Rectification orders U/s 154 not legally permissible if the issue is debatable and not a mistake apparent from the record.
Ahmedabad Tribunal in the case of National Dairy Development Board (ITA No 733/Ahd/2023) has held that rectification orders U/s 154 not legally permissible if the issue is debatable and not a mistake apparent from the record.
The Tribunal, dismissed the Revenue’s appeals and upheld the CIT(A)’s decision that the provisions of Section 115JB of the Act, are not applicable to the National Dairy Development Board (NDDB), a statutory corporation established under the NDDB Act, 1987. The Tribunal ruled that the rectification orders under Section 154 were not legally permissible as the issue was debatable and not a mistake apparent from the record.
Let us have a Short Overview of the case:
Key Issues:
Revenue’s Appeal: The CIT(A) erred in not applying the provisions of Section 115JB (MAT) to NDDB and in deleting the additions made under Section 14A of the Act, which were added to the book profit.
Assessee’s Defense: NDDB argued that it is a statutory corporation and not a company under the Companies Act, and therefore, the provisions of Section 115JB are not applicable. The rectification orders under Section 154 were challenged as they involved debatable issues.
Key Arguments by Both Parties:
Revenue’s Arguments:
NDDB is deemed a company under the Act and should be subject to MAT provisions.
The disallowance made under Section 14A should be added to the book profit as per Section 115JB.
The rectification orders under Section 154 were justified as they corrected mistakes apparent from the record.
Assessee’s Arguments:
NDDB is a statutory corporation established under the NDDB Act, 1987, and not a company under the Companies Act.
The provisions of Section 115JB are not applicable to NDDB as it does not prepare its accounts as per the Companies Act.
The rectification orders under Section 154 were not permissible as the issues involved were debatable and not mistakes apparent from the record.
Tribunal’s decision:
The Tribunal dismissed the Revenue’s appeals and upheld the CIT(A)’s decision that the provisions of Section 115JB are not applicable to NDDB. NDDB is a statutory corporation established under the NDDB Act, 1987, and not a company under the Companies Act. Therefore, the provisions of Section 115JB, which apply to companies registered under the Companies Act, are not applicable to NDDB. NDDB prepares its accounts as per the NDDB Act and not as per the Companies Act, which is a precondition for the applicability of Section 115JB.
The rectification orders under Section 154 were quashed as they involved debatable issues and were beyond the scope of rectification. The Tribunal emphasized that rectification under Section 154 is permissible only for patent mistakes and not for issues requiring long-drawn reasoning.
The copy of the order is as under:
