2011 (7) TMI 23 - HC - Income Tax

Jurisdiction u/s. 254 (2) - The Tribunal in its judgment dated 27th February 2009 committed a factual error in approaching the issue as if the assessee before the Tribunal was a subsidiary company - When pointed out by the assessee that it is a factual error, the Tribunal corrected itself; allowed the rectification application, and passed consequential order changing the previous order - Find that the Tribunal has exercised power of review and it had only corrected an error which was apparent on the face of the record - Held that - though we are not opposed to the contention of the counsel for the Revenue that while exercising power for rectification, the Tribunal cannot exercise substantive power of review, in the present case, such a question does not arise.

Summary

Issues:
1. Jurisdiction of the Appellate Tribunal under section 254(2) of the Act to review earlier orders passed on merits.

Analysis:
The High Court of Gujarat addressed the issue of jurisdiction of the Appellate Tribunal under section 254(2) of the Act to review earlier orders passed on merits. The case involved a dispute regarding the disallowance of depreciation claimed on factory premises for the Assessment Year 2002-2003. The Assessing Officer disallowed a portion of the depreciation claimed as the building was leased out to a subsidiary company. The CIT [A] deleted the disallowance, stating that the building was used exclusively for the appellant's business purposes. The Revenue appealed to the Tribunal, which initially reversed the CIT [A]'s decision, stating that the building was not used for the appellant's business. However, upon a rectification application filed by the appellant, the Tribunal corrected its mistake, acknowledging that the building was indeed used for the appellant's business purposes due to business compulsion and commercial expediency.

The High Court observed that the Tribunal had committed a factual error in considering the appellant as a subsidiary company initially. Upon rectification, the Tribunal corrected the error and allowed the appellant's claim for depreciation on the entire business premises. The Court noted that the Tribunal's correction was not a substantive review but a rectification of a factual error apparent on the face of the record. The Court dismissed the Tax Appeal, affirming the Tribunal's decision to allow the rectification application and grant depreciation to the appellant for the entire business premises. The judgment clarified that the Tribunal's action was within the scope of rectification and did not amount to a substantive review of the earlier order.