Dr. Justice Arijit Pasayat, Chairman - This is an application under Rule 19 of the Authority for Advance Rulings (Procedure) Rules, 1996 (hereinafter referred to as "the Rules"). The background facts so far as relevant are as follows.
2. CTCI Overseas Corporation Limited (hereinafter referred to as 'the applicant') filed an application under Section 245Q(1) of the Income-tax Act, 1961 (for short, the Act) before this Authority. The applicant had prayed for advance ruling on the following questions:
"i. |
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Whether on the facts and circumstances of the case, the income received/ receivable by the applicant for offshore supplies from Petronet LNG Ltd. in terms of Article 13.1 of the contract for Engineering, Procurement, Construction and Commissioning for kochi regas Facilities (Contract) is liable to be taxed in India? |
ii. |
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If the answer to the question no. 1 is in affirmative, to what extent the income received by the applicant under the Contract for offshore supplies is to be considered as reasonably attributable to the operations carried out in India and to be taxed in India." |
3. By order dated 19.1.2010, the application was admitted under section 245R(2) of the Act and notice thereafter was issued to the parties for hearing on merits. By order dated 1.2.2012, at paragraph 12 it was held by the Authority that amount received/receivable by the applicant from Petronet LNG Offshore in terms of contract dated 17.11.2009 is not liable to be taxed in India under the provisions of the Act in view of the decision of the Hon'ble Supreme Court in Ishikawajima Harima Heavy Industry Ltd. v. DIT [2007] 288 ITR 408/158 Taxman 259 (SC). An application under Rule 19 of the Rules was filed by the Revenue.
4. According to the Revenue overruling the contention of the applicant, the Authority held that the taxable unit in respect of the transaction relied on by the applicant is an Association of Persons within the meaning of Section 2(31) (v) of the Act. Having so concluded, the Authority has held that the transaction put forward by the applicant related to offshore supply of equipments and is not taxable in the country, proceeding as if applicants alone is the assessee under the Act, thereby ignoring the effect of the finding that recipient of the income is an Association of Persons. Therefore it was submitted that the order needs to be varied under Rule 19. The applicant submitted this was not a case where Rule 19 had any application.
5. The rival stand before the Authority as raised by the Revenue and the applicant were considered. The Authority held that objections relating to the ruling having been given effect to by the assessing officer cannot be fully accepted. It was further noted that the objection on behalf of the original applicant was that what is stated by the Revenue to be a mistake apparent from record is not correct and it is a case of ruling review. This objection was also not accepted by the Authority being of the view that on going through the ruling rendered it is seen that there is a clear omission to consider the impact of the finding that the Consortium which has been entrusted with the contract and of which one of the members was an Indian resident, had the status of an AOP under the Act. Once the status of an AOP has been assigned to the consortium, then the Consortium can be assessed only as an AOP and not its members individually. Therefore, the logical conclusion to the ruling should have been that the transaction of offshore supplies which was part of the contract undertaken by the consortium had to be considered on the basis that it was an activity carried on by the Consortium. The then Chairman was, therefore, of the view that the ruling of the Authority to the effect that the offshore supplies is not liable to be taxed in India is a ruling inconsistent with the finding that the assessing unit is an AOP. To that extent, the mistake is apparent and it requires to be corrected and can be corrected by exercise of power under Rule 19 of the Rules.
6. Accordingly, the application was allowed with the following observations: by order dated 27.08.2012.
"I, therefore, allow the application filed by the Revenue to the extent of reopening that part of the ruling which rules that the amount received/ receivable from the applicant from the offshore supplies in terms of the contract dated 17.11.2009 is not liable to tax in India under the provisions of the Act in view of the decision of the Supreme Court in IHHI. I post the main application for a fresh hearing on the question whether an AOP found to have come into an existence is liable to be assessed on the said income."
