2006 (8) TMI 155 - HC - Income Tax

Appellate Tribunal - Additional ground - sales tax subsidy in form of exemption - whether the additional ground of appeal can be raised by an assessee before the appellate authority during the course of hearing of the appeal or not - HELD THAT - In our view, the request made by the assessee for raising additional ground of appeal in the present case was not unreasonable, firstly for the reason that the facts with regard to the legal issues, being raised by the assessee as additional ground of appeal, were already on record and secondly on the merits, the issue sought to be raised had already been decided by the Tribunal in favour of the assessee for other years. We find merit in the contention raised by learned counsel for the assessee and accordingly, set aside the order passed by the Tribunal and permit the assessee to raise the additional ground of appeal, mentioned above. Procedurally, the course would have been that the matter is required to be remitted back to the CIT(A) for consideration of the additional ground of appeal being permitted to be raised by the assessee. In view of our discussions and following the dictum of the law laid down by this court in Abhishek Industries' case 2006 (8) TMI 123 - PUNJAB AND HARYANA HIGH COURT , the additional issue, permitted to be raised by the assessee, is decided on the merits while holding that sales tax subsidy received by the assessee is a revenue receipt and not capital in nature. The appeals are disposed of in the manner indicated above.

Summary

Issues:
- Whether the Tribunal's order disallowing the assessee to raise an additional ground of appeal is justified?
- Whether the Tribunal's decision is contrary to the Supreme Court's ruling in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383?
- Whether the Tribunal failed to exercise its jurisdiction by not allowing the assessee to raise the additional issue?

Analysis:
1. The judgment addresses four appeals, with the facts primarily extracted from I. T. A. No. 374 of 2005 concerning the assessment year 1997-98. The assessee declared a "nil" income but included a note regarding sales tax subsidy linked to fixed capital investment, deemed as a capital subsidy.

2. The appellant contended that the Assessing Officer did not address the consequential relief related to the note appended with the return. The Commissioner of Income-tax (Appeals) partially allowed the appeal, leading the assessee to raise an additional ground before the Tribunal regarding the nature of sales tax subsidy.

3. The Tribunal rejected the additional ground, citing its omission from the original appeal memo as unreasonable. However, legal precedent, including the cases of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 and National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383, upholds an assessee's right to raise additional grounds during the appeal process.

4. The judgment highlights that the only pre-condition for permitting additional grounds is reasonableness. In this case, the request was deemed reasonable as the legal issues were on record, and the Tribunal had previously ruled in favor of the assessee for similar matters in other years.

5. The judgment acknowledges the need for procedural remittance to the Commissioner of Income-tax (Appeals) to consider the additional ground. However, a subsequent court decision regarding a similar issue led to a final decision in the present appeal, determining the sales tax subsidy as a revenue receipt, not capital.

6. Following the legal principles established in prior cases, the judgment concludes by deciding the additional issue raised by the assessee on its merits, aligning with the court's previous ruling on a similar matter. The appeals are disposed of accordingly.