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Commissioner of Income Tax v/s Mewar Oil & General Mills Ltd. (No. 2)


Company & Directors' Information:- N K OIL MILLS PVT LTD [Active] CIN = U15201GJ1994PTC022669

Company & Directors' Information:- B P OIL MILLS LIMITED [Active] CIN = U15142UP1965PLC003232

Company & Directors' Information:- K P L OIL MILLS PRIVATE LIMITED [Active] CIN = U15142KL1983PTC003685

Company & Directors' Information:- N K B OIL MILLS PRIVATE LIMITED [Active] CIN = U15142KL1999PTC013095

Company & Directors' Information:- K K K OIL MILLS PRIVATE LIMITED [Strike Off] CIN = U15142KL2000PTC013621

Company & Directors' Information:- S N OIL MILLS PRIVATE LIMITED [Strike Off] CIN = U15142HR1986PTC025702

Company & Directors' Information:- G. B. OIL MILLS PRIVATE LIMITED [Strike Off] CIN = U15326HR1985PTC019817

Company & Directors' Information:- R. OIL MILLS PRIVATE LIMITED [Strike Off] CIN = U15141DL1992PTC047883

Company & Directors' Information:- J K OIL MILLS COMPANY LIMITED [Strike Off] CIN = U15143UP1955PLC002570

Company & Directors' Information:- N N OIL MILLS PRIVATE LIMITED [Strike Off] CIN = U15147MH1999PTC117989

Company & Directors' Information:- J & T OIL MILLS PRIVATE LIMITED [Strike Off] CIN = U15141KL2006PTC019754

Company & Directors' Information:- A AND R OIL MILLS PVT LTD [Strike Off] CIN = U15315CH1994PTC014265

Company & Directors' Information:- GENERAL OIL COMPANY PRIVATE LIMITED [Dissolved] CIN = U15144KL1951PTC000411

    Income Tax Appeal Nos. 35 & 38 of 2002

    Decided On, 21 October 2003

    At, High Court of Rajasthan

    By, THE HONOURABLE MR. JUSTICE SUNIL KUMAR GARG & THE HONOURABLE MR. JUSTICE RAJESH BALIA

    For the Appellant: K.K. Bissa, Advocate. For the Respondent: N.M. Ranka, Sanjeev Johari, Advocates.



Judgment Text


Rajesh Balia, J.

1. These two appeals are directed against the order dated April 30, 2001, passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur (for short "the Tribunal"), whereby the Tribunal has decided Appeals Nos. 663, 664, 666 and 700 of 1994 by a common order.

2. These appeals relate to the assessment years 1986-87 and 1987-88 and arise out of Appeals 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 Assessing Officer for invoking jurisdiction u/s 154 of the Income Tax Act can be considered as a mistake apparent from the record, which could confer jurisdiction to the Assessing Officer for initiating and making orders u/s 154 of the Income Tax Act, 1961, for the purpose of recomputing allowable deduction under Sections 80I and 80HHC

3. The above question relates to the rectification in the original assessment order in computing the deductions permissible under Sections 80I and 80HHC of Chapter VI-A of the Income Tax Act, 1961 (hereinafter to be referred to as "the Act") for the assessment years 1986-87 and 1987-88. So far as the rectification of allowable deduction u/s 80I is concerned, the question has been considered in the assessee's own case for the assessment year 1984-85 in Income Tax Appeal No. 63 of 2002 Commissioner of Income Tax Vs. Mewar Oil and General Mills Ltd., and has been answered as under (page 314) :

"In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible u/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 u/s 80I for the new industrial undertaking was not required in the present case."

4. So far as recomputation of allowable deductions u/s 80HHC is concerned, the Assessing Officer has held that deduction allowable u/s 80HHC has also not been correctly worked out and the above mistake being apparent from the record, notice u/s 154 deserves to be issued requiring the assessee to show cause as to why the assessment should not be revised. The Assessing Officer 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 u/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 Commissioner of Income Tax (Appeals) as well as the Income Tax Appellate Tribunal found this question to be a debatable one and held that the provisions of Section 154 of the Act cannot be invoked for rectifying recomputation of deductions allowable u/s 80HHC. It was also held that since investment allowance is a special rebate, the deductions u/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 Assessing Officer 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 Sections 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."

Section 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. . . ."

8. Section 80AB was inserted by the Finance Act (No. 2) of 1980 with effect from April 1,1981. 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 Section 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-section (3)(a) of Section 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.

9. A combined reading of the aforesaid provisions leave 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. Section 28 defines what income is chargeable to Income Tax under the head "Profits and gains of business or profession". Section 29 states that the income referred to in Section 28 shall be computed in accordance with the provisions contained in Sections 30 to 43D. Section 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.

10. We are, therefore, of the opinion that in so far as the Assessing Officer has found that the investment allowance allowable as deduction u/s 32A has not been deducted from the computation of the total income from incentive income for the purpose of computing allowable deduction u/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 u/s 154, subject to the period of limitation. There being no issue that rectification proceedings were not initiated within the limitation, the rectification order in so far as it relates to the recomputation of allowable deduction u/s 80HHC was not liable to be interfered with. The Tribunal as well as the Commissioner of Income Tax (Appeals) have erred in holding the question to be a debatable one, merely because for different assessment years, the Assessing Officer or the appellate authority has taken a different view. To this extent, the order of the Tribunal deserves to be set aside.

11. 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 Section 80A(2), read with Section 80VVA was also a mistake apparent on the face of the record inasmuch as Section 80A(2), which read with Section 80WA(1) provides the maximum limit up to which deduction can be allowed was clearly breached because the Assessing Officer had allowed carry forward of unabsorbed deductions under Chapter VI-A. The Commissioner of Income Tax (Appeals) as well as the Appellate 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 Section 80A(2) and Section 80VVA(l) provide the maximum limit of allowability of total deduction under Chapter VI-A in the relevant assessment year, Sub-section (4) of Section 80VVA clearly envisages that the total amount of

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allowable deduction which could not be availed of because of the maximum limit provided under Sub-section (2) of Section 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. 12. Apparently, reading of the provisions of Section 80A(2) and Section 80VVA(l) 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. 13. 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 u/s 80I is upheld. The order of recomputing the deduction u/s 80HHC by rectification is set aside and the order passed by the Income Tax Officer in that regard is restored for the respective assessment years. 14. There shall be no order as to costs.
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