TMI Blog1966 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case, the income which accrued to the assessee outside Faridkot State from 13th April, 1948 to 19th August, 1948, was liable to tax ? " An application has also been filed by the assessee under sub-section (3) of section 66 of the above Act for a direction to the Commissioner of Income-tax to refer the following question to this court : " Whether, on the facts and in the circumstances of the case, the income in question of the assessee could have been taxed under the Patiala Income-tax Act (No. VIII of Samvat 2001), in the face of the Part B States Taxation Concessions) Order, 1950 ? " This order would dispose of the reference as well as the application. The assessee was till 15th August, 1947, Ruler of Faridkot State under the suzerainty of the British Crown. On 15th August, 1947, India became independent. By a covenant dated 5th May, 1948, the assessee along with the Rulers of certain other States entered into a covenant whereby the Patiala and East Punjab States Union (PEPSU) was formed. The actual Union came into existence on 20th August, 1948. The assessment year is Samvat 2006, i.e., 13th April, 1949, to 12th April, 1950, and the relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has filed an application praying that the aforesaid question too may be referred to this court. Before dealing with the three questions, which have been referred for determination by the Commissioner of Income-tax, it would be proper to deal with the application under section 66(3) of the Act filed by the assessee. The Commissioner of Income-tax refused to refer the question mentioned in the application to this court on the ground that this question was neither raised before the Commissioner nor it was considered by him in his order. After hearing Mr. Puri on behalf of the petitioner and Mr. Awasthy on behalf of the department, we are of the view that no direction should be issued for referring the question to this court. The law on the point has been laid down by their Lordships of the Supreme Court in the case of Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd., wherein Venkatarama Aiyar J., who spoke for the majority, observed : " The jurisdiction of a court in a reference under section 66 is a special one, different from its ordinary jurisdiction as a civil court. The High Court, hearing a reference under that section, does not exercise any appellate or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order. " Finally it was observed : " Section 66(1) speaks of a question of law that arises out of the order of the Tribunal. Now a question of law might be a simple one, having its impact at one point, or it may be a complex one, trenching over an area with approaches leading to different points therein. Such a question might involve more than one aspect, requiring to be tackled from different standpoints. All that section 66(1) requires is that the question of law which is referred to the court for decision and which the court is to decide must be the question which was in issue before the Tribunal. Where the question itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Pepsu, retained their sovereignty after the formation of the Patiala and East Punjab States Union from 20th August, 1948, was considered by their Lordships of the Supreme Court in Lachhman Dass v. State of Punjab, and was answered by the majority in the negative. The headnote in this regard reads as under : " When the new State of Pepsu was formed on August 20, 1948, in accordance with the covenant entered into by the Rulers of the merging States on May 5, 1948, the eight States which had merged into it ceased to exist as independent personae and there could be no question thereafter of sovereignty of such States or of its ex-Rulers. On the wording of the covenant there was a complete divestiture of all the sovereign rights of the Rulers, when the new State came into existence on August 20, 1948, and the Rulers cannot be said to have had any authority to enter into any supplementary covenant on April 9, 1949. " In view of the above decision, the contention advanced on behalf of the assessee that he retained his sovereignty after the formation of Pepsu cannot be accepted. Reference has been made on behalf of the assessee to the order of the Assistant Commissioner of Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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