Commissioner of Income Tax Vs. Indian Overseas Bank - Court Judgment

SooperKanoon Citationsooperkanoon.com/794903
SubjectDirect Taxation
CourtChennai High Court
Decided OnFeb-25-1997
Case NumberTax Case No. 738 of 1982
JudgeK.A. Thanikkachalam and ;M. Abdul Wahab, JJ.
Reported in[1999]239ITR335(Mad)
ActsIncome Tax Act, 1961 - Sections 20, 37(2), 37(2B), 254(1) and 256(2)
AppellantCommissioner of Income Tax
RespondentIndian Overseas Bank
Appellant Advocate S.V. Subramaniam, Adv.
Respondent Advocate R. Meenakshisundaram, Adv.
Excerpt:
- - 6. we have heard both learned standing counsel for the department as well as learned counsel for the assessee.thanikkachalam, j. 1. in compliance with the direction given by this court in tax case no. 120 of 1980 the tribunal referred the following two questions for the opinion of this court under s. 256(2) of the it act, 1961 : '1. whether, on the facts and in the circumstances of the case, the tribunal had jurisdiction to allow the assessee to raise the additional ground and directing the ito to go into the assessee's claim for deduction towards entertainment expenses and allow the same on the basis of the decision of the tribunal in ita no. 172/mds/1968-69 dt. 19th october, 1971 2. whether, on the facts and in the circumstances of the case, that part of the entertainment expenditure which are admissible as a deduction under s. 20 should not be taken into consideration for allowance of entertainment expenditure while applying the provisions of s. 37(2b) for the asst. yr. 1970-71 ?' 2. the assessee is one of the fourteen nationalised banks. the only question which is the subject-matter of this reference is the question of jurisdiction of the tribunal to admit an additional ground relating to the claim for deduction of entertainment expenses and the further question on merits as to whether part of the entertainment expenditure which are admissible as a deduction under s. 20 should not be taken into consideration for allowance of entertainment expenditure while applying the provisions of s. 37(2)(b) of the act. the assessee claimed deduction towards part of the entertainment expenditure considered as the maximum admissible and the ito accepted the assessee's working in this respect. 3. on appeal before the aac the assessee had not taken up any objection regarding the allowance relating to entertainment expenses. the aac, therefore, did not deal with this issue. 4. this ground was not taken before the tribunal in the original grounds filed on 9th april, 1974. it was taken up by way of additional grounds dt. 17th january, 1974 wherein it was claimed that the assessee had not worked out the claim properly and that the assessee would be entitled to entertainment expenditure to the extent of rs. 15,602 under the head 'interest on securities' and rs. 16,946 under the head 'business' as against the amount originally allowed at rs. 21,724. the tribunal overruled the objection of the counsel for the department against the admission and remanded back the matter to the ito to go into the question and allow the assessee's claim on the basis of the earlier decision in ita no. 172/mad/1968-69. 5. before us, learned standing counsel for the department submitted that the tribunal ought not to have admitted the additional ground and remitted back the matter for fresh disposal. on the other hand, the case of the assessee was that they are approaching the committee constituted under the decision of the supreme court in ongc vs. collector of central excise that this matter should be deferred for the present. 6. we have heard both learned standing counsel for the department as well as learned counsel for the assessee. 7. the fact remains that with regard to the allowance of entertainment expenditure, the assessee has not raised any ground before the aac. even in the original ground filed before the tribunal such a ground was not taken. the assessee filed a petition to admit additional ground for allowance of entertainment expenditure. the tribunal admitted the additional ground since allowing the entertainment expenditure is part of adjustment of tax liabilities of the assessee. therefore, it cannot be said that the tribunal was incorrect in admitting the additional ground. however, without any orders by the authorities below on this aspect, it may not be possible for the tribunal to render any decision on this aspect. under such circumstances, this matter was remitted back to the ito for the purpose of disposing of the same for fresh disposal in accordance with law. now there is also a decision of the supreme court in the matter of allowing expenditure under s. 37(2b) of the act as reported in the case of cit vs . patel bros. : [1995]215itr165(sc) . therefore, there is no infirmity in the order passed by the tribunal remitting back this issue for fresh disposal. accordingly, we answer question no. 1 in the affirmative and against the department. 8. in so far as question no. 2 is concerned, inasmuch as the point raised in this question was remitted back for fresh disposal, this question does not arise out of the order of the tribunal. accordingly, we are returning the same.
Judgment:

Thanikkachalam, J.

