# HUKUMCHAND MILLS LTD. · v. COMMISSIONER OF INCOME-TAX, CENTRAL BOMBAY & ORS

- **Citation:** [1967] 1 S.C.R. 463
- **Court:** Supreme Court of India
- **Decided:** 1966-09-22
- **Case number:** Civil Appeals Nos. 411 to 415 of 1965
- **Bench:** C. Shah, V. Ramaswami, V. Bhargava
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hukumchand-mills-ltd-v-commissioner-of-income-tax-central-bombay-ors-3861
- **Pages:** 6

## Headnote

Income-tax Act (11 of 1922), s. 33(4)-Appel/ate Tribunal-Juris·
diction .to entertain new points in appeal and order remand.
The subject-matter of the assessee's appeal before the Income-tax
Appellate Tribunal was the question as to what
should be the proper
written down value of its buildings, machinery etc., for calculating the
depreciation allowance unMr s. 10(2) (vi) of the Income-tax Act, 1922.
The Department sought to support the orders of the Income-tax Officer
and the Appellate Assistant Commissioner on the new ground that para·
graph 2 of the Taxation Laws (Part B States) (Removal of Difficulties)
Order, 1950, was applicable, and that certain
amounts of depreciation
which were allowed under the Industrial Tax Rules had to be deducted
in arriving at the written down value. The Tribunal permitted the con·
tention to be raised and remanded the matter to the Income-tax Offic~r
for considering the question whether the Industrial Tax Rule.s related to
income-tax or super-tax or any law relating to tax on profits of business,
for ascertaining whether any depreciation was allowed under those Rules,
and whether such depreciation should be taken into account for the purpose of computing the written down value.
In this Court, the jurisdiction of the Tribunal-to entertain and go into the question raised by the
Department for the first time before it, and to remand the case in
tho
manner· it has done-was questioned.
HELD : Under s. 33 ( 4) of the Act the Tribunal has got power to
entertain the argument of the Department,. to remand, and to give the
directions to the Income-tax Officer. The
Appellate.
Tribunal Rules,
1946, made under s. 5A(8) of the Act, are merely procedural in character and do not, in any way, circumscribe or control the powet of the
Tribunal under s. 33(4). [468 B-C]

## Text

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HUKUMCHAND MILLS LTD. ·
v.
COMMISSIONER OF INCOME-TAX, CENTRAL BOMBAY
& ORS.
September 22, 1966
(J, C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.]
Income-tax Act (11 of 1922), s. 33(4)-Appel/ate Tribunal-Juris·
diction .to entertain new points in appeal and order remand.
The subject-matter of the assessee's appeal before the Income-tax
Appellate Tribunal was the question as to what
should be the proper
written down value of its buildings, machinery etc., for calculating the
depreciation allowance unMr s. 10(2) (vi) of the Income-tax Act, 1922.
The Department sought to support the orders of the Income-tax Officer
and the Appellate Assistant Commissioner on the new ground that para·
graph 2 of the Taxation Laws (Part B States) (Removal of Difficulties)
Order, 1950, was applicable, and that certain
amounts of depreciation
which were allowed under the Industrial Tax Rules had to be deducted
in arriving at the written down value. The Tribunal permitted the con·
tention to be raised and remanded the matter to the Income-tax Offic~r
for considering the question whether the Industrial Tax Rule.s related to
income-tax or super-tax or any law relating to tax on profits of business,
for ascertaining whether any depreciation was allowed under those Rules,
and whether such depreciation should be taken into account for the purpose of computing the written down value.
In this Court, the jurisdiction of the Tribunal-to entertain and go into the question raised by the
Department for the first time before it, and to remand the case in
tho
manner· it has done-was questioned.
HELD : Under s. 33 ( 4) of the Act the Tribunal has got power to
entertain the argument of the Department,. to remand, and to give the
directions to the Income-tax Officer. The
Appellate.
Tribunal Rules,
1946, made under s. 5A(8) of the Act, are merely procedural in character and do not, in any way, circumscribe or control the powet of the
Tribunal under s. 33(4). [468 B-C]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 411 to
415 of 1965.
