Law: Income Tax Act, 1961

Section: 154

Income-tax----Rectification of mistake---Non-resident shipping concern ---Loss--¬Depreciation---Law applicable to assessment---Carry forward and set off of losses and depreciation---Insertion of section 44B of Indian Income Tax Act, 1961 with effect from 1=4-1976---Amendment necessitating bifurcation of 1Qsses and unabsorbed depreciation---Set off of total of losses and unabsorbed depreciation in assessment years 1974-75 and 1975, -76---Not a mistake which can be rectified---Indian Income Tax Act, 1961, Ss.44B & 154. The assessee was a non-resident company engaged in the business of shipping. It incurred losses in the assessment years 1968-69, 1970-71, 1971-72 and 1972-73. The losses were carried forward and set off against profits for the assessment years 1969-70 and 1973-74 onwards. In setting off such losses, the Income Tax Officer, who made the original assessments for the assessment years 197.1-75 and 1975-76, did not make any distinction between unabsorbed depreciation and business loss. Subsequently, in view of the amendment of the Income Tax Act, 1961, which introduced section 44B with effect from April 1, 1976 which provided that the net profit of seven and a half percent. had to be estimated on the gross receipts from freight and ignoring the existing sections for computation of such income, the Income Tax Officer was of the opinion that there was a mistake in the assessment orders for the assessment years 1974-75 and 1975-76. The Income Tax Officer, therefore, invoked the provisions of section 154 of the Act for both the years. The Tribunal held that the proceedings under section 154 were not valid. On a reference: Held, that it was only with effect from the assessment year 1976-77 that section 44B of the Act was made applicable and the profit was computed at a sum equal to 7-1/2% of the aggregate of the amounts specified in section 44B(2) of the Act and no loss due to unabsorbed depreciation was allowed as a set-off against the profits. The Income Tax. Officer was not entitled to do indirectly what he was not permitted to do directly. So long as the provisions of section 44B did not come into operation, the assessee was entitled to set off the…

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