1977 (12) TMI 46 - AT - Income Tax

Summary

Issues:
Withdrawal of relief under section 80J of the Income Tax Act, 1961 for a new cold storage plant, lack of separate profit and loss account, calculation of capital employed, rectification under section 154 of the Act.

Analysis:
The judgment revolves around the withdrawal of relief under section 80J of the Income Tax Act, 1961 for a new cold storage plant by the Income Tax Officer (ITO) through a rectification order under section 154 of the Act. The ITO based the withdrawal on two primary reasons. Firstly, he noted the absence of a separate profit and loss account and balance sheet for the new unit, with the assessee deriving profits based on a notional ratio between the old and new units. Secondly, the ITO contended that as per rule 19A of the Income Tax Rules, 1962, there was no capital left in the new unit after certain deductions, thus disallowing the relief under section 80J. The ITO rectified the assessment order to withdraw the relief.

Upon appeal, the Appellate Assistant Commissioner (AAC) upheld the ITO's decision, leading the assessee to appeal further to the Tribunal. The Tribunal considered the submissions of both parties and reviewed the materials provided by the assessee in its paper book. The Tribunal observed that the assessee had claimed a deduction under section 80J for the new cold storage plant and had submitted detailed workings supporting this claim.

The Tribunal found that there was no mistake in the original assessment order regarding the relief under section 80J. It noted that the absence of a separate profit and loss account for the new unit was adequately addressed by the statement of profit and loss filed during assessment. Additionally, the Tribunal found the ITO's objection regarding the capital calculation under rule 19A to be debatable. Referring to legal precedents, including the decisions of the Calcutta High Court and the Madras High Court, the Tribunal concluded that the issues raised were not simple and involved substantial debate on factual and legal grounds.

Ultimately, the Tribunal allowed the appeal, setting aside the orders of the lower authorities. It directed the ITO to reinstate the deduction under section 80J as originally allowed in the assessment order, emphasizing the complexity and debatable nature of the issues involved, which did not amount to a clear mistake under section 154 of the Act.