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Commissioner of Income-tax Vs. Gedore Tools (India) (P.) Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1985)12ITD193(Delhi)
AppellantCommissioner of Income-tax
RespondentGedore Tools (India) (P.) Ltd.
Excerpt:
.....they could not be raised before the tribunal. on behalf of the assessee, it was urged that the grounds raised did not involve any investigation into fresh facts. after considering the rival submissions, the tribunal held as under: we have carefully considered the rival submissions from the arguments advanced on behalf of both the parties ; it would be apparent that there is a cleavage of judicial opinion on the question whether in the case like the present one, additional grounds should be admitted or not. the admitted position is that the grounds which are sought to be raised now were not raised either before the income-tax officer or before the commissioner (appeals). the decision of the madras high court in cit v. indian express (madurai) (p.) ltd. (supra) is in favour of the.....
Judgment:
1. By these two reference applications made under Section 256(1) of the Income-tax Act, 1961 ('the Act'), the Commissioner has required the Tribunal to refer the following question of law, which is stated to arise out of the order of the Tribunal passed in IT Appeal Nos. 1143 and 1826 (Delhi) of 1979 and 696 (Delhi) of 1982 relating to the assessment years 1975-76 and 1976-77.

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in entertaining the additional ground which had not been raised before the lower authorities 2. By this consolidated order, the Tribunal had not disposed of the appeals but had considered the petitions filed by the assessee seeking permission of the Tribunal to raise certain additional grounds of appeal in both the years under consideration. These additional grounds of appeal were as under: 1. That the learned ITO and the Commissioner (Appeals) failed to recognise and give due legal relief owing to the fact that cash compensatory support received by the appellant of the amount of Rs. 85,70,740 was in the nature of capital receipt and that it was not taxable, notwithstanding the fact that the same has been treated as 'revenue receipt' and included in the taxable profits of the appellant.

2. That the learned ITO and the Commissioner (Appeals) failed to recognise and give due legal relief owing to the fact that 'drawback of duty' of the amount of Rs. 13,30,484, was in the nature of capital receipt and that it was not taxable notwithstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profit of the appellant.

3. That the learned ITO and the Commissioner (Appeals) failed to recognise and give due legal relief, owing to the fact that 'income from sale of import entitlement' of the amount of Rs. 27,18,920 was in the nature of capital receipt and that it was not taxable notwithstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profit of the appellant.

4. That without prejudice to any of the aforesaid grounds of appeal, the appellant also claims that the learned assessing authority failed to apply the provisions of Section 10(17B) of the Income-tax Act, which, as a matter of duty cast on it and determine that none of the amounts indicated above could be included by virtue of those provisions in the total income of the appellant.

5. That without prejudice to any one or more of the aforesaid grounds of appeal, the appellant submits that the assessing authority failed to determine the correct head of income under which the impugned receipts were to be brought to tax as income and that, in any event, they erred in law in bringing them to tax under the head 'Profits and gains of business or profession'.

6. That without prejudice to any one or more of the aforesaid grounds of appeal, the appellant submits that the assessing authority erred in taxing the grants made by the Government from the Consolidated Fund of India for specific purpose--for export promotion, under the various schemes to the exporters, ignoring that the same are not taxable as per the charging provisions of the Income-tax Act 1961, thus, violating Article 266(3) of the Constitution of India.

1. That the learned ITO and the Commissioner (Appeals) failed to recognise and give due legal relief, owing to the fact that 'cash compensatory support' received by the appellant of the amount of Rs. 86,73,677 was in the nature of capital receipt and that it was not taxable, notwithstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profits of the appellant.

2. That the learned ITO and the Commissioner (Appeals) failed to recognise and give the legal relief, owing to the fact that 'drawback of duty' of the amount of Rs. 18,17,445 was in the nature of capital receipt and that it was not taxable notwithstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profit of the appellant.

