Income Tax Appellate Tribunal - Ahmedabad
Abhinav Finance & Leasing Co. Ltd. vs Deputy Commissioner Of Income Tax on 10 November, 2000
Equivalent citations: [2002]81ITD339(AHD)
ORDER
T.N. Chopra, A.M.
1. This miscellaneous application has been moved by the assesses arising out of the order of the Tribunal dt. 12th March, 1999 in ITA No'. 1889/Ahd/1993 for asst. yr. 1989-90. In the miscellaneous application the assessee has pleaded that there are two mistakes in the impugned order of the Tribunal which need rectification. Para 7 of the petition as reproduced hereunder brings out the points on which rectification is sought :
"At the outset, the applicant submits that the only ground before the Hon'ble Tribunal as raised by the respondent for consideration was whether the service charges of Rs. 1,75,07,000 has to be included or not in the turnover for computing claim under Section 80HHC, The issue whether the same service charges has to be included as part of profit of the business was never in dispute as both the applicant and respondent have included the said service charges as part of profits and gains of business for working out the deduction under Section 80HHC.
Moreover, the Hon'ble Tribunal has also given its finding with reference to sale of entitlement even when this ground of appeal was not there before them as the same was struck down in the grounds of appeal itself.
It is respectfully submitted that as per provisions of Section 254(1), the Tribunal can deal with only that part of the order of the first Appellate Authority, which has been made the subject-matter of the appeal before it. It is not open to the Hon'ble Tribunal to adjudicate or give finding on an issue which is not in dispute and which does not form part of the appeal before it.
It is thus submitted that in the given case when controversy is precisely limited to a narrow compass of deciding the issue whether the service charges shall be included in turnover for computing claim under Section 80HHC, the Hon'ble Tribunal is not competent to go wider to it as to traverse beyond the subject-matter which was in dispute before it."
Shri J.P. Shah, the learned counsel for the assessee argued that while adjudicating the issue regarding computation of deduction under Section 80HHC the Tribunal has fallen into error in directing that surplus of the service charges over the expenses attributable to the same should be excluded from the profits of business as well as the total turnover as appearing in the formula for computation. The learned counsel submitted that as a result of the Tribunal's order deduction allowable to the assessee under Section 80HHC would be reduced to a figure less than what has been allowed by the AO in the assessment order. The learned counsel argued that this has resulted in enhancement of income which is outside the jurisdiction of the Tribunal under Section 254(1).
2. With regard to the second mistake the learned counsel argued that ground No. 1 (iii) in the Departmental appeal, regarding inclusion of sales of replenishment licences in the total turnover have been struck off and, therefore, the relief on this ground allowed by the Tribunal is contrary to law.
3. Shri Girish Dave, the learned senior Departmental Representative on the other hand argued that the issue which was a subject-matter of appeal before the Tribunal at the instance of the Department was deduction under Section 80HHC and the Tribunal has not in any manner traversed beyond the subject-matter of the appeal and, therefore, the impugned order of the Tribunal. cannot be challenged as vitiated by lack of jurisdiction. The learned Departmental Representative further submitted that the issue regarding the service charges is an integral component of the "subject-matter of appeal" and the same has been adjudicated by the Tribunal. The learned Departmental Representative further emphasised that it was the Department which was the appellant before the Tribunal and the Tribunal has adjudicated the issue holding that service charges would be excluded from the total turnover as well as the profits relatable to the service charges would also be excluded from the profits of business while computing deduction under Section 80HHC. Placing reliance upon the decision of Hon'ble Supreme Court in the case of Bhavana Chemicals Ltd. v. CIT (1998) 231 ITR 507 (SC), the learned Departmental Representative contended that it was the Departmental appeal and while adjudicating the issue raised in the appeal, it is not material whether the final effect results in enhancement of income. Further reliance is placed on the decision of the Supreme Court in CIT v. Assam Travels Shipping Service (1993) 199 ITR 1 (SC).
4. With regard to the second point for rectification raised in the miscellaneous application, Shri Dave, the learned senior Departmental Representative strongly urged that the issue regarding sale of import entitlement to be included in the total turnover has been argued by both the sides during the course of hearing of the appeal arid written arguments on the issue have also been submitted during the course of hearing which have been considered by the Tribunal while adjudicating the issue. The learned Departmental Representative further added that since the issue arising from ground No. 1 (iii) has been argued by both the sides and has been adjudicated, it is immaterial whether the said ground in the memorandum of appeal, has been struck off or not. The learned Departmental Representative referred to Rule 11 of ITAT Rules which provide that even if any ground is not set forth in the memorandum of appeal, the same can be taken by the appellant with the permission of the Tribunal, It is further submitted that after the ground has been allowed to be taken up by the Tribunal and has been argued by both the sides adjudication of the ground in the impugned order can by any stretch of logic or reasoning not be construed as a mistake.
