Facts of the Case

The assessee, GE Nuovo Pignone S.P.A., filed appeals before the Delhi High Court under Section 260A challenging a common order passed by the ITAT for Assessment Years 2001-02 to 2008-09.

The grievance of the assessee was that despite specifically raising grounds concerning:

  1. Installation Permanent Establishment (PE),
  2. Attribution of profits between sale and service components, and
  3. Taxability of income as Fees for Technical Services (FTS),

the ITAT failed to adjudicate these issues in its final order and disposed of the appeals without recording findings on these grounds.

 Issues Involved

  1. Whether the ITAT overlooked grounds specifically urged by the assessee?
  2. Whether non-consideration of grounds relating to PE and FTS rendered the order legally defective?
  3. Whether the assessee was bound to seek rectification under Section 254(2) before filing appeal under Section 260A?
  4. Whether the matter should be restored to the ITAT for adjudication?

 Petitioner’s Arguments (Assessee’s Contentions)

The assessee contended that:

  • Specific grounds regarding Installation PE, attribution of income, and FTS taxation were expressly raised before the ITAT.
  • The ITAT failed to record any findings or adjudication on those grounds.
  • Such omission amounted to non-adjudication of material issues affecting tax liability.
  • Therefore, the order of the ITAT, to that extent, was liable to be set aside and remanded.

The assessee also confirmed compliance with the interim stay order by depositing the requisite amount as directed earlier by the Tribunal.

 Respondent’s Arguments (Revenue’s Contentions)

The Revenue argued that:

  • The assessee had consciously not pressed those grounds before the ITAT.
  • Since the ITAT order did not mention those grounds, it should be inferred that they were abandoned.
  • The assessee had an alternate remedy under Section 254(2) for rectification of omission.
  • Restoration of appeals would unfairly extend the interim protection already granted.

However, these objections were not accepted by the Court.

 Court Findings / Court Order

The Delhi High Court held:

1. ITAT Failed to Adjudicate Material Grounds

The Court observed that where specific grounds are part of the memorandum of appeal, mere silence in the order cannot imply abandonment.

2. No Presumption of Withdrawal

Absence of discussion in the ITAT order cannot lead to an inference that the assessee gave up those grounds.

3. Section 254(2) Not Mandatory

Although rectification under Section 254(2) was available, the High Court held that availability of such remedy does not bar appeal under Section 260A.

4. Partial Setting Aside of ITAT Order

The Court did not set aside the entire ITAT order, but only that portion which failed to adjudicate the concerned grounds.

5. Matter Restored to ITAT

The appeals were restored to the ITAT solely for adjudication of:

  • Installation PE issue
  • Attribution between sales and services
  • FTS taxability issue

 Important Clarification

The Court specifically clarified:

  • ITAT shall decide only the unadjudicated grounds.
  • No fresh or additional grounds shall be entertained.
  • Assessee retains the right to challenge the subsequent ITAT order before the High Court if aggrieved.
  • Existing interim protection would continue until disposal by ITAT. 

    Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8940-DB/SMD13092017ITA6762017_164203.pdf

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