3. That the learned ITO and the Commissioner (Appeals) failed to recognise and give due legal relief, owing to the fact that 'income from sale of import entitlement' of the amount of Rs. 47,38,202 was in the nature of capital receipt and that it was not taxable notwithstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profit of the appellant.

4. That without prejudice to any of the aforesaid ground of appeal, the appellant also claims that the learned assessing authority failed to apply the provisions of Section 10(17B) of the Income-tax Act, which, as a matter of duty cast on it and determine that none of the amounts indicated above could be included by virtue of those provisions in the total income of the appellant.

5. That without prejudice to any one or more of the aforesaid grounds of appeal, the appellant submits that the assessing authority failed to determine the correct head of income under which the impugned receipts were to be brought to tax as income and, that in any event, they erred in law in bringing them to tax under the head 'Profits and gains of business or profession'.

6. That without prejudice to any one or more of the aforesaid grounds of appeal, the appellant submits that the assessing authority erred in taxing the grants made by the Government from the Consolidated Fund of India for specific purpose--for export promotion--under the various schemes to the exporters, ignoring that the same are not taxable as per the charging provisions of the Income-tax Act, 1961, thus, violating article 266(3) of the Constitution of India.

3. The Tribunal considered the submissions made by the parties regarding the admission of these additional grounds. On behalf of the revenue, it was contended that these additional grounds should not be allowed to be raised because they were not pure questions of law and would involve investigation into fresh facts. It was also contended that these grounds had not been raised before the authorities below and, hence, they could not be raised before the Tribunal. On behalf of the assessee, it was urged that the grounds raised did not involve any investigation into fresh facts. After considering the rival submissions, the Tribunal held as under: We have carefully considered the rival submissions from the arguments advanced on behalf of both the parties ; it would be apparent that there is a cleavage of judicial opinion on the question whether in the case like the present one, additional grounds should be admitted or not. The admitted position is that the grounds which are sought to be raised now were not raised either before the Income-tax Officer or before the Commissioner (Appeals).

The decision of the Madras High Court in CIT v. Indian Express (Madurai) (P.) Ltd. (supra) is in favour of the assessee. In that judgment, the judgment in IRC v. Sneath [1932] 17 TC 149 (CA) had been followed. That judgment was followed by the Supreme Court itself in S.S. Gaggil v. Lal & Co. (supra). The judgments of the Gujarat High Court, the Bombay High Court, the Delhi High Court and the Andhra Pradesh High Court are against the assessee. We may make it clear that the controversy before the Delhi High Court in the judgment in CIT v. Anand Prasad (supra) was not similar to the controversy involved in this case. Since the matter in issue is controversial, we feel that the matter should be decided in favour of the assessee, and more so when only the question of admission of the additional grounds of appeal was involved. In fact, if there are two different opinions, the opinion which favours the assessee is generally followed. If any authority is necessary, reference is invited to the Supreme Court judgment in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. It is unnecessary to go into the facts of each and every case relied on by both the parties. Each case has to be determined on the facts of that case. On a consideration of all the facts and in the attendant circumstances of the case, we admit the additional grounds of appeal and direct that the additional grounds of appeal should be heard along with the other grounds raised in the appeals filed by the assessee. The assessee is not guilty of any latches.

4. The Tribunal also admitted additional grounds raised by the departmental representative, which was as follows: The appellant, named above, seeks leave of the Hon'ble Tribunal in support of the following additional ground, which is not set forth in the memorandum of appeal: That the learned Commissioner (Appeals) erred in not disallowing weighted deduction under Section 35B of the Act on commission of Rs. 12,10,893 on export sales even though this amount was allowed by the ITO, since such commission is not entitled to weighted deduction in view of the judgment of the Madras High Court reported in CIT v. Southern Sea Foods (P.) Ltd. [1983] 140 ITR 855'.

5. The Tribunal directed that the additional grounds raised by the assessee as well as the departmental representative were admitted and they will be heard along with other grounds of appeal taken by the parties.

