2017 (6) TMI 1262 - AT - Income Tax

Rectification of mistake - Invocation of the provisions of section 154 - computation of book profit under section 115JA - Held that - Book profit of the assessee-company under section 115JA was not computed by the Assessing Officer in the order dated 28.12.2007 passed under section 143(3)/263 and by treating such non-computation as the mistake apparent from record, the same was rectified by the Assessing Officer under section 154 by computing the book profit of the assessee under section 115JA. As rightly contended by the assessee in this regard, the issue of book profit under section 115JA involves charging as well as computation and these two parts being inseparable, they cannot be seen in isolation. Even if one of these two parts is debatable, the entire issue relating to book profit under section 115JA becomes debatable. The computation of such book profit in the facts and circumstances of the case of the assessee-company, which is engaged in the business of manufacturing of tea was a debatable issue as rightly contended by the assessee keeping in view the applicability of Rule 8 of the Income Tax Rules, 1962 as well as the involvement of slump sale and this position is clearly evident from the fact that the book profit of the assessee-company at three different stages was worked out by the Assessing Officer at three different figures. The computation part of book profit under section 115JA in so far as the assessee s case for the year under consideration is concerned thus was highly debatable issue, rectification on which was beyond the scope of section 154 - Decided against revenue

Summary

Issues:
- Computation of book profit under section 115JA
- Invocation of provisions of section 154 by the Assessing Officer
- Applicability of Rule 8 of the Income Tax Rules, 1962
- Debatability of the issue of book profit under section 115JA

Analysis:

Computation of book profit under section 115JA:
The case involved the computation of book profit under section 115JA for the assessee, a company engaged in tea manufacturing. The Assessing Officer initially failed to compute the book profit in an assessment order, which was rectified later under section 154. The issue was deemed debatable due to the involvement of Rule 8 of the Income Tax Rules, 1962 and the complexity arising from a slump sale. Despite the Assessing Officer's oversight, the Tribunal acknowledged the debatable nature of the computation, ultimately upholding the decision of the CIT(Appeals) to grant relief to the assessee on this basis.

Invocation of provisions of section 154 by the Assessing Officer:
The Assessing Officer invoked section 154 to rectify the non-computation of book profit under section 115JA in an earlier order. The assessee challenged this invocation, arguing that the issue was debatable and beyond the scope of rectification under section 154. While the Assessing Officer contended that the rectification was justified due to an apparent mistake, the Tribunal agreed with the assessee, emphasizing the debatable nature of the computation and ruling in favor of the assessee.

Applicability of Rule 8 of the Income Tax Rules, 1962:
The case involved a dispute regarding the application of Rule 8 to the net profit for arriving at book profit under section 115JA. The CIT(Appeals) directed the Assessing Officer to exclude a portion of the profit for agricultural income and granted similar relief in respect of interest income. The Revenue challenged these directions on the grounds that profit on the sale of fixed assets and interest income were not related to agricultural activities. However, the Tribunal did not find merit in the Revenue's contentions, upholding the CIT(Appeals) decision.

Debatability of the issue of book profit under section 115JA:
The Tribunal considered the debatability of the issue of book profit under section 115JA, particularly in the context of the assessee's tea manufacturing business and the involvement of slump sale. The Tribunal agreed with the assessee's argument that the issue was highly debatable, especially given the varying figures of book profit computed at different stages by the Assessing Officer. Consequently, the Tribunal upheld the decision of the CIT(Appeals) to grant relief to the assessee based on the debatable nature of the computation.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing the debatable nature of the computation of book profit under section 115JA in the case of the tea manufacturing company, ultimately ruling in favor of the assessee based on the complexity and debatability of the issue.