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Commissioner of Income-tax Vs. Maharaja Shri Umaid Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference Application No. 70 of 1982
Judge
Reported in[1987]164ITR268(Raj)
ActsIncome Tax Act, 1961 - Sections 154 and 256(2); Income Tax Rules, 1962
AppellantCommissioner of Income-tax
RespondentMaharaja Shri Umaid Mills Ltd.
Appellant Advocate R.N. Surolia, Adv.
Respondent Advocate H.C. Rastogi, Adv.
Excerpt:
- - in respect of other items, it was observed by the inspecting assistant commissioner of income-tax that the assessee failed to give a reply or furnish details and that it should be presumed that the assessee has nothing to say in this respect. 7. in this application, it was argued before us on behalf of the revenue that in respect of items like electric motors, transformers, weighing scales and amplifier control unit, there could not be two opinions as these items squarely fell within the definition 'machinery and plant' to which the general rate of 10% depreciation is applied and in which no extra shift depreciation allowance was allowable......commissioner to make an order under section 154 of the income-tax act, 1961, for withdrawing the extra shift depreciation allowance allowed on the items of machinery and plant in regular assessment ? 2. whether, on the facts and in the circumstances of the case, the tribunal was justified in cancelling the orders of the inspecting assistant commissioner and the commissioner of income-tax (appeals) ?' 2. in the assessment of m/s maharaja shri umaid mills ltd., pali, marwar (hereinafter called 'the assessee'), in respect of the assessment year1974-75, extra shift depreciation allowance was claimed by the assessee in respect of plant and machinery added during the assessment year in question and the same was allowed by the income-tax officer. the inspecting assistant commissioner of.....
Judgment:

Dwarka Prasad, J.

1. The Commissioner of Income-tax, Jaipur, has filed this application under Section 256(2) of the Income-tax Act, 1961, seeking a direction to the Income-tax Appellate Tribunal to refer the following two questions of law arising out of the order of the Income-tax Appellate Tribunal, Calcutta Bench 'E' (camp at Jaipur), dated May 21, 1981 :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that it was not competent for the Inspecting Assistant Commissioner to make an order under Section 154 of the Income-tax Act, 1961, for withdrawing the extra shift depreciation allowance allowed on the items of machinery and plant in regular assessment ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the orders of the Inspecting Assistant Commissioner and the Commissioner of Income-tax (Appeals) ?'

2. In the assessment of M/s Maharaja Shri Umaid Mills Ltd., Pali, Marwar (hereinafter called 'the assessee'), in respect of the assessment year1974-75, extra shift depreciation allowance was claimed by the assessee in respect of plant and machinery added during the assessment year in question and the same was allowed by the Income-tax Officer. The Inspecting Assistant Commissioner of Income-tax (Assessment), Jaipur, on a perusal of the record of the case found that extra shift depreciation allowance should not have been allowed on the following items as those items were either excepted by inscription of letters 'NESA' or the said allowance was not allowable in respect of such items :

1. Two sets of electric motors control and electric motors.

2. Siemens-make transformer 1250 KWA.

3. One Avery weighing scale of 500 Kg.

4. Amplifier control unit.

5. Extension of trolly line.

6. Acid tanks.

3. A notice under Section 154 of the Act was issued by the Inspecting Assistant Commissioner of Income-tax to the assessee on August 13, 1979, directing the assessee to show cause why the extra shift depreciation allowance should not be disallowed on the aforesaid six items. The assessee filed its reply and submitted that extra shift depreciation allowance was rightly allowed on extension of trolly line and also acid tanks as they fell within the definition of plant and machinery on which extra shift depreciation allowance is allowable under the law. The Inspecting Assistant Commissioner of Income-tax accepted the contention of the assessee as regards the extension of trolly line but did not say anything on the question of allowing extra shift depreciation allowance on acid tanks. In respect of other items, it was observed by the Inspecting Assistant Commissioner of Income-tax that the assessee failed to give a reply or furnish details and that it should be presumed that the assessee has nothing to say in this respect. Thus, an order of rectification under Section 154 of the Act was passed by the Inspecting Assistant Commissioner of Income-tax on September 21, 1979, recomputing the total income of the assessee by adding the amount of extra shift depreciation allowance which had been allowed in respect of first five items referred to above at the time of original assessment.

