1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Ahmedabad Bench 'A', has referred the following three questions for our opinion under s. 256(1) of the Income-tax Act, 1961 (hereinafter referred to as

"the Act"

"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the expenses incurred on messing and tea are not in the nature of entertainment which could be disallowed under section 37(2B) of the Income-tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in not entertaining the additional grounds raised by the Revenue at the hearing of the appeal ?

(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that no adequate ground was brought out to condone the delay in filing the additional grounds ?"

2. Out of three question referred to us, the first question is directly covered by a decision of this court in CIT v. Patel Brothers & Co. [1977] 106 ITR 424. We, therefore, do not consider it necessary to set out the relevant fact so far as this question is concerned. Following the above decision, this question will have to be answered in the affirmative and against the Revenue.

3. So far as the remaining two questions are concerned, the facts which are relevant are as under. The assessee is a registered partnership firm. The accounts of the assessee-firm disclosed that it had paid interest to its partners. The partners also had paid interest to the assessee-firm and such interest was credited to the interest account of the assessee-firm. While computing the income of the assessee-firm, interest paid to the partners was disallowed. The ITO, however, did not take into consideration the interest paid by the partners to the assessee-firm while disallowing such interest. The contention of the assessee-firm was that the interest paid by the partners ought to have been adjusted against the interest paid by the assessee paid by the assessee-firm to the partners while disallowing interest under s. 40(b) of "the Act". According to the assessee-firm after adjusting interest paid by the partners to the assessee-firm interest which was disallowable worked out to Rs. 38,007. The ITO, however, disallowed the entire interest of Rs. 45, 557 paid by the assessee-firm to its partners under s. 40(b) of "the Act". The ITO also disallowed deduction of expenses of Rs. 12,971 incurred for messing and tea under s. 37(2B) of "the Act" on the ground that they were entertainment expenses. We are not concerned with other claims which were made by the assessee-firm in the course of the assessment proceedings for the assessment year 1972-73.

4. Being aggrieved by the assessment order, the assessee-firm carried the matter in appeal before the AAC wherein the assessee-firm challenged the disallowance of entire interest paid by the assessee-firm to its partners claims made by the assessee-firm. The AAC upheld the assessee-firm's contention that the interest paid by the partners should have been adjusted before disallowing interest paid by the assessee-firm to its partners under s. 40(b) of "the Act". He also held that expenses of Rs. 12,971 described as messing disallowing and tea expenses could not have been disallowed as entertainment expenses under s. 37(2B) of "the Act".

5. Being aggrieved by the order passed by the AAC allowing the assessee-firm's claim for deduction of messing and tea expenses, the Revenue went up in appeal before the Income-tax Appellate Tribunal. Only one ground was raised in the appeal, namely, that the AAC had erred in upholding the assessee-firm's claim for deduction of messing and tea expenses. The Revenue did not challenge the view taken by the AAC with regard to adjustment of interest paid by the partners against interest paid by the assessee-firm to its partners while disallowing interest under s. 40(b) of "the Act". In other words, the Revenue accepted the decision of the AAC that the adjustment as claimed by the assessee-firm was permissible and only the balance of interest paid to the partners after making such adjustment was not a permissible deduction under s. 40(b) of "the Act".

