TMI Blog1956 (8) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s Monastery, Thevara, is a religious institution. It is conducting an educational institution called the Sacred Heart's College, Thevara. Notices were issued by the first respondent to the petitioner under section 44 of the Cochin Income-tax Act, 1117, to the effect that the income of the Monastery in respect of the assessment years 1123 and 1124 had escaped assessment. Pursuant to those notices the Monastery was assessed to income-tax for the years 1123 and 1124 on donations received by the Prior for the construction of the college and also on Mass stipends. It was contended on behalf of the petitioner that the donations and Mass stipends were not income for which the Monastery could be taxed. The Income-tax Officer held that donations and Mass stipends were voluntary contributions and that, under the Cochin Income-tax Act, 1117, as amended by Act XXII of 1122, such voluntary contributions were liable to be assessed to income- tax. For the years 1123 and 1124 the petitioner was assessed to income- tax on ₹ 1,17,997 and ₹ 73,847 respectively, amounts received as donations and Mass stipends. The petitioner appealed from these orders before the Appellate Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1122 and dismissed the revision petitions on 15th February, 1955. The petitioner was not heard before the revision petitions were disposed of. This petition was filed on 21st April, 1955. 3. The main grounds urged in the petition are that donations received by the petitioner for the construction of the college and Mass stipends are not income for which the Monastery is liable to be taxed, that the Income-tax Officer had jurisdictions to assess income-tax on those amounts, that in any case they are receipts of a casual and nonrecurring nature and, therefore, exempted under section 5(3) (vii) of the Cochin Income-tax, that the orders of the Income-tax authorities are the result of a misconception regarding the scope of clause (iii) of section 5(3) of the Cochin Income-tax Act, 1117, and the effect of the deletion of the clause by Act XXII of 1122, that they misunderstood the nature of Mass stipends, and that the orders are erroneous on the face of the record. It was also stated in the petition that since the question as to whether donations and Mass stipends are liable to be assessed to income-tax has been finally decided by the Appellate Assistant Commissioner and by the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under article 226 of the commissioner and issue a writ of certiorari quashing the order of the Income-tax Authorities. The mere fact that the impugned orders are wrong will not be a ground for this Court to interfere in the exercise of its extraordinary jurisdiction. This Court will interfere only if the Income-tax Authorities had no jurisdiction to assess the petitioner to income-tax or if they acted illegally in the exercise of their jurisdiction or if there is an error apparent on the face of the record in their order. The question whether the petitioner has other effective remedy will also be taken into consideration by this court in deciding whether this is a fit case in which it should exercise its extraordinary jurisdiction. 7. The law relating to the question has been laid down by the Supreme Court in T.C. Basappa v. T. Nagappa [1955] 1 S.C.R. 250 and in Hari Vishnu v. Ahmad Ishaque [1955] 1 S.C.R. 1104. In the first case his Lordship B.K. Mukherjea, J. (as he then was), said: The second essential feature of a writ of certiorari is that the control which is exercised through it over judicial or quasi-judicial tribunals or bodies is not in an appellate by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iorari but not a mere wrong decision. The essential features of the remedy by way of certiorari have been stated with remarkable brevity and clearness by Morris, L.J., in the recent case of Rex v. Northumberland Compensation Appeal Tribunal [1952] 1 K.B. 338, at p. 357. The Lord Justice says: 'It is plain that certiorari will not issue as the cloak of an appeal in disguise. It does not lie in order to bring up an order or decision for rehearing of the issue raised in the proceedings. It exists to correct error of law when revealed on the face of an order or decision or irregularity or absence of or excess of jurisdiction when shown.' His Lordship then quoted with approval the following passage from the judgment in Veerappa Pillai v. Raman and Raman Ltd. [1952] S.C.R. 582: Such writs as are referred to in article 226 are obviously intended to enable the High Court to issue them in grave cases where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to assess the person to income-tax. Under the Income-tax Act, the Income-tax Officer has full jurisdiction to decide whether a person is liable to be assessed to income-tax in respect of particular items of receipt. If the decision is wrong the remedy of the party is to appeal to the higher authorities. It cannot be said to be a case of the Income-tax Officer assuming jurisdiction which he does not in law possess. The question was discussed by Lord Esher, M.R. in Reg. v. Commissioners for Special Purposes of the Income Tax [1888] 21 Q.B.D. 313 at p. 319. His Lordship observed: When an inferior court or tribunal or body, which has to exercise the power of deciding facts, is first established by Act of Parliament, the Legislature has to consider what powers it will give that tribunal or body. It may in effect say, that if a certain state of facts exists and in shewn to such tribunal or body before it proceeds to do certain things, it shall have jurisdiction to do such things, but not otherwise. There it is not for them conclusively to decide whether that state of facts exists and if they exercise the jurisdiction without its existence, what they do may be quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judication upon such an objection without assuming the functions of the court of appeal, and the power to re-try a question which the judge was competent to decide. 