Madhya Pradesh High Court
Cit vs Kedia Leather And Liquor Ltd. on 26 September, 2006
Equivalent citations: [2007]293ITR95(MP)
Author: S.K. Seth
Bench: S.K. Seth
JUDGMENT S.K. Kulshrestha, J.
1. By this appeal, the appellant assails the order of the Income Tax Appellate Tribunal, Indore Bench, dated 29-1-2002, by which the Tribunal has reviewed its own order passed four years prior to the review application and has changed its conclusions.
2. The Income Tax Appellate Tribunal vide its order dated 27-1-2001, in appeal for the assessment year 1991-92 allowed the appeal of the revenue after going through the law laid down in CIT v. Canara Workshops P. Ltd. as Section 80B(5) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), was not on the statute. The revenue contends that before allowing deductions under Chapter VI-A, effect to all the provisions of the Act has to be given for determining the gross total income. The gross total income is defined in Section 80B(5) of the Act which reads as under :
'gross total income' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter.
3. According to this provision, gross total income means the total income computed in accordance with the provisions of this Act before making any deduction under this Chapter. According to the revenue, deduction under Chapter VI-A can be permitted after applying all the provisions of the Act and determining the gross total income and therefore the Income-tax Appellate Tribunal erred in holding that loss from leather division has to be deducted from the gross total income for the purpose of allowing deductions under Sections 80HH and 80I of the Act. In the above background, this appeal was admitted on 9-6-2003, on the following two questions of law :
(1) Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in ignoring the relevant provisions of gross total income as given in Section 80B of the Act while deciding that the assessee was entitled to deduction under Sections 80HH and 80I before adjustment of losses, sustained during the course of carrying out its business of an industrial undertaking ?
(2) Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was justified in admitting the M.A. filed by the assessee for amending earlier order dated 27-3-2001, in I. T. A. No. 1039/IND/94 which was passed without proper appreciation of the decision of the Honble High Court of Madhya Pradesh reported in CIT v. Rajaram Maize Products ?
4. Since the assessee was claiming deduction in accordance with Sections 4, 80HH and 80I of the Act on the gross total income, the department contends that it is only the residue of the income deducted in accordance with law that such a claim can be made. For better appreciation of the controversy, it would be useful to reproduce the provisions of Sections 80HH and 80I of the Act. Section 80I provides that :
80-I(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, or the business of repairs to ocean-going vessels or other powered craft, 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 from such profits and gains of an amount equal to twenty per cent. thereof.
5. From a bare reading of the provision, it is luculent that the deduction 5 is to be applied on profits and gains derived from an industrial undertaking. Section 80HH also makes a provision for relief by providing deduction in respect of profits and gains from newly established industrial undertaking or hotel business in backward areas. Section 80HH reads as under :
80HH(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business or a hotel, 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 from such profits and gains of an amount equal to twenty per cent. thereof.
6. The provision contemplates deduction on profits and gains derived from an industrial undertaking of the business of hotel to which this section applies. Thus, it can be seen that benefit of these two Sections, viz., 80HH and 80I, is available/extendable to an assessee only if it is a case of profits and gains from an industrial undertaking.
7. According to the stand of the department, before allowing deduction 7 under Chapter VI-A, effect to all the provisions of the Act has to be given for determining the gross total income. The assessee at the relevant time was running two units. From the leather division, the assessee has suffered a loss of Rs. 1,97,556 for which adjustment against the income of liquor division arrived from the business of liquor was made.
8. We have already reproduced the relevant provisions of Sections 80I and 80HH of the Act which contemplates rebate to the extent of 20 per cent. of the profits and gains. On a plain reading of the provisions, we are of the view that the deductions under Sections 80I and 80HH are available only on profits and gains from business. In the present case, the assessee claimed relief under Sections 80I and 80HH on the hypothesis that it is only after the losses are clubbed with the profit of the other concerns that relief is available to him. We find that grant of relief contemplates profits and gains defined under Section 80B(5) which contemplates the gross total income to be the income computed in accordance with the provisions of this Act before making any deduction under this Chapter. Losses adjusted in the profit of the other concerns cannot be taken into account for the purpose of profits and gains. Under this circumstances, the benefit extended even on the income of losses from other units, will not qualify for the deduction. It is only profits and gains which are to be taken into consideration for applying the provisions of Sections 80I and 80HH of the Act.
9. In view of the above, we decide question No. 1 in favour of the revenue and against the assessee.
10. The question about competence of the Income Tax Appellate Tribunal to review its judgment under Sub-section (2) of Section 254 of the Act has also been raised. Section 254 of the Act reads as under :
(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
(2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under Sub-section (1) and shall make such amendment if the mistake is brought to its notice by the assessee or the assessing officer.
11. Sub-section (2) clearly empowers the Tribunal at any time within four years from the date of the order to rectify any mistake apparent from the record and amend any order passed by it under Sub-section (1) and to make such amendment if a mistake is brought to its notice by the assessee or the assessing officer. Though the power of the Tribunal is restricted to rectify any mistake apparent on record, in the present case, the Tribunal has completely reviewed its earlier order passed in favour of the revenue on the first question. We may clarify that though within four years from the order it is permissible to seek rectification, the rectification does not authorise review of its order. In the facts and circumstances of the present case, the assessee was seeking a substitute for the direction given in favour of the revenue, therefore, rectification could not have been invoked.
12. In this view of the matter, we answer the second question also in favour of the revenue and against the assessee. This appeal is accordingly disposed of with no order as to costs.