TMI Blog2023 (12) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... shed by the assessee. He did not dispute the computation made by the assessee which included refund of service tax in the claim made u/s. 10A. From the perusal of the impugned order passed u/s. 154 read with sec. 143(3) of the Act, we note that Ld. AO has formed a view after a long drawn process of reasoning passed on the decision of Hon ble Supreme Court in the case of Liberty India [ 2009 (8) TMI 63 - SUPREME COURT] and Sterling Foods [ 1999 (4) TMI 1 - SUPREME COURT] to dislodge the claim of the assessee in respect of refund of service tax. View taken by the Ld. AO in the proceedings initiated u/s. 154 tantamount to a change in view resulting into review of his own order which is not permissible under the provisions of section 154 of the Act. When the Ld. AO has consciously taken a view to frame the original assessment by making certain additions/disallowances, he is not empowered to take contrary view by adopting a review process for the assessment already completed. We are in agreement with the submissions made on the restricted powers available u/s. 154 to rectify a mistake which is apparent from record, which cannot be otherwise resorted to under the garb of revie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s. 10A of the Act was duly examined and allowed. Thereafter, rectification proceedings u/s. 154 of the Act were initiated. Ld. AO passed a rectification order u/s. 154/143(3) of the Act dated 10.07.2015, denying the claim of deduction u/s. 10A of the Act on the component of refund of service tax received by the assessee. Aggrieved, assessee went in appeal before the Ld. CIT(A). 3.1. Ld. CIT(A) had decided the case in favour of the assessee by stating that Ld. AO erred in initiating rectification proceedings on an issue which is debatable and on which two opinions are conceivable. Against the said order passed by the Ld. CIT(A), Revenue is in appeal before the Tribunal. 3.2. Appeal filed by the revenue had been dismissed by the ITAT coordinate Bench vide order dated 28.08.2019, since tax effect involved in the said appeal was below the limit of Rs. 50,00,000/-, as prescribed vide Circular 17 of 2019. Thereafter, a Misc. Application was filed by the revenue, seeking reinstatement of the appeal on the ground that monetary limits of tax effect for filing of departmental appeal shall not apply in the instant case since it relates to an audit objection which has been acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowing claim u/s. 10A. Reliance in this regard was placed on the decision of the Hon'ble Karnataka High Court in the case of CIT vs. TTK Prestige Limited (2009) 184 Taxman 18 wherein the Hon'ble Court has held that section 154 cannot be invoked when the original assessment did not contain any adverse finding and the Ld. AO subsequently initiated rectification proceedings to add back the deduction allowed u/s 80-IA to the extent of export incentive received by the assessee had been claimed as deduction as a part of profits of the eligible undertaking. The Hon'ble High Court held that the matter of allowability of export incentive as part of the profits of the eligible undertaking was a matter of debate and hence not subject to rectification. 5. Ld. CIT(A) decided the issue in favour of the assessee stating that Ld. AO erred in initiating rectification proceedings on an issue which is debatable and on which two opinions are conceivable. Relevant extract of the order of the Ld. CIT(A) is being reproduced below for ready reference: In view of the above facts and circumstances of the case, I am of the view that the A.O was not justified in rectification of a mista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CIT [2023] 453 ITR 625 (SC), wherein it was held that where assessee received income in the form of receipts from Duty Entitlement Pass Book (DEPB) and from Duty Drawback Scheme (DDS), said income could not be said to be derived from an industrial undertaking and thus assessee would not be entitled to claim deduction u/s. 80IB with respect to such receipts. Ld. Sr. DR thus, strongly contended that Ld. AO has rightly disallowed the claim u/s. 10A in respect of receipt of refund of service tax by the assessee. 8. Per contra, Ld. Counsel for the assessee, at the outset submitted that rectification powers can be exercised only to rectify self-evident errors which are not debatable issues and do not require a lot of reasoning upon which two views are possible. He placed reliance on the decision of the Hon ble Supreme Court in the case of T.S. Balaram, ITO Vs. Volkart Brothers (supra) wherein it has been held that in case of proceedings under section 154 of the Act what is rectifiable is a mistake apparent from record. The Hon'ble Court went on to hold that a mistake to be apparent must be obvious and patent and not something which can be established by a long drawn process of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same principles as relied upon by the Ld. AO are applied to the present case. Ld. Counsel strongly submitted that it is a case of change in the view of the Ld. AO which he has originally arrived after taking into consideration detailed explanation and documentary evidences placed on record in the original assessment proceedings. 