Maintainability estoppel and taxable profits under rule 19(5): appellate objection rejected, depreciation must be deducted.

A party that had earlier invited the appellate forum to entertain an appeal was not allowed, at the second appellate stage, to later challenge that forum's maintainability; the objection was barred on the facts and failed. For computation of average capital employed under rule 19(5), "profits" were construed as taxable profits determined under the Act, not commercial profits from the profit and loss account. Depreciation had to be deducted in arriving at those profits and could not be added back. Both points were answered in favour of the Revenue, leaving no relief on the reference.

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Issues: (i) Whether the assessee could be permitted, at the stage of second appeal, to question the maintainability of the appeal it had earlier invited the first appellate authority to entertain. (ii) Whether, for computing average capital employed under rule 19(5), "profits" meant commercial profit from the profit and loss account or taxable profit after allowing depreciation.

Issue (i): Whether the assessee could be permitted, at the stage of second appeal, to question the maintainability of the appeal it had earlier invited the first appellate authority to entertain.

Analysis: The objection was not raised in the memorandum of appeal before the Tribunal and was sought to be introduced later as an additional ground. The assessee had earlier taken the stand that the consequential order was appealable and had successfully induced the first appellate authority to entertain the appeal. A party cannot invite a tribunal to assume jurisdiction and later challenge that very jurisdiction after an adverse result. The objection was therefore barred on the facts.

Conclusion: The assessee was not entitled to raise the objection to maintainability, and the finding was against the assessee.

Issue (ii): Whether, for computing average capital employed under rule 19(5), "profits" meant commercial profit from the profit and loss account or taxable profit after allowing depreciation.

Analysis: The relief under section 84 was treated as analogous to the relief under section 15C of the Indian Income-tax Act, 1922, where profit was understood as taxable profit and not mere business or commercial profit. Rule 19(5) was read as giving effect to that statutory scheme. On that construction, profits for rule 19(5) had to be determined in accordance with the Act itself, which required deduction of allowable depreciation, and depreciation could not be added back.

Conclusion: "Profits" under rule 19(5) meant taxable profits after deducting depreciation, and the finding was against the assessee.

Final Conclusion: Both referred questions were answered in favour of the Revenue, leaving no relief on the merits of the reference.

Ratio Decidendi: A party that has invited an appellate forum to assume jurisdiction cannot later challenge that jurisdiction after an adverse decision, and for a statutory relief computed by reference to profits, the expression "profits" means taxable profits determined under the Act, not commercial profits shown in the accounts.

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