5. In rejoinder, the learned counsel for the assessee sought to refute the contentions of the learned Departmental Representative and argued that once the service charges have already been included in the profits of business, there was no occasion for the Department to argue that the same may be excluded from the profits of business while computing deduction under Section 80HHC. The learned counsel raised the question whether the Department can be an appellant against its own order? The learned counsel placed reliance on the following decisions :
1. CIT v. Manick Sons (1969) 74 ITR 1 (SC);
2. State of Kerala v. Vijaya Stores (1979) 116 ITR 15 (SC); and
3. ITO v. Gayatri Coal Supply Co. (1999) 238 ITR 16 (AT).
6. We have carefully considered the rival submissions made before us, and have come to the conclusion that there is no mistake in the impugned order which needs rectification under Section 254(2). Before we deal with the points raised in the miscellaneous application it would be relevant to mention that power of rectification which is specifically conferred on the Tribunal under Section 254(2) has to be exercised in terms of the limited ambit of the said provisions. It cannot be enlarged on any assumption that the Tribunal has got an inherent power of rectification or review or revision. A mistake which can be rectified under Section 254(2) is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. Now coming to the points raised by the assessee in the miscellaneous application as indicated herein before, we feel that the impugned order passed by the Tribunal is well within the scope and ambit of jurisdiction and powers of the Tribunal conferred under Section 254(1) of the IT Act. The powers of the Tribunal are expressed in the widest possible term similar to the power of the Civil Appellate Court under Section 96 and 0. 41 of the CPC, 1908. The scope of an appeal before the Tribunal extends to the subject-matter of the appeal before the first Appellate Authority and if the question sought to be raised for the first time before the Tribunal is a question which concerns the subject-matter of the appeal which was before the first Appellate Authority then such question would be permissible. Thus, the Tribunal is entitled to entertain and adjudicate an issue which relates to the subject-matter of the appeal before the first Appellate Authority. It was competent to allow a new ground to be raised, a ground which relates to the subject-matter of appeal.
7. An important facet of adversial adjudication which essentially circumscribes the jurisdiction of the appellate authority need to be stated here. The normal rule governing the appellate jurisdiction is that the existing interests and rights of the appellant party before the appellate forum should not be adversely affected by its decision. It is an elementary principle of the CPC that the respondent who has neither preferred his own appeal nor has filed cross-objection in the appeal preferred by the appellant must be deemed to be satisfied with the decision of the lower authority and he will not be entitled to seek relief against the rival party in an appeal preferred by the latter. If a party appeals he is the party which comes up before the Tribunal in redressal of the grievance alleged by him. If the other side has any grievance he has a right to file a cross-appeal or a cross-objection but if no such thing is done the other party in law is deemed to be satisfied with the decision. The respondent is not entitled to raise the ground so as to work adversely to the appellant and in his favour.
8. Now coming to the judicial authorities cited by the learned representatives on both sides, we may refer to the decision of Hon'ble Supreme Court in Manick Sons case (supra) cited by the learned counsel. In this decision it has been observed by the Hon'ble Supreme Court at p. 5 of the Report that the Tribunal in deciding an appeal before it must deal with question of law and fact which arises out of the order of the assessment made by the tax authorities.
9. In the case of State of Kerala v. Vijaya Stores (supra) it has been held that the powers of the Tribunal are subject to the limitation that the appellant before the Tribunal should not be placed by the Tribunal's order in a situation worse than what he was before the filing of the appeal.
10. The Hon'ble Gujarat High Court in Full Bench decision in the case of CIT v. Cellulose Products of India Ltd. (1985) 151 ITR 499 (Guj)(FB) after an exhaustive review of case law on the subject held that the scope of appeal to the Tribunal would be restricted to the subject-matter of appeal before the first Appellate Authority and questions falling within the contours of subject-matter of appeal before the first Appellate Authority can be entertained,
11. The Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC) has, however, disapproved of the aforesaid view of the Hon'ble Gujarat High Court and held that the view--that the Tribunal is confined only to issues arising out of the appeal before the CIT(A) takes too narrow a view of the powers of the Tribunal. The Hon'ble Supreme Court observed that the power of the Tribunal in dealing with the appeals as conferred under Section 254 of the IT Act, 1961, is expressed in the widest possible terms and there is no reason to restrict the powers of the Tribunal only to decide the grounds which arise from the drder of the CIT(A). The Tribunal, the Hon'ble Court added, should not be prevented from considering questions of law arising in assessment proceedings. Undoubtedly the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to raise when it is necessary to consider that in order to correctly assess the tax liability of the assessee.
