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Commissioner of Income-tax, Gujarat-ii Vs. Vac Met Corporation P., Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 99 of 1976
Judge
Reported in[1981]127ITR676(Guj)
ActsIncome Tax Act, 1961 - Sections 154
AppellantCommissioner of Income-tax, Gujarat-ii
RespondentVac Met Corporation P., Ltd.
Appellant Advocate N.U. Raval, Adv.
Respondent Advocate J.P. Shah, Adv.
Cases ReferredT. S. Balaram v. Volkart Brothers
Excerpt:
- - volkart brothers [1971] 81 itr 50 that it is not for the high court in proceeding like this to consider whether on merits the other of order of rectification was justifiable or not......agreement from the national small scale industries corporation. in the original assessment orders, depreciation and development rebate had been allowed on these assets acquired under the hire purchase agreement. thereafter, proceeding were started for rectification under s. 154 proposing to withdraw the depreciation and development rebate allowed to the assessee in these six years, and ground was that since the assessee-company was not the owner of the assets in question, depreciation and development rebate could not have been granted to the assessee. in those proceeding under s. 154 for rectification, the assessee- company appeared through its chartered accountant and pointed out that by virtue of the circular issued by the central board as far back as march 23, 1943,.....
Judgment:

Divan, C.J.

1. In this case, at the instance of the revenue, the following question has been referred to us for our opinion :

'Whether, on the facts and in the circumstances of the case, the tribunal was right in law in holding that there was no error apparent on the face of the record of the original assessments for the assessment years in question and, therefore, the orders passed by the Income-tax Officer under section 154 were not justified ?'

2. The assessment years under consideration are six years, 1963-64 to 1968-69. The assessee before us is a private limited company and the assessee acquired certain machineries under what was called hire purchase agreement from the National Small Scale Industries Corporation. In the original assessment orders, depreciation and development rebate had been allowed on these assets acquired under the hire purchase agreement. Thereafter, proceeding were started for rectification under s. 154 proposing to withdraw the depreciation and development rebate allowed to the assessee in these six years, and ground was that since the assessee-company was not the owner of the assets in question, depreciation and development rebate could not have been granted to the assessee. In those proceeding under s. 154 for rectification, the assessee- company appeared through its chartered accountant and pointed out that by virtue of the circular issued by the Central Board as far back as March 23, 1943, depreciation was allowable to the assessee-company and that in the light of that circular, the original orders of assessment granting depreciation and development rebate to the assessee-company were correct. However, the ITO rejected this contention of the assessee and withdraw the depreciation allowance and development rebate allowed to the assessee in the earlier years. Against these orders passed in rectification proceedings the assessee went in appeal and the AAC accepted the contention of the assessee and canceled the orders passed by the ITO by his consolidated order for the six years under reference.

3. Against the order of the AAC, the matter was carried in further appeal by the revenue before the Income-tax Appellate tribunal and it was contended by the revenue at that stage, with reference to the terms of the agreement and certain decision relied upon by it and referred to in the order of the Tribunal, that until and unless all the payments stipulated under the agreement had been made by the assessee to the National Small Scale Industries Corporation, who were the owner of the plant and machinery as per the agreement, the said plant and machinery continued to vest in the corporation and the title did not pass to the assessee. Consequently, the revenue contended that the assessee was not the plant and machinery during the relevant previous years and was not entitled to the allowance of development rebate and depreciation allowance for the concerned years and the grant of such allowance for the concerned years was, therefore, a mistake apparent on the face of the record and the ITO was right in acting under s. 154 of the I.T. Act and rectifying that mistake by withdrawing the allowance by the impugned orders. The Tribunal, however, did not accepts this contention of the revenue and ultimately held that the mistake, if any, in the original orders of the ITOs allowing development rebate and depreciation allowance for the years under reference was one which could be established only by a drawn process of reasoning on points on which there might conceivably be two opinions. Following the decision of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) , it held that the AAC was justified in canceling the orders of rectification passed by the ITO. Thereafter, at the instance of the revenue, the question hereinabove set out has been referred to us for our opinion.

4. It has been pointed out by the Supreme Court in T. S. Balaram v. Volkart Brothers [1971] 81 ITR 50 that it is not for the High Court in proceeding like this to consider whether on merits the other of order of rectification was justifiable or not. The only question that the High Court has to consider at this is whether there was an error apparent on the face of the record. It has been pointed out by the Supreme Court in that case that a mistake apparent on the record must be an obvious and patent mistake and not sometime which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. In the instant case, the debate was on two points, one on the question whether the circular of the Board of Revenue issued as far back as March 23, 1943, would apply to the facts of the present case and would be binding on the ITO at the time when the original orders allowing depreciation and development rebate were passed. The second point is on the effect of the hire purchase agreement in question on the terms and conditions set out, and, as the tribunal has rightly pointed out, on that aspect of the case also there may conceivably be two opinions. In view of that position, it is obvious that the decision of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) would directly apply to the facts of the present case. Hence, the tribunal rightly held that the power of rectification under s. 154 of the I.T. Act could not be resorted to for the purpose of withdrawing the depreciation allowance and development rebate originally allowed to the assessee in the assessment years under reference by the respective orders. Under these circumstances, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the revenue. The Commissioner will pay the costs of this reference to the assessee.


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