1. In compliance with the direction given by this Court in Tax Case No. 120 of 1980 the Tribunal referred the following two questions for the opinion of this Court under s. 256(2) of the IT Act, 1961 :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal had jurisdiction to allow the assessee to raise the additional ground and directing the ITO to go into the assessee's claim for deduction towards entertainment expenses and allow the same on the basis of the decision of the Tribunal in ITA No. 172/Mds/1968-69 dt. 19th October, 1971

2. Whether, on the facts and in the circumstances of the case, that part of the entertainment expenditure which are admissible as a deduction under s. 20 should not be taken into consideration for allowance of entertainment expenditure while applying the provisions of s. 37(2B) for the asst. yr. 1970-71 ?'

2. The assessee is one of the fourteen nationalised banks. The only question which is the subject-matter of this reference is the question of jurisdiction of the Tribunal to admit an additional ground relating to the claim for deduction of entertainment expenses and the further question on merits as to whether part of the entertainment expenditure which are admissible as a deduction under s. 20 should not be taken into consideration for allowance of entertainment expenditure while applying the provisions of s. 37(2)(b) of the Act. The assessee claimed deduction towards part of the entertainment expenditure considered as the maximum admissible and the ITO accepted the assessee's working in this respect.

3. On appeal before the AAC the assessee had not taken up any objection regarding the allowance relating to entertainment expenses. The AAC, therefore, did not deal with this issue.

4. This ground was not taken before the Tribunal in the original grounds filed on 9th April, 1974. It was taken up by way of additional grounds dt. 17th January, 1974 wherein it was claimed that the assessee had not worked out the claim properly and that the assessee would be entitled to entertainment expenditure to the extent of Rs. 15,602 under the head 'interest on securities' and Rs. 16,946 under the head 'business' as against the amount originally allowed at Rs. 21,724. The Tribunal overruled the objection of the counsel for the Department against the admission and remanded back the matter to the ITO to go into the question and allow the assessee's claim on the basis of the earlier decision in ITA No. 172/Mad/1968-69.

5. Before us, learned standing counsel for the Department submitted that the Tribunal ought not to have admitted the additional ground and remitted back the matter for fresh disposal. On the other hand, the case of the assessee was that they are approaching the committee constituted under the decision of the Supreme Court in ONGC vs. Collector of Central Excise that this matter should be deferred for the present.

6. We have heard both learned standing counsel for the Department as well as learned counsel for the assessee.

7. The fact remains that with regard to the allowance of entertainment expenditure, the assessee has not raised any ground before the AAC. Even in the original ground filed before the Tribunal such a ground was not taken. The assessee filed a petition to admit additional ground for allowance of entertainment expenditure. The Tribunal admitted the additional ground since allowing the entertainment expenditure is part of adjustment of tax liabilities of the assessee. Therefore, it cannot be said that the Tribunal was incorrect in admitting the additional ground. However, without any orders by the authorities below on this aspect, it may not be possible for the Tribunal to render any decision on this aspect. Under such circumstances, this matter was remitted back to the ITO for the purpose of disposing of the same for fresh disposal in accordance with law. Now there is also a decision of the Supreme Court in the matter of allowing expenditure under s. 37(2B) of the Act as reported in the case of CIT vs . Patel Bros. : [1995]215ITR165(SC) . Therefore, there is no infirmity in the order passed by the Tribunal remitting back this issue for fresh disposal. Accordingly, we answer question No. 1 in the affirmative and against the Department.

8. In so far as question No. 2 is concerned, inasmuch as the point raised in this question was remitted back for fresh disposal, this question does not arise out of the order of the Tribunal. Accordingly, we are returning the same.