TMI Blog1993 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the provision for taxation of Rs. 1,81,00,000 constitutes a fund within the meaning of clause (ii) of rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ? (iii) Whether, on the facts and in the circumstances of the case and in view of the miscellaneous application filed by the assessee, the Tribunal was justified in law in not holding that if the cost of investment in shares which did not produce any income was excluded from computation of the capital under rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, the company should have got the benefit of deduction of provision for taxation from its cost of investment of a fund?" For a proper appreciation of the points at issue, it is necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee was Rs. 2,08,56,181. Therefore, the major part of the shares did not yield any dividend income. The assessee, therefore, pleaded at the assessment stage as also before the Commissioner of Income-tax (Appeals) that the diminution in terms of rule 2 of the Second Schedule should be only of the value of the shares that fetched dividend, i.e., Rs. 11,08,135. But the entire value of the investment in shares, i.e., Rs. 2,08,56,181, was taken as the amount of diminution in the capital under rule 2 of the Second Schedule. The assessee-company urged before the Tribunal an alternative ground that the provision for taxation as on the first day of the previous year standing at Rs. 1,81,00,000 should be treated as a fund so that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises with respect to the question. We find from a reading of the appellate order of the Commissioner of Income-tax (Appeals) that the question raised before him was limited to the contention whether assets from which income is exempt are required to be excluded from the capital for the purpose of arriving at the statutory deduction irrespective of the fact that the assets actually yielded income or not. The Commissioner of Income-tax (Appeals) held that it is the nature of the assets that is determinative of its excludibility. Thus, according to him, the assets of which income is entitled to exemption, no matter whether they did or did not yield income, are required to be excluded from the capital. There could be no question of treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defeated, a situation which cannot be countenanced. Thirdly, it is fraught with the risk of being over-indulgent to a party reproachable for laches. Fourthly, where the ground canvassed as additional ground enlarges the claim of relief beyond what was claimed in assessment it would amount to permitting altogether a new case to be made out in appeal to patch up lacunae in the earlier proceeding. Thus, we are of the opinion that the Tribunal very correctly declined to admit the alternative ground here because if the alternative ground is admitted and the assessee is altogether free from any diminution whatsoever from its capital in terms of clause (ii) of rule 2 of the Second Schedule, the Tribunal would have to substitute itself for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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