1993 (4) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Admissibility of additional ground regarding surtax liability.
2. Deductibility of surtax liability under Section 37 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Ground Regarding Surtax Liability:

The primary issue was whether the additional ground regarding the surtax liability, raised by the assessee at the Tribunal stage, should be admitted. The assessee's representative argued that the additional ground is a pure question of law involving no investigation of fresh facts and cited the Supreme Court judgment in Jute Corpn. of India Ltd. v. CIT to support its admissibility. The Departmental Representative objected, arguing that income-tax and surtax proceedings are separate and that admitting the additional ground would involve investigating fresh facts, referencing the Supreme Court decision in Addl. CIT v. Gurjargravures (P.) Ltd.

Upon careful consideration, the Tribunal decided to admit the additional ground. The Tribunal relied on several judicial precedents, including the Supreme Court's rulings in Hukumchand Mills Ltd. v. CIT and CIT v. Mahalakshmi Textile Mills Ltd., which established that the Tribunal has broad powers to admit new grounds of appeal. The Tribunal emphasized that its role is to ensure the correct assessment of tax liability, which may involve considering new grounds not raised before the lower authorities. The Tribunal also noted that the principles laid down in Jute Corpn. of India Ltd. are applicable, allowing additional grounds if they arise from a settled view of the law and provided the other party is given an opportunity to be heard.

2. Deductibility of Surtax Liability Under Section 37 of the Income-tax Act:

On the merits of the additional ground, the assessee argued that the surtax liability is deductible under Section 37 of the Income-tax Act, citing the Gauhati High Court decisions in Makum Tea Co. (India) Ltd. v. CIT and Doom Dooma Tea Co. Ltd. v. CIT. The Tribunal noted that the law laid down by the Gauhati High Court, which is binding on the Income-tax Department, supports the deductibility of surtax liability under Section 37.

The Tribunal acknowledged that the assessee had submitted a return of chargeable profits under the Surtax Act, indicating a prima facie liability to pay surtax. However, the Tribunal found that there was insufficient material to determine the exact surtax liability and whether an assessment had been made under the Surtax Act.

Conclusion and Order:

The Tribunal admitted the additional ground regarding the surtax liability and remanded the matter to the Assessing Officer. The Assessing Officer was directed to ascertain the exact amount of surtax liability and apply the law as laid down by the Gauhati High Court in Doom Dooma Tea Co. Ltd.'s case to determine the allowability of the claim. The cross-objection was partly allowed.

Summary:

The Tribunal admitted the additional ground regarding the surtax liability raised by the assessee, citing judicial precedents that support the Tribunal's broad powers to consider new grounds. The Tribunal remanded the matter to the Assessing Officer to determine the exact surtax liability and apply the relevant legal principles to decide on the deductibility of the surtax liability under Section 37 of the Income-tax Act.