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T. Manickavasagam Chettiar Vs. Commissioner of Income-tax, Tamil Nadu - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 1366 of 1977
Judge
Reported in(1983)37CTR(Mad)148; [1983]143ITR269(Mad)
ActsIncome Tax Act, 1961 - Sections 67(2), 80T and 154; Wealth Tax Act, 1957 - Sections 5(1) and 35
AppellantT. Manickavasagam Chettiar
RespondentCommissioner of Income-tax, Tamil Nadu
Appellant AdvocateS.V. Subramaniam, Adv.
Respondent AdvocateNalini Chidambaram, Adv.
Excerpt:
.....wealth tax act, 1957 - whether considering section 67 (2) tribunal right in holding that there was mistake apparent on face of record in original assessment granting deduction to assessee under section 80t so as to warrant rectification under section 154 - mistake of grant of relief under section 80t was mistake apparent on record contemplated by section 154 - power to rectify not confined to rectification of some clerical or arthematical mistakes - mistake in present case was rectifiable and authorities justified in rectifying mistake under section 154 - question answered in affirmative. - - 67(2) of the act, the business loss as well as the income from the capital gains should be brought into the assessee's account and the allocation of the income or loss should be made under the..........off the capital gains against the business loss and that, therefore, the loss determined in the firm's assessment should be treated as business loss in the hands of the partner in the partner's individual assessment. 6. the learned counsel for the assessee questions the said view taken by the tribunal and contends that in view of s. 67(2) of the act, the business loss as well as the income from the capital gains should be brought into the assessee's account and the allocation of the income or loss should be made under the corresponding heads of income in the partner's assessment. 7. on a due consideration of the matter, we are of the view that the plain languages of s. 67(2) of the act is not capable of being interpreted in the manner suggested by the learned counsel. 8. section 67(2).....
Judgment:

Ramanujam, J.

1. The assessee in this case is a partner in a firm called M/s. 'Tamil Nadu', a newspaper published from Madurai. In the assessment year 1969-70, the said firm had made certain capital gains on sales of certain assets. It had, however, incurred loss under the head 'Business' which loss was more than the capital gains. Therefore, the capital gains was set off against the business loss. Even after the setting-off, there was a loss of Rs. 1,33,580 which was distributed between the five partners of the firm and the amount of loss which was apportioned to the assessee was Rs. 35,622.

2. In the individual assessment of the assessee, the partner claimed the benefit of s. 80T of the I.T. Act, 1961, hereinafter referred to as 'the Act'. The assessing authority granted the relief under s. 80T of the Act in the original assessment of the assessee. Later, the ITO felt that he had committed a mistake in granting the relief under s. 80T of the Act and, therefore, he issued a notice under s. 154 of the Act for rectification of a mistake and for withdrawal of the relief granted under s. 80T of the Act. The assessee resisted the rectification proceedings initiated by the ITO. However, the ITO rectified his original order and cancelled the relief granted under s. 80T of the Act. Aggrieved by the order of rectification, the assessee took the matter in appeal to the AAC, who, however, held that under s. 67(2) of the Act, the assessee was entitled to the benefit of s. 80T of the Act in his assessment and, therefore, the ITO was not right in passing the order of rectification. The matter was taken by the Revenue to the Income-tax Appellate Tribunal, Madras. The contention of the Revenue before the Tribunal was that the AAC was in error in applying s. 67(2) of the Act to the facts of this case and that the ITO had power to rectify the mistake which he had committed while passing the original assessment order. The Tribunal held that s. 67(2) of the Act will not stand attracted to this case, that under s. 80T of the Act, the assessee is not entitled to the relief and that the ITO was justified in invoking the power of rectification. In that view, the Tribunal reversed the order of the AAC and restored the order of rectification passed by the ITO.

3. Aggrieved by the order of the Tribunal the assessee has obtained a reference to this court on the following question of law :

'Whether, on the facts and in the circumstances of the case, and having regard to the provision of section 67(2) of the Income-tax Act, 1961, the Tribunal was right in holding that there was a mistake apparent on the face of the record in the original assessment in granting the deduction to the assessee under section 80T of the Income-tax Act, 1961, so as to warrant the rectification under section 154 of the Income-tax Act, 1961 ?'

4. The question set out above can be split up as two :

'1. Whether, on the basis of section 67(2) of the Act, the assessee is entitled to claim the benefit of section 80T of the Act and

2. Whether the grant of relief under section 80T of the Act is a mistake apparent on the face of the record of the original assessment and as such it could be rectified under section 154 of the Act by the assessing authority ?'

