Law:

Section:

Section 154, read with section 36(1)(iii) of the Income-tax Act 1961 - Rectification of mistake - Apparent from record - Assessment years 1980-81 and 1981-82 - In course of its electric supply business, assessee set up four power generating units and for that purpose took loan - ITO allowed interest on loan - Subsequently, IAC issued notice under section 154 seeking withdrawal of deduction on ground that new project was not commissioned during previous year - Whether question whether new project was part of business of assessee or separate business altogether, was mixed question of fact and law - Held, yes - Whether, therefore, there was no mistake apparent from record and, consequently deduction of interest could not be withdrawn in rectification proceedings - Held, yes FACTS The assessee was engaged in the business of generation and distribution of electricity. In the course of its electric supply business, the assessee decided to set up four power generating units and decided to instal some additional boilers at one of its Power Station. A loan was taken for this purpose. The ITO allowed interest on loan. Thereafter IAC issued notice under section 154 seeking withdrawal of deduction on ground that new project was not commissioned during the previous year. On writ seeking to quash impugned notice : HELD The amount of the interest on capital borrowed was clearly allowable under section 36(1)(iii). The question was whether the new project was part of the business of the assessee or a separate business altogether. That was a mixed question of fact and law which had to be examined and found out. The mistake, if any, was not apparent from the records. The writ petition, therefore, must succeed. Note: The case was decided in favour of the assessee. Dr. D. Pal, Pranab Kr. Pal and Miss Manisha Seal for the Petitioner. A.C. Moitra and R.C. Prasad for the Respondent. JUDGMENT Suhas Chandra Sen, J.-In this writ petition, the petitioner has challenged the two notices under section 154 of the Income-tax Act, 1961, both dated September 9, 1986, issued by the Inspecting Assistant Commissioner of Income-tax, Assessment Range-XI, Calcutta, for the assessment years 1980-81 and…

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