Mepco Industries vs. CIT (Supreme Court)

DATE: (Date of pronouncement)
DATE: December 1, 2009 (Date of publication)

Click here to download the judgement (mepco_154_mistake_apparant_from_record.pdf)

Debatable issues are not “mistakes apparent from the record” u/s 154

The assessee filed a revision petition u/s 264 in which it claimed that the subsidy received by it from the government was a capital receipt and not chargeable to tax in view of P.J. Chemicals Ltd 210 ITR 830 (SC). The Petition was allowed by the CIT. Subsequently, the Supreme Court held in Sahney Steel and Press Works 228 ITR 253 that the subsidy received by that assessee was a revenue receipt. Pursuant to this judgement, the CIT passed a rectification order u/s 154 by which he held that the subsidy was a revenue receipt. The assessee challenged the said order by a writ petition before the Madras High Court which was dismissed. On appeal by the assessee, HELD allowing the appeal:

The case was a classic one of change of opinion. The question whether a subsidy is capital or revenue depends on the facts of the case. S. 154 can only apply to a “mistake apparent from the record”. A “rectifiable mistake” is a mistake which is obvious and not something which has to be established by a long drawn process of reasoning or where two opinions are possible. A decision on a debatable point of law cannot be treated as a “mistake apparent from the record”.

See Also: Saurashtra Kutch SE 305 ITR. 227 (SC), Honda Siel vs. CIT 295 ITR 466 & Deva Metal Products (SC)