IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 18/07/2006
Coram
THE HON'BLE MR.JUSTICE P.D.DINAKARAN
AND
THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA
Tax Case Appeal No.1927 of 2006
Messrs Dinosaur
Steels Limited
1/110
Mariamman Koil Street
Chinnampalayam Post
Coimbatore. ..Appellant
-Vs-
The Joint
Commissioner of Income Tax
Special Range II
Coimbatore. ..Respondent
Appeal under Section 260A of the Income Tax Act, 1961 against the
order of the Income Tax Appellate Tribunal, Chennai, 'D' Bench in I.T. A.
No.96/Mds/2000 for the assessment year 1997-98.
!For Appellant : Mr.J.Balachander for
Mr.S.Sridhar
^For Respondent :
:JUDGMENT
(Judgment of the Court was delivered by P.P.S.Janarthana Raja, J.)
The present appeal is filed under Section 260A of the Income Tax Act,
1961 by the assessee, in I.T.A. No. 96/Mds/2000, passed by the Income Tax
Appellate Tribunal, Chennai, ‘D’ Bench raising the following substantial
questions of law.
“1. Whether the Tribunal is correct in concluding that the order of
rectification passed by the Respondent in restricting the quantum of deduction
under section 80 IA of the Act upon taking into consideration the unabsorbed
losses is sustainable on facts and in law?
2. Whether the Tribunal is correct in concluding that there was no debate in
understanding and interpreting the provisions of section 80 IA of the Act,
especially with reference to the computation part of the said section?”
2. The brief facts leading to the above questions of law are as
under:
The relevant assessment year is 1997-98 and the corresponding
accounting year ended on 31.03.1997. The assessee filed return of income on
28.11.1997 disclosing an income of Rs.3,31,188/-. The gross income declared
was Rs.34,92,096.87 and on this, deduction under Section 80 IA of the Income
Tax Act (hereinafter referred to as the “Act”), at 3 0% amounting to
Rs.10,47,629/- was claimed. On the balance Rs.24,44,4 67.87, a sum of
Rs.21,13,280/- was adjusted being carry forward loss of earlier assessment
years. The said return was processed under Section 143(1)(a) of the Act and
an intimation was also sent to the assessee on 28.12.1998, determining the
income at Rs.3,31,190/-. Subsequently, the Assessing Officer issued a notice
under Section 154 of the Act, on 28.06.1999 calling for objections, if any, on
the ground that the following mistakes had been crept in.
1.Bonus unpaid of Rs.20,000/- had been omitted to be disallowed.
2.The assessee’s claim of deduction under Section 80IA had been allowed before
setting of the earlier years losses from the profits and gains of the
Industrial Undertaking.
The assessee, by letter dated 12.06.1999, while accepting the disallowance
under Section 43B of the Act, had objected to the proposal of restricting its
claim under Section 80IA of the Act. Rejecting the contention, the Assessing
Officer completed the assessment under Section 154 of the Act and held that
the deduction under Section 80IA should be given only after setting off the
unabsorbed loss of the earlier years. Aggrieved by the order, the assessee
filed an appeal to the Commissioner of Income Tax (Appeals). The C.I.T. (A)
dismissed the appeal by following the Supreme Court Judgment reported in 224
ITR 604 in the case of Commissioner of Income Tax Vs. Kotagiri Industrial
CoOperative Tea Factory Ltd. and confirmed the order of the Assessing
Officer. Aggrieved by the order of the first appellate authority, the
assessee filed an appeal to the Income Tax Appellate Tribunal ( hereinafter
referred to as the “Tribunal”). The Tribunal dismissed the appeal filed by
the assessee by following the Supreme Court judgments reported in 155 ITR 120
and 224 ITR 604, thus confirming the order of the lower authority.
