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income-tax Officer Vs. Homi Mehta and Sons (P.) Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1985)14ITD64(Mum.)
Appellantincome-tax Officer
RespondentHomi Mehta and Sons (P.) Ltd.
Excerpt:
.....the high court held that the tribunal had the power to rectify that order.in the course of the decision, the high court has referred to the decision cited by shri dastur. at page 683 of the report near the bottom, the high court has pointed out that the case of general electric co. of india ltd. (supra) must be understood in the light of the facts of that case. there what happened was that the step for rectification was taken before the amendment. in such a situation the decision of the court was right. but, in this case, i.e., where rectification proceedings are taken up after the amendment, the high court has pointed out that the supreme court decision in the case of m.k. venkatachalam, ito v. bombay dyeing & mfg. co. ltd. [1958] 34 itr 143 and s.a.l. narayan row v. ishwarlal.....
Judgment:
1. This is a miscellaneous application by the department arising out of the order of the Tribunal disposing of a departmental appeal for the assessment year 1974-75. In the original order of the Tribunal, one of the issues decided was the quantum of relief under Section 80J of the Income-tax Act, 1961 ('the Act').

2. In the miscellaneous application, the department has pointed out that the liability of Rs. 31.8 lakhs cannot be treated as part of the capital employed in view of the retrospective amendment of Section 80J.According to the department, it would show that there is a mistake which requires rectification.

3. The Finance Act, 1980 has amended the provisions retrospectively and as per the amended provisions, it is not open for the assessee to include this amount of Rs. 31.8 lakhs as part of the capital employed.

As per the amended provisions, therefore, the order of the Tribunal would be a mistake and it should be rectified under Section 254(2) of the Act.

4. Shri Dastur appearing for the assessee, however, submitted that there is no mistake which is capable of being rectified under Section 254. He first referred to a decision of the Calcutta High Court in the case of Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710, but this decision is in respect of a rectification based on a Supreme Court decision. What the department requires is the rectification based on the retrospective amendment.

5. Shri Dastur then referred to another decision of the Calcutta High Court in the case of CIT v. General Electric Co. of India Ltd. [1978] 112 ITR 246 wherein the Calcutta High Court has held that no rectification is possible even in respect of retrospective amendment.

Now, this particular decision has been considered by the Calcutta High Court in the case of CIT v. Kelvin Jute Co. Ltd. [1980] 126 ITR 679.

That was also a case where the Tribunal was called upon to rectify its order under Section 254(2) because of a retrospective amendment. The question before the Tribunal was whether wealth-tax paid by the company was allowable as a deduction. The Tribunal had held that wealth-tax was allowable. In the meantime, the Act was amended and thereafter the department filed an application for the rectification of the order. The High Court held that the Tribunal had the power to rectify that order.

In the course of the decision, the High Court has referred to the decision cited by Shri Dastur. At page 683 of the report near the bottom, the High Court has pointed out that the case of General Electric Co. of India Ltd. (supra) must be understood in the light of the facts of that case. There what happened was that the step for rectification was taken before the amendment. In such a situation the decision of the Court was right. But, in this case, i.e., where rectification proceedings are taken up after the amendment, the High Court has pointed out that the Supreme Court decision in the case of 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 would be applicable and it could be treated as a mistake apparent from the records. Thus, the decision relied on by Shri Dastur is distinguishable on facts.

6. It was next submitted that the Tribunal has merely followed the decision of the Special Bench of the Tribunal in the case of Amar Dye-Chem. Ltd. v. ITO [1983] 3 SOT 384 (Bom.). Unless that decision of the Special Bench was rectified, there could not be any rectification of this order. We find no merit in this submission. When the Tribunal had referred to the Special Bench decision, it was merely adopting the reasons given in the Special Bench decision, whether that decision is rectified or not is a matter of least relevance to us.

7. It was then submitted that the Tribunal had already made a reference on this very same issue to the High Court and the matter was now pending for answer from the High Court. Under those circumstances, it was submitted that the Tribunal could not make any rectification order.

We are unable to accept this submission either. The order passed by the Tribunal in the face of the statutory provisions is a mistake. If it is mistake, then it could be rectified under Section 254. The fact that a reference had already been made does not take away from the Tribunal the power of rectification.

8. A reference was also made to the decision of the Bombay High Court in the case of J.M. Shah v. J.M. Bhatia, AAC [1974] 94 ITR 519. That was a case of a rectification of a retrospective amendment to be made by an AAC. The Bombay High Court pointed out that it was debatable whether the amending provision applied to a completed assessment against which no further proceedings were pending on the date of enactment of the amending provision. It is on those facts of the case that the Bombay High Court held that the rectification is not possible.

In this case, further proceedings are pending. In the earlier paragraph, Shri Dastur had himself pointed out that the reference was pending. Since further proceedings are pending, the ratio of the Bombay High Court is not applicable. Shri Dastur has also referred to a decision in the case of Padmavati Jaykrishna v. CWT [1976] 105 ITR 115 (Guj.). That was a case which turned on the fact that while a part of the amendment was retrospective, another part, i.e., the Explanation, was not retrospective. We don't have any such difficulties in Section 80J(IA). Therefore, that decision also has no relevance.

9. Lastly, it was submitted that the Tribunal's order was passed on 29-9-1979 and rectification, if at all, could be only within four years of that date. Since that date has expired, no rectification is possible. Now, it is well settled that the rights of the parties can never lapse because of the laches of the Court. The department had filed their application for rectification on 21-5-1981, which is within the period of limitation. The right of the department cannot be taken away merely because the Tribunal did not hear the matter within a period of four years. This is too well settled a proposition to require any further elaboration. In the result, we hold that the ruling of the Supreme Court in the case of Bombay Dyeing & Mfg. Co. Ltd. (supra) would be applicable and there is a mistake in our order passed on 29-9-1979 and that mistake is rectified under Section 254(2). As a result, para 5 of the original order of the Tribunal would be amended to hold that the liability of Rs. 31.8 lakhs cannot be treated as capital employed.

10. A faint reference was made to the finding of the Tribunal in para 4 of the original order. This dealt with machineries purchased but not yet installed. No rectification of this finding is required.

11. In the result, the miscellaneous application is partly allowed. The original order of the Tribunal would stand amended accordingly.


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