TMI Blog1976 (10) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee paid Rs. 50,000 for acquiring the said shares. In the same year, the Controller of Insurance directed the assessee to sell these shares. The assessee carried out the directions and sold the shares to Premier Chemical Industries Ltd. for Rs. 50,000. However, the transfer of the shares was not recorded in the books of Kapila Textile Mills Ltd. and they continued to stand in the name of the assessee. In the year 1958, Kapila Textile Mills Ltd. went into liquidation. The official liquidator of Kapila Textile Mills Ltd. called upon the assessee to pay the balance of call money of Rs. 50,000 referable to the 10,000 shares to make them fully paid up. The assessee contested this claim in a suit. The assessee deposited a sum of Rs. 6,999 as ordered by the court some time before 1963. In 1963, orders of the court were received by which the liquidator was authorised to appropriate the sum of Rs. 6,999 towards the dues from the assessee for making the shares paid up and towards the cost. The court further ordered that 75 per cent. of the total claim for the sum due and interest should also be paid by the assessee and this came to Rs. 45,591. Thus the assessee paid out in all Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partly paid-up shares had been sold by the assessee and no part of the sum of Rs. 52,591 around which the dispute centered related to the sum of Rs. 50,000 which had been originally paid for acquiring the shares. It is the correctness of this conclusion of the Tribunal that is challenged in the form of the question extracted already. There is no controversy with regard to the facts. Admittedly, the assessee purchased 10,000 shares of Kapila Textile Mills Ltd. of the face value of Rs. 10 per share and paid Rs. 5 per share in respect of 10,000 shares totalling Rs. 50,000 and that it took place in 1953. Equally admittedly, before 1963, the assessee had sold away the shares to the Premier Chemical Industries Ltd. for Rs. 50,000 but the transfer of shares was not registered in the name of the transferee in the books of Kapila Textile Mills Ltd. and therefore, at the time when Kapila Textile Mills Ltd. went into liquidation in 1958, in its books the assessee remained the shareholder and, therefore, became a contributory to pay the balance of the face value of the shares and it is that balance which ultimately came to Rs. 52,591 which was paid during the year of account. Mr. S. Swam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure, but will cover a case of some provision made in the accounts by way of writing off or reserve for the purpose of meeting depreciation of or loss on the realisation of investments. It is not the case of the assessee that any depreciation of investment is involved in the present case. On the other hand, the case of the assessee is that the sum represented loss on the realisation of investment. Even assuming that there was loss on the realisation of investment, the amount that could be deducted under rule 5(b) is not the amount that was actually spent, but only the provision made in the accounts, in anticipation of any depreciation of or loss on the realisation of investment. As a matter of fact, the actual expenditure is dealt with in rule 5(a) and it is only the provision made in anticipation of depreciation of or loss on the realisation that is covered by rule 5(b). The present being not one of a case of provision to meet a depreciation of or loss on the realisation of investment, rule 5(b) has no application to the present claim of the assessee. In support of the claim that rule 5(b) applies to the present case, Mr. S. Swaminathan relied on the decision of the Bombay Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 10 be allowed. Since we have already found that these two items do not constitute 'expenditure', but is a simple business loss sustained by the assessee, we do not think that the tax authorities would have any jurisdiction to go behind the balance of profits as disclosed by the annual accounts and tamper with the figure by disallowing any item of business loss such as we have found it to be. " Thus, it will be seen that the Bombay High Court merely referred to the scope of rule 6 corresponding to the present rule 5 and it was not dealing specifically with the provision corresponding to rule 5(b) to hold what type of claims can be brought under rule 5(b). Therefore, this decision is not of any assistance to the assessee in the present case. Consequently, on the basis of the claim put forward by the assessee before the Income-tax Appellate Tribunal the assessee has to fail. Mr. S. Swaminathan, the learned counsel for the assessee, once he realised this position, contended that there is no need for him to rely upon rule 5(b) at all and it is enough for him to put forward the contention that the main part of rule 5 itself shows that the balance of profit disclosed in the annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions and the language of section 66, the Supreme Court observed : " The result of the above discussion may thus be summed up : (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt 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. " If this test is applied to the present case, having regard to what we have already pointed out, namely, that the only point urged before the Tribunal was that the assessee was entitled to deduction of this amount under rule 5(b) of the rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the true scope of the reference will have to be ascertained and limited by what appears on the statement of the case. " Consequently, having regard to what we have pointed out as to the content of the statement of the case, the true scope of the question actually referred to the court, though apparently wide in its terms, has to be ascertained and limited to the claim based on rule 5(b) only. Mr. S. Swaminathan also relied on two other decisions of the Supreme Court which followed the above decision. The first of them is Bhanji Bagawandas v. Commissioner of Income-tax [1968] 67 ITR 18, 22 (SC). In that case, the question actually referred to the court was whether, on the facts and in the circumstances of the case, the assessment made is saved from the bar of limitation under the second proviso to section 34(3). One of the points that was raised before the court was with reference to the amendment of the Income-tax Act by Act 1 of 1959 which question was not admittedly raised either before the Tribunal or before the High Court. With reference to that situation, the Supreme Court observed : "It is not a separate question by itself and is only an aspect of the question of limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations of the Supreme Court in Commissioner of Income-tax v. Kirkend Coal Co. [1969] 74 ITR 67, 72 (SC) : " Before the Tribunal and the High Court, the case was argued on the footing that section 44 alone was applicable. Whether under the terms of section 26 read with section 28, penalty may be imposed upon the new partners for the failure of the partners of the firm constituted in the year of account relevant to the assessment year 1948-49 was never investigated. The question raised by the Tribunal is in terms sufficiently comprehensive to embrace an enquiry whether partners of the firm in existence on July 30, 1954, were liable to be assessed to penalty as successors in interest of the partners of the original firm in existence in the year of account relating to the assessment year 1948-49. But, in a reference under section 66 of the Indian Income-tax Act, 1922, only the question which was either raised or argued before the Tribunal may be answered, even if the language of the question framed by the Tribunal may apparently include an enquiry into other matters which could have been, but were not, raised or argued. " Having regard to the above decision as well as the actual ..... 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