TMI Blog1992 (4) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, the Tribunal was justified in law in holding that the grounds regarding the computation of capital employed in the industrial undertaking and the quantum of deduction under section 80J could not be agitated before it under sections 253 and 254 of the Income-tax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, the depreciation of the current year is deductible in computing the profits and gains for granting relief under section 80-I of the Income-tax Act ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no appeal lay to the Appellate Assistant Commissioner against charge of interest under section 217 of the Income-tax Act, 1961 ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessment made by the Income-tax Officer on January 29, 1973, under section 143(3) of the Income-tax Act, 1961, for the assessment year 1968-69 was valid in law ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was not entitled to take the additional ground claimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bishamber Lal, advocate, that the right of the assessee to claim depreciation under the substantive provision, namely, section 32(1)(ii) is not taken away by virtue of the enactment of the proviso. On the other hand, the reasoning of the Revenue authorities has been supported by Mr. Rajendra who has submitted that the assessee can claim depreciation on these tools, each of which has cost of less than Rs. 750, only in the year in which they are first used. Before examining the rival contentions, it is pertinent to note that the aforesaid proviso was inserted by the Finance Act, 1966, with effect from April 1, 1966. Prior to its insertion, plant, machinery and other items including tools were entitled to depreciation under the provisions of section 32(1)(ii). Depreciation is to be claimed at the rates which are prescribed from time to time. We are informed that in the year in question, the rate of depreciation, for the first year, was 30 per cent. It is after deducting the depreciation allowed that the written down value is calculated. The intention of inserting the proviso apparently seems to be that if the value of the item on which depreciation is allowable is only Rs. 750 then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was the immediately preceding assessment year in which the tools were used for the first time, no benefit has been accorded to the assessee for the simple reason that the assessee did not seek the benefit. This benefit which was available to the assessee was lost. Therefore, in the subsequent year it could not invoke the provisions of the proviso to section 32(1)(ii), but the substantive right under section 32(1)(ii) was not lost. In the terms in which it is framed the proviso cannot be so construed as to oust the applicability of section 32(1)(ii) to a case like the present one. In the year 1967-68, because the proviso applied, it would have been incumbent upon the Assessing Officer to give deduction of 100 per cent. if a claim had been made. As no claim was made in the year 1967-68 and the claim has been made in the year in question, namely, 1968-69, then because the proviso is not applicable in this year, the assessee is entitled to claim and obtain deduction under section 32(1)(ii). The intention of the Legislature in inserting the proviso was clearly to give an added benefit to the assessee. It was not meant to deprive the assessee of the benefit which was due under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax for the year in question. In the appeal filed by the assessee, the levy of interest was sought to be challenged. The Appellate Assistant Commissioner came to the conclusion that the appeal on this ground was not maintainable. The Tribunal, purporting to follow the decisions of the Gujarat High Court and the Allahabad High Court in CIT v. Sharma Construction Co. [1975] 100 ITR 603 and Vidyapat Singhania v. CIT [1977] 107 ITR 533, came to the conclusion that the appeal was not maintainable. It also referred to another decision of the Allahabad High Court in Swadeshi Cotton Mills Co. Ltd. v. CIT [1975] 101 ITR 621. Two (sic) other decisions referred to by the Tribunal were that of the Madras High Court in the case of A. S. S. S. S. Chandrasekaran and Bros. v. CIT [1974] 96 ITR 711. Following the said decisions, the Tribunal held that the assessee was not entitled to agitate the charging of interest under section 217 of the Income-tax Act in an appeal. Neither the order of the Appellate Assistant Commissioner nor the order of the Tribunal indicates as to what was the nature of the challenge of the assessee to the levy of interest. It has been contended by learned counsel for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the return was not belated or that the penal provision was not attracted at all to his case. In such a case also, he denies his liability to be assessed to interest." The Supreme Court observed that (at page 968 of 160 ITR), " in cases where the jurisdictional fact attracting the levy cannot be disputed, for example, that the return had been furnished under section 139 with delay, it will be a question merely of satisfying the relevant authority that there are circumstances calling for a reduction or waiver of the interest ". From the aforesaid observations, it is clear that what can be challenged in an appeal, in relation to the levy of interest under section 217, is not the quantum of interest which is charged, but the fact that the interest itself was not leviable. The real attack has to be with regard to the payment of advance tax. If it is contended that advance tax was paid in time or a lesser amount of advance tax was payable, then on that basis challenge to the levy of interest can be raised in an appeal. If there is no dispute with regard to the non-payment of advance tax within the stipulated time then it is not possible for the assessee to raise a contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation under section 146 of the Act. Thereafter, a valid assessment had been made and there is no grievance on the part of the assessee that full opportunity to represent itself was not granted. Once an order under section 146 is passed and the assessment under section 144 is set aside, then the question of the fresh assessment made on January 29, 1973, under section 143(3) being invalid, cannot arise. This question is, therefore, answered in favour of the Revenue. The relevant facts with regard to question No. 6 are that before the Income-tax Appellate Tribunal the assessee sought to raise