TMI Blog2002 (4) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of cultivation, manufacture and sale of tea and also derives income from rent, tea made out of the green leaves purchased during the year and substantial export of tea made. In the return, the applicant-company claimed deduction under section 35B of the Act in respect of warehouse charges paid abroad. The original assessment for the year 1982-83 was completed by the Assessing Officer under section 143(3) of the Act on March 31, 1985, and while making such assessment, the Assessing Officer allowed weighted deduction of warehouse charges under section 35B(1)(b)(iv) of the Act read with rule 6AA of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules"). The Assessing Officer in the original assessment made the following observations: "Regarding warehouse charges claimed it is found that the assessee is required to maintain warehouse for storing of its goods for effecting sales Outside India and therefore the assessee is entitled to get weighted deduction on warehouse charges paid under section 35B clause (iv) read with rule 6AA." The Commissioner of Income-tax, North Eastern Region, Shillong, in exercise of his power under section 263 of the Act, by order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The Commissioner of Income-tax (Appeals), Dibrugarh, by order dated February 15, 1991, came to the conclusion that the Assessing Officer was not justified in not allowing the export markets development allowance as claimed by the applicant-company and directed that the claim of the applicant-company for such allowance be allowed in respect of all assessments made after August 1, 1981. The Commissioner of Income-tax took note of the three contentions raised before the Assessing Officer and also the submission in support thereof made before him. Referring to the provisions of section 35B of the Act and rule 6AA, the said authority observed that the provision of granting export markets development allowance as provided under section 35B of the Act is to be read with rule 6AA of the Rules which provided granting of such allowance in respect of warehouse charges. It was observed that rule 6AA was introduced by the Income-tax (Eighth Amendment) Rules, 1981, with effect from August 1, 1981. The said authority noticed that the dispute between the assessee and the Revenue on the issue was as to whether the allowance was to be given only in respect of warehouse charges incurred after Augu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the warehouse charges under section 35B(1)(b)(iv) of the Act. The learned Tribunal after considering the rival submissions of the parties reversed the order of the Commissioner of Income-tax (Appeals) and uphold the order of the Assessing Officer holding that rule 6AA of the Rules incorporated with effect from August 1, 1981, did not have any retrospective effect and therefore would not apply to expenses incurred on or before June 30, 1981. It further held that the said provision of the Rules would not be applicable in respect of assessments pending as on August 1, 1981. With regard to the contention of the applicant-company that the judgment of this court could also be relied upon for holding that the expenses involved in the case were covered by section 35B(1)(b)(iv) of the Act, the learned Tribunal was of the opinion that such contention was not acceptable in the absence of any appeal or cross-objection by it. According to the learned Tribunal, the applicant-company not having contended before the learned Commissioner of Income-tax (Appeals) that the expenses in connection with the warehouse were eligible for weighted deduction under section 35B(1)(b)(iv) of the Act, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (iv) of section 35B(1)(b) of the Act in the absence of appeal or cross-objection by the assessee?" Mr. Goenka, learned counsel for the applicant-company has argued that the subject-matter of appeal before the learned Tribunal was as to whether the applicant-company was entitled to the benefit of weighted deduction under section 35B of the Act. He submitted that the broad issue before the learned Tribunal was one with regard to allowability of the export markets development allowance under the aforesaid provision of law and therefore the subject-matter of the appeal cannot be confined or restricted to examine the claim of the applicant-company with regard thereto under any particular clause of section 35B of the Act, namely, clause (iv) or clause (ix) as the case may be. He has argued that keeping in view the issue in question, it was permissible on the part of the learned Tribunal to examine the contention of the applicant-company with regard to its claim under section 35B(1)(b)(iv) of the Act in view of the decision of this court reported in Assam Frontier Tea Ltd.'s case [1997] 224 ITR 398. Drawing the attention of this court to the fact that the assessee-company had initiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any claim under section 35B(1)(b)(iv) of the Act. Learned counsel has drawn our attention to the assessment order, the order of the Commissioner of Income-tax (Appeals) and the order of the learned Tribunal in support of his above contention. Learned counsel further