8.3. In the proceedings initiated u/s. 154, ld. AO has resorted to a view which is solely based on the decision of the Hon ble Supreme Court in the case of Liberty India (supra) and Sterling Foods (supra) which in itself demonstrates that it is a case of long drawn discussion on which debate can be made and then a conclusion can be arrived at. To support this contention, Ld. Counsel elaborated on the two decisions which were relied on by the Ld. AO in the impugned order passed u/s. 154 read with section 143(3) of the Act. 8.4.1. He first referred to the decision of Liberty India (supra). In the said case, while dealing with the question as to whether duty drawback/DEPB benefits are entitled for deduction, being profits and gains derived from the eligible undertaking u/s 80IB of the Act, the Court answered in favour of the revenue. The decision th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source of revenue having immediate nexus with the operation of the eligible business. 8.5.1. Similarly, in the second decision referred to by the Ld. AO of Sterling Foods (supra), ld. Counsel elaborated on the same that the term 'derived from' would mean a direct nexus between the profits and gains of the industrial undertaking. The Hon ble Court went on to hold that the facts of the case present before them showed that the assessee had received import entitlements granted by the Central Government under an Export Promotion Scheme as it was carrying out the export of prawns, sea food, etc. The Hon'ble Court went on to hold that the source of import entitlements were the Export Promotion Scheme of the Central Government and not the industrial undertaking. The Court held that the industrial undertaking can at best be termed as an incidental source of the import entitlements. 8.5.2. According to the Ld. Counsel this ruling relied upon by the Ld. AO can be distinguished from the facts present in the assessee s case as this ruling deals with an income received which has no direct and immediate nexus with the operations of the undertaking carrying out for the export of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued as being directly linked to the operation of the eligible undertaking and accordingly should be allowed as a deduction falling within the meaning of the term 'derived from'. He further submitted that service tax paid on input service is an expense which is debited to the profit and loss account when incurred and goes on to reduce the profits eligible for deduction in the year of its incurrence. Similarly, the refund of service tax should be considered as recovery of the expenses already made, considered and offered in the earlier year and has a direct nexus to the operations of the undertaking. Hence, refund of service tax is recovery of cost incurred in the operations of the undertaking and goes on to reduce the operating cost of the eligible undertaking. He also stated that when the taxes were paid, the same was offered and reduced the eligible deduction u/s 10A, similarly, on its refund the same should be allowed as a deduction u/s 10A considering it as one derived from the undertaking. 8.8. Thus, Ld. Counsel submitted that Ld. AO is not justified in resorting to rectification of a mistake which is a debatable issue. It is not a patent mistake of fact or law but r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the Court in the original judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the record. 9.2. From the perusal of the assessment order passed u/s. 143(3) and the queries raised by the Ld. AO and submissions made by the assessee thereon vis- -vis refund of service tax forming part of claim u/s. 10A, we note that Ld. AO had passed the original assessment order after examining the details furnished by the assessee. He did not dispute the computation made by the assessee which included refund of service tax in the claim made u/s. 10A. 9.3. From the perusal of the impugned order passed u/s. 154 read with sec. 143(3) of the Act, we note that Ld. AO has formed a view after a long drawn process of reasoning passed on the decision of Hon ble Supreme Court in the case of Liberty India (supra) and Sterling Foods (supra) to dislodge the claim of the assessee in respect of refund of service tax. 10. To our mind, the view taken by the Ld. AO in the proceedings initiated u/s. 154 tantamount to a change in view resulting into review of his own order which is not permissible under the provisions of section 154 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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