1. By this misc. application the assessee has required the Tribunal to amend its order dated 30-4-1991 under the provisions of Section 254(2) of the Income-tax Act, 1961.
2. We have heard Sri P.R.P. Verma, the learned counsel of the assessee and Sri S.C. Sen, the learned senior departmental representative. We have also perused the order of the Tribunal dated 30-4-1991. The paper book filed by the assessee's counsel on 8-7-1991 on which the assessee's counsel has heavily relied on was also gone through.
3. On careful consideration of the arguments advanced by both the sides and the records available to us, we do not find any merit in the misc.
application filed by the assessee. We also find that the paper book filed by the assessee on 8-7-1991 was not filed before the Tribunal during the course of hearing the appeal. Since the Tribunal has passed its order on the basis of arguments advanced by both the sides during the course of hearing the appeal as well as on the basis of the records available before it, the alleged mistakes stated to have been committed by the Tribunal cannot be said to be apparent from the records. In fact, the assessee merely made an attempt to persuade the Tribunal to review its order which is not permissible in law as held in a number of judicial decisions.
4. In view of the facts stated above, the misc. application filed by the assessee is hereby rejected.
5. I have carefully gone through the proposed order of the learned Accountant Member in this Miscellaneous Application. As we could not agree on the point of rectification of the order dated 30th April, 1991, in ITA No. 118 (Cal.) of 1989 for the assessment year 1985-86 in this misc. application on the mistake of fact, therefore, I had to differ on the point of rectification of the Tribunal's order on the basis of apparent mistake on the face of the order. The reasons to differ are as follows: 6. The basic fact is that the assessee-company is a manufacturing company. Another basic fact is that it has claimed 100% depreciation on the bottles, and wooden crates used in filling up bottles with the soft drinks and wooden shelves used to store the bottles'. The assessee-company also claimed depreciation on the plant and machinery used in manufacturing the beverages. In grounds 2 and 3 of the appeal, the assessee has agitated the dispute of sustaining the disallowance of depreciation and investment allowance. Audited accounts were filed before the Assessing Officer. The assessee-company showed loss of Rs. 61,79,130 including claim of investment allowance of Rs. 14,91,051 and claim of 50 per cent depreciation on Rs. 4,49,450 and 100% depreciation on purchase of bottles amounting to Rs. 41,60,569. The company was registered on 23-2-1983.
7. The Assessing Officer examined the balance-sheet as on 3-9-1984 with reference to the copy of Memorandum filed before him. The Assessing Officer has noted in the assessment order that "The assessee-company has claimed investment allowance for the installation of plant and generator set in the factory". On page 4 of the assessment order, the Assessing Officer found that the assessee has claimed a sum of Rs. 7,12,311 in the profit and loss account relating to the bottles and wooden shelves written off due to breakage. The Assessing Officer disallowed a sum of Rs. 2,58,000 from the total claim of Rs. 71,23,111 out of the breakage. He held that the 100% claim of depreciation on the cost of bottles and crates was inadmissible. In page 5 of the assessment order he has held as follows: However, I do not disagree that the bottle and crates are not constitute the word 'Plant' in relation to the manufacturing operation of the assessee-company but I am unable to accept it as 'plant' for the purpose of allowing depreciation on the basis of my reliance on the decision of Gujarat High Court in CIT v. EleconEngg.
Co. Ltd [ 1974] 96ITR 672 whether it has been observed that the article to clarify as plant must have some degree of durability and it should cover the stock-in-trade or it should be quickly consumed or worn out in course of few operation. In the case of the assessee it is found that the bottle and crates are constituted the stock-in-trade of the assessee and breakage has also been claimed in the revenue account in respect of bottles and crates so the claim of depreciation by considering the above articles as 'plant' is not found as warranted. The a/r also submitted for considering the claim of depreciation in terms of Section 32(i)(iii) as the value of unit of the items in respect of which the claim is made is below Rs. 5,000. But as the articles could not be established as 'Plant' the decision of the Gujarat High Court contents of which is discussed above, the submission of the A/R for such is knocked off in respect thereof. Accordingly, the claim of depreciation returnable package as claimed in the statement of computation of loss for the year to the tune of Rs. 41,60,554 is disallowed.
8. The assessee's mistake of claiming breakage does not come in the way of claiming depreciation on the bottles, crates and wooden shelves. It is well settled principle that the correct position under the law should be explained to the assessee instead of denying the lawful entitlement under the law. The Income-tax Officer held that the depreciation was allowable on the plant and machinery but the same could not be allowed because of the decision of the Gujarat High Court in the case of CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672.
