High Court Of Rajasthan
CIT vs. Mewar Oil & General Mills Ltd.
Sections 80A, 80AB, 80B(5), 80HHC, 80-I, 154
Asst. Year 1986-87, 1987-88
Rajesh Balia & Sunil Kumar Garg, JJ.
IT Appeal Nos. 35 & 38 of 2002
21st October, 2003
Counsel Appeared
K.K. Bissa, for the Appellant : N.M. Ranka & Sanjeev Johri, for the Respondent
JUDGMENT
Rajesh Balia, J. :
These two appeals are directed against the order dt. 30th April, 2001, passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur (for short “the Tribunal”), whereby the Tribunal has decided Appeal Nos. 663, 664, 666 and 700 of 1994 by a common order.
2. These appeals relate to the asst. yrs. 1986-87 and 1987-88 and arise out of Appeal Nos. 666 and 664 of 1994. While admitting these appeals, the following substantial question of law was framed in each appeal for consideration by this Court :
“Whether, on the facts and circumstances of the case, the mistake pointed out by the AO for invoking jurisdiction under s. 154 of the IT Act can be considered as a mistake apparent from the record, which could confer jurisdiction to the AO for initiating and making orders under s. 154 of the IT Act, 1961, for the purpose of recomputing allowable deduction under ss. 80-I and 80HHC ?”
3. The above question relates to the rectification in the original assessment order in computing the deductions permissible under ss. 80-I and 80HHC of Chapter VI-A of the IT Act, 1961 (hereinafter to be referred to as “the Act”), for the asst. yrs. 1986-87 and 1987-88. So far as the rectification of allowable deduction under s. 80-I is concerned, the question has been considered in the assessee’s own case for the asst. yr. 1984-85 in IT Appeal No. 63 of 2002, CIT vs. Mewar Oil & General Mills Ltd. [reported at (2004) 186 CTR (Raj) 141—Ed.] and has been answered as under : “In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under s. 80-I in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under s. 80-I for the new industrial undertaking was not required in the present case.”
4. So far as recomputation of allowable deductions under s. 80HHC is concerned, the AO has held that deduction allowable under s. 80HHC has also not been correctly worked out and the above mistake being apparent from the record, notice under s. 154 deserves to be issued requiring the assessee to show-cause as to why the assessment should not be revised. The AO further held that the contentions made by the assessee with regard to the mistakes pointed out by him are not tenable and the deductions allowed under s. 80HHC as also the benefit of carried forward of unabsorbed deductions allowed under Chapter VI-A are not in accordance with the provisions of the Act and the mistakes being apparent from the record are liable to be rectified.
5. On appeal, the CIT(A) as well as the Tribunal found this question to be a debatable one and held that the provisions of s. 154 of the Act cannot be invoked for rectifying recomputation of deductions allowable under s. 80HHC. It was also held that since investment allowance is a special rebate, the deductions under s. 80HHC was directed to be computed on the basis of the profits of the business after allowing depreciation but before allowing investment allowance. The AO was directed to exclude the investment allowance.
6. We have heard learned counsel appearing for the parties.
7. For deciding the controversy involved in the case, it would be profitable to quote the relevant provisions of the Act in extenso :
“80HHC. Deduction in respect of profits retained for export business.—(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise. 80A. Deductions to be made in computing total income.—(1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in ss. 80C to 80U. 80AB. Deductions to be made with reference to the income included in the gross total income.— Where any deduction is required to be made or allowed under any section included in this Chapter under the heading
C.—Deductions in respect of certain incomes in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income,” Sec. 80B defines “gross total income”. It reads as under : “80B. Definitions.—In this Chapter,—………. (5) ‘gross total income’ means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter……” Sec. 80AB was inserted by the Finance (No. 2) Act of 1980, w.e.f. 1st April, 1981. Thus, it is clear that this section was inserted much prior to the date of passing the assessment order in question. It clearly postulates that where any deduction is required to be made or allowed under any section included in this Chapter under the heading C.—Deductions in respect of certain incomes in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of the Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income in question. As per s. 80B, the gross total income means the total income computed in accordance with the provisions of the Act before making any deduction under this Chapter. Sub-s. (3)(a) of s. 80HHC clearly lays down that where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee.
