1. This is a departmental appeal. The assessee is a non-resident (sterling) company. The proceedings relate to its assessment for the assessment year 1977-78. The appeal was originally allowed by the Calcutta Bench 'A' of the Tribunal comprising of S/Shri Anand Prakash and S. S. Mehra as members vide order dated 18-9-1981. The assessee filed a miscellaneous application on the receipt of the aforesaid appellate order. The Tribunal was requested to recall the appellate order and dispose the appeal afresh according to law. In the alternative, the request was made to pass a supplementary order on points which were stated to have been argued but not dealt with in the appellate order. The Bench, comprising of the same members, heard the parties on the miscellaneous application. Being satisfied that certain important contentions raised by and on behalf of the assessee were not considered by it in the appellate order and that the appellate order suffered from certain patent mistakes, the said Bench, vide its order dated 29-3-1982, recalled the appellate order and directed the office to refix the appeal for hearing and for disposal afresh. When the appeal next came up for hearing, the Bench felt that the issues raised in the appeal are interesting and important and that it would be in the fitness of things, if the appeal was heard by a Special Bench.
Reference was made to the President for constituting a Special Bench to dispose of the appeal. The proposal having been accepted, the appeal has come up for hearing before this Special Bench.
2. Shri Bagchi, the learned standing counsel, has appeared for the department. He raised a preliminary objection to the hearing of the appeal by the Special Bench. He contended that the Tribunal does not have the power to review its order. The appeal was finally disposed by the Calcutta Bench of the Tribunal vide appellate order dated 18-9-1981. The appellate order was not challenged by the assessee either by filing a reference application or by v/ay of writ in the High Court. It only filed a miscellaneous application and that too on the ground that some of its arguments were not considered or dealt with by the Tribunal. Patent or basic error was not even pointed out. The subsequent order passed by the Tribunal on 29-3-1982, according to Shri Bagchi, amounts to the review of the order, which power the Tribunal does not have. In this context, he relied upon a number of decisions such as : Mahboob Bi v. TRO  93 ITR 127 (Mad.), CIT v. 1TAT  109 ITR 267 (Cal.), CIT v. R. Chelladurai  118 ITR 108 (Mad.), CIT v. Kelvin Jute Co. Ltd.  126 ITR 679 (Cal.) and CIT v. Jagabandhu Roul  145 ITR 153 (Ori.).
The order dated 29-3-1982, recalling the appellate order dated 18-9-1981 itself, it was contended, is bad and illegal, i.e., non est, and, therefore, the subsequent order of the Bench referring the case to the President for constituting a Special Bench and the Constitution of Special Bench by the President are all invalid.
3. Dr. Pal, the learned counsel for the assessee, admitted that the Tribunal does not have the power to review its order. However, according to him, the Tribunal has not reviewed its order. It has exercised its power of rectification under Section 254(2) of the Income-tax Act, 1961 ('the Act'), judicially. It is pointed out that it is Shri Bagchi, who is asking the Special Bench to review the rectifying order dated 29-3-1982 of the Bench and hold that the said order is not a rectifying but a review order which the Tribunal cannot do. It is stated that the department, if it found anything wrong with the aforesaid rectifying order, should have challenged that order in appropriate forums which it has, admittedly, not done.
4. We see no merit in the preliminary objection raised by the learned standing counsel. Nobody has even suggested that the Tribunal has the power to review its order. The Tribunal is certainly empowered by Sub-section (2) of Section 254 to amend its order within a period of four years from the date of the order with a view to rectify any mistake apparent from record. That the amendment of the order within the meaning of Section 254(2) includes even recalling of the order in appropriate cases cannot, perhaps, be disputed. The dispute can possibly be about, whether a particular case is or is not appropriate for passing such an order. This is a matter which will have to be decided by the Bench in its judicial discretion and in the light of its appreciation of facts and understanding of the legal provisions. An aggrieved party can challenge such an order by filing a reference application or by invoking writ jurisdiction of the High Court or may be even by filing another miscellaneous application before the Tribunal itself for withdrawing the recalling order passed under Section 254(2).
To challenge the validity of such an order by raising a preliminary objection before the Special Bench in subsequent proceedings arising out of that order, is certainly not permissible because consideration of the preliminary objection in these proceedings will undoubtedly amount to reviewing the order. The preliminary objection is, therefore, rejected.
