2002 (9) TMI 86 - HC - Income Tax

Powers Of Commissioner, Export, Special Deduction - By this writ petition, the petitioner/assessee seeks to challenge the order passed by the revisional authority under section 264 - The main issue which arose for consideration by the Commissioner was whether the export incentives received in subsequent assessment years can be allowed under section 80HHC even though such incentive has not been shown as income for the relevant year. - Commissioner has correctly framed an issue. However, he has rejected the revision application on extraneous grounds. We are of the view that the revision application is maintainable under section 264 of the Act. We direct the Commissioner to decide the issue of law which he has framed in impugned order viz., Whether export incentives received in subsequent assessment years can be allowed under section 80HHC even though not shown as income for the relevant year in view of the rectification application subsequently filed supported by the auditors report . This issue needs to be decided by the Commissioner under section 264 of the Act. - we set aside the orders of the Commissioner and we remit the matter back

Issues: Challenge to order under section 264 of the Income-tax Act for deduction under section 80HHC based on export incentives received in subsequent assessment years, maintainability of revision application, rectification under section 154 for claiming deduction in the relevant assessment year.

Analysis:
1. Challenge to Order under Section 264 of the Income-tax Act: The petitioner sought to challenge the orders dated October 19, 2000, and March 4, 2002, passed by the revisional authority under section 264 of the Income-tax Act. The main issue revolved around whether export incentives received in subsequent assessment years could be allowed under section 80HHC, even if not shown as income for the relevant year. The Commissioner dismissed the revision application on the grounds that rectification was not warranted since the Assessing Officer had accepted the deduction under section 80HHC for the relevant year. However, the High Court found the revision application maintainable under section 264 and directed the Commissioner to decide the issue in question.

2. Maintainability of Revision Application: The Commissioner had rejected the revision application on the basis that the assessee had opted for appeal before the Commissioner of Income-tax (Appeals) for the assessment year 1996-97. However, the High Court disagreed with this reasoning, stating that since the assessee did not have export sales in 1996-97, claiming the deduction for that year was not feasible. Therefore, the only recourse left for the assessee was to seek rectification for the assessment year 1995-96, where the export incentives had a direct nexus with the export income.

3. Rectification under Section 154 for Claiming Deduction: The petitioner filed a rectification application under section 154 with the specific prayer to grant the deduction under section 80HHC for the assessment year 1995-96, as the export incentives were not received in the relevant year but in the subsequent year. The High Court emphasized the importance of rectification in such cases where the export incentives had a direct link to the export income of the relevant assessment year. The fresh audited accounts correcting the mistake further supported the claim for rectification.

In conclusion, the High Court set aside the orders of the Commissioner and remitted the matter back for a decision on whether export incentives received in subsequent assessment years could be allowed under section 80HHC, even if not shown as income for the relevant year. The judgment highlighted the significance of rectification under section 154 and the maintainability of revision applications under section 264 to ensure justice and correct application of tax laws.

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