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PETITIONER: HUKUMCHAND MILLS LTD.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, CENTRAL BOMBAY & ORS.

DATE OF JUDGMENT: 22/09/1966

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. BHARGAVA, VISHISHTHA

CITATION:  1967 AIR  455            1967 SCR  (1) 463  CITATOR INFO :  F          1969 SC1068  (6)  R          1980 SC 485  (9)

ACT: Income-tax  Act  (11of 1922), s.  33(4)-Appellate  Tribunal- Jurisdiction  to  entertain new points in appeal  and  order remand.

HEADNOTE: The  subject-matterof  the  assessee’s  appeal  before   the Income-tax  Appellate Tribunal was the question as  to  what should  be the proper written down value of  its  buildings, machinery  etc., for calculating the depreciation  allowance under  s.  10(2)(vi)  of the  Income-tax  Act.’  1922.   The Department  sought to support the orders of  the  Income-tax Officer and the Appellate Assistant Commissioner on the  new ground that paragraph 2 of the Taxation Laws (Part B States) (Removal  of Difficulties) Order, 1950, was applicable,  and that  certain  amounts of depreciation  which  were  allowed under  the  Industrial  Tax  Rules had  to  be  deducted  in arriving at the written down value.  The Tribunal  permitted the contenation to be raised and remanded the matter to  the Income-tax Officer for considering the question whether  the Industrial  Tax Rules related to income-tax or super-tax  or any  law  relating  to  tax  on  profits  of  business,  for ascertaining  whether  any depreciation  was  allowed  under those  Rules, and whether such depreciation should be  taken into account for the purpose of co putting the written  down value.   In this Court, the jurisdiction of the  Tribunal-to entertain and go into the question raised by the  Department for  the first time before it and to remand the case in  the manner it has done-was questioned. HELD:  Under s. 33(4) of the Act the Tribunal has got  power to entertain   the  argument of the Department,  to  remand, and to give the directions    to  the  Income-tax  ’Officer. The Appellate.  Tribunal Rules, 1946, made under s. 5A(8) of the  Act, are merely procedural in character and do not,  in any way,, circumscribe or control the power of the  Tribunal under s. 33(4). [468 B-C]

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JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 411 to 415 of 1965. Appeals from the judgment and order dated June 22, 1962,  of the Bombay High Court in 1. T. R. N. 34 of 1960. A.S.  Bobde, and O. C. Mathur, for the appellant (In C.  As. Nos. 411-413 of 1965) and the respondent (In C.As. Nos.  414 and 415 of 1965). B.  Sen, Gopal Singh and R. N. Sachthey,for  the  respondent (in C.As. Nos. 411-413 of 1965) and the Appellant (in C. As. Nos. 414 and 415 of 1965). The Judgment of the Court was delivered by Ramaswami, J. These five appeals consolidated by an order of the Bombay High Court arise out of a Reference made by the 464 Income-tax  Appellate Tribunal, Bombay Bench ’A’ on  January 2,  1959 and decided by the Bombay High Court  on  September 22,  1962.   The High Court granted certificates  to  appeal against  its judgment under s. 66-A of the Income  Tax  Act, 1922  to  both  the Commissioner  of  Income-Tax,  (Central) Bombay  and the assessee.  Civil Appeals Nos. 411 to 413  of 1965 are brought on behalf of the assessee and Civil Appeals Nos.  414  and  415 of 1965 are brought  on  behalf  of  the Commissioner of Income-Tax, (Central) Bombay. Hukumchand  Mills  Ltd.  (hereinafter  referred  to  as  the ’assessee’) is a public company incorporated in the previous Indore  State.  The assessee owns a textile mill there.   Up to  the  assessment year 1949-50 it was  being  assessed  in British  India as a non-resident (except in 1948-49 when  it was  assessed as a resident), on such income as fell  within s.  4  (1)(a) or 4(1)(c) read with s. 42 of the  Income  Tax Act, 1922 (hereinafter referred to as the ’Act’).  After the Constitution  came into force, Indore became a Part B  State and  the  Act  was brought into force in  such  States  with effect  from April 1, 1950.  The assessee  therefore  became liable to be assessed as a resident from the assessment year 1950-51. The  assessee was accordingly assessed as a resident in  the years  1950-51,  1951-52 and 1952-53, One of  the  questions which  arose for determination in the assessments for  these years  was the proper written down value of  the  buildings, machinery   etc.  of  the  assessee  for   calculating   the depreciation  allowance under s. 10(2)(vi) of the Act.   The assessee  relied  upon s. 10(5)(b) and  contended  that  the original  cost  of the machinery, buildings etc.  should  be taken  for this purpose.  That sub-clause provided  that  in the  case  of assets acquired before the previous  year  the written down value was the actual cost less all depreciation actually  allowed to the assessee under the Act or  any  Act repealed thereby.  But as no depreciation had been  actually allowed  under  the  Act, the assessee  contended  that  the original  cost  should  be taken as the  basis  of  allowing depreciation without taking into consideration the number of years  during  which the machinery had been working  or  the depreciation  it  had  suffered or the  written  down  value entered  in the books.  The case of the Department,  on  the contrary,  was  that as it was necessary  to  determine  the total  income  of  the assessee to  arrive  at  the  taxable proportionate income of the assessee under the Act as a non- resident  and as depreciation had been allowed to arrive  at such  total income, the same must be taken into  account  to arrive  at  the written down value as it had  been  actually allowed within the meaning of s. 10(5) (b).  The  Income-tax Officer  and the Appellate Assistant  Commissioner  rejected

