TaxTMI 
TaxTMI 
2010 (9) TMI 85
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.... poration of Japan. The main business of the assessee is international trad- ing in various items such as textiles, chemicals, energy, metals, etc. The appellant commenced business from June 1, 1996, after taking over the assets and liabilities of the liaison office of Marubeni Corporation. The appellant also took over 18 employees of the liaisoning office on deputation basis. The employees were to continue in the dual employment of both the Japanese-company as well as the appellant. However, it was agreed that the salaries and perquisites of the said employees were to be paid by the Japanese-company in Japan. For their services to the appellant, they were paid a comparatively small amount of salary and perquisites. 3. It is the case of the appellant that the appellant in the previous year relevant to the assessment years 1997-98 and 1998-99, paid to the afore- said employees by way of incentives, the taxes which they had to pay in India in respect of the salary and perquisites received by them from the Japanese Company outside India. The said taxes were to the tune of Rs.4,21,87,756 for the assessment year 1997-98 and Rs. 2,78,28,161 for the assessment year 1998-99. Thes....
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....unt was sought to be disguised as payment of "incentive" to the staff while, in fact, it actually constituted dis- charge of statutory liability in terms of section 201 of the Act. Relying upon the judgment of the Supreme Court in the case of Indian Aluminium Co. Ltd. v. CIT [1971] 79 ITR 514, the Commissioner of Income-tax (Appeals) held that in the absence of any enforceable contractual liability, the amounts were not allowable as deductions. In this view of the matter he dismissed the assessee's appeals on this point. 6. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the appellant-company approached the Income-tax Appellate Tribunal. Before the Tribunal, the appellant did not dispute that there was no con- tract in writing with the expatriate employees, but relying upon the judg- ment of the hon'ble Supreme Court in CIT v. Chandulal Keshavlal and Co. [1960] 38 ITR 601, the appellant sought to urge that there was no bar on the liability being undertaken in pursuance of an oral arrangement. The appellant contended that the said oral arrangement was the one under which the service of the employees were seconded by the Japanese com- pany to the appella....
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....on account of pressure put upon the appellant-company to settle the matter with the Income-tax Department. In the context of the submission of the appellant that the amount had been paid on the ground of commercial expediency, the Tribunal observed as follows : "12. That takes us to the question whether the amounts can be allowed on grounds of commercial expediency. We do not see how they can be so allowed. A sum of money expended not out of neces- sity and with a view to a direct and immediate benefit to the trade, but voluntarily and on grounds of commercial expediency and in order indirectly to facilitate the carrying on of the business, may yet be expended wholly and exclusively for the purpose of the company's business. The argument based on the principle of commercial expe- diency does not, however, accord with the facts of the case. We have already seen that there was no contractual liability undertaken by the assessee at the time when the services of the employees were seconded to it by the Japanese company to pay the tax in question as incentive to them and as part of their salary payable by the assessee- company. If such a liability had been undertaken, it was n....
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....wing are the decisions referred to on behalf of the appellant : (1) CIT v. Ajay Forgings (P.) Ltd. [2002] 257 ITR 572 (Cal) ; (2) CIT v. Chackola Spinning and Weaving Mills Ltd. [1991] 188 ITR 532 (Ker) ; (3) Motilal Bawalal v. CIT [1963] 50 ITR 249 (Bom) ; (4) ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) ; (5) CIT v. Edward Keventer (Successors) P. Ltd. [1980] 123 ITR 200 (Delhi) ; (6) Rajinder Nath v. CIT [1979] 120 ITR 14 (SC) ; and (7) MCorp Global P. Ltd. v. CIT [2009] 309 ITR 434 (SC). 9. In the case of Chackola Spinning and Weaving Mills Ltd. [1991] 188 ITR 532 (Ker), while dealing with the question whether the Tribunal was jus- tified in law in directing that a payment would be an admissible deduction in the assessment year 1981-82 in an order relating to the assessment year 1980-81, it was held by the court as follows (page 536) : "We answer question No. 2 to this effect : the observation that the payment will be deductible for the assessment year 1981-82, while disposing of the appeal for the assessment year 1980-81, was only an incidental one ; such a matter never arose for consider....