an additional ground to the effect that surtax which was levied on the assessee for the assessment year 1968-69 was allowable as a deduction for computation of its total income. The Tribunal came to the conclusion that this was an altogether new point and it could not be agitated by the assessee for the first time before it. The short question which, therefore, arises for our consideration is whether it was open to the assessee, on the facts of the present case, to raise this additional ground before the Income-tax Appellate Tribunal for the first time. Before dealing with the two decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner should have entertained the question of relief under section 84 or to direct the Income-tax Officer to allow the relief " Strong reliance has been placed on this decision by Mr. Rajendra, and it has been contended by him that as far as the Income-tax Appellate Tribunal is concerned, its jurisdiction is not coterminous with that of the Income-tax Officer. Learned counsel submits while relying upon Gurjargravures' case [1978] 111 ITR 1 (SC), that if the Appellate Assistant Commissioner could not permit the raising of a new ground, there was less reason or justification for the Tribunal to permit the urging of an additional or a new ground. Apart from the fact that the Supreme Court in Gurjargravures' case [1978] 111 ITR 1 was not concerned with the power of the Tribunal in allowing the assessee to urge an additional ground and, consequently, did not have an occasion to consider the full scope and effect of the aforesaid rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, the Supreme Court, in a later decision of a larger Bench, has struck a different note. In jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, the question arose whether the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subordinate authority may have in the matter. " The Supreme Court noticed the decision in Gurjargravures' case [1978] 111 ITR 1 (SC), and observed that the court had taken a different view in that case, and further observed that the view taken by the two judge Bench appeared to be in conflict with the view taken by the three judge Bench of that court in Kanpur Coal Syndicate's case [1964] 53 ITR 225 which held the field. The Supreme Court did state that it did not consider it necessary to overrule the view taken in Gurjargravures' case [1978] 111 ITR 1, "as, in our opinion, that decision is founded on the special facts of that case...." The Supreme Court in Jute Corporation's case [1991] 187 ITR 688, specifically approved the decision of the Calcutta High Court in Rai Kumar Srimal v. CIT [1976] 102 ITR 525, wherein it had been held that the Appellate Assistant Commissioner was entitled to admit new grounds or evidence either suo motu or at the invitation of the parties. In our opinion, the observations of the Supreme Court in Jute Corporation's case [1991] 187 ITR 688 are clearly applicable here. There is no dispute with regard to the fact that surtax was levied in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case Manji Dana v. CIT [1966] 60 ITR 582 (SC). In that case, the Tribunal did not grant leave to the assessee to raise an additional ground. The question which was for consideration before the Supreme Court was whether the Tribunal erred in not allowing the assessee to raise and argue that additional contention. The Supreme Court observed that the Tribunal was justified in refusing to allow the question to be raised, which had not been set forth in the memorandum of appeal, for the reason that the necessary evidence was not on record. In the absence of relevant evidence, the Tribunal may be justified in refusing to allow an additional ground to be urged, but such a situation is not present in this case. As already observed there is no dispute with regard to the fact that surtax in respect of the assessment year 1968-69 was levied, and the only question which arose for consideration was whether this was entitled to be deducted or not. In our opinion, this question ought to have been allowed to be agitated by the Tribunal. From the aforesaid discussion, it will follow that question No. 1 is answered in favour of the assessee, question No. 2 has become academic while question N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustry was set up for the manufacture of some items. This industry was a priority industry. The Income-tax Officer computed profits and gains attributable to this industry at Rs. 31,50,735. Certain amounts aggregating to Rs. 3,81,150 had been excluded by the Income-tax Officer while computing the assessee's profits and gains, attributable to the assessee's priority industry, and relief on the said amount had not been granted. The Appellate Assistant Commissioner, however, in appeal, came to the conclusion that the assessee was entitled to the relief claimed by it. This decision was upheld by the Tribunal. In the present reference, we are not concerned with this amount. The point in issue here is that under the second agreement whereby the assessee was made the representative of the foreign company, it had received commission in respect of the stock supplied by the collaborators to the parties in India. The total sum so received was Rs. 1,25,602. Under this agreement, the assessee was the exclusive sales representative and was entitled to receive commission in respect of the sales effected by the American company in the territory of India. The Appellate Assistant Commissioner uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Sixth Schedule or the business of any hotel where such business is carried on by an Indian company and the hotel is for the time being approved in this behalf by the Central Government. " According to section 80-1, deduction in respect of profits and gains is available to those industries to which the said section applies. The section applies to priority industries as defined in section 80B(7). This sub-section, inter alia, provides that a priority industry would mean the business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Sixth Schedule to the Act. Therefore, the income must be generated in order to qualify for the benefit under section 80-1 from the construction, manufacture or production of any one of the said items. There must be a direct nexus in the generation of income with the construction, manufacture or production by the assessee of any of the items falling in the Sixth Schedule. In the present case, in so far as it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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