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Oil India Limited Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 241 of 1979
Judge
Reported in(1981)24CTR(Cal)276,[1982]135ITR713(Cal)
ActsIncome Tax Act, 1961 - Section 254
AppellantOil India Limited
RespondentCommissioner of Income-tax
Appellant AdvocateK. Roy and ;A. Chari, Advs.
Respondent AdvocateS. Sen and ;P.K. Ghosh, Advs.
Excerpt:
- sudhindra mohan guha, j. 1. this reference arises out of an application filed by the assessee, oil india ltd., duliajan, under section 256 of the i.t. act, 1961.2. there is an agreement dated december 27, 1963, between the assessee-company and the burmah oil co. ltd. under which charges in accordance with the basis set out in the schedule annexed to the said agreement are payable half yearly by the assessee-company to the burmah oil co. ltd. for the services rendered by the latter to the assessee-company. clause 7 of the said agreement reads as follows :'in consideration of the services to be performed by the burmah oil co. ltd. pursuant to clauses 3 and 5 of this agreement, the company shall pay and allow respectively to the burmah oil co. ltd. or to the associated or subsidiary company,.....
Judgment:

Sudhindra Mohan Guha, J.

1. This reference arises out of an application filed by the assessee, Oil India Ltd., Duliajan, under Section 256 of the I.T. Act, 1961.

2. There is an agreement dated December 27, 1963, between the assessee-company and the Burmah Oil Co. Ltd. under which charges in accordance with the basis set out in the schedule annexed to the said agreement are payable half yearly by the assessee-company to the Burmah Oil Co. Ltd. for the services rendered by the latter to the assessee-company. Clause 7 of the said agreement reads as follows :

'In consideration of the services to be performed by the Burmah Oil Co. Ltd. pursuant to Clauses 3 and 5 of this agreement, the company shall pay and allow respectively to the Burmah Oil Co. Ltd. or to the associated or subsidiary company, or the companies actually performing the services, as the case may be, costs determined in accordance with the basis set out in the Schedule annexed hereto. Such costs shall be payable half-yearly, in arrear, in sterling in London and shall become due for payment on receipt by the company of Burmah's debit notes for such costs.'

3. Originally, a return was filed on September 28, 1970, showing a total income of Rs. 9,08,35,318. Subsequently, a revised return was filed on January 3, 1973, showing a total income of Rs. 9,48,17,590. During the assessment, the ITO passed the order as follows:

'The assessee has claimed deduction of Rs. 61,565 being guarantee commission for purchase of Gas Compressor. Similar claim for guarantee commission made in 1969-70 has been disallowed as of a capital nature. As the circumstances are similar, the amount will be disallowed.

London office charges paid to the Burmah Oil Co, are being allowed in the earlier assessments with reference to bills issued by that party.Thus, for the assessment year 1969-70, the charges relating to the second half of 1967 and first half of 1968 have been allowed and the claim for deduction relating to the second half of 1968 has been disallowed. On the same basis, the charges for the second half of 1968 and the first half of 1969 will be allowed in this current assessment and the claim for deduction relating to second half of 1969 of Rs. 2,93,623 will be disallowed. This will be considered in the assessment for 1971-72.

In all the past assessments, depreciation on bungalows are being allowed @ 2 1/2% only while the assessee has been claiming @ 5% WDV for bungalows for the assessment year 1969-70.'

