The Tribunal has the power to permit the appellant to urge a new ground in appeal, even though it is not covered by the grounds of appeal. The Tribunal can also pass orders on grounds not taken in the memorandum of appeal, provided that the party who is affected by the raising of the new ground has been given sufficient opportunity of being heard.

1. The assesses is an insurance company and carries on business in life insurance and other insurance business, it has its head office in Bombay and its branches in other parts of India including Indian States. During the two years under reference, the assessee company earned profits of Rs. 65,203/- and Rs. 1,27,836/- in respect of the non-life assurance business carried on in the Indian States and the Question that had to be considered was whether these two sums were liable to tax both under the Income-tax Act and the E. P. T. Act. The Income-tax Officer came to the conclusion that the profits in respect of Indian States insurance policies arose in British India and hence the immunity from tax in respect of these profits claimed or sought by the company could not be granted. The asses-see appealed to the A. A. O. and the A. A. C, held that the income in respect of this insurance had accrued in the Indian States and therefore he came to the conclusion that these amounts were not liable to tax. Prom this decision the Commissioner appealed to the Tribunal. It is important to note that the only ground of appeal taken by the Commissioner was that the learned A. A. C. erred in holding that the sun* of Rs. 65.203/- (and the same applies to the other sum of Rs. 1,27,836/-) represented profit accruing, or arising in Indian States from business transacted in those States and deleting the same from, the income of the assessee. The Tribunal in its decision upheld the view of the A. A. C.; but it set aside the order of the A. A. C., and directed that he should dispose of the appeal after taking into consideration the question of apportionment. In other words, the view of the Tribunal was that, although the income had accrued in the Indian States, the question should be considered-whether any process for the earning of that income had taken place in British India and la accordance with the ratio of Commr. of Income-tax, Bombay v. Ahmedbhai Umarbhai and Co., 1950-18 ITR 472: (AIR 1950 SC 134) (A), the income should be apportioned between Indian States and British India, it is this decision of the Tribunal that is being challenged by the assessee, and what is urged before us is that the only ground of appeal by the Commissioner of Income-tax before the Tribunal was whether the income had accrued in British India or in the-Indian States, The question of apportionment was never agitated either before the I. T. O. or before the A. A. C. or in the grounds of appeal, and it is said that it was not open to the Tribunal under Section 33 (4) to decide on a question which was not a question urged by the appellant before it.

2. Now, it is not disputed that the Commissioner, notwithstanding the grounds of appear, did urge this point before the Tribunal; nor is it suggested that the assessee had not sufficient notice to meet this new ground urged by the Commissioner. But the stand taken by the assessee is that, whether leave was given to the Commissioner to urge this point before the Tribunal and whether the assessee had sufficient notice of this new ground, the Tribunal had no competency at all to decide the appeal on a ground not taken by the Commissioner in his grounds of appeal. This raises a rather important question and we therefore must carefully consider what are the powers of the Tribunal functioning as an appellate Court.

3. Before we look at the authorities and before we look at the section and the relevant rules, it, is desirable to consider on general principles what are the powers of an appellate Court. When an appellant comes before a Court of appeal, he comes there because he is dissatisfied with the decision of the trial Court and he challenges that decision: and he challenges that decision on certain grounds which are set out in the grounds of appeal or in the memo of appeal. The respondent, if he has not appealed or has not cross-objected, is satisfied with the decision of the trial Court and he is before the Court of appeal to