High Court Of Karnataka
CIT & ANR. vs. TTK Prestige Ltd.
Section 154
Asst. Year 1994-95
K.L. Manjunath & A.S. Pachhapure, JJ.
IT Appeal No. 415 of 2004
18th March, 2009
Counsel Appeared :
M.V. Seshachala, for the Appellants : R.B. Krishna, for the Respondent
JUDGMENT
A.S. Pachhapure, J. :
This appeal is by the Revenue challenging the concurrent findings of the order passed by the CIT (A) and further confirmed by the Tribunal, Bangalore Bench, in ITA No. 514/Bang/1998, dt. 10th Feb., 2004 for the asst. yr. 1994-95.
2. The facts relevant for the purpose of this appeal are as under. The respondent assessee is being assessed in the status of a company and for the asst. yr. 199495, the assessee filed a return of income. An order came to be passed under s. 143(3) of the Act on 25th Sept., 1996. After passing the assessment order, the AO initiated rectification proceedings under s. 154 of the Act and he found that the claim of Rs. 93,14,820 as deduction under s. 80-IA being 30 per cent on Rs. 3,10,49,400 included a sum of Rs. 97,61,594 being the export incentive received by the company. It is the contention of the Revenue that this incentive is only a scheme by the Central Government to encourage the exports and it is not an income earned by the industrial undertaking of the assessee. A notice was issued under s. 154 of the Act for rectification of this mistake and there was no response from the assessee and therefore, a sum of Rs. 29,28,478 i.e., 30 per cent on Rs. 97,61,594 deduction was disallowed as per s. 80-IA of the Act and the order of the rectification came to be passed on 31st March, 1998. The assessee being aggrieved by the order of rectification, preferred an appeal to the CIT(A) of Bangalore. The CIT(A) holding that there were number of judgments in respect of s. 80HH of the Act, giving contrary view and that s. 80-IA of the Act was similarly placed concluded with the matter with regard to whether the export incentive would qualify for deduction under s. 80-IA of the Act was held to be highly debatable and therefore, he set aside the order passed under s. 154 of the Act and the Revenue being aggrieved by this order, preferred an appeal to the Tribunal, Bangalore Bench and the said appeal also came to be dismissed (vide order dt. 10th Feb., 2004).
3. The Revenue aggrieved by the concurrent findings of both the authorities, has approached this Court to set aside the orders by raising the following substantial questions of law :
“(1) Whether the appellate authorities were correct in holding that the controversy decided by the AO in rectification proceedings was a debatable issue when admittedly the assessee was not entitled to claim the deduction under s. 80-IA of the IT Act (hereinafter referred to as the Act) in respect of a sum of Rs. 97,61,594 being the export incentive i.e., the duty drawback received by the assessee from the Central Government to encourage the exports, which could not be treated as the profits ofthe assessee in order to satisfy the eligibility criterion under s. 80-IA of the Act ?
(2) Whether the appellate authorities failed to record a finding that export incentives i.e., duty drawback received by the assessee did not amount to profit earned by the assessee which could be treated as an eligible deduction under s. 80-IA of the Act before holding that it was a debatable issue ?”
We have heard the learned advocates for the Revenue and the assessee on the abovesaid substantial questions of law. It is the contention of the counsel for the Revenue that both the appellate authorities failed to appreciate that the export incentive i.e., the duty drawback served (received) by the assessee of a sum of Rs. 97,61,954 cannot be included in the profit of Rs. 3,10,49,400 in respect of its unit at Hosur for the purpose of computation of deduction under s. 80-IA of the Act and it was beyond the purview of s. 154 of the Act. It is also his contention that both the appellate authorities failed to appreciate that there was no debatable issue as such in respect of the assessee being entitled to deduction under s. 80-IA of the Act over the export incentive, as the said incentive was given by the Central Government to encourage the exports and it is not an income earned by the industrial undertaking of the assessee. On these grounds, he has sought for setting aside the orders and the concurrent findings of the authorities below.
Per contra, it is the contention of the learned counsel for the assessee that the matter with regard to whether the export incentive would qualify for deduction under s. 80-IA of the Act is highly debatable matter and it does not come within the purview of s. 154 of the Act. It is his further contention that the deduction has been allowed at the time of passing the order under s. 143(1)(a) and s. 143(3) of the Act and it is clearly a case of change of opinion and that there is nothing as such to say that there is a mistake apparent on the record in the order of assessment and therefore, the provisions of s. 154 of the Act cannot be invoked for rectification. The provisions of s. 154 of the Act read as under : “With a view to rectifying any mistake apparent from the record an IT authority referred to in s. 116 may— (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation or deemed intimation under sub-s. (1) of s. 143.” So, as could be seen from the provision, it is only in case if a mistake has been crept into the order, which is apparent from the record that the AO has got the authority to amend the order passed by it under the provisions of this Act. On this aspect of the matter, the Hon’ble High Court of Calcutta in a decision reported in CIT vs. Schlumberger Sea Co. Inc. (1999) 157 CTR (Cal) 538 : (2003) 264 ITR 331 (Cal) held that, to invoke the provisions of s. 154 of the Act to rectify the mistakes, the subject-matter must be beyond debate and in such circumstances, only the mistake committed could be amended.
7. The question as to whether the subject-matter is beyond debate and that whether it was a mistake apparent from the record, in this context, it is relevant to note that the Hon’ble apex Court in the decision in CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) took into consideration the export promotional scheme, whereunder the export entitlements became available, it held that there must be a nexus between the profits and gains and the industrial undertaking. Further, it observed that the nexus was not direct and it is only an incidental. It also held that the assessee was entitled to import entitlements which it could sell and the sale consideration therefrom could not be held to constitute a profit and gain derived from the assessee industrial undertaking and further, that the receipts from the sale of import entitlements could not be included in the income of assessee for the purpose of computing the relief under s. 80HH of the Act. Sec. 80-IA is similarly placed. Furthermore, it is relevant to note that there are concurrent findings holding that the export incentive would qualify for deduction under s. 80-IA of the Act is highly a debatable matter and there are judgments on both the sides with regard to whether the export incentive would qualify for deduction. In the circumstances, we have to hold that it is a debatable matter and therefore, does not come within the purview of s. 154 of the Act and when the AO allowed the deduction at the time of passing the order under s. 143(1)(a) and also at the time of passing the order under s. 143(3), it is clearly a case of change of opinion. This cannot be said to be a mistake apparent from the record and therefore, the provisions of s. 154 of the Act, cannot be invoked. The question as to whether the assessee was entitled for deduction or not, is a matter to be decided on merits and cannot be said to be an error apparent on record.
8. In the circumstances, we do not find any infirmity in the findings arrived at by the CIT(A) and the Tribunal and answer the substantial questions of law 1 in affirmative and 2 in negative and in the result, the appeal is dismissed.
[Citation : 322 ITR 390]