12. Reference at this stage may also be made to the decision of the apex Court in the case of Bhavana Chemicals Ltd. v. CIT (supra) cited by the learned senior Departmental Representative before us. The facts in this case are that the Revenue raised a contention before the Tribunal for the first time that the AO had allowed certain expenses wrongly while computing the total income. The Tribunal accepted the preliminary objection of the Revenue and remanded the matter to the AO for assessment afresh. The Supreme Court upheld the order of the Tribunal and rejected the contention of the assessee that the order of the assessment to be made by the AO might result in enhancement of the tax payable by the assessee and that such a course was not open to the Tribunal. The Supreme Court observed that if the assessee feels aggrieved with the assessment, he can adopt the remedies provided by law.
13. Applying the aforesaid principles to the instant case, we find that the impugned order has been passed by the Tribunal for disposing of an appeal by the Department. The limitations placed on the powers and jurisdiction of the Tribunal have been fully adhered to inasmuch as the Tribunal has not traversed outside the subject-matter of the appeal being the issue concerning deduction of relief under Section 80HHC, particularly with reference to the treatment to be given to the service charges as well as sales of import entitlement. Both the issues have been considered and adjudicated by the first Appellate Authority and are, therefore, clearly covered by the subject-matter of appeal. Service charges have been credited to the P&L a/c. on account of receipts of the business of finance and leasing. The CIT(A) has estimated the expenses relating to the service charges being 10 per cent of the receipts. The CIT(A) further held that 10 per cent of the receipts should be added to the total turnover. The Department was aggrieved and it was in pursuance of the Departmental appeal that the issue has been adjudicated vide the impugned order. There was no occasion for enhancement inasmuch as the appeal has been filed by the Department and not by the assessee. The question of enhancement of income would possibly arise only if the assessee had come as an appellant and the order of the Tribunal would have adversely affected the interest of the assessee and favoured the Department. This is not the case here. The elementary rule of CPC referred by their Lordships in the case of Vijaya Stores (supra) has thus not been violated in any manner. In the said case, appeal had been filed by the assessee before the Tribunal and the Supreme Court held that in the absence of an appeal or cross-objection by the ST Department the Tribunal has no jurisdiction or power to enhance the assessment while adjudicating the assessee's appeal. The decision, therefore, does not in any manner support the case of the assessee. The Supreme Court decision in Bhavana Chemicals Ltd.'s case (supra) cited by the learned Departmental Representative, fully supports the view taken by us here.
14. Regarding the subject-matter of appeal, it may be noted that service charges as well as sales of import entitlement are integral components of the working of relief under Section 80HHC and the issues concerning the treatment to be accorded to these two items while computing deduction under Section 80HHC have been specifically considered by the CIT(A) and these are, therefore, well within the contours of the subject-matter of appeal. We see no apparent mistake or infirmity in the impugned order passed by us.
15. In the miscellaneous application it has been observed that there is an inconsistency in the impugned order of the Tribunal inasmuch as while service charges have been held as part of the business in para 6 of the order, the same have been directed to be excluded while applying the formula for computation of deduction under Section 80HHC. The inconsistency pointed in the miscellaneous application is clearly based on misreading of the impugned order of the Tribunal. In para 6 of the impugned order it has been clearly pointed out that for computing the export profits under Section 80HHC total turnover of business i.e., total sale proceeds of the goods and merchandise exported and sold in India and profit of business relating to the goods and the merchandise would have to be considered. Service charges on account of finance and leasing were excluded from the total turnover as well as profits and gains of business in a consistent and harmonious fashion and we see no contradiction or inconsistency in our conclusion. This contention of the assessee is, therefore, without substance and is rejected.
16. Regarding ground No. 1 (iii) which according to the learned counsel had been struck off in the memorandum of appeal, we concur with the contention of the learned Departmental Representative that the ground has been argued during the course of hearing and the arguments of both the sides have been recorded by the Tribunal and the decision has been arrived at. In such circumstances it is immaterial whether the said ground has been scored off in the memorandum of appeal or not. The learned Departmental Representative pointedly referred to the fact that it is not known at what stage the ground has been scored off and in any case the fact of scoring off has not been evidenced by the signature of the appropriate authority. Without going into the issue any further we feel that Rule 11 of the ITAT Rules fully support the contention of the learned Departmental Representative and we see no mistake in the order of the Tribunal on the issue.
17. For the aforesaid reasons the miscellaneous application of the assessee is rejected.