2006 (1) TMI 75 - HC - Income Tax

Relief under section 80HHC rectification - 1. Whether, Tribunal was right in holding that the assessee ought to be given an opportunity to create an increased investment allowance reserve, when it had not even created a reserve sufficient to cover the claim made in its return? 2. Whether, Tribunal was right in holding that the assessee should be granted the benefit of section 80HHC as per its claim, as the quantification could not be considered under section 154? - held that even though losses should be deducted from the profit available for the purpose of computation of relief under section 80HHC, since the question of relief under section 80HHC is a debatable issue which does not fall within the purview of prima facie adjustment under section 143(1)(a) and could be taken up in regular assessment under section 143(3), the action of the Revenue invoking section 154 of the Act to rectify the intimation under section 143(1)(a) of the Act was not valid.

Summary

Issues:
1. Set off of brought forward investment allowance
2. Dispute regarding quantification of benefit under section 80HHC

Set off of brought forward investment allowance:
The case involved an appeal against the order of the Income-tax Appellate Tribunal regarding the withdrawal of the set off of brought forward investment allowance for earlier years by the Assessing Officer. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to allow the appellant to credit the required amount in the investment allowance reserve account as per the Explanation under section 32A(4) of the Act. The Tribunal upheld this decision, emphasizing compliance with the circular and statutory provisions. The court held that the directions were in line with the circular and the Explanation to section 32A(4), ruling in favor of the assessee against the Revenue.

Dispute regarding quantification of benefit under section 80HHC:
The second issue revolved around whether the assessee should be granted the benefit of section 80HHC as per its claim. The Commissioner of Income-tax (Appeals) and the Tribunal found that due to a short deduction of brought forward investment allowance, the claim of deduction under section 80HHC would be academic. They held that the issue of deduction under section 80HHC was debatable and could not be considered under section 154 of the Act. Citing a previous decision, the court affirmed that the relief under section 80HHC falls under regular assessment and cannot be rectified under section 154. Consequently, the court dismissed the appeal, finding no error in the Tribunal's order and no substantial question of law to consider.

In conclusion, the judgment addressed the issues of set off of brought forward investment allowance and the quantification of benefit under section 80HHC. It emphasized compliance with statutory provisions and previous decisions, ultimately ruling in favor of the assessee and dismissing the appeal filed by the Revenue.