IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH `B', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
MA No. 173/Hyd/2013
Arising out of ITA No. 328/Hyd/2012
Assessment year 2008-09
M/s. Karvy Computer- vs. The Asst. CIT
Share Pvt. Ltd. Circle-2(1)
PAN: AACCK2193D Hyderabad
Applicant Respondent
Applicant by: Sri P. Murali Krishna
Revenue by: Sri Solgy Jose Kottaram
Date of hearing: 25.10.2013
Date of pronouncement: 08.11.2013
ORDER
PER CHANDRA POOJARI, AM:
This Miscellaneous Application (MA) filed by the
assessee is seeking recall of Tribunal order in ITA No.
328/Hyd/2012 for A.Y. 2008-09 dated 28.03.2013 with a
view to rectify mistake apparent from record under
subsection (2) of section 254 of Income-tax Act, 1961.
2. The learned AR submitted that the following errors
had crept in the afore cited order of the Tribunal:
(i) In para-12 the Tribunal recorded the finding
"The same issue was a subject matter of
dispute before this Tribunal, Bombay Bench in
the case of Kotak Securities Ltd. vs. Addl. CIT
(124 TTJ 214) which was decided in favour of
the assessee" contrary to the following facts on
record:
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(a) Finding of the Assessing Officer in his
order dated 31-12-2010 passed under
section 143(3) of the Income-tax Act,
1961 in para 4.2 of his order which reads
as under:
"As the payment to NSDL/CDSL is in the
nature of professional services, the
provisions of sec. 194J are attracted and
tax was deductible at source under
Chapter XVIIB of the IT Act."
(b) Finding of the Commissioner of income
Tax (Appeals)-III, Hyderabad in ITA No.
0255/CIT(A)-III/10-11 dated 15-12-2011
in para 5.3 which reads as under:
"After considering the above detailed
explanation furnished by the appellant
clarifying that such payment has been
made by them to NSDL and CDSL for
providing access to their database for
downloading the data electronically and
from the manner of charging for the same
by the depository, known as "BENPOS", at
flat rates of Rs. 5,000/- or Rs. 10,000/-
depending upon the number of records, in
my considered view, such payment made
by the appellant to NSDL and CDSL,
shown under 'Settlement and Custody
Fees' cannot he considered as falling
under professional services, as defined
under section 194J of the Act. Therefore,
no tax was deductible at source on such
payments made by the appellant to those
depositories i.e. NSDL and CDSL".
(c) The issue in the case of Kotak Securities
Ltd., was payment of the transaction
charges to the BSE for BSE On-line
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Trading (BOLT) system and not payment
of "BENPOS" at flat rates for downloading
the data electronically.
Hence, the finding that the same issue was
subject matter of dispute before the Tribunal,
Bombay Bench in the case of Kotak Securities
Ltd vs. Addl. CIT (124 TTJ 214) is a mistake
apparent from record.
(ii) In para-13 the Tribunal recorded the finding
"The facts considered by the Bombay High
Court on this issue are similar to the facts of
the assessee's case before us". The facts
recorded by the Assessing Officer and the
Commissioner of Income Tax (Appeals) in the
assessee's case is payment of "BENPOS", at flat
rates of Rs. 5,000/- or Rs. 10,000/- depending
upon the number of records by providing access
to their database for downloading the data
electronically; whereas the payment covered in
the Bombay High Court judgment is payment of
transaction charges to the Stock Exchanges.
Prima facie as the nature of the payments are
totally different, the above finding is a mistake
apparent from record.
(iii) National Securities Depository Ltd. (NSDL)
raised the Invoice for the "BENPOS" in the
names of the respective companies directly and
the assessee paid the fees on behalf of the
various clients under their instructions as a
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Trustee/Agent. Copies of the invoices were filed
as per the directions of the Tribunal on 18-1-
2013. The Tribunal omitted to notice this fact
while recording the above findings.
(iv) The Tribunal in para-11 of its order recorded
the submission of the applicant that NSDL/CDSL
declared the settlement and custody fees
received from the Applicant as its income in
their Income Tax Returns placing reliance on
the judgement of the Calcutta High Court and
the relevant observations are as under:
"Further he relied on the judgment of Calcutta
High Court in the ease of CIT vs. Virgin
Creations (lTAT No. 302 of 2011 (GA)
3200/2011 dated 23 November, 2011) wherein
their Lordships relied on the judgment of
Supreme Court in the case of R.B. Jodhamal
Kuthialal vs. CIT (82 ITR 570) and observed
that the provisions, which has inserted the
remedy to make the provisions workable,
requires to be treated with retrospective
operation so that reasonable deduction can be
given to the section as well, decided the issue
whether section 40(a)(ia) having retrospective
operation or not."
