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Commissioner of Income-tax Vs. George Williamson (Assam) Ltd. - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberIncome-tax Reference No. 7 of 1995
Judge
ActsIncome Tax Act, 1961 - Sections 35B, 35B(1) and 256
AppellantCommissioner of Income-tax
RespondentGeorge Williamson (Assam) Ltd.
Appellant AdvocateG.K. Joshi and U. Bhuyan, Advs.
Respondent AdvocateR. Gogoi, H. Roy and S. Saikia, Advs.
Prior history
1. As per the direction given by this court on April 25, 1994, in Civil Rule No. 34(M) of 1992, the following questions have been referred by the Income-tax Appellate Tribunal, Gauhati Bench, Guwahati, under Section 256(2) of the Income-tax Act, 1961 (for short, 'the Act'), for opinion of this court :
' (1) Whether the Tribunal did not err in facts as well as in law in holding that Rule 6AA which was made effective from August 1, 1981, and which was held to be substantive law by the Tribuna
Excerpt:
.....of the income-tax act, 1961 (for short, the act'), for opinion of this court :(1) whether the tribunal did not err in facts as well as in law in holding that rule 6aa which was made effective from august 1, 1981, and which was held to be substantive law by the tribunal itself, would be applicable in respect of pending assessment as on august 1, 1981 ? (2) whether the tribunal did not err in facts as well as in law in holding that rule 6aa which was stated to be substantive law and which was brought into the statute with effect from august 1, 1981, would apply in respect of expenses incurred on or before june 30, 1980 ? (3) whether under the facts and in the circumstances of the case, the tribunal was justified in holding that the assessee is entitled to weighted deduction under..........that the accounting year of the company was from 1st of july, 1979, to 30th of june, 1980. mr. joshi submits that this provision is a prospective one and, therefore, in the concerned assessment year this has got no application whatsoever. in this connection, mr. joshi submits that the law applicable in the previous year relevant to the assessment year is the law and in this case the previous year was 1st of july, 1979, to 30th of june, 1980, and definitely the provision contained in rule 6aa was not attracted. mr. joshi further submits that the provision contained in rule 6aa is prospective in nature. in this connection, mr. joshi also draws our attention to a decision of this court dated august 19, 1996, in income-tax reference no. 29 of 1993 (cit v. assam frontier tea ltd. ). in.....
Judgment:

1. As per the direction given by this court on April 25, 1994, in Civil Rule No. 34(M) of 1992, the following questions have been referred by the Income-tax Appellate Tribunal, Gauhati Bench, Guwahati, under Section 256(2) of the Income-tax Act, 1961 (for short, 'the Act'), for opinion of this court :

' (1) Whether the Tribunal did not err in facts as well as in law in holding that Rule 6AA which was made effective from August 1, 1981, and which was held to be substantive law by the Tribunal itself, would be applicable in respect of pending assessment as on August 1, 1981

(2) Whether the Tribunal did not err in facts as well as in law in holding that Rule 6AA which was stated to be substantive law and which was brought into the statute with effect from August 1, 1981, would apply in respect of expenses incurred on or before June 30, 1980

(3) Whether under the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is entitled to weighted deduction under Section 35B(1)(b)(ix) ?'

2. The assessee is a limited liability company owning tea estates in the State of Assam. The company carries on tea business. For the assessment year 1981-82, the assessee claimed deduction of Rs. 47,49,906 being 1/3rd of the total cost of Rs. 1,42,49,717, i.e., Rs. 44,89,858 towards cost of maintaining an agency outside India and Rs. 97,59,859 towards cost of maintaining warehouses outside India. The Assessing Officer allowed the deduction. By exercising power of revision suo motu, the Commissioner of Income-tax reversed the decision of the Assessing Officer allowing deduction of l/3rd of Rs. 97,59,385, the amount spent for maintaining warehouses outside India under Section 35B(1)(b)(ix) read with Rule 6AA. The assessee preferred an appeal before the Income-tax Appellate Tribunal (for short, 'the Tribunal'). The Tribunal, however, allowed the appeal of the assessee claiming deduction not under Section 35B(1)(b)(ix) but under Section 35B(1)(b)(ix). The Revenue, thereafter requested the Tribunal to refer the above questions for opinion of this court. The Tribunal refused to do so. Situated thus, the Revenue filed an application (Civil Rule No. 34(M) of 1992) before this court and this court by order dated April 25, 1994, directed the Tribunal to refer the above questions. Hence, the present reference.