9. The Assessing Officer has not specifically mentioned in his order that the assessee-company is not a manufacturing company. According to him, the articles produced by the assessee-company are not durable and, therefore, the depreciation cannot be allowed. The statement of facts was filed before the Tribunal along with grounds of appeal. There are two copies of the said statement of facts which are on record filed along with the appeal itself. It is mentioned therein that the assessee-company has claimed investment allowance under Section 32A on the cost of plant and machinery and electric generator in the return of income for the assessment year under appeal, on the basis of invoice value of the said plant and machinery. In para 3 of the said statement of facts it is mentioned that the assessee-company purchased and used bottles and wooden crates of value of Rs. 41,60,554 for filling the soft drinks manufactured and distributing and selling the same. Out of the said amount, bottles and crates of the value of Rs. 7,12,311 were broken and used up and were written off in the P/L A/c. The assessee-company contended that bottles and crates were plant eligible for depreciation @ 100% and adduced judgment in the cases of 'Jai Drinks' and 'Krishna Bottlers (P.) Ltd.' (copies enclosed) in support of its contention. The Income-tax Officer accepted that bottles and crates are plant under Section 43(3) but not plant for purposes of Sections 32 and 32A. He has disallowed the depreciation @ 100% amounting to Rs. 41,60,554 and has allowed Rs. 2,58,000 only out of value of bottles and crates used and written off Rs. 7,12,311 on account of breakage. Definition of plant under Section 43(3) is patently applicable for claims under Sections 28 to 41. As such claim under Sections 32 and 32A was allowable on items of plant covered under definition vide Section 43(3).
10. The assessee has maintained the books of accounts, records, vouchers, bills and other supporting evidence which were duly produced at the assessment stage. The assessee has submitted full details and particulars of balance sheet and P/L A/c. items which were examined and verified were placed on record. The Income-tax Officer has pointed out no defect in the books of account or no item of disallowable nature or of the nature of personal expenses. He has made disallowances on estimate out of various items of revenue expenses alleging that the same are attributable to personal use of the directors. The expenses claimed are all related to business supported by bills, vouchers, evidences and are fully vouched and verifiable.
11. These are the narrations of the assessee-company contained in paragraphs 3 and 4 of the statement of facts. The relevant documents were very much produced before the Income-tax Officer for his examination. The Income-tax Officer has disallowed the depreciation and investment allowance for different reasons without expressly mentioning that the assessee is not a manufacturing company.
12. When the CIT(A)'s order was agitated before the Tribunal, the Tribunal proceeded on the ground that the evidence in respect of the manufacturing part of the assessee's factory was not produced. It is true that the copies of the documents were not produced but even without the said documents it was very much on record consisting the books of account, balance-sheet, profit and loss account and other relevant vouchers coupled with the explanation regarding the claim. It was not the case that the evidence before the ITO was not sufficient.
13. At the time of hearing this misc. application, the learned representative Shri Verma for the assessee brought several facts to our notice, such as, consumption of raw materials purchased, power consumption, oil fuel consumption, electric expenses, manufacturing expenses, etc. According to Shri Verma, the assessee-company purchased only flavors and scent from M/s. Parle (Exports) Pvt. Ltd. From the assessment order itself it can be clearly made out that the assessee-company itself is manufacturing soft drinks and it is only purchasing flavors and scent from others. Similar is the case for manufacturing soda. Under no circumstances it can be said that the assessee-company is not a manufacturing company and it is not entitled to depreciation and investment allowance on the bottles, crates and wooden shelves. The breakage claimed by the assessee-company on the bottles and crates cannot be taken into account for disallowing the depreciation and investment allowance.
14. We have also heard the learned departmental representative Shri S.C. Sen who has strongly objected to rectify the order. According to him, the assessee-company did not produce evidence at the time of hearing the appeal to prove that it is a manufacturing company to claim 100% depreciation on the bottles, crates and wooden shelves and the depreciation at the prescribed rate on the plant and machinery.
Depreciation is also claimed on the bottles, crates and wooden shelves trading as plant and the value of each item is below Rs. 5,000. Once having accepted that the bottles and wooden shelves constitute plant, depreciation cannot be disallowed. The said items cannot constitute stock-in-trade. The containers were returnable. The meaning of the assessee-company's affairs as understood that the assessee-company is bottling the concerntrated chilled soft drinks supplied by M/s. Parle (Exports) Ltd., Bombay, and also purchased and sold Bisleri Club Soda from the said company, is not a correct fact. This conclusion is not in consonance with the assessment order coupled with audited balance-sheet and profit and loss account. The notes attached to the account provided information as to consumption of various principal raw materials like, sugar, citric acid, carbon-dioxide, Crown corks and essence. Out of the above raw materials, only essence is supplied by M/s. Parle (Exports) Limited, Bombay, and other materials are procured by the assessee-company from the established sources. The assessee was sanctioned electrical power from the State Electricity Board to the tune of 245 K.V.A. The assessee paid power charges of Rs. 1,09,419 during the relevant accounting period under consideration. The assessee has also license under the Central Excise and Salt Act, 1944. The assessee was paying the prescribed duty of excise to the appropriate authority.
