9911796707
TMI Blog1990 (9) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... o deduction both under sections 80HH and 80J of the Act, in respect of the assessment year 1976-77. As there was no taxable profit from this unit, deduction was not allowable under either of these two sections. In the Return filed on 30-6-1976, the assessee did not claim deduction under section 80HH of the Act. However, vide its letter dated 11-5-1978 the assessee claimed deduction of Rs. 24,21,501 under that section in the following manner : " This has reference to our letter No. Socy/356/76 dated 26-6-1976. In the above assessment year, the profit of Century Cement before charging Depreciation and Development Rebate Reserve comes to Rs. 1,22,93,949. Now, we are claiming 80HH relief as per statement enclosed, as provided under section 32 and in view of the Judgment of the Kerala High Court in the case of M/s. Indian Transformers Ltd., reported in 86 ITR page 192 and another case reported in 93 ITR page 115. Hence our total taxable income will be reduced from Rs. 12,99,88,643 to Rs. 12,75,67,142. This may kindly be considered while computing the taxable income at the time of assessment. It is just for your information that since there is no taxable income in the said Unit for thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this will be carried forward and adjusted in the subsequent year, when this Division goes into profit. It may be mentioned that the ITO had simply lifted the deduction of Rs. 24,21,501 from the computation sent by the assessee along with its letter dated 11-5-1978 without applying his mind to the relevant provisions of Sec. 80HH of the Act: " Deduction under section 80J: The company has claimed deduction under section 80J on gross assets without deducting current liabilities in respect of its two units viz. (i) Gas plant and (ii) Cement Plant. In view of the detailed discussion, and finding given in respect of the Gas Plant in earlier years deduction in respect of 80J on account of this Unit cannot be allowed. As far as Cement Plant is concerned, the claim of the company appears to be correct and therefore the 80J allowable is worked as under. " " This amount of Rs. 85,86,937 is allowed to be carried forward for adjustment in future, since there are no taxable profits in this year for this unit. " (d) For the assessment year 1977-78 framed on 28-8-1988, the ITO worked out deduction under section 80HH and 80J of the Act of Rs. 54,95,385 and Rs. 96,15,287 respectively. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took action u/s. 154 of the Act with a view to withdraw deduction of Rs. 24,21,501 for the assessment year 1976-77 allowed in the assessment year under consideration. The relevant portion of the order passed u/s. 154 of the Act reads as under :--- " In this case, regular assessment was completed on 28-8-1980 on a total income of Rs. 9,95,11,040. On going through the record it was seen that while allowing deduction under Chapter VIA, a sum of Rs. 24,21,501 under Sec. 80HH for A.Y. 1976-77 was also allowed. Under the scheme of the Income-tax Act, deduction under Sec. 80HH is not allowed to be carried forward to be set off against the income of the subsequent year. Mistake being apparent from record, the same was discussed with Shri M.L. Sharma, C.A. authorised representative of the assessee company. Notice u/s. 154 of the IT Act is waived. He objected to the proposed rectification. However, as mentioned above and the mistake being apparent from record the same is being rectified by this order. " 5. In appeal before the Commissioner of Income-tax (Appeals) the assessee had disputed the action of the ITO. In order to appreciate the stand taken on behalf of the assessee, it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deals with the assessment of the subsequent year. In view of the above-noted observations of the S.C. the contention of Shri M.L. Sharma, C.A. is rejected. " 7. Being aggrieved by the order of the CIT(A) the assessee has come up in appeal before the Tribunal. The learned Counsel for the assessee reiterated the submissions, which were made before the first appellate authority and strongly urged that the CIT(A) ought to have set aside the order of the ITO passed under section 154 of the Act. According to him, there was no mistake in the assessment order for the assessment year under consideration, as in the said order the ITO had simply implemented the finding given by his predecessor in the assessment year 1976-77. This finding in the assessment year 1976-77 would show that in interpreting the provisions of Section 80HH of the Act, the ITO was of the view that deduction of Rs. 24,21,501 would have to be carried forward and adjusted in the subsequent year. In this connection, he further submitted that the mistake, if at all, had crept in in the assessment order for A.Y. 1976-77, for in that year the ITO had accepted the assessee's request for deduction of Rs. 24,21,501. It was, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT v. Manmohan Das [1966] 59 ITR 699, which, according to him, has no relevance to the facts and circumstances obtaining in the instant case. In this connection, he pointed out that in the case of Manmohan Das the Hon'ble Supreme Court was dealing with the provisions of carry forward of loss under section 24(2) of the Indian Income-tax Act, 1922. According to him, since the scheme of that section is entirely different from the scheme of section 80HH of the Act, with which we are concerned in the present case, the ratio laid down by the Hon'ble Supreme Court in that case cannot be applied in the present case. He further submitted that whether a decision of a court is applicable or not is itself a debatable issue which cannot be brought within the purview of Section 154 of the Act. In this connection, he invited the attention of the Tribunal to the observations appearing at page 4509 of Vol. V of Sampath Iyengar's Law of Income-tax. Finally, he submitted that in order to withdraw the deduction of Rs. 24,21,501, whether the order under section 154 should have been passed in respect of the assessment year 1976-77 or 1977-78 or in both the years is highly controversial issue and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciency" under section 84 of the Act, the assessee was still entitled to carry forward "deficiency". On the contrary the ratio laid down by the Hon'ble Supreme Court in the case of Manmohan Das is clearly applicable in the instant case, which was rightly applied by the CIT(A). He further submitted that the fact that the ITO had not attempted to rectify first the assessment for the assessment year 1976-77 is not at all fatal, as no deduction was allowed u/s. 80HH of the Act. He emphasised the fact that the tax payable by the assessee would remain the same, whether the rectification was made or not. However, for the year under consideration, action u/s. 154 was not only necessary but imperative, as the assessee was granted deduction which it was not only not entitled to but was against the provision of the Act. He, therefore, strongly urged that the order of the CIT(A) should be upheld. 9. We have carefully considered the rival submissions of the parties. At the outset, we would like to mention that during the course of hearing, we had asked the learned Counsel for the assessee as to whether there is any specific provision contained in Sec. 80-HH of the Act for determination of "def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (3) of Sec. 80-J, arising under this section. Therefore, in our opinion, the ITO had grieviously erred in quantifying deduction at 20% of the profit for the assessment year 1976-77, when there were no profits at all for that year against which it could be allowed. In other words, the "deficiency" of Rs. 24,21,501 worked out by the assessee and accepted by the ITO in respect of Sec. 80-HH for the assessment year 1976-77 was without authority of law and has no consequence in determining the taxable income for that year or any subsequent year. The ITO further compounded his error in carrying such "deficiency" to the assessment year 1977-78 and allowing it against the profit of that year. For the assessment year 1977-78, deduction u/s. 80-HH of the Act could only be confined to 20% of the profits of that year from the unit concerned. If any additional deduction was given for the assessment year 1977-78, it was clearly given by mistake, as the provisions of Sec. 80-HH of the Act do not provide for such additional deduction. The legislature has not provided for carry forward of "deficiency", because it did not visualise a situation where such deduction after being quantified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lted in reduction of the total income chargeable to tax. We entirely agree with the stand taken on behalf of the Revenue that the reported decisions relied on the assessee have no application to the issue involved in the instant case. The decision in the case of East India Hotels Ltd. went in favour of the assessee, as the provisions of Sec. 80J (6) of the Act were made applicable with effect from 1-4-1968. On the contrary the ratio laid down by the Hon'ble Supreme Court in the case of Manmohan Das is clearly applicable in the instant case and has rightly been applied by the CIT(A). In the case of Bombay Dyeing Mfg. Co. Ltd. v. M.K. Venkalachalam [1954] 26 ITR 298 (Bom.), the Hon'ble Supreme Court has held that a mistake of law could be rectified u/s. 154 of the Act. Again it is a trite law that in a case where two views are not possible, if by misreading the section or miscalculation a mistake is committed, such mistake would come within the purview of Sec. 154 of the Act. At this stage we may mention that the learned Counsel for the assessee was fair enough to state that there was mistake in granting deduction of Rs. 24,21,501 in the year under consideration. However, the main ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
