Law:

Section:

I. Section 254 of the Income-tax Act, 1961 [Corresponding to section 33 (4) of the Indian Income-tax Act, 1922] - Appellate Tribunal - Powers of - Assessment year 1940-41 - Whether it is not open to Tribunal to give finding adverse to assessee, which does not arise from any question raised in appeal nor is it open to it to raise any ground which would work adversely to appellant and pass order which makes his position worse than it was under order appealed against - Held, yes - Assessee filed appeal against disallowance of Rs. 30,000 which was claimed as deduction towards interest paid on borrowed money - No cross appeal was filed by revenue - Tribunal giving finding that disallowance should be in excess of Rs. 30,000 directed ITO to amend assessment according - Whether Tribunal was competent to give direction in question - Held, no FACTS While examining the account books of the assessee relating to relevant assessment year, the ITO found that out of its borrowed capital, the assessee - firm had advanced a sum of about Rs. 9 lakhs to its partners but did not charge any interest on such advances. Out of the total interest claimed by the assessee as a deduction, the ITO disallowed a sum of Rs. 30,000, representing the interest on the advances made to the partners on the ground that the capital advanced to the partners had not been utilised for business purpose. The assessee's appeal on this point was rejected by the AAC The assessee then appealed to the Tribunal. The Tribunal found that out of the total borrowings amounting of Rs. 83,39,903 a sum of Rs. 11,25,572 was advanced to the partners and, as such, the assessee was entitled to a deduction of 72.5/83.3 of the total interest paid and the balance was to be disallowed. The Tribunal, accordingly, directed the ITO to work out the amount of disallowable interest according to this formula and to amend the assessment order accordingly. The disallowance in this manner worked out to Rs. 36,000 as against Rs. 30,000 disallowed by the ITO. On reference: HELD Under section 33(4) of the 1922 Act, the powers of the Tribunal in disposing of an appeal are stated in very wide terms. It can 'pass such orders thereon as it…

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