15. The process employed by the assessee comprises of purification and softing of water, preparation of raw and ready sugar syrup with the help of steam jacketed steel tanks and oil fired boiler, carbonation and flavoring of syrup, filling into the bottles with automatic fillers, processing the bottles for removal of dirt and bacteria with the help of automatic crower. These facts suggest that the assessee-company is engaged in manufacturing activity holding licences under the Factories Act, 1948, the India Boilers Act and the Employees State Insurance Act, 1948, required for manufacturing process carried on by the assessee. The assessee also employed the same process for Bisleri Club Soda except preparation of syrup and adding of flavors.
16. The Assessing Officer has not discussed anything for disallowing capitalisation of pre-operative expenses to the plant and machinery, on the other hand it is held that the pre-operative expenses capitalised by the assessee has no nexus with the assets and plant to confirm the disallowance. The Assessing Officer has not at all discussed and had not adduced any reason for disallowing capitalisation of pre-operative expenses to the plant and machinery. All that he has considered is that "the investment allowance has been claimed on the cost of plant and machinery inclusive of pre-operative expenses amounting in all to Rs. 59,66,007. But the actual cost of plant and machinery is Rs. 57,80,718.
Accordingly a sum Rs. 10,83,885 is found allowable to the company for future set off (vide page 3 of the assessment order dated 20-2-1988).
Aggregating the actual cost of plant and machinery is Rs. 57,80,718 (i.e., without capitalising the pre-operative expenses) the investment allowance works out to Rs. 14,45,180 and the ITO has computed Rs. 10,83,885. This goes to show that the ITO has completed the assessment in haste without verifying the facts before him. Even the CIT(A) in his order dated 29-11 -1988 has stated that the pre-operative expenses capitalised by the assessee has no direct nexus to the assets and plant. To justify this finding no reasons are adduced.
17. As per audited balance-sheet filed before the ITO it may be seen that the expenses in the nature of pre-operative expenses capitalised to the assets are incurred during the construction and installation of.
plant. Disallowance of all the expenses including the interest during implementation period and loan raising expenses in toto is not in accordance with established principle of law. It is a practice to capitalise the pre-operative expenses incurred during the construction period to the assets and the same is supported by several decisions.
Even according to the accepted accounting principles this pre-operative expenses require to be capitalised.
18. It is held in the appellate order of the Tribunal that the assessee-company is not a manufacturing company and it is not entitled for depreciation. The pre-operative expenses are also not allowable fully to capitalise. The facts go to show that the assessee-company is a manufacturing company and it is entitled to 100% depreciation on bottles, crates and wooden shelves. Even without looking into the documents filed at the time of hearing this misc. application, this meaning can be easily construed from the facts considered by the Assessing Officer in the assessment order and the documents produced before him at that time. The statement of facts of the assessee produced before us at the time of hearing of the appeal also cannot be discarded without giving a finding that the statement of facts is either false or incorrect. As the Tribunal has not considered the facts properly, therefore, a mistake of fact is apparent on the face of the order of the Tribunal. If this mistake of fact is rectified, the assessee is entitled to get relief of 100% depreciation on bottles, crates and wooden shelves and not the depreciation at the prescribed rate on the plant and machinery. The assessee is entitled to capitalise the correct pre-operative expenses.
19. It is correctly argued by the learned departmental representative Shri S.C. Sen that if the assessee's application is allowed then it would amount the revival of the order. It is well settled principle that while rectifying the mistake apparent there may be revival of the order, but that does not mean that the mistake apparent should not be rectified. Because of that, the mistake should not be rectified cannot be a correct proposition. If technicalities are very serious, they cannot be ignored. But technicalities of non-production of copies of some of the documents in support of the claim before the Tribunal and produced at the time of hearing of the misc. application does not mean it should be discarded without looking into it. We are meant to do substantial justice and doing the substantial justice means the rightful claim of the assessee should not be rejected. I am not on the point that the evidence now produced at the time of hearing of this misc. application but even without taking into consideration that evidence I am of the opinion, the evidence which was before the Assessing Officer at the time of making assessment was sufficient to arrive to the correct conclusion that the assessee is a manufacturing company and it is entitled to depreciation as prayed. The rightful claim of the assessee should not be disallowed on mere technicality of not producing the evidence before the Tribunal. The lawful claim of the assessee is based on the production of the books of account, audited balance sheet, profit and loss account and other relevant evidence produced by the assessee at the time of making assessment. Therefore, in my opinion, there is an apparent mistake on the face of the order in holding that it is not a manufacturing company and not entitled to depreciation as prayed. On the basis of these facts, in my considered opinion, there is a mistake apparent and the assessee's miscellaneous application requires to be allowed. I am fortified in my conclusion by the decision of the Supreme Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 1201.
20. In the result, the miscellaneous application is allowed by holding that the assessee is a manufacturing company and it is entitled to 100% depreciation on the bottles, crates and wooden shelves and the depreciation at the prescribed rate on plant and machinery and the proportionate capitalisation of the pre-operative expenses.
