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TMI Blog2022 (4) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order u/s. 143(3) of the Act in the present case was passed on 26.12.2008 assessing the income of the assessee at Nil after assessing the business income of the assessee at Rs. 1,94,97,014/-, adding thereto other incomes by way of short term capital gain, income from house property and income from other sources, resulting in gross total income of Rs. 3,83,37,613/- and after allowing deduction against the same on account of deduction u/s. 80G of Rs. 9,92,000/- and deduction u/s. 80IA of Rs. 6,26,51,076/-, the total eligible deduction thus amounting to Rs. 6,36,43,076/- which was restricted to the extent of gross total income, resulting in Nil income assessed. Computation of the assessed income at Para 10 of the order was pointed out to us as under: 10. Subject to the above, the total income of the assessee is computed as under: Business as per return of income (-) Rs. 3,80,56,248/- Add: Additions/Disallowances 1) Transfer pricing addition 2) u/s.92CA(3) of the Act as per para 4 2,70,80,409/- 2) Depreciation disallowed,,,...para 5 2,66,83,892/- 3)6xpenditure disallowed U/S.14A as per para 6 14,00,410/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly balance income of Rs. 1,21,98,597/- was assessed as taxable income of the assessee. The relevant portion of the order of the A.O. at Para 1 to 4 was pointed out as under: 1. The unabsorbed depreciation of Rs. 26139016/- (A.Y. 2004-05) was not adjusted before allowing deduction u/s. 80IA as required u/s. 32(2). This has been corrected in order u/s. 154 dated 10.12.2009. 2. After adjusting the unabsorbed depreciation, the resultant income shall comprise of Capital Gain, Income from House Property and Income from other sources which are not "Profit derived from the business of power and hence not to be considered for deduction Under Section 80 IA. 3 On setting off the unabsorbed depreciation, the income chargeable to tax be Rs. 12198597/- (Rs. 38338616 -Rs. 26139016) as against "NIL" income assessed. Incorrect computation of income has thus resulted in under assessment of income of Rs. 12198597/- 4. Consequent to setting off the unabsorbed depreciation of Rs. 26139016/- pertaining to Assessment Year 2004-05, there would be no amount to be carried forward to years. However, as per Assessment Order Date 26-12-2008 read with rectification passed on 10-12-2009, Rs. 60,98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assesse has come up in appeal before us raising the following grounds: 1. Ld. CIT (A) erred in law and on facts in confirming action of AO in invoking provisions of sec. 154 of the Act in respect of mistakes pointed out by AO not apparent from the record. Ld. CIT (A) ought to have quashed the rectification order passed by AO on highly debatable issues that required investigation of facts. It be so held now. 2. Ld. CIT (A) erred in law and on facts in confirming action of AO denying deduction u/s 80IA on short term capital gain arising on sale of depreciable business assets under deeming provisions of sec. 50 of the Act treating as profits not derived from business of the appellant. Ld. CIT (A) ought to have quashed the order of AO appreciating that the issue being debatable is not amenable to rectification u/s 154 of the Act. It be so held now. 3. Alternatively and without prejudice to above, Id. CIT (A) erred in law and on facts in confirming action of AO in not allowing deduction u/s 80IA of the Act. Ld. CIT (A) ought to have allowed deduction claimed on profit arising out of sale of depreciable asset. It be so held now. 4. Alternatively and without prejudice to above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction Under Section 80 IA. 3 On setting off the unabsorbed depreciation, the income chargeable to tax be Rs. 12198597/- (Rs. 38338616 -Rs. 26139016) as against "NIL" income assessed. Incorrect computation of income has thus resulted in under assessment of income of Rs. 12198597/- 4. Consequent to setting off the unabsorbed depreciation of Rs. 26139016/- pertaining to Assessment Year 2004-05, there would be no amount to be carried forward to years. However, as per Assessment Order Date 26-12-2008 read with rectification passed on 10-12-2009, Rs. 60,98,597/- has been allowed to be carried forward to subsequent years, which is a mistake apparent from record. 6.3 To put it briefly the rectification effected was : 1. The adjustment of brought forward unabsorbed depreciation Rs. 26139016/-; first against assessed business income of Rs. 19497014/- reducing it thus to Nil and thereby denying deduction u/s 80IA of the Act to it. 2. The balance unabsorbed depreciation of Rs. 6642002/-(26139016 - 19497014) being adjusted against other sources of income totaling in all to Rs. 18840599 (17855920+967386+17293),resulting in balance income of Rs. 12198597/- (18840599 - 6642002) and ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon before us. 11.1 As noted above the controversy before us boils down to whether non adjustment of unabsorbed depreciation against business income prior to deduction u/s 80IA of the Act was a patent error rectifiable u/s 154 of the Act. 12. The contention of the Ld.Counsel for the assessee was that it was a debatable issue and therefore could not be rectified in proceedings u/s 154 of the Act where only patent errors could be rectified. 13. There is no dispute vis -a-vis the aforesaid proposition of law relating to section 154 of the Act which has been clearly laid down by the Hon'ble apex court in the case of Volkart Brothers(supra) cited by the Ld.Counsel for the assessee before us. 13.1 But having said so, the Ld.Counsel for the assessee did not elaborate /explain as how and why the issue of adjustment of unabsorbed depreciation from profits of business prior to deduction u/s 80IA of the Act was debatable. He only referred to certain case laws, noted above by us ,on going through which we find that they relate to issues different from that before us and which were held /noted to be debatable and hence outside the purview of being rectified u/s 154 of the Act. We shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermination of the profits eligible for deduction u/s 80IA of the Act to be calculated as provided under the Act and considering as if the eligible business is the only business of the assessee . 14.1 The determination/calculation of business profits under the Act is governed by Chapter IV of the Act which provides for manner of computation of income under different heads,part D of which deals with Income under the head Profits and Gains of Business and Profession.As per the provisions contained therein ,from section 28 to section 43B ,Depreciation is to be set off/adjusted for determining the profits as per 32 of the Act and further the unabsorbed depreciation of earlier years is to be treated as current years depreciation as per 32(2) of the Act as under: SECTION 32. Depreciation. 1133[(1) 1134[In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998 [1135][not being goodwill of a business or profession], owned, wholly or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated to adjustment of brought forward business losses against profits of the year prior to deduction u/s 80IA of the Act. Set off of business losses being dealt with under section 72 of the Act is not dealt with under chapter IV D of the Act which, as mentioned above deals with computation of Profits and Gains from Business and Profession wherein depreciation and unabsorbed depreciation is dealt with ,requiring to be adjusted for determining the business profits. The ratio laid down therein cannot therefore be applied to the facts of the present case. 19. In the case of Hero Cycles (supra) the rectification related to Grant of weighted deduction in respect of Export Sales Commission, ECGC Charges and foreign dealers visiting expenses, u/s 35B of the Act, which was held to be debatable. 20. In the case of Royal Cushion the rectification carried out by denying deduction u/s 80HHC of the Act for the purposes of computing Book Profits u/s 115JB of the Act, was held to relate to the debatable issue of computation of deduction u/s 80HHC of the Act. 21. The decision in the case of Hirsh Bracelet (supra) goes against the assessee and supports our findings since it holds that Unabsorbe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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