Monday, June 13, 2016

The Law not applied – a mistake apparent from the record

Rectification of mistake.
154. [(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,—

amend any order passed by it under the provisions of this Act ;

amend any intimation or deemed intimation under sub-section (1) of section 143;]]

amend any intimation under sub-section (1) of section 200A;]

amend any intimation under sub-section (1) of section 206CB. ]
1. The purpose of this study is to examine the scope of the usage "rectifying any mistake apparent fromthe record", as appearing in section 154. The pre-condition for the rectification of any mistake is that it should be an apparent mistake, obvious from the record. Interestingly, the terms mistake, apparent, &the record have not been defined in the Act, hence are subject to judicial interpretation.

Unabsorbed depreciation deductible from book profits even if it was adjusted under rehabilitation Scheme

a) The assessee-company made huge loss and its net worth got wiped out. Therefore, the case of the assessee was referred to BIFR under SICA. It was declared as 'sick' industrial unit. 

b) The Board has sanctioned the rehabilitation scheme and, all credit amounts lying in various accounts, such as, equity share capital account, share premium account, etc. were transferred to credit of rehabilitation account. Ultimately, the credit balance in that account was used to liquidate the debit balance of profit & loss account by way of transfer of debit balance of P&L to the rehabilitation scheme account to the extent of credit balance available therein.

c) Since the net worth of the company was negative till AY 2008-09, it was not under the obligation to pay book-profit tax as per clause(vii) of Explanation to section 115JB. During AY 2012-13, assessee claimed deduction of unabsorbed depreciation loss of earlier years while computing the book profit. However, AO denied such deduction. He held that once the assessee made credits in the P&L account by way of restructuring , then the debit balance would be considered as wiped out from the P&L account and thus no unabsorbed depreciation would be available for reduction under Section 115JB.On appeal, CIT(A) upheld AO’s order.