ORDER
Agrawal, AM
1. This appeal by the revenue is directed against the order of CIT (Appeals), Jabalpur.
2. The only ground raised in this appeal by the revenue reads as under :-
“On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in cancelling the order under section 154 of the Income-tax Act, 196 1, passed by the Assessing Officer without properly appreciating the facts of the case.”
3. The facts of the case are that the assessee is a partnership firm, which is running a cinema theatre known as Pankaj Talkies at Chhindwara (MP). During the accounting year relevant to assessment year under Consideration, the assessee received subsidy amounting to Rs. 12,49,877 from the Government of Madhya Pradesh. The assessee treated the subsidy as a capital receipt in its hand, however, the factum of receipt of subsidy was disclosed by way of note appended to the statement of total income filed along with the return of income. During the course of assessment proceedings, the Assessing Officer raised the query with regard to the receipt of subsidy by the assessee. In its reply dated 28-3-1989, the assessee claimed the subsidy as capital receipt. The Assessing Officer completed the assessment under section 143(3) on 31st March, 1989. The Assessing Officer did not make any addition with regard to the receipt of subsidy by the assessee. Thus, he impliedly accepted the contention of the assessee that the subsidy was a capital receipt in its hand, not liable to be taxed. Subsequently, that is on 15-1-1993, the Assessing Officer issued notice under section 154 on the ground that subsidy of Rs. 12,49,877 received by the assessee remained to be taxed by mistake. The assessee filed the written reply objecting to such rectification. The assessee reiterated its earlier stand that the subsidy is a capital receipt. It was also contended that during the course of assessment proceedings under section 143(3), this matter was already examined and, therefore, it is not covered by the provision of section 154. The Assessing Officer over-ruled the objection of the assessee and passed the order under section 154 on 30th March, 1993. In the order under section 154, the Assessing Officer made an addition of Rs. 12,49,877 being subsidy received by the assessee as revenue receipt chargeable to tax. On appeal, the CIT (Appeals) vide her order dated 16-2-1994 cancelled the order of rectification passed by the Assessing Officer under section 154. She was of the opinion that the matter is debatable and clearly out of the purview of section 154. The Revenue aggrieved with the order of the CIT (Appeals), is in appeal before us.
4. At the time of hearing before us, it was contended by the learned DR that during the course of original assessment proceedings, the taxability or otherwise of the subsidy received by the assessee was not considered. It was a clear case of omission by the Assessing Officer, who completed the original Assessment. As it is a case of clear omission by the Assessing Officer, who completed the original assessment, it is duly covered by section 154 being an apparent mistake. The learned DR further submitted that the issue is now settled by the decision of Hon’ble Apex Court of the country in the case of Sahney Steel& Press Works Ltd. v. CIT [1997] 228 ITR 253194 Taxman 368. He submitted that the Hon’ble Supreme Court has clearly laid down that the various subsidies we referred of sales tax subsidy on power consumption and exemption from the payment of water charges, etc., are all revenue receipts chargeable (sic). Hon’ble Apex Court of the country would be squarely applicable in respect of the entertainment subsidy received by the assessee. Therefore, the Assessing Officer was fully justified in treating the subsidy as revenue receipt in the order passed under section 154. He, therefore, submitted that the order of the CIT (Appeals) be reversed and the order under section 154 by the Assessing Officer be restored.
5. The learned counsel for the assessee argued at length. He strongly opposed to the submission of the learned DR that this issue was not examined during the course of original assessment proceedings. He pointed out that the assessee had disclosed these facts by way of not appended to the computation of income. Moreover, a query was raised during the course of assessment proceedings and the reply was filed thereto. The Assessing Officer being fully satisfied with the explanation of the assessee did not make the addition in the assessment order passed under section 143(3). The subsequent rectification under section 154 is only a change of opinion by the Assessing Officer. He submitted that by way of rectification under section 154, the additions on debatable points cannot be made. Merely because the Assessing Officer changed his opinion subsequently will not give him power to pass an order under section 154. In support of this contention, he relied upon the following decisions :-
(a) T. S. Balaram ITO v. Volkart Bros. [1971] 82 ITR 50 (SC),
(b) Sagar Co-operative Central Bank Ltd. v. CIT [1990] 186 ITR 292 (MP),
(c) CIT v. Bhawani Prasad Girdharilal & Co. [1991] 187 ITR 257 (All.),
(d) CIT v. Hero Cycles (P.) Ltd. [1997] 228 ITR 463/94 Taxman 271 (SC),
(e) CIT v. General Industries Society Ltd [1993] 71 Taxman 36 (Cal.).
