TMI Blog2009 (1) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the expenses are in the nature of head office expenses and the deduction has to be restricted to the amount allowable under section 44C of the Act, whereas the CIT(A) reversed the action of the Assessing Officer by holding that such expenses are not in the nature of head office expenses and therefore are not covered by section 44C of the Act. It is also submitted that the Tribunal at para 29 of its order has reversed the finding of the CIT(A) and restored the order of the Assessing Officer by applying the provisions of section 40( a )( iii ) on the ground that the taxes deductible at source on such salaries were not paid within the time prescribed under Chapter XVII-B of the Act. According to the assessee, the issue relating to the application of section 40( a )( iii ) was not raised by the Assessing Officer in the assessment order or in his grounds of appeal before the Tribunal nor was it considered by the CIT(A) and the finding of the Tribunal has resulted in suo motu expansion of the scope of the appeal before the Tribunal which is erroneous. It is, thus, prayed that the error in para-29 of the Tribunal s order be rectified. 3. The ld. counsel for the assessee r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: "14. The seventh ground of appeal of the appellant is against the disallowance of Rs. 1,70,13,721 being the salaries paid to expatriate staff employed in India. These expatriate employees were employed in India but the salaries were paid outside India. The appellant claimed that in view of Board s Circular No. 685 the amount claimed as a deduction should be allowed. The Assessing Officer did not allow the claim on the ground that no material was brought on record to show that the liability has been borne by the appellant. 15. At the time of appeal, the appellant argued that the salaries were paid by Head Office but these expenditure cannot be treated as Head Office expenses. It was stated that the salaries were paid to the employees who are employed in India who are not doing any work for the head office. It was stated that the salaries paid outside India to such officials employed in India is of the same nature as salaries paid to other staff members employed in India. It was argued that the expenditure was entirely for the purpose of business and that the same should be allowed for the purpose of determining the taxable income of the appellant. It was therefore argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of salary payments to the assessee-company. Let us now examine the powers of the Tribunal under section 254 of the Income-tax Act. The powers of the Tribunal in dealing with appeals are expressed in section 254(1) of the Income-tax Act. The relevant provision reads as under: (1)The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. Thus, in dealing with the appeals before it, the Tribunal is conferred with the statutory authority and duty to exercise its judgment on such material as comes before it and also to obtain any material which it thinks necessary for adjudication of the appeal. Therefore, the powers of the Tribunal are not only those which are expressly granted but are also implied powers which are necessary for the accomplishment of the object intended to be secured i.e., for doing all such acts or employing all such means as are reasonably necessary to make the grant effective. 10. Various courts have considered the scope of section 254(1) and have held that Tribunal s power is limited to the subject-matter of the appeal before it. The Hon ble Bombay High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee was a loss in the nature of a speculative loss or business loss and not whether it was a capital loss or revenue loss or whether the loss was liable to be taken into consideration in computation of the income of the assessee and, therefore, Tribunal whose power is restricted only to deciding that controversy was not competent to enlarge the controversy and decide an issue not before it and the Tribunal has exceeded its jurisdiction. 12. What is the subject-matter of appeal before the Tribunal? Is it the issue decided by the first appellate authority or is it only the controversy regarding the reasoning given by the revenue authorities? 13. The Hon ble Gujarat High Court in the case of CIT v. Steel Cast Corpn. [1977] 107 ITR 683 has held that the subject-matter of appeal can be determined only by finding out what the first appellate authority expressly or impliedly decided. What is meant by the implied decision is that though a point might have been raised before the first appellate authority, in its final order the first appellate authority might not have dealt with that point and thereby impliedly rejected. The subject-matter of appeal before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no enlargement of the issue. In view of the same, we are satisfied that the applicability of section 40( a )( iii ) is relevant to the controversy between the parties before us and, therefore, the Tribunal has not traversed its jurisdiction and hence there is no error apparent from the records which needs rectification. The ld. counsel for the assessee has also requested to recall the order with a view to allowing opportunity of hearing to the assessee in relation to the question of applicability of section 40( a )( iii ). But from careful perusal of the order of Tribunal in para 27, it is clear that this aspect had also been heard by the Tribunal. The ld. DR had cited the decision of the Tribunal in the case of ANZ Grindlays Bank v. Dy. CIT [2004] 88 ITD 53 (Delhi) in which in an identical situation the Tribunal had confirmed the addition on account of salary payment to expatriate employees on the ground that no tax had been deducted at source nor payment of tax was made as per the provisions of Chapter XVII-B as required under section 40( a )( iii ). The Tribunal observed that the case of the assessee was covered by the said decision of the Tribunal as in this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see while reiterating the contentions raised before the authorities below submitted that taxes have been paid in subsequent year and, therefore, by virtue of the proviso under section 40( a )( i ) deduction should be allowed in the year of payment. He also placed reliance upon the decision of the Tribunal dated 9-1-2006 in the assessee s own case for TDS for the assessment year 2000-01 wherein on the issue of payment in respect of TDS on fees recovered by Master Card and Visa from the applicants, the Tribunal has held as under: A request was made by the learned counsel for the assessee for the proposition that to the extent of tax paid by the payee no recovery be made from the assessee under section 201(1). We find that the contention is acceptable. The Assessing Officer shall ascertain as to whether any tax payable on the receipts by the payee have been paid and if so no other recovery be made from the assessee herein before us. The Assessing Officer is directed to recompute the demand of the assessee in the light of the directions of the Tribunal ( supra ). We order accordingly . 56. In view of the above, we direct the Assessing Officer to verify the payment of taxes mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