6. The decision of the AAC was rendered on August 25, 1975. The appeal raising only one ground as stated above was filed before the Income-tax Appellate Tribunal on November 7, 1975, which was the last date for filing the appeal. On November 28, 1975, the Revenue sought to raise additional grounds challenging the view taken by the AAC on the question of adjustment of interest as stated above while disallowing interest under s. 40(b) of "the Act". In other words, the Revenue sought to prefer an appeal against that part of the order of the AAC by which he upheld the claim for adjustment of interest paid by the partners to the assessee-firm while disallowing deduction of interest paid to the partners by the assessee-firm under s. 40(b) of "the Act". The assessee-firm resisted the application made by the Revenue to raise additional grounds. It was contended that the appeal against the decision of the AAC allowing the above claim made by the assessee-firm was time-barred and that there was no sufficient ground to condone the delay. No facts or material were placed on record by the Revenue justifying the delay in raising additional grounds or in other words preferring appeal against the order of the AAC, allowing the above claim of the assessee-firm. It was, however, urged that the additional grounds were raised in view of a circular issued by the CBDT revising its earlier view that adjustment of interest as held by the AAC could be made. It was urged that the CBDT had issued fresh directions to the made and the entire interest paid to the partners was liable to be disallowed under s. 40(b) without making any adjustment of interest paid by the partners to the assessee-firm. It was urged that its was taken by the AAC were filed. The circular on which reliance was placed pointed out above, the appeal before the Tribunal was filed on November 7, 1975, which was the last date for filing appeal against the order of the AAC. It would, therefore, appear that the appeal before the Tribunal was filed more than a month after the circular was issued by the CBDT. No material was placed on record to show that this circular issued by the CBDT was not brought to the notice of the ITO before he filed the appeal against the order of the AAC. In spite of the fact that the circular was issued on September 25, 1975, the view taken by the AAC on the question of adjustment of interest paid by the partners while disallowing interest under s. 40(b) of "the Act" was not challenged in the appeal filed on November 7, 1975. The Tribunal held that the appeal filed by the Revenue against the decision of the AAC on the question of disallowance of interest under s. 40(b) of "the Act" was not within time and that there was not sufficient ground to condone the delay. In the result, the Tribunal refused to entertain the additional grounds. It is in the background of these facts that questions Nos. 2 and 3 are referred to us for our opinion.

7. It was urged by Mr. B. R. Shah, learned counsel for the Revenue, that the Revenue had preferred an appeal against the order of the AAC and all that it did was to raise additional grounds on the question of disallowance of interest under s. 40(b) of "the Act". The appeal which was pending before the Tribunal was filed within time and, therefore, the question of condoning delay did not arise. Mr. Shah drew our attention to r. 11 of the I. T. (Appellate Tribunal) Rules, 1963, and urged that, under this rule, it was open to the Revenue to raise additional grounds with the permission of the Tribunal.

8. We are not able to see any force in Mr. Shah's arguments. Claims regarding, (i) messing and tea expenses, and (ii) adjustment of interest paid by the partners to the assessee-firm while disallowing interest paid to the partners under s. 40(b) of "the Act" were separate and distinct claims, which were made in the course of the assessment proceedings. Both these claims were the subject-matter of appeal before the AAC, who, as stated above, upheld them. It is true that it is permissible to file a common memorandum of appeal for both the claims, and, in fact, such a common memorandum of appeal was filed for both the claims before the AAC ; but, at the same time, it could not be gainsaid that each claim made in the appeal could have been filed before the AAC. As pointed out above, the Revenue did not prefer an appeal against the decision of the AAC upholding the assessee-firm's claim that while disallowing interest paid to the partners under s. 40(b) of "the Act" interest paid by the partners of the firm should be adjusted. Therefore, so far as that part of the order of the AAC was concerned, it became final. Revenue had challenged the order of the AAC only in so far as the claim of the assessee was concerned. In other words, the subject-matter of the appeal before the Tribunal was confined to the claim as regards messing and tea expenses. Disallowance of interest under s. 40(b) of "the Act" was not the subject-matter of the appeal. Therefore, when the Revenue sought to raise additional grounds, what in effect and substance it did was to prefer for the first time an appeal against the decision of the AAC upholding the assessee-firm's claim for adjustment of interest paid by the partners while disallowing interest paid to the partners under s. 40(b) of "the Act". Therefore, for all practical purposes, it was a fresh or new appeal so far as this claim was concerned. Such appeal, even assuming that it could have been filed by raising additional grounds, could not have been filed beyond the period of limitation without applying for a condonation of delay on sufficient ground. Such appeal could have been entertained unless the appellant, the Revenue, satisfied the Tribunal that there was sufficient grounds to condone delay in filing the appeal. To clarify the position, we may give an illustration. Say, for example in a civil suit two separate and distinct claims-one in respect of Rs. 10,000 and another in respect of Rs. 15,000-are made and both these claims are rejected by the trial court. If the appeal against the decree of the trial court is confined to the rejection of the claim of Rs. 10,000, can the appellant by raising an additional ground, call into question the rejection of the claim of Rs. 15,000 beyond the period of limitation without showing sufficient grounds for not preferring an appeal within time against the rejection of that claim ? The answer is obviously "no". So far as the rejection of the claim of Rs. 15,000 is concerned, the order of the trial court becomes final when no appeal is preferred against it. Appeal having been confined to the claim of Rs. 10,000, the plaintiff-appellant could not have challenged the decision of the trial court as regards the rejection of the claim of Rs. 15,000 after the expiry of the period of limitation for filing appeal without showing sufficient cause for the delay. Same would be the position in a proceeding arising under "the Act". We have, therefore, no doubt in our mind that by raising the additional grounds, the Revenue was seeking to prefer a fresh appeal against the decision of the AAC allowing the claim of the assessee-firm for adjustment of interest as stated above. A new subject-matter cannot be introduced by raising additional grounds. Rule 11 of the I.T. (Appellate Tribunal) Rules, 1963, on which reliance was place by Mr. B. R. Shah, does not permit an appellant before the Tribunal to introduce an altogether new subject-matter of appeal, in respect of which the decision was accepted. All that it provides is that 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. Under the said rule, the Tribunal has the discretion to permit the appellant to raise additional grounds. The additional grounds must, however, relate to the subject-matter of the appeal and in the guise of raising additional grounds a new item or subject-matter cannot be allowed to be introduced under r. 11. Disallowance of interest under s. 40(b) of "the Act" was not the subject-matter of appeal before the Tribunal. As already stated earlier, the appeal was confined to the assessee-firm's claim in respect of messing and tea expenses. Therefore, additional grounds could have been raised only in respect of the messing and tea expenses which was the subject-matter of the appeal. The additional grounds which were sought to be raised were additional grounds not in return to the messing and tea expenses but altogether a new subject-matter. Therefore, by filing additional grounds what the Revenue sought to do was to file an appeal against the assessee-firm's claim for adjustment of interest as stated above.

