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Issues involved: The issues involved in this legal judgment are: 1. Whether the Tribunal failed to exercise its discretion judiciously in declining to allow the assessee to raise additional ground at the hearing regarding legal expenses and fees paid, and 2. Whether the Tribunal was correct in holding that a claimed deduction was not admissible under specific sections of the Income-tax Act, 1922.
Issue 1: Additional Ground for Legal Expenses The assessee, a partnership firm, claimed a deduction for legal expenses and fees paid, which was disallowed by the Income Tax Officer (ITO). The assessee did not contest this disallowance before the Appellate Assistant Commissioner (AAC) and did not raise it in the appeal before the Tribunal. The Tribunal refused to allow the assessee to raise this contention, stating that the claim was not kept alive before the AAC. The High Court cited previous judgments emphasizing that the Tribunal's jurisdiction is restricted to the subject matter of the appeal before the AAC. As the deduction of legal expenses was not the subject matter of appeal before the Tribunal, it was held that the Tribunal had no jurisdiction to allow the assessee to raise this ground. The court's answer to this question was in the negative and against the assessee. Issue 2: Deduction Claim under Income-tax Act The second issue pertained to a deduction claimed by the assessee firm in relation to managing agency and sole selling agency agreements. The Tribunal found that no liability had accrued in the accounting year under consideration based on the terms of the sole selling agency agreement. The assessee contended that the liability was not contingent, but the Tribunal held that no liability had been incurred in the relevant year. The High Court agreed with the Tribunal's findings, stating that the letter provided by the mill company did not specify when the liability was incurred. As the liability accrued when the amount became due from the parties, and no evidence was presented to show the liability in the relevant year, the deduction was not admissible under the Income-tax Act. The court's answer to this question was in the affirmative and against the assessee. In conclusion, the High Court upheld the Tribunal's decision regarding both issues, emphasizing the importance of jurisdictional limitations and the need for clear evidence to support deduction claims under the Income-tax Act, 1922.
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