4. The assessee came up in appeal before the AAC. The disallowance of Rs. 2,93,623 was challenged among others by the assessee-company in the appeal. It was contended that the manner in which the service charges were being allowed in the past, though acquiesced in by the assessee-company, was strictly not in accordance with the correct legal position or the principles of accountancy or the manner in which the service charges were being obtained in the accounts maintained by the assessee-company. It was contended that the liability to pay the service charges relatable to the half years of each previous year arose during the relevant previous year, though such charges might be payable by the assessee-company as and when the debit notes were received by it and that, under law and also according to the principles of accountancy, the liability was allowable as a deduction in the year in which it was incurred, though such a liability was to be discharged by payment some time later. It was further pointed out by the AAC that the service charges relatable to the second half of the year 1969, in respect of which the debit note of the Burmah Oil Co. Ltd. was dated December 31, 1969, but received by the assessee-company after the end of the year 1969, i.e., in the month of January, 1970, was Rs. 1,43,224-96 only and not Rs. 2,93,623. The AAC accepted the above contention advanced on behalf of the assessee-company and deleted the disallowance of Rs. 2,93,623 claimed by the assessee as a deduction on account of service charges.

5. Being aggrieved by the order of the AAC in deleting the disallowance of Rs. 2,93,623, the department came up in appeal before the Tribunal. It was argued on behalf of the department that the assessee-company having acquiesced, in the earlier years, to the basis adopted by the ITO in allowing deduction on account of service charges payable to the Burmah Oil Co. Ltd., it should not be allowed to claim the deduction on a different basis for the assessment year under appeal, even though that basis adopted by the ITO was not consistent with the manner in which the assessee was debiting the service charges in its own accounts. The assessee also would not stand to lose by the basis adopted by the ITO in allowing the deduction because the service charges relatable to the second half year of 1969 which were not allowed as a deduction in the assessment for the assessment year 1970-71, would naturally be allowed as a deduction in the assessment for the assessment year 1971-72. As a result of the action of the AAC, the assessee had a double benefit, i. e., the benefit of deduction of the service charges relatable to the second half year of 1968, which the ITO himself allowed, following the departmental practice of allowing deduction of service charges in the year of receipt of the debit notes by the assessee-company from the Burmah Oil Co. Ltd., and also the benefit of deduction of the service charges relatable to the second half year of 1969 being allowed on the basis of what was claimed to be the correct legal position, principles of accountancy and the manner of maintenance of accounts by the assessee-company. If the claim of the assessee for the allowance of service charges on the basis of the correct legal position and correct principles of accountancy is to be accepted, then, on the assessee's own showing, the allowance of the deduction of the service charges relatable to the second half year of 1968 in the assessment year 1970-71 was not proper.

6. It is also pointed out that it is not fair that the assessee should be allowed to get away with the benefit of both the allowance of deduction in respect of the service charges relatable to the second half year of 1968 on the basis of the past departmental practice and allowance of deduction in respect of the service charges relatable to the second half year of 1969 on the basis of what is claimed to be the correct legal position and principles of accountancy. It is further pointed out that even according to Clauses 7 of the agreement dated December 27, 1963, the service charges are payable by the assessee to the Burmah Oil Co. Ltd. only on receipt of the Burmah Oil debit notes. The liability of the assessee to pay the service charges can, therefore, be said to have accrued only when the assessee-company received the debit notes. The claim of the assessee-company for allowance of deduction of the service charges relatable to the second half year of 1969 cannot, therefore, be allowed on the basis that the liability for those service charges had accrued during the relevant previous year.

7. The assessee's counsel, on the other hand, had drawn a distinction between the accrual of liability and the discharge of the liability by payment. It was contended that the liability to pay the service charges relatable to the second half year of 1969 arose on December 31, 1969, itself, on which date the relevant debit note was issued by the Burmah Oil Co. Ltd. and that Clause 7 of the agreement dated December 27, 1963, providing for the discharge of that liability on the receipt of the debit notes did not detract from the liability having already accrued on the date the debit note was made out. It was further contended that the pastdepartmental practice was inconsistent with the correct legal position and the method of accounting adopted by the assessee and it would not be fair to perpetuate a wrong practice which was not consistent with the correct legal position. As regards the service charges relatable to the second half year of 1968 which the ITO allowed in the assessment for the assessment year under appeal, it was contended that the said allowance was not the subject-matter of the appeal before the Tribunal and the Tribunal should not, therefore, adjudicate upon it. It is also pointed that if the Tribunal were to withdraw the allowance, the assessee would be hard put to it, since it would not be possible for the assessee at this stage to get those service charges allowed as deduction in the assessment for the assessment year 1969-70, which was already completed. All the assessments completed in the past would be upset, if the service charges relatable to the second half year of 1968 were directed to be allowed as a deduction in the assessment of an earlier year, which was already completed without the same, being allowed. The service charges in respect of the second half year of 1968 were not allowed as a deduction in the assessment of any other year, and there was, therefore, no question of the same deduction being allowed twice over.