He further submitted that even after the decision of the Hon’ble Supreme Court in the case of Sahney Steel & Press Works Ltd. (supra), all subsidies are not revenue receipt. In fact, the Hon’ble Supreme Court in the case of Sahney Steel & Press Works Ltd. (supra) has stated that the character of the subsidy in the hands of the recipients whether revenue or capital will have to be determined having regard to the purpose for which the subsidy is given. He pointed out that in the very case, the Hon’ble Apex Court has approved the following decisions of various High Courts in which the subsidy is treated as a capital receipt :-
(i) CIT v. Ruby Rubber Work Ltd. [1989] 178 ITR 181/46 Taxman 1 (Ker.) (FB).
(ii) Sadichha Chitra v. CIT [1991] 189 ITR 774/55 Taxman 247(Bom.).
He further submitted that the Hon’ble Supreme Court also he held the rubber re-plantation subsidy to be of capital receipt in the case of Kalpetta Estates Ltd. v. CIT [1996] 221 ITR 601/87 Taxman 281. He further submitted that the Hon’ble Jabalpur Bench of the ITAT has also examined the similar issue in the case of Agrawal M.J. Enterprises v. Dy. CIT [I.T. Appeal No. 746 (Jab.) of 1992]. The ITAT vide its order dated 1-10-1997 has held the entertainment subsidy to be of capital receipt. He further submitted that the Hon’ble Apex Court in the case of CIT v. P. J. Chemicals Ltd [1994] 210 ITR 830/76 Taxman 611, has considered the issue of subsidy, though with regard to the determination of actual cost of plant and machinery. However, the Hon’ble Supreme Court has held that the capital subsidy received by the assessee should not be reduced from the value of plant and machinery form. determining its cost as the real intention for giving the subsidy was to encourage entrepreneurs to move to the backward area to establish industries there. The subsidy was not given to subsidies the cost of the capital. He stated that the Hon’ble Supreme Court in the case of Sahney Steel& Press Works Ltd. (supra) has not considered and over-ruled the decision in the case of P. J. Chemicals (supra). He submitted that in the case of the assessee also, the subsidy was given as an incentive to establish and run a cinema theatre. Therefore, the decision of the Supreme Court in the case of P. J. Chemicals (supra) would be applicable rather than the decision in the case of Sahney Steel & Press Works Ltd. (supra). He concluded that in any case the issue under consideration is a debatable issue, it is out of the purview of section 154. Therefore, the order of the CIT (Appeals) should be upheld.
6. We have carefully considered the arguments of both the sides and have perused the material placed before us. The only issue in the present appeal is whether the CIT (Appeals) was justified in cancelling the order under section 154 passed by the Assessing Officer. Section 154(1) reads as under :-
“With a view to rectifying any mistake apparent from the record, an Income-tax Authority referred to in section 116 may amend any order passed by it under the provisions of this Act.”
Thus, the above section empowers the Income-tax Authority to amend any order passed, by it to rectify any mistake apparent from record. The various Courts have interpreted the above provision to illustrate what is an apparent mistake. The Hon’ble Supreme Court in the case of Volkart Bros. (supra) have held –
“A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law i! not a mistake apparent from the records.”
The Hon’ble Supreme Court further in the case of Hero Cycles (P.) Ltd. (supra) have held –
“Rectification under section 154 can only be made when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from record. Rectification is not possible if the question is debatable.”
The Hon’ble Madhya Pradesh High Court, which is a jurisdictional High Court in the case of Sagar Co-operative Central Bank Ltd. (supra) has taken a similar view and held –
“A decision on a debatable point of law is not a mistake apparent from record.”
