Case Note & Summary
The petitioner, M/s Inventure Growth & Securities Limited, filed a writ petition under Article 226 of the Constitution challenging an order of the Income Tax Appellate Tribunal dated 20 November 2009, which dismissed its Miscellaneous Application under Section 254(2) of the Income Tax Act, 1961. The dispute pertained to the assessment year 1997-1998. The petitioner had acquired a membership card of the Bombay Stock Exchange for Rs. 1.81 crores and claimed depreciation on the cost treating it as a plant under Section 32(1). The Assessing Officer disallowed the claim, but the Commissioner (Appeals) allowed it by order dated 11 April 2001. The Revenue appealed to the Tribunal, and the assessee filed cross-objections seeking an alternative allowance of the cost as revenue expenditure under Section 37(1). The Tribunal, by order dated 30 May 2008, reversed the Commissioner's order, holding that the membership card is not an asset for depreciation, and also rejected the alternative claim under Section 37(1) following its decision in Deputy Commissioner of Income Tax v. Khandwala Finance Limited. The assessee then filed a Miscellaneous Application under Section 254(2) contending that the Tribunal had relied on the Khandwala Finance decision without giving the assessee an opportunity to address it, as the decision was not cited by either side during arguments. The Tribunal dismissed the application, leading to the present writ petition. The High Court, after hearing counsel for both sides, held that the Tribunal's reliance on an uncited precedent without affording a hearing does not constitute a mistake apparent on record under Section 254(2). The court observed that the Tribunal is entitled to rely on any precedent, and if the assessee felt aggrieved, the remedy was to file a substantive appeal, not a miscellaneous application. The court further noted that the Tribunal had already considered the assessee's alternative claim and rejected it. Accordingly, the High Court dismissed the petition, finding no merit in the challenge.
Headnote
A) Income Tax - Miscellaneous Application - Section 254(2) of the Income Tax Act, 1961 - Mistake Apparent on Record - The assessee sought recall of the Tribunal's order on the ground that the Tribunal relied on a decision not cited by either party without giving an opportunity to address it. The High Court held that such an omission does not amount to a mistake apparent on record under Section 254(2), as the Tribunal is entitled to rely on any precedent and the remedy lies in a substantive appeal, not a miscellaneous application. (Paras 1-6) B) Income Tax - Depreciation - Section 32(1) of the Income Tax Act, 1961 - Plant - The assessee claimed depreciation on a stock exchange membership card treating it as plant. The Commissioner (Appeals) allowed the claim, but the Tribunal reversed it, holding that a membership card is not an asset for depreciation. The High Court did not adjudicate this issue on merits. (Paras 2-3) C) Income Tax - Revenue Expenditure - Section 37(1) of the Income Tax Act, 1961 - Alternative Claim - The assessee alternatively claimed the cost of acquiring the membership card as revenue expenditure. The Tribunal rejected this claim following its decision in Deputy Commissioner of Income Tax v. Khandwala Finance Limited. The High Court did not rule on this issue. (Para 3)
Issue of Consideration
Whether the Income Tax Appellate Tribunal erred in dismissing the assessee's Miscellaneous Application under Section 254(2) of the Income Tax Act, 1961, on the ground that reliance on an uncited precedent without affording an opportunity of hearing constitutes a mistake apparent on record.
Final Decision
The High Court dismissed the writ petition, holding that the Tribunal's reliance on an uncited precedent without affording a hearing does not constitute a mistake apparent on record under Section 254(2) of the Income Tax Act, 1961. The court found no merit in the petition and discharged the rule.
Law Points
- Mistake apparent on record
- Section 254(2) of the Income Tax Act
- 1961
- Depreciation on membership card
- Stock exchange membership card as plant
- Revenue expenditure under Section 37(1)
- Opportunity of hearing
- Uncited precedent
