1. This application is under Section 256(2) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax, Jaipur. The applicant requires this court to direct the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, to refer the following questions said to be questions of law arising out of the Tribunal's order dated January 13, 1988, in Income-tax Appeal No. 949/JP of 1985 and Cross-objection No. 1/JP of 1986 for the assessment year 1982-83.
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in entertaining the additional grounds of appeal ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-Corporation is constituted for carrying out the activities as laid down in Section 10(20A) of the Income-tax Act, 1961 ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in not reversing the Commissioner of Income-tax (Appeals) finding that the income from the assessee's income from business ?'
2. The respondent is the Rajasthan Land Development Corporation which is constituted under the Rajasthan Land Development Corporation Act, 1975. The respondent-assessee claimed exemption of its income from being subjected to tax under Section 10(20A) of the Act claiming that it is a Corporation established under a statute under the competent legislative action for the purpose of dealing with the planning, development and improvement of villages in Rajasthan.
3. This contention was not raised before the Assessing Officer. The assessment has taken place subjecting the income of the respondent to tax.
4. The Assessing Officer computed net loss under the head 'Profit and gains from business' and has also assessed interest income and other miscellaneous receipts as income from other sources making the net taxable income at Rs. 5,68,666. The Commissioner of Income-tax (Appeals) in Appeal No. 15/85-86 held that the loans and advances were given to the cultivators in Rajasthan Canal Project area and Chambal Project area for development of agriculturalland. He also upheld the contention of the assessee regarding holding the income from interest as an income from business and not from other sources. However, the assessment of income on the merits was not interfered with and the appeal was partly allowed.
5. Before the Tribunal the assessee pointed out that since the Corporation is established under a statute and has been established for the purpose of rural development its entire income is exempted under Section 10(20A) of the Act. The Tribunal entertained this plea and examining the scheme of the Act of 1975 accepted the contention of the assessee and set aside the assessment.
6. The application under Section 256(1) of the Revenue for making reference of the aforesaid questions to this court was rejected by the Tribunal vide its order dated August 26, 1988, by holding that since it has been held by the Rajasthan High Court in Chand Behari Lal v. State of Rajasthan in SBCWP No. 6 of 1980 decided on March 14, 1980, that the Rajasthan Land Development Corporation is a Corporation established by a- statute to improve the land for facilitating better cultivation with proper irrigation facilities, roads, water channels, levelling of the area and making the fields regular, where they are irregular areas and by referring to the preamble of the Act of 1975 held that the respondent is a Corporation which falls within the scheme of Section 10(20A) of the Act to claim exemption from income-tax in respect of its income. It is a finding of fact and is founded on a decision rendered by the jurisdictional High Court therefore no question arises from the Tribunal's order.
7. In the aforesaid circumstances, this application under Section 256(2) has been made by the Revenue on the ground that the order of the Tribunal rejecting the application under Section 256(1) is erroneous.
8. It was urged by learned counsel for the applicant that the questions raised in the present application involve questions relating to the ambit and scope of the Tribunal's powers to entertain additional plea and interpretation of statute ; it cannot be said that such questions are not questions of law. The questions stated in the application do arise from the appellate order of the Tribunal.
9. Having heard learned counsel for the applicant, we are of the opinion that in the facts and circumstances of the present case, the Tribunal has not committed any error in rejecting the application for making a reference to this court on the aforesaid questions.
10. Question No. 1 is with reference to the power of the Tribunal to entertain additional grounds of appeal. While dealing with the subject-matter of appeal, the Appellate Tribunal enjoys ample power to allow a new ground of appeal. The only inhibition is that if such a new ground is allowed, the opposite party must be given adequate opportunity to meet the new ground which has been permitted to be raised and it is a matter of discretion of the Appellate Tribunalin appropriate cases to allow any party to the appeal to raise a new contention before it. Such power is clearly stipulated under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. Thus, in every case, it is a matter of exercise of discretion whether to permit a party to raise a new ground or not. To exercise such discretion in a given case, in our opinion does not give rise ordinarily to a question of law unless, the same is challenged on the ground that the discretion exercised by the Tribunal was grossly injudicious. So far as the question about the power of the Tribunal to permit new grounds of appeal is concerned, the answer is obvious and in the affirmative. So far as the question about the exercise of discretion judiciously is concerned, the same has not even been raised. We, therefore, hold that the Tribunal in rejecting the application under Section 256(1) so far as question No. 1 is concerned, was not in error.
