The Judgment of the Court was delivered by

S.C Agrawal, J.:— This reference has been made by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as “the Tribunal”), under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), whereby the following questions have been referred for consideration of this court:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not entertaining and adjudicating upon the additional ground raised on behalf of the assessee-company?

(2) Whether, on the facts and in the circumstances of the case, the term ‘profit’ occurring in rule 19(5) of the Income-tax Rules, 1962, was rightly taken by the Tribunal to signify profit as per profit and loss account of the assessee and such profit without add back of depreciation?”

2. This reference relates to the assessment year 1963–64. The appellant, Jaipur Udyog Limited (hereinafter referred to as the “assessee”), is a public limited company carrying on the business of manufacturing cement at Sawaimadhopur. The assessee claimed deduction under section 84 of the Act in respect of the fourth cement plant set up by it. While dealing with the said claim of the assessee, the Income-tax Officer determined the capital employed by taking into account the total profit as Rs. 87,11,985 and the proportionate amount relatable to the fourth plant out of the total profit was assessed at Rs. 26,66,934. The claim of the assessee is that, for the purpose-of computing the amount of profit, the depreciation amounting to Rs. 43,64,760 should have been added. The said claim of the assessee was, however, not accepted by the Income-tax Officer. The Appellate Assistant Commissioner, on appeal, was of the view that the increase in the capital should be Rs. 14,06,567 instead of Rs. 26,66,934 made by the Income-tax Officer. Before the Tribunal, it was submitted by the assessee that the amount of Rs. 43,64,760 should be added to the total amount of profit of Rs. 87,11,985 for the purposes of determining the average profit and, on that basis, there should be an increase of Rs. 20,01,542 in the capital already worked out. Before the Tribunal, an additional ground was urged on behalf of the assessee that the Appellate Assistant Commissioner should not have entertained the appeal of the assessee and that the said appeal was incompetent because an appeal could be filed before the Appellate Assistant Commissioner against an order passed under section 143(3) or section 144 and the order of the Income-tax Officer giving effect to an appellate order is a mere administrative order which cannot be equated with an order under section 143(3), and, therefore, it cannot be the subject-matter of an appeal to the Appellate Assistant Commissioner. The Tribunal was of the view that the additional ground sought to be raised by the assessee with regard to the maintainability of the appeal before the Appellate Assistant Commissioner seeks to nullify the gain of the Revenue and at the same time, seeks to protect its own gain erroneously granted to it by the Income-tax Officer. In this context, the Tribunal has observed that, before the Appellate Assistant Commissioner, it was submitted on behalf of the assessee that the consequential order passed by the Income-tax Officer was a mini assessment order giving effect to the findings of the Tribunal and the same was, therefore, appealable under section 246 and the said contention of the assessee was accepted by the Appellate Assistant Commissioner. It has also been observed by the Tribunal that, in the memorandum of appeal, no such ground with regard to the competency of the appeal before the Appellate Assistant Commissioner was raised and the Tribunal held that the omission from the memorandum of appeal was quite natural and consistent with the assessee's own stand taken earlier and that what the assessee was seeking to do now is a volte face which involves clogging of the machinery of appeal set in motion by the assessee itself and nullification of the order of the Appellate Assistant Commissioner already passed in appeal on the assessee's own motion. The Tribunal did not permit the assessee to raise the additional ground with regard to the maintainability of the appeal before the Appellate Assistant Commissioner. For the purpose of computing the profits under rule 19(5) of the Income-tax Rules, 1962, the Tribunal held that, in ordinary commercial sense, real profit cannot be determined without taking into account all items of manufacturing expenditure or cost and that depreciation represents the value of the wear and tear of the depreciable assets in a particular year and, in that sense, it is an item of manufacturing cost. The Tribunal held that it was necessary to deduct the depreciation along with the other items of manufacturing cost in order to arrive at real profits in the commercial sense and, in that view of the matter, the Tribunal held that the authorities below were right in adopting the profit as per profit and loss account of the assessee without adding back depreciation for the purpose of determining the average profit in terms of rule 19(5).

3. Thereupon the assessee moved the Tribunal for referring the questions of law arising out of the order of Tribunal for consideration of this court and the Tribunal has referred the questions mentioned above for the consideration of this court.

