High Court Of Madras
CIT vs. Tirupathur Co-Operative Sugar Mills Ltd.
Sections 154, 256(2)
Asst. Year 1983-84
Abdul Hadi & N.V. Balasubramanian, JJ.
Tax Case Petn. No. 399 of 1996
25th February, 1997
C.V. Rajan, for the Appellant : P.P.S. Janarthana Raja, for the Respondent
N.v. Balasubramanian, J. :
This is a petition filed by the Revenue under s. 256(2) of the IT Act, (hereinafter referred to as âthe Actâ) to direct the Tribunal to state a case and refer the following question of law for the opinion of this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the grant of depreciation at15 per cent on the plant and machineries which do not come into contact with corrosive chemicals in a sugar factory inot a mistake apparent from records and that the issue being a debatable one, cannot be rectified under s. 154 ?”. The assessee is a company engaged in the manufacture of sugar and allied products. In the original assessment for the asst. yr. 1983-84, the AO granted depreciation on the machineries which are put into use in the sugar factory at a higher rate of 15 per cent while those machineries which do not come into contact with corrosive chemicals were eligible for depreciation at the rate of 10 per cent only. The AO initiated proceedings under s. 154 of the Act for rectification of the order of the assessment on the ground that the machinery did not come into contract with corrosive chemicals as contemplated under the relevant IT Rules and passed an order of rectification restricting the rate of depreciation to 10 per cent. The assessee preferred an appeal to the CIT(A) against the order of rectification. The CIT(A) held that the question whether the machinery and plant came into contact with corrosive chemicals or not is a controversial issue and hence the AO was not justified in passing of an order of rectification under s. 154 of the Act and allowed the appeal.
Thereupon the Revenue preferred an appeal before the Tribunal and the Tribunal found that the question whether a particular item of plant and machinery is entitled to depreciation at the rate of 10 per cent or 15 per cent cannot be treated as a mistake apparent from the record as the same involves the ascertainment of the fact the plant or machinery plays in the process of manufacture of sugar from sugarcane. The Tribunal, therefore, held that the issue involved is a controversial issue and debatable issue are involved in the process and hence the ITO was notjustified in invoking the provisions of s. 154 of the Act to rectify the order of assessment. Aggrieved by the order of the Tribunal, the Department filed a reference application under s. 256(1) of the Act, requiring the Tribunal to state a case and refer the question of law set out in para above. The Tribunal rejected the said application on the ground that be question raised is not a referable question of law. Hence, the present tax case petition. Mr. C.V. Rajan, learned counsel appearing for the Department strenuously argued that the question whether a particular machinery is entitled to depreciation at 15 per cent or 10 per cent cannot be regarded as an apparent mistake and it is open to the ITO is rectify the mistake. According to him, if a particular machinery falls under particular item in the depreciation schedule, the grant of depreciation by the ITO as if it falls under another item in the same schedule should be regarded as a mistake apparent form the record and it is open to the ITO to rectify the same in the rectification proceedings. The learned counsel for the Revenue strongly relied on the decisions in Gwalior Sugar Co. (P) Ltd. vs. CIT (1989) 178 ITR 415 (MP) : TC 27R.445 and CIT vs. Saraswati Industrial Syndicate Ltd. (1981) 23 CTR (P&H) 6 : (1982) 136 ITR 758 (P&H) : TC 27R.442 and submitted that both the Madhya Pradesh High Court as well as the Punjab & Haryana High Court have considered the matter on merits and held that the machineries used in the manufacture of sugar do not come into contact with corrosive and hence the said machineries are not entitled to higher depreciation. Mr. P.P.S. Janarthana Raja, learned counsel appearing for the assessee, on the other hand, submitted that, on the facts of the case, it is seen that in the process of manufacture of sugar, sugarcane juice was mixed with lime and acid and the question whether the composition would have corrosive effect on the machinery is debatable issue and it is not a mistake apparent from the record. We have carefully considered the rival contentions of the parties. It is seen that in the process of manufacture of sugar, the sugarcane juice is mixed with sulphuric acid and lime for the purpose of filtration and once chemical reaction has set on, the question whether the resultant product, after filtration would have corrosive effect on the machinery is a debatable issue. The Tribunal has found that the issue involved is a controversial issue and once it is found that the issue is controversial one, it is not open to the ITO to invoke the provisions of s. 154 of the Act for rectification. It is well settled that for rectification of mistake under s. 154 of the Act there must be a mistake apparent from the record and where the question is a debatable issue, it cannot be regarded as a mistake apparent from the record. As a matter of fact, in T.C. Nos. 628 and 189 of 1982 by order dt. 17th June, 1996, this Court has remitted the matter to the Tribunal to consider the question whether the machineries engaged in the manufacture of sugar came into contact with the corrosive chemicals or not. The fact that the matter was remitted for fresh consideration shows that more than one view is possible on the question involved. Therefore, we are of the view that there is adebatable point involved in the question; Whether the assessee would be entitled to depreciation at the rate of 15 per cent or 10 per cent. We, therefore, hold that the Tribunal has come to the correct conclusion on the question that there is controversial issue involved in the rectification proceedings initiated by the ITO and we are therefore of theopinion that the question of law sought to be referred by the Revenue is not a referable question. Accordingly we dismiss the tax case petition. There will be no order as to costs.
[Citation : 246 ITR 227]