1985 (9) TMI 106 - AT - Income Tax

Summary

Issues:
1. Admission of additional ground in appeal.
2. Taxability of amount set aside under section 10A of U.P. Sheera Niyantran Adhiniyam.
3. Whether the amount set aside forms part of the assessee's income.
4. Interpretation of the Tribunal's decision in Nizam Sugar Factory v. ITO.
5. Applicability of the decision in CIT v. Tollygunge Club Ltd.
6. Direction to the ITO for calculation of income-tax.
7. Allowance of depreciation on assets not granted in original assessment.

Issue 1 - Admission of additional ground in appeal:
The Tribunal admitted the additional ground raised by the assessee despite opposition from the departmental representative. The Tribunal found it necessary in the interest of justice to admit the ground as it was the main ground in the appeal, and the omission to take the ground did not appear to be intentional. The Tribunal emphasized that the additional ground was raised promptly after realizing the oversight, and hence, it was admitted.

Issue 2 and 3 - Taxability of amount set aside under section 10A:
The Tribunal considered the provision of section 10A of U.P. Sheera Niyantran Adhiniyam, which directed the setting aside of a specific amount for storage facilities. The assessee had set aside Rs. 20,218 for this purpose, claiming it did not form part of its income. However, the Tribunal held that this amount was an application of income earned by the assessee and was not exempt from taxation. The Tribunal rejected the argument that the amount was not taxable, emphasizing that the setting aside of income for a specific purpose did not create an overriding charge or trustee relationship.

Issue 4 - Interpretation of Tribunal's decision in Nizam Sugar Factory case:
The Tribunal distinguished the Nizam Sugar Factory case, where a similar amount was held not to be part of the income. In the present case, the Tribunal noted that the counsel failed to provide evidence of the Excise Commissioner's order for the maintenance and construction of storage facilities. The Tribunal also highlighted the differences in legislation between states, making it challenging to apply decisions from other jurisdictions.

Issue 5 - Applicability of CIT v. Tollygunge Club Ltd. decision:
The Tribunal discussed the decision in CIT v. Tollygunge Club Ltd., emphasizing that it was not applicable to the present case. In the Tollygunge Club case, the amount set aside was for charitable purposes and not for the assessee's own business requirements. The Tribunal concluded that the Tollygunge Club decision did not support the assessee's argument regarding the taxability of the amount set aside in the current case.

Issue 6 - Direction to the ITO for calculation of income-tax:
The Tribunal found that the Commissioner (Appeals) had provided a clear direction to the ITO regarding the calculation of income-tax in paragraph 3 of the order. Therefore, the Tribunal saw no reason to interfere with this aspect of the decision.

Issue 7 - Allowance of depreciation on assets not granted in original assessment:
The Tribunal rejected the contention that depreciation on assets not granted in the original assessment should be allowed during the reassessment. Citing the decision in Sir Shadi Lal & Sons v. CIT, the Tribunal held that on reassessment, only matters relevant to the income that had escaped assessment could be considered. Claims for expenditures disallowed in the original assessment could not be re-agitated during reassessment for previously unassessed income.

In conclusion, the Tribunal dismissed the appeal, upholding the taxability of the amount set aside under section 10A and rejecting claims for depreciation on assets not granted in the original assessment.