Appeals from the judgment and order dated June 22, 1962, of
the Bombay High Comt in I. T. R. N. 34of1960.
A. S. Bobde, and 0. C. Mathur, for the appellant (In C. As.
Nos. 411-413 of 1965) and the respondent (In C. As. Nos. 414 and
415 of 1965).
B. Sen, Gopal Singh and R .. N. Saclzthey, for the respondent
(in C. As. Nos. 411-413 of 1965) and the Appellant (in C. As.
Nos. 414 and 415 of 1965).
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The Judgment of the Court was delivered by
Ramaswami, J, These five appeals consolidated by an order
of the Born bay High Court arise out of a Reference made by the
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SUPREME COURT REPORTS
[1967] l S.C.R.
Income-tax Appellate Tribunal, Bombay Bench •A' on January 2,
1959 and decided by the Bombay High Court on September 22, 1962.
The High Court granted certificates to appeal against its judgment
under s. 66-A of the Income Tax Act, 1922 to both the Commissioner
of Income-Tax, (Central) Bombay and the assessee.
Civil Appeals
Nos. 411 to 413 of 1965 arc·brought on behalf of the asscsscc and
Civil Appeals Nos. 414 and 415 of 1965 arc brought on behalf of the
Commissioner of Income-Tax, (Central) Bombay.
Hukumchand Mills Ltd. (hereinafter referred to as the 'assessce')
is a public company incorporated in the previous Indore State.
The assessee owns a textile mill there.
Up to the assessment year
1949-50 it was being assessed in British India as a non-resident (except
in 1948-49 when it was assessed as a resident), on such income as
fell withins. 4 (!)(a) or 4(1)(c) read withs. 42 of the Income Tax
Act, 1922 (hereinafter referred to as the 'Act'). After the Constitution came into force, Indore became a Part B State and the Act
was brought into force in such States with effect from April 1,
1950. The asscssec therefore became liable to be assessed as a
resident from the assessment year 1950-51.
The assesscc was accordingly assessed as a resident in the years
1950-51, 1951-52 and 1952-53. One of the questions which arose
for deterrr.ination in the assessments for these years was the proper
written down value of the buildings, machinery etc. of the asscssce
for calculating the depreciation allowance under s. 10(2)(vi) of the
Act. The assessee relied upon s. 10(5)(b) and contended that the original cost of the machinery, buildings etc. should be taken for this
purpose. That sub-clause provided that in the case of assets
acquired before the previous year the written down value was the
actual cost less all depreciation actually allowed to the assessee
under the Act or any Act repealed thereby. But as no depreciation
had been actually allowed under the Act, the assessec contended
that the original cost should be taken as the basis of allowing depreciation without taking into consideration the number of years during
which the machinery had been working or the depreciation it had
suffered or the written down value entered in the books. The case
of the Department. on the contrary, was that as it was necessary
to determine the total income of the asscssee to arrive at the taxable
proportionate income of the assessee under the Act as a non-resident
and as depreciation had been allowed to arrive at such total income,
the same must be taken into account to arrive at the written down
value as it had been actually allowed within the meaning of s. 10(5)
(b), The Income-tax Officer and the Appellate Assistant Commissioner rejected the contention of the assessee hut the Tribunal,
by its order dated October 8, 1958 held that only that part of the
depreciation which entered into the computation of the taxable
income of the assessee under the Act can be treated as depreciation
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HUKUMCHAND MILLS v. c.I.T. (Ramaswami, J.)
465
'actually allowed' and not the total depreciation which went into the
computation of the total income.