8. On a careful consideration of the rival contentions, the Tribunal recorded the following finding in para. 8 of the order:

'We have carefully considered the rival contentions advanced by both the sides. While we agree with the interpretation put upon Clause 7 by Shri P.T. Sanyat, we cannot ignore the fact that the assessee had already been allowed by way of deduction the service charges payable for the second half of 1968. The liability in respect of the service charges for the second half of 1969 arose out of the debit note dated December 31, 1969, and was definitely to be treated as a liability for the calendar year 1969. Clause 7 of the agreement emphasised by the departmental representative does not shift the accrual to a later date but only fixes the point of time at which the accrued liability is to be discharged by payment. However, as pointed out by the AAC, the amount relatable to the second half of 1969 is Rs. 1,43,224. This amount is to be rightly allowed as a liability for the assessment year 1970-71 but should be reduced by the deduction already given by the ITO in respect of the second half of 1968. Subject to this modification, the AAC's order is upheld. It is open to the assessee to seek administrative remedies for the earlier, years if available.'

9. On a miscellaneous application filed by the assessee-company, the Tribunal by its order dated February 2, 1977, rectified the aforesaid appellate order to obviate any misunderstanding as to its scope. The last but one sentence of the above order was substituted in the following manner:

'This amount is to be rightly allowed as a liability for the assessment year 1970-71 but should be reduced to that extent by the deduction already given by the ITO in respect of the second half of 1968. The balance of Rs. 2,93,623 as reduced by Rs. 1,43,224 was obviously a wrong addition and was rightly deleted by the AAC.'

10. In the above facts and circumstances, the assessee filed an application for a reference to this court. On the statement of the case, the following question was referred by the Tribunal:

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in reducing the allowance of Rs, 1,43,224 representing the service charges of the second half of 1969 by a deduction already allowed by the ITO in respect of the second half of 1968 which deduction was not the subject-matter of either the appeal of the assessee before the AAC or the appeal by the department before the Tribunal ?'

11. Both parties cited several cases before us in order to show the scope and jurisdiction of the Appellate Tribunal, Under Section 254 of the I.T. Act, 1961, powers have been conferred on the Tribunal which are very wide and extensive. The Tribunal can 'pass such orders thereon as it thinks fit'. The word 'thereon' restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. Mr. Kalyan Roy, the learned advocate for the assessee draws our attention to the decision of Chief Justice Chagla in the case of Indira Balakrishna v. CIT : [1956]30ITR320(Bom) of the report, Chief Justice Chagla gives out a caution in the following lines :

'It must try and confine itself to the question that really arises in the appeal before it and not travel outside the ambit of its jurisdiction and express opinions prejudicial to the assessee which may help the department in taking proceedings against the assessee......'

12. Our attention was also drawn to the decision of the Allahabad High Court in the case of Kanpur Industrial Works v. CIT : [1966]59ITR407(All) . In this case, the department filed an appeal for an increase in the assessed income, the subject-matter of the appeal was the increase claimed by the department and in such a case the assessee could urge any ground of defence, even though it might have been rejected by the AAC for showing that there should be no increase. But if the Tribunal accepts the ground of defence that the assessee was not liable to be assessed at all, it can only refuse to increase the assessed income as only that will be 'an order on the appeal' by the department. Any other order such as annulling the assessment would be outside the scope of the appeal.