As we have differed in our opinion, hence we have prepared the following point of difference of opinion for consideration of the Third Member to decide it according to the opinion of the majority under Section 255(4) of the Income-tax Act, 1961: Whether, on the facts and in the circumstances of the case, there was mistake rectifiable under Section 254(2) of the Income-tax Act, 1961, in the order dated 30th April, 1991, of the Income-tax Appellate Tribunal? 1. This matter came before me as a Third Member under Section 255(4) of the Income-tax Act to express my opinion on the following point of difference of opinion that arose between the Members, who heard this matter in Calcutta: Whether, on the facts and in the circumstances of the case, there was mistake rectifiable under Section 254(2) of the Income-tax Act, 1961, in the order dated 30th April, 1991, of the Income-tax Appellate Tribunal? 2. In the normal course it would have been easier for me to say that in a case of this type where long arguments were needed explaining and interpreting the orders passed by the revenue authorities, there could be no mistake apparent from the record rectifiable under Section 254(2) for the very simple reason that it needed interpretation to discover the mistake, which could not be said to be a mistake apparent from the record. Nevertheless the Members of the Bench in their wisdom differed on an apparently undifferable issue. Hence as per the provisions of Section 255(4) there is no exception except to express my opinion leaning in favour of one of the two views expressed.
3. If there is a mistake committed by the Court or the Presiding Officer, it needs to be rectified as no one should suffer or come to grief on account of the mistake committed by the Court. This is the basic principle of jurisprudence. In one of the recent cases decided by the Supreme Court Justice Sahai speaking for the Supreme Court explained the law on the subject thus: Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the Court should not be prejudicial to any one. Rules of stare decisis is adhered for consistency but it is not as inflexible in Administrative Law as in Public Law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher courts is founded on equity and fairness. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order.
Difference lies in the nature of mistake and scope of rectification, depending on if it is of fact or law. But the root from which the power flows is the anxiety to avoid injustice. It is either statutory or inherent. The latter is available where the mistake is of the Court. In Administrative Law the scope is still wider.
Technicalities apart if the Court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order.
4. To correct a mistake committed by the Court is an inherent power vested in the Court because the mistake committed by the Court cannot be allowed to perpetrate to the detriment of the parties that come before it for redressed of their grievances. I am approaching this problem keeping this wholesome principle in view.
5. The facts in issue are not too complicated to comprehend. The assessee is a company engaged in bottling of soft drinks, which are marketed in the trade names of Gold Spot, Limca, Thums Up, Bisleri Soda etc. There was another company called Parle Exports (P.) Ltd. having its registered office in Bombay. By a franchise agreement dated 23-3-1984 the said Parle Exports (P.) Ltd. had permitted and authorised the assessee-company to bottle, to sell and to distribute the beverages known and sold under the trade marks as mentioned above. The former company agreed to supply to the assessee, the bottler company, the essence for the beverages at the prevailing prices. In other words the Parle Exports (P.) Ltd. will supply the concentrate only to the bottler company for a price and the bottler company, i.e., the assessee will convert the concentrate into a drink by adding some more chemicals, water and sugar and sell them in the market. Clause 6 of the agreement provided that the said Beverages will be manufactured in a plant approved by the Parle (Exports) Private Limited and located within the assigned territory by it to the assessee-company. The beverages will be manufactured only according to formula provided by the Parle (Exports) Private Limited strictly in accordance with the sanitary conditions as recommended by it in compliance with the Local and National Laws of the West Bengal. It also provided that the samples of the finished beverages would be sent at Bottler's expenses to the Parle (Exports) P.Ltd. every month for approval and inspection. Under Clause 7, the assessee will have to keep complete records of all chemical tests made as specified by the Parle (Exports) P. Ltd. and or production, sale and distribution of the beverages and shall furnish to the Company such reports monthly as are required. The assessee-company also covenanted with Parle (Exports) P. Ltd. that at no time to manufacture, bottle, sell, deal in or otherwise be concerned with any product under any get up or container used by Parle (Exports) P. Ltd. or which is likely to be confused or used in unfair competition. There are several other clauses in the agreement with which I am not directly concerned in this matter.
6. Pursuant to this agreement the assessee was incorporated as a private limited company at Faizabad in U.P. The accounting year of the assessee ended on 30-9-1984. For the purpose of manufacture of the drinks the assessee-company purchased and used bottles of the prescribed standards and sizes and also wooden crates for filling soft drinks and for distribution. The assessee-company claimed, inter alia, in the profit and loss account a sum of Rs. 7,12,311 as write off of the bottles and crates on account of breakage. Subsequently it also claimed that since the value of these bottles and crates was less than the prescribed limit, it was entitled to 100% deduction, which worked out to Rs. 39,08,474 in respect of bottles and Rs. 2,52,080 in respect of wooden crates totaling in all to Rs. 41,60,554. In support of the claim that it was entitled to 100% deduction, the assessee-company placed reliance upon a decision of the Calcutta High Court in the case of CIT v. Burmah-Shell Oil Storage and Distribution Co. of India Ltd. (Bombay) [1978] 115 ITR 891 and a decision of the Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 1. On the ground that the assessee was not able to substantiate by filing the details the claim for breakages, the Income-tax Officer disallowed the claim of Rs. 7,12,311. However, the Income-tax Officer allowed 10% of the empty bottles and 25% of the wooden crates as breakages and allowed only Rs. 2,58,000 out of the claim of Rs. 7,12,311.