It was urged before the Tri bun al by the Department that although the Income Tax Officer had not considered the provisions of
paragraph 2 of the Taxation La\vs (Part B States) (Removal of
Difficulties) Order, 1950 (hereinafter referred to as the 'Taxation
Laws Order'), the said provisions were applicable in the present case
and certain amounts of depreciation which are .allowed under
the Industrial Tax Rules, which had the force of law in the Indore
State, were required to be deducted in arriving at the written down
value of the assets of the assessee. The Tribunal permitted this
contention to be raised by the Department. It was pointed out on
behalf of the assessee 'that the contention could not be entertained
unless it was found as a fact that the depreciation was actually
allowed under the Industrial Tax Rules to the assessee, and unless it
was also further held that the Industrial Tax Rules were rules which
related to income-tax or super-tax, or a1\y law relating to tax
on profits of business. Paragraph 2 of the Taxation Laws Order
provides as follows:-
"Computation of aggregate depreciation allowance
and the written down value.-ln making any assessment
under the Indian Income-tax Act, 1922, all depreciation
actually allowed under any laws or rules of a Part B State
relating to income-tax and super-tax or any law relating
to tax on profits of business, shall be taken into account
in computing the aggregate depreciation allowance referred
to in sub-clause (c) of the proviso to clause (vi) of subsection (2) and the written down value under· clause (b)
of sub-section (5), of section 10 of the said Act."
In view of this submission made by the parties the Tribunal
remanded the matter back to the Income Tax Officer for ascertaining whether any depreciation was allowed under the Industrial Tax
Rules and for' considering the·question whether the said· rules related
to i!1come-tax or super-tax or any law relating to tax on profits of
busmess and if he decided these questions in favour of the Department he should take into consideration such depreciation actually
all?wed under the said rules for the purposes of computing the
wntten down value.
Under s. 66(1) of the Act the Tribunal referred the following
questions of law for the determination of the High Court:
"(I) Whether the words 'all depreciation actually
allowed' used in section 10(5)(b), of the Indian Income-tax
Act refer ?~ly to the.depreciation allowed for the purpose
of determmmg the amount liable to Indian income-tax.
466
SUPREME COURT REPORTS
[ 1967] l S.C.R.
(2) Whether the provisions of paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order,
1950, apply and were correctly applied to the facts of the
case."
By its judgment dated June 22, 1962 the High Court agreed with the
view taken by the Tribunal on the first question and answered it in
favour of the assessee. As regards the second question, the High
Court held as follows:-
·
"We do not find anything in the Tribunal's order
which indicates that any contention was raised before the
Tribunal that paragraph 2-had no application to the case.
What was contended was that the questions whether any
depreciation was allowed under the Industrial Tax Rules, or
ifit was so:allowed, whether such depreciation was under
any law or rules relating to income-tax or super-tax etc. not
having been determined, the contention raised by the
Department on the basis of paragraph 2 of the Taxation
Laws (Part B States) (Removal of Difficulties) Order,
1950, could not be entertained at that stage, and that
contention has been accepted by the Tribunal. In these circumstances, our answer to question No. 2 as framed is that
Paragraph 2 of the Taxation Laws (Part B States) (Removal
of Difficulties) Order, 1950, is a valid provision of Jaw, but
it will have application to the present case only if the questions which the Tribunal has asked the Income-tax officer to
determine, are determined by the Income-tax Officer in
favour of the Department."
CM/ Appeals Nos. 41 I to 413 of 1965:
The sole question argued on behalf of the assessee in these appeals
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is that the Tribunal was not competent to go into the question
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whether the provisions of paragraph 2 of the Taxation Laws Order
were applicable to the present case and the respondent should not
have been allowed to raise the contention for the first time before the
Tribunal. It was also argued that the Tribunal ought not to have
remanded the case to the Income Tax Officer for ascertaining whether ,
any depreciation was allowed under the Industrial Tax Rules and
whether such depreciation should be taken into account for the
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purpose of computing the written down value. In our opinion
there is no justification for this argument. Jn the first place, no
objection was raised before the Tribunal or before the High Court
that the Department should not have been allowed to raise the
question for the first time with regard to the application of paragraph 2 of the Taxation Laws Order. We shall, however, assume
in favour of the assessee that the question was implicit in the question
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actually framed and referred to the High Court. Even upon that
assumption we are of opinion that the Tribunal had jurisdiction to
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HUKUMCHAND MILLS v. c.1.T. (Ramaswami, J.)
