Bombay High Court
Commissioner Of Income-Tax vs Scindia Investment Pvt., Ltd. on 18 September, 1990
Equivalent citations: [1991]190ITR128(BOM)
Author: Sujata V. Manohar
Bench: Sujata V. Manohar
JUDGMENT T.D. Sugla, J.
1. This is an application by the Department under section 256(2) of the Income-tax Act, 1961. The questions sought to be raised are :
"Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal was -
(a) justified in taking the view that the authorities relied upon by the Commissioner of Income-tax (Appeals) in his order under section 154 are not of any assistance to the Revenue and having regard to the clear language in section 154(7), the impugned order passed under section 154 is without jurisdiction and thus setting aside the rectification order passed by the Commissioner of Income-tax (Appeals) ?
(b) justified in holding that the Commissioner of Income-tax (Appeals) had re-examined the question on facts which is not contemplated under section 154 and thus accepting the assessee's contention on merits ?"
2. The proceedings relate to the assessment year 1973-74. The question involved is regarding computation of deduction under section 80M in respect of divided income. The Income-tax Officer had allowed the deduction, inter alia, by estimating expenditure that might have been incurred in relation to the divided income at the rate of 25% of the dividend income. In appeal, the Commissioner of Income-tax (Appeals), by his order dated January 31, 1979, following our court's judgment in the case of New Great Insurance Co. Ltd. (1973) 90 ITR 348, held that deduction under section 80M was required to be allowed on the basis of the gross dividend income and not the net dividend income as computed by the Income-tax Officer. Section 80AA was inserted in the Income-tax Act by the Finance (No. 2) Act, 1980, with retrospective effect from April 1, 1968, in terms of which deduction under section 80M was required to be allowed on the basis of the net dividend income. On July 27, 1981, the Income-tax Officer filed an application before the Commissioner of Income-tax (Appeals) for rectification of his appellate order on the basis of section 80AA so inserted. By his order dated August 7, 1985, the Commissioner of Income-tax (Appeals) rectified the appellate order by holding that deduction under section 80M had to be allowed on the basis of the net dividend income. He also held that, in the absence of exact particulars as regards expenditure, it would be reasonable to estimate the expenditure at the rate of 5% of the gross dividend income as was done by the Tribunal in some other cases.
3. Against the above order, the assessee filed an appeal before the Tribunal. It was contended that the order passed by the Commissioner of Income-tax (Appeals) rectifying his appellate order was barred by limitation in view of section 154(7) of the Income-tax Act, 1961. Alternatively, the contention was that, even on merits, the question was debatable and the order of rectification passed by the Commissioner of Income-tax (Appeals) was not sustainable. The Tribunal accepted the contentions and set aside the rectifying order of the Commissioner of Income-tax (Appeals).
4. The Department's application for reference was rejected by the Tribunal as, in its opinion, no referable questions of law arose. Hence, this application under section 256(2).
5. Section 154(7) provides that save as otherwise provided in section 155 or sub-section (4) of section 186, no amendment under this section shall be made after the expiry of four years from the date of the order sought to be amended. The impugned order of the Commissioner of Income-tax (Appeals) has, admittedly, been passed after four years of the appellate order passed by him. The order is, thus, barred by limitation. The argument that, in case the assessee's applications for rectification are not disposed of by the departmental authorities within four years, the courts have held that the orders rectifying the orders passed earlier should be passed if the applications were filed within four years has no application in this case inasmuch as the principle behind those decisions is that nobody can take advantage of his own wrong. The Department certainly cannot refuse to pass an order under section 154 on the ground that it had failed to pass such an order within four years and that not it cannot pass the order as it has become barred by limitation. This argument cannot apply to a case where the application for rectification is by one departmental officer before another departmental officer. The assessee is not taking advantage of its own wrong. The answer to the first question is, thus, obvious.
6. In view of the fact that we are not directing the Tribunal to refer the first question as a question of law, the second question need not be referred as a question of law as the answer to that question either way is not going to materially affect the parties.
7. Accordingly, rule stands discharged. No order at to costs.