TMI Blog1996 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal justified in holding that in the instant case the validity of the jurisdiction assumed by the Income-tax Officer under section 147(b) cannot be entertained in the proceedings under section 260(1) of the Act ?" For the assessment year 1974-75, before the Income-tax Officer, the question as regards the assessee's claim for deduction of remuneration of two managing directors of the assessee-company came up for consideration and at that time, the claim was founded on the statutory provisions of section 40A(5) of the Income-tax Act, 1961. This was on the ground that the two managing directors were employees and, therefore, deduction could be claimed as regards remuneration paid to them. The Income-tax Officer disallowed their claim holding that the provisions of section 40A(5) of the Act governed the situation. The Appellate Assistant Commissioner of Income-tax was, the first appellate authority. By the order dated February 23, 1977, two questions came up for consideration. Firstly, it was urged that resort to the provisions of section 147(b) was unjustified as no new information had come to the possession of the Income-tax Officer, after the original assessment was complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the instance of the Revenue, the proceedings travelled before the Income-tax Appellate Tribunal. By order dated February 23, 1979, the Appellate Tribunal dismissed the departmental appeal holding that the managing directors are not employees, thereby ruling out the application of the provisions of section 40A(5) of the Act. It must be stated that going through its judgment in the department's appeal, where the assessee was represented as respondent, this was the only question that was taken up for consideration. The proceedings thereafter travelled to this court in CIT v. Travancore Chemical Mfg. Co. [1982] 133 ITR 818, only with regard to the question of applicability of section 40A(5) of the Income-tax Act, 1961. This court held that the assumption of the Tribunal that in every contract of service there should be a provision for power to take disciplinary action was erroneous. This court also held that the managing directors were not members of the provident fund and that they were not entitled to any bonus or leave privileges or even to a minimum remuneration, observing in the context that these considerations were totally irrelevant for determining the nature of the relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the question of deduction of the amount of salary paid to the two managing directors should be controlled by section 40A(5) of the Act. The Appellate Tribunal further observed that it is not open to it to consider the question under its powers under section 260(1) of the Act as to whether section 40(c) would govern the situation. The Appellate Tribunal placed reliance on the decision of the Madras High Court in East India Corporation Ltd. v. CIT [1975] 99 ITR 287, to the effect that the question that could be considered by the Appellate Tribunal in its power under section 260(1) of the Act could only be one which was in dispute before the High Court in the reference proceedings, leaving only to the Appellate Tribunal to proceed in accordance with the decision of the High Court. The Tribunal has expressed that it must be held that the High Court had decided in the case of the assessee for the assessment year that only section 40A(5) of the Act could be considered for application and not section 40(c) of the Act on the basis of the decision of the High Court. With regard to the aspect of jurisdiction under section 147(b) of the Act, the Appellate Tribunal also considered the diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Reference No. 67 of 1976 (para. 2 of the judgment thereof) held that in the case of a managing director being an employee there is no scope for a higher ceiling. It was thereafter that the assessee approached this court in O. P. No. 8856 of 1983, obviously after the rejection of the reference application. At the second appellate stage, the proceedings are before the Income-tax Appellate Tribunal in accordance with the statutory provisions of sections 253 and 254 of the Income-tax Act, 1961. In this context, it would be more than appropriate to refer to the said provisions and in regard thereto, it would be necessary to reproduce the provisions of sections 253(4) as well as section 254(4). They are as hereunder: "253. (4) The Income-tax Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Appellate Assistant Commissioner has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 254(4) more emphatically and the said rules clearly spell out that it is the respondent who has to exercise his right in support of the order, that may be in his favour on other grounds making it unnecessary for him to be the appellant himself in regard thereto. The combined effect of the above two rules keeps open two methods for such a respondent, one is to file a memorandum of cross-objections and the other is specifically to urge to support the order on grounds decided against him, although he may not have appealed. This is his second remedy in the proceedings taken up before the Appellate Tribunal, not by him but by the appellant. Therefore, it will have to be considered that the basic principle that the respondent has to take up steps, although he may not have appealed independently from any part of the order, such a respondent has a right not only to support the order, but he has also to state that the finding against him by the authority below in respect of any issue ought to have been in his favour. This principle of finality is based on the general assumption that any matter or question which might and ought to have been made a ground, is required to be deemed to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Premier Cotton Spinning Mills Ltd. v. CIT. We have gone through the contents of the said judgment. In the said judgment, even the aspect of applicability of section 40(c) of the Act is taken up for consideration, to be read with section 40A(5) of the Act. Referring to the contents of section 40A(5) of the Act, this court has considered that the situation would be applicable only to the lower ceiling of Rs. 60,000. Be that as it may, the question before us is clearly whether the assessee could be allowed to take up the above contentions under the above situation in regard to which it can be safely and surely stated that these contentions are sought to be taken up certainly not at the appropriate and proper occasions when they ought to have been taken up when the matter was before the Income-tax Appellate Tribunal prior to its reaching this court by reference at the instance of the Revenue. We have already stated that at that stage although the assessee was a respondent, the proceedings were allowed to be taken up in a situation where the respondent-assessee who could have supported the order under the above statutory provisions had chosen to be conspicuous by silence. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence only lies under section 66 of the said Act, provided a question of law arises out of an order passed by the Tribunal under section 33(4) of the Act. Accepting these submissions on behalf of the Revenue, emphasising also the situation of finality to be found in section 33 of the 1922 Act, it was observed that the situation is clear that except in cases which may go up to the High Court on a reference, the decision of the Appellate Tribunal under section 33 is final. We have already emphasised the statutory provisions under the Act now in force--Income-tax Act, 1961. This is to the effect that no finality attaches to the decision of the Appellate Tribunal because by reason of the decision of the High Court on a reference, the decision given by the Appellate Tribunal is liable to be reopened and it will be the duty of the Appellate Tribunal to give effect to whatever decision the High Court gives. We have also sufficiently emphasised the statutory provision of sections 254(4) and 260(1) of the Income-tax Act, 1961, to emphasise that the Appellate Tribunal is expected to dispose of the proceedings received from the High Court conformably to such judgment of the High Court. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
