1982 (5) TMI 51 - AT - Income Tax

Summary

Issues:
Claim for relief under section 80HH of the Income-tax Act, 1961 was refused by the ITO but allowed by the AAC. The ITO deducted the relief amount from the total income, set off losses of the previous year, and determined total income at nil. Later, the ITO rectified the assessment under section 154, withdrawing the relief under section 80HH. The main issue involves the interpretation of 'gross total income' and 'total income' as defined in the Act, and whether the ITO's rectification was valid.

Analysis:
The case involved a claim for relief under section 80HH of the Income-tax Act, 1961. The ITO initially refused the claim, but the AAC allowed it. The ITO, while giving effect to the AAC's order, deducted the relief amount from the total income, set off losses of the previous year, and determined the total income as nil. Subsequently, the ITO rectified the assessment under section 154, withdrawing the relief under section 80HH. The crux of the matter revolved around the interpretation of 'gross total income' and 'total income' as defined in the Act.

The Commissioner (Appeals) upheld the ITO's order, emphasizing the definitions of 'gross total income' and 'total income' under the Income-tax Act. The Commissioner reasoned that the total income must be computed after setting off unabsorbed depreciation and business losses of previous years. This interpretation was based on the provisions of the Act and the Income-tax Rules, which prescribe the procedure for arriving at gross total income. The Commissioner concluded that the ITO's method of computing total income was in line with the statutory requirements.

The assessee contended that there was no mistake apparent from the record and cited a decision of the Kerala High Court in a similar case. The assessee argued that when there are two provisions allowing different reliefs, the assessee should not be denied any entitled relief. On the other hand, the revenue argued that the definition of 'gross total income' under section 80B necessitates computing total income after setting off losses and unabsorbed depreciation. The revenue maintained that any deviation from these principles would constitute a mistake apparent from the record.

The Tribunal deliberated on the conflicting interpretations and referred to the Kerala High Court's decision in a related matter. The Tribunal observed that the wording in the relevant section aligned with the definition of 'gross total income,' allowing for different views on granting relief under various sections. Consequently, the Tribunal held that the issue was debatable and fell outside the scope of section 154. As a result, the Tribunal set aside the Commissioner (Appeals)'s order and canceled the ITO's rectification, allowing the appeal in favor of the assessee.