A combined reading of the aforesaid provisions leaves no room of doubt in our mind that the total income of the business carried on by the assessee, whether exclusively of export or with some other business, is to be computed in accordance with the general provisions of the computation of profits and gains of the business or profession. Part D of Chapter IV deals with computation of income from profits and gains of business or profession. Sec. 28 defines what income is chargeable to income-tax under the head “Profits and gains of business or profession”. Sec. 29 states that the income referred to in s. 28 shall be computed in accordance with the provisions contained in ss. 30 to 43D. Sec. 32A of the Act lays down the investment allowance allowable as deduction. It is to be taken into account for the purpose of computing profits and gains of business or profession of the assessee. Thus, for the purpose of income out of the profits derived from export, in computing profits and gains from business of the assessee is to be computed by taking into account the investment allowance. There cannot be any two opinions about the same. In the circumspect reading of the provisions of the statute itself, there cannot be any arguable debate on the issue about the adjustment of investment allowance. We are, therefore, of the opinion that insofar as the AO has found that the investment allowance allowable as deduction under s. 32A has not been deducted from the computation of the total income from incentive income for the purpose of computing allowable deduction under s. 80HHC which needs to be rectified, he has committed no mistake. It was a mistake apparent on the face of the record for which there could be no different opinion and, therefore, liable to be rectified under s. 154, subject to the period of limitation. There being no issue that rectification proceedings were not initiated within the limitation, the rectification order insofar as it relates to the recomputation of allowable deduction under s. 80HHC was not liable to be interfered with. The Tribunal as well as the CIT(A) have erred in holding the question to be a debatable one, merely because for different assessment years, the AO or the appellate authority has taken a different view. To this extent, the order of the Tribunal deserves to be set aside. Before parting with the case, we may notice that in the memo of appeal, the respondent has sought to urge that a substantial question of law about disallowance of recomputation of total deduction in the light of s. 80A(2) r/w s. 80VVA was also a mistake apparent on the face of the record inasmuch as s. 80A(2) which read with s. 80VVA(1), provides the maximum limit upto which deduction can be allowed was clearly breached because the AO had allowed carry forward of unabsorbed deductions under Chapter VI-A. The CIT(A) as well as the Tribunal have held that the rectification proceedings were not applicable to it in view of the fact that it was a debatable issue. In coming to this conclusion, the assessee’s contention has been taken into account that though s. 80A(2) and s. 80VVA(1) provide the maximum limit of allowability of total deduction under Chapter VI-A in the relevant assessment year, sub-s. (4) of s. 80VVA clearly envisages that the total amount of allowable deduction which could not be availed of because of the maximum limit provided under sub-s. (2) of s. 80VVA during the relevant assessment year, the same can be added in the allowable deduction in the subsequent year. In view thereof, the carry forward of unabsorbed allowable deduction under Chapter VI-A was permissible.
Apparently, reading of the provisions of s. 80A(2) and s. 80VVA(1) and (4) justifies the contention of the assessee that this is a debatable issue whether unabsorbed deduction under Chapter VI-A could be carried forward for the subsequent assessment year or not. We have, therefore, not framed this question as a substantial question of law arising for consideration in this appeal. As a result of the aforesaid discussion, these appeals are allowed in part. The order of the Tribunal in setting aside the rectification of recomputation of deduction under s. 80-I is upheld. The order of recomputing the deduction under s. 80HHC by rectification is set aside and the order passed by the ITO in that regard is restored for the respective assessment years. There shall be no order as to costs.
[Citation : 271 ITR 315]