11. The law is thus stated in Halsbury's Laws of England, second edition, Volume IX, at page 88: The case is more difficult where the jurisdiction of the court below depends not upon some preliminary proceeding, but upon the existence of some particular fact. If the fact be collateral to the actual matter which the lower court has to try, that court cannot, by a wrong decision with regard to it, give itself jurisdiction which it would not otherwise possess. The lower court must, indeed, decide as to the collateral fact, in the first instance; but the superior court may upon certiorari inquire into the correctness of the decision, and may quash the proceedings in the lower court if such decision is erroneous, or at any rate if there is no evidence to support if. On the other hand, if the fact in question be not collateral, but a part of the very issue which the lower court has to enquire into certiorari will not be granted, although the lower court may have arrived at an erroneous conclusion wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the act itself. It follows that even if two items of receipt in respect of which the petitioner was assessed to income-tax do not constitute income it cannot be said that the income-tax Officer acted without jurisdiction in assessing the petitioner to income-tax on those items. 14. The next and the more important question is whether there is an error apparent on the face of the record in the orders of the Income- tax Authorities. It is settled law that the High Court can interfere with the decision of an inferior tribunal in the exercise of its supervisory jurisdiction if there is an error apparent on the face of the record in the decision of the tribunal. Where upon the face of the proceedings themselves it appears that the determination of the inferior court is wrong in law, certiorari to quash will be granted (Halsbury's Laws of England, Vol. IX, page 887). The principle was discussed by Singleton, L.J. Denning L.J. and Morris L.J. in Rex v. Northumberland Compensation Appeal Tribunal*, in which the decision of Lord Goddard, C.J, in Rex v. Northumberland Compensation Appeal Tribunal was upheld by their Lordships. After referring to the case law relating to the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the statute, states in its order the grounds on which the order has been made and when those grounds are not such as to warrant the decision arrived by the tribunal certiorari will issue for quashing the order. In K.P. Mushram v. B.C. Patil Chagla, C.J., said. The error of law which can be considered to be apparent on the face of the record is not an error which can be pointed out to the superior court after a long and elaborate argument. The learned Chief Justice further observed: The error of law contemplated is an error so patent, so manifest, that the superior court will not permit the subordinate court to come to a decision in the face of a clear ignorance or disregard of a provision of law. If a section of a statute is clearly misconstrued or if a provision of the law is overlooked or not applied, and that appears from the judgment of the lower court itself, then the superior court may interfere by a writ of certiorari. In Batuk K. Vyas v. Surat Municipality the same learned Chief Justice said: The mere fact that two views are possible on question of law does not make the decision of a tribunal with jurisdiction bad on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected the petition holding that the petitioner did not require the house for his residence and for his business. The appeal filed by the petitioner before the Additional Deputy Commissioner was also dismissed. The Additional Deputy commissioner took the view that, under clause 13(3)(vi)(a) and (c) of the Rent Control Order, the petitioner had to prove that the need to occupy the house was genuine and bona fide. In his application for a writ of certiorari the petitioner contended that the Rent Controller and the Additional Deputy commissioner ignored the provisions of sub-clause (a) of clause 13(3)(vi) of the Rent Control Order which was in the following term: that the landlord needs the house or a portion thereof for the purpose of (a) his bona fide residence, provided he is not occupying any other residential house of his own in the city or town concerned. It was pointed out that the Rent Controller and the Additional Deputy Commissioner omitted to consider the force of the underlined* words. The High Court held that the Rent Controller and the Additional Deputy Commissioner ignored the relevant provisions of the sub-clause and that it was an error ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e record which attracts the jurisdiction of the High Court under article 226 of the constitution. 19. The Calcutta High Court considered the question in United Commercial Bank Limited v. Kartar Singh which was a case under the Industrial Disputes Act. The order of the Industrial Tribunal was passed on a wrong apprehension of the scope and powers vested in him under the provisions of section 11(vii) of the Act. Bose. J. held that the order of the Tribunal was liable to be quashed by a writ of certiorari. The learned Judge observed: If the order impugned is a 'speaking order' or in other words an order which on the face of it sets out the reasons for making the order, such an order can be quashed by certiorari if the reasons are bad in law. 20. In Nangaram v. Ghinsilal the Collector, in deciding an appeal from the order of the Rent Controller under the Jaipur Rent Control Order, 1947, committed a patent error in interpreting a provision of the Rent Control Order. It was held that the order of the Collector could be quashed by a writ of certiorari. In National Coal Company Limited v. Deve the Patna High Court held that when the order of the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (3) of section 5 exempting voluntary contributions from liability to income-tax was deleted in 1122, they became liable to be assessed to income-tax. The second contention raised on behalf of the Monastery was stated to be the following: The donations received by the Monastery are not of a recurring nature. Nor are they receipts with any certainty. The donations in question depended purely on the goodwill and fancy of the donors concerned. The Income-tax Officer held that the donations were of a recurring nature. The reason given was that the Monastery received as donations ₹ 1,17,997 in 1946, ₹ 73,864 in 1947, ₹ 15,360 in 1948 and ₹ 13,433 in 1949. The contention that the donations were of the nature of gifts was repelled by the Income-tax Officer for the following reason : The idea of gift is usually associated with one individual making an ex gratia payment to another individual. This is a case where an appeal for funds is issued to the wider public, and the money payments made by the public are usually called contributions. There is thus wide difference between gift and voluntary contributions. The de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In repelling this contention the Appellate Assistant Commissioner said : These receipts are not income which is arising from any 'property' held under trust. They are the 'property' itself and the benefit of the above provision is therefore not available to the appellant. 24. The Commissioner in his order dismissing the revision petitions filed by the assessee gave the following reason for holding that the donations were liable to be taxed: By the amendment of section 4 of Act VI of 1117 religious institutions also were made liable to be assessed to income-tax and the effect of the deletion of clause (iii) of sub-section (3) of section 5 was to make voluntary contributions to religious institutions assessable income With regard to Mass stipends, the commissioner held that they also were donations with the condition attached that Masses should be said as requested by the donors and that they were assessable income. 25. The question for consideration is whether the orders of the Income-tax authorities holding that donations received by the Monetary for the construction of the college and Mass stipends are assessable income ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 122 that these donations were held to be liable to be taxed for the period during which the amended Act was in force. The question, therefore, for consideration is whether the amendment of the Cochin Act in 1122 had the effect of making donation of this kind taxable income. 27. Section 4 of the Cochin Income-tax Act, VI of 1117, which is the charging section, corresponds to section 3 of the Indian Act. That section was amended by Act XXII of 1122 by substituting the words company local authority, and the trustee or trustees of religious or chariable institution for the words company and local authority . But this amendment is not material so far as the question in issue is concerned. It is nobody's case that religious and charitable institutions were altogether exempted under the Cochin Income-tax Act, 1117, from liability to pay income-tax whatever be the nature of their income. The material provisions of the Act with which we are concerned in this case are those contained in section 5 sub-section (3) which provides for exemption of certain classes of income. The relevant portions are extracted below: Any income, profits or gains failing within the following classes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the year in which it was so set apart or within such extended time as may be allowed by the Commissioner of Income-tax in any special case, it shall be included in the total income and taxed as the income of the year following the end of the period in which it was set apart to the spent. Clauses (ii), (iii) and (viii) were deleted. In clause (vii) after the words any receipts the words, figure and letter not being capital gains chargeable according to the provisions of section 13B and were inserted. In the explanation occurring at the end of the sub-section the words and figures clause (ii) or clause (iii) were deleted. We are not concerned in this case with the effect of the amendment of clause (i) or the deletion of clauses (ii) and (viii) The amendment of clause (vii) also is not material so far as this case is concerned. The amendment of the explanation to the sub-section is only consequential to the selection of clauses (ii) and (iii). Therefore the only question for consideration so far as this case is concerned is the effect of the deletion of clause (iii). 