Rectification for later binding precedent and factual verification of section 80P eligibility based on actual activities.

A later binding jurisdictional decision reversing the precedent applied in the original order can justify rectification under section 154, because the earlier allowance was based on a legal position that no longer stood. The rectification was therefore valid. For deduction under section 80P, eligibility after insertion of sub-section (4) must be tested by examining the assessee-society's actual activities for the relevant year; registration status alone is not conclusive. The Assessing Officer was required to verify the facts afresh, and the deduction issue was remitted for that factual enquiry.

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Issues: (i) Whether the order granting deduction under section 80P could be rectified under section 154 on the basis of a later binding decision; (ii) whether the claim for deduction under section 80P required verification of the assessee-society's activities by the Assessing Officer.

Issue (i): Whether the order granting deduction under section 80P could be rectified under section 154 on the basis of a later binding decision.

Analysis: A subsequent decision of the jurisdictional Full Bench reversing the earlier view relied upon in the original appellate order was treated as sufficient to bring the case within the scope of rectification. The earlier allowance of deduction was founded on a precedent that no longer represented the correct legal position, and such a change in the controlling law was considered a rectifiable mistake.

Conclusion: The rectification under section 154 was held to be valid and the assessee's challenge on this point failed.

Issue (ii): Whether the claim for deduction under section 80P required verification of the assessee-society's activities by the Assessing Officer.

Analysis: The governing legal position required the Assessing Officer to examine the actual nature of the assessee's activities to determine eligibility for deduction under section 80P after insertion of sub-section (4). The classification of the society in the registration certificate was not conclusive, and eligibility had to be determined year-wise on the facts of the relevant assessment year.

Conclusion: The matter was restored to the Assessing Officer for factual enquiry and fresh decision on the admissibility of deduction under section 80P.

Final Conclusion: The rectification order was sustained, but the deduction issue was remitted for factual verification, resulting in a partial allowance of the appeal for statistical purposes.

Ratio Decidendi: A later binding decision reversing the precedent applied in the original order can constitute a rectifiable mistake, and eligibility for deduction under section 80P after insertion of sub-section (4) must be determined on an enquiry into the assessee's actual activities rather than solely on its registration status.

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