2014 (7) TMI 1128 - AT - Income Tax

Retrospective Application of Supreme Court Decision in Tax Case | Rectification Order

VASUDEVA PAHWA Versus ASSISTANT COMMISSIONER OF INCOME-TAX

The Tribunal concluded that the subsequent Supreme Court decision in Topman Exports should be applied retrospectively to the case. As it constituted a ... Deduction u/s 80HHC of the receipt of DEPB entitlement - Legality of revision of order of Tribunal u/s 254 on ground of retrospective overruling - whether the issue involved in the present case is now covered by the decision of CIT v. Kalpataru Colours and Chemicals [2010 (6) TMI 63 - BOMBAY HIGH COURT] OR the ratio laid down by Topman Exports v. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] which has reversed the decision of Kalpataru Colours and Chemicals and held that the face value of the DEPB will fall under clause (iiib) of section 28 - Rectification of mistake - Held that:- Subsequent decision of the hon'ble Supreme Court operates retrospectively and, therefore, it had to be regarded as it existed when the impugned order was passed by the Tribunal and, thus, a mistake has crept on the face of the record which could not be allowed to remain. We further note that the limitation for correcting mistake, that is imposed by the provisions of section 254(2), is only with respect to time and since the miscellaneous application in hand for rectification had been made within the prescribed time limitation, the order of tribunal deserves to be rectified and we proceed to rectify the same by respectfully following decision of the hon'ble apex court in the case of Topman Exports v. CIT [supra] and decision Lakshmi Sugar Mills Co. Ltd. v. Asst. CIT (2012 (6) TMI 39 - DELHI HIGH COURT) as follows. - Decided in favour of assesse. Issues Involved:1. Applicability of the Supreme Court decision in Topman Exports v. CIT to the present case.2. Rectification of the Tribunal's order based on the subsequent Supreme Court decision.3. Compliance with the time limit for rectification under section 254(2) of the Income-tax Act, 1961.Detailed Analysis:1. Applicability of the Supreme Court decision in Topman Exports v. CIT:The primary issue revolves around whether the decision of the Supreme Court in Topman Exports v. CIT [2012] 342 ITR 49 (SC) should be applied retrospectively to the present case. The Tribunal had initially dismissed the appeal based on the Bombay High Court's decision in CIT v. Kalpataru Colours and Chemicals [2010] 328 ITR 451 (Bom), which held that the entirety of the sale consideration of DEPB would fall under section 28(iiid) of the Income-tax Act, 1961. However, the Supreme Court in Topman Exports reversed this decision, holding that the face value of DEPB falls under clause (iiib) and the difference between the sale value and face value under clause (iiid) of section 28.2. Rectification of the Tribunal's order based on the subsequent Supreme Court decision:The assessee argued that the Tribunal's order should be rectified under section 254(2) of the Act, as the Supreme Court's decision in Topman Exports, which operates retrospectively, constitutes a 'mistake apparent from the record.' The Departmental representative did not object to this rectification. The Tribunal acknowledged that the decision of the Supreme Court in Topman Exports, which was delivered after the Tribunal's original order, should be regarded as the law as it existed when the order was passed.3. Compliance with the time limit for rectification under section 254(2) of the Income-tax Act, 1961:The Tribunal considered the time limit for rectification under section 254(2), which prescribes a four-year period from the date of the order. Since the application for rectification was made within this period, the Tribunal found it permissible to rectify the order. The Tribunal cited the Delhi High Court's decision in Lakshmi Sugar Mills Co. Ltd. v. CIT [2013] 212 Taxman 118 (Delhi) (Mag), which supports the view that a Supreme Court decision operating retrospectively can be the basis for rectification if the application is within the stipulated time frame.Conclusion:Upon careful consideration of the facts and submissions, the Tribunal concluded that the subsequent Supreme Court decision in Topman Exports operates retrospectively and should be applied to the present case. This constitutes a 'mistake apparent from the record,' which warrants rectification. Since the rectification application was filed within the prescribed time limit, the Tribunal decided to rectify the order dated December 16, 2011, and remanded the issue to the Assessing Officer to recompute the deduction under section 80HHC in accordance with the Supreme Court's decision in Topman Exports. The Assessing Officer is directed to provide the assessee with an opportunity for a hearing during the remanded proceedings.The Tribunal's order dated December 16, 2011, is thus rectified, and the sole ground of the assessee in I.T.A. No. 5563/Del/2010 is allowed for statistical purposes. The miscellaneous application filed by the assessee is allowed.The order was pronounced in the open court on July 1, 2014.