7. As regards the claim for 100% depreciation on the bottles and crates, the Income-tax Officer distinguished the cases relied upon by the assessee and held that the assessee was not entitled to this claim.
In the opinion of the Income-tax Officer these bottles and crates formed part of the plant in relation to the manufacturing operations and therefore entitled to the claim of the assessee but he would not allow the claim on the ground that the same could not be held to be plant for the purpose of allowing 100% depreciation in view of the decision of the Gujarat High Court in Elecon Engg. Co. Ltd. 's case (supra). The Gujarat High Court held in this case that an article to qualify as plant must have some degree of durability and should not be the stock-in-trade of the assessee or quickly consumable or worn out in the course of few operations. According to the Income-tax Officer though the bottles and crates formed part of the plant, they were still the stock-in-trade of the assessee and therefore fell out of the ratio of the Gujarat High Court. Without discussing how the bottles and crates were treated as stock-in-trade, the Income-tax Officer sought to support his view from the very claim made by the assessee for the allowance of the breakages of Rs. 7,12,311. According to the Income-tax Officer the claim of the assessee towards breakages disqualified the assessee to claim 100% depreciation and converted the bottles and crates, which was considered as plant, into stock-in-trade. He thus disallowed the entire claim for 100% deduction and allowing Rs. 2,58,000 towards breakages as mentioned above completed the assessment.
8. On a further appeal before the Commissioner (A), he confirmed in toto the view of the Income-tax Officer with the following observations: Bottles, crates and shelves all wearing out have been claimed by the appellant as deduction by 100% in this year. The appellant had written off such items at Rs. 2,58,000. Bottles, crates and shelves are all non-enduring nature. If breakages and wearing out are allowed and depreciation also allowed in that case there will be double reduction in the income. The decision of various cases relied on by the appellant are also found to be not applicable on the facts of this case. This is so because the ITO stated in his order that Bottles and crates constituted stock-in-trade of the assessee and breakages have been claimed in the Revenue account.
Articles in question are not absolutely essential for manufacture of soft drinks which the appellant does and in no way help manufacturing or production. Therefore claim of Investment allowance as well as depreciation on bottles, shelves, crates are found inadmissible.
Aggrieved by the order of the Commissioner (A), the assessee came up in further appeal before the Tribunal.
9. The Tribunal confirmed that view in its entirety by adopting the same contentions as were taken by the Revenue authorities. The Bench observed: It has, therefore, to be held that the business of the assessee-company was mainly bottling of concentrated chilled soft drinks supplied by Parley Exports (P.) Ltd. In view of the above, the claim of the assessee that it had manufactured soft drinks and it is a new industrial undertaking cannot be accepted. The business of the assessee is found to be bottling of soft drinks supplied by the principal company at Bombay. The CIT(A) has also pointed out that the bottles, crates and shelves are of non-enduring nature and the assessee also had written off a huge amount on account of breakage etc. of the above items. We, therefore, find that the various judicial decisions relied on by the learned counsel for the assessee in support of his arguments rightly rejected by the CIT (A) in view of the above facts and also having regard to the fact that the facts and circumstances considered by the various High Courts can be distinguished from the facts of the instant case as there was no manufacturing activity carried out by the assessee. In view of the above, the appeal by the assessee on this point is rejected.
While dealing with the allowance of Investment allowance, the Bench again reiterated its findings in paragraph 10 as follows: 10. After hearing the arguments advanced by both sides and in view of our findings at ground No. 1 (supra) relating to the claim of depreciation in respect of crates, shelves and bottles we do not find any merit in the assessee's claim for identical reasons. It may be stated at the cost of repetition that the business of the assessee was only bottling of soft drinks etc. supplied by the principals, M/s Parley Export (P.) Ltd., Bombay. The assessee did not manufacture soft drinks. The finding made by the Assessing Officer to the above effect was not controverted by the assessee's counsel with any documentary evidence. We also find that the assessee had duly claimed the value of breakage of bottles, shelves and crates which was partly allowed by the Assessing Officer as per his order. In view of the above, the claim for investment allowance on crates, shelves and bottles is rejected.