The Tribunal did not give any decision on this
legal Issue in its operative portion. Hence it is a
mistake apparent from record.
3. Thus, according to the AR provisions of section 194J
of the Act are not applicable as the impugned payment was
not made for professional or technical services and it was
only a reimbursement of expenditure. Further, he
submitted that there is no finding in the Tribunal order
regarding the nature of services rendered by the assessee
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so as to say whether the expenditure incurred by the
assessee falls under the category of professional services or
not so as to attract the provisions of section 194J of the
Act.
4. On the other hand, the learned DR submitted that
consideration of present arguments of the assessee's
counsel amounts to review of earlier order of the Tribunal
which is not permissible u/s. 254(2) of the Act.
5. We have heard both the parties at length. The
learned AR tried to explain that the payment made by the
assessee is not towards professional charges. According to
him, it was paid only towards data access charges so that it
would not attract the provisions of section 194J of the Act.
He also submitted before us that the issue is not covered by
the judgement of Bombay High Court in the case of CIT vs.
Kotak Securities Ltd. (340 ITR 333) (Bom). In our opinion,
in the present case, while adjudicating the issue, the
Tribunal considered the entire facts of the case and
observed in paragraph 13 that the assessee has availed
managerial services from NSDL/CDSL for which the
assessee has paid the fees. Taking support from the
judgement of Bombay High Court, it was held by the
Tribunal that the assessee is liable to deduct TDS on the
impugned payment.
6. Further, it is well settled that statutory authority
cannot exercise power of review unless such power is
expressly conferred. There is no express power of review
conferred on this Tribunal. Even otherwise, the scope of
review does not extent to re-hearing of the case on merit.
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It is held in the case of CIT vs. Pearl Woollen Mills (330 ITR
164):
"Held, that the Tribunal could not readjudicate
the matter under section 254(2). It is well
settled that a statutory authority cannot
exercise power of review unless such power is
expressly conferred. There was no express
power of review conferred on the Tribunal.
Even otherwise, the scope of review did not
extent to rehearing a case on the merits.
Neither by invoking inherent power nor the
principle of mistake of court not prejudicing a
litigant nor by involving doctrine of incidental
power, could the Tribunal reverse a decision on
the merits. The Tribunal was not justified in
recalling its previous finding restoring the
addition, more so when an application for the
same relief had been earlier dismissed."
7. The scope and ambit of application of section 254(2)
is very limited. The same is restricted to rectification of
mistakes apparent from the record. We shall first deal with
the question of the power of the Tribunal to recall an order
in its entirety. Recalling the entire order obviously would
mean passing of a fresh order. That does not appear to be
the legislative intent. The order passed by the Tribunal
under s. 254(1) is the effective order so far as the appeal is
concerned. Any order passed under s. 254(2) either
allowing the amendment or refusing to amend gets merged
with the original order passed. The order as amended or
remaining un-amended is the effective order for all practical
purposes. An order under s. 254(2) does not have
existence de hors the order under s. 254(1). Recalling of
the order is not permissible under s. 254(2). Recalling of
an order automatically necessitates rehearing and re-
adjudication of the entire subject-matter of appeal. The
dispute no longer remains restricted to any mistake sought
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to be rectified. Power to recall an order is prescribed in
terms of Rule 24 of the ITAT Rules, 1963, and that too only
in case where the assessee shows that it had a reasonable
cause for being absent at a time when the appeal was
taken up and was decided ex-parte. Judged in the above
background the order passed by the Tribunal is
indefensible.
8. The words used in s. 254(2) are `shall make such
amendment, if the mistake is brought to its notice'.
Clearly, if there is a mistake, then an amendment is
required to be carried out in the original order to correct
that particular mistake. The provision does not indicate
that the Tribunal can recall the entire order and pass a
fresh decision. That would amount to a review of the entire
order and that is not permissible under the IT Act. The
power to rectify a mistake under s. 254(2) cannot be used
for recalling the entire order. No power of review has been
given to the Tribunal under the IT Act. Thus, what it could
not do directly could not be allowed to be done indirectly.
