Income Tax Appellate Tribunal - Chandigarh
Assistant Commissioner Of Income-Tax vs Sangrur Vanaspati Mills Ltd. on 30 August, 1996
Equivalent citations: [1997]60ITD332(CHD)
ORDER
J. Kathuria
1. This appeal by the revenue pertains to assessment year 1986-87.
2. Original assessment in this case was completed on 30-12-1988. Later on, while scrutinising the assessment order, the Assessing Officer noticed that deduction under section 80HH of the Income-tax Act had been allowed on a gross profit of Rs. 1,44,36,149 which had been determined before allowing deductions under sections 32 and 32A of the Act. From this the Assessing Officer concluded that an excess allowance of deduction under section 80HH had been allowed to the assessee. The Assessing Officer accordingly issued a notice under section 154 proposing to re-determine the deduction under section 80HH on the profit after giving effect to deductions under sections 32 and 32A of the Act. It appears that the assessee had no objection to the proposed rectification. The assessee, however, filed a letter stating therein that deduction under section 80HH be allowed on the profit after adjustment of current year's depreciation and investment allowance but before the adjustment of unabsorbed investment allowance and previous years' relief. This contention was not found to be acceptable by the Assessing Officer. The Assessing Officer held that deductions under section 80HH were to be determined on the profit arrived at after giving effect to unabsorbed deficiencies of earlier years.
3. The Assessing Officer further noted that the first appellate authority has allowed certain relief to the assessment year 1985-86 and some other orders under section 154 had been passed in earlier years after the completion of regular assessment for assessment year 1986-87. The Assessing Officer, therefore, passed an order under section 154 dated 30-3-1989 to give consequential effect to passed by the CIT(A) for assessment year 1985-86 and to the orders passed by the Assessing Officer under section 154 in earlier years so as to give consequential effect to those orders. The Assessing Officer recomputed the assessee's total income by reducing income from Rs. 1,44,36,149 (income as originally assessed) the current year's depreciation (Rs. 15,13,245), the unabsorbed depreciation for assessment year 1985-86 (Rs. 10,00,428), current year's investment allowance (Rs. 2,38,462), unabsorbed investment allowance for assessment year 1985-86 (Rs. 30,382) and worked out the income at Rs. 1,16,43,632. On this figure of Rs. 1,16,43,632, the Assessing Officer allowed deduction under section 80HH at the rate of 20 per cent at Rs. 23,28,726 and after the further deductions of Rs. 5,62,242 and Rs. 6,73,724 in respect of section 80J claim were allowed and the revised total income was computed at Rs. 80,78,940.
4. The assessee preferred an appeal before the learned CIT(A) and submitted that the Assessing Officer had erred in computing the claim under section 80HH at Rs. 23,28,726 as against the claim of Rs. 28,87,030 made by the assessee. The learned CIT(A) following his order in the assessee's own case for assessment year 1987-88 upheld the assessee's contention and directed the Assessing Officer to compute the deduction under section 80HH before deducting investment allowance from the profits and gains of industrial undertaking.
5. The learned D.R. submitted that the learned CIT(A) had erred in directing the Assessing Officer to compute the deduction under section 80HH before deducting investment allowance from the profits and gains of the industrial undertaking. The learned D.R. referred to and relied on the Tribunal's order dated 22-8-1995 in the assessee's own case for assessment years 1987-88 and 1988-89 in which it was held that the learned CIT(A) was not justified in directing the Assessing Officer not to reduce investment allowance from the profits and gains on industrial undertaking for purposes of computing deduction under section 80HH of the Act. It was submitted that in the said order dated 22-8-1995 the Tribunal had relied on the Supreme Court decision in the case of H.H. Sir Rama Varma v. CIT [1994] 205 ITR 433. It was also pointed out that in the aforesaid order, the Tribunal had observed that there was no conflict of judicial opinion now and hence the proposition that where two reasonable constructions are possible, the one favouring the assessee should be adopted, had no application. The learned D.R. also referred to the Supreme Court decision in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 at 95 wherein the Supreme Court had held that while computing the deduction under section 80E of the Act, there was no scope for excluding items like unabsorbed depreciation and unabsorbed development rebate. It was argued that according to the ratio