10. Subsequently the assessee filed a miscellaneous petition on 12-6-1991 before the Tribunal stating that as many as four mistakes crept into the order of the Tribunal said to be apparent from the order of the Tribunal and requesting the Tribunal to rectify them : (a) The first mistake was that though the assessee claimed Rs. 7,12,311 as and by way of breakages of the bottles and crates and though this was stated to be a fact in the order of the Tribunal, the fact of the matter was that the assessee withdrew this claim through a computation of statement of total income filed before the Assessing Officer. It was in that statement that the assessee by withdrawing the claim for breakages put forth the claim for 100% deduction. The Income-tax Officer took the figures only from that computation of total income filed before him and discussed. The Tribunal even though it was brought to its notice that this claim was withdrawn still it proceeded as if the assessee made this claim for breakage and based upon that disallowed the claim of the assessee for 100% deduction. This was a mistake apparent from the record and should be rectified. Since the assessee had not claimed the breakage at all in the return of income, the question of the Income-tax Officer considering it as if it was claimed by the assessee did not arise and the Tribunal also erroneously relied upon that erroneous fact which was non-existent. It was also pointed out in the miscellaneous petition that the same mistake was committed by the Commissioner (A) also when he observed in his order that the allowance of both breakage and 100% depreciation on bottles amounted to claiming double deduction which was not a fact.
(b) The Income-tax Officer had agreed that the bottles and crates were plant in relation to the manufacturing operations carried on by the assessee-company. But at the same time, he observed that they did not constitute plant. This was a mistake which needed to be rectified. The Income-tax Officer held that the bottles and crates were held by the assessee as stock-in-trade which was not a fact at all. The Tribunal also without discussing anything about this matter affirmed and upheld this view. It was also pointed out that in all the sale transactions with the customers, it was clearly pointed out that the bottles were returnable and were not meant for sale.
(c) The Tribunal held that the assessee was bottling the concentrate chilled soft drinks supplied by Parle (Exports) (P.) Ltd. and also produced and sold Bisleri Soda, which was not a fact at all. This is not a fact at all. The assessee was purchasing as shown to the Tribunal various raw materials like sugar, acid, carbon dioxide etc.
along with essence from the Parle (Exports) P. Ltd. With the help of these raw materials it was preparing the drinks by using the essence, which was only one of the raw materials. It is not purchasing chilled soft drinks from Parle (Exports) P. Ltd. This fact had weighed very heavily with the Bench in coming to the conclusion that the assessee-company was not manufacturing soft drinks and therefore not entitled to 100% deduction. It also showed to the Bench the electrical power of as high as 245 KWA and the licence it obtained under the Central Excise and Salt Act for paying excise duty on the soft drinks it manufactured. It also explained to the Bench the process involved in the manufacture of soft drinks.
From this it could never be said hat the assessee had been purchasing concentrated chilled soft drinks from Parle (Exports) P. Ltd. but was not manufacturing itself the soft drinks. It also obtained licence under the Factories Act, 1948 and the Indian Boilers Act and the Employees State Insurance Act, 1948, all go to show that the assessee was a manufacturer.
(d) It was stated by the Tribunal in its order in paragraphs 11 and 12 that pre-operational expenses capitalised by the assessee had no nexus to the assets or plant. The Assessing Officer had allowed investment allowance of Rs. 10,83,885 on the actual cost of plant and machinery valued at Rs. 57,80,718 even though the cost of machinery shown in the books was Rs. 59,66,007. The investment allowance on Rs. 57.80 lakhs worked out to Rs. 14.45 lakhs as against which the Income-tax Officer computed it only at Rs. 10.83 lakhs, which was a mistake. Apart from correcting this mistake, the Bench failed to understand that the Income-tax Officer having allowed investment allowance on the plant and machinery to as high an extent as Rs. 10.83 lakhs contradicted itself when it said that the assessee was not engaged in the manufacturing operations. It failed to see that for the allowance of investment allowance manufacture of any article or thing is a condition precedent. The Tribunal had overlooked this fact and still held that the assessee was not engaged in the manufacture of soft drinks, which was a contradiction. This has also got a direct relation to the capitalisation of the pre-operational expenses. It is because of the capitalisation of the pre-operative expenses that the cost of the plant and machinery had worked out to Rs. 59.66 lakhs out of which the Income-tax Officer had taken Rs. 57,80,718 for the purpose of allowance of investment allowance. The point made out was that having agreed that the assessee was carrying on manufacturing operations and allowed investment allowance, it was not open to the Bench to say that the assessee was not engaged in the manufacture and therefore not entitled to the 100% deduction in respect of bottles and wooden crates, whose value of each of the assets independently was less than the prescribed limit of Rs. 5,000. The legislative injunction is that in case the value of the asset is less than Rs. 5,000, the entire cost would be allowed as depreciation. It was this claim that the assessee had made by withdrawing the claim earlier made for the deduction of breakages though on estimate basis.
11. When this petition came up for hearing before the Bench, the learned Accountant Member held that there was no merit in the miscellaneous application. In support of the mistakes pointed out in the miscellaneous petition, the assessee filed certain documents before the Bench by way of a paper book enclosing therein those papers which were already before the Bench. But the learned Accountant Member observed that this paper book as not filed before the Tribunal during the course of hearing of the original appeal. He held: Since the Tribunal has passed its order on the basis of arguments advanced by both the sides during the course of hearing the appeal as well as on the basis of the records available before it, the alleged mistakes stated to have been committed by the Tribunal cannot be said to be apparent from the records. In fact, the assessee merely made an attempt to persuade the Tribunal to review its order which is not permissible in law as held in a number of judicial decisions.