argued that as would be abundantly clear from the recital of facts and the discussion in the above mentioned orders, the contentions of the applicant-company were all related to section 35B(1)(b)(ix) of the Act and rule 6AA of the Rules. The case of the applicant-company was wholly based on rule 6AA which is exclusively relatable to section 35B(1)(b)(ix) of the Act and therefore it was not open for the applicant-company to raise any plea pertaining to the claim for such allowance under section 35B(1)(b)(iv) of the Act. He therefore submitted that the subject matter of the appeal before the learned Tribunal was wholly confined to the examination of the claim of the assessee under section 35B(1)(b)(ix) of the Act and it was not permissible under the law to enlarge the scope of the subject matter of the appeal and, therefore, according to him, the learned Tribunal was fully justified in refusing to consider the plea of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion of the learned Tribunal refusing to entertain the contention of the applicant-company regarding its claim under section 35B(1)(b)(iv) of the Act is unexceptionable. Learned counsel placed reliance on the following decisions in support of his submissions: (1) Kanan Devan Hills Produce Co. Ltd. v. CWT [1968] 67 ITR 823 (Cal); (2) L.K. Shaik Mohammed Brothers. v. CIT [1978] 112 ITR 622 (Mad) (3) New Jehangir Vakil Mills Ltd. v. CIT [1959] 37 ITR 11 (SC); and (4) Oriental Investment Co. P. Ltd. v. CIT [1969] 72 ITR 408 (SC). In reply, Mr. Goenka, learned counsel for the applicant-company, referring to the decision of the apex court reported in National Thermal Power Co. Ltd.'s case [1998] 229 ITR 383, submitted that keeping in view the power conferred on the Tribunal under section 254(1) of the Act, it is clearly permissible for the Tribunal to consider the plea of the applicant company pertaining to its claim under section 35B(1)(b)(iv) of the Act. He argued that as the decision of this court reported in Assam Frontier Tea Ltd.'s case [1997] 224 ITR 398 had been pronounced during the pendency of the appeal before the Tribunal, it was incumbent on the learned Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Eighth Amendment) Rules, 1981, with effect from August 1, 1981. Clause (b) of the said rule, which is relevant for the purpose of this case is quoted hereinbelow: "6AA. For the purposes of sub-clause (ix) of clause (b) of sub-section (1) of section 35B, other activities for the promotion of the sale outside India of the goods, services or facilities which the assessee deals in or provides in the course of his business shall be as follows, namely:--... (b) maintenance outside India of a warehouse for the promotion of the sale outside India of such goods." On a reading of sub-clauses (iv) and (ix) under section 35B(1)(b) and rule 6AA more particularly clause (b) thereunder, it appears to us that it is quite possible in a given case that an assessee, depending on its activities contemplated under section 35B and rule 6AA may claim the benefit of weighted deduction under more than one of the heads of expenditure envisaged under the said provision of law. In other words, the activities contemplated in the different sub-clauses of section 35B(1)(b) and rule 6AA are not necessarily mutually exclusive of each other. The relevant consideration in a given case would however be as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable to the facts of that case and whether the respondent therein should have been allowed to raise the contention for the first time before the Tribunal. The matter related to the claim of the assessee for calculating the depreciation allowance under section 10(2)(vi) of the Act. The plea of the assessee being rejected by the Income-tax Officer and the Appellate Assistant Commissioner, the assessee was in appeal before the Tribunal. It was in that appeal, that the Department/Revenue raised the plea that the provisions of paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, were applicable in the facts of that case and certain amount of depreciation allowable under the Industrial Tax Rules were required to be deducted in arriving at the written down value of the assets of the assessee. The Tribunal permitted this contention to be raised by the Department. On an objection being raised by the assessee that such contention could not be entertained unless it was found as a fact that the depreciation was actually allowable under the Industrial Tax Rules to the assessee and unless the Industrial Tax Rules were rules which related to income-tax or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the Departmental authorities was canvassed. Interpreting section 33(4) of the Indian Income-tax Act, 1922, the apex court observed that there was nothing in the Act which restricted the Tribunal to the determination of questions raised before the Departmental authorities. It further observed that all questions whether of law or of fact which related to the assessment of the assessee may be raised before the Tribunal. The apex court further observed that if for reasons recorded by the Departmental authorities in rejecting the contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the Departmental authorities and the Tribunal