By AJAY R. SINGH Advocate
12. Procter & Gamble Home
Products Pvt. Ltd. vs. ITAT & Others. [Writ Petition no. 2738 of 2017 dated
: 09th March, 2018 (Bombay High Court)].
[Procter & Gamble Home
Products Pvt. Ltd. vs. DCIT [ MA order
dt. 28/7/2017 (reversed) ; arising out of ITA No. 3531/Mum/2014; Bench : K ;
AY: Dated 06th June, 2016 ;
Mum. ITAT ]]
Section 254 (2) : Appellate
Tribunal – Rectification of mistakes – Issue is debatable in view of
contradictory judgements–order cannot be rectified
The
assessee had entered into an agreement with its sister concern for sharing of
certain common facilities and not for renting of the premises in favour of the
sister concern. However, the AO treated the amount received by assessee as
income from house property. The provision in the agreement for charge at Rs.90
per sq.ft. for the built-up area occupied from time to time was, in terms of the
understanding of the party, not implemented. Instead, as intended by the
parties all along, the cost of common facilities shared by the companies was
pooled and borne by the parties in the ratio of respective net sales. In terms
of this arrangement, the assessee in fact had paid Rs.7.63 crore to the said
sister concern such amount being net of the recoveries from such sister concern
in respect of its share of common expenses, full break-up of which was
furnished by the assessee during the assessment proceedings. Therefore, there
was no scope for arriving at any other artificial rent or any other amount
received/receivable by the assessee under the agreement. The impugned amount
considered taxable in the hands of the assessee has not been considered by the A.O
as an allowable expense in the hands of the sister concern in its assessment,
thereby resulting into double taxation of the said amount.
The Tribunal allowed the
Revenue appeal u/s. 254(1) of the Act by
holding that the amount received by it as rent/ compensation from its sister
concern for utilisation of a part of its premises is to be classified as ‘income
from other sources‘. This was after negative the alternate contention of
the assessee that rent/ compensation should be classifiable under the head ‘business
income‘ as also Revenue’s contention that it is classifiable under the head
‘income from the house property‘. The Tribunal did by following the
order of its coordinate bench (on identical facts) in the case of M/s. Procter
& Gamble Hygiene & Healthcare Ltd., (sister concern) for the Assessment
Years 1996-97 to 2000-01. In all the aforesaid cases, on identical facts it has
been held that the rent/compensation received has to be taxed under the head ‘income
from other sources’.
The Revenue had filed
Miscellaneous Application, seeking to rectify the order dated 6th June,
2016. This essentially on the following grounds:(a) the order dated 6th June,
2016 was passed without considering the written submission which were filed on
behalf of the Revenue; and (b) the order dated 6th June, 2016 had
erred in relying upon the orders
passed in the sister concern case
for AY: 1996-97 to 2000-01 to allow the appeal.
This was in view of the fact
that all of them proceeded on a fundamentally wrong basis namely – that the
issue stands concluded by an order passed by the Tribunal for AY: 1995-96 in
respect of the sister concern. This was not so as in fact, as it did not
consider the claim of the Revenue that rent/ compensation is chargeable to tax
under the head ‘income from the house property‘ while holding it to the
taxable as ‘income from other sources‘.
The MA order of the Tribunal dated 28th July,
2017 does recall its order dated 6th June, 2016 only on the second
ground that the reliance by the Tribunal on its earlier order in respect of the
sister concern was not correct. As those orders in turn it relied upon an
earlier order for A.Y 1995-96 of the Tribunal which did not have any occasion
to deal with submission regarding the classification of the rent/compensation under the head ‘income
from house property’.
Being aggrieved, the assessee
filed an Writ petition to the High Court challenging the order passed in MA .
The High Court observed that the order of the Tribunal dated 6th June,
2016 while allowing Petitioner’s appeal, had relied upon the sister concern’s
order passed by the Tribunal in respect of A.Y 1996-97 to 2000-01. Admittedly,
all the orders of the Petitioner’s sister concern relied upon by the order
dated 6th June, 2016 had an issue with regard to the classification of
rent/compensation being received on letting of property under the head ‘income
from the house property’ or ‘income from other sources’. Therefore, it
followed the same. The order of the Tribunal in respect of its sister concern
for A.Y. 1995-96 was also before the Tribunal while passing the order dated 6th
June, 2016. Therefore, the rectification application of the Revenue calls
upon the Court to reappreciate its understanding of the order passed by the
Tribunal in the case of its sister concern for A.Y 1996-97 to 2000-01. This was
on the ground that the earlier orders did not correctly understand/ interpret the
order passed by the Tribunal in respect of A.Y 1995-96 in the case of
Petitioner’s sister concern. This itself would in effect amount to Review.
Therefore, outside the scope of rectification. Besides, it seeks to sit in
appeal over order passed by its Coordinate Bench for Assessment Years 1996-97
to 2000-01. This was not permissible. Moreover, the Revenue has filed appeals
in the sister concern case for the A.Y. 1996-97 to 2000-01 u/s. 260A of the Act
to this Court. The question raised therein is on the issue of appropriate
classification of the rent/ compensation under the head ‘income from the
other sources‘ or under the head ‘income from the house property‘.
The aforesaid appeals have been admitted and are awaiting consideration for
final disposal. Till such time, as the orders of the Tribunal of its Coordinate
Bench in respect of the A.Y 1996-97 to 2000-01 are set aside or are stayed
pending the final disposal, its ratio would, prima facie, continue to be
binding. Therefore, even if the Revenue seek to contend to the contrary it
would be a debatable issue. This cannot be a subject matter of rectification.
Therefore, MA order dated 28th July, 2017 of the Tribunal to the
extent it allowed the Revenue’s application for rectification of the order
dated 6th June, 2016 of the Tribunal was set aside. Accordingly, Petition was
allowed.