6. It is under these circumstances that the Commissioner has sought a reference on the question already given above. The learned counsel for the assessee has, however, contended that no reference can be made to the High Court in respect of the order passed by the Tribunal, admitting certain grounds of appeal as the appeal filed before the Tribunal has not at all been disposed of and even the additional grounds admitted, have not been considered or disposed of. It was submitted by him that the order passed by the Tribunal could not be considered to be an order under Section 254 of the Act. He referred to the language of Section 256 and submitted that a question of law can arise only if there is an order passed under Section 254. He pointed out that the appeal before the Tribunal had not been disposed of. It was argued by him that Section 254 gives the power to the Tribunal to pass an order on the appeal. He pointed out that the term 'thereon' as used in Section 254 has been interpreted by the Courts and that the term refers to the subject-matter of appeal before the Tribunal. It was contended by the learned counsel that a question of law can be raised and considered only if the Tribunal passes an order disposing of a particular appeal and does not merely pass an interlocutory order or intermediate order.

7. The departmental representative, on the other hand, submitted that the Tribunal has chosen to pass a well discussed and detailed order and this order has to be under Section 254, though it has not finally disposed of the appeal before the Tribunal. It was also submitted that the question raised was clearly a question of law as would be apparent from the order of the Tribunal, where conflicting case laws have been discussed and a particular view has been preferred as there was a clear conflict.

8. We have carefully considered the rival submissions. The question which we have to decide at this stage is 'whether the order passed by the Tribunal, admitting certain additional grounds of appeal but not disposing of the appeal, is an order under Section 254 in respect of which a reference could be made'. At this stage, the Tribunal has admitted the additional grounds and he has directed that these grounds should be taken into consideration when the appeals are heard. Such an order, in our opinion, could not be considered as an order under Section 254. None of these grounds have been decided by the Tribunal and those matters are still pending. As held by the Courts, the Tribunal hears the appeals and passes orders thereon. The question of consideration of the additional grounds would obviously arise as and when the Tribunal decides those matters, one way or the other.

Questions of law about the merits as well as regarding admissibility, may be taken and may be considered at that stage. The learned counsel for the assessee was fair enough to submit before us that his client would not raise any question of limitation, if such a question is raised at the time of making a reference application when the final order of the Tribunal is passed. He also submitted that it would be open to the parties to contend whether the question raised is a question of law, which should be referred.

9. At this stage, we may take note of certain case laws which throw light on the issue before us. The Bombay High Court in the case of Trikamlal Maneklal, In re. [1958] 33 ITR 725, held as under: There is nothing express or implicit in Sections 33(4) and 66(1) of the Income-tax Act which requires that the order passed by the Appellate Tribunal against which an application for reference of a question of law to the High Court may be made must be an order finally disposing of the assessment of the assessee. The order that the Appellate Tribunal passes under Section 33(4) on appeal from an order of the Appellate Assistant Commissioner may be one confirming the order of the Appellate Assistant Commissioner or setting aside his order or remanding the proceedings to him ; and against any such order, which so far as the Tribunal is concerned decides questions about the rights or obligations of the assessee, an application for making a reference under Section 66(1) may lie.

In the case of Munna Lal & Sons v. CIT [1965] 55 ITR 508 (AIL), a question arose--whether a question of law could arise from the order of the Tribunal, directing the ITO to make a report on certain points. In that case, the facts were that after the order of the Tribunal was passed calling for a report from the ITO, the assessee applied for a reference from the order, while the application for reference was pending. The ITO sent his report and, after hearing the parties, the Tribunal passed an order setting aside the assessment and remanding the case for a fresh disposal. The question whether the appeal to the AAC was competent itself, was not raised at the first stage but was raised by the assessee on the hearing of the case after the report was received. The Tribunal referred the matter about the competence of appeal on the pending reference application. On these facts, the High Court held that the order passed by the Tribunal calling for a report was not an order under Section 33(4) of the Indian Income-tax Act, 1922 ('the 1922 Act'), and no reference would lie from such an order. The High Court further held that even if it was assumed that this was an order under Section 33(4), the question regarding the competence of appeal did not arise from the earlier order. While holding as above, the High Court held that there can be only one order under Section 33(4) and that is the final order and the interlocutory orders could not be considered as orders under Section 33(4). The High Court went on to hold that where the Tribunal remands the matter for further enquiry and report, it could not be considered as final disposal of the matter and no reference can be raised at that stage. However, if the Tribunal set aside the order directing the authorities below to pass a fresh order after making the necessary enquiries, such order would be an order under Section 33(4) and a reference would lie against such an order.

