2013 (6) TMI 280 - HC - Income Tax

Rectification u/s 154 - on the basis of the undisputed and admitted facts, different view was taken by the Assessing Officer while exercising jurisdiction under section 154 of the Act, 1961. - Ascertained liability or not - Deduction u/s 32AB - income on account of dividend, capital gains and the provision of excise duty written back - Held that - reference of Parts II and III of Schedule VI to the Companies Act, 1956, in sub-section (3) of section 32AB clearly indicates that the provisions is in accordance with the requirement of Parts II and III of the said Schedule to the Companies Act, 1956. There was an order relating to the liability of the ascertained amount. - mere change in its liability in toto and not to quantitative only cannot be made the liability as unascertained liability, which was ascertained when demanded and in the same way, liability was contingent depending upon the ambiguity in the legal opinion which upon the judgment of the Patna High Court in the assessee s case wiped out the ascertained contingent liability of the assessee. The distinction is required to be seen in unascertained and contingent liability. In earlier years, the assessee was not entitled to get the benefit of section 32AB and, therefore, it is not a case of taking double benefit, rather to say other view will deny the benefit to the petitioner in both the years which will amount to the total denial of the benefit under section 32AB. Admittedly, the petitioner was taxed on this amount, i.e., Rs. 95.25 lakhs in the year, in which, he has claimed the allowance under section 32AB of the Act and, therefore, there cannot be two views for the purpose of taxing one income amount of Rs. 95.25 lakhs. Therefore, not only it was a case of invoking of powers under section 154 on forming a different opinion on question of law but also it was legally wrong. The matter in question could not have been decided by the Assessing Officer by invoking section 154 of the Act - Decided in favor of assessee

Summary

Issues:
1. Interpretation of provisions for deduction under section 32AB of the Income-tax Act regarding dividend, capital gains, and excise duty written back.
2. Application of section 154 of the Income-tax Act in rectifying orders and debatable legal issues.

Analysis:
1. Interpretation of Provisions for Deduction under Section 32AB:
The case involved questions regarding the treatment of dividend, capital gains, and excise duty written back as profit from business for the purpose of deduction under section 32AB of the Income-tax Act. The Tribunal held that these amounts should be considered as profit from business for deduction purposes. The Revenue argued against this decision, claiming that the excise duty liability was not ascertained and, therefore, not eligible for deduction under section 32AB. However, the Tribunal justified its decision based on legal opinions and interpretations, including references to judgments by various High Courts. The Tribunal also highlighted the distinction between ascertained and contingent liabilities, ultimately supporting the assessee's entitlement to the deduction under section 32AB.

2. Application of Section 154 and Debatability of Legal Issues:
The case also addressed the application of section 154 of the Income-tax Act in rectifying orders and dealing with debatable legal issues. The Revenue contended that the Tribunal erred in not applying section 154 and in considering the matter debatable. However, the Tribunal, supported by legal arguments, ruled in favor of the assessee, emphasizing that a change in legal opinion cannot be a sole basis for invoking section 154. The Tribunal further justified its decision by analyzing the facts, orders, and legal provisions involved, ultimately concluding that the matter could not have been decided by the Assessing Officer through section 154 and that the questions were rightly decided in favor of the assessee.

In conclusion, the High Court upheld the Tribunal's decisions regarding the interpretation of provisions for deduction under section 32AB and the application of section 154 in rectifying orders. The Court supported its rulings with detailed legal analysis, references to relevant judgments, and a thorough examination of the facts and legal arguments presented by both parties.