Commissioner Of Income-Tax, A.P v. Gangappa Cables Ltd.

1. The following question has been referred to this court at the instance of the revenue for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law to permit the assessee to raise for the first time a claim for Section 80J(1) relief in the appeal filed before it ?"

2. The learned counsel for the revenue, Mr. Rama Rao, relying upon the decision of the Supreme Court in Addl. CIT v. Gurjargravures P. Ltd. , contended that it is not open to an assessee to claim any relief before the AAC or before the Tribunal which he had not claimed before the ITO.

3. The facts necessary for determining the question referred to us and raised by the learned counsel are these : The assessee, Messrs. Gangappa Cables Ltd., Hyderabad, is a limited company carrying on business of manufacturing cables. The assessee filed an appeal before the Tribunal as it was aggrieved by the orders of the ITO and the AAC that certain expenditure incurred by it prior to the date when it went into commercial production was not allowable deduction under the provisions of section 80j(1) of the i.t. act. The amount of expenditure incurred by the assessee prior to the date when it went into commercial production was a sum of Rs. 1,81,694. It was the case of the revenue before the Tribunal that it was not open to the assessee to claim relief under Section 80J(1) as no such relief was claimed by it before the ITO. The Tribunal negatived that contention, holding that it had discretion to admit a new ground depending upon the facts of each case and that, on the facts of the case, the omission to take this ground before the lower authorities was a bona fide mistake and, therefore, it should be permitted to be raised before it. The Tribunal, on the facts placed before it, recorded a finding :

"The assessee filed the return of income duly accompanied by the directors' report showing the profit and loss account and balance-sheet. There were also other statements filed. The question whether allocation of the entire expenditure to the capital assets can be done was also mooted before the Income-tax Officer. Therefore, all the necessary details for allowing a claim under Section 80J(1) were practically there before the Income-tax Officer."

4. It is on that finding that the Tribunal expressed the view that the assessee was entitled to make a claim under Section 80J(1) and allowed the claim. Hence, the reference.

5. The facts of the case with which the Supreme Court was concerned in Addl. CIT v. Gurjargravures P. Ltd. are these: The asses-see was carrying on business of copper engraving and manufacturing of labels, etc. It appealed to the AAC against an order of assessment made under Section 143(3) and one of the grounds of appeal was that the ITO had erred in not giving the assessee any benefit under Section 84 of the Act. No claim, however, was made before the ITO when he completed the assessment that the assessee was entitled to an exemption in respect of a portion of its profits under Section 84. The AAC dismissed the appeal on the ground that no question of error on the part of the ITO arose. The Tribunal took a contrary view and held that since the entire assessment was open before the AAC, there was no reason for not entertaining the claim of the assessee. Then on a reference to the High Court of Gujarat, the High Court agreed with the Tribunal's view. The correctness of the view expressed by the Tribunal was questioned before the Supreme Court. The Supreme Court on those facts stated (p. 5):

"We are not here called upon to consider a case where the assessee failed to make a claim though there was evidence on record to support it, or a case where a claim was made but no evidence or insufficient evidence was adduced in support. In the present case neither any claim was made before the Income-tax Officer, nor was there any material on record supporting such a claim. We, therefore, hold that, on the facts of this case, the question referred to the High Court should have been answered in the negative."

6. It is thus plain that the Supreme Court was not dealing with a case where there was evidence on record to support a claim or where a claim was made but there was no evidence or the evidence adduced was insufficient. That was a clear case where neither any claim was made before the ITO, nor was there any material on record supporting such a claim. The finding extracted supra of the Tribunal would show that in the present case there was material and all the necessary details for allowing a claim under Section 80J(1) were there before the ITO. We are, therefore, unable to agree with the learned counsel for the revenue that the decision of the Supreme Court applies even to a case where there was evidence on record to support a claim put forth by the assessee. The Supreme Court in CIT v. Maha-lakshmi Textile Mills Ltd. , dealing with the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the departmental authorities opined that there is nothing in the I.T. Act which restricts the Tribunal to the determination of questions raised before the departmental authorities and that all questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal. That was a case where for the first time before the Tribunal a claim was put forth by the assessee on the basis of introduction of casa-blanca conversion system that the expenditure incurred in that regard was of revenue nature. The High Court had taken the view that the Tribunal had jurisdiction to permit the assessee to raise a new contention which was not raised before the departmental authorities. The Commissioner went up to the Supreme Court by special leave.

7. To the same effect was the view expressed by the Supreme Court earlier in Hukumchand Mills Ltd. v. CIT . The Supreme Court construing the words "pass such orders as the Tribunal thinks fit" held that those words include all the powers (except possibly the power of enhancement) which are conferred upon the AAC by Section 31 of the Act. That was, of course, a case where the Tribunal had directed the AAC or the ITO to hold a further enquiry and dispose of the case on the basis of such enquiry. No doubt, it was not a case where any claim for exemption was made under any provisions of law.

8. We are of the opinion that when there is sufficient evidence on record to support a claim, neither the AAC nor the Tribunal is barred from entertaining a claim on the basis of the evidence on record which is sufficient to support the claim. The decision of the Supreme Court in Addl. CIT v. Gurjargravures P. Ltd. , therefore, is no bar to the entertaining of the claim by the AAC or the Tribunal, in view of the fact that all the necessary material for allowing a claim under Section 80J(1) was before the ITO.

9. In the result, the reference is answered in the affirmative and against the revenue with costs. Advocate's fee Rs. 250.