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Judgment
P.P.S. Janarthana Raja, J.—The present appeal is filed u/s 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.
Whether the Tribunal is correct in concluding that the order of rectification passed by the Respondent in restricting the quantum of deduction u/s
80IA of the Act upon taking into consideration the unabsorbed losses is sustainable on facts and in law?
Whether the Tribunal is correct in concluding that there was no debate in understanding and interpreting the provisions of Section 80IA of the
Act, especially with reference to the computation part of the said section?
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 u/s 80IA of the
Income Tax Act (hereinafter referred to as the ""Act""), at 30% amounting to Rs. 10,47,629/- was claimed. On the balance Rs. 24,44,467.87, a
sum of Rs. 21,13,280/- was adjusted being carry forward loss of earlier assessment years. The said return was processed u/s 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 u/s 154 of the Act, on 28.06.1999 calling for objections, if any, on the ground that the following mistakes had been crept in.
Bonus unpaid of Rs. 20,000/- had been omitted to be disallowed.
The assessee''s claim of deduction u/s 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 u/s 43B of the Act, had objected to the proposal of restricting its claim
u/s 80IA of the Act. Rejecting the contention, the Assessing Officer completed the assessment u/s 154 of the Act and held that the deduction u/s
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
Commissioner of Income Tax, Tamil Nadu-V, Madras Vs. Kotagiri Industrial Co-operative Tea Factory Ltd., Kotagiri, 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 Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, and Commissioner of Income Tax, Tamil Nadu-V, Madras Vs.
Kotagiri Industrial Co-operative Tea Factory Ltd., Kotagiri, , thus confirming the order of the lower authority.
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 u/s 154 of the Act is without jurisdiction. The learned Counsel further stated that
any debatable issue should not be subjected to rectification u/s 154 of the Act and relied on the Supreme Court judgment reported in T.S.
Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , and the Delhi High Court judgment reported in
Commissioner of Income Tax 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 Commissioner of Income Tax Vs. K.N. Oil Industries, , wherein it was held as
follows:
The benefit u/s 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 of deduction under both the sections without deducting
earlier years'' losses from the current income.
Heard the counsel. The issue is well settled now by Supreme Court judgment in the case of Commissioner of Income Tax, Tamil Nadu-V,
Madras Vs. Kotagiri Industrial Co-operative Tea Factory Ltd., Kotagiri, , wherein it was held as follows:
Having regard to the law as laid down by this Court in Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, and H.H. Sir Rama
Varma Vs. Commissioner of Income Tax, Kerala, , it must be held that before considering the matter of deduction u/s 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 u/s 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.
The Madhya Pradesh High Court judgment reported in Commissioner of Income Tax Vs. K.N. Oil Industries, , relied on by the learned
Counsel for the assessee, is no longer good law in view of the Supreme Court judgment reported in Commissioner of Income Tax, Tamil Nadu-V,
Madras Vs. Kotagiri Industrial Co-operative Tea Factory Ltd., Kotagiri, , in the case of IPCA Laboratory Ltd. Vs. Deputy Commissioner of
Income Tax, Mumbai, in the case of Commissioner of Income Tax Vs. Krishak Bharti Co-operative Ltd., in the case of C.I.T. v. 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 u/s 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 u/s 154 of the Act, the
Supreme Court, in the case of T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, , 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 u/s 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 u/s
154 of the Act, is perfectly justified.
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.