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South India Sugars Ltd. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1985)14ITD16(Mad.)
AppellantSouth India Sugars Ltd.
Respondentincome-tax Officer
Excerpt:
.....of deducting the depreciation including the depreciation carried forward and added to the current year's depreciation that the question of set off of development rebate would arise. the only exception to this rule contained in the provisions is that in case of carried forward loss, which is different and distinct from unabsorbed development rebate, the carried forward loss must first be deducted as contained in section 72(2) of the act and as held by the supreme court in cit v. jaipuria china clay mines (p.) ltd. [1966] 59 itr 555 in regard to similar provisions of the indian income-tax act, 1922. indeed, the learned counsel has not been able to point out any decision taking a different view and even in the gujarat high court's decision referred to and relied on by him, it has been.....
Judgment:
1. The appeal is by the assessee. It arises out of an order passed by the ITO under Section 154 of the Income-tax Act, 1961 ('the Act') on 19-1-1983. To appreciate the controversy and dispute, it is necessary to set out the relevant facts. The assessment year involved in this case is 1975-76. In the original assessment made in this case on 9-2-1978, the ITO in computing the profit or loss of the year considered and deducted the unabsorbed depreciation of the earlier assessment year 1972-73 first and then the unabsorbed development rebate of the year 1971-72 to the extent required for absorbing the balance of income. The balance of the unabsorbed development rebate of the year 1971-72 and the unabsorbed development rebate for the subsequent years up to 1974-75 were carried forward. On 24-1-1979, the ITO passed an order purporting to rectify the assessment order dated 9-2-1978 on the ground that the unabsorbed development rebate should have actually been given set off first and then the unabsorbed depreciation. He, therefore, revised the priorities between the unabsorbed development rebate and unabsorbed depreciation by first setting off the unabsorbed development rebate for the years 1971-72 to 1974-75 aggregating to Rs. 4,53,694 and then the unabsorbed depreciation of the assessment year 1972-73 to the extent required to reduce the balance of income to nil. It is not known and neither party has been able to throw any light on the question as to whether this order was made by the ITO suo moto or at the instance of the assessee.

Later, on 12-11-1982, the ITO issued a show-cause notice to the assessee proposing rectification of the order dated 24-1-1979, which is itself purported to be a rectification order. The reason stated by him was that the unabsorbed development rebate should rank for set off after the unabsorbed depreciation is absorbed. The assessee objected to this on the ground that the question as to whether there was a mistake apparent from record in the order dated 24-1-1979 is a highly debatable one and, therefore, it cannot form the subject-matter of rectification.

The ITO, however, overruled the objection and revised it by the order dated 19-1-1983, the effect of which was to restore the computation made by him in the original assessment of giving priority for set off of unabsorbed depreciation for the assessment year 1972.-73 first and then setting off partly the unabsorbed depreciation for 1971-72. In the appeal preferred by the assessee, the Commissioner (Appeals) confirmed the action of the ITO and rejected the objections of the assessee pointing out that according to the provisions of the law, the original order passed was the correct one and the revision subsequently made was clearly a mistake. He further negatived the assessee's contention that the issue was also controversial and debatable one. He also relied on the decision in the case of R.A. Boga v. AAC [1977] 110 ITR 1 (Punj. & Har.) (FB). Aggrieved by his order, the assessee is in further appeal.

2. The learned representative for the assessee vehemently contended that the order passed by the ITO on 24-1-1979 cannot be said to disclose any mistake apparent from record. In this connection, the learned representative for the assessee strongly relied on the Gujarat High Court decision in the case of Monogram Mills Co. Ltd. v. CIT [1982] 135 ITR 122 dealing with the order of priority as between carried forward losses, depreciation and development rebate. That decision of course holds that the unabsorbed depreciation must come for set off before unabsorbed development rebate and, therefore, cannot be said to support the assessee's case in this respect on merits, but what the learned representative submits is that the very fact that a question had gone to the High Court for determining the priority between carried forward unabsorbed depreciation and development rebate and the High Court has considered the question in an elaborate judgment shows that it is a complicated question of law involving long drawn debate and reasoning and, therefore, the order of the ITO dated 24-1-1979 on such a point cannot be considered to disclose any apparent mistake. He also sought to draw support for this contention from the fact that although in that decision of the Gujarat High Court, it has been held that according to the order of priority, the unabsorbed development rebate comes only after unabsorbed depreciation, the High Court has considered it fit to grant a certificate of appeal to the Supreme Court at the request of the assessee pointing out that the question of law involved in that case is a substantial question of law.

The learned departmental representative strongly supported the order of the Commissioner (Appeals) contending that merely because the provisions of the Act require interpretation of the language of the section, it cannot amount to a debatable question of law, on which two views are reasonably possible.

3. On a consideration of the facts and the contentions of the parties, we are satisfied that there is no merit in the assessee's appeal.

According to us, on a proper interpretation and construction of the provisions touching on the question of carry forward and set off of unabsorbed depreciation and development rebate, there can be no two opinions that the unabsorbed depreciation has to be considered before considering the question of unabsorbed development rebate for the purpose of the set off. The provisions of Section 32(2) of the Act clearly provide that the unabsorbed depreciation of the earlier years has to be added to the amount of allowance for depreciation of the following previous year and deemed to be part of that allowance and, therefore, there is no question of computing the income of the following previous year without adding the depreciation of the earlier year to the depreciation of the concerned previous year and it is only after such computation of deducting the depreciation including the depreciation carried forward and added to the current year's depreciation that the question of set off of development rebate would arise. The only exception to this rule contained in the provisions is that in case of carried forward loss, which is different and distinct from unabsorbed development rebate, the carried forward loss must first be deducted as contained in Section 72(2) of the Act and as held by the Supreme Court in CIT v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 in regard to similar provisions of the Indian Income-tax Act, 1922. Indeed, the learned counsel has not been able to point out any decision taking a different view and even in the Gujarat High Court's decision referred to and relied on by him, it has been stated that all the commentators have taken the same view and the certificate has been granted only because there is no direct Supreme Court decision. Another aspect which also compels us to reach the same conclusion is that even assuming that the question involves a long drawn debate and controversy reasonably leading to two views, it follows that the first order seeking to rectify the original assessment cannot lie as it could not be said that the original assessment discloses any apparent mistake capable of rectification under Section 154. Therefore, it is obviously a mistake to seek to rectify the earlier assessment and it is this mistake which is sought to be rectified by the later order, which has been upheld by the Commissioner (Appeals). We, therefore, find no merit in the assessee's objection, which is rejected.

4. The assessee in an additional ground filed on 6-2-1985 seeks to raise a dispute on the merits of the question as to whether it is unabsorbed depreciation or unabsorbed development rebate, which should get priority. It is stated that the omission to raise this additional ground in the original appeal filed by the assessee was not deliberate and wilful and is said to arise out of the order under appeal. We are unable to entertain this additional ground as arising out of the order under appeal. It is common ground that the original assessment order has been accepted by the assessee and it is not kept alive by any appeal preferred by the assessee or otherwise. We find that the grievance sought to be agitated by the assessee in the additional ground really arises in the original assessment order passed, where the ITO has deducted the unabsorbed depreciation first and then the part of the earlier years' development rebate in computing the income. The occasion for agitating the grievance, therefore, was against the original assessment. The appeal before us in the present case is solely on the point as to whether there is a mistake apparent from the record capable of rectification under Section 154 in the order passed by the ITO on 24-1-1979 and it cannot give rise to any other controversy on the merits. Therefore, we reject this additional ground also as misconceived and infructuous.


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