9. By raising the additional grounds, the Revenue sought to introduce or bring in a new item, which had nothing to do with the subject-matter of the appeal as originally filed. It was by filing these additional grounds that the Revenue sought to appeal for the first time against the decision of the AAC allowing the assessing-firm's claim for adjustment of interest as state above. User of the expression "additional grounds" will not and cannot alter the real position that under the guise of additional grounds, an appeal against the above decision of the AAC in regard to the above item is sought to be preferred afresh. The appeal in respect of this new item was admittedly belatedly filed and, therefore, it was open to the Tribunal to entertain the additional grounds or new appeal only after considering whether there are sufficient grounds to condone the delay in filing the additional grounds or appeal. Similar view was taken by the Delhi High Court in CIT v. Edward Keventar (Successors) P. Ltd. [1980] 123 ITR 200, 207, wherein it was observed :

"Normally speaking such additional grounds can be urged only in relation to the subject-matter already appealed against and in regard to such grounds the Tribunal has discretion to grant or refuse permission and the grant of permission may also be express or implied. But, where an appellant seeks to bring in new items which had nothing to do with the subject-matter of the appeal as originally filed, it will be as if the appeal in this regard has been filed belatedly and the Tribunal can entertain them only after considering whether there are grounds to excuse the delay in filing the appeal........."

10. We fully agree with the view taken by the Delhi High Court.

11. As already pointed out above, the Revenue failed to make out a case before the Tribunal for condoning the delay. The Tribunal after considering the material which was placed before it and the arguments which were advanced before it, came to the conclusion that there were no sufficient grounds to condone the delay and permit the Revenue to raise additional grounds for bringing in a new item which was not the subject-matter of the appeal as originally filed. It was fully within the discretion of the Tribunal whether or not to condone the delay.

12. It was, however, urged by Mr. Shah that the Board's circular referred to above was brought to the notice of the ITO after the appeal was filed by the Revenue challenging the decision of the AAC on the question of messing and tea and expenses and it was, therefore, that the additional grounds were belatedly raised. No material was produced before the Tribunal to show as to when the above circular was sent to or received by the ITO. In fact, no argument was advanced before the Tribunal that it was because the ITO came to know about the Board's circular after filing of the appeal that the additional grounds were raised belatedly as stated above. The Tribunal was expected to decided the question whether or not to condone the delay on the basis of the material placed before it. It is not open to the Revenue to make out a new case on the basis of facts and materials which were not before the Tribunal. Whether or not to condone delay was a matter within the discretion of the Tribunal and we see reason to interfere with the conclusion reached by the Tribunal. We, therefore, hold that the Tribunal was justified in not entertaining the additional grounds raised by the Revenue. We also hold that no adequate grounds were made out to condone the delay. We, therefore, answer questions Nos. 2 and 3 in the affirmative and against the Revenue.

13. In the result, all the questions are answered in the affirmative and against the Revenue with no order as to costs.