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TMI Blog1985 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Iron and Steel Controller and also the excise duty drawback received from the Customs Department by the assessee in respect of the export sales as part of the " sales proceed " and " turnover " within the meaning of the relevant provisions of the said Finance (No. 2) Act, 1967, and the rules made thereunder. The successor-ITO considered that the inclusion of the cash subsidy and the excise duty drawback in the " sale proceeds " and " turnover " for the purpose of rebate under s. 2(4)(a) of the Finance (No. 2) Act, 1967, and the rules made thereunder was a mistake apparent from the record. He accordingly initiated proceedings under s. 154 of the I.T. Act, 1961, for rectification of the assessment. This action of the ITO was opposed by the assessee. The ITO, however, overruled the assessee's contention that the cash subsidy received from the Iron Steel Controller and the excise duty drawback received from the Customs Department were rightly treated in the original assessment as part of the " sale proceeds " and " turnover " within the meaning of the relevant provisions of the Finance (No. 2) Act, 1967, and the rules made thereunder and that there was no mistake apparent fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 154. Mr. R. N. Bajoria, learned advocate for the respondents, has submitted that the mistake sought to be rectified must be a patent or apparent or an obvious one on which there could not conceivably be two points of view. In this case, the mistake, if any, has to be established by a process of reasoning or investigation of facts or by examination of question of law on which there might conceivably be two views. Thus, it is not a mistake which would come within the provisions of s. 154 of the Act. He has also contended that even on merits, the Revenue has no case at all inasmuch as most of the High Courts have taken the view that cash subsidy and excise duty drawback should be treated as a part of export sale. It is now well-settled that a mistake which can be rectified under s. 154 of the Act must be a mistake apparent from the record. It may be a mistake either of law or of fact. However, the power of rectification can only be exercised if there is a mistake apparent from the record. The Supreme Court in the case of Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50, has considered the scope of s. 154 of the Act regarding rectification of mistakes. In that case, the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act, 1961. 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 conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale [1960] 1 SCR 890, this court while spelling out the scope of the power of a High Court under article 226 of the Constitution, ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record-see Sidhramappa Andannappa Manvi v. Commissioner of Income-tax [1952] 21 ITR 333 (Bom). The power of the officers mentioned in section 154 of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash subsidy or excise duty drawback could be included in the value of the turnover is again a debatable issue. As a matter of fact, most of the High Courts in construing similar provisions of different Finance Acts, have taken the view that the sale proceeds would include not only the actual consideration but also what are received in connection with the export sale. In the case of CIT v. Wheel and Rim Company of India Ltd. [1977] 107 ITR 168, the question before the Madras High Court was whether under the provisions of s. 2(5)(a) of the Finance Act, 1966, the cash subsidy and the income derived from the sale of import entitlements would form part of the profits and gains derived from the export of any goods or merchandise. The Madras High Court held that the cash subsidy and income from the sale of import entitlements would necessarily constitute business receipts referable to, or derived from, the export of cycle rims by the assessee and as such the assessee is entitled to the rebate under the Finance Act, 1966, on the aforesaid two items. In the case of Hindustan Lever Ltd. v. CIT [1980] 121 ITR 951 (Bom), the question before the Bombay High Court was whether the profits ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee submitted before the ITO that three more items should be taken into account in calculating the value of the turnover of exports, namely, drawback of customs duty and the value of the import entitlements and refund of excise duty. The ITO refused to take into account these items on the ground that the words " turnover " as used in r. 2(3) should be construed in its ordinary commercial usage to mean sale price of goods and, therefore, other benefits arising from exports could not be added to the invoice value of sales for calculating the value of turnover of exports. The AAC as well as the Tribunal affirmed the view taken by the ITO. The Madhya Pradesh High Court held that since the amounts received by the assessee-company as drawback of customs duty and as refund of excise duty were received only because of the export business carried on by it and they were not referable to any other business carried on by the assessee, a direct relationship between the receipt of these items and the export business was established. There cannot be a neutral source of income or non-descript business. As these items were not relatable to any other source, they were derived from the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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