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Judgment
Sengupta, J.—In this reference u/s 256(1) of the income tax Act, 1961 (''the Act'') for the assessment years 1982-83 to 1984-85 the following questions of law have been referred to this Court:
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in changing their original decision dated 7-9-1989 regarding non-allowability of surcharge on corporation tax as deduction u/s 23(1) of the income tax Act, 1961 by their order of rectification u/s 254(2), ibid., dated 31-7-1989 while the rectification petition on the same issue had once been rejected earlier on 17-4-1989, holding that the miscellaneous petition was an attempt to seek a review of the Tribunal''s order which is not permissible under the law?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding by their rectification order u/s 254(2) of the income tax Act, 1961 dated 31-7-1989 that the deduction of commercial surcharge was allowable u/s 23(1), ibid., from the annual value of the house property at 40, Strand Road, Calcutta for the assessment year 1984-85 ?
The relevant facts pertaining to both the questions are that the Assessing Officer in the course of assessment proceedings found that the assessee-company was the owner of a house property at 40, Strand Road, Calcutta. This property was used for commercial and non-residential purposes. The assessee-company had claimed a deduction of corporation tax and surcharge to the tune of Rs. 4,87,740 for the assessment year 1982-83, Rs. 4,03,509 for the assessment year 1983-84 and Rs. 6,35,157 for the assessment year 1984-85, respectively. The amounts were debited in the profit and loss account and claimed as deduction from the annual value of the house property. The assessee-company did not show bifurcation of the corporation tax and surcharge thereon. The amount so claimed was Rs. 1,99,606 for the assessment year 1982-83, Rs. 1,47,631 for the assessment year 1983-84 and Rs. 2,17,204 for the assessment year 1984-85 as surcharge.
The Assessing Officer found that there was no legitimate claim or documentary evidence for the levy of surcharge. He, therefore, did not allow deduction u/s 23(1) of the Act from the computation of the annual value of the house property in respect of surcharge. The Corporation of Calcutta by a notification dated 10-1-1987 proposed to levy surcharge of 50 per cent on the consolidated rate of corporation tax with effect from October 1976 on the land and building which was used wholly and in part for commercial or non-commercial purpose. The levy of such surcharge was challenged by some other rate payers before the Hon''ble Calcutta High Court and the Hon''ble High Court struck down the imposition of surcharge by its judgment dated 2-8-1979. The levy of surcharge was subsequently enacted in 1980. The Corporation of Calcutta filed appeal before the Supreme Court and the Supreme Court subsequently passed its judgment on 21-12-1984 directing the Calcutta Corporation to show separately the total amount of surcharge payable by the occupiers.
The assessee-company being aggrieved by the order of the Assessing Officer for not allowing the surcharge by way of deduction u/s 23(1) took the dispute before the Commissioner (Appeals). Certain new evidence was produced by the assessee-company before the Commissioner (Appeals). The Commissioner (Appeals) allowed the Assessing Officer to examine the new evidence and documents produced before him. The Assessing Officer submitted his written submissions after examining the evidence and documents. The Commissioner (Appeals) directed the Assessing Officer to allow the full amount of commercial surcharge as leviable under the Ordinance followed by the amending Act.
Thereafter, the revenue preferred an appeal against the order of the Commissioner (Appeals) before the Tribunal. The Tribunal examined the issue and set aside the order of the Commissioner (Appeals) on this point and restored the matter to the file of the Assessing Officer. Thereafter the assessee-company filed miscellaneous application u/s 254(2) of the Act before the Tribunal to rectify certain mistake. The Tribunal dismissed that application.
The assessee-company again filed another miscellaneous application u/s 254(2) for the assessment years 1981-82 to 1984-85 reflecting on the point from a different angle. The Tribunal allowed the assessee-company''s miscellaneous application to the extent of deduction of surcharge from the computation of the annual value of the house property.
It is necessary for us to consider the orders passed by the Tribunal on the two miscellaneous applications. The order dated 7-4-1989 which was passed on the first miscellaneous application, inter alia, records as follows:
It is further stated in the miscellaneous petition that the Tribunal while discussing the notice dated September 30, 1985, in para 12 of its order did not notice the following portion of the said order :
Further, the demand on account of commercial/non-residential surcharge leviable under the provisions of the Calcutta Municipal Corporation Act, 1951 which was kept in abeyance pending litigation, will also be made in due course in view of the decision of the Hon''ble Supreme Court in favour of the corporation.
According to the assessee, the above petition shows that the raising of the demand which is a recovery proceeding was kept in abeyance while upholding the levy. It is also stated that the municipal tax of Rs. 4,17,953 referred to in para 4 of the Tribunal''s order did not include any surcharge. It is further stated in the petition that in para 13 of the Tribunal''s order it is recognized that the recovery and not the levy of the surcharge has been kept in abeyance. This is applied to all the commercial buildings and it is obvious that no separate levy need be made in respect of the assessee''s building. Failure to arrive at this obvious conclusion has resulted in a mistake apparent from record.
