2012 (5) TMI 211 - HC - Income Tax

Entitlement to deductions u/s 80HHA and u/s 80-I Held that - Only total value of the plant and machinery of industrial undertaking, which manufactures or produces article should alone be considered considering the break up details of the each plant and machinery and excluding certain items such as air-conditioners for office, 63 numbers of ceiling fans, value of electrical installations in branches of the company the aggregate value of the plant and machinery relating to industrial undertaking comes less than Rs. 35,00,000 thus liable to claim deduction - in favour of assessee. Withdrawing the deductions u/s 154 by AO Held that - Assessing Officer was wrong in rectifying the assessment order under Section 154 in respect of the relief granted earlier under Section 80HHA and 80-I on the reason assigned that the second unit was also functioning in the same - it is not necessary that the new industrial undertaking should be set up in a new premises - no justification for withdrawing the relief granted earlier - there is no patent or glaring mistake on the face of the record regarding the original assessment that warrants rectification under Section 154 against revenue.

Summary

Issues:
1. Entitlement to deductions under Section 80HHA and Section 80-I.
2. Validity of initiating rectification proceedings under Section 154.

Entitlement to deductions under Section 80HHA and Section 80-I:
The case involved an appeal by the Revenue against the Income-tax Appellate Tribunal's order for assessment years from 1989-90 to 1993-94. The assessee, a private limited company engaged in manufacturing and trading activities, claimed relief under Section 80HHA and 80I, which was initially granted by the Assessing Officer but later withdrawn under Section 154 of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) allowed the appeals, considering the issue debatable, leading to the Revenue's appeals before the Tribunal. Both the Commissioner and the Tribunal upheld that there was no mistake apparent from the record justifying the withdrawal of deductions. The Tribunal's decision was based on detailed scrutiny, concluding that the assessee qualified for the relief as the total value of plant and machinery did not exceed the threshold. The Tribunal's decision aligned with the principle that a decision on a debatable point of law does not constitute a mistake apparent from the record. Ultimately, the High Court found no illegality in the Tribunal's order, emphasizing it was based on material evidence and factual analysis, leading to the dismissal of the Revenue's appeals.

Validity of initiating rectification proceedings under Section 154:
The Assessing Officer sought to revise the assessment, contending that the assessee did not qualify as a small-scale industry, thus ineligible for benefits under Section 80HHA and 80-I. However, the Commissioner of Income Tax (Appeals) and the Tribunal disagreed, emphasizing that the exclusion of certain items brought the total value of plant and machinery within the small-scale industry definition. The Commissioner held that the Assessing Officer correctly allowed the relief initially and erred in rectifying the assessment order under Section 154. The Tribunal concurred, highlighting that there was no glaring mistake warranting rectification, in line with the Supreme Court's precedent that decisions on debatable legal points do not constitute apparent errors. The High Court upheld the Tribunal's decision, affirming that the rectification was unwarranted, as there was no evident mistake in the original assessment. The judgment favored the assessee, dismissing the Revenue's appeals and emphasizing the absence of legal grounds for interference.