Rectification under section 154 unavailable where business integration is a mixed fact-law question, quashing reopening notices.

Interest on borrowed capital remains allowable under section 36(1)(iii) of the Income-tax Act, 1961, but whether a new project forms part of an existing business or constitutes a separate business is a mixed question of fact and law. Because that issue required factual examination, the alleged mistake could not be characterised as an apparent error from the record for rectification under section 154. On that basis, notices issued under section 154 to reopen the allowance of interest were not sustainable and were quashed.

---

---

Issues: Whether notices issued under section 154 of the Income-tax Act, 1961 for reopening the allowance of interest on borrowed capital could be sustained when the alleged error depended on whether the new project formed part of the assessee's existing business and was not an apparent mistake from the record.

Analysis: Interest on capital borrowed is allowable under section 36(1)(iii) of the Income-tax Act, 1961. Whether the new project was part of the assessee's existing business or constituted a separate business was a mixed question of fact and law requiring examination of the facts. On that basis, the alleged error could not be treated as a mistake apparent from the record so as to justify rectification under section 154.

Conclusion: The notices under section 154 were not sustainable and were quashed.

---