2012 (12) TMI 496 - HC - Income Tax

Deduction u/s 80IA - rectification of mistake u/s 154 - whether the assessing officer was justified in thrusting depreciation upon the assessee while computing deduction under Section 80IA - held that - on the date on which jurisdiction under Section 154 of the Act was invoked, the issue was covered in favour of the assessee and in any event the issue was debatable. In such a case, no fault can be found with the decision of the Tribunal in holding that the assessing officer was not justified in invoking jurisdiction under Section 154 of the Act. Once it is held that the assessing officer was not justified in invoking jurisdiction under Section 154 of the Act, then we do not consider it necessary to go into the merits of the case. - Decided in favor of assessee.

Summary

Issues:
1. Justification of thrusting depreciation upon the assessee while computing deduction under Section 80IA of the Income Tax Act, 1961 by invoking jurisdiction under Section 154 of the Act.

Analysis:
The High Court of Bombay addressed the issue of whether the assessing officer was justified in thrusting depreciation upon the assessee while calculating the deduction under Section 80IA of the Income Tax Act, 1961 by utilizing the powers under Section 154 of the Act. The revenue contended that as per a previous decision by the Court in the case of Indian Rayon Corporation Ltd. v. CIT, the deduction under Section 80IA should have included depreciation, and since it was not done, the assessing officer was correct in invoking Section 154. However, the Court noted that another decision by the ITAT in the case of Plastibands India Pvt. Ltd v. ITO clarified that the judgment in Indian Rayon Corporation applied only if depreciation was claimed by the assessee. In this case, as the assessee had not claimed depreciation while computing business income, the issue was in favor of the assessee. The Court further emphasized that the matter was debatable, and hence, the assessing officer's decision to invoke Section 154 was not justified.

The Court also referred to a similar case involving The Commissioner of Income Tax-10 v. M/s. Chemtex Engineering of India Ltd., where a similar view was taken, setting aside the CIT's order under Section 263 of the Act. The Court's analysis highlighted the importance of whether depreciation was claimed by the assessee in computing business income and how it impacted the applicability of Section 154 in such scenarios. The judgment emphasized the need for a valid basis before invoking jurisdiction under Section 154 and the relevance of precedents in determining the correctness of such decisions.

Furthermore, the Court concluded that since it was determined that the assessing officer was not justified in invoking Section 154, there was no need to delve into the merits of the case. Consequently, the Court upheld the decision of the ITAT in quashing the assessing officer's decision made under Section 154 of the Act. The final outcome of the judgment was the dismissal of the appeal with no order as to costs, thereby settling the matter in favor of the assessee based on the interpretation of relevant provisions and precedents in tax law.