2005 (7) TMI 300 - AT - Income Tax

Tribunal grants appeals, remits matter for relief under Income Tax Act sec 112(1)

The Tribunal allowed the appeals of the assesses, remitting the matter to the AO to grant appropriate relief under section 112(1) of the Income Tax Act. ... Mistake Apparent Issues:Application under section 154 of the Income Tax Act rejected, Admissible relief under proviso to section 112(1) not allowed, Wrong calculation of tax on capital gain, Ignoring proviso to section 112(1) while levying tax on capital gains.Analysis:The appeals by the assessees raised common grounds regarding the rejection of the application under section 154 of the Income Tax Act. The grievance was that the relief under the proviso to section 112(1) was not granted, and there was an error in the calculation of tax on capital gain. The assessee declared income from long-term capital gains on the sale of shares, with tax computed under section 48 of the Act. The AO rejected the application under section 154, stating that there was no apparent mistake requiring rectification. The CIT(A) upheld this decision, emphasizing that the AO cannot rectify a wrong claim made by the assessee through an amendment under section 154 based on the provisions of section 143(1) of the Act.The main contention revolved around the interpretation of the proviso to section 112(1) of the Act. The assessee argued that there was no dual claim as observed by the AO; instead, the relief sought was in line with the mandatory provisions of the Act. The proviso to section 112(1) mandates that excess tax payable on long-term capital gains, after indexation, should be ignored for computation purposes. The Departmental Representative contended that the assessee had already availed indexation benefits in the original and revised returns, and there was no need for rectification. The counsel for the assessee highlighted that each share's computation can be done separately under section 112 of the Act.The crux of the issue was whether the assessee was entitled to claim relief under section 112(1) through an application under section 154. The Act's provisions regarding capital gains computation, indexation benefits, and tax rates were analyzed. The Tribunal noted that section 112 is a beneficial and mandatory provision, requiring the AO to grant the specified benefits. The rejection of the application by the Revenue authorities was deemed unjustified. The Tribunal remitted the matter to the AO to grant the appropriate benefit, whether indexation or under the proviso to section 112(1), as desired by the assessee, ensuring the correct tax rates are applied based on the chosen benefit.In conclusion, the appeals of the assesses were allowed for statistical purposes, emphasizing the need for proper application of tax rates based on the availed benefits under the relevant provisions of the Income Tax Act.