4. On appeal by the assessee, the Commissioner of Income-tax (Appeals), Rajasthan, Jaipur, held that the five items in question were either excepted by inscription of letters 'NESA' or are covered by other items of machinery and plant on which no extra shift depreciation allowance was admissible. The Commissioner of Income-tax (Appeals), therefore, held by his order dated June 4, 1980, that the Inspecting Assistant Commissioner was right in withdrawing the extra shift depreciation allowancein respect of five items referred to above, which was wrongly allowed atthe time of assessment and the order of the Inspecting Assistant Commissioner was confirmed.

5. On further appeal by the assessee, the Income-tax Appellate Tribunal'B' Bench, Calcutta (camp at Jaipur), observed that the questionwhether extra shift depreciation allowance was admissible on the aforesaiditems of machinery and plant was undoubtedly a debatable question onwhich there may conceivably be two opinions and as such the InspectingAssistant Commissioner was not competent to pass an order of rectificationunder Section 154 of the Act withdrawing the extra shift depreciationallowance allowed to the assessee at the time of regular assessment. TheAppellate Tribunal, vide its order dated May 21, 1981, allowed the appealfiled by the assessee.

6. The application for making a reference, filed by the Commissioner of Income-tax, Jaipur, tinder Section 256(1) of the Act, was dismissed by the Appellate Tribunal by its order dated August 31, 1981, on the ground that the decision of the Tribunal recorded a finding of fact and no question of law arose out of the order of the Appellate Tribunal.

7. In this application, it was argued before us on behalf of the Revenue that in respect of items like electric motors, transformers, weighing scales and amplifier control unit, there could not be two opinions as these items squarely fell within the definition 'machinery and plant' to which the general rate of 10% depreciation is applied and in which no extra shift depreciation allowance was allowable. However, learned counsel for the Revenue could not make any submission in respect of the item acid tank. On the other hand, learned counsel for the assessee vehemently submitted that electric motors and electric motors control could not be considered as electrical machinery unless they fell squarely within the items specified in Part I of Appendix I annexed to the Income-tax Rules, 1962. He also submitted that weighing scales could not be considered as the same item as weighing machine. Learned counsel for the assessee also submitted that as there could be two opinions about these items, viz., whether they fell within the item 'electrical machinery' contained in the general classification machinery and plant in the aforesaid schedule, the Appellate Tribunal was justified in setting aside the order of the Inspecting Assistant Commissioner and the Commissioner of Income-tax (Appeals) inasmuch as the provisions of Section 154 of the Income-tax Act could not have been utilised for the purpose of disallowing the extra shift depreciation allowance which was allowed by the assessing authority at the time of regular assessment. Learned counsel for the assessee relied upon the decision of the Bombay High Court in Sidhramappa Andannappa Manvi v. CIT : [1952]21ITR333(Bom) and the decision of their Lordships of the Supreme Court in T.S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) , in support of his contention that the power of the taxing authorities under Section 154 of the Act could be utilised for the correction of a mistake which was apparent from the record and that such a mistake must be obvious and patent and not something which can be established by a long-drawn process of reasoning on points on which there could conceivably be two opinions.

