Law:

Section:

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 1948-49 - Question raised in appeal before Tribunal was whether payment made by assessee to 'M' was capital expenditure or revenue expenditure - Tribunal held said payment as revenue expenditure - Tribunal also held that assessee had not paid to 'M' entire sum but only part of said sum and, therefore, allowed deduction only to extent of such part of sum actually paid - It was found from statement of case submitted by Tribunal that an objection was raised by assessee that Tribunal had no jurisdiction to deal with question as to quantum of payment by assessee to 'M' inasmuch as it was a fact found in favour of assessee and no objection was raised to that finding of fact by ITO - Whether, on facts, Tribunal erred in dealing with question as to quantum of payment made by assessee to 'M' - Held, yes - Whether, therefore, Tribunal exceeded its power under section 33(4) of 1922 Act in partly disallowing claim of assessee on ground that said amount was not paid by assessee - Held, yes Words and phrases : Expression "thereon" as occurring in section 33(4) of the Indian Income-tax Act, 1922 FACTS The assessee-firm was dealing in cloth. One 'M', who was carrying on the business as the sole proprietor was able to secure a contract for purchase of parachutes. In November, 1946, 'M' assigned to the assessee the benefits of the said contract of purchase of the parachutes and the assessee paid to 'M' a certain sum. For the assessment year 1948-49, the assessee deducted the aforesaid amount paid to 'M' from its income. In the assessment order the ITO observed that he was not satisfied whether the expenditure on account of aforesaid amount had been incurred by the assessee at all. He further held that even if the assessee had paid any amount to 'M', it was not an expenditure relating to the business of the assessee but was of a capital nature. On appeal, the AAC upheld the order of the ITO. On further appeal, the Tribunal held that the payment was not of a capital nature, but was a revenue expenditure. The Tribunal also…

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