Assessee's option to claim deduction under Section 36(1)(viia) cannot be overridden through rectification when the chosen mode is permissible.

Section 36(1)(viia) was construed as giving the assessee the option to choose the permissible mode of claiming the deduction, and that election could not be overridden by the Assessing Officer through rectification under Section 154. The phrase "at its option" was given substantive effect, so a completed and lawful claim could not be re-characterised by the Department as a rectifiable mistake on the facts considered. The assessee's interpretation was therefore accepted, the deduction claim was upheld, and the departmental challenge failed.

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Issues: Whether the deduction under Section 36(1)(viia) of the Income-tax Act, 1961 is to be treated as an option exercisable by the assessee and whether the Assessing Officer could override that choice through rectification under Section 154 of the Income-tax Act, 1961.

Analysis: The provision was construed to mean that the election to claim deduction under the relevant limb of Section 36(1)(viia) lies with the assessee and not with the Assessing Authority. Once the assessee has chosen a permissible mode of claiming deduction, that choice cannot be superseded by the Department by re-characterising the claim through rectification. The expression "at its option" was given substantive meaning, and the rectification was held to be beyond the proper scope of Section 154 in the circumstances considered.

Conclusion: The interpretation adopted by the assessee was accepted, and the challenge to the deduction claim failed; the appeal was allowed in favour of the assessee.

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