Back
HIGH COURT OF CALCUTTA
P. B. Mukharji, B. C. Mitra
INCOME-TAX OFFICER, "G" WARD - Appellant
Versus
INDIA FOILS LTD. - Respondent
Appeal 97 Of 1971
Decided On : MARCH 6, 1972
INCOME TAX - RECTIFICATION OF MISTAKE - MISTAKE APPARENT ON THE FACE OF THE RECORD - DEPRECIATION ALLOWANCE - ACTUAL COST OF FIXED ASSETS - TRANSFER OF ASSETS FROM ONE COMPANY TO ANOTHER - VALUATION OF ASSETS - INCOME TAX ACT, 1961, SECTIONS 154, 155.
Fact of the Case:
Venesta Foils Ltd., a British company, transferred its assets in India to India Foils Ltd., the respondent, a newly incorporated company. The consideration for the transfer was the issue of shares in the respondent company to Venesta Foils Ltd. The respondent claimed depreciation on the basis of the actual cost of the fixed assets, which was the value shown in the books of Venesta Foils Ltd. on the date of the transfer. The Income-tax Officer accepted the respondent's claim and allowed depreciation accordingly for the assessment year 1962-63 and subsequent years. However, by a notice dated March 11, 1969, the Income-tax Officer sought to rectify the mistake apparent from the record and enhance the assessment for the year 1962-63, contending that the depreciation allowed was excessive as the value of the assets transferred was much higher than the consideration paid.
Finding of the Court:
The court held that the mistake alleged by the Income-tax Officer was not apparent on the face of the record. The valuation of the assets was a debatable point on which two opinions were possible. The Income-tax Officer had considered the valuation and allowed depreciation accordingly. The subsequent change of opinion by the Income-tax Officer did not amount to a mistake apparent on the face of the record.
Issues: Whether the mistake alleged by the Income-tax Officer was apparent on the face of the record, justifying the issuance of a notice under Sections 154 and 155 of the Income Tax Act, 1961.
Ratio Decidendi: A mistake apparent on the face of the record, as contemplated by Sections 154 and 155 of the Income Tax Act, 1961, must be an obvious and patent mistake, not something that can be established through a long process of reasoning or on which there may be two or more opinions. In this case, the valuation of the assets transferred from Venesta Foils Ltd. to India Foils Ltd. was a debatable point on which two opinions were possible. The Income-tax Officer had considered the valuation and allowed depreciation accordingly. The subsequent change of opinion by the Income-tax Officer did not amount to a mistake apparent on the face of the record.
Final Decision: The court dismissed the appeal filed by the Income-tax Officer and upheld the order of the lower court quashing the notice issued under Sections 154 and 155 of the Income Tax Act, 1961.
( 1 ) THIS is an appeal from the order of K. L. Roy J. It was an application under article 226 of the Constitution of India. K. L. Roy J, India Foils Ltd. v. Income-tax Officer made the rule absolute and issued a writ of prohibition, commanding the respondent to forbear from proceeding any further with the impugned notice and with any other proceedings connected therewith.
( 2 ) A notice dated 11th March, 1969, relating to the assessment year 1962-63, purported to have been issued under Section 154/155 of the Income-tax Act, 1961, is the subject-matter of this application. The notice dated 11th March, 1969, reads as follows :"c/1/1-27/g Ward Dated 11th March, 1969 notice under Section 154/155 of the Income-tax Act, 1961. To, the Principal Officer, Name : Messrs, India Foils Ltd. , 11, Sooterkin Street, Calcutta. The assessment under Section 143 (3) for the assessment year 1962-63 made on 18th March, 1965, requires to be amended as there is a mistake apparent from the record within the meaning of Section 154/155 of the Income-tax Act, 1961. The rectification of the mistake, as per details given below, have the effect of enhancing the assessment or reducing the refund or increasing your liability and if you wish to be heard, you are requested to appear in person or by an authorised representative in my office on 14th March, 1969, at 11-30 a. m. If, however, you intend sending a written reply to this notice and do not wish to be heard in person, you are requested to ensure that your reply reaches me on or before the date mentioned above. Sd/-IIIegiblc income Tax Officer, ' C ' Ward, Comp. Dist, I. Seal. Nature of mistake proposed to be rectified. Mistakes in the calculation of allowance of depreciation. "
( 3 ) THE sole ground alleged in the notice was that the mistake was apparent from the record within the meaning of Section 154/155 of the Income-tax Act, 1961. The main question in this appeal is whether, in the facts and circumstances of this case, it may be called a mistake apparent on the face of the record within the meaning of these sections.
( 4 ) THE facts are not in dispute. Venesta Foils Ltd. , a company incorporated in the United Kingdom, manufactures and markets aluminium foils and allied products exclusively in the U. K. and in the other countries throughout the world. On the 17th March, 1939, another company called the Foils Centre Ltd. was incorporated under the English Companies Act with an authorised capital of 100, divided into 100 shares of 1 each of which only 2 shares were issued as fully paid up and held by Venesta Foils Ltd. On the 28th April, 1961, at an extraordinary general meeting of Foils Centre Ltd. resolutions were passed, changing the name of that company to India Foils Ltd. and also increasing the authorised capital by a further sum of 900, divided into 900 shares of 1 each. By an agreement dated 30th November, 1961, Venesta Foils Ltd. agreed to transfer all its immovable properties, factories, plants, machineries and other movable and immovable assets in India to India Foils Ltd. , the present respondent at the value shown in the books of Venesta Foils Ltd. , while the respondent undertook to meet all the liabilities of Venesta Foils Ltd. , incurred on account of its Indian business, including a loan of 204,328, due by Venesta to M/s. Reynolds T. I. Aluminium Ltd. It was further agreed that after setting off all the liabilities from the aforesaid book value of the assets, the residue of the consideration for the said sale would be paid and satisfied by the issue to Venesta or its nominees of 998 shares of 1 each credited as fully paid up in the petitioner-company. As a result Venesta Foils Ltd. held all the thousand shares, constituting the authorised capital of the petitioner-company and the petitioner-company became a hundred per cent. subsidiary of Venesta Foils Ltd.
( 5 ) THE petitioner-respondent closed the accounts for the first time on the 30th November, 1961. It
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
