Law:

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Section 154 of the income-tax act, 1961-Rectification of mistake-Apparent from record-In original assessment, ito allowed deduction under section 80M in respect of assessee's dividend income and arrived at loss figure after taking into consideration depreciation of earlier years-Subsequently, acting under section 154, he withdrew said deduction on ground that since assessee was assessed at loss, it was not entitled to said deduction-Whether allowance of deduction to assessee under section 80m in original assessment was mistake rectifiable under section 154-Held, on facts, no Facts Besides income from business, the assessee-company also derived income from dividend. In the original assessment, the ITO allowed the deduction as claimed by the assessee under section 80M in respect of dividend income received by it and assessed it at a loss figure, after taking into consideration the depreciation of the earlier years. Subsequently, the ITO took the view that since the total income of the assessee was determined at a loss, the assessee was not entitled to deduction under section 80M in respect of the dividend income received by it. Consequently, he passed an order under section 154 withdrawing the deduction granted under section 80M in the original assessment. On second appeal, the Tribunal cancelled the ITO's order. On reference: Held The question in the instant case is whether the relief under section 80M should be given before or after the deduction of the depreciation of the past years. There is a possibility of two views in respect of this matter. Hence, it could not be said that there was a mistake apparent on the face of the record which could be rectified under section 154. The Tribunal was, therefore, justified in cancelling the order of the ITO made under section 154. Cases referred to T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC) and National Engg. Industries Ltd. v. CIT [1978] 113 ITR 252(Cal.). JUDGMENT PYNE, J.-In this reference under section 256(2) of the Income-tax Act, 1961 ('the Act'), the following question has been referred to this Court for its opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was right…

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