The Tax Publishers2012 TaxPub(DT) 0400 (AP-HC) : (2012) 044 (I) ITCL 0264 : (2011) 336 ITR 0516 : (2011) 244 CTR 0086 : (2011) 060 DTR 0281

INCOME TAX ACT, 1961

--Appeal [High Court]--MaintainabilityQuestion allegedly not raised before Tribunal--The Senior Counsel raised a preliminary objection as to maintainability of the appeals. Referring to the question of law framed in the memorandum of appeals by the revenue he would urge that when the question of law is neither raised before the Tribunal nor considered, it cannot be permitted to be raised before the High Court. The High Court cannot adjudicate such a question which was not raised before the Tribunal. Held: ,/b>The substantial question is to be decided by High Court and the issue in dispute was maintainable as the same was raised before the Tribunal.

Section 260A was inserted by the Finance (No. 2) Act, 1998 with effect from 1-10-1998. Sections 256, 257, 260 and 261 were also amended to provide an appeal to the High Court directly against orders of the Tribunal. The appellate power, however, was limited to consideration of a substantial question of law. Section 260A(2)(c) mandates that proceedings under section 260A(1) shall be in the form of memorandum of appeal precisely stating the substantial question of law involved in the case. Prior to amendments introduced by the Finance (No. 2) Act, 1998, the Tribunal was the final adjudicatory forum insofar as finding of facts are concerned. If any question of law is raised either by the revenue or by the assessee, the Tribunal was empowered under sections 256(1) and (2) to state the case and refer the question of law arising out of the order of the Tribunal in appeal to the jurisdictional High Court. The answer by the High Court on the question of law would then be the basis for the Tribunal to dispose of the appeal before them during pre-1998 period. A question of law referred to the High Court under sections 256(1) and (2) and a question of law pleaded in the memorandum under section 260A is not an academic or general question of law. Such question of law should be one which 'arises out of an order of the Tribunal in an appeal or proceeding before them under section 256 and a substantial question of law which is involved in the case.' If a question of law was not raised before the Tribunal or such question of law does not arise out of the case decided by the Tribunal, an appeal under section 260A is barred. To that extent, the Senior Counsel is correct and is well supported by the ratio in Seth Pushalal Mansinghka (P.) Ltd.'s case. The said case arose under section 55 of the 1922 Act which is the precursor of section 256(1). Ruling on the scope of the said provision, the Division Bench of the Supreme Court observed that, 'when a question of law is neither raised before the Tribunal nor considered by it, will not be a question arising out of the order of the Tribunal and the High Court will be acting beyond its jurisdiction in dealing with any such question'. Whether this binding ratio bars these appeals. This Court is afraid this aspect of the matter does not arise in these cases. This Court is given the pricis of the orders of the Commissioner (Appeals) as well as the Tribunal impugned in these appeals. Before the Commissioner (Appeals) the assessee raised the plea that the investment of non-SLR reserves voluntarily also amounts to business of banking and that the income therefrom is attributable to the main activity. Before the Tribunal the assessee filed appeal insofar as the department appeal went against them, and the revenue also filed appeals. The question was specifically raised and a specific issue was framed by the Tribunal touching upon this aspect. After perusing the orders of the Commissioner (Appeals) as well as the Tribunal, the revenue specifically raised the issue and also tried to distinguish the decision of the Supreme Court relied on by the assessee therefore, the submission of the Senior Counsel is rejected and hold that these appeals are maintainable and the question of law raised in these appeals was very much in issue before the Commissioner (Appeals) as well as before the Tribunal.

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