1983 (6) TMI 68 - AT - Income Tax

Appellate Authority, Assessment Order, Development Allowance, President Of Tribunal, Weighted Deduction

Issues Involved:

1. Condonation of delay in filing the appeal.
2. Jurisdiction to hear the appeals.
3. Claim under section 35B of the Income-tax Act.
4. Claim under section 80J of the Income-tax Act.
5. Allowability of royalty payments as revenue expenditure.
6. Maintainability of the revenue's appeal regarding the enhancement of assessment.

Issue-wise Detailed Analysis:

1. Condonation of delay in filing the appeal:

The assessee filed IT Appeal No. 157 (Nag.) of 1981 late and submitted an application for condonation of delay. The delay occurred because the assessee's appeals were heard in Delhi due to transfers, and the papers were mistakenly sent to Delhi instead of Nagpur. After reviewing the application and hearing both sides, the Tribunal condoned the delay, noting that the grounds in the appeal were identical to those in the cross-objection.

2. Jurisdiction to hear the appeals:

The learned standing counsel argued that the Tribunal had no jurisdiction to hear the appeals as the President had no power to transfer these appeals from Nagpur Bench to Delhi Bench. He cited Standing Order No. 1 of 1973 and relevant case law. The Tribunal rejected this objection, stating that Section 255 of the Income-tax Act, 1961, allows the President to constitute Benches and assign cases. Rule 4 of the Income-tax (Appellate Tribunal) Rules, 1963, empowers the President to issue general or special orders for case assignments. The Tribunal found that the President's power to pass special orders was not exhausted by issuing a general order. The President followed the proper procedure, including obtaining objections from the Commissioner, before transferring the appeals. Therefore, the Tribunal held that the transfer was valid and proceeded to dispose of the appeals on merits.

3. Claim under section 35B of the Income-tax Act:

The assessee, a limited company manufacturing Ferro Chrome, claimed a weighted deduction under section 35B for export-related expenditure. The ITO allowed only a partial deduction, and the Commissioner (Appeals) rejected the additional claim, stating that the assessee was not the real exporter but rather MMTC was. The Tribunal disagreed, stating that Section 35B allows weighted deductions for specific expenditures incurred by the assessee, regardless of whether the assessee is the exporter. The Tribunal emphasized that the section does not require the claimant to be the exporter, only that the expenditure be related to the assessee's goods. Therefore, the Tribunal found the revenue's objection untenable and directed the ITO to consider the additional claim.

4. Claim under section 80J of the Income-tax Act:

The assessee challenged the disallowance of Rs. 15,22,422 under section 80J, particularly the exclusion of borrowed moneys from the computation of capital employed. The Commissioner (Appeals) upheld the ITO's computation based on the retrospective amendment to section 80J by the Finance (No. 2) Act, 1980. The assessee filed a writ petition in the Supreme Court challenging the validity of the amendment, and the Court granted an interim stay. The Tribunal followed the practice of directing the ITO to determine the matter in light of the Supreme Court's decision, without deciding the issue itself, to avoid conflicting with the stay order.

5. Allowability of royalty payments as revenue expenditure:

The assessee paid royalty under a collaboration agreement for technical know-how. The ITO allowed the payment, but the Commissioner (Appeals) upheld the allowance despite the ITO's later contention for disallowance. The revenue appealed, arguing that the payments were capital in nature. The Tribunal noted that the Commissioner (Appeals) had already decided similar issues in favor of the assessee in previous years. The Tribunal reiterated that the ITO cannot appeal against his own order, and the Commissioner (Appeals)'s refusal to enhance the assessment does not create a right for the ITO to appeal. The Tribunal treated the Commissioner's findings as superfluous and non-binding, dismissing the revenue's ground on this issue.

6. Maintainability of the revenue's appeal regarding the enhancement of assessment:

The revenue sought to challenge the Commissioner (Appeals)'s refusal to enhance the assessment based on the ITO's letter. The Tribunal emphasized that the ITO has no right to appeal against his own order or seek enhancement through the appellate authority. The Tribunal clarified that the first appellate authority's powers are limited to acting on its own and not at the instance of the ITO. The Tribunal concluded that the Commissioner (Appeals)'s observations on the merits of the claim were non-binding and superfluous, and the revenue's appeal on this ground was not maintainable.

Conclusion:

Both the departmental appeals and the cross-objections were dismissed, while the assessee's appeal was allowed in part. The Tribunal provided detailed reasoning on each issue, emphasizing proper procedural adherence and legal interpretations.

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