(a) Income-tax---

----Reference---High Court---Appellate Tribunal---Jurisdiction of---Question based on a plea not raised before Tribunal---Cannot be raised for first time before High Court---High Court not precluded from considering another aspect of same question provided question was raised before Tribunal when appeal was decided---Indian Income Tax Act, 1961,

(b) Income-tax--

----Reference---Question of law---Export business---Assessing Authority disallowing deduction under S.80HHC---Matter contested up to stage of Tribunal solely by reference to controversy whether total turnover would include turnover from export sales or domestic sales would also be taken into '' account---Plea of revenue that certain income was income from other sources raised for first time in application for reference under S.256(l) and later in application under S.256(2)---Not permissible---No question of law arises for reference---Indian Income Tax Act, 1961.

It is well settled that while invoking the jurisdiction under section 256 of the Income Tax Act, 1961, either of the Tribunal or of the High Court, a party cannot be allowed to suggest a question based on a plea which was not raised before the Tribunal when the appeal came to be heard and decided. The High Court is not precluded from considering another aspect of the same question provided the question was before the Tribunal when the appeal was decided. But a new question cannot be urged in the proceedings under section 256 of the Act.

The assessee claimed deduction under section 80HHC of the Act amounting to Rs.15,39,752. The Deputy Commissioner of Income-tax disallowed the claim for deduction on the ground that from the profit and loss account it was seen that there were other incomes amounting to Rs.84,70,024 out of Which income amounting to Rs.2,93,239 could be treated to be the income from export business only and the balance income of Rs.81,76,785 did not pertain to export business, that if the balance income was excluded from the total income, there would result a minus figure and that, therefore, the assessee was not entitled to deduction under section 80HHC read with section 80AB. On appeal, the Commissioner of Income-tax (Appeals) allowed the claim for deduction. On further appeal by the Revenue, the Tribunal dismissed the appeal and affirmed the order of the Commissioner of Income-tax (Appeals). The Tribunal dismissed the application of the Revenue for referring a question of law. On an application filed under section 256(2), the Revenue contended that the source of income of the assessee consisted of (i) income from export business; (ii) income from other business, and (iii) income from other sources such as interest, insurance, etc., which would not be classified as income relatable to business and if the income from sources other than business was excluded from consideration, the income from export business would be a negative figure and the question of allowing deduction to the assessee would not arise, that, therefore, the Commissioner of Income-tax (Appeals) and the Tribunal were not justified in allowing the deduction under section 80HHC to the assessee and that, therefore, the Tribunal ought to have stated a question of law for reference to the High Court. The assessee opposed the application and contended that the Department was trying to raise a new question which was never raised before any of the assessing or appellate authorities.

Held, that a perusal of the orders of assessment and the orders in the two appeals showed that up to that stage the matter was contested solely by reference to the controversy as to whether total turnover would include the turnover from export sales only or the domestic sales would also be taken into account, and if so, in what ratio the total turnover should be bifurcated. Only for the first time before the Tribunal in the statement of case to application under section 256(1) a plea was sought to be raised that certain income was income from other sources which should have been excluded from consideration while examining the plea of the assessee for the deduction under section 80HHC. However, no such plea was raised before the assessing or appellate authorities. Therefore, no question of law arose for reference.

T.D. Kumar and Brothers (P.) Ltd. v. CIT (1967) 63 ITR 67 (SC) ref.

R.D. Jolly with Ms. Premlata Barisal for Petitioner.

R.S. Suri for Respondent.

JUDGMENT

R. C. LAHOTI, J---By this petition under section 256(2) of the Income Tax Act, 1961, the Revenue seeks a mandamus to the Tribunal for drawing up a statement of case and referring the following question of law arising out of the assessment years 1986-87 and 1987-88 for the opinion of the High Court:

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in directing the Assessing Officer to allow deduction under section 80HHC to the assessee-company? "

The petition under section 256(1) of the Act filed by the Department was rejected by the Tribunal forming an opinion that the above said question -did, not arise as a question of law from the order of the Tribunal.

