TMI Blog2012 (8) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... counting for ascertaining net profit and/or book-profit as it nowhere provides that the net profit as shown in the profit and loss account not the profit computed under the head profit and gains of business or profession - Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company Even if the income from other sources is included in the profit and loss accounts to ascertain the net profit qua book-profit for computation of the remuneration of the partners the same cannot be discarded. - I.T.A. No.201 of 2003 - - - Dated:- 17-5-2012 - KALYAN JYOTI SENGUPTA AND JOYMALYA BAGCHI JJ. K.J. Sengupta, J.:- The instant appeal has been preferred against the judgment and order dated 28th February, 2003 of the learned Tribunal for the assessment years 1995-96 to 1998-99. The above appeal was admitted by an order of this Court dated 17th November, 2003 on the following substantial questions of law:- (i) Whether the Tribunal was justified in law in dismissing the appellant s appeal for the assessment years 1995-96 to 1998-99 without affording to it reasonable opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultancy fees, interest on bank deposit, profit on disposal of assets and interest on advance tax which has been shown as income under the head other sources could not be considered as part of the book profit for the purpose of computation of allowable partners remuneration. Hence the Assessing Officer proposed to rectify the said alleged mistake under Section 154 of the Act by adding back the deduction allowed in excess. The appellant-assessee duly replied to the said notice and objected to reopening of the same raising the question of jurisdiction as the point raised in the notice under Section 154 was debatable and arguable. The Assessing Officer however, did not accept the appellant s contention and passed orders rectifying the intimations under Section 143(1)(a) for each of the years. The appellant thence preferred appeal against the aforesaid order of rectification before the Commissioner of Income Tax (Appeals) who by consolidated order dated 29th January, 2002 which apart from the aforesaid four years also for assessment year 1995-96 rejected all the appeals. Thereafter the petitioner took the matter to the learned Tribunal and preferred appeal once again in connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hown in the profit and loss account however it was intended that for the purpose of Explanation 3 only profit computed under head profits and gains on business or professions were to be considered, the expression used in Explanation 33A to Section 80HHC and Section 33AB would have also found place in Explanation 3. He contends that stipulation for the net profit should be computed in the manner laid down in Chapter IV-D requires that computation provision of Chapter IV-D namely those contained in Sections 30 to 33D should have been followed in computing the net profit. Section 29 of the Act contained in Chapter IV-D deals with computation of income under the head profits and gains on business or profession . Sections 30 to 43D provide for various deductions. None of the said sections provide for exclusion of any item of income because it does not fall under the head of profits and gains of business or profession . The reasons for making the computation provisions of Chapter IV-D applicable for computing the book profit is only to ensure that all deductions have been allowed as otherwise an assessee may compute the book profit and higher figure and thereby claim a higher amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntimation issued under the said provision did not suffer from any mistake apparent from the record and there can be no question of exercising the power under Section 154 for rectifying such an intimation. He reminds us referring to the decisions of the Supreme Court in case of CIT v. Hero Cycles Private Limited reported in (1997) 22 ITR 463 and Deva Metal Powders (P) Limited v. Commissioner, Trade Tax, Uttar Pradesh reported in (2008) 2 SCC 439 that rectification under Section 154 can only be made if there is a glaring mistake of fact and law but not if the question is debatable. A point which was not examined on fact or in law cannot be dealt with as a mistake apparent from the record within the meaning of Section 154. Learned counsel for the respondent contends that in the returns filed by the assessee, the book profit for the purpose of computation of remuneration paid to partners has been taken as Rs.9,79,081/- which includes income under the heads granting consultancy fees and interest on bank deposit totaling to Rs.18,77,749/-. The assessee himself detailed income under the head income from other sources. From the plain reading of Section 40(b)(v) Explanation 3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the age of the matter we refrained ourselves from remanding the matter and we decide the matter by ourselves. As we have already observed learned two authorities below have not decided anything else, we therefore, examined the order passed by the Assessing Officer in relation to aforesaid two assessment years. Three several orders were passed with identical reasons and even language. It appears from the orders of the Assessing Officer when notice under Section 154 was issued replies in writing were given to the Assessing Officer explaining how the computation of remuneration of partners were determined and the same were shown in the audited accounts, the said explanation was not accepted. The Assessing Officer was of the view that the entire profit of the business of the assessee cannot be a book profit for the purpose of explanation 3 of Section 40(b)(v). It is better to quote the language used by the Assessing Officer in three assessment orders as follows:- Thus, clearly income from other sources is not to be included in the book profit for the purpose of computation of allowable remuneration to partners. In the respective intimations under Section 143(1)(a) of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It means open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious, seeming . A mistake which can be rectified under Section 22 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. It is appropriate to quote also paragraph 15 of the said report- 15. Mistake is an ordinary word but in taxation laws, it has a special significance. It is not an arithmetical error which, after a judicious probe into the record from which it is supposed to emanate is discerned. The word mistake is inherently indefinite in scope, as to what may be a mistake for one may not be one for another. It is mostly subjective and the dividing line in border areas is thin and indiscernible. It is something which a duly and judiciously instructed mind can find out from the record. In order to attract the power to rectify under Section 22, it is not sufficient if there is merely a mistake in the order sought to be rectified. The mistake to be rectified must be one apparent from the record. A decision on a debatable point of law or a disputed question of fact is not a mistake apparent from the record. (emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time during the said previous year, provide for such payment. Explanation 1. - Where an individual is a partner in a firm on behalf, or for the benefit, of any other person (such partner and the other person being hereinafter referred to as partner in a representative capacity and person so represented , respectively), - (i) interest paid by the firm to such individual otherwise than a partner in a representative capacity, shall not be taken into account for the purposes of this clause; (ii) interest paid by the firm to such individual as partner in a representative capacity and interest paid by the firm to the person so represented shall be taken into account for the purposes of this clause. Explanation 2. - Where an individual is a partner in a firm otherwise than as partner in a representative capacity, interest paid by the firm to such individual shall not be taken into account for the purposes of this clause, if such interest is received by him on behalf, or for the benefit, of any other person. Explanation 3.- For the purposes of this clause, book-profit means the net profit, as shown in the profit and loss account for the relevant previous year, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act. There cannot be two incomes one for the purpose of the Companies Act and another for the purpose of income-tax both maintained under the same Act. If the Legislature intended the Assessing Officer to reassess the company s income, then it would have stated in section 115J that income of the company as accepted by the Assessing Officer . In the absence of the same and on the language of section 115J, it will have to held that view taken by the Tribunal is correct and the High Court has erred in reversing the said view of the Tribunal. At page 282 of the said report the Supreme Court has also observed amongst other- The fact that it is shown under a different head of income would not deprive the company of its benefit under section 32AB so long as it is held that the investment in the units of the UTI by the assessee-company is in the course of its eligible business . Therefore, in our opinion, the dividend income earned by the assessee-company from its investment in the UTI should be included in computing the profits of eligible business under section 32AB of the Act. Thus it emerges as follows: Even if the income from other sources is included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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