Glimpses of Supreme Court Rulings

14.  Question of Law –
Whether the trading activity in the nature of re-export of imported goods
carried on by the SEZ unit of the assessee is to be considered as ‘services’
eligible for exemption u/s. 10AA of the Income-tax Act in view of the
definition of ‘services’ in Special Economic Zones Rules, 2006 though there is
no such provision in section 10AA of the Act, is a question of law.

CIT vs. Bommidala Enterprises Pvt. Ltd. (2016) 389 ITR 1
(SC)

In an appeal filed before the Andhra Pradesh High Court, the
Department had raised the following questions of law:

1.  In the facts and circumstances of the case,
whether the Tribunal was correct in upholding the finding of the Commissioner
of Income-tax (Appeals) that the trading activity carried on by the SEZ unit of
the assessee was to be considered as ‘services’ eligible for exemption u/s.
10AA of the Income-tax Act by relying on the definition of “services” as per
Special Economic Zone Rules, 2006 when there was no such provision in section
10AA of the Act?

2.  In the facts and circumstances of the case,
whether the Tribunal was justified in relying on the instructions issued by the
Ministry of Commerce regarding the applicability of exemption u/s. 10AA of the
Income-tax Act to the trading activity in the nature of re-export of imported
goods though there was no subsequent amendment made to the provisions of the
Income-tax Act to give effect to the clarification contained in the
instructions in spite of the mention in the said instructions that appropriate amendments are being issued?

3.  In the facts and circumstances of the case,
whether the Tribunal was correct in law in upholding the exemption claimed u/s.
10AA of the Income-tax Act when the respondent assessee was not involved either
in manufacture or production of article/or/thing or provide any services as
required in the said statutory provision but was engaged in trading activity
only?

The Revenue’s Counsel contended before the High Court that
the assessee was carrying on trading business and not the manufacturing
business. The High Court however held that this was a factual aspect and it had
been taken care of by the authorities below (both CIT(A) and ITAT held that the
assessee was entitled to exemption u/s. 10AA) and that the fact finding could
not be interfered with, unless it was found perverse. The High Court dismissed
the appeal of the Revenue.

On further appeal, the Supreme Court observed that the
question of law that was raised by the Appellant-Revenue herein before the High
Court was as to whether trading activity carried on by the SEZ unit of the
Respondent-Assessee was to be considered as ‘service’ eligible for exemption u/s.
10AA of the Income-tax Act. The Supreme Court noted the submission of the
Appellant that for this purpose, the Income-tax Appellate Tribunal could not
have relied upon the definition of ‘services’ as per SEZ Rules when there was
no such provision u/s. 10AA of the Act.

The Supreme Court observed that a perusal of the order of the
High Court showed that this aspect was not considered and brushed aside by
merely saying that the Tribunal had held it to be a ‘service’ and that it was a
question of fact. The Supreme Court held that no doubt, insofar as activity
carried on by the Respondent-Assessee was concerned, factual aspects were not
in dispute.

However, whether that would constitute ‘service’ within the
meaning of section 10AA of the Act would be a question of law and not a
question of fact. The High Court was, therefore, in error in not entertaining
the said plea and dismissing the appeal of the Revenue by labelling it as a
question of fact. The Supreme Court, therefore, set aside the order of the High
Court and remanded the case to the High Court to decide the aforesaid question
of law.

15. Deduction of tax at source – Assessee not heard by the
High Court and the review petition also dismissed – Supreme Court set aside the
orders and remanded the matter for decision afresh

Novo Nordisk Pharma India Ltd. vs. CIT (2016) 389 ITR 134
(SC)

The High Court allowed the appeal filed by the Revenue. The
question was as to whether the transaction between the assessee and the person
to whom certain payments were made was one attracting the provisions of section
194C of the Act.

The assessee sought review because: (i) the Counsel of the
assessee was unable to appear on the day of hearing and argue the case as he
was engaged in other court; (ii) the Court had not examined the relevant board
circular, (iii) that the deductee having paid the tax, there was no loss to the
Revenue, and as such the situation did not warrant levy of interest.

The High Court dismissed the review petition holding that:
(i) inability to appear due to other engagement could hardly constitute a
ground for review; (ii) the Board Circular was not relevant as the matter was
decided considering the three inter-linking agreements; and (iii) whether the
deductee had paid its tax or not was not a relevant question in so far the
provisions of section 194C was concerned as section 201 was only consequential.

On appeal, the Supreme Court noted that it was a fact that
the assessee was not heard when the impugned judgment was delivered. Even the
review petition filed by the Appellant before the High Court was also rejected.