In the case of Bhawani Prasad Girdhari Lal & Co. (supra), the Hon’ble Allahabad High Court have held :-
“Under section 154 of the Income-tax Act, 1961, only mistake apparent from the record can be rectified. The section does not give power to the ITO to change his opinion and review his order.”
From the above decisions of the Hon’ble Supreme Court as well as jurisdictional High Courts and other High Courts, it is clear that an apparent mistake is an obvious and, patent mistake. A debatable point of law cannot be said to be a mistake apparent from record. Moreover, section 154 cannot be invoked by the Assessing Officer to review his order and change his opinion. In the above light, we will examine whether the order of section 154 passed by the Assessing Officer is sustainable or not.
7. As we have already stated that during the accounting year relevant to assessment year under consideration, the assessee had received a subsidy of Rs. 12,49,877 from Government of Madhya Pradesh. The assessee had claimed it to be a capital receipt. During the course of assessment proceedings, the Assessing Officer raised the query with regard to the taxability of subsidy received by the assessee. The assessee filed the written explanation 28-3-1989, claiming the receipt of subsidy to be capital receipt. The Assessing Officer passed the order under section 143(3) on 31st March, 1989, in which he did not make any comment about the subsidy received by the assessee. Therefore, the only possible inference is that the Assessing Officer was satisfied with the explanation of the assessee and he accepted the assessee’s claim that the subsidy received by it was capital receipt. By the order of rectification under section 154 dated 30th March, 1993, the Assessing Officer has treated the subsidy to be revenue receipt, chargeable to tax. The learned DR has contended that after the decision of Sahney Steel & Press Works Ltd.s case (supra), the various subsidies received by the assessee has to be treated as revenue receipt. The learned counsel for the assessee contended that even after the decision of Sahney Steel & Press Works Ltd. case (supra), all the subsidies are not revenue receipt. We have carefully gone through the decision of Hon’ble Supreme Court in the case of Sahney Steel & Press Works Ltd (supra). The Hon’ble Supreme Court has stated –
“The character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of the fund is quite immaterial. However, if the purpose is to help the assessee to set-up its business or complete a project, the moneys must be treated as having been received for capital purposes.”
8. The Hon’ble Supreme Court in this case had examined the different types of subsidies received by different assessees and have held the receipt of subsidy by the assessee by way of refund of sales tax, subsidy on power consumption, refund of water tax, etc., as revenue receipt. The Hon’ble Supreme Court on examining the scheme was of the view that all the incentives received by the assessee were production incentives. However, in the same decision, their Lordships have approved the decision of various High Courts, in which the subsidies were held to be capital receipt. Such decisions are as under :-
(i) In the case of Sadichha Chitra (supra), the Hon’ble Bombay High Court has held the subsidy received by the film producer producing new film in Marathi language to be capital subsidy.
(ii) Similarly, in the case of Ruby Rubber Work Ltd. (supra) the subsidy given by the State Government for replantation of rubber plants was held to be capital subsidy.
Therefore, the contention of the learned Departmental Representative that after the decision of Hon’ble Supreme Court in the case of Sahney Steel & Press Works Act (supra) all subsidies are to be treated as revenue receipt chargeable to tax is misplaced. We may point out that the receipt of entertainment subsidy, which is under consideration in the present appeal, was not considered by the Hon’ble Supreme Court in the case of Sahney Steel & Press Works Ltd (supra).
9. In the case of Kalpetta Estates Ltd. (supra), the revenue itself at the time of hearing before the Supreme Court conceded that the re-plantation subsidy received by the planters from Rubber Board was not revenue receipt. The ITAT, Jabalpur Bench after examining the scheme of entertainment subsidy in the case of Agrawal M. J. Enterprises (supra) has held the subsidy to be capital receipt.
10. In view of the above legal position, we have no hesitation to hold that the matter whether the subsidy received by the assessee was capital receipt or revenue receipt is a debatable issue and it was out of the purview of power of rectification permissible under section 154.
11. In view of the above, we uphold the order of the CIT (Appeals) and finds no merit in the revenue’s appeal. The same is dismissed.
12. In the result, the revenue’s appeal is dismissed.