13. In the case of F.Y. Khambhaly v. CIT : [1966]61ITR30(Guj) , the assessee was a partner in the Kano firm and held 60% of the shares of the firm. The business of the firm consisted in importing agate stones and other items to Nigeria and selling them there. The assessee also had aconcern in Cambay which agreed to supply agates required by the Kano firm on a commission basis. During the relevant period, the assessee resided in Cambay. The ITO included the share of profits earned by the Kano firm in the assessee's total income on the basis that the assessee was controlling the affairs of the Kano firm from India.

14. Both the assessee and the firm appealed against the order. The AACconfirmed the assessment of the Kano firm in its status as a resident andissued a direction to the ITO to revise the assessee's assessment so as toinclude the assessee's share of profits in the Kano firm in his personalassessment for, purposes of rates only. In a further appeal to the Tribunal, it was contended on behalf of the firm that the assessment madeagainst it was bad in law as it was dissolved in 1952, i.e., before theassessment was made. The Tribunal, agreeing with the firm set asideits assessment and issued a direction to the ITO to assess the shareof profits of the assessee in the Kano firm in his assessment. TheTribunal also held that the Kano firm was resident in India and in doingso relied on the following circumstances: (i) the assessee was a majorpartner residing at the material time in Cambay from where most of theagate stones and other articles were being supplied to the Kano firm,(ii) the assessee could not be said to be disinterested in the purchase ofagate stones from the Cambay firm as he was getting a commission fromall purchases as proprietor of the Cambay firm, and (iii) the assesseewas almost daily visiting the Cambay firm during the material time. Ona reference :

Held, (i) that there was evidence to support the finding that the share of profits of the assessee from the Kano firm was derived from business controlled in India, (ii) The Tribunal's direction was not consequential to a change in the firm's assessment. It was clear that, had not the assessee filed his appeal before the Tribunal, his position would have been better off than what it became as a result of the Tribunal's direction. The direction was to assess the assessee as an individual and add to his income his share of profits which could be done only by proceedings taken under Section 34. The direction given by the Tribunal was, therefore, without justification. As to the jurisdiction of the Tribunal in dealing with an appeal pending before it, the Mysore High Court in the case of Pathikonda Balasubba Setty V. CIT : [1967]65ITR252(KAR) held that the powers of the Tribunal are limited to the subject-matter of the appeal; that the Tribunal had no power to make an enhancement beyond the figure fixed by the officer and that the Tribunal could only deal with the two additions relating to the gross profit but .not with the other addition relating to unexplained stock and hence had no jurisdiction to set aside the entire order of the AAC.

15. In completing the assessment for 1949-50, the ITO estimated the gross profit under two of the various businesses carried on by the assessee, viz., buying and selling of groundnut kernel and manufacturing and selling of groundnut oil and oilcake. The officer found suspicious entries but did not make any additions specifically for that purpose but used them as supporting the additions made to the gross profits. A further addition of Rs. 20,000 was made on account of unexplained stock. On appeal, the AAC gave substantial relief on the addition to the gross profit but did not interfere with the addition of Rs. 20,000. The Tribunal, on an appeal by the department, set aside the entire order of the AAC and directed him to decide the appeal afresh. On a reference, the High Court held as stated before,

16. Next reference is made to the decision of my Lord Justice Sabyasachi Mukharji in R.L. Rajgharia v. ITO : [1977]107ITR347(Cal) . In this case, the controversy before the ITO as well as the AAC was whether certain loss of Rs. 23,100 should be treated as speculative loss or business loss. The grounds of appeal filed before the Tribunal by the petitioner were as follows:

1. For that, on the facts and in the circumstances of the case, the learned AAC was not justified in confirming the ITO in treating the loss of Rs. 23,100 in share account as speculative loss.