5. The Tribunal on the first question has taken the view, as already stated, that the reference to s. 67(2) of the Act would not help the assessee and that on the facts of the case, there is no computation of the income of the firm under capital gains in accordance with the provisions of Chap. VI-A, that there was computation of business income after setting off the capital gains against the business loss and that, therefore, the loss determined in the firm's assessment should be treated as business loss in the hands of the partner in the partner's individual assessment.

6. The learned counsel for the assessee questions the said view taken by the Tribunal and contends that in view of s. 67(2) of the Act, the business loss as well as the income from the capital gains should be brought into the assessee's account and the allocation of the income or loss should be made under the corresponding heads of income in the partner's assessment.

7. On a due consideration of the matter, we are of the view that the plain languages of s. 67(2) of the Act is not capable of being interpreted in the manner suggested by the learned counsel.

8. Section 67(2) is as follow :

'67. (2) The share of a partner in the income or loss of the firm, as computed under sub-section (1) shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the firm has been determined under each head of income.'

9. The apportionment contemplated under that section of either the income or the loss of the firm should, no doubt, be under the various heads of income in the same manner in which the income or the loss of the firm had been determined. But this section does not enable the assessee to ignore the assessment made on the firm and insist on a fresh assessment to be made under each head of income, ignoring the assessment made on the firm. What the learned counsel for the assessee in this case says is that the share of the entire business loss and the share of capital gains should be brought under the heads of business and capital gains respectively and assessed in the partner's individual capacity. If the section is interpreted in the manner suggested by the learned counsel for the assessee, it will be against the language used in the section. What is contemplated is the apportionment of the loss or of the income of the firm. In this case, the firm's assessment has resulted in a loss. According to the assessee's learned counsel, since the firm's assessment which has resulted in a loss cannot be apportioned to the various heads of income, the income or loss under each head of income of the firm should be brought in as such in the assessee's individual assessment and then assessed. But what the section, according to us, contemplates is the apportionment of the income or loss of the firm as such and as in this case if the loss has occurred in the business of the firm, then that loss has to be apportioned under the head 'Business' in the partner's assessment also. If in a particular year the firm has a loss under two sources of income, then on the basis of this section apportionment should be made proportionately under the two heads in the partner's assessment. We are not, therefore, inclined to agree with the learned counsel for the assessee that as a result of s. 67(2), there should be a fresh assessment in the hands of a partner of the income or loss of the firm under various heads. We therefore, agree with the Tribunal that s. 67(2) of the Act will not be of any help to the assessee to claim the benefit of s. 80T of the Act.

10. Coming to the second question, the contention of the learned counsel for the assessee is that the mistake in granting the relief under s. 80T of the Act is not rectifiable under s. 154 of the Act, as the applicability of s. 80T to the assessee's case is a debatable question and as such the mistake, if any, is not apparent from the record. The learned counsel points out by way illustration that in this case, the assessing authority took a view in his rectification proceedings that relief under s. 80T of the Act is not available to the assessee, while the AAC took a country view. This itself would show that the applicability of s. 80T is a debatable point. It is said that in such a case where a mistake has to be detected by a process of reasoning or deliberation, it cannot be taken to be a mistake apparent on the record as contemplated by s. 154 of the Act. The learned counsel also relies on the decision of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) , in which it has been pointed out that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions and that a decision on a debatable point of law is not a mistake apparent from the record.

11. However, we are of the view that the mistake in this case, that is, the grant of relief under s. 80T of Act by the ITO is a mistake apparent on the record as contemplated by s. 154 of the Act. The ITO has applied erroneously the provision in s. 80T of the Act to the facts which do not call for its application. If a provision, which is inapplicable to the facts, has been applied, then it is a mistake on the fact of the record. To find out whether there is a mistake which could be rectified under s. 154 of the Act, one has to see whether the provision is applicable to the facts of the case. If on the face of it, it is not applicable, then the application of the provision will be a mistake. In this case, as already stated, the assessee claims the benefits of s. 80T of the Act read with s. 67(2) of the Act. If the ITO has given the relief under s. 80T which the assessee is not entitled on the language of the section, then it will be a mistake apparent from the record as it does not call for any detailed argument.