29. What was exempted under clause (iii) was any income of a religious or charitable institution der ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y capital receipts was not considered by him Nor was it considered by the Appellate Assistant Commissioner or the Commissioner of Income- tax. As stated already, this is an error apparent on the face of the record and also amounts to an illegal exercise of jurisdiction. Clause (iii) is only an exemption clause. The mere fact that a particular item of receipt does not come within an exemption clause does not mean that it is assessable income. The primary question is whether it is income at all. Clause (iii) applies only to religious or charitable institutions and not to other bodies or individuals. If donations of this kind are assessable income all individuals and bodies other than religious or charitable institution should be able to be assessed to income-tax in respect of such income under the Cochin Income-tax Act. We do not think that it will be seriously contended that under the Indian Income- tax Act, donations received by person for putting up a charitable institution and used for that purpose will be regarded as his income and assessed to income-tax. They are obviously of the nature of gift and are capital receipts. They do not come which the meaning of the word income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax and of Lord Wright in Kamakshya Narain Singh v. Commissioner of Income-tax#. In Commissioner of Income-tax and Excess Profits Tax, Madras v. South Indian Pictures Limited* his Lordship S.R. Das, C.J., said: No infallible criterion or test can be or has been laid down and the decided cases are only helpful in that they indicate the kind of consideration which may relevantly be borne in mind in approaching the problem. The character of the payment received may vary according to the circumstances. Yet the definition of income given by Sir George Lowndes is helpful in understanding its true character. The donations in question do not possess any of the characteristics of income as that word is understood in ordinary language. No case was cited before us in which donations of this kind were treated as the income of the recipient. 32. Amrit Kunwar v. Income-tax Commissioner* cited before the Income-tax Officer and referred to in his order is a clear authority for the position that donations of this kind are not income within the meaning of the Income-tax Act. The assessee in that case, Rani Amrit Kunwar, was the wife of the Ruler of Kalsia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are voluntary in the sense that they might be discontinued without the Rani having any enforceable remedy; but on the ground that it has not been proved in this particular case that there is anything more certain than the mere whim of the Ruler to support them. Malik, J., held that the receipts were of a casual and non-recurring nature and that they came within the exemption provided in section 4 clause (3) sub-clause (vii) of the Indian Income-tax Act. The learned Judge observed : To my mind, the word 'non-recurring' does not mean that it has as a matter of accident or as a matter of fact, recurred, but that there was a claim or a right in the assessee to expect its recurrence. I think a mere voluntary payment, not being receipts arising from business, or the exercise of a profession, vocation or occupation and not being by way of addition, to the remuneration of a employee or not having been made expressly liable is not liable to be taxed and as I understand the exception, a voluntary payment must be deemed to be of a causal and nonrecurring nature unless there is a liability on the donor to pay, which liability may arise out of contract, a cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible to contend that the receipt in this case were of a recurring nature. They were mere gifts or windfalls and were clearly of a casual and non-recurring nature. A voluntary gift depending entirely upon the goodwill of the donor does not cease to be of a casual and non-recurring nature by reason merely of the fact that the gift is repeated. A mere donation given each year with no certioration that it would be repeated the year following cannot be regarded as a receipt of a 'recurring' nature . (Vide Stedeford v. Beloe**) There is also nothing to show that in this case the donations were repeated by the same donor or donors. It is patent that the Income-tax Officer has misconceived the meaning of the expression receipts of a casual and nonrecurring nature in section 5(3)(vii) of Cochin Income-tax Act. It is not a mere wrong decision on a question on which two views