2. For that the learned AAC has erred on both points of law as well as fact.

17. Thus, the subject-matter of the appeal was the controversy as to whether the loss claimed by the assessee was a loss in the nature of speculative loss or business loss. The controversy was not whether the loss was a capital loss or revenue loss or whether the loss was liable to be taken into consideration in the computation of the income of the assessee. That being the controversy, the jurisdiction and the power of the Tribunal was restricted only to deciding that controversy. The Tribunal was not entitled to, and was not competent, to enlarge the controversy and decide an issue not before it. In so far as the Tribunal had, therefore, remanded the case to the AAC with a direction to find whether the loss was a capital loss or not, the Tribunal exceeded its jurisdiction. This decision was confirmed in appeal : ITO v. R.L. Rajghoria. : [1979]119ITR872(Cal) . On the basis of this decision, it is pointed out by Mr. Roy that the only ground taken in appeal before the Tribunal was as follows :

'That, on the facts and in the circumstances of the case, the learned AAC erred in holding that the assessee was entitled to the amount of Rs. 2,93,623 as a deduction on account of services charged during the year.'

18. The Tribunal did not accept the appeal preferred by the department. The Tribunal had held that the balance of Rs. 93,623 as reduced by Rs. 1,43,224 was obviously a wrong addition and was rightly deleted by the AAC. According to Mr. Roy, the Tribunal had no jurisdiction to delete this addition made by the AAC. According to him, the scope of the appeal was limited to the finding whether the assessee was entitled to the amount of Rs. 2,93,623 as deduction. It is also argued by him that it is not open to the Tribunal to come to a finding adverse to the assessee which does not arise from any question raised in the appeal, nor is it open to it to raise any ground which would work adversely to the assessee and pass an order which would make its position worse than it was under the order appealed against.

19. Mr. Subash Sen, learned counsel for the revenue, at once points out that the argument of Mr. Roy would hold good had the assessee been the appellant before the Tribunal. It is the department which came up in appeal before the Tribunal. Thus, the question that the order passed by the Tribunal affecting the position of the assessee adversely or making its position worse than it was under the order appealed against would not arise at all. He draws our attention to Rule 11 of the Rules and Orders relating to the Appellate Tribunal. It is stated therein that the appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal. But the Tribunal in dealing with the appeal shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this Rule. According to him, the powers of the Appellate Tribunal are enormous and these powers should not be confined only to the ground of appeal taken but could be extended with the leave of the Tribunal to any other matter affecting the appeal. He makes a reference to the decision of the Bombay High Court in the case of Puranmal Radhakishan & Co. v. CIT : [1957]31ITR294(Bom) . As to the jurisdiction of the Tribunal, their Lordships make the following observations at page 304 of the report:

'Wide as the language seems to be, this court has construed this section and has particularly emphasised the language used by the Legislature, viz. 'thereon', and the view taken by the court, as we will presently point out, is that the orders that the Appellate Tribunal can pass, whatever the nature of the order may be, must be orders on the appeal and the Tribunal cannot travel outside the appeal. This decision is to be found in Motor Union Insurance Co. Ltd. v. CIT : [1945]13ITR272(Bom) and Mr. Justice Kania in that ease held that the word 'thereon' used in Section 33(4) must mean on the grounds raised in the appeal, and that section gave power to the Appellate Tribunal to give its decision and pass orders in respect of allgrounds urged on behalf of the appellant in respect of the decision appealed against. In deciding those grounds it could pass appropriate orders, but it was not open to the Tribunal itself to raise a ground or permit the party who has not appealed, to raise a ground which will work adversely to the appellant. The words of the section were not wide enough to include a power of enhancement without an appeal by the Commissioner.'

20. He also makes a reference to the decision of the Gujarat High Court in F.Y. Khambhaty v. CIT : [1966]61ITR30(Guj) , to which we have already made reference earlier.

