The “curse of Lord Curzon” haunts the wheels of the tax administration. This vile system has caused colossal losses to the exchequer. Despite severe strictures by the Courts, it is impossible to get rid of it. The only way to cure the malady is to make the concerned officer personally liable to pay “costs” for his negligence and irresponsibility.

It was an unnecessary controversy and the delay in resolving it may have cost the exchequer several hundreds of crores in taxes.

The question whether courts have the power to condone delay in filing of appeals under section 260A of the Income-tax Act arose because of careless drafting. While all other provisions of the Act provide that the authority therein can condone a delay in filing an application/appeal, the draftsman forgot to add a similar provision in s. 260A. This bit of careless drafting lead to a spate of litigation.

The Full Bench of the Bombay High Court took the view in Velingkar Brothers 289 ITR 382 that the Court had inherent power to condone delay. However, the Supreme Court took a different view in Singh Enterprises 221 ELT 163 and Punjab Fibres 223 ELT 337 in the context of the pari-materia provisions of the Excise and Customs Act and held that the power of the Court to condone delay flows from the provisions of the relevant law and the inherent powers of Court to condone delay under the Limitation Act does not apply. Following this, the Bombay High Court in Arun Asher and Shruti Colorants held that the Full Bench judgement in Velingkar Brothers was not good law.

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In Ishikawajima-Harima Heavy Industries 288 ITR 408 the Supreme Court held {on a misreading of s. 9 (1) (vii)} that in order to be chargeable to tax in the hands of the non-resident, fees for technical services had to be rendered in India as well as utilized in India. It held that if both conditions were not fulfilled, the fees for technical services was not chargeable to tax in India.

That the judgement was wrong was said so by the AAR in Worley Parsons Services Pty. Ltd (AAR) 312 ITR 273. It observed that Ishikawajima had wrongly referred to s. 9(1) (vii) (c) instead of s. 9 (1) (vii) (b) even though the two dealt with different situations. It also noted that the Supreme Court had stated that s. 9 (1)(vii) (c) requires that the services have to be rendered as well as utilized in India in order to be taxable in India even though the word “rendered” was not to be found even in the inapplicable clause (c). It also noted that the law was that “a decision not expressed and accompanied by reasons and not proceeded on a conscious consideration of issue cannot be deemed to be a law having binding effect as is contemplated under Art.141 of the Constitution. That which has escaped in the judgment is not the ratio decidendi” though it finally found a way to “distinguish” Ishikawajima.

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The author is full of appreciation at the stellar roles played by the ITAT and the Bombay High Court in reducing arrears. He argues that the dwindling pendency of matters has rendered the concept of the NTT redundant. He makes out a strong case for increasing the role of the ITAT in judging income-tax disputes by making all non-appealable orders appealable to the ITAT

In the 61st year of Republic of India, the tax-payers of India will be getting speedy justice from the Income Tax Appellate Tribunal, which is considered as Mother Tribunal, within six months of the filing of an Appeal. As on 1-1-2010 the pendency before the Income Tax Appellate Tribunal is only 45,730 Appeals; sanctioned strength of Members is 102; hence, per member there are only 444 matters. In the year 1999, pendency was 3,00,597. In Mumbai, the pendency is only 14021 appeals and the sanctioned strength of 24 members which gives only 584 appeals per member (Source AIFTP Journal January, 2010 P. 53). The reduction in pendency is due to innovative procedure of the Income Tax Tribunal and the active support of the Tax Bar.

2. It is also heartening to know that pendency of tax appeals for final hearing before the Bombay High Court is only 1500. At present there is a permanent tax bench of the Bombay High Court to hear the tax matters. Bombay High Court is making a sincere attempt to group the matters and dispose of the same. Some of the matters, disposed of through this method, are dividend stripping, power of Settlement Commission, taxability of co-operative societies, depreciation on stock exchange card, option to claim depreciation, etc. This has helped to dispose of more than 3,000 appeals. One matters similarly clubbed and listed for disposal relates to disallowance of expenses incurred under section 14A of the Income Tax Act to earn exempted income under section 14A of the Act.

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