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Atlas Shoe Company Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1983)6ITD188(Delhi)
AppellantAtlas Shoe Company
Respondentincome-tax Officer
Excerpt:
.....of the deduction to be allowed under section 80j, the ito was of the opinion that there was a mistake apparent from the records in the case of the assessee in the matter of deduction allowed to it under section 80j. he, accordingly, issued show cause notices to the assessee as to why the assessments of the assessee for the years under consideration be not rectified under section 154 of the act so as to exclude from the capital computation of the assessee for each of the years under consideration the respective amounts of the borrowed capital of the assessee in each of those years. after cause was shown, the assessee was heard, the ito passed his rectification orders under section 154. by these orders the amount of deduction available to the assessee in each of the years under.....
Judgment:
1. These three appeals by Atlas Shoe Co., New Delhi, a registered firm, directed against the consolidated order of the AAC, dated 26-11-1981, have been consolidated, heard together and are being disposed of by a common order for the sake of convenience. The years of assessments involved are 1975-76 to 1977-78 for which the respective previous years ended on 31-3-1975, 31-3-1976 and 31-3-1977. In the years under consideration the assessee carried on business of manufacture and sale of PVC footwears.

2. In respect of its new industrial undertaking the ITO for each of the years under consideration allowed deduction to the assessee under Section 80J of the Income-tax Act, 1961 ('the Act') of Rs. 25,947 in the assessment year 1975-76, Rs. 27,823 in the assessment year 1976-77, and Rs. 25,938 in the assessment year 1977-78. While computing the above deductions, it is an admitted position that the ITO while computing the capital basis for the purpose of aforesaid deductions had taken into account the borrowed capital of the assessee in each of the years concerned. It may be added, however, here that the assessment orders for the years under consideration were passed on 25-1-1978 (assessment year 1975-76), 3-2-1979 (assessment year 1976-77) and 30-6-1979 (assessment year 1977-78).

3. It is an admitted position that by virtue of the Finance (No. 2) Act, 1980, sub-section (1A) was added to section 80J with retrospective effect from 1-4-1972. The said Finance Bill received the assent of the President of India on 8-6-1980. As according to the aforesaid amendment the borrowed capital was not to be included in the capital computation basis for the purpose of the deduction to be allowed under Section 80J, the ITO was of the opinion that there was a mistake apparent from the records in the case of the assessee in the matter of deduction allowed to it under Section 80J. He, accordingly, issued show cause notices to the assessee as to why the assessments of the assessee for the years under consideration be not rectified under Section 154 of the Act so as to exclude from the capital computation of the assessee for each of the years under consideration the respective amounts of the borrowed capital of the assessee in each of those years. After cause was shown, the assessee was heard, the ITO passed his rectification orders under Section 154. By these orders the amount of deduction available to the assessee in each of the years under consideration under Section 80J pertaining to the new industrial undertaking was depressed by reducing from the capital computation basis the respective borrowed capital of the assessee for each of those years.

4. Aggrieved by the said orders of the ITO under Section 154 the assessee brought the matter by way of appeals before the AAC who has agreed with the ITO.5. In the appeals before the Tribunal the representative for the assessee, Shri Nagrath, basing himself on the ratio of the decision of the Calcutta High Court in CIT v. General Electric Co. of India Ltd. [1978] 112 ITR 246 has urged that though the amendment in question incorporated in Section 80J (1A) was retrospective in effect, for assessments of the assessees, like the one before us, with retrospective effect from 1-4-1972, the mistake which was sought to be rectified by the ITO in the present case though a deemed mistake was not mistake apparent from the record which could be rectified. Shri Nagrath further urged that the ratio of the decisions of the Supreme Court in M.K. Venkatachalam, ITO v. Bombay Dyeing & Mfg. Co. Ltd. [1958] 34 ITR 143 and S.A.L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149 had no application in the present case and were distinguishable as laid down by the Calcutta High Court in the aforesaid decision. These arguments are controverted by the departmental representative who has urged that the aforesaid decisions of the Supreme Court as also another decision of that Court in ITO v.Asok Textiles Ltd. [1961] 41 ITR 732 support the view taken by the tax authorities.

6. We have given consideration to the above arguments. The decision relied upon by the representative of the assessee in the case of General Electric Co. of India Ltd. {supra) is distinguishable as is clear from the observations of their Lordships of the Calcutta High Court at page 256 because both the assessment order which was sought to be rectified under Section 154 as also the order of rectification which was sought to be challenged had been made before the passing of the Amending Act involved over there, though the amending Act was retrospective in operation. It is in the light of these facts that the Calcutta High Court distinguished the aforesaid two decisions of the Supreme Court in the cases of Bombay Dyeing & Mfg. Co. Ltd. and S.A.L.

Narayan Row (supra). Their relevant observations in this behalf are as under :M.K. Venkatachalam, ITO v. Bombay Dyeing & Mfg. Co.

Ltd. [1958] 34 ITR 143 (SC), the amendment had already been promulgated when the Income-tax Officer sought to rectify under Section 35 of the 1922 Act. The records as it stood at the relevant time disclosed an apparent mistake. In the case of S.A.L. Narayan Row v. Ishwarlal Bhagwandas [1965] 57 ITR 149 (SC) the Amending Act with retrospective effect was also in existence at the time when the Income-tax Officer proceeded to rectify the order and could determine whether the records disclosed an apparent mistake in the background of the Amended Act. In the instant case the amending Act came into existence long after the order sought to be rectified and the order of rectification. Therefore, at the relevant time, the mistake, though deemed, could not be apparent from the records. We do not propose to include the expression 'deemed to be apparent' in Section 35 of the Act.

This is not the position here. In the present case, as we have brought out above, the assessment orders were passed long before the Finance Act of 1980. Insofar as the rectification proceedings and the rectification orders passed by the ITO in the present case are concerned, they were initiated and made after Section 80J (1A) was incorporated by virtue of the Finance (No. 2) Act, 1980. The present case is not one where the order of rectification has been made prior to the aforesaid passing of the Finance Act, 1980. The present case is squarely covered by the decision of the Supreme Court in the cases of Bombay Dyeing & Mfg. Co. Ltd. and S.A.L. Narayan Row (supra). As in those cases, in the present case the Finance Act of 1980 was passed with retrospective effect from 1-4-1972 and in view of the incorporation of Section 80J (1A) the present case became a case of mistake apparent from the record in the background of the Amending Act.

We hold likewise.

7. In the result, the appeals by the assessee fail and are hereby dismissed.


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