1997 (12) TMI 652 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to deduction under section 36(1)(iii) of the Income-tax Act.
2. Validity of the formula adopted by the Assessing Officer for apportioning the claim.
3. Whether the principles of natural justice were violated.
4. Authority of Mr. Arvind Modi to address arguments before the Tribunal.
5. Interpretation of Rule 2(ii)(b) of the Appellate Tribunal Rules.
6. Validity of the appointment of Mr. Tralshawala as an authorised representative.
7. Whether the requirement for a Government notification and gazetting is mandatory or directory.

Issue-wise Detailed Analysis:

1. Entitlement to Deduction under Section 36(1)(iii) of the Income-tax Act:
The Tribunal was hearing arguments on whether the assessee was entitled to a deduction of Rs. 81.24 crores as interest under section 36(1)(iii) of the Income-tax Act. This issue was central to the appeal and involved detailed examination of the facts and legal provisions.

2. Validity of the Formula Adopted by the Assessing Officer for Apportioning the Claim:
One of the arguments presented by the assessee was that the formula adopted by the Assessing Officer for apportioning the claim should be struck down because the assessee was not given an opportunity to rebut it, nor was the basis of apportionment made known beforehand. This was argued to be a violation of the principles of natural justice.

3. Whether the Principles of Natural Justice Were Violated:
The assessee argued that there had been a violation of the principles of natural justice because no opportunity was given to rebut the formula used by the Assessing Officer. This argument was part of the broader issue of whether the assessee's rights had been infringed during the assessment process.

4. Authority of Mr. Arvind Modi to Address Arguments Before the Tribunal:
The Departmental Representative, Mr. Tralshawala, requested that Mr. Arvind Modi be permitted to address arguments on behalf of the Revenue. This request was opposed by the assessee's counsel, Mr. Vyas, who argued that Mr. Modi's locus standi needed to be clarified in the context of the relevant rules and provisions of law.

5. Interpretation of Rule 2(ii)(b) of the Appellate Tribunal Rules:
The Tribunal examined the interpretation of Rule 2(ii)(b) of the Appellate Tribunal Rules, which defines an "authorised representative" as a person appointed by the Central Government by notification in the Official Gazette to appear, plead, and act for the income-tax authority. The Tribunal held that the words "appear," "plead," and "act" have distinct meanings and that the power to "act" does not include the right to address arguments or plead.

6. Validity of the Appointment of Mr. Tralshawala as an Authorised Representative:
The Tribunal examined whether Mr. Tralshawala was duly appointed as an authorised representative. It was found that no notification issued by the Government of India, duly gazetted, appointing Mr. Tralshawala was produced. Therefore, his appointment was held to be invalid, and consequently, he could not validly appoint Mr. Modi to act on his behalf.

7. Whether the Requirement for a Government Notification and Gazetting is Mandatory or Directory:
The Tribunal held that the requirement for a Government notification, duly gazetted, is mandatory. The absence of such a notification rendered the appointment of Mr. Tralshawala as an authorised representative invalid. The Tribunal rejected the argument that the requirement was merely directory and held that the rule must be strictly complied with.

Conclusion:
The Tribunal concluded that Mr. Arvind Modi could not address arguments before the Tribunal based on the letters dated 1-9-1997 and 27-8-1997. The appeal was scheduled to be taken up for hearing in January 1998, with notices to be issued to both sides.