(2) and recalling its earlier order, it appears that the Tribunal has re-heard the entire appeal on merits as if the Tribunal was deciding the appeal against the order passed by the Commissioner (Appeals). In exercise of powers under section 254(2), the Appellate Tribunal may amend any order passed by it under section 254(1) with a view to rectifying any mistake apparent from the record only. The powers under section 254(2) are akin to order XLVII – Rule 1 – Code of Civil Procedure. While considering the application under section 254(2), the Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under section 254(2) are only to rectify/correct any mistake apparent from the record. Merely because the Revenue might have in detail gone into the merits of the case before the Appellate Tribunal and merely because the parties might have filed detailed submissions during the miscellaneous proceedings, it does not confer jurisdiction upon the Tribunal to pass the order de hors section 254(2)

    CIT v. Reliance Telecom Ltd. (2021) 208 DTR 113 / 323 CTR 873 / (2022) 440 ITR 1 / 284 Taxman 517 (SC)

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