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the  contention  of the assessee but the  Tribunal,  by  its order dated October 8, 1958 held that only that part of  the depreciation  which  entered  into the  computation  of  the taxable income of the assessee under the Act can be  treated as depreciation 465 ’actually allowed’ and not the total depreciation which went into the computation of the total income. it was urged before the Tribunal by the Department that  al- though  the  Income  Tax  Officer  had  not  considered  the provisions  of  paragraph  2 of the Taxation  Laws  (Part  B States)  (Removal of Difficulties) Order, 1950  (hereinafter referred  to  as  the  ’Taxation  Laws  Order’),  the   said provisions  were applicable in the present case and  certain amounts   of  depreciation  which  are  allowed  under   the Industrial  Tax  Rules, which had the force of  law  in  the Indore  State, 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.   It was pointed out on behalf of  the  assessee that  the contention could not be entertained unless it  was found  as a fact that the depreciation was actually  allowed under  the Industrial Tax Rules to the assessee, and  unless it was also further held that the Industrial Tax Rules  were rules  which related to income-tax or super-tax, or any  law relating to tax on profits of business.  Paragraph 2 of  the Taxation Laws Order provides as follows:-               "Computation    of   aggregate    depreciation               allowance  and  the  written  down   value.-In               making any assessment under the Indian Income-               tax  Act,  1922,  all  depreciation   actually               allowed  under any laws or rules of a  Part  B               State relating to income-tax and super-tax  or               any   law  relating  to  tax  on  profits   of               business,  shall  be  taken  into  account  in               computing the aggregate depreciation allowance               referred  to in sub-clause (c) of the  proviso                             to  clause  (vi)  of  subsection  (2)  and  the               written  down value under clause (b)  of  sub-               section (5), of section 10 of the said Act." In view of this submission made by the parties the  Tribunal remanded  the  matter  back to the Income  Tax  Officer  for ascertaining whether any depreciation was allowed under  the Industrial  Tax  Rules  and  for  considering  the  question whether the said rules related to income-tax or super-tax or any  law  relating to tax on profits of business and  if  he decided  these  questions  in favour of  the  Department  he should  take into consideration such  depreciation  actually allowed  under the said rules for the purposes of  computing the written down value. Under  s.  66(1),of  the  Act  the  Tribunal  referred   the following questions of law for the determination of the High Court: lm15 "(1)  Whether the words ’all depreciation actually  allowed’ used in section 10(5)(b), of the Indian Income-tax Act refer only  to  the  depreciation  allowed  for  the  purpose   of determining the amount liable to Indian income-tax. 466 (2)  Whether the provisions of paragraph 2 of  the  Taxation Laws (Part B States) (Removal of Difficulties) Order,  1950, apply and were correctly applied to the facts of the case." By  its judgment dated June 22, 1962 the High  Court  agreed with  the view taken by the Tribunal on the  first  question

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and  answered it in favour of the assessee.  As regards  the second question, the High Court held as follows:-               "We  do  not find anything in  the  Tribunal’s               order which indicates that any contention  was               raised  before the Tribunal that  paragraph  2               had  no  application to the  case.   What  was               contended  was that the questions whether  any               depreciation was allowed under the  Industrial               Tax  Rules, or if it was so  allowed,  whether               such  depreciation was under any law or  rules               relating  to income-tax or super-tax etc.  not               having been determined, the contention  raised               by the Department on the basis of paragraph  2               of the Taxation Laws (Part B States)  (Removal               of  Difficulties)  Order, 1950, could  not  be               entertained at that stage, and that contention               has  been accepted by the Tribunal.  In  these               circumstances, our answer to question No. 2 as               framed  is  that Paragraph 2 of  the  Taxation               Laws (Part B States) (Removal of Difficulties)               Order, 1950, is a valid provision of law,  but               it  will have application to the present  case               only  if the questions which the Tribunal  has               asked the Income-tax officer to determine, are               determined by the Income-tax Officer in favour               of the Department."               Civil Appeal’s Nos. 411 to 413 of 1965: The sole question argued on behalf of the assessee in  these appeals  is that the Tribunal was not competent to  go  into the  question whether the provisions of paragraph 2  of  the Taxation Laws Order were applicable to the present case  and the  respondent  should not have been allowed to  raise  the contention  for the first time before the Tribunal.  It  was also argued that the Tribunal ought not to have remanded the case to the Income Tax Officer for ascertaining whether  any depreciation was allowed under the Industrial Tax Rules  and whether  such depreciation should be taken into account  for the  purpose  of computing the written down value.   In  our opinion there is no justification for this argument.  In the first place, no objection was raised before the Tribunal  or before  the High Court that the Department should  not  have been  allowed to raise the question for the first time  with regard  to  the application of paragraph 2 of  the  Taxation Laws  Order.   We shall, however, assume in  favour  of  the assessee  that  the question was implicit  in  the  question actually  framed and referred to the High Court.  Even  upon that  assumption  we are of opinion that  the  Tribunal  had jurisdiction to 467 permit  the  question  to be raised for the  first  time  in appeal.  The powers of the Tribunal in dealing with  appeals are expressed in s. 33(4) of the Act in the widest  possible terms.  Section. 33(3) of the Act states that "An appeal  to the  Appellate Tribunal shall be in the prescribed form  and shall be verified in the prescribed manner ........  Section 33(4) reads as follows:-               "(4) The Appellate Tribunal may, after  giving               both  parties to the appeal an opportunity  of               being  heard, pass such orders thereon  as  it               thinks  fit,  and shall communicate  any  such               orders  to  the assessee and  to  the  Commis-               sioner." ’Me word "thereon," of course, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal.  The words "pass  such orders as the Tribunal thinks fit"  include  all

