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TMI Blog1990 (2) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... nce No. 90 of 1984 (relating to the assessment year 1977-78) and Income-tax Reference No. 89 of 1984 (relating to the assessment year 1978-79) are as follows Income-tax Reference No. 90 of 1984 : "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in disallowing an amount of Rs. 19,53,904 being bonus paid during the accounting year, but relating to the year preceding the accounting year, when this was treated as an allowable deduction for computation of taxable income by the Income-tax Officer and when there was no appeal/cross-objection by the Department in respect of the same before the Appellate Tribunal ? (2) Having come to the conclusion that the assessee was entitled to deduct the provision of accrued liability for bonus payable to the employees for the previous year, that is, Rs. 42,67,500, was the Appellate Tribunal right in disallowing the amount of Rs. 19,53,904 being bonus for the year preceding the previous year ? (3) Whether, on the facts and in the circumstances of the case, the assessee is not entitled to the deduction of the bonus paid to the employees in the previous year towards liability for the same in the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bonus that is actually paid during the previous year. For the first time, in the assessment year 1977-78, the assessee desired to depart from this practice. It wrote a letter dated August 20, 1979, to the Incometax Officer. It stated that in addition to the claim for the payment relating to the preceding year, that was actually paid, for this assessment year the assessee has decided to claim the bonus for the current year's "accrued liability". The reason stated was that the company was converted into rupee company. The assessee claimed Rs. 42,67,500 as "a provision" for this (current) assessment year and Rs. 19,53,904 as bonus "paid" relating to the preceding accounting year. The bonus related to the estate staff and labour. The Income-tax Officer held that the reason stated for deviation from the practice hitherto adopted was untenable and allowed only the liability of the preceding accounting year, that was "actually paid", as deduction. This was confirmed in appeal by the Commissioner of Incometax (Appeals). He added that regarding the bonus payment, the assessee was following the cash system of accounting or the actual payment basis. Before the Appellate Tribunal, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted two points or aspects which are germane to answer the questions referred by the Appellate Tribunal for the decision of this court. They are : (1) The Income-tax Officer allowed deduction of bonus that was actually paid during the previous year. This is on actual payment basis or on cash basis. It was upheld by the Commissioner of Income-tax (Appeals). There was no appeal by the Revenue against that portion of the order. Even at the assessment stage, the assessee had also claimed deduction for payment of bonus for the current year on the basis of accrued liability. The Appellate Tribunal upheld this claim. In doing so, the Tribunal negatived the claim allowed by the Income-tax Officer and upheld by the Commissioner of Income-tax (Appeals) on the basis of actual payment basis. The Appellate Tribunal was incompetent to do so in an appeal filed by the assessee. The relief granted by the Income-tax Officer and upheld by the Commissioner of Income-tax (Appeals) cannot be interfered with. This is all the more so in the absence of an appeal by the Revenue. Reliance was placed on the decisions in CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC), L. K. Shaik Mohammed Brothers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to give our reasons for the said conclusion. Section 254(1) of the Income-tax Act deals with the powers of the Appellate Tribunal to pass orders in appeal. It is extracted hereinbelow : "254. Orders of Appellate Tribunal.-(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit." The Income-tax (Appellate Tribunal) Rules, 1963, contains rules and regulations relating to the proceedings of the Appellate Tribunal. Rules 11 and 27 of the said Rules, extracted hereinbelow, are also relevant. "11. Grounds which may be taken in appeal. -The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule : Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. 27. Respondent may support order on grounds decided against hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w or of fact which relate to the assessment of the assessee may be raised before the Tribunal : If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him." The Appellate Tribunal is competent to grant relief to an assessee, not merely under the head under which the assessee had made its claim, but even in the alternative under another head, though not put forward (See CIT v. R. B. Rungta and Co. [1963] 50 ITR 233 (Bom)). It is settled law that the Tribunal is not precluded from adjusting the tax liability of the assessee in the light of its findings merely because the findings are inconsistent with the case pleaded by the assessee. (CIT v. S. Nelliappan [1967] 66 ITR 722, 725 (SC)). Law is fairly clear that where the Tribunal finds that disallowance of a particular expenditure under one section by the authorities below is not proper or is unjustified, it is open to the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les to the case on hand, we should state that the question mooted before the Appellate Tribunal was the relief the assessee was entitled to by way of deduction regarding payment of bonus. The assessee claimed it under two counts : (1) actual payment basis, and (2) accrual basis. The authorities below granted partial relief and allowed deduction in part, on actual payment basis. They disallowed deduction claimed on accrual basis. When the matter came up before the Appellate Tribunal, the Tribunal, noticing that the assessee was following the mercantile system of accounting, held that it is entitled in law to deduction for payment on accrual basis only. Relief was granted on that basis. It followed that the assessee was not entitled to any deduction on actual payment basis. The Appellate Tribunal negatived that part of the plea and allowed deduction on the basis of accrual basis which the assessee was entitled to in law. We are of the view that the course adopted by the Appellate Tribunal is justified and is consistent in the light of the law laid down by the Supreme Court in Mahalakshmi Textile Mills Ltd.'s case [1967] 66 ITR 710, 713, the decision in Steel Containers Ltd.'s case [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne and the same head". The assessing authority, having granted the smaller relief, could not appeal against it. But, when the entire matter was before the Tribunal, it was within the competence of the Tribunal to grant the larger relief. It was so done at the instance of the assessee. It could be so done in order to adjust/adjudicate the exact relief the assessee was entitled to. It is not a case where the Revenue was or could be aggrieved by the assessing authority allowing the smaller relief only. The Revenue could not file an appeal from the order of the assessing authority. It was also not aggrieved by the grant of the smaller relief. It was the Appellate Tribunal which substituted the larger relief, in place of the smaller one granted by the lower authorities and the Revenue can be aggrieved, if at all, only when such larger relief was granted. The assessee has only gained an additional amount, by way of relief, at the hands of the Tribunal ; it was not in a worse and more disadvantageous position. The assessee's complaint that, in the absence of an appeal by the Revenue, the Appellate Tribunal, while granting the larger relief, in effect and substance, negatived the smaller r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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