2000 (9) TMI 237 - AT - Income Tax

Tribunal rectifies error, directs reassessment of Corporation's tax exemption eligibility under Income-tax Act

The Tribunal acknowledged a mistake in its order dated 9-9-1996 and rectified it following the Supreme Court's judgment, which clarified the Corporation's ... Appellate Tribunal Issues Involved:1. Rectification of mistake in the Tribunal's order dated 9-9-1996.2. Exemption under section 10(20) of the Income-tax Act.3. Exemption under section 11 of the Income-tax Act.4. Applicability of section 12A of the Income-tax Act.5. Power of the Tribunal to rectify its own orders.Detailed Analysis:1. Rectification of Mistake in the Tribunal's Order Dated 9-9-1996:The Tribunal issued a notice under section 254(2) of the Income-tax Act to rectify mistakes in its order dated 9-9-1996 concerning the assessment years 1985-86 and 1986-87. The Tribunal acknowledged that the rectifiable mistake originally occurred in the order dated 9-9-1996, which led to the filing of miscellaneous applications by the Revenue. The Tribunal concluded that the judgment of the Hon'ble Supreme Court dated 2-3-1998, which reversed the earlier High Court decision, necessitated rectification of the Tribunal's order.2. Exemption Under Section 10(20) of the Income-tax Act:The U.P. Forest Corporation claimed exemption under section 10(20) of the Income-tax Act, asserting it was a local authority. The Hon'ble High Court initially declared the Corporation a local authority but allowed assessment proceedings. The Supreme Court later reversed this decision, holding that the Corporation was not a local authority and thus not exempt under section 10(20).3. Exemption Under Section 11 of the Income-tax Act:The Tribunal initially dismissed the Revenue's appeals for the assessment years 1985-86 and 1986-87, following the High Court's decision. However, the Supreme Court's subsequent judgment directed the Assessing Officer to re-examine the Corporation's claim for exemption under section 11, considering the necessary conditions, including registration under section 12A and income accumulation limits. The Tribunal noted the Supreme Court's directive and decided to rectify its earlier order to comply with this judgment.4. Applicability of Section 12A of the Income-tax Act:The Tribunal highlighted that the Supreme Court directed the Assessing Officer to ensure that the Corporation fulfills the conditions for registration under section 12A and other requirements for claiming exemption under section 11. This necessitated a fresh examination of the Corporation's eligibility for exemption.5. Power of the Tribunal to Rectify Its Own Orders:The Tribunal asserted its inherent power under section 254(2) of the Income-tax Act to rectify mistakes in its orders. It referenced several judicial precedents affirming this power, including the decisions of the Hon'ble Madras High Court and the Hon'ble Bombay High Court, which held that the Tribunal has the authority to rectify mistakes apparent from the record and pass consequential orders. The Tribunal emphasized that it is duty-bound to correct mistakes arising from the application of incorrect or invalid law, especially in light of the Supreme Court's judgment.Conclusion:The Tribunal concluded that the order dated 9-9-1996 required rectification due to the Supreme Court's judgment, which invalidated the earlier High Court decision. The Tribunal decided to recall its order regarding the applicability of section 11 of the Income-tax Act for fresh adjudication in accordance with the Supreme Court's directives. Notices were to be sent to the parties for further proceedings.