1. During the assessment year 1966-67, for which the previous year ended on March 31, 1965, the assessee, which is an insurance company was was carrying on general insurance business in and outside India, claimed that it had spent Rs. 25,500 in connection with a campaign against a proposal to nationalise general insurance by way of giving donations and making contributions to certain institutions. This amount included a contribution of Rs. 7,500 to the Forum of Free Enterprise. The ITO has disallowed the entire amount of Rs. 25,500 but in appeal, the claim of the assessee in respect of the contribution of Rs. 7,500 to the Forum of Free Enterprise was allowed on the ground that it was laid out wholly and exclusively for the purpose of the business of the assessee. In respect of the donations/contributions disallowed by the AAC, the assessee filed an appeal before the Appellate Tribunal some time in October, 1969, being appeal No. 3445 of 1969-70. In this appeal, the Revenue filed cross-objection No. 189 of 1969-70 on February 2, 1970, challenging the order of the AAC with regard to the allowance of Rs. 7,500. Prior to that, however, the Revenue had already filed Appeal No. 4039 of 1969-70 in November, 1969, challenging the finding that the assessee was entitled to the deduction of expenditure of Rs. 7,500.
2. The assessee had objected to the maintainability of the cross-objection on the ground that the Revenue had already file an appeal. This objection prevailed with the Tribunal which took the view that the Revenue having filed an appeal, there is no manner of doubt that the cross-objection was not maintainable.
3. Thereafter, the Revenue sought to raise an additional ground in their Appeal No. 4039 of 1969-70, challenging the view of the AAC, with regard to the contribution of Rs. 7,500 to the Forum of Free Enterprise. The Tribunal, however, declined to allow the Revenue to raise the additional ground as, according to the Tribunal, all the facts relevant for the decision of that question, namely, the objects for which the Forum of Free Enterprise was set up, etc., were not available on the record. It may be noted that the cross-objection was dismissed on September 8, 1971, and the request for raising the additional ground was rejected on September 22, 1971, and the order was made while disposing of the Revenue's appeal which was also concerned with some other questions which are not relevant for the purposes of this appeal. The Revenue also failed to persuade the Tribunal to make a reference arising out of this decision not to permit the additional ground of appeal to be raised. This application was rejected on April 20, 1972.
4. The Revenue filed an application under s. 256(1) of the I.T. Act against the order of the Tribunal dismissing the cross-objection. According to the Revenue, the two questions of law, which arose out of the order of the Tribunal, were as follows :
'(i) Whether the Tribunal was justified in law in dismissing the cross-objections filed by the Revenue as being not maintainable on the ground that the Revenue had filed an independent appeal bearing No. 4039 (Bom) of 1969-70 ?
(ii) Whether having regard to the fact that the subject-matter of Revenue's Appeal No. 4039 (Bom) of 1969-70 was different from that of the cross-objections, the Tribunal ought to have heard and decided the said cross-objections, on merits, while disposing of the assessee's appeal ?'
5. With regard to the contribution of Rs. 7,500, the Tribunal took the view that the following question was wide enough the cover the questions proposed by the Revenue :
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in dismissing the cross-objection filed by the Revenue pertaining to the contribution of Rs. 7,500 to the Forum of Free Enterprise as being not maintainable on the ground that the revenue had filed an independent appeal bearing I.T.A. No. 4039 (Bom) of 1969-70 against the order of the Appellate Assistant Commissioner dated April 15, 1969, which had allowed the claim of the assessee in respect of the said sum of Rs. 7,500 ?'
6. It appears that, according to the Revenue, the two questions originally suggested by it still survive in spite of this reference and a motion was, therefore, taken out to have these two questions referred. According to the Revenue, the two questions referred. According to the Revenue, the two questions originally proposed by it before the Tribunal arose out of the following order of the Tribunal in para. 7 of the order disposing of the assessee's appeal.
'We now come to the cross-objection filed by the Revenue. It is an admitted position that the Revenue has also filed an appeal against the aforesaid order of the Appellate Assistant Commissioner and that appeal bears No. 4029 (Bom) of 1969-70. The Revenue having filed an appeal, there remains no manner of doubt that the present cross-objection is not maintainable. We hold accordingly.'
7. This motion has been disposed of by this court by the following order on November 13, 1975 :
'In our view, the motion is thoroughly misconceived as no point of law arises from the order of the Tribunal holding that the cross-objection are not maintainable on the footing stated in para. 7 of its order dated September 8, 1971.
Accordingly the motion will stand dismissed with costs.'
