2004 (12) TMI 22 - HC - Income Tax

(i) Whether Tribunal was legally correct in holding that the rectification of mistake relating to incorrect depreciation at 20 per cent on electric installations and generator and bringing it to 10 per cent was not correct as it relates to a debatable point and does not come within the purview of section 154 of the Income-tax Act 1961? (ii) Whether Tribunal was legally correct in holding that depreciation on electrical installations and generator was allowable at 20 per cent instead of 10 per cent under the Income-tax Rules 1962? - mistake in the original assessment order was not a mistake which could be rectified by invoking section 154. It was not a mistake apparent on the face of the record. At the most it was a case of error in the judgment or order. In the result the mistake could not be rectified by invoking the provisions of section 154 of the Act by the assessing authority. - We answer question No. 1 in the affirmative i.e. in favour of the assessee and against the Department. In view of our finding on question No. 1 question No. 2 does not arise out of the order of the Tribunal

Summary

Issues:
1. Correctness of rectification of depreciation rate from 20% to 10% on electric installations and generator under section 154 of the Income-tax Act, 1961.
2. Allowability of depreciation on electrical installations and generator at 20% instead of 10% under the Income-tax Rules, 1962.

Analysis:
The case involved a dispute regarding the rectification of a mistake in the depreciation rate applied to electric installations and a generator. Initially, the Inspecting Assistant Commissioner allowed depreciation at 20%, but later initiated rectification proceedings under section 154 of the Income-tax Act to correct it to 10%. The Commissioner of Income-tax (Appeals) set aside the rectification order, deeming the depreciation rate a debatable issue. The Tribunal upheld this decision. The Department argued that the rate of depreciation on the generator was not debatable and was an apparent mistake. However, the court emphasized that for rectification under section 154, the mistake must be apparent from the record, and the power is not for review purposes. The court noted that the question of whether the generator qualifies as an electrical installation for 20% depreciation was debatable, as seen in a previous assessment for the same assessee. Therefore, the mistake was not rectifiable under section 154 as it was not apparent on the face of the record but rather an error in judgment.

The court concluded that the mistake in the original assessment order did not meet the criteria for rectification under section 154. As the issue was debatable and required reasoning, it could not be rectified using the provisions of the Act. Consequently, the court ruled in favor of the assessee on question No. 1, stating that the mistake was not rectifiable under section 154. Since the decision on question No. 1 resolved the matter, question No. 2 was deemed irrelevant. No costs were awarded in the case.