That, on the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred in his finding that provisions of Section 44C were not applicable in the instant case and in that view in directing the Assessing Officer to recompute the total income by excluding disallowance made under Section 44C of the Income-tax Act, 1961.
6. The assessee is a non-resident (sterling) company. Its registered office is in London (UK). Its activities are cultivation and manufacture of tea in India. The sales are both in India and outside, mostly in London. The business is, thus, located only in India and the head office expenses are incurred for the purpose of the business in India because that is the only business carried on by the assessee. It is pertinent to mention that the company has appointed Walter Duncan & Goodricke Ltd. (WDG) as its secretaries and managing agents not only for the purpose of carrying out the functions required of the assessee-company on account of its registered office being in London but also for supervising the sales of tea produced in India by the assessee-company, for which WDG was paid a sum calculated at 3 per cent of the assessee's total sales in London or elsewhere.
7. The assessee contended that the provisions of Section 44C, introduced in the Act with effect from 1-6-1976, are not applicable in its case and, therefore, no amount claimed under Sections 28 to 43A of the Act can be disallowed under that section in computing its total income. The figures of the expenditure that could be said to have been incurred by the head office for the purpose of Section 44C, as desired by the IAC, were, of course, furnished. According to the said statement, a copy of which is made available at pages 1 and 2 of the paper book, the maximum amount that could possibly be considered, for the purpose of Section 44C, amounts to 57,827.38 which is equivalent to Rs. 8,87,488. The provisions of Section 44C being applicable from 1-6-1976 whereas the assessee's previous year is calendar year 1976, and being a tea company its income is liable to be taxed under the Act to the extent of 40 per cent only, the assessee claimed that for the purpose of computing disallowance, assuming Section 44C is applicable, the expenditure requiring consideration would work out to Rs. 2,09,396.
As desired by the IAC, the assessee also furnished figures of average UK expenditure and the adjusted total income. The IAC has considered the assessee's submissions in paragraph No. 1 of his order and finding that 5 per cent of the adjusted total income, i.e., Rs. 1,07,559, is the least of the computations, has computed the disallowance under Section 44C at Rs. 79,515.
8. It was reiterated before the Commissioner (Appeals) that the provisions of Section 44C are not applicable in the assessee's case, as its entire business, i.e., cultivation, manufacture and sale of tea was in India and that its affairs in UK, where the assessee had its registered office only, were looked after by WDG, its secretaries and managing agents. It was submitted that the provisions of Section 44C are applicable in cases where an assessee has business in a number of countries. Reference was made to the notes on clauses relating to the provisions in the Finance Bill, 1976, through which Section 44C was introduced in the Act. The Commissioner (Appeals) has accepted the assessee's submissions and has directed the IAC to recompute the total income by excluding disallowance made by him under Section 44C.9. Shri Bagchi, the learned standing counsel for the department, and Dr. Pal, the learned counsel for the assessee, advanced learned and detailed arguments. For the sake of brevity, it is proposed to deal with them in the course of the order. In order to appreciate the rival contentions, it is desirable to refer to Section 44C, to the extent it is relevant for the purpose of this appeal: Notwithstanding anything to the contrary contained in Sections 28 to 43A, in the case of an assessee, being a non-resident, no allowance shall be made, in computing the income chargeable under the head 'Profits and gains of business or profession', in respect of so much of the expenditure in the nature of head office expenditure as is in excess of the amount computed as hereunder, namely : (a) an amount equal to five per cent of the adjusted total income ; or (c) the amount of so much of the expenditure in the nature of head office expenditure incurred by the assessee as is attributable to the business or profession of the assessee in India, (iv) 'head office expenditure' means executive and general administration expenditure incurred by the assessee outside India, including expenditure incurred in respect of- (a) rent, rates, taxes, repairs or insurance of any premises outside India used for the purposes of the business or profession ; (b) salary, wages, annuity, pension, fees, bonus, commission, gratuity, perquisites or profits in lieu of or in addition to salary, whether paid or allowed to any employee or other person employed in, or managing the affairs of, any office outside India ; (c) traveling by any employee or other person employed in, or managing the affairs of, any office outside India ; and (d) such other matters connected with executive and general administration as may be prescribed.