467
permit the question to be raised for the first time in appeal. The
powers of the Tribunal in dealing with appeals are expressed in
s. 33( 4) of the Act in the widest possible terms. Section 33(3) of
the Act states that "An appeal to the Appellate Tribunal shall be in
the prescribed form and shall be verified in the prescribed manner
...... " Section 33(4) reads as follows:-
"(4) The Appellate Tribunal may, after giving both
parties to the appeal an opportunity of being heard, pass
such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner."
The word "thereon," of course, restricts the jurisdiction of the
Tribunal to the subject-matter of the appeal. The words "pass such
orders as the Tribunal thinks fit" include all the powers (except
possibly the power of enhancement) which are conferred upon
the Appellate Assistant Commissioner by s. 31 of the Act. Consequently the Tribunal has authority under this section to direct the
Appellate Assistant Commissioner or the Income Tax Officer to
hold a further enquiry and dispose of the case on the basis of
such enquiry. Rule 12 of the Appellate Tribunal Rules, 1946 made
under s. 5A(8) of the Act provides as follows:-
"The appellant shall not, except by leave of the
Tribunal, urge or be heard in support of an)' ground not set
forth in the memorandum of appeal; but the Tribunal,
in deciding the appeal, shall not be confined to the grounds
set forth in the memorandum of appeal or taken by leave
of the Tribunal under this rule:
Provided that the Tribunal shall not rest its decision
on any other ground unless the party who may be affected
thereby has had a sufficient opportunity of being heard
on that ground."
Rule 27 states:
"The respondent, though he may not have appealed,
may support the order of the Appellate Assistant Commissioner on any of the grounds decided against him."
Rule 28 is to the following effect:
"Where the Tribunal is of opinion that the case should
be remanded, it m:ay remand it to the Appellate Assistant
Commissioner or the Income-tax Officer, with such directions as the Tribunal may.think fit."
In the present case, the . subject-matter of the appeal before the
Tribunal was the question as to what should be the proper written
down value of the buildings, machinery etc. of the assessee for
.C68
SUPREME COURT REPORTS
[ 1967) I S.C.R.
<:alculating the depreciation allowance under s. 10(2)(vi) of the Act.
It was certainly open to the Department, in the appeal filed by the
assessce before the Tribunal, to support the finding of the Appellate
Assistant Commissioner with regard to the written down value on
any of the grounds decided against it. It was argued on behalf of
the appellant that the action of the Tribunal in remanding the case
is not strictly justified by the language of Ruic 28 or Rule 12.
Even
assuming that Rules I 2 and 28 are not strictly applicable to the case,
we are of opinion that the Tribunal has got sufficient power under
s. 33(4) of the Act to entertain the argument of the Department
with regard to the application of paragraph 2 of the Taxation Laws
Order and remand the case to the Income Tax Officer in the manner
it has done. It is necessary to state that Rules 12 and 28 are not
exhaustive of the powers of the Appellate Tribunal. The rule6 arc
merely procedural in character and do not, in any way, circumscribe or control the power of the Tribunal under s. 33(4) of the Act.
We arc accordingly of the opinion that the Tribunal had jurisdiction
to entertain the argument of the Department in this case and to
direct the Income Tax Officer to find whether any depreciation was
actually allowed under the Industrial Tax Rules and whether such
depreciation should be taken into consideration for the purpose of
computing the written down value.
For these reasons we reject the argument of Mr. Bobde on
behalf of the a>sesscc and dismiss these appeals. There will be no
order as to costs.
Civil Appeals Nos. 414-415 of 1965:
The question of law arising in these appeals has been the subjectmatter of consideration in the decision of this Court' in Commissioner of Income-tax, Madhva Pradesh, NaKP"' and Blumdara v.
Nandlal Bhandari Mills Ltd.('). and for the reasons given in that case
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we hold that the question has been correctly answered by the High
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We accordingly dismiss these appeals but there will be
no order as to costs.
V. P. S.
Appeals dismissed.
(I) 11966) 2 S.C.R. 925; 60 I.T.R. 173.