11. Question No. 2 undoubtedly is a question of law but, in our opinion, the answer being self-evident and obvious from the provisions of the Rajasthan Land Development Corporation Act, 1975, it is not required to be referred to this court for its adjudication. In this connection also the law is trite that a question of law, the answer to which is self-contained or obvious, need not be made a subject matter of reference.
12. As per the requirement of Section 10(20A) of the Act, unequivocally what is needed to be seen for the purpose of invoking it is that the authority claiming exemption must be constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both. It cannot be doubted and has not been doubted that the Rajasthan Land Development Corporation has been constituted by a legislative enactment, i.e., by the State Legislature of Rajasthan. This being the condition whether the respondent-Corporation is an authority constituted in India by or under any law does not require any interpretorial exercise for the purpose to answer it.
13. The second requirement is that such an authority must have been constituted for the purpose of dealing with and satisfying the need of housing accommodation, like the housing board or for the purpose of planning, development and improvement of cities, towns and villages or for both. This obviously refers to the preamble regarding the purpose for which the enactment has been made and also the relevant definition and the functions which are assigned to such duly constituted authority. In that light, the Tribunal has referred to the preamble of the Act of 1975 which reads as under :
'An Act to constitute a corporation for the execution of projects relating to land development with a view to preventing damage to land and loss in agricultural productivity and to securing optimum utilisation of land and water resources in the State of Rajasthan and for other matters connected therewith or incidental thereto.'
14. The word 'land development' has been defined under Section 2(j) of the Act as under :
'(j) 'land development' means any of the following works,--
(i) construction, renovation, re-designing, re-aligning and lining of water resources ;
(ii) land levelling and land shaping, including re-alignment of field boundaries ;
(iii) digging, renovation, re-designing and re-aligning of field drains ;
(iv) providing of drop structures, culverts and farm roads in the fields ;
(v) land reclamation by use of engineering, biological and chemical measures, including leaching ;
(vi) contour bunding and nala bunding ;
(vii) growing of trees, plants, shrubs and grasses ;
(viii) development of permanent and temporary pastures, farm forestry and commercial afforestation ;
(ix) such other works as may be necessary or incidental to development of land or ground or flow water potential and for optimising the utilisation of land and water resources ; and
(x) repairing and maintenance of any of the foregoing works.'
15. This clearly gives out the object of the Act to have a planned development of the pre-dominant activities related to the villages, namely; agriculture and agricultural lands. Moreover, the question is now to be taken beyond doubt after the decision of the Supreme Court, which has given meaning to development of cities, towns and villages as used in Section 10(20A) of the Act. The Gujarat High Court in Gujarat Industrial Development Corporation v. CIT : [1985]151ITR255(Guj) , has taken a view interpreting Section 10(20A) that development of an industrial area does not fall within the ambit of Section 10(20A because the same is not for the development of cities, towns or villages and that is for a different purpose. Examining the judgment of the Gujarat High Court, the Supreme Court said in Gujarat Industrial Development Corporation v. CIT : [1997]227ITR414(SC) , that the word 'development' in Section 10(20A of the Income-tax Act should be understood in its wide sense. There is no warrant to exclude all development programmes relating to any industry from the purview of the word 'development' in the said clause. There is no indication in the Act that development envisaged therein should be confined to non-industrial activities. Development of a place can be accelerated through varieties of schemes and establishment of industries is one of the modes of developing an area.
16. The pre-dominant activities of the Corporation are related to agricultural land and development activity of the same for the purpose of planned development ; and the agricultural land cannot be isolated from the development of villages and, therefore, the lands fall within the ambit of Corporationengaging in the activities of planning, development and improvement of agri-cultural lands which related to planning, development and improvement of villages. Thus, the answer being self-evident and finally determined by the apex court, in our opinion, it also need not be made subject to a reference application for re-examination.
17. In view of our aforesaid conclusion, question No. 3 becomes of academic importance whether the interest income derived from the business or other sources also need not be referred to this court for its adjudication.
18. As a result, this reference application fails and is hereby rejected.