Commissioner of Income Tax vs Chithrasala and Another

V.V. Kamat, J.—On hearing the learned Senior Standing Counsel for Taxes and the counsel for the assessee, in fact, the question need not be answered. Additionally we also find that before the presentation of this reference to this Court, the order of the Tribunal is already complied with and has done real justice to the situation. This is apart from the position that the question is a pure and simple question of fact. It is as follows:

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the ITO to allow the assessee''s claim for deduction of 50 per cent of the cost of production of the feature film for the asst. yr. 1976-77 when the entire cost of production was already allowed for the asst. yr. 1975-76 and the matter became final after the AAC had looked into the matter and dismissed the assessee''s appeal?

The assessment year in question is 1976-77. The assessee is a registered firm producing feature films. During the previous year 1975-76, a film by name "Mucheettu Kalikkarante Makaf'' was released on 14th March, 1975. During the said previous year 1975-76, the assessee had claimed full deduction and it was granted. This was by the then ITO relying on r. 9A(2)(a) of the IT Rules and on the basis of the agreement. The record shows that the assessee realised his mistake and had approached the first appellate authority in regard to the assessment of the previous year 1975-76. This was on the ground that only 50 per cent of the cost of production should have been granted as a deduction and not the full deduction even though claimed by him which was erroneous in law. The record also shows that the first appellate authority did not accept the contention and the matter with regard to the previous year 1975-76 remains at that stage.

In the assessment year in question in this proceedings 1976-77, the return shows a net loss of Rs. 63,960 and in regard to this figure the assessee had claimed 50 per cent of the cost of production in spite of full deduction in regard thereto for the previous year 1975-76. This was not allowed by the ITO for the year in question. In this regard it was contended by the assessee that the claim for full deduction for the previous year 1975-76 was erroneous as r. 9AM(a) of the IT Rules could not be said to be applicable.

It was plainly contended that the exercise of option claiming full deduction for the previous year 1975-76 was a mistake. The ITO did not agree since, according to him, the entire cost of production was already allowed as a deduction for the previous year.

The appeal before the CIT(A) endorsed the said decision by observation that the assessee cannot turn round and take up resort to contend that it was a mistake.

Before the Tribunal the assessee contended similarly. The Tribunal took the

view that the mistake committed was really by the ITO and could not be considered as a bar on the assessee to assert his rights. The Tribunal took the view that the ITO had material in the form of the agreement dt. 29th Aug., 1974 to verify and satisfy himself whether the assessee''s case fell under r. 9A(2)(a) or not. The Tribunal found fault with the ITO that he had simply gone by the contents of the assessee''s letter dt. 8th Oct., 1977. The Tribunal by its order dt. 9th Oct., 1986 directed the ITO to grant the necessary relief not under r. 9A(2)(a), but under r. 9AQ) with liberty to the Department to take remedial measures to rectify or modify the assessment for the asst. yr. 1975-76 as per law.

Thus, the Tribunal, by the impugned order, has corrected the situation permitting the assessee to claim 50 per cent deduction in the year in question holding his claim for full deduction during the previous year to be a mistake. The result of the Tribunal''s order would naturally be the rectification or modification of the assessment order for the year 1975-76 with a view to permit the assessee to claim 50 per cent deduction in the matter of assessment for the year in question. Going through the order of the Tribunal, in our judgment substantial justice has already been done.

the learned counsel for the assessee has placed on record the steps taken by the ITO in pursuance of the above directions of the Tribunal by the impugned order. In fact, the order of the ITO, Quilon, dt. 7th July, 1987 shows that the Tribunal''s directions have been given effect to and accordingly the ITO has already acted upon the directions. This appears to be the situation much before the order of reference by the Tribunal. To be precise, the Tribunal''s order of reference with the statement of case is dt. 9th Sept., 1987 whereas the proceedings showing compliance by the ITO are prior to that date, being 7th July, 1987, and 10th Aug., 1987. This being the position, the proceedings are rendered infructuous. This is apart from our observations that the question is a pure and simple question of fact.

For the above reasons we decline to answer the question.