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the powers (except possibly the power of enhancement)  which are  conferred upon the Appellate Assistant Commissioner  by s.  31 of the Act.  Consequently the Tribunal has  authority under  this  section  to  direct  the  Appellate   Assistant Commissioner  or  the Income Tax Officer to hold  a  further enquiry  and  dispose  of  the case on  the  basis  of  such enquiry.  Rule 12 of the Appellate Tribunal Rules, 1946 made under s. 5A(8) of the Act provides as follows:-               "The  appellant shall not, except by leave  of               the  Tribunal, urge or be heard in support  of               any ground not set forth in the memorandum  of               appeal;  but  the Tribunal,  in  deciding  the               appeal,  shall not be confined to the  grounds               set forth in the memorandum of appeal or taken               by leave of the Tribunal under this rule:               Provided that the Tribunal shall not rest  its               decision on any other ground unless the  party               who   may  be  affected  thereby  has  had   a               sufficient opportunity of being heard on  that               ground."               Rule 27 states:               "The  respondent,  though  he  may  not   have               appealed,   may  support  the  order  of   the               Appellate Assistant Commissioner on any of the               grounds decided against him." Rule 28 is to the, following effect:               "Where  the  Tribunal is of opinion  that  the               case  should be remanded, it may remand it  to                             the  Appellate  Assistant Commissioner   or  the               Income-tax  Officer, with such  directions  as               the Tribunal may think fit." in the present case, the subject-matter of the appeal before the  Tribunal  was  the question as to what  should  be  the proper  written down value of the buildings, machinery  etc. of the assessee for 468 calculating the depreciation allowance under S. 10(2)(vi) of the  Act.  It was certainly open to the Department,  in  the appeal filed by the assessee before the Tribunal, to support the  finding  of the Appellate Assistant  Commissioner  with regard  to  the  written down value on any  of  the  grounds decided  against  it.   It  was  argued  on  behalf  of  the appellant  that the action of the Tribunal in remanding  the case is not strictly justified by the language of Rule 28 or Rule  12.   Even  assuming  that Rules 12  and  28  are  not strictly applicable to the case, we are of opinion that  the Tribunal has got sufficient power under s. 33(4) of the  Act to  entertain the argument of the Department with regard  to the  application of paragraph 2 of the Taxation  Laws  Order and remand the case to the Income Tax Officer in the  manner it has done.  It is necessary to state that Rules 12 and  28 are not exhaustive of the powers of the Appellate  Tribunal. The rules are merely procedural in character and do not,  in any  way, circumscribe or control the power of the  Tribunal under  s.  33(4)  of the Act.  We  are  accordingly  of  the opinion that the Tribunal had jurisdiction to entertain  the argument  of the Department in this case and to ,direct  the Income  Tax  Officer to find whether  any  depreciation  was actually allowed under the Industrial Tax Rules and  whether such depreciation should be taken into consideration for the purpose of computing the written down value. For  these  reasons we reject the argument of Mr.  Bobde  on behalf  of  the assessee and dismiss these  appeals.   There will be no order as to costs.

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Civil Appeals Nos. 414-415 of 1965: The  question of law arising in these appeals has  been  the subjectmatter of consideration in the decision of this Court in  Commissioner of Income-tax, Madhva Pradesh,  Nagpur  and Bhandara  v.  Nandlal Bhandari Mills Ltd.(1),  and  for  the reasons  given  in that case we hold that the  question  has been  correctly answered by the High Court.  We  accordingly dismiss  these  appeals  but there will be no  order  as  to costs. V. P. S.                     Appeals dismissed. (1) [1966] 2 S.C.R. 925; 60 I.T.R. 173. 469