Judgment:
K. S. PARIPOORNAN J. - At the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following question of low for the decision of this court :
'Whether, on the facts and in the circumstances of the case, secured loans from the banks and the provision for taxation should be adjusted against the value of investment while computing the capital under rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?'
The respondent, a public limited company, is an assessee under the Income-tax Act, 1961, and the Companies (Profits) Surtax Act, 1964. We are concerned with the assessment years 1977-78 and 1978-79. The matter arises in connection with the surtax assessments for the said two years. In computing the capital under the Second Schedule to the Companies (Profits) Surtax Act, the claim of the assessee was that in determining the capital attributable to the income from dividends, interest, etc., which is not considered as business income, the secured loans and the provision for taxation should also be adjusted. The Income-tax Officer declined to do so. In appeal, the Commissioner of Income-tax (Appeals) found that the provision for taxation for the year 1977-78 was Rs. 1,83,896 and secured loan from banks was Rs. 2,85,430. He took the view that under rule 2(ii) of the Second Schedule to the Companies (Profits) Surtax Act, any surplus and any such reserve as is not taken into account in computing the capital under rule 1 can be deducted from the cost of the assets. According to him, provision for taxation or the secured loan from the banks was neither a fund a surplus not a reserve which can be so taken into account. He rejected the plea of the assessee. In further appeal before the Tribunal, the Tribunal considered and disposed of the matter, by its appellate order dated August 26, 1987, thus :
'3. The second ground is whether the secured loans from the banks the provision for taxation should be adjusted against the value of investments while computing the capital under rule 2 of the Second Schedule. This is also decided by the Tribunal for the earlier years in favour of the assessee. Therefore, this ground is also allowed.'
It is thereafter at the instance of the revenue, the question of law formulated hereinabove for the decision of this court.
We heard counsel. The Appellate Tribunal has forwarded a statement of the case dated September 17, 1990. In paragraph 4 of the statement of the case, the Tribunal has amplified what it has stated in paragraph 3 of the appellate order dated August 26, 1987. According to the statement of the case, the decision of the Appellate Tribunal for the earlier years in favour of the assessee is not in the case of the very same assessee, but in the case of another company belonging to the same group - the Periakaramalai Tea and Produce Co. Ltd. - and a common order was passed by the Appellate Tribunal for the assessment years 1971-72, 1972-73, 1973-74, 1977-78 and 1978-79. The Tribunal has extracted the common order passed by it, in the statement of the case. In this connection, we should also state that the aforesaid common order dated September 13, 1985, was the subject-matter of Original Petitions Nos. 10642 of 1987, 10705 of 1987, etc. The judgment was rendered by a Bench of this court on January 16, 1989.
At the time of hearing, counsel on both sides agreed that the reference by the Appellate Tribunal, in paragraph 3 of its order dated August 26, 1987, that the matter was decided by the Tribunal in favour of this assessee, is factually incorrect. Probably, the Tribunal had in mind the decision referred to by it in the statement of the case dated September 17, 1990 (common order of the Appellate Tribunal dated September 13, 1985, in the case of another company belonging to the same group). It is not permissible for the Appellate Tribunal to make out a new plea or entirely a different version at the time of drawing up the statement of the case which is not borne out by the appellate order dated August 26, 1987.
We are constrained to hold that the decision of the Appellate Tribunal in S. T. A. Nos. 1 and 2/(Coch.) of 1984, dated August 26, 1987, proceeds on a factual mistake. The Tribunal has not decided the question that arose before it in accordance with law and has disposed of the appeal on a mistaken impression that the matter was decided by the Appellate Tribunal for the earlier years in favour of the assessee. This is not so. In this circumstance, we decline to answer the question referred to this court; but at the same, we direct the Income-tax Appellate Tribunal to restore the appeals to file and decide the matter afresh in accordance with law.
The reference are disposed of as above.
A copy of this judgment, under the seal of this court and the signature of the Registrar, shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.