High Court has no Power to entertain grounds not raised before tribunal

C& C Construction Pvt Ltd vs. CIT (Delhi High Court)- Clause (a) of sub-Section (6) to Section 260A of the Act states that the High Court may decide an issue, which is not determined by the Appellate Tribunal. The word “determined” means that the issue is not dealt with, though it was raised before the Tribunal. The word “determined” presupposes an issue was raised or argued but there is failure of the Tribunal to decide or adjudicated the same. In a given case, a substantial question of law may arise because of the facts and findings recorded by the Tribunal, but the said issue/question is not determined. In such cases, an appeal under Section 260A of the Act can be entertained.

HIGH COURT OF DELHI

ITA No. 1118/2011

Decided on : 25^th November, 2011.

C& C CONSTRUCTION PVT. LTD.

versus

COMMISSIONER OF INCOME TAX

ORDER

SANJIV KHANNA, J. (ORAL)  :

This appeal under Section 260A of the Income Tax Act, 1961 (‘Act^‘ for short) impugns the order dated 26.6.2009 passed by the Income Tax Tribunal (^„Tribunal^‟ for short) in ITA No. 4000/Del/2007. The appeal relates to the assessment year 2003-04.

2. The findings of the authorities/tribunal and the reasoning portion of the impugned order is reproduced as under :

“2. With regard to ground No.1, the assessee claimed 100% depreciation amounting to Rs.41 ,37,577/-. The AO, however, allowed depreciation on sheds @ only 10%, treating the construction as construction of office building. The assessee had submitted that the sheds were of temporary nature and were necessary for carrying out efficient business for earning of profits; that after the project is over, the sheds are handed over to the contractee.  The AO rejected this plea of the assessee since the assessee had not shown any income from anysuch transfer to its contractee. It was observed that Rs.20,26,181/- had been incurred at the Koklata Regional Office-I of the assessee, whereas sums of Rs.10,75,297/- and Rs.10,14,599/- had been incurred at two other different sites. It was from this that the AO concluded that the expenses had been incurred on construction of the office building. Depreciation was allowed @10% and not @100% as claimed by the assessee, keeping in view the scale of the expenditure, the past history and the above conclusion that the expenditure was on construction of office building. The ld. CIT(A) upheld the AO^‟s order with regard to allowing depreciation @ 10% concerning the construction at the assessee^‟s Kolkata Regional Office-1. However, it was found by the ld. CIT(A) that the    other two expenses of  Rs.10,75,297/- and Rs. 10,14,599/- (total amounted to Rs.2,08,98,967/- pertained to two other projects, namely, GSB-WMM Project and Panogarh Palsit, where the construction was of temporary sheds. The AO was directed to allow depreciation @ 100% on these two sites.

3. xxx

4. xxx5. We have heard the parties and have perused the material on record. The Tribunal order in the assessee^‟s own case for assessment year 1998-99 is at pages 10 to 27 of the assessee^‟s paper book (^„APB^‟ for short). In that year, as observed in para 6 of the Tribunal order, the structures were admittedly of temporary nature and they were constructed on the land which did not belong to the assessee. For the present year, the assessee seeks to draw parity with the facts for assessment year 1998-99 by contending that here also, the structures were of temporary nature; that they were not built on the land owned by the assessee; and that after the contract got over, these structures were to be handed over to the contractee. It has, however, been found by the authorities below concurrently, that the construction in question is different from the construction involved in assessment year 1998-99. It was observed that the expenditure of Rs. 20,26,181/- included the purchase of cement for Rs. 1,92,360/- and of sand of Rs. 1,02,386/-. Likewise, there were other expenses of sanitary items, water tank, plywood, roof tiles, black stone, tube well, tiles, etc. These heads of expenses were found not to be required for construction of temporary sheds required for residence of labours and storage of material. These facts do not stand rebutted. These facts were also not before the Tribunal for assessment year 1998-99.”

3. Mr. Ajay Vohra, Advocate for the appellant submits that the expenditure on the sheds was not capital expenditure and in fact was revenue expenditure. It is pointed out to Mr. Vohra that this contention and issue was not raised before the Tribunal. He submits that even if this issue and contention was not raised before the authorities/Tribunal, the Tribunal should have sue moto, on its own, granted the said relief. He relies upon Commissioner of Income Tax vs. Mahalakshmi Textile Mills Ltd., reported as (1967) 66 ITR 710.

4. It is not possible to accept the contention of Mr. Vohra. An appeal under Section 260A of the Act is maintainable against every order passed by the Tribunal, where High Court is satisfied that a substantial question of law is involved. A contention/ issue, which is not raised, dealt with or answered by the Tribunal, cannot be raised before the High Court for the first time in an appeal under Section 260A of the Act. A contention/question raised and answered by the Tribunal or dealt with by the tribunal suo motu and a question/issue which was raised, but not answered/decided by the Tribunal, can be made subject matter of an appeal under Section 260A of the Act. Therefore, a contention/issue, which is not raised and not decided by the Tribunal, cannot form subject matter of an appeal before the High Court.

5. It may be noticed that an appeal under Section 260A of the Act is the fourth tier of appeal in most of the cases and a third tier of appeal in a few cases.

6. Learned counsel for the appellant has referred to sub-Section (6) to Section 260A of the Act and submits that jurisdiction of the Court is very wide. The said sub-Section reads as under:-

“(6)  The High Court may determine any issue which –

(a)    has not been determined by the Appellate Tribunal; or

(b)   has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).”

7. Clause (a) of sub-Section (6) to Section 260A of the Act states that the High Court may decide an issue, which is not determined by the Appellate Tribunal. The word “determined” means that the issue is not dealt with, though it was raised before the Tribunal. The word “determined” presupposes an issue was raised or argued but there is failure of the Tribunal to decide or adjudicated the same. In a given case, a substantial question of law may arise because of the facts and findings recorded by the Tribunal, but the said issue/question is not determined. In such cases, an appeal under Section 260A of the Act can be entertained. This would depend upon the facts of each case and the reasoning and findings recorded by the Tribunal. This is not so in the present case.