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TMI Blog1998 (7) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ther. One common order was passed in all the appeals. The reference applications were also disposed of by a common order and therefore this order shall dispose of the reference petitions for all the three years by a common order : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order dated December 3, 1985, under section 154 for the assessment year in question?" The assessee is an arrack contractor. It has been assessed in the status of unregistered firm. In the assessment for the assessment year 1979-80 completed by the Income-tax Officer, on February 15, 1982, the Income-tax Officer computed income under the head "Business income" at Rs. 2,30,758 and income under the head "Income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et off of brought forward losses from earlier years to the income computed under the head "Business" only and to subject to tax the interest income. Objection letters dated July 17, 1985, were filed by the assessee. Overruling the objections, the assessing authority rectified the assessments. According to the Income-tax Officer, a mistake had crept in the order in so far as the carried forward business loss was set off against the income under the head "Income from other sources". According to him, section 72(1) of the Act makes it clear that the carried forward losses of an earlier year can in no case be set off against the profits from a source other than business, profession or vocation. It rectified the mistakes committed in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is a business income. By referring to certain decisions of the High Court it was held that there could be two views on this question, and therefore, under such circumstances, the Income-tax Officer was not justified in resorting to the provisions of section 154. The Department carried a further appeal before the Tribunal. The contention of the Department before the Tribunal was that the assessee itself had shown interest income under the head "Income from other sources". In the assessments made, interest income had been assessed under the head "Income from other sources". Since interest income had been assessed under the head "Income from other sources" it was an obvious mistake committed on the part of the Income-tax Officer to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad as follows : "154. Rectification of mistake.---With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,--- (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation sent by it under sub-section (1) of section 143, or enhance or reduce the amount of refund granted by it under that sub-section..." We have to now see whether the Income-tax Officer was justified in opining that in the original orders of assessment there was only apparent mistake. The admitted case of the parties is that the deposits which yielded interest were made at the instance of the bank to enable the bank to give bank guarantee for the assessee for bidding for the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried forward losses. In any case the assessee could not be precluded from establishing before the authorities that it was a business income. The predominant view of the various High Courts is that interest income arising from the transaction connected with the business would be interest income. In Snam Progetti S. P. A. v. Addl. CIT [1981] 132 ITR 70 (Delhi), an Italian company engaged in India in execution of engineering works running into millions of dollars had large liquid funds. These funds were placed in short-term deposits and interest income was earned thereon. For the assessment year 1970-71, it had incurred a net business loss of Rs. 122 lakhs and in the next assessment year 1971-72 had earned a profit of Rs. 30 lakhs and intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be "business income" or "income from other sources" has not been referred to us and, therefore, we need not opine on it and confine ourselves to the question whether two views were possible on this point. From the judgments referred to above of the Delhi and Madras High Courts possibly a view could be taken that interest income on these facts was business income. It was a debatable point and two opinions were possible. If the point is debatable and can give rise conceputally to two opinions, then it would not be a mistake apparent on the face of the record, authorising the Assessing Officer to exercise jurisdiction under section 154 of the Act. It is the consistent opinion of the Supreme Court as well as the various High Courts that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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