Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
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]
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
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
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
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.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
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