7. The present application has been filed by the original applicant, inter alia, stating as follows:
"This application is being filed under Rule 19(1) of the AAR Rules with a request to rectify the subject orders passed by this Hon'ble Authority wherein, the Hon'ble Authority has held that the consortium formed by the applicant with CINDA Engineering & Construction Private Limited ('CINDA') constitutes an Association of Persons ('AOP') under the provisions of Act. The subject orders passed by this Hon'ble Authority do not cite any reason for coming to such conclusion and accordingly does not provide any reasonable justification as to why the consortium between the applicant and CINDA constitutes an AOP under the provisions of Act."
8. It was contended by the learned counsel for the applicant that consequent upon re-opening of the case by the Authority on the basis of Revenue's application, the findings have considerable nexus with other issues which have been highlighted in the present application and those need to be addressed by rectifying the earlier order dated 1.2.2012 passed under section 245R(2) and order dated 27.8.2012 passed under section 245R(2) of the Act read with Rule 19 of the Rules. It is submitted that course adopted by the Authority while dealing with the earlier application under Rule 19 is not on a true construction of the scope and ambit of Rule 19. There was no error apparent from record which could have been corrected by the Authority. Therefore, while dealing with the present application, same on parameters adopted for allowing earlier application under Rule 19 by order dated 27.8.2012 need to be adopted also.
9. The learned representative for the Revenue, on the other hand, submitted that the facts situation highlighted by the Revenue while seeking rectification are entirely different from those highlighted by the applicant in the present application. According to him, Rule 19 has no application because there is no error apparent from record which needs rectification.
10. In order to appreciate the rival submissions, it is relevant to note that the exercise of powers under Rule 19 is dependant upon "error apparent from record". The core issue was whether the Consortium between applicant and CINDA constitutes an AOP under the provisions of the Act.
Section 2(31 )(v) provides that "person" includes:
"an Association of Persons or body of individuals, whether incorporated or not".
The explanation provides that for the purpose of clause 'an association of persons or body or individuals or local authorities or an artificial judicial person shall be deemed to be a person, whether or not such person or body or authority or judicial person was formed or established or incorporated with the object of deriving income, profits or gains.
It is not necessary to deal with merits of the case and rival stand qua issue of taxability and the person in whose hands the income is taxable while dealing with an application under Rule 19 of the Rules. Said Rule reads as follows:
"(1) The Authority may, with a view to rectifying any mistake apparent from the record, amend any order passed by it before the ruling pronounced by the Authority has been given effect to by the Assessing Officer.
(2) Such amendment may be made suo motu or when the mistake is brought to its notice by the applicant or the Commissioner, but only after allowing the applicant and the Commissioner reasonable opportunity of being heard"
11. As observed by the Hon'ble Supreme Court in Karam Chanel Thapar & Bros. (Coal sales) v. State of UP [1976] 4 SCC 257, "apparent error" means "patent mistake, error which one can point out without elaborate argument."
'Error means a mistake in judgment/assessment in a process or proceedings; some wrong decision taken inadvertently; unintentional mistake; something incorrectly done through ignorance or inadvertence; mistake occurred from an accidental slip, deviation from standard or course of right or accuracy, unintentionally; to be wrong about; to think or understand wrongly; an omission made not be design, but by mistake. (See Cauvery Coffee Traders v. Hornor Resources (International) Co. Ltd, [2011]10 SCC 420.)
An apparent error of fact or law can be rectified by an officer. If the mistake of law has to be established by construing the words of a section to find its proper meaning, then such an error cannot normally be a rectifiable error under Section 36. If two views are possible, then obviously the error will not be an error apparent from the record. However if the Supreme Court has construed the meaning of a section, they any decision to the contrary given by any other authority must be held to be erroneous and such error must be treated as an error apparent on the record. (See Poothundu Planations (P) Ltd. v. Agricultural ITO [1996] 87 Taxman 286 (SC).
Error means that must be such as would be apparent on mere looking of the record without requiring any long-drawn process of reasoning.
An error apparent on the face of record must be such an error which must strike one on mere looking at the record and would not require any long-drawn process of reasong on points where there may conceivably be two opinions. (See Meera Bhanja v. Nirmala Kumar Choudhury [1995] 1 SCC 170)
"Error apparent on face of record" - as per Civil Procedure Code, 1908 -( Or. 47 R.1) needs to be noted.