Thus holding that the petition filed by the assessee was only an attempt to review its earlier order, the learned Accountant Member rejected the miscellaneous petition.
12. But the learned Judicial Member took an entirely opposite view. By discussing the orders of the Income-tax Officer and the Commissioner (A) in great detail, the learned Judicial Member held that there was a mistake apparent from the record and therefore that should be rectified. In addition he held that the assessee was entitled to 100% depreciation on the bottles, crates and shelves and depreciation at the prescribed rate on plant and machinery and proportionate capitalisation of the pre-operational expenses. Here I may observe that these are not the points shown as mistakes in the miscellaneous petition filed by the assessee and to that extent, it appeared to me that the learned Judicial Member had granted relief not asked for by the assessee.
Perhaps he took the miscellaneous petition as a fresh appeal. Be that as it may, because of this difference of opinion, the above point of difference of opinion was referred to me for my opinion.
13. Arguments were addressed to me by Shri R.N. Bajoria on behalf of the assessee and by Shri R.P. Rajesh on behalf of the department, each urging their respective view points. As I said earlier I have to decide whether there is a mistake in the order passed by the Tribunal on 30-4-1991. Should I confine to the order of the Tribunal dated 30-4-1991 to find out the mistake without looking into the other record, namely, the orders of the Commissioner (A) and the Assessing Officer or should I take into account the entire record If I follow the former, it may amount to consideration of partial record. Did the Members desire me to consider only a part of the record or was it their desire to consider the entire record to ascertain the apparent mistakes. From the tenor of the orders passed by my learned Brothers and the way in which the point of difference of opinion was couched, I think I should not stop short of considering the order of the Tribunal.
The order of the Tribunal is the culmination of assessment proceedings.
Without the assessment proceedings, assessment order, appellate order being in existence, the order of the Tribunal cannot stand by itself.
Bearing this position in view, I will now set out to ascertain whether there is a mistake in the order of the Tribunal seen in the light of the facts that emerge taking into account the orders of the Assessing Officer, the Commissioner (A) and the record placed before them and me.
14. Now as I have pointed out there are four kinds of mistakes pointed out in the miscellaneous petition. The first and foremost was about the claim made on account of breakages of bottles and wooden crates of Rs. 7,12,311. Though this claim was made in the profit and loss account, in the final computation sheet that was filed before the Income-tax Officer, this claim was withdrawn and in its place a new claim for the deduction of 100% deduction was made. The Income-tax Officer though proceeded to compute the income on the basis of this fresh computation of income, had still not considered the point that the assessee had withdrawn the claim made for breakages. He proceeded as if the claim made by the assessee was still subsisting. It was this mistake committed both by the Assessing Officer and in appeals by the Commissioner (A) as well, was agitated before the Tribunal. The Tribunal also overlooked this point. While the Commissioner (A) regarded the claim made for breakages and also for 100% deduction amounted to double deduction inferring thereby the assessee made the claim for breakages also, the Bench of the Tribunal proceeded as if the assessee still claimed the breakages. It was on account of this supposition (viz.) that the assessee made the claim for breakages, the Bench recorded that the Income-tax Officer was right in saying that the assessee treated the bottles as its stock-in-trade. The assessee did not show the bottles etc. as stock-in-trade in its balance sheet. This is an erroneous assumption not borne out by the facts. When this point was brought to the notice of the Bench through the means of miscellaneous petition, the Bench should have in all fairness considered it but instead the learned Accountant Member said, as I mentioned earlier, that the records available with it did not show any merit in the miscellaneous application and that the paper book filed along with the miscellaneous petition was not filed before the Tribunal during the course of hearing. At this point of time I specifically asked the departmental representative whether the computation sheet filed before the Income-tax Officer was available with him but he candidly submitted that the records were not available with him and therefore he would not be able to show whether the computation sheet was filed before the Assessing Officer. The computation sheet filed before the Bench along with the miscellaneous petition must have been available to the Income-tax Officer because as I said earlier, it was on the basis of the figures mentioned in the computation sheet that the Income-tax Officer proceeded to compute the income. In the profit and loss account filed by the assessee, there was no claim for the deduction for 100% depreciation on the bottles amounting to Rs. 41,60,569. This claim was made only in the computation sheet. The Income-tax Officer borrowed this amount only from the computation sheet and disallowed it and in its place allowed a portion of the alleged claim made for breakages, which the assessee had withdrawn by itself.
These facts show that the assessee had not made the claim for breakages at all. It withdrew the claim and in its place made a claim for a larger sum for deduction and therefore the Bench should have verified this fact when it was brought to its notice. That the Bench was influenced by this fact was very apparent from the order passed by it, particularly the observations in paragraph 10, which was extracted above, where the Bench had said that they also find that "the assessee had duly claimed the value of breakages of bottles, shelves and crates, which was partly allowed by the Assessing Officer as per his order".
This was a mistake committed by the Bench, which was brought to its notice but which the Bench had not properly appreciated.
