2014 (1) TMI 319 - AT - Income Tax

Rectification of mistake - Held that - As per the amended section came into force w.e.f. 01-4-1998 - Profit upon sale of DEPB lincense shall be eligible for deduction u/s 80IB of the Act treating it as profit from industrial undertaking - Assessing Officer has passed the impugned order based on the verdict given in Liberty India 2009 (8) TMI 63 - SUPREME COURT without considering the amended provision - Following T.S. Balaram (ITO) vs Volkart Brothers and Others 1971 (8) TMI 3 - SUPREME Court - An error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record - A decision on a debatable point of law is not a mistake apparent from the record - The allowance of deduction is not a glaring, obvious, patent and apparent from record - Decided in favour of assessee.

Issues:
1. Allowability of deduction u/s 80IB on Duty Entitlement Pass Book (DEPB) amount.
2. Applicability of amended provision in Section 28 of the Income Tax Act.
3. Interpretation of judicial precedents in relation to the deduction u/s 80IB.
4. Legality of proceedings u/s 154 of the Act.
5. Consideration of amended provisions in delivering judgments.
6. Correctness of the order passed by the ld. CIT(A).
7. Binding nature of judgments when relevant provisions are not considered.
8. Debatable nature of issues and rectifiability u/s 154 of the Act.

Issue 1 - Allowability of deduction u/s 80IB on DEPB amount:
The appeal questioned the legality of the order passed by the ld. CIT(A) disallowing the deduction u/s 80IB on the DEPB amount credited in the Profit & Loss Account. The Assessing Officer initiated proceedings u/s 154 to withdraw the deduction based on the verdict in Liberty India case. However, the appellant contended that the amended provision in Section 28, inserted w.e.f. 01-04-1998, allowed such deduction. The Hon'ble Rajasthan High Court's verdict supported the appellant's stance, holding that profit from the sale of DEPB license is eligible for deduction u/s 80IB.

Issue 2 - Applicability of amended provision in Section 28:
The amended provision in Section 28, specifically clause (iiid), was crucial in determining the eligibility of the DEPB amount for deduction u/s 80IB. The appellant argued that the amended provision, effective from 01-04-1998, supported their claim for deduction, contrary to the Assessing Officer's decision based on the Liberty India case. The Hon'ble Rajasthan High Court's interpretation of the amended provision favored the appellant's position.

Issue 3 - Interpretation of judicial precedents:
The judgment extensively referenced various judicial precedents such as CIT vs Sterling Foods, Panadian Chemicals vs CIT, B. Desraj vs CIT, and CIT vs Sharda Gum and Chemicals to support the interpretation of provisions related to deduction u/s 80IB. These precedents were crucial in establishing the legal basis for allowing the deduction on the DEPB amount.

Issue 4 - Legality of proceedings u/s 154:
The legality of the proceedings initiated u/s 154 by the Assessing Officer to withdraw the deduction previously allowed u/s 80IB was challenged by the appellant. The appellant argued that the amended provision in Section 28, coupled with relevant judicial precedents, rendered the proceedings under section 154 invalid.

Issue 5 - Consideration of amended provisions in delivering judgments:
The judgment emphasized the importance of considering amended provisions of the law while delivering judgments. It highlighted that judgments not considering relevant amendments lose their binding nature. The decision in Liberty India case was deemed inapplicable post-amendment, as per the interpretation of the Hon'ble Rajasthan High Court.

Issue 6 - Correctness of the order passed by the ld. CIT(A):
The correctness of the order passed by the ld. CIT(A) was questioned by the appellant, asserting that the order was against the law and judicial decorum. The Appellate Tribunal, after thorough consideration of the submissions and relevant provisions, reversed the decision of the ld. CIT(A) and allowed the appeal of the assessee-firm.

Issue 7 - Binding nature of judgments when relevant provisions are not considered:
The judgment highlighted that judgments failing to consider relevant provisions lose their binding nature. Citing the decision in Chokshi Contacts (P) Ltd., it was established that judgments not considering amended provisions do not hold as binding precedents. The judgment in Liberty India case was deemed inapplicable post-amendment, as per the interpretation of the Hon'ble Rajasthan High Court.

Issue 8 - Debatable nature of issues and rectifiability u/s 154:
The judgment reiterated that debatable issues cannot be corrected u/s 154 of the Act. Citing the decision in T.S. Balaram vs Volkart Brothers, it was emphasized that rectification under section 154 is not applicable to issues that are debatable. The Appellate Tribunal accepted the appeal of the assessee, setting aside the finding of the ld. CIT(A) based on the debatable nature of the issue.

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