2000 (11) TMI 276 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of service charges in turnover for computing deduction under section 80HHC.
2. Inclusion of sales of replenishment licenses in the total turnover.
3. Jurisdiction of the Tribunal under section 254(1) and 254(2).
4. Enhancement of income by the Tribunal.

Detailed Analysis:

1. Inclusion of Service Charges in Turnover for Computing Deduction under Section 80HHC:
The assessee contended that the only ground before the ITAT was whether the service charges of Rs.1,75,07,000 should be included in the turnover for computing the claim under section 80HHC. The issue of including the service charges as part of the profit of the business was not in dispute, as both the assessee and the department had included these charges in the profits and gains of the business for working out the deduction under section 80HHC.

The Tribunal, however, directed that the surplus of the service charges over the expenses attributable to the same should be excluded from the profits of the business as well as the total turnover. The assessee argued that this direction resulted in a reduction of the allowable deduction under section 80HHC, effectively enhancing the income, which is outside the jurisdiction of the Tribunal under section 254(1).

2. Inclusion of Sales of Replenishment Licenses in the Total Turnover:
The second mistake pointed out by the assessee was that ground No. 1 (iii) in the departmental appeal regarding the inclusion of sales of replenishment licenses in the total turnover had been struck off. The Tribunal's relief on this ground was thus argued to be contrary to law.

The department argued that the issue of service charges was integral to the subject-matter of the appeal and had been adjudicated by the Tribunal. The department also contended that the issue regarding the sale of import entitlement was argued by both sides during the hearing, and written arguments were submitted, which were considered by the Tribunal.

3. Jurisdiction of the Tribunal under Section 254(1) and 254(2):
The Tribunal emphasized that the power of rectification under section 254(2) is limited to correcting patent mistakes that are obvious and not dependent on argument or elaboration. The Tribunal held that its order was within the scope and ambit of its jurisdiction under section 245(1) of the Income-tax Act, which allows it to entertain and adjudicate issues related to the subject-matter of the appeal before the first appellate authority.

The Tribunal referred to the Supreme Court's decision in National Thermal Power Co. Ltd. v. CIT, which held that the Tribunal's powers under section 254 are expressed in the widest possible terms and are not restricted to deciding grounds arising from the CIT(A)'s order.

4. Enhancement of Income by the Tribunal:
The Tribunal noted that the appeal was filed by the department, not the assessee. Therefore, the question of enhancement of income would arise only if the assessee had come as an appellant and the Tribunal's order adversely affected the assessee's interest. The Tribunal's decision did not violate the elementary rule of the Civil Procedure Code that the respondent, who has not filed a cross-appeal or cross-objection, is deemed satisfied with the lower authority's decision and cannot seek relief against the rival party in an appeal preferred by the latter.

Conclusion:
The Tribunal concluded that there was no mistake in its order requiring rectification under section 254(2). The issues concerning the treatment of service charges and sales of import entitlement while computing deduction under section 80HHC were within the subject-matter of the appeal and were rightly adjudicated. The Tribunal rejected the assessee's miscellaneous application, finding no apparent mistake or inconsistency in its order.