15. The second mistake crept into the order of the Bench was to hold that the business of the assessee was only bottling of soft drinks supplied by the principals, Parle (Exports) P. Ltd. and that the assessee was not manufacturing any soft drinks. This is again a wrong fact. The assessee was only purchasing the essence from Parle (Exports) P. Ltd. under the franchise agreement as seen earlier and was later on manufacturing the soft drinks by adding several chemicals and subjecting the essence to several processes and bottling the liquid so obtained into bottles. All this activity amounted to manufacture. The Income-tax Officer also accepted this position and allowed investment allowance, which he could not have done unless he was satisfied that there was manufacturing processes involved. This is also a mistake apparent from the record. The learned Judicial Member had referred to this aspect in his differing opinion and recorded a finding in favour of the assessee. I am inclined to agree with his view, which was supported by ample evidence on the record (Paragraphs 15 and 18 of the differing opinion of the learned Judicial Member).
16. An argument was addressed before me at the time of hearing of this difference of opinion that the record that was produced before the Bench at the time of consideration of the miscellaneous petition was not available at the time of the hearing of the original appeal and therefore that evidence should not be considered. This argument overlooks the very fundamental fact that the evidence sought to be produced at the time of the hearing of the miscellaneous petition was nothing new. It was only a portion of the evidence already available on record, culled out and put in the form of a paper book to facilitate easy reference by the Bench and also for its convenience. To reject it as new evidence without looking into it is in my opinion itself a mistake. The departmental representative also argued at great length by placing very strong reliance upon the decisions in the cases of CIT v.ITAT [1992] 196 ITR 564 (Ori.) and Sagar Co-operative Central Bank Ltd. v. CIT{ 1990] 186 ITR 292 (MP) that the recalling of the order of the Tribunal was not permissible and therefore the order should not be recalled and that in any case the issue before me was a debatable question and could not be rectified. While I have no quarrel with the latter proposition of law, which is very well settled, I am unable to see how the first proposition can be held to be a valid law in view of the enunciation of law on the subject by the Supreme Court in the case above referred to, portions of which judgment were extracted. If a mistake was committed by the Court, that cannot be allowed to stand to the detriment of the interests of the parties before it all because that would amount to recalling of the order. If a Bench is called upon to decide an issue, let us say 'A' but instead it decides the issue 'B', what should the parties do. If it is brought to the notice of the Bench that issue 'A' remained undecided and that issue 'B' was never before the Bench, should not the Bench decide issue 'A' and recall its observation on issue 'B'. Should it confine to the technicalities of saying that it would not look into the matter. The purpose of the Tribunal is to render justice and not to negate it. Recently the Supreme Court had held in the case of All India Judicial Officers Association that the Courts and Tribunals perform the sovereign judicial functions of the State. How can they achieve the performance of the sovereign judicial function unless they do justice if necessary by recalling its erroneous order passed by it committing a mistake. To hold on to this view will be perpetuating injustice even though it was brought to the notice of the Bench, which committed the mistake. I am therefore unable to agree with the view that if a mistake was committed by the Bench, that should not be rectified all because the rectification of that mistake would amount to in the ultimate sense recalling of the order. The very purpose of rectification of a mistake is to modify the appellate order or the assessment order, as the case may be. The modified order will not be the same as the original order.
To that extent it has to undergo change. It is to bring about this change and to see that the anxiety of justice is fully satisfied that the power is given to rectify the mistakes within the parameters of the provisions of that particular section. The Supreme Court had laid down as to what is the meaning of the expression "mistake apparent from the record". It laid down the law that a mistake which may be discovered by a long drawn process of reasoning or a debatable issue, where two opinions are possible, are not mistakes apparent from the record.
Within these parameters one has to find out whether any mistake was committed by the Bench. Now within these parameters it is very clear that the Bench had not taken into account the fact that the claim for breakages was withdrawn, and that it was purchasing manufactured drinks from Parle (Exports) P. Ltd., both of which are not borne out by the records. These mistakes are not such mistakes, which are discovered only by a long drawn process of reasoning or where two opinions are possible. They are apparent on the face of the record.
17. For these reasons I am of the opinion that the view expressed by the learned Judicial Member is proper and correct and I agree with it though for different reasons as I enumerated above and hold that there is a mistake rectifiable under Section 254(2) of the Income-tax Act in the order dated 30-4-1991 of the Income-tax Appellate Tribunal.
18. In view of my conclusion that there are mistakes in the order passed by the Tribunal, it is not necessary for me to go into all the mistakes pointed out in the miscellaneous petition. Suffice it to say that if there is even one mistake, that is a mistake apparent from the record and the order of the Tribunal needs to be rectified to that extent provided for the purpose of this reference that was one of the mistakes pointed out in the miscellaneous petition. Since these mistakes are pointed out in miscellaneous petition and since I am of the opinion that they are mistakes apparent from the order of the Tribunal, I have come to the above conclusion without referring to the other points.
19. The matter will now go before the regular Bench for deciding the appeal according to the opinion of the majority.