The assessee claimed deduction under section 80HHC of the Act. The Deputy Commissioner of Income-tax, Range-VI, who was the assessing authority disallowed the claim .for deduction on the following reasoning as set out in the order of assessment:

"Deduction under section 80HHC: The assessee has claimed deduction under section 80HHC amounting to Rs.15,39,752. The assessee did not give any explanation in support of its claim. From the profit and loss account, it is seen that there are other incomes amounting to Rs.84,70,024 out of which income amounting to Rs.2,93,239 can be treated to be the income from export business only and the balance income of Rs.81,76,785 do not pertain to export business. If this amount of other income is excluded from the total income computed above then there conies a minus figure. Thus, as per the provisions of section 80HHC read with section 80AB of the Income Tax Act, 1961, the assessee is not entitled to deduction under section 80HHC. Hence, the assessee's claim for deduction under section 80HHC is not allowed. ".

The reasoning assigned is common to both the years of assessment.

The assessee preferred appeals to the Commissioner of Income-tax (Appeals). The plea of the assessee for allowing the deduction under section 90HHC prevailed with the learned Commissioner of Income-tax (Appeals). It will be useful to extract and reproduce from the appellate order the following excerpts so as to show how the plea was raised, how it was opposed and how it was dealt with thereat:

"Grounds Nos. 6, 7 and 8 are directed against the computation of the deduction under section 80HHC. It has been pointed out by the Assessing Officer that the appellant's income includes Rs.84,70,024 as other income. Out of this, he held that Rs.2,93,239 could be attributed to export. From this point onwards, the Assessing Officer deducted Rs.81,76,785 from the net income assessed before making any deduction under section 80HHC and found that the net income was reduced to a negative figure. He, there?fore, held that the appellant was not entitled to any deduction under section SOHHC. On behalf of the appellant it was submitted by Sh. Sah that the Assessing Officer has not interpreted section 80AB and section 80HHC correctly. Section 80AB provides that deduction under a particular section of Chapter VI-A, section-C would be restricted to the income covered by that section of Chapter VI-A. In other words, if the assessee is entitled to deduction under section 80HHC, that deduction would be admissible to the assessee only if it has income Tax export turnover. Sh. Sah further submitted that clause (b) of sub-section (3) of section 80HHC lays down the method of apportionment of income where the assessee has income from export turnover and local turnover. Section 80HHC(3)(b) reads as under:

. . in a case where the business carried on by the assessee does not consist exclusively of the export out of India of the goods or merchandise to which this section applies, the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession" the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee.'

From a plain reading of the section it is clear that the income is to be apportioned on the basis of the turnover. First of all the income under the head 'Profits and gains of business' has to be determined. Thereafter it has to be apportioned in the manner provided in section 80HHC(3)(b). The appellant had a total turnover of Rs.7.73 crores. The FOB sales, i.e., the export salt's stood at Rs.6.12 crores. Shr Sah requested that on a combined reading of sections 80AB and 80HHC his client was entitled to a deduction in the ratio of 6.12: 7.67 of the net income. I have considered the matter. After going through section 80AB I am left in no doubt in my mind that the section provides restriction only with respect to the income covered by a particular section Chapter VI-A. Section 80HHC(3)(b) makes the method of working the deduction quite clear. The Assessing Officer is directed to allow the deduction under section 80HHC by multiplying net income after giving appeal affect by 6.12/7.73. "

Feeling aggrieved by the appellate orders the Revenue went in appeal to the Income-tax Appellate Tribunal. The appeals have been dismissed by a common order dated October 28, 1994. A perusal of the order of the Income-tax Appellate Tribunal shows that before the Tribunal the learned Departmental representative simply relied on the orders of the Assessing Officer in support of his submission that the same should not have been reversed in appeal in so far as it related to section 80HHC.

