1997 (2) TMI 16 - HC - Income Tax

Summary

Issues:
1. Whether the grant of depreciation at 15% on plant and machinery not in contact with corrosive chemicals in a sugar factory is a mistake apparent from records.
2. Whether the issue of depreciation rate for machinery in a sugar factory is debatable and not subject to rectification under section 154 of the Income-tax Act, 1961.
3. Whether the question raised by the Revenue is referable as a question of law.

Detailed Analysis:
1. The case involved a petition by the Revenue under section 256(2) of the Income-tax Act, 1961, regarding the grant of depreciation at a higher rate of 15% on machinery in a sugar factory not in contact with corrosive chemicals. The Assessing Officer initiated rectification proceedings under section 154 to reduce the depreciation rate to 10%. The controversy arose as to whether this discrepancy constituted a mistake apparent from records.
2. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal both held that the issue of determining the depreciation rate for machinery in a sugar factory was debatable and not suitable for rectification under section 154. The Tribunal emphasized that assessing the eligibility for higher depreciation involved a controversial issue regarding the role of the machinery in the manufacturing process of sugar.
3. The Revenue filed a reference application under section 256(1) of the Act to refer the question of law regarding the depreciation rate issue. However, the Appellate Tribunal rejected the application, stating that the question was not referable as a question of law. The court agreed with the Tribunal's decision, emphasizing the debatable nature of the issue and the existence of multiple perspectives on the matter.
4. The court highlighted that the process of manufacturing sugar involved mixing sugarcane juice with sulphuric acid and lime, leading to a debatable issue of whether the resultant product would have a corrosive effect on the machinery. The court referenced previous cases and held that since the issue was controversial and open to interpretation, it did not qualify as a mistake apparent from the record. The court dismissed the tax case petition, affirming the Tribunal's decision and emphasizing the debatable nature of the issue.