Facts of the Case

GE Nuovo Pignone S.P.A., the assessee, filed multiple appeals challenging a common order passed by the ITAT for Assessment Years 2001–02 to 2008–09.

Before the ITAT, the assessee had specifically raised grounds relating to:

  1. Installation Permanent Establishment (PE) in India
  2. Attribution of profits between offshore sales and onshore services
  3. Taxability of receipts as Fees for Technical Services (FTS)

However, while disposing of the appeals, the ITAT failed to address these grounds. Aggrieved by such omission, the assessee approached the Delhi High Court under Section 260A of the Income Tax Act.

 Issues Involved

  1. Whether the ITAT overlooked material grounds raised by the assessee?
  2. Whether such omission justified restoration of the appeal to the ITAT?
  3. Whether filing rectification under Section 254(2) was the only remedy available?
  4. Whether the assessee had abandoned those grounds before the ITAT?

 Petitioner’s Arguments (Assessee’s Contentions)

The assessee contended that:

  • Specific grounds regarding Installation PE, attribution of profits, and FTS taxability were expressly raised in the appeal memo before the ITAT.
  • The ITAT omitted adjudication on these substantive issues.
  • Such omission amounted to failure in judicial determination.
  • Restoration was necessary to ensure proper adjudication of all issues.
  • The interim protection granted earlier by ITAT remained operative and compliance had already been made through deposit of the required amount.

 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 record arguments on those grounds, it should be inferred that they were abandoned.
  • The assessee should have invoked Section 254(2) instead of filing an appeal under Section 260A.
  • Restoration would give the assessee an unfair procedural advantage and prolong interim protection.

 Court Findings / Observations

The Delhi High Court observed:

  • Mere absence of discussion in the ITAT order does not establish abandonment of grounds.
  • Where grounds are specifically pleaded in the appeal memo, adjudication is mandatory.
  • Judicial omission by the ITAT cannot be presumed as withdrawal by the assessee.
  • Section 254(2) may be an alternative remedy, but it does not bar maintainability of appeal under Section 260A.
  • The Revenue’s contention regarding unfair advantage was factually incorrect because the interim order covered the assessee as well.

 Court Order / Final Decision

The Delhi High Court held that the ITAT had indeed failed to adjudicate material grounds raised by the assessee.

Accordingly:

  • The impugned ITAT order was partially set aside.
  • The appeals were restored to the ITAT only for adjudication of omitted grounds relating to:
    • Installation PE
    • Ad-hoc attribution between sales and services
    • Taxability as FTS
  • The interim protection granted earlier continued until disposal.

The substantial question of law was answered in favour of the assessee.

 Important Clarification

This judgment clarifies that:

  • ITAT is under a mandatory obligation to adjudicate every specific ground raised in appeal.
  • Silence in the appellate order cannot be treated as abandonment.
  • Rectification under Section 254(2) is optional and not an exclusive remedy.

Partial remand is permissible where only specific issues remain unaddressed

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

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