12. The decision in ITO v. Asok Textiles Ltd. : [1961]41ITR732(SC) , deals with s. 35 of the Indian I.T. Act, 1922, which corresponds to s. 154 of the I.T. Act, 1961. The Supreme Court has pointed out in that case that s. 35 of the Indian I.T. Act, 1922, was not analogous to 0.41, r. 1, CPC, that the expression 'apparent from the record' is quite different from 'apparent on the face of the record' occurring in 0.41, r. 1, CPC, and that under s. 35 of the Act, the ITO had power to examine the record and if on such examination, he discovers that he had made a mistake, he could rectify the error which may be an error of fact or of law, provided no additional material or reasoning is necessary to detect that mistake. In that case, the ITO, while making the original assessment overlooked the provisions of the Finance Act of 1952 which were applicable to the facts of that case. Subsequently, he found out the mistake provisions of the Finance Act. That rectification was sustained by the Supreme Court, on the ground that the non-applicability of the provisions of the Finance Act, was a mistake apparent from the record.

13. In T.S. Rajam v. CED : [1968]69ITR342(Mad) , a Division Bench of this court dealing with the power of rectification under s. 62 of the E.D. Act, 1953, corresponding to s. 154 of the I.T. Act, 1961, had opined as follows (p. 349) :

''Mistake' is an ordinary word, but in taxation law, it has a special signification. It is not an arithmetical or clerical error alone that comes within its purview. It comprehends errors which, after a judicious probe into the record from which it is supposed to emanate, are discerned. It is difficult to axiomatise and lay down dictas for the discovery of a mistake from official records. The word 'mistake' is inherently indefinite in scope, as what may be a mistake to one may not be one for another. It is mostly subjective and the dividing line in border areas is thin and indiscernible. Indeed, it is imponderable due to its inherent indefiniteness. It is something which a duly and judiciously instructed mind can find out from the record. It may be that sometimes an argument, though not a complex study, may be required to find it out. But that by itself is not the test to discountenance it as being not a mistake apparent from record. In the ultimate analysis, the conclusion a well equipped and trained judicial mind will reach after scrutinising the record, will govern and his finding whether it is a mistake or not has to be accepted.'

14. The learned judges further expressed that the jurisdiction of the officer to rectify a mistake depended on the mistake being apparent from the record, that the power to rectify is not confined only to the rectification of some clerical or arithmetical mistakes, but at the same time it will not cover any mistake which has to be discovered by a complicated process of investigation, argument or proof. The Bench further observed, after considering the relevant decision of this court as well as the Supreme Court on that point, that for a rectification of an error which is said to be apparent from the face of the record, the mere complexity of the problem or that genuine argument is necessary to discover the same may not by themselves by sufficient to oust the jurisdiction of a Tribunal to rectify such a mistake and that if it could be discerned with some precision after a fair probe into the assessment records and a reasonable and probable conclusion can be arrived at that the court's conscience has been shaken, in that there appears an error on record which has to be certainly corrected, then it would appear that the jurisdiction of the tribunal vested with power to rectify such mistakes arises and that the essence of rectification is to bring the order which has been expressed and is intended to be in pursuance of the existing law, into harmony with such law.

15. In CWT v. Kamala Ganapathi Subramaniam : [1981]127ITR175(Mad) , this court has dealt with the scope of s. 35 of the W.T. Act, 1957, which corresponds to s. 154 of the I.T. Act, 1961. In that case, this court has pointed out the distinction between an apparent error and construction and legal effect of a statutory provision that had to be kept in mind for deciding whether the mistake is apparent from the order or not and stated that the question whether, in a giver case, the jurisdiction was properly exercised will depend on the application of the proper provisions of the Act. In that case the assessee claimed exemption under s. 5(1)(viii) of the W.T. Act, 1957, in respect of certain jewellery in her wealth-tax assessment. That was accepted by the authorities. However, in view of the Finance (No. 2) Act, 1971, which came to be enacted later, the assessee will not be entitled to the exemption, as the Act had been given retrospective effect. After the coming into force of that Act, the concerned authority proposed to rectify the order to bring it in line with the provisions of the said Act. The assessee objected that there is no rectifiable error which could be corrected under s. 35. That matter ultimately came up before this court and this court has, after referring to the earlier decisions on the point, held that the mistake is a rectifiable one so as to call for the application of s. 35. Having regard to the view expressed in the decisions referred to above, we are of the view that the mistake in this case is a rectifiable one and the authority was justified in rectifying the mistake under s. 154 of the Act.

16. In this view, the question referred to this court is answered in the affirmative and against the assessee. There will be no order as to costs.


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