8. When this reference was taken up for hearing, at the very threshold Mr. Dastur, appearing on behalf of the assessee, has raised an objection that the reference itself now stands disposed of by the aforesaid order of the Bench because the question which is referred by the Tribunal also arises out of para. 7 of the order of the Tribunal quoted above. Now, it has to be noted that what was before the Division Bench was the motion and not the reference itself. The prayer made in the motion was two fold. It was primarily prayed that a fresh statement of the case referring the two questions suggested in the motion be called from the Tribunal or, in the alternative, the court may make an order incorporating the two questions of law as questions of law as if those questions had been raised and referred to this court. Since undisputedly the reference itself was not placed for final hearing before the Division Bench, the order passed by the Division Bench cannot be construed as disposing of the reference itself. The order dated November 13, 1975, must be read in the light of the prayer made in the notice of motion and it must, therefore, be construed only as rejecting the contention of the Revenue that the two questions suggested by the Revenue should have been referred by the Tribunal. It is not, therefore, possible to treat this reference as having been disposed of by the order of the Division Bench on the notice of motion.
9. Now, so far as the question referred by the Tribunal is concerned, it is contended by Mr. Joshi on behalf of the Revenue that the Revenue having exercised its right under s. 253(4) of the I.T. Act, 1961, the cross-objection could not be rejected by the Tribunal merely on the ground the Revenue had already filed an appeal in respect of certain other parts of the order of the AAC. Mr. Dastur, appearing on behalf of the assessee has contended that s. 253(4) has the effect of treating the cross-objection 'as if it were an appeal presented within the time specified in sub-section (3)' and, under the Act, a party cannot file two appeals. The contention appears to be that the Revenue having already filed an appeal in November, 1969, it was not entitled to exercise its right to file the cross-objection thereafter. It was then contended that the application for urging an additional ground with regard to the deduction of Rs. 7,500 had also been rejected by the Tribunal and that order having now become final, the question as to whether the cross-objection should have been decided on merits or not does not really survive.
10. Now, a bare reading of s. 253(4) of the I.T. Act, 1961, will show that the right to file a memorandum of cross-objection is an independent right given to the opposite party in an appeal and it is in addition the independent right of appeal which may or may not be exercised by the assessee under s. 253(1) or by the ITO at the instance of the Commissioner in s. 253(2) of the Act. It is not possible for us to read any restriction in sub-s. (4) of s. 253 which has the effect of restricting this right to file a cross-objection. In a given case, it is quite possible that certain matters may not be agitated either by the Commissioner or the assessee by way of an appeal, but if any appeal is filed either by the assessee or the ITO, then the opposite party might consider it necessary to file a cross-objection in respect of such matters which were not thought fit originally to be agitated by way of an independent appeal. It is common experience that orders under the I.T. Act decide several questions of controversy between the Revenue and the assessee and if, in a given case, either the assessee or the ITO chooses to restrict his appeal only to certain questions or findings, having regard to a positive right to file a cross-objection, he can on second thoughts, be permitted to challenge the finding which was not originally challenged in the appeal provided, of course, the cross-objection is filed in the manner prescribed by law and within the limitation prescribed by law. It is not, therefore, possible for us to uphold the view of the Tribunal that the cross-objection filed by the Revenue was liable to be rejected on the short ground that the Revenue had already filed an appeal. If the question as to deductibility of Rs. 7,500 was not originally raised in the appeal, it was permissible to be raised by way of a cross-objection, validly filed.
11. It is also not possible to accept the argument of Mr. Dastur that no reference having been sought in respect of the order of the Tribunal rejecting the application to urge additional ground, the validity of the order rejecting the cross-objection is now academic. When the Revenue sought to raise an additional ground, whether to permit such an additional ground to be raised or not was a matter of discretion of the Tribunal and the only question which can validly arise out of such an order would be whether the discretion has been properly exercised by the Tribunal or not. The question as to whether the deduction of Rs. 7,500 has been properly allowed or not would be outside the scope of the controversy at the time when the question agitated was whether the additional ground should be allowed to be urged or not.
12. The position with regard to the cross-objection is, however, different. The ground with regard to the legality of the allowance of Rs. 7,500 having been expressly taken in the cross-objection, the cross-objection could not have been decided properly and effectively unless the merits of this contention were adjudicated upon. The challenge to the validity of the decision of the Tribunal rejecting the cross-objecting is not, therefore, in any way affected by the earlier decision not to permit the Revenue to raise the additional ground because that was not a decision on the merits of the contention sought to be canvassed by the Revenue. It appears to us that the Tribunal was, therefore, clearly in error in dismissing the cross-objection on the ground that an appeal was already filed by the Tribunal.
13. In this view of the matter, the answer the question referred is in the negative and in favour of the Revenue. The assessee to pay the costs of this reference.