21. Our attention is also drawn to the decision of the Supreme Court in the case of Hukumchand Mills Ltd. v. CIT : [1967]63ITR232(SC) . In this case, the assessee, a company incorporated in the Native State of Indore, was assessed in British India (except for the assessment year 1948-49) as a non-resident on such income as fell within Section 4(1)(a) or (c) read with Section 42 of the Indian I.T. Act, 1922. After the Constitution of India came into force, Indore became a Part B State and the Indian I.T. Act, 1922, was brought into force in Part B States with effect from April 1, 1950. From the assessment year 1950-51, the assessee became assessable as a resident. For the assessment years 1950-51 to 1952-53, one of the questions that arose for determination was the proper written down value of its building, machinery, etc. for calculating the depreciation allowance under Section 10(2)(vi) of the Act. The Tribunal held that only that part of the depreciation which entered into the computation of the taxable income of the assessee under the Act for the assessment years prior to 1950-51 could be treated as depreciation actually allowed and not the total depreciation which went into the computation of the total world income. The Tribunal, however, permitted the department to raise the contention that the ITO had not considered the provisions of para. 2 of the Taxation Laws Order, 1950, and remanded the matter to the ITO to ascertain whether any depreciation was allowed under the Indore Industrial Tax Rules, and, if he was of opinion that these Rules related to income-tax or super-tax or any law relating to tax on profits or business, to take into consideration such depreciation actually allowed under these Rules also for the purpose of computing the written down value. The assessee contended that the Tribunal should not have allowed the department to raise the contention for the first time before it and remanded the case. It was held that the Appellate Tribunal had sufficient power under Section 33(4) of the I.T. Act to entertain the contention of the department with regard to the application of para. 2 of the Taxation Laws Order, 1950, and remanded the case to the ITO. It is observed that the powers of the Appellate Tribunal in dealing with the appeals are expressed in Section 33(4) of the I.T. Act in the widest possible terms. The word ' there-on' in Section 33(4) restricts the terms of the Tribunal to the subject-matter of the appeal. The words 'pass such order as the Tribunal thinks fit' include all the powers (except possibly the power of enhancement) which are conferred on the AAC by Section 31. Consequently, the Tribunal has authority under Section 33 to direct the AAC or the ITO to hold further enquiry and dispose of the case on the basis of such enquiry. It was also held that only that part of the depreciation which entered into the computation of the taxable income of the assessee under the Act for the assessments prior to 1950-51 should be treated as depreciation 'actually allowed' and not the total depreciation which went into the computation of its world income.

22. Reference is also made to the decision of the Supreme Court in the case of CIT v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) . It was held therein that under Section 33(4) of the Indian I.T. Act, 1922, the Appellate Tribunal was competent to pass such orders on appeal 'as it thinks fit'. There was nothing in the I.T. Act which restricted the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or of facts which related to the assessment of the assessee might be raised before the Tribunal. If for reasons recorded by the departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground was justified, it would be open to the departmental authorities and the Tribunal and indeed they would be under a duty to grant that relief. The right of the assessee to relief was not restricted to the relief raised by him. In this case, the assessee claimed development rebate on the ground that introduction of the 'Casablanca conversion system' involved installation of new machinery and for the first time before the Appellate Tribunal claimed in the alternative that the amount laid out was in any event expenditure for current repairs allowable under Section 10(2)(v) of the Indian I.T. Act, 1922. It was held that because the Tribunal rejected the assessee's claim for development rebate it was not open to disallow the claim of the assessee for an allowance of the amount spent, if it was a permissible allowance on another ground. Whether the allowance was admissible under one head or another of Sub-section (2) of Section 10, the subject-matter of the appeal remained the same and the Tribunal having held that the expenditure incurred fell within the terms of Section 10(2)(v), though not under Section 10(2)(vib), it had jurisdiction to admit that expenditure as a permissible allowance in the computation of the taxable income of the assessee. On the basis of this decision, it is contended by Mr. Sen that the powers of the Tribunal are wide enough to pass such orders on appeal, as it thinks fit. Thus, in deciding the appeal as to the point whether the assessee was entitled to the amount of Rs. 2,93,623 as a deduction on account of service charges duringthe year, the Tribunal was competent enough to restrict such deduction by way of reduction of Rs. 1,43,224.