3. We have heard Mr. G.K. Joshi, learned senior standing counsel assisted by Mr. U. Bhuyan, learned junior standing counsel appearing on behalf of the Revenue, and Mr. R. Gogoi, learned counsel assisted by Mr. S. Saikia, learned counsel appearing on behalf of the assessee.

4. The contention of Mr. Joshi is that the Tribunal committed a manifest error of law in allowing the deduction under Section 35B(1)(b)(ix). According to Mr. Joshi, deduction under Section 35B(1)(b)(ix) is applicable only in respect of any other activities for the promotion of the sale outside India of such goods, services or facilities that may be prescribed. At the relevant time, the activities referred to in Clause (ix) were not prescribed. It was prescribed later under Rule 6AA of the Income-tax Rules, 1962 (for short, 'the Rules'), which provision was inserted in the rules by the Income-tax (Eighth Amendment) Rules, 1981, and the said rule came into force on August 1, 1981. The relevant assessment year in this case was 1981-82. It is stated that the accounting year of the company was from 1st of July, 1979, to 30th of June, 1980. Mr. Joshi submits that this provision is a prospective one and, therefore, in the concerned assessment year this has got no application whatsoever. In this connection, Mr. Joshi submits that the law applicable in the previous year relevant to the assessment year is the law and in this case the previous year was 1st of July, 1979, to 30th of June, 1980, and definitely the provision contained in Rule 6AA was not attracted. Mr. Joshi further submits that the provision contained in Rule 6AA is prospective in nature. In this connection, Mr. Joshi also draws our attention to a decision of this court dated August 19, 1996, in Income-tax Reference No. 29 of 1993 (CIT v. Assam Frontier Tea Ltd. ). In the said case, this court held that Rule 6AA being a substantive law has prospective effect and it does not have retrospective effect. Relying on the said decision, Mr. Joshi submits that the provision of Rule 6AA was not at all applicable in the present case. Mr. Joshi further submits that Section 35B(1)(b)(ix) speaks of allowance available to an assessee for such other activities for the promotion of the sale outside India of such goods, services or facilities as may be prescribed. At the relevant point of time, there were no such prescribed activities. Therefore, the claim under Clause (ix) was not applicable. Mr. Joshi submits that if that is the position then the question will be answered in the affirmative and in favour of the Revenue. Mr. Gogoi does not dispute the submission made by Mr. Joshi. He also submits that as per the decision of this court in Income-tax Reference No. 29 of 1993 (CIT v. Assam Frontier Tea Ltd. ), Clause (ix) of Section 35B(1)(b) of the Act is not attracted in the facts and circumstances of the case. But Mr. Gogoi argues in a different way. According to him, in the facts and circumstances appearing in the case, the question was not properly framed. He also submits that it should be reframed to answer the real controversy between the parties. In this connection, Mr. Gogoi draws our attention to the decision in the case of CWT v. Mahadeo Jalan : [1972]86ITR621(SC) . Relying on the said decision, Mr. Gogoi submits that the court has ample power to recast or reframe the question to find out the real controversy and answer the same. Mr. Joshi does not dispute the proposition of law. However, Mr. Joshi submits that reframing is possible only when the real controversy arises out of the order of the Tribunal. This court has no power or jurisdiction to frame a new question. In support of his contention, Mr. Joshi draws our attention to the decision of the apex court in CWT v. Mahadeo Jalan : [1972]86ITR621(SC) . Mr. Joshi, in support of his submission, also relies on another decision of the apex court in CIT v. Smt. Anusuya Devi : [1968]68ITR750(SC) and further submits that as per the decision of the apex court in the said case, the power of the High Court to reframe a question may be exercised to clarify some obscurity in the question referred, or to pinpoint the real issue between the taxpayer and the Department or for similar other issues and it cannot be exercised for reopening an enquiry on questions of fact or law which is closed by the order of the Tribunal. Relying on the decision of the apex court in Kusumben D. Mahadevia v. CIT : [1960]39ITR540(SC) , Mr. Joshi draws our attention to page 544 where the apex court observed thus :

'Section 66 of the Income-tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order. It is possible that the same question of law may involve different approaches for its solution, and the High Court may amplify the question to take in all the approaches. But the question must still be one which was before the Tribunal and was decided by it. It must not be an entirely different question which the Tribunal never considered.'