are possible. It is a manifestly erroneous decision resulting from a misconception of the provision contained in section 5(3)(vii). It clearly amounts to an error apparent on the face of the record. The Appellate Assistant Commissioner and the Commissioner of Income-tax did not consider the question at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gued that this Court will not be justified in interfering with the decisions of the Income-tax Authorities in the exercise of its extraordinary jurisdiction. The question of law as to whether the donations and Mass stipends are liable to be taxed was decided by the Appellate Assistant Commissioner by his order disposing of the appeals filed by the petitioner from the first assessment orders of the Income-tax Officer. That question will not arise for decision in the appeals filed from the revised orders of the Income-tax Officer. The only question that arises for decision by the Appellate Assistant Commissioner in the appeals pending before him relates to the correctness of the amount for which allowance was made by the Income-tax Officer as per the direction contained in the orders of the Appellate Assistant Commissioner. The provision for reference is contained in section 109 of the Cochin Act. Under sub-section (2) of that section, an application for reference can be made by the assessee only when a question of law arise out of an order passed under section 41, 42 or 43, and the application has to be made within sixty days of the date on which be is served with notice of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision by the Commissioner. Section 2 Provided that Government might by general or special notification in the Gazette direct that the powers conferred on the Income-tax Officer and the Deputy Commissioner under the Act in respect of any specified case or classes of case be exercised by the Deputy Commissioner and the Commissioner respectively. It was also provided that for the purposes of any case in respect of which such a notification applied reference in the Act or in any rules made thereunder to the Income-tax Officer and the Deputy Commissioner should be deemed to be reference to the Deputy Commissioner and the Commissioner respectively. By a notification issued by the Government of Cochin in all cases in which the income of the assessee exceeded ₹ 7,000 a year the assessment had to be made by the Deputy Commissioner. Under the Indian Act, the hierarchy of Income-tax Authorities consists of the Central Board of Revenue, Commissioner of Income-tax, Appellate Assistant Commissioners of Income-tax and Income-tax Officers. There is also the Appellate Tribunal. Under that Act assessment has to be made by the Income-tax Officer in all cases. From his order appeal is provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. Although the Cochin Act provided for reference in respect of the order of the Commissioner passed in revision the assessee could apply for a reference only when the order was prejudicial to him within the meaning of section 43(2). Again, under the Cochin Act, the application for reference had to be made to the Commissioner even in respect of orders passed by the Deputy Commissioner. In the case of an order passed by the Commissioner under section 43 reference lay only on a question of law arising out of that order and not on a question of law arising out of a previous order under section 41 revised by the order under section 43. In this uncertain state of affairs nobody could be expected to the sure of the procedure that should be adopted in respect of assessments made under the Cochin Act by the Income-tax Authorities under the Indian Act. If, in the circumstances, the assessee though that the only remedy available to him under the Cochin Act was to file revision petitions before the Commissioner from the orders of the Appellate Assistant Commissioner, we do not think that he can be penalised for that. Having filed revision petitions he could not apply for a reference in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son for refusing interfere in the exercise of the extraordinary jurisdiction of the High Court it was pointed out that the petitioner had other effective remedy and that he had availed himself of that remedy. The scope of this decision was considered by the same learned Judge in Lakshmana Shenoi v. Income-tax Commissioner. It was observed: The learned Advocate-General during the course of his argument invoked Padmanabha Menon Krishna Menon v. Income-tax Commissioner# in support of his contention. All that that decision has laid down is that a resort to the High Court for relief under article 226 of the Constitution cannot be permitted when there is no illegality or fatal irregularity in the pursuit of the procedure provided by the Act or usurpation or excessive exercise of jurisdiction. In the Full Bench case Subramania Iyer, J., discussed the question with reference to decided cases and said: We do not consider the existence of an alternative remedy a bar to the issue of a writ of prohibition in appropriate case. This is a conclusion well supported by judicial decisions and dicta spread over a long period of years. Reference may also be made to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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