of the Supreme Court judgment in the case of Cambay Electric Supply Industrial Co. Ltd. (supra) even for purposes of section 80HH investment allowance had to be reduced before working out the deduction under section 80HH. It was also submitted that under section 80AB which was inserted by the Finance (No. 2) Act, 1980 w.e.f. 1-4-1981 income and first to be computed as per the provisions of the Income-tax Act, and then only deduction had to be allowed under section 80HH. It was, therefore, submitted that the investment allowance had to be reduced from the income to be computed in accordance with the Income-tax Act before allowing deduction under section 80HH of the Act and that this was clear from the bear reading of section 80AB. Reliance was also placed on the Supreme Court decision in the case of Mettur Chemicals & Industrial Corpn. Ltd. v. CIT [1996] 217 ITR 768/86 Taxman 157 for the proposition that the profits and the gains of industrial undertaking to which section 84 of the Act, applies have to be computed in accordance with the provisions contained in Chapter IV-D of the Act and development rebate has first to be deducted from the total income and it is only thereafter, if any profits and gains remain from this business that the benefit under section 84(1) of the Act shall be applicable. It was submitted that in its judgment in the case of Mettur Chemical & Industrial Corpn. Ltd. (supra), the Supreme Court had followed its earlier judgment in the case of Cambay Electric Supply Industrial Co. Ltd. (supra). It was, therefore, submitted that the principle had already been formulated by the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. (supra) and so the Assessing Officer had mistake while allowing deduction under section 80HH at a higher amount in the original assessment and he was fully justified in passing a rectification order.
6. Referring to the Calcutta High Court decision in the case of Allahabad Bank v. CIT [1993] 199 ITR 664/69 Taxman 66 it was submitted that the earlier decision in the case of Export Enterprises (P.) Ltd. v. ITO [1983] 142 ITR 641/15 Taxman 299 (Cal.) had been held to be no longer good law. Reliance was also placed on the Delhi High Court decision in the case of Motilal Pesticides (India) (P.) Ltd. v. CIT [1994] 207 ITR 636 for the proposition that section 80HH had to be read along with the provisions of section 80B(5) which defines gross total income as meaning "the total income computed in accordance with the provisions of the Income-tax Act, before marking any deductions under Chapter VI-A". It was submitted that the Delhi High Court had further held that special deduction under section 80HH had to be calculated on the net income. It was also pointed out that the Delhi High Court had also held that the ratio of the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. (supra) was applicable even in respect of deduction under section 80HH of the Act.
7. The learned D.R. also relied on the Gujarat High Court decision in the case of Paushak Ltd. v. CIT [1994] 210 ITR 535 for the proposition that unabsorbed losses and unabsorbed depreciation have to be deducted before arriving at the figures that would be exigible for purposes of deduction under section 80HH of the Act. It was submitted that the Gujarat High Court had also followed the Supreme Court decision in the case of Cambay Electric Supply Industrial Co. Ltd. (supra).
8. The learned D.R. vehemently argued that a subsequent decision of the Supreme Court gives rise to a mistake apparent from record and for this proposition reliance was placed on the following decisions :-
(i) B.V.K. Seshavataram v. CIT [1994] 210 ITR 633/75 Taxman 180 (AP);
(ii) M.K. Kuppuraj v. ITO [1995] 211 ITR 853 (Mad.);
(iii) CIT v. East India Storage (P.) Ltd. [1996] 218 ITR 668 (Cal.);
(iv) Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO [1975] 100 ITR 651 (Guj.);
(v) Walchand Nagar Industries Ltd. v. V.S. Gaitonde, ITO [1962] 44 ITR 260 (Bom.).
9. The learned D.R. relied on the Calcutta High Court decision in the case of CIT v. Bengal Assam Steamship Co. Ltd. [1985] 155 ITR 26/22 Taxman 356 for the proposition that a mistake in the allowance of relief under section 80L and under section 80M made because of misreading of section 80A would be a mistake apparent from record and such mistake was rectifiable under section 154 of the Act. It was submitted that likewise a mistake in the allowance of relief under section 80HH because of the misreading of sections 80AB and 80B(5) would be mistake apparent from record and such mistake can be rectified under section 154 of the Act.
10. Thus the learned D.R. submitted that the order passed by the Assessing Officer under section 154 of the Act was valid and correct and that the first appellate authority was not justified in giving relief to the assessee.
