Judgment:
ORDER
The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for opinion to this court:
'Whether, in law and circumstances of the case, the Income-Tax Appellate Tribunal was justified in holding that the question involved was debatable and that the provisions of section 154 of the Income Tax Act, 1961 could not be invoked in withdrawing the excess depreciation allowed originally at the rate of 15 per cent instead of 10 per cent as admissible under item No. III of the Appendix I Part I to rule 5 of the Income Tax Rules, 1962
2. Briefly stated the facts giving rise to the present reference are as follows:
The reference relates to the assessment years 1975-76 and 1977-78. The income -tax officer for the assessment years 1975-76 and 1977-78 allowed depreciation on power plant at the rate of 15 per cent as claimed by the assessee. Thereafter the said part of the order was sought to be rectified by the Income Tax Officer on the ground that the depreciation on power plant was wrongly allowed at special rate, while it was allowable only against general rate of 10 per cent as admissible under item No. III of the Appendix I Part I rule 5 of the Income-Tax Rules, 1962. The notice under section 154 of the Act was contested by the assessee-respondent on the ground that power plant forms part and parcel of the entire plant and machinery, as it is engaged in manufacture of artificial silk, there is no justification for considering it separately from the rest of the machinery and accordingly depreciation was correctly allowed at the rate of 15 per cent. The assessing officer being not satisfied with the aforesaid contention of the assessee-respondent, rectified the mistake under section 154 of the Act. The Commissioner (Appeals) set aside the rectification orders on the ground that the question involved with regard to the admissibility of rate of depreciation was a debatable one and was not free from doubt and as such it was beyond the scope of provisions of section 154 of the Act. The said order of Commissioner (Appeals) has been confirmed by the Tribunal.
3. Heard Shri A.N. Mahajan, the leamed standing counsel for the department. None appeared on behalf of the assessee. We find that the controversy involved in the present case is squarely covered by a judgment of this court in CIT v. Jayana Cold Storage & Ice Factory : [2003]260ITR430(All) . It has been held that the correct rate of admissibility of depreciation is a debatable issue and such mistake cannot be subject-matter of rectification proceedings under section 154 of the Act and it cannot be said that there was an error apparent on the face of record on this issue in the original assessment order.
4. Respectfully following the aforesaid judgment, we answer the question referred to us in affirmative, i.e., in favour of the assessee and against the revenue.