4. Nobody has appeared on behalf of the assessee. We have heard Mr. V.K Singhal, learned counsel for the Revenue.

5. With regard to question No. 1, we find from the record that the assessee had gone in appeal before the Appellate Assistant Commissioner and, at that stage, a question arose with regard to the competency of the said appeal. It was submitted on behalf of the assessee that the appeal was competent because the consequential order passed by the Income-tax Officer was a mini assessment order giving effect to the findings of the Tribunal and that the same was appealable. The said submission on behalf of the assessee was accepted by the Appellate Assistant Commissioner and the appeal was entertained. After the appeal was decided by the Appellate Assistant Commissioner, the assessee filed an appeal before the Tribunal and, in the grounds of the said appeal, the assessee did not agitate the question as to the maintainability of its appeal before the Appellate Assistant Commissioner. At a subsequent stage, the assessee sought to raise this question with regard to the maintainability of the appeal as an additional ground. The Tribunal has held that the assessee could not be permitted to raise this additional ground in the facts and circumstances of the case and more specially in view of the stand taken by the assessee before the Appellate Assistant Commissioner. It is well-settled that a person who does not raise an objection with regard to jurisdiction of a Tribunal and permits the Tribunal to adjudicate under the hope that the decision may be in his favour cannot be permitted to assail the said decision when it goes against him. The said principle would be applicable with greater force to a case like the present one where a party invites the Tribunal to entertain the appeal and seeks to challenge the order when it goes against it. The assessee having invited the Appellate Assistant Commissioner to entertain the appeal against the order of the Income-tax Officer cannot be permitted to assail the order passed by the Appellate Assistant Commissioner on the said appeal on the ground that the Appellate Assistant Commissioner had no jurisdiction to entertain the appeal. We are, therefore, in agreement with the view of the Tribunal and question No. 1 must be answered in the affirmative, i.e, against the assessee and in favour of Revenue.

6. As regards question No. 2, it may be mentioned that this question arose in the context of deduction claimed by the assessee under section 84 of the Act, which was in force at the relevant time. Section 84 made a provision for relief in cases of newly established undertakings and the said provision was similar to that contained in section 15C of the Indian Income-tax Act, 1922 (old Act). Rule 19 of the Income-tax Rules, 1962, prescribes the mode of computation of the capital employed in an industrial undertaking or a hotel.

7. Sub-rule (5) of rule 19 provides as under:

“(5) For the purpose of ascertaining the average amount of capital employed in a business during any computation period, the profits or losses made in that period shall, except so far as the contrary is shown, be deemed—

(a) to have accrued at an even rate throughout the said period and

(b) to have resulted, as they accrued, in a corresponding increase or decrease, as the case may be, in the capital employed in the business.”

8. The question which requires consideration is whether the term “profits” occurring in rule 19(5) of the Income-tax Rules, 1962, was rightly taken by the Tribunal to signify profits as per profit and loss account of the assessee without adding back the depreciation claimed. The case of the assessee is that profit under rule 19(5) means profit after adding back the depreciation.

9. In CIT v. S.S Sivan Pillai, [1970] 77 ITR 354 (SC), the Supreme Court, while considering the provisions of section 15C of the old Act, has laid down that exemption under section 15C(1) from payment of income-tax is not related to the business profits and that it is related to the taxable profits. In other words, the said decision of the Supreme Court shows that, for the purpose of section 15C of the old Act, the term “profit” means taxable profit, viz., the profit as arrived at after making deductions permissible under the provisions of the old Act. The scheme of section 84 of the Act is similar to that of section 15C of the old Act and, therefore, the term “profit” in section 84 should be construed in the same sense to mean taxable profit. Rule 19 seeks to give effect to the provisions of section 84 of the Act and the term “profit” under rule 19(5), therefore, must have the same meaning as that expression had in section 84 of the Act. In our opinion, therefore, for the purpose of rule 19(5), the term “profits” has to be construed to mean taxable profit, i.e, profit arrived at in accordance with the provisions of the Act, i.e, after deducting the depreciation permissible under the Act, and, therefore, the amount of depreciation cannot be added back for the purposes of determining the profit under rule 19(5). For the aforesaid reasons, we are in agreement with the view of the Tribunal in this regard and question No. 2 must, therefore, be answered in the affirmative, i.e, in favour of the Revenue and against the assessee. In the result, both the questions referred by the Tribunal are answered in the affirmative, i.e, in favour of the Revenue and against the assessee.

10. No order as to costs.