1985 (3) TMI 94 - AT - Income Tax

Capital Employed Mistake Apparent From Record Original Order Retrospective Amendment Tribunal s Order

Summary

Issues:
Rectification of order under section 80J of the Income-tax Act, 1961 based on retrospective amendment.

Analysis:
The case involved a miscellaneous application by the department concerning the order of the Tribunal for the assessment year 1974-75, specifically regarding the quantum of relief under section 80J of the Income-tax Act, 1961. The department argued that a liability of Rs. 31.8 lakhs should not be considered as part of the capital employed due to a retrospective amendment by the Finance Act, 1980. They sought rectification under section 254(2) of the Act based on this amendment.

The assessee, represented by Shri Dastur, contended that no rectification was necessary under section 254. Referring to various court decisions, including the Calcutta High Court cases of Jiyajeerao Cotton Mills Ltd. v. ITO and CIT v. General Electric Co. of India Ltd., it was argued that rectification based on a retrospective amendment was not permissible. However, the department relied on the case of CIT v. Kelvin Jute Co. Ltd. where the High Court allowed rectification post-amendment, distinguishing it from previous cases.

Shri Dastur also argued that since the Tribunal had followed a decision of the Special Bench in a previous case, rectification of that decision should precede any rectification in the current case. The Tribunal rejected this argument, stating that the relevance of the Special Bench decision's rectification was minimal. Additionally, the pending reference to the High Court on the same issue did not preclude the Tribunal from rectifying its order under section 254.

The Tribunal further addressed the limitation period for rectification, noting that the department's application fell within the four-year limit from the date of the original order. Citing the Supreme Court ruling in Bombay Dyeing & Mfg. Co. Ltd., the Tribunal found a mistake in its previous order and rectified it to exclude the liability of Rs. 31.8 lakhs from the capital employed, in line with the retrospective amendment.

Finally, the Tribunal clarified that no rectification was needed for the finding regarding machineries purchased but not yet installed. The miscellaneous application was partly allowed, amending the original order of the Tribunal accordingly.