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TMI Blog1983 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... nd income of Rs. 41,600 and, thus, took the net income from dividend at Rs. 16,640. This net income from dividend was adjusted against the loss of business of Rs. 16,289. The positive income of Rs. 351 for the assessment year under consideration was, thus, determined. Against the aforesaid income, the ITO set off unabsorbed depreciation of 1976-77 to the extent of Rs. 351, thereby reducing the total income to rupees nil. 3. Subsequently, the ITO realised that he had committed a mistake in granting the relief to the assessee under section 80M. Accordingly, he issued a notice under section 154 to the assessee and after hearing him, he redetermined the total income of the assessee as follows : Rs. Business loss as per original assessment order (-) 16,289 Income from dividends (+) 41,600 -------------------- (+) 25,311 Less : Set off of unabsorbed depreciation of assessment year 1976-77 to the extent of income available 25,311 -------------------- (46,171-25,311=20,860 will be c/f.) Rs. Nil, Gross total income. The benefit of section 80M was not given to the assessee, as according to the ITO, the gross total income was nil and as such the benefit of section 80M cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parently the action by the ITO under section 154 would not be justified. 7. Gross total income has been defined vide sub-section (5) of section 80B as follows : " ' gross total income ' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter . . ." 8. In the present case, the assessee had income from business and dividends. Income from business computed as per the original assessment order was at a loss of Rs. 16,289 after allowing depreciation of Rs. 59,243, allowable to the assessee for the previous year in question. While computing the above business loss, the ITO did not take into account the unabsorbed depreciation of the assessment year 1976-77 amounting to Rs. 46,171 and did not add it to the depreciation of the previous year which he was otherwise obliged to do in terms of sub-section (2) of section 32 of the Act which, so far as is relevant for our purpose, reads as follows : " Where, in the assessment of the assessee ... full effect cannot be given to any allowance under clause (i) or clause (ii) - . . of sub-section (1) ... in any previous year owing to there being no profits or gains chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and deeming it to be part of that allowance ; the effect of deeming it to be part of that allowance is that it falls in the following year within clause (vi) and has to be deduced as allowance . . , " [Emphasis supplied] 10. Being depreciation of the current year under section 10(2)(vi) of the 1922 Act, the unabsorbed depreciation becomes eligible for set off against the income, profits and gains under other heads in terms of section 24(1) of the 1922 Act (which is in pari materia with the provisions of section 71 of the 1961 Act). In view of the above decision, the ITO had patently committed an error when in the original assessment order he did not deem unabsorbed depreciation of assessment year 1976-77 as part of the depreciation of the previous year in question and did not set it off against the income of the assessee from dividends. The income of the assessee from dividends was Rs. 41,600 before granting relief to the assessee under section 80M. The definition of ' gross total income ', as extracted above, stipulates that it would be computed ' in accordance with the provisions of this Act, before making any deduction under this Chapter ', i.e., Chapter VI-A of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two opinions could be possible with regard to the computation of gross total income. The law on the above point has been very succinctly stated by their Lordships of the Hon'ble Supreme Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50, which says 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.... A decision on a debatable point of law is not a mistake apparent from the record ". We have, therefore, to answer the above question in the light of the principles enunciated by their Lordships in the above case. 12. The mistake committed by the ITO was one of law. If his order was based on a debatable point of law, the mistake committed by him would not be a mistake apparent from record. If, however, his order can be shown to be based on a total misconception of law, about which there could never be two opinions and in respect of which a genuine debate could not develop the mistake committed by him, though of law, would be a mistake apparent from record. Taking into account the definition of gross ..... X X X X Extracts X X X X X X X X Extracts X X X X
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