1. At the instance of the Revenue, relevant to the assessment years 1967-68 to 1973-74, the following question has been referred for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that there was a mistake apparent on the record which called for rectification by the Income-tax Officer, under section 154 ?'
2. For the assessment years in question, the original assessments were completed in usual course. After the completion of the assessments, the assessed filed applications under section 154 of the Income-tax Act, 1961, claiming deduction of surtax paid by the assessed on the ground that it should have been allowed against the business income of the assessed for all the years under consideration and relied upon the decision of a Bench of the Tribunal in support of the plea that it was an allowable deduction. The Income-tax Officer, however, rejected the applications filed under section 154 of the Act. The order of the Income-tax Officer was upheld in appeals before the Appellate Assistant Commissioner. The Tribunal, however, came to the conclusion that there was a mistake apparent on the record and, accordingly, allowing the appeal of the assessed directed the matter to be reconsidered on the merits. It may be noticed that the decision of the Tribunal which was relied upon by the assessed was not in the case of the assessed but in some other case. The Tribunal, however, relying upon the decision of the Supreme Court in the case of T.S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) , came to the conclusion that the matter could be said to be debatable or in regard to which two views could possibly be taken only if in fact a different view on this issue was taken either by any other Bench of the Tribunal or a High Court or the Supreme Court. It has noticed that no contrary decision was brought to its notice and, thereforee, in the absence thereof, the assessed could base its claim for rectification on an order of the Tribunal and the mistake could be rectified under section 154. In Volkart Brothers' case : [1971]82ITR50(SC) , while referring to an earlier decision of the Supreme Court in Satyanarayan Laxminarayan Hegde v. Malikarjun Bhavanappa Tirumale : [1960]1SCR890 , it was held that an error which has to be established by a long drawn process of reasoning on the points on which there may be conceivably two opinions, cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record. Reference was also made to a decision of the Bombay High Court in Sidhramappa Andanappa Manvi v. CIT : [1952]21ITR333(Bom) .
3. In the instant case, the question was whether deduction on account of payment of surtax by a company while computing its business income could be allowed. The decision of the Bombay Bench of the Tribunal had not been accepted by the Department and was sub judice and had not attained finality as noticed by the Tribunal itself in the order while coming to the conclusion that there was a mistake apparent on the record. At that time, there was no decision of any High Court or the Supreme Court that such deduction could be allowed. It is apparent from a bare reading of the order of the Tribunal that the question about availability of such deduction was highly debatable. It cannot be held that since the Tribunal had taken a view in another case that such deduction was allowable and, thereforee, to come to the conclusion that the matter could not be said to be debatable or the matter in regard to which two views could not possibly be taken.
4. In our opinion, the decision of the Tribunal allowing the rectification application is contrary to the ratio of the decision of the Supreme Court in Volkart Brothers' case : [1971]82ITR50(SC) . The fact that the question was highly debatable stands further reaffirmed in view of the decision of the Supreme Court in Smith Kline and French (India) Ltd. v. CIT [1996] 219 ITR 581 holding that surtax levied under the Companies (Profits) Surtax Act, 1964, clearly falls within the mischief of sub-clause (ii) of clause (a) of section 40 of the Income-tax Act, 1961, and cannot be allowed as a deduction while computing the business income of the assessed under the provisions of the Income-tax Act. A similar view had earlier been taken by this court in Orissa Cement Ltd. v CIT : [1993]200ITR636(Delhi) . In view of these decisions the deductions claimed by the assessed could not be allowed even at the first instance.
5. For the reasons aforesaid, the question is answered in the negative, in favor of the Revenue and against the assessee. No costs.