11. Shri. N.K. Garg, the learned Counsel for the assessee, submitted that the Calcutta High Court in the case of Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710 had held that the law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate, doubt or conflict to judicial opinion is resolved and settled by the Supreme Court, it does not obliterate the existence of such debate, doubt or conflict prior to such decision. It was submitted that the Supreme Court had also rejected the departmental SLP in the case of CIT v. Jiyajeerao Cotton Mills [1983] 142 ITR (St.) 2. It was argued that after the decision of the Supreme Court in the case of Mettur Chemical & Industrial Corpn. Ltd. (supra) perhaps it may be possible to say that there was a mistake in the original assessment order of the Assessing Officer with regard to the deduction under section 80HH but when the Assessing Officer passed the order under section 154 in the assessee's case on 30-3-1989, no such order of the Supreme Court was available because the Supreme Court rendered the decision much later 16-11-1995. It was, therefore, submitted that when the Assessing Officer passed the order under section 154, there was a debate and a doubt and hence the order passed was bad in law. It was also pointed out that the Supreme Court decision in the case of Mettur Chemical & Industrial Corpn. Ltd. (supra) was in respect of section 84 whereas in the present case we were concerned with the provisions contained in section 80HH of the Act. It was pointed out that under section 84(5), it was stipulated that the profits and gains derived from an industrial undertaking to which this section applies shall be computed in accordance with the provisions contained Chapter IV-D, i.e., sections 28 to 43 of the Act. It was submitted that there was no such restriction under section 80HH of the Act. It was also submitted that the Tribunal in deciding the revenue's appeals in the assessee's case for assessment years 1987-88 and 1988-89 had relied on the Supreme Court decision in the case of H.H. Sri Rama Varma (supra) in which it was held that relief under section 80T was to be given only for the amount of long-term capital gains of the current assessment year after the long-term capital loss of the earlier years brought forward was set off. It was, however, pointed out that the Supreme Court in the case of CIT v. V. Venkatachalam [1993] 201 ITR 737/70 Taxman 231 had held that the words "such income" in the main part of section 80T meant and referred to the capital gains and not the total income of the assessee. It was submitted that there was contradiction in the decisions of the Supreme Court in the cases of H.H. Sri Rama Varma (supra) and V. Venkatachalam (supra). Relying on the ration of the Punjab and Haryana High Court decision in the case of CIT v. Rajesh Talkies [1996] 220 ITR 107/87 Taxman 204 it was submitted that on merits the issue may have been decided against the assessed in its own case for assessment years 1987-88 and 1988-89 but in the present proceedings the order had been passed under section 154 and hence the assessee could legitimately claims that this point being a dispute one was not rectifiable under section 154. It was submitted that was the dispute of deduction under section 80HH has still not been resolved and in that view of the matter, the rectification under section 154 was not permissible in law. It was submitted that even for assessment years 1987-88 and 1888-89, the Tribunal itself had referred the following question of following law to the Punjab and Haryana High Court vide statement of the case dated 24-1-1996 in R.A. Nos. 270 and 271/Chandi/1995 :
"Whether on the facts and circumstances of the case, the ITAT was right in law in holding that the deduction under section 80HH should be allowed out of profits and gains derived from industrial undertaking as computed under the law i.e. after deduction under sections 32A/32AB For assessment years 1987-88/1988-89 ?"
It was submitted that the Tribunal itself was of the opinion that the matter was not free from doubt and debate and had referred the question of law to the High Court in the assessee's own case for assessment years 1987-88 and 1988-89 and in the view of the matter it could not be said that it was a mistake apparent from record which could be rectified under section 154 for assessment year 1986-87.
12. The learned Counsel submitted that a specific ground being ground No. 3 was raised before the learned CIT(A) to the effect that the Assessing Officer was not justified in reducing the claim under section 80HH by passing an order under section 154. It was submitted that this issue by implication had been decided in the impugned order against the assessee and the assessee by the virtue of rule 27 of the Appellate Tribunal Rules, 1963 can support the order appealed against on any of the grounds decided against it.
13. The learned Counsel also pointed that the decisions in the cases of CIT v. Tarun Udyog [1991] 191 ITR 688 (Ori.); CIT v. Agency Marketing Co-operative Society Ltd. [1993] 201 ITR 881 (Ori.); CIT v. H.M.T. Ltd. [1993] 199 ITR 235 (Kar.); CIT v. Siddaganga Oil Extractions (P.) Ltd. [1993] 201 ITR 968/67 Taxman 426 (Kar.); ITO v. Hindustan Electro Graphites Ltd. [1992] 41 ITD 223 (Indore) and Yenpeyees Rubber (P.) Ltd. v. First ITO [1983] 5 ITD 605 (Mad.) support the assessee's view-point and hence investment allowance could not be reduced from the total income before allowing relief under section 80HH. It was submitted that in section 80AB, the expression used was "income" whereas section 80HH mentioned the expression "profits and gains of business".
