TMI Blog1981 (8) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... mport licences in respect of exports of handicrafts made by it, under the Export Promotion Scheme. As Rajarajeswari Textiles was not experienced enough to find a market for the goods to be imported under the import licences to be obtained, the J. K. K. group were asked to market the goods to be imported by Rajarajeswari Textiles under the said licence. In terms of the agreement, J. K. K. group can enter into contracts with any parties for the sale of goods to be imported and Rajarajeswari Textiles was to authorise the employees of the J. K. K. group to act on their behalf for all purposes and the profit and loss from the sale transactions was to be ascertained on the 31st of July, every year in the case of Rajarajeswari Textiles and 31st of March, every year in the case of other firms and 91 % of such profit was to be the share of J. K. K. group and the remaining 9% was to be retained by Rajarajeswari Textiles and the other three firms in respect of the sale transactions. The basic value of the import licences received in the names of all the four firms came to Rs. 8.25 lakhs. The four firms had shown in their accounts the import of goods on the basis of the licences and the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as against the income of Rs. 1,25,000 returned by the assessee. For the assessment year 1969-70, the ITO treated a sum of Rs. 59,929 shown in the return of Rajarajeswari Textiles towards their 9% share of profits as the consideration paid by J. K. K. group to the said firm for having lent its name and in that view he deducted the amount of Rs. 59,929 from the sum of Rs. 28,85,000 which was held by him to be the profit in the sale of import licences for the assessment year 1969-70 and treated the balance of Rs. 28,25,071 as the income of the members of the J.K.K. group and brought to tax in their separate assessments Rs. 7,06,268 as against the income of Rs. 1,25,000 returned by each of them. The members of J.K.K. group filed four appeals for the assessment year 1968-69 and four appeals for the assessment year 1969-70. The AAC passed a common order in respect of the members of the J.K.K. group for the assessment years 1968-69 and 1969-70 dismissing the appeals.Appeals had been filed before the Income-tax Appellate Tribunal for the two assessment years by each of the members of the J.K.K. group. The Tribunal dealt with the appeals filed by each member of the J.K.K. group by passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion. Before the AAC, it was contended that the two-thirds share of the income arising from each of the aforesaid firms belonged to Angappa Chettiar's two sons, and half share of such income belonged to Sundararaj's son by virtue of overriding title even though they were not taken in as partners in the firm before the partition in the family. The AAC has stated that the same point had come up for consideration in the appeals filed in connection with the wealth-tax assessment for the assessment years 1962-63, 1963-64 and 1964-65 and had been considered by his predecessor in his order dated October 21, 1969. Accepting the views of his predecessor he held that the ITO was right in treating the entire income as belonging to the assessee, except to the extent of interest of 6% on the monies belonging to the minor which had been used by the assessee in the aforesaid business. Both Angappa Chettiar and the Department filed appeals before the Tribunal; the assessee contending that the two-thirds share income should have been excluded from each of the aforesaid firms while the Department contending that the AAC should not have allowed 6% referred to above. The Tribunal held that as there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the various partnership firms and the interest in the various partnership firms belonging to the family was to be held by the assessee and his sons as tenants in common with a right to the division of the profits of the partnership firm, and (ii) that since there has been a partition of the family capital account in the four partnership firms, that is, M/s. Sundaram Spinning Mills, M/s. Kandaswamy Spinning Mills, M/s. Alagappa Cotton Mills and M/s. Bell Textiles and since he was exclusively receiving the income from the partnership firms, there is a legal liability to account for the minors' 2/3rd share of the profits and since the assessee had gained an advantage in derogation of the rights of his sons in the capital account, the profits and accretions attributable to the minors' interest in the partnership firms had to be treated as the wealth of the minor sons and it can no longer be considered as the wealth of the assessee, Angappa Chettiar. Following the said reasoning it had adopted in the wealth-tax assessments for the years 1962-63 and 1963-64, the Tribunal excluded 2/3rds share of the profits belonging to the minor sons and restricted the assessment only to 1/3rd share i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied questions as arising out of the common order of the Tribunal dated January 31, 1975, out of which questions Nos. 1 to 8 related to the assessee's dealing with import licences. However, the Tribunal, after referring to the main dispute, felt that all the said eight questions related to Rs. 40.85 lakhs alleged to be the sale price of import licences and that those questions were only the various facets of the same question and not different questions. The Tribunal, after stating that the main controversy was as to whether there was a sale of import licences as alleged by the Revenue or whether there was a sale of the imported goods as alleged by the assessees, has chosen to refer only the aforesaid question thinking that it is comprehensive. Even before the Tribunal the Revenue specifically prayed for referring the specific question whether the Tribunal's decision that there was no sale of import licences but there was only a sale of imported goods was correct or not but the Tribunal thought it fit to refer only one question of law as set out above on the assumption that the question referred was comprehensive enough to include all the eight questions sought to be referred by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that such notice of motion cannot be maintained under ss. 256 and 260 of the Act, that the questions suggested by the Revenue at the stage of the finalisation of the reference did not survive and that the Revenue cannot move this court to consider them at this stage since the Tribunal has refused to refer those two questions suggested by the Revenue and the Revenue has not filed an application under s. 256(2) for referring the said two questions which the Tribunal refused to refer, and this court has no jurisdiction to reframe the question or to frame fresh