5. Mr. Joshi further submits that the conclusion arrived at on the basis of facts by the Tribunal shall be regarded as final unless it is challenged as a perverse finding. In this connection, Mr. Joshi relies on a decision of the Supreme Court in Dr. K. George Thomas v. CIT : [1985]156ITR412(SC) . Mr. Joshi submits that as per the said decision of the apex court, the findings of facts arrived at by the Tribunal shall always be treated as final. Mr. Joshi further submits that this court has no scope whatsoever to reframe a question. In the facts and circumstances of the case, according to Mr. Joshi, the reframing of the question, as urged by Mr. Gogoi, does not arise particularly in view of the fact that all through the authorities including the Tribunal considered the applicability of Section 35B(1)(b)(ix). Nowhere the Tribunal or the authorities below had to consider the provisions of Section 35B(1)(b)(ix). Therefore, in all fairness, the court should refrain from refraining a question which does not arise out of the order of the Tribunal.

6. Law relating to power of this court to reframe a question is well settled and it has clearly been indicated in CWT v. Mahadeo Jalan : [1972]86ITR621(SC) . The decision in this case clearly indicates that this court in appropriate cases has power to reframe a question, but it must definitely arise out of the order passed by the Tribunal. It is also true that the court has no power to recast or reframe a question which becomes absolutely new and the Tribunal had no occasion to deal with that type of question. Taking the ratio of the decisions cited above, we are to see whether the question can be reframed as urged by Mr. Gogoi, learned counsel appearing on behalf of the assessee.

7. Mr. Gogoi submits that in the present facts and circumstances of the case, the appropriate question ought to have been whether the assessee would be entitled to get deduction as per the provisions contained in Section 35B(1)(b)(ix).

8. Clause (iv) of the above section refers to allowance for the expenses made towards maintenance outside India of a branch, office or agency for the promotion of the sale outside India of such goods, services or facilities. In the instant case, the assessee engaged an agent who maintained a warehouse outside India. The expenses made by the agency were reimbursed by the assessee. Before the Assessing Officer the assessee claimed deduction towards expenses made for maintenance of the agency and this matter was taken up suo motu by the Commissioner of Income-tax who reversed it. The matter came up before the Tribunal also. The Tribunal was to consider whether the expenses made for the maintenance of a warehouse by the agency and later on reimbursed by the assessee were allowable. The Tribunal, after considering the facts and circumstances, allowed the deduction, however, under Section 35B(1)(b)(ix). But the real controversy was, all through from the Assessing Officer level to the Tribunal level, whether the expenses made towards maintenance of a warehouse by the agency and later on reimbursed by the assessee were deductible. It is true that the Tribunal quoted a wrong section which was absolutely inapplicable in the present facts and circumstances of the case. The real question ought to have been whether the expenses made towards maintenance of the warehouse by the agency could be deducted from the income. In our considered view, the question ought to have been framed as such. Considering all these, we reframe the question as under :

'Whether under the facts and in the circumstances of the case, the assessee would be entitled to get deduction of expenses for maintenance of warehouse outside India under the provisions contained in Section 35B(1)(b)(ix) ?'

9. In view of the provisions contained in the said section, in our opinion, the assessee was entitled to get deduction under Section 35B(1)(b)(ix) after reframing the said question as above. We answer the question in the affirmative, in favour of the assessee and against the Revenue. In view of the reframing of the questions, it is not necessary to answer the questions as referred by the Tribunal.

10. A copy of this judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal, Guwahati.


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