1984 (10) TMI 97 - AT - Income Tax

Issues Involved:
1. Admissibility of additional grounds not raised before lower authorities.
2. Nature of certain receipts (cash compensatory support, duty drawback, and income from sale of import entitlement) as capital or revenue receipts.
3. Application of Section 10(17B) of the Income-tax Act.
4. Correct head of income for taxation of specific receipts.
5. Taxability of government grants under Article 266(3) of the Constitution.
6. Admissibility of additional grounds raised by the departmental representative.
7. Reference to High Court on the interlocutory order of the Tribunal.

Detailed Analysis:

1. Admissibility of Additional Grounds Not Raised Before Lower Authorities:
The primary issue was whether the Tribunal was right in law in entertaining additional grounds that had not been raised before the lower authorities. The Tribunal admitted these additional grounds based on the principle that if there are two different judicial opinions, the one favoring the assessee should be followed. This approach was supported by the Supreme Court judgment in CIT v. Vegetable Products Ltd. The Tribunal noted that the grounds did not involve fresh facts and thus, should be admitted for consideration.

2. Nature of Certain Receipts as Capital or Revenue Receipts:
The Tribunal admitted additional grounds questioning the nature of various receipts:
- Cash compensatory support.
- Drawback of duty.
- Income from the sale of import entitlement.
The assessee contended these were capital receipts and non-taxable, contrary to the treatment by the ITO and Commissioner (Appeals) as revenue receipts included in taxable profits.

3. Application of Section 10(17B) of the Income-tax Act:
The assessee argued that the assessing authority failed to apply Section 10(17B) of the Income-tax Act, which would exclude certain amounts from total income. The Tribunal admitted this ground for consideration along with other grounds.

4. Correct Head of Income for Taxation of Specific Receipts:
The assessee contended that the assessing authority failed to determine the correct head of income under which the impugned receipts should be taxed. The Tribunal admitted this ground, allowing it to be heard along with other grounds.

5. Taxability of Government Grants under Article 266(3) of the Constitution:
The assessee argued that grants made by the Government for export promotion should not be taxable under the charging provisions of the Income-tax Act, 1961, thus violating Article 266(3) of the Constitution. The Tribunal admitted this ground for consideration.

6. Admissibility of Additional Grounds Raised by the Departmental Representative:
The Tribunal also admitted an additional ground raised by the departmental representative regarding the disallowance of weighted deduction under Section 35B on commission for export sales, citing the judgment in CIT v. Southern Sea Foods (P.) Ltd.

7. Reference to High Court on the Interlocutory Order of the Tribunal:
The Commissioner sought a reference to the High Court on whether the Tribunal's order admitting additional grounds constituted an order under Section 254 of the Act. The Tribunal concluded that the order admitting additional grounds was not an order under Section 254, as it did not dispose of the appeal. The Tribunal cited various case laws, including Trikamlal Maneklal, In re., Munna Lal & Sons v. CIT, and CIT v. Calcutta Discount Co. Ltd., to support its decision that no reference could be made at this interlocutory stage. The Tribunal emphasized that questions of law could be raised and considered only when the Tribunal passes a final order disposing of the appeal.

Conclusion:
The Tribunal admitted the additional grounds raised by both the assessee and the departmental representative for consideration along with the original grounds of appeal. It held that the order admitting additional grounds was not an order under Section 254 and thus, no reference to the High Court could be made at this interlocutory stage. The reference applications filed by the Commissioner were rejected, with the Tribunal noting that questions of law could be raised after the final order is passed.

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