An error contemplated under Rule 1 of Order 47 which is apparent on the face of the record and not an error which has to be fished out and searched. In the other words, it must be an error of inadvertence. It should be something more than a mere error and it must be one which must be manifest on the face of the record. When does an error cease to be mere error and becomes an error apparent on the face of record depends upon the materials placed before the Court. If the error is so apparent that without further investigation or enquiry, only one conclusion can be drawn in favour of the applicant, the review will lie. Under the guise of review, the parties are not entitled to rehearing of the same issue but the issue can be decided just by a perusal of the records and if it is manifest it can be set right by reviewing the order (See S. Bagirathi Ammal v. Palani Roshan Catholic Mission [2009] 10 SCC 464).
Failure to take into consideration material evidence which is present on record is mistake apparent on face of record. Hence, Tribunal has jurisdiction to correct said mistake in exercise of its powers under S.35-C(2) of Central Excise Act, 1944. (See CCE v. Bharat Bijlee Ltd. [2011] 12 SCC 172).
A patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long-drawn-out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no court would permit it to remain on record. It has, however, been conceded in all leading cases that it is very difficult to define an "error apparent on the face of the record" precisely, scientifically and with certainty. (See CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 14 SCC 171).
The expression "any mistake apparent from the record" occurring in section 154(1) of the Act has a wider content than the expression "error apparent on the face of the record" occurring in Order XL VII, rule I of the Code of Civil Procedure. In ITO v Bombay Dyeing & Mfg Co. Ltd. [1958] 34 ITR 143 (SC) the Hon'ble Supreme Court observed that the former covers all mistakes discoverable from a perusal of the whole evidence in the case, or from an omission to apply certain provisions of the Act to the facts of the case, or a mistake due to an overlooking of certain aspects of the case, or a mistake arising on account of a wrong construction of any provisions of the Act.
The error may be either an error of fact or an error of law. The restrictions on the power of review under Order XLVII, rule 1, Code of Civil Procedure, do not hold in the case of section 154 of the Act. For instance, if the Assessing Officer had over-looked in the relevant year of assessment the liability of the assessee to pay additional income-tax on "excess dividends" under the Finance Act, 1952, he can rectify such omission by making a recomputation of the tax under section 154, as held in ITO v. Asok Textiles Ltd. [1961] 41 ITR 732 (SC) A mistake which cannot be gathered from the record as it stands and requires, for being shown to be a mistake, matter or evidence extraneous to the record, is not a mistake "apparent from the record' which can be corrected under this section. The plain meaning of the word "apparent from the record" which can be corrected under this section. The plain meaning of the word "apparent" has been held to be something which appears to the ex facie and is incapable of argument or debate.'
12. Exercise which the applicant wants to be undertaken does not come within the ambit of rectification of an error apparent from record.
13. Other aspects highlighted are that since the Authority while dealing with the application filed by the Revenue under Rule 19 has expanded the scope and ambit of the expression "apparent from record". There is no reason as to why the same yardstick should not be applied while dealing with the present application. We are not impressed by these arguments because even if it is accepted for the sake of argument that the Authority did not keep in view the appropriate parameters while dealing with the earlier application under Rule 19, the concept of negative equality cannot be pressed into service. A party cannot claim that since something wrong has been done in another case direction should be given for doing another wrong. It would not be setting a wrong right, but would be perpetuating another wrong. In such matters, there is no discrimination involved. What the concept of equal treatment presupposed is existence of similar legal foot hold. It does not countenance repetition of a wrong action to being both wrongs on a par. Even if hypothetically it is accepted that a wrong has been committed in some other cases by introducing a concept of negative equality a party cannot strengthen its case. (See Union of India v. International Trading Co. [2003] 5 SCC 437.
We are of the considered view that this is not a case for rectification in terms of Rule 19 of the Rules as the modification/rectification as prayed for is not encompassed by the scope and ambit of that Rule, Accordingly, the application is rejected.