Law:

Section:

Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Power of - Assessment years 1997-98 and 1998-99 - Whether jurisdiction of Tribunal is confined to passing of orders on subject-matter of an appeal, that is, those orders which are necessary for disposal of appeal and, therefore, Tribunal cannot give a finding in respect of an assessment year which is not subject-matter of appeal before it - Held, yes - Whether, therefore, Tribunal can give a finding that particular deduction/income does not belong to relevant assessment year/years, but it cannot give a finding that said deduction/income belongs to another specified year, though it may incidentally find that said deduction/income relates to another assessment year - Held, yes FACTS The assessee-company was a wholly owned subsidiary of a Japanese company in India. Its main business was international trading in various items such as textiles, chemicals, energy, metals, etc. It commenced business from 1-6-1996, after taking over the assets and liabilities of the liaison office of the Japanese company. It also took over 18 employees of the liaisoning office on a deputation basis. The employees were to continue in the dual employment of both, the Japanese company as well as the assessee. However, it was agreed that the salaries and perquisites of the said employees were to be paid by the Japanese company in Japan. For their services to the assessee, they were paid a comparatively small amount of salary and perquisites. The assessee claimed that during the assessment years 1997-98 and 1998-99, it paid to the aforesaid employees by way of incentives, the taxes which they had to pay in India in respect of the salary and perquisites received by them from the Japanese company outside India. Those amounts were claimed as deductions in computing the income for income-tax purposes. The Assessing Officer disallowed the claim on the ground that the liability was a contingent liability, both at the time of the closing of the accounts for the years under consideration and at the time of filing of the returns, as the payment was actually made in the financial year 1998-99, relating to the assessment year 1999-2000. On…

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