1996 (12) TMI 7 - SC - Income Tax

Powers/jurisdiction of Tribunal - held that tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee and have the discretion to allow or not allow a new ground to be raised

Summary

Issues:
Assessment of interest income on short-term deposits for tax purposes

Analysis:
During the assessment year 1978-79, the assessee deposited funds not immediately required on short-term deposits with banks, resulting in interest income of Rs. 22,84,994. The assessee offered this amount for tax assessment, which was included in the assessment without challenge. Subsequently, the assessee sought to raise additional grounds challenging the inclusion of this interest income, citing legal precedents indicating such income before business setup is not taxable. The Tribunal declined to entertain these additional grounds, prompting a question on whether the Tribunal has jurisdiction to examine new questions of law affecting tax liability not raised earlier.

The Supreme Court held that the power of the Tribunal in dealing with appeals is extensive under section 254 of the Income-tax Act, allowing for consideration of new grounds affecting tax liability. Referring to the case of Jute Corporation of India Ltd. v. CIT, the Court emphasized that appellate authorities have broad powers to entertain additional grounds if raised bona fide and not previously raised for valid reasons. The Court rejected the notion that the Tribunal is limited to issues from the Commissioner of Income-tax (Appeals), asserting that questions of law affecting tax liability should be allowed even if not raised earlier.

In conclusion, the Court affirmed that the Tribunal has the jurisdiction to examine questions of law arising from facts found by lower authorities and impacting tax liability. The case was remanded to the Tribunal for consideration of the new grounds raised by the assessee on their merits, highlighting the importance of ensuring correct assessment of tax liability based on relevant legal principles and factual circumstances.