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Issues involved:
1. Admission of an alternate additional ground by the Income-tax Appellate Tribunal. 2. Whether provision for taxation constitutes a fund under rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964. 3. Treatment of provision for taxation as a fund and computation of capital under rule 2 of the Second Schedule. Issue 1 - Admission of Alternate Additional Ground: The Tribunal rejected the admission of an alternate additional ground raised by the assessee, emphasizing that such additional plea, not arising from the order of the Commissioner of Income-tax (Appeals), cannot be entertained at the stage of hearing. The Tribunal's decision was based on the principle that allowing new grounds at a later stage would undermine the appellate process and statutory limitations on appeals, potentially leading to a party seeking to introduce a completely new case to augment relief beyond the original claim. Issue 2 - Provision for Taxation as a Fund: The Tribunal upheld the contention that provision for taxation constitutes a fund within the meaning of clause (ii) of rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964. This ruling was supported by previous decisions of the High Court, establishing that the provision for taxation should indeed be treated as a fund for the purpose of determining the diminution in the capital under the specified rule. Issue 3 - Computation of Capital under Rule 2: The assessee argued that the diminution in capital under rule 2 of the Second Schedule should only consider the value of shares that yielded dividend income, rather than the total investment in shares. However, the Tribunal accepted the assessee's contention only partially, limiting the diminution to the value of shares producing dividend income. The Tribunal did not admit the assessee's additional ground regarding the treatment of provision for taxation as a fund, as it would have resulted in the complete exemption of diminution from the capital, a situation the Tribunal deemed beyond its authority. In conclusion, the High Court affirmed the rejection of the alternate additional ground, upheld the provision for taxation as a fund, and found the third question unnecessary due to the Tribunal's previous ruling. The judgment did not award costs to either party.
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