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TMI Blog2014 (6) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ded along with the Departmental appeal in ITA No. 1601/Ahd/2007 for A.Y. 2003-04. This Miscellaneous Application seeks rectification of certain mistakes apparent from record in the order of the Hon'ble Tribunal on account of the fact that the legal position on the relevant issues was reversed on account of subsequent Supreme Court decisions on the same issues. 2. The relevant issue which requires rectification pertains to finding of the Hon'ble Tribunal with regard to Ground No. 4 of the Departmental Appeal which reads as under: "4. The learned CIT(A) erred in law and on the facts of the case in directing the AO not to exclude 90% of other incomes comprising of (i) insurance claim received of Rs.39,78,429/- and (ii) C & F Stockist interest at Rs.5,77,309/- from the Profit of the business for the purpose of computation of deduction u/s. 80HHC of the I. T. Act." 3. This Ground has been dealt with and adjudicated by the Hon'ble Tribunal at para 8 of the order. It has been held by the Hon'ble Tribunal that in respect of the other incomes referred to in the aforesaid Ground No. 4, 90% of the gross income is required to be excluded under clause (baa) of the Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee for determining "profits of the business" of the assessee under Explanation (baa) to section 80HHC. Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in it, the words "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and gains of business or profession" referred to in the first part of Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head "Profits and gains of business or profession", ninety per cent, of such quantum of the receipt cannot be deducted under Explanation (baa) to section 80HHC. Held, accordingly, that ninety per cent, of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "Profits and gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause judicial opinions differ, and what is a mistake apparent from the record cannot be defined precisely and must be left to be determined judicially on the facts of each case ; (f) Non-consideration of a judgment of the jurisdictional High Court would always constitute a mistake apparent from the record, regardless of the judgment being rendered prior to or subsequent to the order proposed to be rectified; (g) After the mistake is corrected, consequential order must follow, and the Tribunal has power to pass all necessary consequential orders." (emphasis supplied) The aforesaid Gujarat High Court judgment was subsequently applied by the Hon'ble Gujarat High Court in the case of CIT v. Subodhchandra S. Patel (265 ITR 445). 7. It is notable that the Hon'ble Gujarat High Court decision in the case of Saurashtra Kutch Stock Exchange Ltd. (supra) has been affirmed by the Hon'ble Supreme Court in 305 ITR 277). 8. It is respectfully submitted that various Benches of the Hon'ble Ahmedabad ITAT have also adopted the same view. A reference may kindly be made to the following orders: (1) Order dated 31st August, 2012 in the case of Jay Chemical Industries Ltd. v. DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal at paras 1 to 7 of the order. With regard to Ground No. 1, the Hon'ble Tribunal observed that third Proviso to Section 80HHC(3) of the Income-tax Act was introduced by the Taxation Laws (Second Amendment) Act, 2005 with retrospective effect from 1.4.1998. At para 5.2 the Hon'ble Tribunal observed that the learned CIT(A) recorded a MA Nos. 9 & 10/Ahd/14 ( in ITA Nos. 1591 & 1601/Ahd/07) for A.Y. 03-04 in Intas Pharmaceuticals Ltd. vs. DCIT Page 8 finding that the assessee company did not fulfill the two conditions laid down in the aforesaid third Proviso. The Hon'ble Tribunal has thereafter observed that no evidence was produced by the assessee company before the Tribunal to show that the conditions of the third Proviso have been fulfilled. The Hon'ble Tribunal has also referred to the finding of the learned CIT(A) that DEPB income accruing in the year of sale of DEPB entitlement would be considered and the provision for DEPB receivables and accruals on notional basis would not be considered as income for this purpose. It is further observed that the learned AR of the assessee company did not refer to any material to controvert the findings of the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard laid down by the Hon'ble Supreme Court in the case of Top Man Exports v. CIT (342 ITR 49). 6. It is respectfully submitted that a subsequent decision of the jurisdictional High Court or the Supreme Court gives rise to a mistake apparent from-record which has to be rectified u/s. 254(2) of the Income-tax Ac. In this connection, kind reference is invited to the Hon'ble Gujarat High Court decision in the case of CIT v. Saurashtra Kutch Stock Exchange (262 ITR 146) wherein the scope and ambit and the powers of the Tribunal u/s. 254(2) have been elaborately considered and analyzed by the Hon'ble High Court and the position has been summed up on page 162 of the report in the following manner: "(a) The Tribunal has power to rectify a mistake apparent from the record on its own motion or on an application by a party under section 254(2) of the Act; (b) An order on appeal would consist of an order made under section 254(1) of the Act or it could be an order made MA Nos. 9 & 10/Ahd/14 ( in ITA Nos. 1591 & 1601/Ahd/07) for A.Y. 03-04 in Intas Pharmaceuticals Ltd. vs. DCIT Page 10 under sub-section (1) as amended by an order under subsection (2) of section 254 of the Act; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of Rs.14,18,854, the Hon'ble Tribunal has recorded its findings at paras 6.9 and 7 of the order. The Hon'ble Tribunal has relied on the Hon'ble Bombay High Court decision in the case of CIT v. Asian Star Co. Ltd. (326 ITR 56). At para 6.9 the Hon'ble Tribunal has observed that in consonance with the aforesaid Bombay High Court judgment 90% of the receipts referred to in Ground No. 2 of the assessee have to be excluded under clause (baa) of the Explanation. It is further observed that to take care of any expenditure which may have been incurred in earning this income, an ad hoc deduction of 10% has been allowed by the Legislature and as per the Bombay High Court judgment no further deduction is permissible. With this observation Ground No. 2 raised by the assessee company was dismissed. 10. It is respectfully submitted that the Hon'ble Bombay High Court decision in the case of Asian Star Co. (supra) has been overruled by the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (343 ITR 89). The Head Note of this judgment is reproduced below for ready reference: For the purpose of section 80HHC of the Income-tax Act, 1961, it is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profits of business of an assessee as computed under the head "Profits and gains of business or profession", ninety per cent, of such quantum of the receipt cannot be deducted under Explanation (baa) to section 80HHC. Held, accordingly, that ninety per cent, of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "Profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business. Decision of the Bombay High Court reversed. Decision of the Delhi High Court affirmed. Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120 (SC) relied on. CIT v. Shri Ram Honda Power Equip [2007] 289 ITR 475 (Delhi) approved. CIT v. Asian Star Co. Ltd. [2010] 326 ITR 56 (Bom) impliedly overruled." 11. From the above it may kindly be appreciated that 90% of only net income can be excluded under clause (baa) of the Explanation to Section 80HHC while determining the profits of the business eligible for deduction. This judgment has been rendered by larger Bench of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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