1987 (4) TMI 100 - AT - Income Tax

Assessment Year, Industrial Company, Mistake Apparent From Record, Previous Year, Set Off, Supreme Court

Summary

Issues:
Rectification of assessment under section 154 - Deduction under section 80MM - Set off of unabsorbed losses from previous years - Interpretation of gross total income for relief under Chapter VIA - Debatable point of law - Application of Supreme Court decisions in Cambay Electric Supply Industrial Co. case - Discrepancy between High Court decisions - Rectifiability under section 154 - Precedence of rectification order over appellate authority's decision.

Analysis:
The appeal before the Appellate Tribunal ITAT BOMBAY-C concerns the rectification of an assessment order under section 154 by the Income Tax Officer (ITO), which was challenged by the revenue. The issue revolves around the deduction under section 80MM for a private limited company with unabsorbed losses from previous years. The ITO rectified the assessment by setting off the losses before granting the deduction, leading to a nil gross total income. The Commissioner of Income Tax (Appeals) held the ITO's order was debatable and set it aside, prompting the revenue's objection.

The ITO relied on the Supreme Court's decision in Cambay Electric Supply Industrial Co. case to justify setting off previous losses before granting relief under Chapter VIA. However, the CIT(A) referenced the Kerala High Court's decision in Indian Transformers Ltd. case to argue that deduction under section 80MM should precede setting off earlier losses. The debate centered on the interpretation of "gross total income" for the purposes of relief under Chapter VIA, with both parties presenting conflicting legal precedents to support their positions.

The Tribunal analyzed the conflicting decisions and concluded that the point in question was no longer debatable, especially considering the clear language of section 80B(5) and the Supreme Court's ruling in Cambay Electric Supply Industrial Co. case. The Tribunal emphasized that the computation of gross total income is crucial for determining relief under section 80MM, and setting off previous losses is a necessary step before granting the deduction. The Tribunal found the ITO's rectification order justified and overturned the CIT(A)'s decision, reinstating the ITO's rectification order.

In summary, the Tribunal's decision upheld the rectification order passed by the ITO, emphasizing the precedence of setting off previous losses before granting relief under section 80MM. The Tribunal rejected the notion that the issue was debatable, citing the Supreme Court's authoritative interpretation in Cambay Electric Supply Industrial Co. case as decisive in resolving the conflicting legal positions. The judgment highlights the importance of statutory provisions and judicial precedents in determining the correct application of tax laws, ultimately favoring the revenue's position in this case.