questions suggested by the Revenue or to call for a fresh statement of the case on those questions from the Tribunal. In this case the question actually referred for our opinion was as to whether the Tribunal was right in holding that in respect of the transactions relating to import licences the income assessable in the hands of the assessee for the assessment years 1968-69 and 1969-70 was only Rs. 1,51,487 and Rs. 1,25,000 as returned by the assessee. The said question has to be answered in the affirmative if the factual finding given by the Tribunal that there was no sale of import licences, but there was onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended by the learned counsel for the assessees that in the face of the question now referred, it is not possible for the Revenue to question the finding of fact arrived at by the Tribunal that there has been no sale of the import licences by the assessees as contended by the Revenue, as the Question is not comprehensive enough. However, it cannot he disputed that the main controversy between the Revenue and the assessees before the ITO, AAC and the Tribunal was whether the assessees have realised a sum of Rs. 40-85 lakhs by the sale of import licences and all the authorities went into the question in considerable detail and gave their respective findings. The ultimate finding given by the Tribunal was that there was no sale of import licences as alleged by the Revenue. The Revenue has sought a reference to this court mainly to canvass that finding of the Tribunal. The Tribunal has, after referring to the controversy between the parties, taken the view that the question as framed is comprehensive and will take in the dispute as to whether there was sale of import licences fetching Rs. 40.85 lakhs. As against the refusal of the Tribunal to refer the questions proposed by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication under s. 66(2) seeking a reference on that question. The learned judges in that case observed (p. 237): " Whatever may be said as to the stage at which an application under section 66(2) should be heard, we are clearly of the opinion that section 66 itself contained with regard to the procedure to be adopted when an assessee or Commissioner is dissatisfied with the order of reference and that it does provide for the contingency when the statement of the case is incomplete, as well as for that when no reference has been made at all." In Mrs. Sarojini Rajah v. CIT [1969] 71 ITR 504 (Mad), another Division Bench of this court has held that whether a question referred to the High Court under s. 66(2) of the Indian I.T. Act, 1922, is comprehensive enough to include other questions not specifically raised will have to be decided in the light of the facts of each case and that a factual finding of the Tribunal cannot be disturbed in a reference except when the conclusion of the Tribunal could not reasonably be entertained upon a reasonable view of the facts. In CIT v. McLeod and Co. Ltd. [1970] 78 ITR 22, the Supreme Court held that when a statement of case, with the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t drawn by the Tribunal is perverse and is not rationally possible, and that it is within these narrow limits that the conclusion of fact by the Tribunal can be challenged under s. 66. However, such conclusions of the Tribunal cannot be challenged on the ground that they are based on a misappreciation of evidence. In CIT v. ICI (India) (P.) Ltd. [1969] 74 ITR 17, the Supreme Court has pointed out that the High Court is not a court of appeal in a reference under s. 66(1) of the Act, that it is not open to the High Court in such reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the Tribunal, that while hearing the reference the High Court ought to confine itself to the facts as found by the Tribunal, and to answer the question of law in the context of those facts and that even if the finding of fact is defective in law or there is no evidence to support it or if the finding is perverse it is not open to the assessee or the Revenue to challenge such a finding of fact unless there is a reference on the specific question. In CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349, the Supreme Court again pointed out that the findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenging the finding of the Tribunal that there is no sale of import licences by the assessees. It is in this background, the Revenue has filed the notices of motion referred to above with a prayer either to reframe the question referred already or to call for a fresh statement of the case from the Tribunal referring the two questions proposed by then. In what circumstances this court can reframe a question or call for a fresh statement of the case have been considered in the following decisions. In Jethabhai Hirji Co. v. CIT [1949] 17 ITR 533, the Bombay High Court held that when the assessee or the Commissioner comes to the High Court under s. 66(2) it would be for the High Court after hearing the other side to determine what are the questions of law which would arise out of the order of the Tribunal, and when a requisition is made by the High Court to the Tribunal to state a case, that requisition should contain the question or questions of law which according to the High Court arise out of the Tribunal's order, and the function of the Tribunal, once a requisition is made upon it under s. 66(2), is to formulate proper questions which arise out of those questions of law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the real controversy between the parties. In Hanutram Ramprasad v. CIT [1978] 112 ITR 187, the Gauhati High Court had taken a somewhat extreme view. It has held that s. 260 of the I.T. Act, 1961, has not laid down that the High Court is to decide only the questions referred and if a point of law has been raised before the Tribunal and considered by it, it arises out of the order of the Tribunal and that although this point was not referred by the Tribunal under s. 260, the High Court has jurisdiction to consider and give its opinion on it and reframe the question for the purpose in order to bring out the true purport. The learned judges in that case have purported to follow the decisions of the Supreme Court in Kusumben D. Mahadevia v. CIT [1960] 39 ITR 540 and CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC). In Agha Abdul Jabbar Khan v.. CIT [1971] 82 ITR 872, the Supreme Court has ruled that the High Court had no jurisdiction to raise new questions of law which did not flow from the question referred by the Tribunal and that if the High Court felt that the question referred to it did not bring out the real point in issue, it was open to it to call for fresh s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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