Facts of the Case

The Assessee, GE Nuovo Pignone S.P.A., filed multiple appeals before the Delhi High Court under Section 260A challenging a common order passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Years 2001–02 to 2008–09.

The grievance of the Assessee was that although specific grounds were raised before the ITAT regarding the existence of an Installation Permanent Establishment (PE), attribution of profits between sales and services, and taxability of receipts as Fees for Technical Services (FTS), the Tribunal failed to adjudicate these grounds in its final order.

The Assessee contended that such omission amounted to failure of adjudication on substantive issues affecting tax liability.

 Issues Involved

  1. Whether the ITAT overlooked material grounds raised by the Assessee relating to Installation Permanent Establishment (PE)?
  2. Whether the ITAT failed to adjudicate on ad-hoc attribution between sales and services?
  3. Whether taxability of income as Fees for Technical Services (FTS) remained unaddressed?
  4. Whether the appeals should be restored to the ITAT for fresh adjudication of these specific grounds?

 Petitioner’s Arguments (Assessee’s Contentions)

  • The Assessee argued that it had specifically raised grounds before the ITAT concerning Installation PE, FTS, and profit attribution.
  • The Tribunal failed to record findings on these grounds.
  • Non-consideration of specific grounds amounts to denial of adjudication and violates principles of proper appellate determination.
  • Restoration of appeal was necessary to ensure adjudication on all material issues.

 Respondent’s Arguments (Revenue’s Contentions)

  • The Revenue contended that the Assessee had consciously not pressed those grounds before the ITAT.
  • Since the ITAT order did not mention arguments on these grounds, it could be inferred that the grounds were abandoned.
  • The Revenue also argued that the Assessee could have invoked Section 254(2) for rectification before the ITAT instead of filing appeals before the High Court.
  • It was further argued that restoration would unfairly extend the benefit of interim stay orders.

 Court Findings / Observations

The Delhi High Court held that:

  • Mere absence of discussion in the ITAT order does not automatically establish abandonment of grounds by the Assessee.
  • When specific grounds exist in the memorandum of appeal, the Tribunal is duty-bound to adjudicate them.
  • The only reasonable inference was that the ITAT failed to consider the grounds.
  • Availability of rectification under Section 254(2) does not bar an appeal under Section 260A in such circumstances.
  • Procedural omission by the Tribunal cannot prejudice substantive rights of the Assessee.

 Court Order / Final Decision

The High Court:

  • Set aside only that portion of the ITAT order which disposed of the Assessee’s appeals without adjudicating the specified grounds.
  • Restored the appeals to the file of the ITAT for adjudication limited to:
    • Installation Permanent Establishment (PE)
    • Ad-hoc attribution between sales and services
    • Taxability of income as Fees for Technical Services (FTS)
  • Directed ITAT to decide these issues within three months.
  • Continued the interim stay protection till adjudication.

 Important Clarification

The High Court clarified that:

  • Restoration is confined only to the unadjudicated grounds.
  • No other issues would be reopened.
  • After the fresh ITAT decision, the Assessee would retain the right to challenge both the fresh and earlier findings before the High Court, if required. 


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

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