14. In short, the learned Counsel submitted that there was no justification for the Assessing Officer to have rectified the original assessment order and reduced the assessee's claim under section 80HH of the Act.
15. In reply, the learned D.R. submitted that at the time of passing order under section 154, the decision in the case of Cambay Electric Supply Industrial Co. Ltd. (supra) was available and that the Supreme Court in subsequent decision in Mettur Chemical & Industrial Corpn. Ltd.'s case (supra) had merely followed the same. It was also submitted that there was not difference in the language used in section 84 of the Act and section 80HH, read with section 80AB of the Act because originally section 84(5) stipulated that the profits and gains from an industrial undertaking shall be computed in accordance with the provisions contained in Chapter IV-D (i.e. sections 28 to 43) whereas sections 80HH and section 80AB stipulated that first the income had to be computed in accordance with the provisions of the Income-tax Act before allowing deductions contemplated under Chapter VI-A which included section 80HH also.
16. We have carefully considered the submissions of both the sides. When the Assessing Officer passed the order under section 154 on 30-3-1989, the Supreme Court decision in the case of Cambay Electric Supply Industrial Co. Ltd. (supra) was available because the same was rendered on 11-4-1978. In that case, however, the question was one of exclusion or inclusion of items like unabsorbed depreciation and unabsorbed development rebate. In the present case, we are not concerned with items like unabsorbed depreciation and unabsorbed development rebate but with the question of investment allowance. One may, therefore, argue that the decision of the Supreme Court in the case of the Cambay Electric Supply Industrial Co. Ltd. (supra) did not cover the assessee's case. It is true that the Supreme Court in the case of Mettur Chemical & Industrial Corpn. Ltd.'s case (supra) had held that development rebate has first to be deducted from the total income before working out the relief under section 84 of the Act. We find that section 84 and section 80HH are in pari materia but the decision of the Supreme Court in the case of Mettur Chemical & Industrial Corpn. Ltd. (supra) was rendered on 16-11-1995 which was much later than the order passed by the Assessing Officer under section 154 of the Act in the present case. When the Assessing Officer, passed the order under section 154, there was a debate and a dispute with regard to the inclusion or exclusion of investment allowance for purposes of computation of relief under section 80HH. The Calcutta High Court in the case of Jiyajeerao Cotton Mills Ltd. (supra) held that the law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate, doubt or conflict of judicial opinion is resolved and settle by the Supreme Court, it does not obliterate the existence of such debate, doubt or conflict prior to such decision. In other words, when the Assessing Officer passed the order under section 154, the debate, doubt or conflict on the point was there. It is also significant to note that the Supreme Court rejected the departmental SLP in the case of Jiyajeerao Cotton Mills Ltd. (supra). The learned D.R. has pointed out a host of authorities for the proposition that investment allowance is to be reduced first before computing the relief under section 80HH of the Act. The learned Counsel for the assessee has also cited authorities to the contrary. The learned CIT(A) in the present case has followed his order in the assessee's own case on merits for assessment year 1987-88 which order was reserved by the Tribunal in ITA No. 1418/Chandi/1989 vide order dated 22-8-1985 but the fact remains that the Tribunal has allowed the assessee's reference applications for assessment years 1987-88 and 1988-89 and drawn up the statement of the case on 24-1-1996 and referred the matter to the High Court for its opinion. The question referred has been reproduced in the earlier portion of this order and may not be repeated here. But even the Tribunal thinks that the matter is still not finally settled and that is why the question of law has been referred to the High Court. The very fact that the matter had to be debated at length before us shows that the neat proposition of law arrived at by the Revenue in the present case was arrived at after a long drawn process of reasoning and thus the matter in not one which would fall within the purview of section 154. Taking into consideration the entire facts and circumstances of the case, we hold that at the time of rectification, the dispute was very much there and it cannot be said that the dispute had been finally resolved with respect to the controversy at hand. We, therefore, hold that the Assessing Officer was not justified in passing an order under section 154 reducing the claim of the assessee under section 80HH of the Act.
17. In the result, the appeal is dismissed. Though not for the reason mentioned by the CIT(A).