2020 (5) TMI 515 - HC - Income Tax

Court validates Section 154 rectification for Section 80-HH deductions, clarifies loss treatment.

M/s Kakkar Complex Steels (P) Ltd. Versus The Commissioner of Income-Tax Jalandhar

The court upheld the Assessing Officer's invocation of Section 154 to rectify errors in the calculation of deductions under Section 80-HH for a specific ... Rectification u/s 154 - deduction u/s 80-HH - assessee argued that the issue with regard to deduction under Section 80-HH was specifically decided by CIT (A) hence the AO could not have passed order under Section 154 for rectifying the mistake - HELD THAT:- The contention raised is not well-founded. CIT (A) allowed the appeal holding that deduction under Section 80-HH should have been allowed @ 20% of the profit for the year without considering the actual amount allowable. Re-compute the deduction in respect of unit 'A' and unit 'B'@ 20% of the profit ultimately determined for the year, the matter was remitted back to the AO. While re-computing the deduction, the Assessing Officer considered the profit earned from non-industrial activities and also did not deducted unabsorbed brought forward losses. It was to correct this mistake apparent on the record that Section 154 was invoked. Suffice to say that the issue dealt with by the 1st Appellate Authority was not subject-matter of proceedings under Section 154 of the Act, rather 20% of the profit earned from industrial activities was considered and deduction was allowed. There is no perversity in the order passed. Question No. 1 is answered against the assessee. Deduction under Section 80-HH - Tribunal relying upon the decision of the Supreme Court in Distributors (Baroda) Pvt. Ltd. v. Union of India and others [1985 (7) TMI 1 - SUPREME COURT] upheld the order of the AO reducing the unabsorbed brought forward loss from the profit of the current year for the purpose of computing deduction under Section 80-HH - Assessee has not been able to show that the decision of the Supreme Court is not applicable in the facts of the present case, hence the question is answered against the assessee. Issues:1. Correct invocation of Section 154 for calculation of Section 80-HH.2. Reduction of unabsorbed brought forward loss for deduction under Section 80-HH.Analysis:Issue 1:The case involved a dispute regarding the correct application of Section 154 of the Income Tax Act, 1961 for the calculation of deduction under Section 80-HH. The assessment year in question was 1983-84, and the initial assessment allowed a deduction of Rs. 1,18,346 under Section 80-HH. Subsequently, the Commissioner of Income Tax (Appeal) directed a re-computation of the deduction for specific units. The Assessing Officer, upon re-computation, allowed the deduction even on profits from nonindustrial activities, leading to the invocation of Section 154 to rectify this apparent mistake. The court held that the Assessing Officer was justified in invoking Section 154 to correct the error, as the issue was not the subject matter of the previous appeal. Therefore, the order passed under Section 154 was deemed valid, and the first question was answered against the assessee.Issue 2:The second issue revolved around the reduction of unabsorbed brought forward losses from the profits of the current year for computing the deduction under Section 80-HH. The Tribunal, relying on a Supreme Court decision, upheld the Assessing Officer's decision to reduce the losses. The court found that the Supreme Court decision cited by the Tribunal was applicable in the present case, and the assessee failed to demonstrate otherwise. Consequently, the second question was also answered against the assessee. Ultimately, the reference was disposed of accordingly, affirming the decisions made in relation to both issues.This judgment clarifies the application of Section 154 for rectification of errors in deductions under the Income Tax Act and the treatment of unabsorbed brought forward losses for computing deductions under Section 80-HH.