Superficially looked at, the section applies to all non-resident assessees. Its effective provision which is non obstante, viz., 'no allowance shall be made,...as is in excess of...' however, visualises three computations. The expenditure to be disallowed is the difference between the expenditure in the nature of 'head office expenditure' and the least of those three computations. Dr. Pal's contention is that unless all the three computations are possible in a case, the non obstante provision for disallowance will have no application. We have considered Dr. Pal's above contention in the light of the observations of the Supreme Court in the case of CIT v. B.C. Srinivasa Setty  128 ITR 294. It was held that goodwill generated in a new business cannot be regarded as an 'asset' within the meaning of Section 45 of the Act as no cost of it can at all be conceived and Section 48 of the Act, which provides for computation of income under the head 'Capital gains', inter alia, contemplates deduction of cost of acquisition of the capital asset. The ratio of the decision is that the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. In view of the above observations of the Supreme Court, we are inclined to hold that if any one or more of the computations under clause (a), (b) or (c) of Section 44C is not conceivable in a particular case, it will have to be held that non obstante provisions contemplating disallowance of 'head office expenditure' under Section 44C does not apply.
10. With this end in view, we now concentrate on clause (c) which, it is stated, does not apply in the case before us. The clause, admittedly, uses the expression "the amount of so much of the expenditure...as is attributable to the business...in India". The question is what does this expression mean i.e., whether in order to fail under clause (c), the expenditure should be incurred not only in connection with the business in India but also business outside India.
In other words, whether because of the expression "...so much of the expenditure...as is attributable..." means that a part of the expenditure at least must not be attributable to the business in India.
It is seen that almost similar situation had come up for consideration before the Supreme Court in the case of Anglo-French Textile Co. Ltd. v. CIT  23 ITR 82. The subject-matter of consideration was Section 24(2) of the Indian Income-tax Act, 1922 ('the 1922 Act'). The expression, inter alia, used in that sub-section was "and the loss cannot be wholly set off under Sub-section (1), so much of the loss as is not so set off". It was held that the expressions 'not wholly set off' and 'so much of the loss as is not so set off' mean that at least the loss must have been set off partially from which it follows that if there is a loss under the head 'Business' and no income under any head at all, the loss will not fall in the categories of 'not wholly set off' and 'so much of the loss as is not so set off' and cannot, therefore, be carried forward at all. Taking a clue from the above decision, we are inclined to hold that the expression "so much of the expenditure...as is attributable to the business...in India" contemplates that at least a part (however small it might be) of the expenditure is referable to a business outside India. Since in the case before us the entire expenditure, whether allowable or not, is wholly and necessarily incurred for the business in India as the non-resident assessee has no business outside India at all, we are inclined to hold that clause (c) of Section 44C is not applicable. Once we come to the conclusion that clause (c) is not applicable, following the ratio of B.C. Srinivasa Setty's case (supra), we have to hold that non obstante clause, providing for disallowance out of the 'head office expenditure' in excess of the least of the expenditure under three clauses, cannot apply.
11. To say the least, the above discussion creates a doubt as to whether Section 44C will or will not apply in cases where the exclusive business activity of a non-resident assessee is in India only. This will justify our taking external aid for the purpose of understanding the purport and scope of the section. In this context, it is desirable to refer to the following observations of the Supreme Court in the case of K.P. Varghese v. ITO ...It is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and the purpose for which the legislation was enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible....** ** ** ...The rule of construction by reference to contemporanea exposition is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous....
But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio....
In view of the above observations, we have considered it necessary to go through the notes on clauses of the Bill through which Section 44C was introduced, memorandum explaining the provisions in the Bill, the Board's Circular No. 202 dated 5-7-1976 explaining the provisions introduced by the Finance Act, 1976, relating to direct taxes and extract from Taxes & Incentives (a guide for investors) published by Indian Investment Centre (a Government of India Organisation) in October 1983. The notes on clauses and the memorandum explaining the provisions in the Bill are available in  102 1TR (St.) 161 to 199, respectively, the respective relevant paragraphs being at pages 166 (clause 10) and 187 (paragraphs 36 and 37). The Board's circular is published in  105 ITR (St.) 17 to 53. The paragraph dealing with the provisions of Section 44C is paragraphs 25.1 to 25.3 at pages 36 and 37. The relevant extracts from the book called Taxes & Incentives, published by Indian Investment Centre is made available to us by the assessee at page 58 of its paper book.