The controversy before the Tribunal centered around sec?tion 80HHC(3)(b). The order of the Tribunal shows that the arguments advanced by either party were at interpreting the expression "total turnover" as used in section 80HHC(3)(b)--whether the said expression included only the turnover of exports or included the domestic turnover as well. The Tribunal upheld the interpretation as placed by the Commissioner of Income?tax (Appeals) relying on a Special Bench decision of its own in some other matter.

Before this Court, it was submitted by learned counsel for the Department that the sources of income of the assessee consisted of: (i) income from export business; (ii) income from other business; and (iii) income from other sources such as interest, insurance, etc., which could not be classified as income relatable to business. Learned counsel submitted that if the income from sources other than business was to be excluded from consideration then the income from export business would be negative and the question of allowing a deduction to the assessee would not arise. Looked at from this angle the learned Commissioner of Income-tax (Appeals) as also the Tribunal were not justified in allowing the deduction under section 80HHC to the assessee. This raises a question of law which the Tribunal ought to have stated to the High Court, submitted learned counsel.

Learned counsel for the assessee has opposed the petition under section 256(2) of the Act by submitting that the Department is trying to build up a new case before this Court and raise a question which was never raised before any of the authorities of the Department up to the Tribunal.

Having heard learned counsel for the parties, we are of the opinion that learned counsel for the assessee is right and, therefore, the petition under section 256(2) of the Act deserves to be rejected.

At the stage of filing the petition under section 256(1) of the Act, the following statement of case was filed on behalf of the Department:

"The Income-tax Appellate Tribunal as well as learned Commissioner of Income-tax (Appeals) both have stressed on the expressions export turnover and total turnover and have not considered the nature of other income which were held by the Assessing Officer not allowable for deduction under section 80HHC.

The nature of incomes clearly indicates that the main income is under the head "agency commission" in both these years in respect of which the sales are not at all accounted for either in export sales or local sales and hence the business income from this cannot be considered for deduction under section 80HHC. Similarly, other items of income like interest, insurance claim, excess provisions written back, recovery front agents of import are also not relatable to the sales effected during the year. Thus it is clear that since these incomes are not derived out of the turnover (whether export or local turnover) the same cannot be a part of business income for the purpose of deduction under section 80HHC."

For the first time at that stage a plea was sought to be raised that it was the income from other sources which should have been excluded from consideration while examining the plea of the assessee for deduction under section 80HHC. However, such was not the plea raised before the Assessing Officer nor before any of the two appellate authorities.

A perusal of the orders of assessment and the orders in the two appeals shows that up to that stage the matter was contested solely by reference to the controversy as to whether total turnover would include the turnover from export sales only or the domestic sales would also be taken into account, and if so, in what ratio the total turnover shall be bifurcated.

It is well-settled that while invoking the jurisdiction under section 256 of the Act either of the Tribunal or of the High Court a party cannot be allowed to suggest a question based on a plea which was not raised before the Tribunal, when the appeal came to be heard and decided. The High Court is not precluded from considering "another aspect of the same question provided that the question was there before the Tribunal when the appeal was decided. But a new question cannot be urged an the proceedings under section 256 of the Act. In the case at hand we are not satisfied that the plea sought to be raised before this Court at this stage was raised before the Tribunal or any of the authorities below till the assessment proceedings achieved finality.

In T. D. Kumar and Brothers (P.) Ltd. v. CIT (1967) 63 ITR 67 (SC), their Lordships have held (page 71 ):

"The question on which a reference to the High Court was sought was a limited question and the Tribunal declined to refer the question because it did not arise out of its order, the question not having been raised before or decided by the Tribunal. The question sought to be raised before the High Court in a reference under, section 66(2) was not an aspect of a question raised before the Tribunal; it was a new question which was never raised before the Tribunal. The High Court was, therefore, right in rejecting the prayer for an order under section 6.6(2) of the Act. "

For the foregoing reasons, we find the petition devoid of any merit and liable to be dismissed. It is dismissed accordingly though without any order as to the costs.

M.B.A./3212/FC???????????????????????????????????????????????????????????????????????????????? Petition dismissed.