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2015 (1) TMI 1265 - AT - Income TaxRectification of mistake - treating the amounts of interest subsidy and excise duty refund as capital receipts - Held that - Section 154 has been enacted to enable the authorities to rectify the mistake whether the mistake is done by assessee or by AO. The legislative intent in section 154 is not to allow a mistake to continue. A liberal construction of the statute has to be made else the object of the legislation shall be forfeited. Accordingly, the arguments by Ld. DR cannot help the Revenue. Therefore, in the circumstances and facts of the present case, Hon ble Jurisdictional Court of J K in the case of Shree Balaji Alloys reported as (2011 (1) TMI 394 - Jammu and Kashmir High Court ) having held the Excise Duty Refund and Interest Subsidy received by the assessee as capital receipts is a decision subsequent to the decision of AO dated 17.12.2009 where such receipts have been accepted as revenue as returned by the assessee. Accordingly, in view of the decision in the case of Smt. Arun Luthra (2001 (8) TMI 84 - PUNJAB AND HARYANA High Court ) and Kil Kotagiri Tea and Coffee Estates Ltd. (1988 (7) TMI 54 - KERALA High Court), we are of the view that there is a mistake apparent from record which is rectifiable u/s 154 of the Act and the Ld. CIT(A) has rightly directed the AO to carry out the necessary rectification and the order of the Ld. CIT(A) is found to be well reasoned one and we find no infirmity in the same.
Issues Involved:
1. Treatment of interest subsidy and excise duty refund as capital receipts. 2. Applicability of Section 154 of the Income Tax Act for rectification of mistakes. 3. Validity of CIT(A)'s directive to the AO for rectification despite the Revenue's appeal to the Supreme Court. Detailed Analysis: Issue 1: Treatment of Interest Subsidy and Excise Duty Refund as Capital Receipts The Revenue contested the CIT(A)'s directive to treat interest subsidy and excise duty refund as capital receipts. The CIT(A) based its decision on the Jammu & Kashmir High Court's ruling in the case of M/s. Shree Balaji Alloys, which held these receipts as capital in nature. The Revenue argued that the assessee had initially declared these receipts as revenue in their return and that an SLP was filed against the High Court's decision. However, the CIT(A) found that the AO should have adhered to the jurisdictional High Court's ruling, which was binding unless overturned by a higher court. Issue 2: Applicability of Section 154 for Rectification of Mistakes The Revenue argued that rectification under Section 154 could only correct mistakes made by the AO, not those made by the assessee. The Tribunal, however, referenced multiple judicial precedents to establish that Section 154 allows for rectification of any apparent mistake, whether committed by the AO or the assessee, especially when a jurisdictional High Court or superior court has subsequently clarified the law. Citing the decisions of the Punjab & Haryana High Court in CIT vs. Smt. Aruna Luthra and the Kerala High Court in Kil Kotagiri Tea and Coffee Estates Co. Ltd., the Tribunal emphasized that the legislative intent of Section 154 is to correct mistakes to uphold justice. Issue 3: Validity of CIT(A)'s Directive for Rectification The Tribunal upheld the CIT(A)'s directive to the AO to rectify the assessment order in light of the jurisdictional High Court's decision. The Tribunal noted that the AO's refusal to rectify the order based on the pending SLP was incorrect. The Tribunal reiterated that judicial decisions have retrospective effect and should be applied to rectify mistakes apparent from the record. The Tribunal found no infirmity in the CIT(A)'s order and confirmed its legality and reasoning. Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order directing the AO to treat the excise duty refund and interest subsidy as capital receipts. The Tribunal also dismissed the assessee's cross-objections, which were either withdrawn or supportive of the CIT(A)'s order. The decision reinforced the broader applicability of Section 154 for rectifying mistakes and the binding nature of jurisdictional High Court rulings unless overturned by a higher court. Order: The appeal of the Revenue and the cross-objections of the assessee were dismissed. The Tribunal pronounced the order in the open court on 16th January 2015.
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