Tribunal's power to admit new grounds is limited; one-half of relevant year's profits may be included in capital employed.

The Tribunal's power to admit a new ground is confined to the subject-matter of the appeal as defined by what the Appellate Assistant Commissioner expressly or impliedly decided, so a contention not raised before the departmental authorities and unsupported by any factual foundation cannot be introduced for the first time before the Tribunal. The High Court also applied its earlier ruling in Elecon Engineering Co. Ltd. and held that one-half of the relevant year's profits could be included in computing capital employed for statutory relief. The reference was therefore answered against the Revenue on the new-ground issue and in favour of the assessee on profit inclusion.

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Issues: (i) Whether the Appellate Tribunal could permit the assessee to raise, for the first time, an additional ground that debts and liabilities could not be deducted while computing capital employed for relief under the relevant tax provisions. (ii) Whether the assessee was entitled to include one-half of the profits of the relevant year while computing capital employed for the purpose of relief under the relevant tax provisions.

Issue (i): Whether the Appellate Tribunal could permit the assessee to raise, for the first time, an additional ground that debts and liabilities could not be deducted while computing capital employed for relief under the relevant tax provisions.

Analysis: The jurisdiction of the Tribunal is confined to the subject-matter of the appeal, which is determined by what the Appellate Assistant Commissioner expressly or impliedly decided. A new ground can be permitted only if it falls within that subject-matter. On the facts, the assessee had never urged before the departmental authorities that debts and liabilities, apart from tax liability, were not deductible in computing capital employed, and no factual foundation had been laid for that contention. The doctrine of implied decision could not be invoked to enlarge the scope of the appeal, because no such contention had been raised before the Appellate Assistant Commissioner in the first place.

Conclusion: The Tribunal was not entitled to allow the additional ground, and the answer to this issue is against the assessee and in favour of the Revenue.

Issue (ii): Whether the assessee was entitled to include one-half of the profits of the relevant year while computing capital employed for the purpose of relief under the relevant tax provisions.

Analysis: The point was covered by the earlier decision of the High Court in Elecon Engineering Co. Ltd., which had already settled that one-half of the relevant year's profits could be taken into account in computing capital employed for the statutory relief. The Court applied that binding position to the questions referred.

Conclusion: The assessee was entitled to include one-half of the relevant year's profits in the computation, and this issue is decided in favour of the assessee and against the Revenue.

Final Conclusion: The reference was answered by rejecting the Revenue's challenge on the profit-inclusion question and by holding that the Tribunal could not entertain a wholly new ground not raised before the departmental authorities.

Ratio Decidendi: The Tribunal's power to permit additional grounds is limited to questions falling within the subject-matter of the appeal as determined by the Appellate Assistant Commissioner's express or implied decision, and a new legal contention without a factual foundation before the departmental authorities cannot be raised for the first time before the Tribunal.

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