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....in respect of which assess- ment year the amounts should be assessed and the Tribunal was justified in making the observations in its appellate order. It further held that if a court or a Tribunal chooses to decide all the issues arising in the case before it, even though the decision of one issue is sufficient to dispose of the case, it cannot be said that the court was not justified in deciding all the issues nor can it be said that in deciding all the issues the court had acted without jurisdiction. 11. In the case of Ajay Forgings [2002] 257 ITR 572 (Cal), also relied upon by the appellant, a Division Bench of the Calcutta High Court was dealing with a reference where the Tribunal had held that the date of receipt falls in the accounting year relevant for the assessment year 1986-87 and directed the Assessing Officer to consider the claim of the assessee for the assessment year 1986-87. The Department submitted that as the Tribunal was considering the claim of the assessee for the assessment year 1985-86, it had no jurisdiction to give any direction to the Assessing Officer for quite another assessment year, viz., 1986-87. The Division Bench, however, held as follows ....
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....ould not be made to suffer and be deprived of the benefit given to him by the lower authority, where the other side has not appealed, equally the procedural rules should not be interpreted or applied so as to confer on an appellant a relief to which he cannot be entitled if the points decided in his favour on the same matter by the lower court are also considered as requested by the respondent." 13. Mr. Sanjeev Sabharwal, the learned counsel appearing on behalf of the Revenue, contended that the Tribunal would have no jurisdiction nor would the Tribunal be justified in giving directions in respect of a matter pertaining to an earlier or later assessment year. The words "pass such orders thereon" in section 254 of the Income-tax Act, 1961 (section 33(4) of the Indian Income-tax Act, 1922), he contended, referred to the orders that may be passed in the appeal. The Tribunal could not be required to give directions in respect of a matter which did not constitute the subject-matter of the appeal. Though the powers of the Tribunal in dealing with an appeal are very wide, they are not absolute. Mr. Sabharwal, in this context, relied upon the decisions rendered in the case of Nat....
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.... 17. In Radhey Lal Mannilal v. CIT [1960] 39 ITR 587 (All), a Division Bench of the Allahabad High Court was called upon to give its opinion on the following question (page 590) : "Whether the income received as compensation for closure of the rolling mill would be assessable in the year of assessment 1945-46, relevant to the accounting year during which the mills were closed down, or would be assessable in the assessment year 1947-48, relevant to the accounting year in which the money was actually received ?" 18. The Allahabad High Court, after observing that the appellate order of the Tribunal out of which the reference arose was made in the proceedings for assessment for the assessment year 1945-46, held that the Tribunal in the appeal was, therefore, not called upon to pronounce at all as to whether this amount can be included in the assessment for the year 1947- 48. In the circumstances, the Allahabad High Court held that they were not called upon to answer the second part of the question and a reference of that question to the court was, therefore, "inappropriate". 19. In V. Ramaswamy Iyengar v. CIT [1960] 40 ITR 377 (Mad), a Division Bench of....
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....ellate Tribunal is confined to the passing of orders on the subject-matter of the appeal, that is, those orders which are necessary for the disposal of the appeal. The Tribunal cannot give a finding in respect of the assessment of a year which is not the subject-matter of the appeal before it. The Tribunal, thus can give a finding that the deduction/income does not belong to the relevant assessment year/years, but though it may incidentally find that the deduction/income relates to another assessment year, it cannot give a finding that the deduction/income belongs to another spec- ified year. There is, however, an exception to the general rule that the juris- diction of the Tribunal is confined to the subject-matter of the appeal. The exception is where an additional ground has been raised with the leave of the Tribunal. In that case, the subject-matter of the appeal constitutes the original grounds of appeal and such additional ground/grounds as may be raised with leave of the Tribunal. 23. In the instant case, a reading of paragraph 12 of the order of the Tribunal makes it abundantly clear that the Tribunal had permitted the assessee to raise the ground of commercial ex....