3. The learned counsel appearing for the assessee submitted that
the issue involved is not a mistake apparent on the face of the record and it
is only a debatable one and hence, the rectification order passed under
Section 154 of the Act is without jurisdiction. The learned counsel further
stated that any debatable issue should not be subjected to rectification under
Section 154 of the Act and relied on the Supreme Court judgment reported in 82
ITR 50 in the case of T.S. Balaram, Income Tax Officer, Company Circle IV,
Bombay Vs. Volkart Brothers and Others, and the Delhi High Court judgment
reported in 266 ITR 2 08 in the case of C.I.T. Vs. Krishak Bharti
Co-operative Ltd., to support his contention. The learned counsel for the
assessee also relied on the judgment of the Madhya Pradesh High Court reported
in 226 ITR 547 in the case of Commissioner of Income Tax Vs. K.N. Oil
Industries, wherein it was held as follows:
“The benefit under Section 80HH and 80-I of the Income Tax Act, 1961 are in
the nature of incentives for these industries in the backward areas.
Therefore, a positive approach should be taken in the matter. The assessee is
entitled to the full amount o f deduction under both the sections without
deducting earlier years’ losses from the current income.”
4. Heard the counsel. The issue is well settled now by Supreme
Court judgment in the case of C.I.T. Vs. Kotagiri Industrial Cooperative Tea
Factory Ltd. reported in 224 ITR 604, wherein it was held as follows:
“Having regard to the law as laid down by this Court in Distributors (Baroda)
Pvt. Ltd.’s case [1985] 155 ITR 120 and H.H. Sir Rama Varma’s case [1994]
205 ITR 433, it must be held that before considering the matter of deduction
under section 80P(2), the Income-tax Officer had rightly set off the carried
forward losses of the earlier years in accordance with section 72 of the Act
and on finding that the said losses exceeded the income, he rightly did not
allow any deduction under section 80P(2) and the Appellate Assistant
Commissioner as well as the Tribunal and the High Court were in error in
taking a contrary view.
The principle of statutory construction invoked by Mrs.Ramachandran
has no application in construing the expression “gross total income” in
sub-section(1) of section 80P. In view of the express provision defining the
said expression in section 80B(5) for the purpose of Chapter VI-A, there is no
scope for construing the said expression differently in section 80P.”
5. The Madhya Pradesh High Court judgment reported in 226 ITR
547, relied on by the learned counsel for the assessee, is no longer good law
in view of the Supreme Court judgment reported in 224 ITR 604, in the case of
C.I.T. Vs. Kotagiri Industrial Co-operative Tea Factory Ltd. and the later
judgment 266 ITR 521 in the case of IPCA Laboratory Ltd. Vs. Deputy
Commissioner of Income Tax. The Delhi High Court judgment reported in 266 ITR
208 in the case of C.I.T. Vs. Krishak Bharti Co-operative Ltd., relied on by
the counsel for the assessee is also not relevant to the present case, as in
that case, the finding was that the issue involved was a debatable one and
hence it was not a subject matter for rectification under Section 154 of the
Act. In the present case, the issue involved is not a debatable one and is
settled by the Supreme Court judgments cited supra. While interpreting the
scope of rectification under Section 154 of the Act, the Supreme Court, in the
case of T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs.
Volkart Brothers and Others, reported in 82 ITR 50, held as follows:
“A mistake apparent on the record must be an obvious and patent mistake and
not something which can be established by a long drawn process of reasoning on
points on which there may be conceivably two opinions. A decision on a
debatable point of law is not a mistake apparent from the record.”
From a reading of the above Supreme Court observation, it is clear that only
apparent mistake and non-debatable issue, would be the subject matter of
rectification under Section 154 of the Act. As in this case, the order sought
to be rectified is not in confirmity with the law declared by the Supreme
Court cited supra, which amounts to mistake apparent on the face of the
record. Hence, the action of Assessing Officer in rectifying the order under
Section 154 of the Act, is perfectly justified.
6. In view of the foregoing reasons, we are of the view that the
order of the Tribunal is in confirmity with law and there is no error or
infirmity in the order of the Tribunal and the same requires no interference.
Hence, no substantial questions of law arise for consideration of this Court
and the tax case is dismissed. No costs.
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