and indeed it would be their duty to grant that relief and that the right of the assessee to relief could not be restricted to the plea raised by him. The apex court held that the subject-matter of the appeal in that case was the right of the assessee to claim allowances for Rs. 93,215 and that whether the allowance was admissible under one head or the other of sub-section (2) of section 10, the subject-matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so long as the relevant facts are on record in respect of that item, and if as a result of a judicial decision given when the appeal is pending before the Tribunal, a non-taxable item is taxed or a permissible deduction is denied, there is no reason why an assessee should be prevented from raising that question before the Tribunal for the first time. In that case, the apex court remanded the proceeding to the Tribunal for consideration of the new grounds raised by the assessee on the merits. We have already culled out the contentions raised on behalf of the Revenue. The main ground urged by Mr. Joshi, learned counsel for the Revenue, is that the applicant-company in the reassessment proceedings had wholly confined its claim for weighted deduction under sub-clause (ix) of section 35B(1)(b) of the Act and at no point of time in any of the proceedings before the Assessing Officer or the Commissioner of Income-tax (Appeals) was it contended by it that it was entitled to the weighted deduction on account of export markets development allowance under sub-clause (iv) of the said section of the Act. Therefore, according to learned counsel for the Revenue, the applicant-company not having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act before the Tribunal springs from the prescribed procedure under the Act or the Rules, it could not be availed of by a litigant or the Department who was guilty of laches and who had not availed of himself of such specific remedies. The decision reported in New Jehangir Vakil Mills Ltd. v. CIT [1959] 37 ITR 11 (SC), is one regarding the jurisdiction of the High Court under section 66(1) (presently section 256(1) of the Act). This decision was relied upon by learned counsel for the Revenue to lay emphasis on his submission that in deciding the question referred to by the Tribunal, this court should confine its attention to the question so framed and referred and not travel beyond the same. We are fully alive to the ambit of the jurisdiction of the High Court under section 256 of the Act in answering a question of law referred to it by the Tribunal and therefore we do not consider it necessary to deal in detail with the ratio laid down by the apex court in the aforesaid decision. The next decision relied upon by learned counsel for the Revenue, i.e., Oriental Investment Co. P. Ltd. v. CIT [1969] 72 ITR 408 (SC), is also with regard to the jurisdiction of the High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that it had not preferred any appeal or cross-objection against the order of the Commissioner of Income-tax (Appeals) is the question which now engages the attention of this court. It need not be over-emphasised that the Appellate Tribunal Rules framed by the Tribunal in exercise of its power under section 255(5) of the Act are wholly for the purpose of regulating its own procedure and the procedure of the Benches of the Tribunal. The rules therefore embody the principles of procedure to be followed by the Tribunal and its Benches for the discharge of its functions. The scheme of the Rules read as a whole does not suggest that the Rules in any way have the effect of curtailing or circumscribing the power, authority and jurisdiction of the Tribunal in dealing with matters at its disposal. We have not been able to read any prohibition in the rules totally precluding the Tribunal from considering any ground beyond those mentioned in the memorandum of appeal filed by a party, whether the assessee or the Department, in the absence of an appeal or cross-objection by the other side projecting the new ground. It is a settled principle of law that procedural law is the hand maid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt made in the decisions relied upon by learned counsel for the Revenue but we are, in the facts and circumstances of the case, persuaded to accept the observations of the apex court made in this regard in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383. We are therefore of the view that it is permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party. We must however hasten to add that in order to enable either the assessee or the Department to urge a ground in the appeal filed by the other side, the relevant facts on which such ground is to be founded should be available on record. In the absence of such primary facts, in our opinion, neither the assessee nor the Department can be permitted to urge any ground other than those which are incorporated in the memorandum of appeal filed by the other party. In other words, if the assessee or the Department, without filing any appeal or a cross-objection seeks to urge a ground other than the grounds incorporated in the memora ..... X X X X Extracts X X X X X X X X Extracts X X X X
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