23. Reference is also made to the decision of the Supreme Court in the same volume, i.e., in the case of CIT v. S. Nelliappan : [1967]66ITR722(SC) . In this case, the first question raised in the application for reference is a question of fact. It is true that there is no direct evidence of any connection between the cash credit entries and the income withheld from the books of account by the assessee. But if the Tribunal inferred that there was a connection between the profits withheld from the books and the cash credit entries, it cannot be said that the conclusion is based upon speculation. Thus, it is held that the inference ,of the Tribunal that there is a connection between the profits withheld by the assessee from his account books and the cash credit entries found therein and the conclusion that since additions were made to the book profit in excess of the amount of the cash credits, the addition of the cash credits becomes redundant, is a finding of fact and no question of law can arise therefrom.

24. Reference is also made to the decision of the Madras High Court in the case of CIT v. Madras Industrial Investment Corporation Ltd. : [1980]124ITR454(Mad) . In this case, it was held that neither the assessee nor the department was restricted to the plea put forward at any earlier stage when the matter travelled through the hierarchy of authorities and it would not be open to the Tribunal to consider any fresh matter in the exercise of its discretion. Even where the consequence of the acceptance of the assessee's plea would involve granting as deduction a larger amount than was demanded at the stage of assessment, the Tribunal would have jurisdiction to consider such a plea. The Tribunal had, however, the discretion not to admit any fresh plea being put forward when it would involve an investigation of facts. An assessee could put forward a claim for a larger deduction which he had not urged before the lower authorities and it would be open to the Tribunal as the final fact-finding authority to consider such a claim. According to Mr. Sen, the scope of the enquiry before the Tribunal was whether, on the facts and in the circumstances of the case, the AAC erred in holding that the assessee was entitled to the amount of Rs. 2,93,623 as a deduction on account of service charges during the year. The Tribunal appears to have heard both the parties at length in deciding the point at issue. It is found by the Tribunal that the liability in respect of the service charges for the second half of 1969 arose out of the debit note dated December 31, 1969, and was definitely to be treated as a liability for the calendar year 1969. Clause 7 of the agreement emphasised by the departmental representative does not shift the accrual to a later date but only fixes the point of time at which the accrued liability is to be discharged by payment. However, as pointed out by the AAC, theamount relatable to the second half of 1969 is Rs. 1,43,224. According to the Tribunal, this amount is to be rightly allowed as a liability for the assessment year 1970-71, but should be reduced by the extent of the deduction already given by the ITO in respect of the second half of 1968. In conclusion, it is held that the balance of Rs. 2,93,623 as reduced by Rs. 1,43,224 was obviously a wrong addition and was rightly deleted by the AAC. In the face of such findings, it cannot be said that the Tribunal travelled beyond the scope of the appeal. The Tribunal was only concerned as to the fact whether the assessee was entitled to the amount of Rs. 2,93,623 as a deduction. As stated earlier, in answering the question, the Tribunal was of the opinion that the balance of Rs. 2,93,623 was to be reduced by Rs. 1,43,224. We have earlier pointed out that on this point both the parties had occasion to argue at length. Thus, it could not be said that the assessee was taken by surprise as to such findings of the Tribunal.

25. Next it is rightly pointed out by Mr. Sen that the appellant before the Tribunal was not the assessee but the department. In this view of the matter, according to Mr. Sen, it will not be right to say that a ground was taken by the Tribunal which went adversely to the interest of the assessee. Thus, it appears to us that the Tribunal was competent enough to pass the impugned order and that it was within the jurisdiction of the Tribunal to find out as to what amount the assessee was entitled as deduction.

26. We, therefore, answer the question that, in the facts and in the circumstances of the case, the Tribunal was right in law in reducing the allowance of Rs. 1,43,224 representing the service charges of the second half of 1969 by a deduction already allowed by the ITO in respect of the second half of 1968.

27. We propose to pass no order as to costs.

Sabyasachi Mukharji , J.

28. I agree.


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