Facts

The Assessee had imported spirit from outside West  Bengal in terms of rule 6 of  the West Bengal Excise (Manufacture of Country Spirit in Labelled and Capsuled Bottles) Rules, 1979 during assessment years 1984-85 and 1985-86. Apart from the   fee which was payable by the manufacturer for the privilege of manufacturing of country spirit in labelled and capsuled bottles, an additional fee was payable on  the import of spirits. Clause (a) of section 43B as inserted by Finance Act, 1983  only applied to any amount payable as tax or duty. Subsequently, the said clause was substituted by the Finance Act, 1988 with effect from 01.04.1989 to include any amount also payable as a cess or fee. Deduction of the said fee was denied by  the AO invoking the provisions of section 43B of the Income-tax Act which was upheld by the CIT(A) holding fee payable to the Government by whatever name called as a duty. The Tribunal had however deleted the  disallowance holding that section 43B as it then stood did not apply to fee. The High Court upheld the Tribunal’s order holding that the amount paid by the assessee was neither a duty nor a cess or fee but was a price for the grant of the privilege. For the first time before the Supreme Court, the Revenue urged that the duty was in the nature of      a countervailing duty which the State Government was competent to levy under entry 51 of List II to the Constitution of India. Assessee urged before the Court    that this issue had not beenraised by the Revenue even before the Tribunal.

Issue

Whether it was competent for the Supreme Court to allow a new issue to be raised in an appeal for the first time before it arising under section 262 of the Income-tax Act.

Views

According to the Court, the issue relating to treatment of the said payment as countervailing duty had neither been raised before the Tribunal or in the reference application. However, it has concluded that the Tribunal as well as the High Court erred in not dealing with the same. Nevertheless, the Revenue has been granted   the benefit of doubt that this is what was intended to be argued.  Apart from this,   ithas also been observed that they cannot shut out what is a pure question of law

Held

The Court has entertained the new issue and remanded the matter back to the Tribunal for deciding the same. (AY. 1984-85, 1985-86) (CA Nos. 8667-8688 of 1997 & Ors, dt. 2-3-2006)

Editorial: In CIT v. Jhabua Power Ltd (2013) 262 CTR 277/93 DTR (SC) 469/217 Taxman 399 (SC) also the Supreme Court realizing that a fresh issue was raised before them for the first time remanded the matter back to the Tribunal for reconsideration.

“We may stumble and fall but shall rise again; it should be enough if we did not run away from   the battle.”

– Mahatma Gandhi