Notes on clauses do not throw any light inasmuch as salient features of the section are only repeated therein. However, memorandum explaining the provisions in the Bill, the Board's circular and the extract from the Taxes & Incentives clearly indicate tha the provisions of Section 44C were introduced in the Act to get over the following difficulties : It is extremely difficult to scrutinise and verify claims in respect of such expenses, particularly in the absence of account books of the head office which are kept outside India. Foreign companies operating through branches in India sometimes try to reduce the incidence of tax in India by inflating their claims in respect of head office expenses.
The difficulties of above nature cannot exist in a case where the entire head office expenditure is for the purpose of business in India and the books of the head office can be produced. In our view, the provisions of Section 44C have been introduced to cover cases where non-resident assessee was incurring expenditure abroad which expenditure was in the nature of 'head office expenditure'. The business activities of the non-resident assessee were not only confined to India but also outside India. The books of account of the head office were not produced. There was a possibility of the non-resident assessee's claiming inflated expenditure attributable to business in India ; but there was no effective method to verify the claim. It was to get over these difficulties that a ceiling was provided for the expenditure in the nature of 'head office expenditure'. Accordingly, we hold that the section does not apply in the assessee's case. There is no necessity for a special provision as in such a case the claim for expenditure in the nature of head office expenditure for allowance or disallowance can be considered under Section 37 itself without any difficulty.
12. In the view we have taken, strictly speaking, it is not necessary to consider the alternative claim of the assessee. Since, however, detailed arguments were advanced before the Special Bench, we have considered it desirable to consider and adjudicate alternative contention as well. Definition of 'head office expenditure', as given in Explanation (iv) to Section 44C, has already been quoted in para 9 of the order. It means 'executive and general administration expenditure'. Expenditure on sales cannot certainly fall in the above category. A major portion of the so-called 'head office expenditure' taken by the IAC covers the expenditure for supervising the sales which is included in the commission paid to its secretaries WDG by the non-resident assessee. We are aware that the definition has used the expression 'including expenditure incurred in respect of Sub-clauses (a), (b), (c) and (d) under Explanation (iv). However, the definition read carefully means and can, according to us, only mean that while the outer parameter of 'head office expenditure' is exhaustive, it is the inner parameter only which is inclusive. In other words, in order to constitute 'head office expenditure', the expenditure on Sub-clauses (a), (b), (c) and (d) has necessarily to be of the nature of 'executive and general administration expenditure'. Thus, in terms of its definition, the expression 'head office expenditure' is nothing but 'executive and administration expenditure'. However, the expression 'executive and administration expenditure' will mean not only what is ordinarily understood by the expression but also the expenditure of four types referred to in clauses (a), (b), (c) and (d). At best, it can be held that any expenditure which falls under the category of 'executive and general administration expenditure' automatically falls under 'head office expenditure', whether it is expended directly as such or is incurred indirectly in one of the four manners referred to therein. Since expenditure on sales cannot as such fall under the 'executive and administrative expenditure', the same to the extent it is attributable to the sales, will not fall under the 'head office expenditure'. In interpreting the expression 'head office expenditure' in the manner we have done, we have derived support from the Supreme Court decision in the case of CGT v. N.S. Getti Chettiar  82 1TR 599, where it was held that an interpretation clause which extends the meaning of a word, does not take away its ordinary meaning.
13. It is pertinent to mention that the commission at 3 per cent of the sales paid to WDG by the assessee is not only for supervising the sales but also for performing functions of the non-resident assessee's registered office in London. According to us, it will be reasonable in the circumstances to hold that commission at the rate of 2 per cent is referable to the supervision of sales and the balance, i.e., 1 per cent is referable to the activities of 'executive and administration nature'. Both the parties agree that if allocation is made of the expenditure in this manner, nothing would remain to be disallowed out of the 'head office expenditure' under Section 44C, assuming it applies in the case of the assessee. Accordingly, the order of the Commissioner (Appeals) is confirmed.