TMI Blog2010 (9) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... lant for a direction to be issued that the amounts should be allowed as a deduction in the assessment year 1999-2000 - Tribunal incidentally remarked that the argument of the appellant that it had made payment by way of incentive to its expatriate employees, though was not available to it in the assessment years under consideration of the Tribunal, may be available to it in the year of payment, that is, the assessment year 1999-2000 - Appeal is dismissed - 1329/2006, 1333/2008 - - - Dated:- 14-9-2010 - SIKRI A. K., REVA KHETRAPAL MS. JJ JUDGMENT Ms. Reva Khetrapal J.- The appellant seeks adjudication of the following question of law in respect of the deduction of Rs. 2,78,28,161 paid by the appellant by way of incentives to its expatriate employees : "Whether the Tribunal was right in law in holding that it did not have jurisdiction to direct that the amount be allowed in the year of payment, i.e., assessment year 1999-2000, while considering the appeals relating to the assessment years 1997-98 and 1998-99 ?" 2. The aforesaid question had arisen from the following facts. The asses- see-company (the appellant herein) was incorpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1999-2000. The Assessing Officer also disallowed the claim on the ground that since the accounts of the company had been finalized and adopted by the board of directors and the shareholders, they could not be interfered with by the appellant after a lapse of three years. 5. The appellant preferred an appeal before the Commissioner of Income- tax (Appeals). The Commissioner of Income-tax (Appeals) held that the appellant did not make any payment of incentives to its employees in the relevant assessment years and what had actually happened was that the appellant had failed to deduct TDS on the salaries paid to its expatriate employees, despite the fact that section 9(1)(ii) specifically provided that any payment for the services rendered in India shall be regarded as income earned in India. In the financial year 1998-99, when the Department started enquiries in respect of some of the Japanese companies, to ascertain as to whether the TDS provisions were being complied with in regard to the payment of salaries/allowances, whether paid in India or abroad, the appellant-company discharged the liability of tax which it was required to deduct, and payment of tax was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rquisites are also allowable as deductions in those years and to hold otherwise would lead to incongruity. The alter- native prayer of the appellant was that in case the amounts were not found in law to be allowable for the years under appeal, directions should be issued by the Tribunal that they should be allowed in the year of payment, namely, the assessment year 1999-2000. 7. After hearing the parties, the Tribunal concluded that the appellant- company was under no contractual liability to pay the amount and as such the amounts could not be claimed as deductions for the assessment years under appeal. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) on the ground that it was difficult to believe that there was no formal written agreement as alleged by the appellant-com- pany. It further held that it was difficult to lay down that the appellant- company, well advised in its income-tax matters, would not claim the liability as deductions under the return for the years filed originally, since the amounts were quite substantial. From the evidence on record, the Tribunal concluded that the assessee had been compelled to pay the tax in respect of the salari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, we are unable to accede to the prayer. (emphasis supplied) 13. For the aforesaid reasons, we are unable to allow the amount of taxes paid by the assessee as incentive, as a deduction in the assess- ment years 1997-98 and 1998-99." 8. It is in the aforesaid backdrop that this court has been called upon to decide whether the Tribunal did not have the jurisdiction to direct that the deductions be allowed in the year of payment, i.e., the assessment year 1999-2000. Mr. M. S. Syali, the learned senior counsel appearing on behalf of the appellant, relied upon a number of decisions to submit that the pow- ers of the Tribunal in dealing with appeals are expressed in the widest pos- sible terms, and it was open to the Tribunal to render a finding that the deduction sought for by the appellant, though not admissible for the assessment years 1997-98 and 1998-99, could be granted for the assess- ment year 1999-2000. More so, when the Tribunal had clearly opined that the said amounts could not be allowed as deduction on the principle of commercial expediency for the years under consideration, but could be allowed as a deduction in the year when the amount was actually paid, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of which were as follows : For the assessment year 1945-46, certain cash credits in the asses- see's account books in March, 1944, and certain amounts with which an account was opened in that month in the name of the assessee's wife, in all amounting to Rs. 84,000, were assessed to tax as income from undisclosed source after rejecting the assessee's explanation. In his appeal to the Appellate Tribunal, the assessee, inter alia, took the plea that if the amount was found liable to be taxed then the appropriate assessment year, was not the assessment year 1945-46, but the assessment year 1944-45. Accepting the appeal, the Appellate Tribunal held that although the assessee had failed to account for the sources of the amount, it could not be brought to tax as the income for the assessment year 1945-46 but ought to be brought to tax as income for the assessment year 1944-45, and observed that if so advised the Income-tax Officer might take suitable action for the assessment year 1944-45. On further appeal, a Division Bench of the jurisdictional High Court held that, in view of the contention raised by the assessee, the Tribunal was justified in proceeding to decide in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question is accordingly answered in favour of the assessee and in the negative." 12. A Division Bench of this court in the case of Edward Keventer [1980] 123 ITR 200 (Delhi), relied upon by the appellant, while dealing with the ques- tion whether the Tribunal was justified in coming to the conclusion that the Department was precluded from agitating the disallowance of Rs. 2,77,691 (though it had not filed any appeal against the same, in view of the fact that the net result of the decision of the Appellate Assistant Com- missioner of Income-tax even after allowing the abovesaid interest was enhancement of Rs. 6,36,309), held that the subject-matter of the appeal should be understood not in a narrow and unrealistic manner, but should be so comprehended as to encompass the entire controversy between the parties which is sought to be adjudicated upon by the Tribunal. It further held as under : "But in a case where there are interconnected grounds of appeal and they have an impact on the same subject-matter, the scope of the appeal should be broadly considered in the correct perspective. While the appellant should not be made to suffer and be deprived of the benefit given to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, which is constituted of the original grounds of appeal and such additional grounds as may be raised by the leave of the Tribunal. 16. A look now at the law laid down with regard to the scope and ambit of the powers exercisable by the Tribunal. More than four decades ago, a three-judge Bench of the Supreme Court in CIT v. Manick Sons [1969] 74 ITR 1, while delineating the powers of the Tribunal held that the power conferred by section 33(4) of the Act of 1922 (section 254 of the new Act) is wide, "but it is still a judicial power which must be exercised in respect of the matters that arise in the appeal and according to law. The Tribunal in deciding an appeal before it must deal with the question of law and fact which arise out of the order of assessment made by the Income-tax Officer and the order of the Appellate Assistant Commissioner. It cannot assume powers which are inconsistent with the express provisions of the Act or its scheme." It held that the Tribunal had no jurisdiction in the appeal for the assessment year 1953-54 to reopen the assessment for the year 1952-53. 17. In Radhey Lal Mannilal v. CIT [1960] 39 ITR 587 (All), a Division Bench of the Allahabad H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 ITR 783 while dealing with the powers of the Appellate Tri- bunal to direct the Income-tax Officer to take action in respect of the earlier assessment years made the following pertinent observations (page 786) : "The words `pass such orders thereon' refer to the order that may be passed in the appeal. The Tribunal cannot be required to give directions in respect of a matter which does not constitute the sub- ject-matter of the appeal. What the Tribunal in effect was asked to do was to give directions in respect of a matter pertaining to an earlier assessment year and to direct the Income-tax Officer to take action in respect of the completed assessment for the previous assessment year. This, the Tribunal would have no jurisdiction to do and the Tri- bunal was justified in not acceding to the request of the assessee in this connection. Our answer to question No. 1 is in the affirmative." 22. From a conspectus of the above decisions, it is clear to us that the consensus of judicial opinion appears to be that the jurisdiction of the Appellate Tribunal is confined to the passing of orders on the subject-matter of the appeal, that is, those orders which are necessary for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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