2014 (3) TMI 211 - HC - Income Tax

Claim of investment allowance u/s 32A of the Act - Whether the assessee is entitled to claim investment allowance u/s 32A of the Act on the value of bottle washer machine leased out by the assessee as part of its business Held that - The decision in Commissioner of Income Tax Vs. Shaan Finance (P) Ltd. 1998 (3) TMI 8 - SUPREME Court where the business of the assessee consisted of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery, was business income, the assessee must be considered as having used the machinery for the purpose of its business thus, a leasing or finance company, which leased out machinery owned by it, to third parties, who used the machinery for manufacture of articles or things as specified in Section 32A(2)(b)(III) would be entitled to investment allowance in respect of such machinery under Section 32A of the Income Tax Act. Validity of Recall of order Held that - The issue of whether the Tribunal could have rectified its mistake is settled in Assistant Commissioner of Income-Tax Vs. Saurashtra Kutch Stock Exchange Ltd. 2008 (9) TMI 11 - SUPREME COURT - The Admissibility of the claim of the assessee to investment allowance under Section 32A of the Income Tax Act, in a case like this, has been decided in favour of the assessee and against the revenue - An order which is contrary to a judgment of the Supreme Court is patently erroneous - When the Supreme Court renders a decision enunciating a principle of law, it is assumed that, what was enunciated by the Supreme Court, was in fact, the law from the inception thus, the Tribunal was justified in recalling the earlier order Decided against Revenue.

Summary

Issues:
1. Entitlement to claim investment allowance under Section 32A of the Income Tax Act, 1961 on a leased machine.
2. Rectification and recall of the earlier order by the Income Tax Appellate Tribunal.

Analysis:

1. Entitlement to Investment Allowance:
The case involved the question of whether the respondent assessee could claim investment allowance under Section 32A of the Income Tax Act on a bottle washer machine leased out as part of its business. Initially, the claim for investment allowance was rejected by the assessing officer and the Commissioner of Income Tax (Appeals). The Income Tax Appellate Tribunal upheld the decision based on a Supreme Court judgment regarding development rebate under Section 33(1)(a) of the Income Tax Act. However, the respondent filed a Miscellaneous Application citing another Supreme Court judgment which clarified that the relevant provision did not specify that the assessee himself should use the machinery for claiming the deduction. The Tribunal, considering the new judgment, allowed the application and recalled its earlier order, directing a review of the admissibility of the deduction under Section 32A.

2. Rectification and Recall of Order:
The Revenue challenged the Tribunal's decision to allow the Miscellaneous Application, arguing that since the appeal had been disposed of earlier, the application for rectification could not be entertained. The petitioner contended that the issue was debatable due to contradictory decisions of the Supreme Court. However, the Tribunal's power to rectify its own mistake was established through various judgments, including a Division Bench of the Bombay High Court and a Supreme Court decision affirming the Tribunal's jurisdiction to correct mistakes apparent on record. The High Court, citing the settled law, upheld the Tribunal's decision to recall its earlier order, emphasizing that an order contrary to a Supreme Court judgment is considered patently erroneous, and the Tribunal was justified in rectifying its mistake. The appeal was ultimately dismissed, affirming the Tribunal's decision.

In conclusion, the High Court upheld the Tribunal's decision to allow the Miscellaneous Application, recalling the earlier order, and dismissing the appeal challenging the rectification. The judgment emphasized the importance of adhering to Supreme Court decisions and established the Tribunal's authority to rectify mistakes in line with legal principles.