2017 (3) TMI 437 - HC - Income Tax

Rectification of mistake - deduction under Section 80HHA and 80I of the Act on the gross profit - Held that - There is no scope for interference with the orders of the Tribunal in these appeals. Though we have framed the question whether a issue which is debatable could be corrected under Section 154 of the Act , the same would not arise for consideration in the circumstances of the case. The issue was not debatable, as the same was decided in Motilal Pesticides India Private Limited vs. Commissioner of Income Tax, Delh 2000 (2) TMI 9 - SUPREME Court wherein held that the assessee would be entitled to deduction under Section 80HH of the Income tax Act on the net profit and not on the gross profit. Though the Full Bench of this Court has decided the issue in the year 2009, the Hon ble Supreme Court had decided the same way back in the year 2000 in the matter of Motilal Pesticides India Private Limited. Since the Assessing Officer had permitted the deduction under Section 80HHA and 80I of the Act on the gross profit, the Assessing Officer was justified in rectifying the mistake as permitting the deduction under Section 80HHA and 80I of the Act on the gross income was an error apparent on the face of record.

Summary

Issues:
- Whether deduction under Sections 80HHA and 80I could have been made on gross profit or net income.
- Whether rectification of mistake under Section 154 of the Income Tax Act was justified.

Analysis:

Issue 1: Deduction under Sections 80HHA and 80I
The appellant, a partnership firm, claimed deductions under Sections 80HHA and 80I of the Income Tax Act for relevant assessment years. The Assessing Officer initially allowed the deductions on the gross profit, not considering the net income after deduction under Section 40(b) of the Act. Subsequently, the Assessing Officer sought to rectify this mistake under Section 154 of the Act. The Commissioner of Income Tax (Appeals) set aside the rectification orders, but the Income Tax Appellate Tribunal reversed this decision. The Tribunal relied on a Supreme Court judgment (Motilal Pesticides India Private Limited vs. Commissioner of Income Tax) to support the rectification, stating that the law was well settled on this issue.

Issue 2: Rectification under Section 154
The appellant argued that the issue of whether deductions could be made on gross profit or net income was debatable, and thus, rectification under Section 154 was not justified unless the error was apparent on record. The appellant cited a Full Bench decision in 2009 (Plastiblends India Ltd., Mumbai vs. Additional Commissioner of Income Tax) that resolved the issue. However, the respondent contended that the Supreme Court had already settled this issue in 2000. The High Court agreed with the respondent, noting that the Supreme Court had ruled deductions should be on net profit, not gross profit. Therefore, the Assessing Officer rectifying the mistake was deemed valid as allowing deductions on gross income was an error apparent on record.

In conclusion, the High Court dismissed the Income tax appeals, stating that there was no scope for interference with the Tribunal's orders. The Court emphasized that the issue was not debatable, as it had been settled by the Supreme Court in 2000. Therefore, the rectification of the mistake under Section 154 was deemed justified, and the appeals were dismissed with no order as to costs.