2007 (10) TMI 718 - HC - Income Tax

Summary

Issues involved: Interpretation of Section 154 of the Income Tax Act regarding disallowance of selling expenses claimed by the Assessee.

The judgment pertains to an appeal filed by the Revenue against an order passed by the Income Tax Appellate Tribunal (the Tribunal) in relation to the Assessment Year 1996-1997. The Assessee had declared income, including a capital gain, and claimed deduction for selling expenses based on an agreement with M/s Fortune International Ltd. The Assessing Officer disallowed the claim of selling expenses under Section 154 of the Act, stating that the entire expenditure was to be borne by the company. The Assessee's reply to the notice was rejected, and the Assessing Officer passed an order disallowing the deduction. The Assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the appeal on the grounds that the disallowance exceeded the scope of rectification under Section 154 of the Act.

The Tribunal, in considering the appeal, analyzed the scope of Section 154 of the Act and concluded that the issue raised was debatable, rendering Section 154 inapplicable. It was observed that the Assessing Officer's action amounted to a review of the order rather than rectification, which is not permissible under Section 154. The High Court upheld the Tribunal's decision, stating that the interpretation of the relevant Section was correct, and no substantial question of law arose. Consequently, the appeal was dismissed.