9. In the case of CIT vs. Hindustan Coca Cola Beverages
(P) Ltd. (2007) 207 CTR (Del) 119; (2007) 293 ITR 163
(Del), their Lordships while considering the powers of the
Tribunal under s. 254(2) of the IT Act, 1961 observed as
under:
"Under s. 254(2) of the IT Act, 1961, the
Tribunal has the power to rectify mistakes in its
order. However, it is plain that the power to
rectify a mistake is not equivalent to a power to
review or recall the order sought to be rectified.
Rectification is a species of the larger concept of
review. Although it is possible that the pre-
requisite for exercise of either power may be
similar (a mistake apparent from the record),
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by its very nature the power to rectify a
mistake cannot result in the recall and review of
the order sought to be rectified."
10. Thus the scope and ambit of application u/s. 254(2) is
as follows:
(a) Firstly, the scope and ambit of application of s.
254(2) of IT Act is restricted to rectification of the
mistakes apparent from the record.
(b) Secondly, that no party appearing before the
Tribunal should suffer on account of any mistake
committed by the Tribunal and if the prejudice has
resulted to the party, which prejudice is
attributable to the Tribunal's mistake/error or
omission, and which an error is a manifest error,
then the Tribunal would be justified in rectifying its
mistake. The "rule of precedent" is an important
aspect of legal certainty in the rule of law and that
principle is not obliterated by s. 254(2) of the Act
and non-consideration of precedent by the
Tribunal causes a prejudice to the assessee.
(c) Thirdly, power to rectify a mistake is not
equivalent to a power to review or recall the order
sought to be rectified.
(d) Fourthly, under s. 254(2) an oversight of a fact
cannot constitute an apparent mistake rectifiable
under the section.
(e) Fifthly, failure on the part of the Tribunal to
consider an argument advanced by either party for
arriving at a conclusion is not an error apparent on
record, although it may be an error of judgement.
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(f) Sixthly, even if on the basis of a wrong conclusion
the Tribunal has not allowed a claim of the party it
will not be a ground for moving an application
under s. 254(2) of the Act.
(g) Lastly, in the garb of an application for
rectification under s. 254(2) the assessee cannot
be permitted to reopen and reargue the whole
matter as the same is beyond the scope of s.
254(2) of the IT Act.
11. Keeping in mind the above parameters, now we
proceed to consider and dispose of the Miscellaneous
Application filed by the assessee as under.
12. In the instant case, the Tribunal while deciding the
appeal of the assessee vide order dated 28th March, 2013
not only considered the elaborate arguments advanced by
the Authorised Representatives of both the parties but also
took into consideration the written synopsis filed by the AR
for assessee before it. Generally the main purpose of the
Tribunal for calling for written synopsis from the parties is
that nothing is ignored or any point in issue which was
raised during the course of arguments or which could not
properly be noted by the Members in the log book while
hearing the arguments of the parties, is left unconsidered.
It means that it is always the endeavour of the Tribunal
that while passing the order it considers all the arguments
as well as the written synopses submitted by the parties.
13. In this regard, we would like to mention that in the
order, the Tribunal first meticulously mentioned the
arguments of the learned AR for the assessee, the points
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raised by him then the relevant case-laws relied upon by
the AR of the assessee. Thereafter, the Tribunal considered
the same and passed a speaking order for not entertaining
the claim of the assessee. While rejecting the claim of the
assessee the Tribunal placed reliance on the judgement of
Bombay High Court CIT vs. Kotak Securities Ltd. (340 ITR
333) (Bom) which is directly on the issue raised by the
assessee.
14. We may mention herein that we might have
committed an error of judgement in wrongly applying/
interpreting the judgement of the Bombay High Court as
mentioned on the matter, but the assessee is free to
explore the remedy available under the law.
15. In the result, MA filed by the assessee is dismissed.
Order pronounced in the open court on 8th November, 2013
Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 8th November, 2013
tprao
Copy forwarded to:
1. M/s. Karvy Computer-share Pvt. Ltd., 46, Avenue No. 4,
Karvy House, Street No. 1, Road No. 10, Banjara Hills,
Hyderabad.
2. The Asst. Commissioner of Income-tax, Circle-2(1), 8th
Floor, B Block, IT Towers, Hyderabad.
3. The CIT(A)-III, Hyderabad.
4. The CIT-II, Hyderabad.
5. The DR 'B' Bench, ITAT, Hyderabad
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