TMI Blog1986 (7) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appellate Tribunal was right in law in holding that the amount of Rs. 89,888 which formed part of the total sum of Rs. 3,82,905 and which was written off by the assessee could not be said to be a benefit, reward or bounty arising out of the business ? " We will first take up for our consideration, the second question relating to the amount of Rs. 3,82,905. If our answer to this question is in the affirmative, the third question will not survive because that question is in regard to an amount of Rs. 89,888 which forms part of the aforesaid amount of Rs. 3,82,905 and which is alleged to have been written off by the assessee. If it is held that the amount of Rs. 3,82,905 could not be subjected to tax under the provisions of section 28(iv) of the Act, it is immaterial whether or not Rs. 89,888 could be said to be the value of any benefit or perquisite arising from the business of the assessee. Facts relevant to question No. 2 may be briefly stated as under. One jodhpur Bone and Fertiliser Company, a partnership firm (hereinafter referred to as the " firm ") carried on business at jodhpur. The partners of the firm are directors of the assessee-company which is a private limited co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commissioner who held that there was no business transaction between the firm and the assessee-company and, therefore, the aforesaid amount could not be treated as a revenue receipt. In the result, the Appellate Assistant Commissioner deleted the addition made by the Income-tax Officer. Being aggrieved by the decision of the Appellate Assistant Commissioner, the Revenue carried the matter in appeal before the Tribunal. The Tribunal, dealing with the above controversy, observed : " monetary benefits not partaking of the character of income under fundamental concept of income have been now made taxable by the extended definition of income under section 2(24)(va) as a corollary by treating the said income taxable under the head 'Profits and gains of business or profession ', the essential pre-requisite of taxability of such benefit or perquisite is that it must arise from the business of the assessee ". In other words, observed the Tribunal, there must be a nexus between the business of the assessee and the benefit which the assessee has derived. After referring to various decisions, the Tribunal observed, " these decisions make it abundantly clear that the benefit received or rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirm its view that the amount of Rs. 3,82,905 was not includible in the total income, of the assessee-company under section 28(iv) of the Act. We, therefore, answer question No. 2 referred to us in the affirmative and against the Revenue. In view of our answer to question No. 2, as already observed above, question No. 3 does not survive and, therefore, we need not answer the said question. This takes us to question No. 1. Facts which are relevant so far as this question is concerned, briefly stated, are as follows. As pointed out above, the assessee-company is a private limited company. It carried on business of manufacture, sale and export of bones, crushed bone meals, horns, hoofs, etc., up to the assessment year 1955-56. After the said assessment year, it entered into an agreement with the Gujarat Bone Crushing Company, Bhavnagar (hereinafter referred to as " Bhavnagar firm "), under which it allowed the Bhavnagar firm to run its factory in consideration of lump sum of Rs. 30,000 per year and the Bhavnagar firm was under an obligation either to sell the entire goods manufactured by it to the assessee company or to effect sales thereof through the assessee-company. Agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before making any deduction under Chapter VI-A of the Income-tax Act) is not less than fifty one per cent. of such total income." The assessee-company claimed that it is an " industrial company within the meaning of the aforesaid provision on the ground that it is mainly engaged in the manufacture or processing of goods.. Now, before proceeding to examine the claim of the assessee-company on merits, it was necessary for the Tribunal to interpret the expression " engaged in the manufacture or processing of goods ". Unless the meaning to be attributed to this expression was clearly understood, the exercise of examining the evidence would prove to be futile. The Tribunal, however, besides reproducing the aforesaid provision, made no attempt to interpret the above expression, and, consequently, the exercise which it did in not referring to various clauses of the agreement, decisions of various courts, etc., was meaningless. The Tribunal has also not discussed in detail as to how the principles laid down by various decisions referred to by it helped in interpreting the expression " engaged in the manufacture or processing of goods ". The decisions to which reference is made lay down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. As observed by the Supreme Court in CIT v. Indian Molasses Co. Pvt. Ltd. [1970] 78 ITR 474, two courses are open to us; to call for a supplementary statement of the case from the Tribunal or to decline to answer the question raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under section 260(1) of the Act in the light of the answer of this court. If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will, according to the decisions of the Supreme Court in New Jehangir Vakil Mills Ltd. v. CIT [1959] 37 ITR 11, Petlad Turkey Red Dye Works Co. Ltd. v. CIT [1963] 48 ITR 92 (SC) and Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365, be restricted to the evidence on the record and may not be entitled to take additional evidence. That may result in injustice. In the circumstances, as held by, the Supreme Court in Indian Molasses Co.'s case [1970] 78 ITR 474, we think it appropriate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question whether the assessee-company is an " industrial company " within the meaning of section 2(6)(c) of the Finance (No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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