10. Somewhat similar matter came up before the Calcutta High Court in the case of CIT v. Calcutta Discount Co. Ltd. [1971] 82 ITR 941. In this case, the High Court held that the word 'thereon' in Section 33(4), is restricted to the subject-matter of the appeal before the Tribunal and the subject-matter of the appeal consists of the memorandum or grounds of appeal, the additional grounds, if any, allowed by the Tribunal and the grounds, if any, urged by or on behalf of the respondent to support the order under appeal. In the case, the revenue wanted to raise a few additional grounds of appeal and made a formal application to the Tribunal for that purpose. The Tribunal rejected the application and the additional grounds mentioned therein remained outside the purview of the subject-matter of the appeal. The High Court held that since the additional grounds did not form part of the subject-matter of the appeal, the Tribunal's order refusing to entertain them was not an order under Section 33(4) at all and as such, no reference to the High. Court against that order was permissible. The High Court, therefore, held that the Tribunal was not competent to entertain any application under Section 66(1) of the 1922 Act with respect to the Tribunal's order not allowing the revenue to raise certain additional grounds.

11. The above matter in Calcutta Discount Co. Ltd.''s case (supra) was taken to the Supreme Court and the judgment of the Supreme Court in CIT v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8. One of the questions raised before the High Court, which was considered by the Tribunal, was whether the Tribunal was competent to entertain an application under Section 66(1) in respect of the interlocutory order of the Tribunal, not permitting the revenue to raise the additional grounds. However, when the matter was heard by the Supreme Court, the revenue did not seek to get any answer on this question. The Supreme Court held that the AAC had rightly directed some more enquiries to be made and in view of that matter, question was required to be answered. While doing so, their Lordships observed: Had we come to the conclusion that the decision of the Income-tax Appellate Commissioner was wrong in law we would have had no hesitation in answering the three questions formulated above in favour of the revenue and directing the Tribunal to reconsider the matter....

However, in view of their decision on the main question, the other question was not answered.

12. Now in the present case, there is no order of the Tribunal rejecting the petition for admission of additional grounds which possibly raise the question that so far as those grounds were concerned, the Tribunal has barred the consideration and, therefore, a question of law could be raised. This is a case where certain additional grounds were raised and the effect of the order of the Tribunal is that these grounds could have to be considered by the Tribunal along with other grounds as if these grounds were already taken at the time of the filing of the appeal. An assessee may take a ground in the original memorandum of appeal of any question, even if it has not been considered by the lower authorities and it would be open to the Tribunal to consider the facts and circumstances and to decide the matter on merits having regard to the circumstances in which the question was not raised on earlier occasions and has been raised before the Tribunal. Thus, the whole matter is open before the Tribunal and there is no disposal of any ground whatsoever and, in view of this, it has to be held that there is no order under Section 254. The reference application filed by the Commissioner cannot, therefore, be entertained and no question could be considered for getting the opinion of the Hon'ble High Court. At this stage, we are not holding whether a question of law, as raised by the revenue, should ultimately be referred or not and it would be open to the parties to raise questions after the order of the Tribunal under Section 254, finally disposing of the appeals are passed and the Tribunal will consider the questions which may include a similar question as above on merits. The reference applications are, therefore, rejected.


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