1976 (6) TMI 39 - AT - Income Tax

Summary

Issues:
1. Allowance of deduction under section 80-E for a steel re-rolling mills.
2. Discrepancy in the assessment figures and deduction calculation.
3. Interpretation of the Kerala High Court decision on section 80-E.
4. Rectification of mistake in the assessment records.

Analysis:
1. The case involves a steel re-rolling mills initially assessed with a deduction under section 80-E based on the original assessment figure. Subsequently, the Income Tax Officer (ITO) reopened the assessment, withdrew the deduction, and set off losses from previous years. The Appellate Tribunal later held that the activity falls under the Fifth Schedule and allowed the deduction under section 80-E. The ITO then computed the taxable income after setting off losses but allowed the deduction on the net figure, leading to a dispute by the assessee.

2. The assessee contended that the deduction should be based on the total income before setting off losses, citing a decision of the Kerala High Court and the original assessment practice. The ITO and the Appellate Assistant Commissioner (AAC) disagreed, leading to the appeal before the Appellate Tribunal. The Tribunal found that the ITO erred in not following the Kerala High Court decision and allowing the deduction on the pre-set off amount. The Tribunal held that the mistake in the assessment records should be rectified in favor of the assessee.

3. The Departmental Representative argued that despite the High Court decision, debatable points cannot be rectified under section 154. However, the Tribunal reasoned that once a High Court pronouncement is made, the matter ceases to be debatable within that State. The Tribunal differentiated a previous appeal where no High Court decision was available at the time of the order. Consequently, the Tribunal allowed the appeal based on the authoritative pronouncement of the Kerala High Court and rectified the mistake in the assessment records.

4. Ultimately, the Tribunal allowed the appeal, emphasizing the binding nature of the Kerala High Court decision on the ITO and the need to rectify the mistake in the deduction calculation based on the pre-set off income figure. The Tribunal's decision was based on the principle that once a High Court pronouncement is made, it becomes binding and should be followed in similar cases.