Tribunal jurisdiction and accrued liability principles defeated a new deduction claim under income tax law.

The Tribunal's jurisdiction is confined to the subject-matter of the appeal decided by the Appellate Assistant Commissioner, so it cannot entertain a new and independent ground not previously raised or decided; the additional claim for deduction of legal expenses was therefore rejected. A deduction for liability under section 10(1) of the Income-tax Act, 1922 is allowable only when the liability has accrued in the relevant accounting year, and the record did not establish accrual during that year. On both points, the claim failed and the reference was answered in favour of the Revenue.

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Issues: (i) Whether the Tribunal could permit the assessee to raise, for the first time before it, an additional ground relating to deduction of legal expenses that had not been challenged before the Appellate Assistant Commissioner. (ii) Whether the assessee was entitled to deduct the claimed amount as a liability under section 10(1) of the Income-tax Act, 1922, or under the alternative heads referred to in the reference.

Issue (i): Whether the Tribunal could permit the assessee to raise, for the first time before it, an additional ground relating to deduction of legal expenses that had not been challenged before the Appellate Assistant Commissioner.

Analysis: The jurisdiction of the Tribunal is confined to the subject-matter of the appeal before it, and that subject-matter is determined by the decision, express or implied, of the Appellate Assistant Commissioner. Where the assessee does not contest a disallowance before the Appellate Assistant Commissioner and that point is not decided by him, the Tribunal cannot permit the assessee to agitate that independent disallowance as a new subject of appeal.

Conclusion: The Tribunal was right in refusing to allow the additional ground. The answer is against the assessee.

Issue (ii): Whether the assessee was entitled to deduct the claimed amount as a liability under section 10(1) of the Income-tax Act, 1922, or under the alternative heads referred to in the reference.

Analysis: A deduction under section 10(1) requires that the liability must have accrued in the accounting year. The agreement showed that the assessee's responsibility arose when amounts became due from the buyers, but the record did not establish that the liability in question had accrued during the relevant accounting year. The material relied upon by the assessee did not fix the time of accrual, and the Tribunal was justified in holding that the claim was not proved to have arisen in that year.

Conclusion: The deduction was not admissible under section 10(1), and the assessee was not entitled to the claimed relief. The answer is against the assessee.

Final Conclusion: The reference was answered in favour of the Revenue on both questions, with the assessee failing on the jurisdictional ground and on the claimed deduction.

Ratio Decidendi: The Tribunal cannot entertain a new and independent claim not forming part of the subject-matter decided by the Appellate Assistant Commissioner, and a deduction based on liability is allowable only when the liability has actually accrued in the relevant accounting year.

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