8. We agree with learned counsel for the assessee that the provisions of Section 154 of the Income-tax Act could only be used for the purpose of correcting mistakes apparent on the face of the record and such power is analogous to the power of the High Court of entertaining a petition for a writ of certiorari. Thus, if a mistake is not obvious and patent on the record and has to be established by a long drawn process of reasoning, then the taxing authorities have no jurisdiction to enter into a long drawn argument for the purpose of establishing such a mistake, as it falls outside the purview of the provisions of Section 154 of the Income-tax Act. If there may conceivably be two opinions on a question, it cannot be said that there is an error apparent on the face of the record. A decision on a debatable point of law cannot be held to be a mistake apparent from the record. But, in the present case, the Appellate Tribunal did not apply its mind to the facts of the case and did not observe as to on which of the five items there could be two opinions or a long drawn argument was necessary to establish that the item fell within the items in respect of which extra shift depreciation allowance could not be allowed under the provisions of law. It is not disputable that extra shift depreciation allowance cannot be allowed in respect of items which have been marked as 'NESA' in Part I of Appendix I annexed to the Income-tax Rules, 1962, and also in respect of items which have been specifically mentioned in the aforesaid Appendix and in respect of which it has been stated as under:

'The extra shift allowance shall not be allowed in respect of any item of machinery or plant which has been specifically excepted by inscription of the letters 'N.E.S.A.' (meaning ' No Extra Shift Allowance') against it in Sub-item (ii) above and also in respect of the following items of machinery and plant to which the general rate of depreciation of 10 per cent. applies:--

(1) Electrical machinery--Switchgear and instruments, transformers and other stationary plant and wiring and fittings of electric light and fan installations....

(10) Weighing machines.'

9. The extra shift depreciation allowance was wrongly allowed to the assessee at the time of assessment in respect of four items specified above because the assessee did not give any reply in respect thereof and acid tanks. Although the assessee raised an objection, the Inspecting Assistant Commissioner did not consider the same. However, he withdrew the extra shift depreciation allowance allowed by the assessing authority. While deciding the appeal, the Commissioner of Income-tax (Appeals) generally observed that the five items were either excepted by the inscription of letters 'NESA' or they were covered by other items of machinery and plant on which no extra shift depreciation allowance was admissible. The Appellate Tribunal, without considering each individual item generally, held that there could be two opinions and the question was debatable as to whether the extra shift depreciation allowance was admissible in respect of the five items mentioned above. As regards acid tanks, learned counsel for the Department was unable to show as to whether they fell in any of the items specified in Appendix I, Part I, Sub-part III, relating to machinery and plant in respect of which letters 'NESA' were used. It is also not disputed that acid tanks constituted plant and machinery and extra shift depreciation allowance was allowed at the rate of 10%. As regards electric motors and electric control motors and transformers, it was submitted that it would fall in item No. 1 of the general items of machinery and plant to which the general rate of depreciation of 10% applies. Then, it was submitted that weighing scale was the same thing as weighing machines included in item No. 10. Item No. 10 is amongst the items of machinery and plant to which the general rate of depreciation of 10% applies. As regards amplifier control unit, it was submitted that it fell within the item 'electrical machinery'. The Appellate Tribunal should have applied its mind and then decided as to whether the five items specified above fell within one of the items mentioned in Part I of Appendix I appended to the Income-tax Rules, 1962, without considering as to under which item the particular plant and machinery fell. It was difficult to say that there could be two opinions about each one of the items. As such, the two questions which have been mentioned above, appear to us to arise out of the order of the Appellate Tribunal dated May 21, 1981. We are unable to agree with the Appellate Tribunal that they are questions of fact or that it was a finding of fact, and as we have observed above, the Tribunal has not recorded any finding at all.

10. We, therefore, allow the application and direct the Income-tax Appellate Tribunal to state the case and refer the following two questions of law arising out of its order dated May 21, 1981, to this court for its opinion :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that it was not competent for the Inspecting Assistant Commissioner to make an order under Section 154 of the Income-tax Act, 1961, for withdrawing the extra shift depreciation allowance allowed on the items of machinery and plant in regular assessment ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the orders of the Inspecting Assistant Commissioner and the Commissioner of Income-tax (Appeals)?'


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