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2010 (9) TMI 721 - AT - Income TaxRectification of mistakes u/s - Debatable issue - Deduction u/s 80M - Dividend declared u/s 115O - Held that - Though it appears from the original assessment order that the AO did not apply his mind regarding the applicability of the provisions of sub-section 115-O while allowing the deduction u/s 80M, however, since the amount of dividend received by the assessee prior to 1.4.2003 was not subject to the tax under the provisions of section 115-O(1), then the disallowance of deduction u/s 80M by applying the provisions is not a question which can be decided u/s 154 of the Act.
Issues:
- Whether the order passed under section 154 of the Income Tax Act, 1961 for the assessment year 2003-04 can be quashed. Analysis: 1. Issue of Quashing Order under Section 154: - The appeal by the revenue challenges the order dated 21.07.2009 of CIT(A)-XXX, Mumbai regarding the withdrawal of deduction under section 80M by invoking section 154 of the Act. - The AO withdrew the deduction under section 80M based on section 115-O(5), which disallows deductions for amounts charged to tax under section 115-O(1). - The CIT(A) found the withdrawal debatable and not a clear mistake on record, hence quashed the order under section 154. - The revenue argued that the AO's oversight in applying section 115-O in the original assessment is a clear mistake rectifiable under section 154. - The assessee contended that the issue of deduction under section 80M is complex and debatable, citing relevant case law supporting their position. 2. Application of Section 115-O and Section 80M: - Section 115-O imposes tax on distributed profits of domestic companies post-April 1, 2003, affecting deductions under section 80M. - The Tribunal analyzed the applicability of section 115-O to the dividend received during the financial year 2002-03, determining the debatable nature of the issue. - The Tribunal referenced the judgment in the case of Godrej Agrovet Ltd v/s DCIT to support the assessee's position that the deduction under section 80M is allowable for dividends received by the domestic company. - The Tribunal emphasized that a mistake under section 154 must be obvious and not a debatable point of law, concluding that the issue in question is complex and not rectifiable under section 154. 3. Legal Precedents and Jurisdictional High Court Decision: - The Tribunal cited the decision of the Honourable jurisdictional High Court in the case of Godrej Agrovet Ltd v/s DCIT to establish the debatable nature of the issue. - The Tribunal highlighted that a mistake under section 154 must be patent and not based on a complex point of law or fact, as clarified by legal precedents. - The Tribunal concluded that the order of the CIT(A) in quashing the order under section 154 was justified based on the complexity and debatable nature of the issue. 4. Final Decision: - The Tribunal dismissed the appeal filed by the revenue, upholding the CIT(A)'s decision to quash the order passed under section 154 regarding the withdrawal of deduction under section 80M. This detailed analysis of the judgment showcases the intricacies involved in determining the applicability of tax provisions and deductions under the Income Tax Act, emphasizing the importance of clear mistakes for rectification under section 154.
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