We have heard learned authorised representatives for the parties and are clearly of the view that the submissions made before us in respect of the miscellaneous petition is an attempt to seek a review of the Tribunal''s order which is not permissible under the law. We are, therefore, of the opinion that the Tribunal''s order does not suffer from any mistake as contended in this petition.
Thereafter, the second miscellaneous application was filed by the assessee. The Tribunal in the order dated 31-7-1989 dealing with the second miscellaneous application noted the contention of the counsel for the assessee as follows :
At the time of hearing of this miscellaneous application the learned representative for the assessee-company, Shri K.V. Singh, contended that the levy of surcharge was never kept in abeyance. What was kept in abeyance was the collection of levy. The process of collecting surcharge is different from the levy of surcharge. The Tribunal has agreed that the levy of surcharge was not struck down by the Calcutta High Court by its judgment dated 2-8-1979 in the case of Ali Hassan Properties (P.) Ltd.
Thereafter, the Tribunal went into the question whether the surcharge was levied or the surcharge was kept in abeyance and after elaborate arguments had been advanced, the Tribunal observed as follows :
From the above narrated facts it becomes clear what was understood by the Tribunal was that surcharge was not leviable. In fact this understanding was not correct as the levy of surcharge was neither struck down by the High Court nor the same was kept in abeyance, but due to challenging the amendment the recovery of the surcharge was stayed. The assessee realised surcharge from the tenants for payment on behalf of the tenants to the municipal authorities as prescribed under the law and the same did not form part of the rent receivable within the meaning of section 23(1)(b) of the income tax Act. Surcharge cannot become income of the petitioner by not allowing deduction as the same is either payable to the Calcutta Municipal Corporation or refundable to the tenants or occupiers, as the case may be. The Commissioner (Appeals) has discussed this point. However, the Tribunal has not touched this point.
It is argued before us now that an alternative submission was made before the Tribunal for exclusion of surcharge from the rent receivable u/s 23(1)(b) if the same could not be deducted under the first proviso. The Tribunal has not expressed any opinion in this respect. Therefore, it is urged that it was a mistake not to discuss the alternative submission or to hold that the surcharge is not deductible from the income from house property for not interpreting the levy of surcharge and the recovery of the surcharge correctly.
The learned departmental representative, Shri Sahai, has contended that there is no mistake apparent on the face of the order. According to him, demand notice was not served and the Tribunal has considered the whole thing. Therefore, he has contended that there is nothing to be rectified. He has pointed out in the Tribunal''s orders. He has also pointed out the judgment of the High Court.
We have perused the facts and the relevant provision regarding the levy of surcharge. The amendment to levy surcharge has not been struck down by the High Court. The recovery of the same was stopped. The said recovery does not mean that the levy of surcharge is struck down. The collection of surcharge cannot become part and parcel of the income from property. Either it is payable to the tenants or occupiers from whom surcharge is collected. In this view of the matter, the interpretation of levy of surcharge was not correct. In our opinion, surcharge is allowable as deduction from the property income and this aspect is not considered in the light of the amendment to the Calcutta Municipal Act, Notification, High Court Judgment and the letter of the Deputy Municipal Commissioner. Non-consideration of this aspect is a mistake apparent on the fact of the order and, therefore, the rectification is allowable.
We are of the view that the Tribunal in a miscellaneous application was only concerned to find out as to whether there was any mistake apparent from the record or not, but in doing so the Tribunal not only reconsidered the appellate order but also the order on the first miscellaneous application. It is now well-settled that the jurisdiction of the Tribunal to rectify would only be limited to a mistake which is apparent from the record. Where long-drawn reasoning is necessary and where elaborate arguments have to be made, as in the instant case, to find a mistake, it cannot be said to be a mistake apparent from the record. There is no glaring mistake of law apparent on the face of the record. In our view, the Tribunal was not justified in reviewing its earlier order. As a matter of fact, the Tribunal reviewed the appellate order as well as the order on the first miscellaneous application which the Tribunal was not competent to do.
For the reasons aforesaid both the questions are answered in the negative. However, we make it clear that the Assessing Officer in disposing of the matter in terms of the direction of the Tribunal contained in the appellate order shall consider whether the liability, if any, for surcharge is allowable as deduction for the assessment years in question. The Assessing Officer shall allow the assessee to produce evidence in support of its claims and contentions as to whether there has been any levy of the surcharge and whether such surcharge, if levied, is allowable as deduction for the assessment years 1981-82 to 1984-85. There will be no order as to costs.
Sen, J.
I agree.