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TMI Blog1961 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation. As the total compensation received exceeded the cost price, the respondents have recouped themselves all the amounts deducted for depreciation. On these facts, the point in controversy between the respondents and the Department is whether the amount of Rs. 9,26,532 is liable to be included in the total income of the company for the year of assessment which is 1946-47. The provision of law under which the charge is sought to be imposed is section 10(2)(vii) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act), and that is, omitting what is not relevant, as follows : " (2) Such profits or gains shall be computed after making the following allowances, namely :--- ... (vii) in respect of any such building, machinery or plant which has been sold or discarded or demolished or destroyed, the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant, as the case may be, is actually sold or its scrap value : ... Provided further that where any insurance, salvage or compensation moneys are received in respect of any such building, machinery or plant as aforesaid, and the amount of such moneys exceeds the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court, and one of them was as follows : " Whether in view of the fact that the fourth proviso to section 10(2)(vii) of the Indian Income-tax Act did not apply to the assessment for the assessment year 1945-46 and under the law in force as applicable to that assessment year the sum of Rs. 9,26,532 which accrued in the previous year relevant to that assessment year was not taxable at all, and the fact that having regard to the assessee's method of accounting the said sum should not be assessed in any other year, the assessment in respect of the said sum in the subsequent assessment year 1946-47 was valid in law ? " By its order dated February 9, 1954, the Tribunal referred the following question for the opinion of the court : " Whether the sum of Rs. 9,26,532 was properly included in the assessee company's total income computed for the assessment year 1946-47 ? " The reference came up for hearing before a Bench of the Bombay High Court consisting of Chagla, C.J., and Tendolkar, J., and then the respondents raised the contention that the proviso to section 10(2)(vii) under which the charge was made could not be taken into account in making the present assessment, as the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequence within its power in entertaining it and deciding the reference on it. We may now refer to the provisions of law bearing on the question. Section 66(1) of the Act confers on the assessee and the Commissioner a right to apply to the Tribunal in the prescribed form to refer any question of law arising out of its order for the decision of the High Court. If the Tribunal is satisfied that a question of law arises, then it has to draw up a statement of the case and refer it to the decision of the High Court. But if it considers that no question of law arises on its order, and dismisses the application under section 66(1), then the assessee or the Commissioner, as the case may be, has a right to move the court under section 66(2), and if the court is not satisfied about the correctness of the decision of the Tribunal, it can require it to state the case and refer it to its decision. Under section 66(4) the High Court can, for the purpose of disposing of the reference which comes to it under section 66(1) and (2), call for additional statement from the Tribunal. Under section 66(5) the High Court is to decide the question of law raised in the case and send a copy of its judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to the court under section 66(1). The Madras High Court declined to answer it on the ground that as the order was not one passed in an appeal, the reference under section 66(1) was incompetent, as under that provision the power of the Tribunal to refer was limited to questions of law arising out of an order passed in an appeal. In affirming this decision, this court observed at page 187 : " The jurisdiction of the Tribunal and of the High Court is conditional on there being an order by the Appellate Tribunal which may be said to be one under section 33(4) and a question of law arising out of such an order. " This is an authority for the position that the jurisdiction of the Tribunal to make, and of the High Court to hear, a reference must be strictly sought within the four corners of section 66. In Commissioner of Income-tax v. Ogale Glass Works Ltd. the question referred by the Tribunal under section 66(1) was whether certain amounts received by the assessee from the Government by cheques drawn on the Reserve Bank at Bombay were income received in British India within section 4(1)(a) of the Act. The High Court had held that as the cheques were received in the State of Aun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmer State of Baroda or whether it had accrued or should be deemed to have accrued to her in British India. On this reference the High Court resettled the question so as to raise the contention as to whether the assessee was entitled to any concession under the Merged States (Taxation Concessions) Order, 1949, as regards the income of Rs. 47,120 and holding that she was not, answered the reference against her without deciding the question as to where the income accrued. Against this judgment the assessee appealed to this court and contended that the High Court was in error in not deciding the question which was actually referred. This court accepted this contention and remanded the case to the High Court for hearing on that point. So far this decision does not bear on the present controversy. But a further point was discussed and considered by this court, and that was that it was not open to the court to raise the question about the applicability of the Merged States (Taxation Concessions) Order, 1949, as that was not a question which was raised before or considered by the Tribunal or referred under section 66(1). In agreeing with this contention, this court observed : " Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecise meaning of the words " any question of law arising out of " the order of the Tribunal, we must examine the decision of the High Courts on the question, and as already stated they are in a state of conflict. In Abboy Chetty and Co. v. Commissioner of Income-tax the application of the assessee under section 66(1) required the Tribunal to refer a question of res judicata to the court. The Tribunal declined to do so on the ground that that question had not been argued before it. The assessee then moved the court under section 66(2) for an order requiring the Tribunal to refer that question. Dismissing that application, Patanjali Sastri, J., as he then was, observed as follows : " Mr. Radhakrishnayya for the petitioner contends that a question, though not raised before the Appellate Tribunal, can well be said to ' arise out of its order ', if, on the facts of the case appearing from the order, the question fairly arises. I am unable to agree with that view. I am of opinion that a question of law can be said to arise out of an order of the Appellate Tribunal only if such order discloses that the question was raised before the Tribunal. " Adverting to the contention that the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question whether a sum of Rs. 2,20,887 was on a true construction of section 14(2)(c) of the Act assessable to tax. The Tribunal dismissed the application on the ground that the question sought to be raised had not been mentioned at the hearing of the appeal and had not been dealt with by the Tribunal and was, therefore, not one which arose out of its order. The question having been brought up before the court under section 66(2), Chakravartti, J., held that under section 66(1) it was only a question that arose out of the Tribunal's order that could be referred, and that that must be some question which was actually raised before the Tribunal and dealt with by it and that under section 66(2) the words, " no question of law arises could only mean that the question of which reference had been asked for by the applicant did not arise, and that the High Court could not require the Tribunal to refer some question which was not proposed before it. The learned judge then went on to observe : " The Indian Income-tax Act has not charged the High Court with the duty of setting right in all respects all assessments that might come to its notice ; its jurisdiction is not either appellate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petent as the point had not been raised before the Tribunal. We must now consider the decisions which have taken a some what different view. Vadilal Lallubhai Mehta v. Commissioner of Income-tax was a case under section 66 of the Act, as it stood prior to the amendment of 1939, and what was held there was that even though the assessee had not stated in his application for reference the questions which really arose out of the order, it was for the Commissioner to formulate the correct questions and refer them to the court, and where he had failed to do so, the court could direct him to do so. This is not a decision on the question as to whether questions not raised before or decided by the Commissioner could be held to be questions arising out of his order. In New Piecegoods Bazaar Co. Ltd. v. Commissioner of Income-tax the question that was referred under section 66(1) was whether taxes paid on urban immovable property by the assessee were an allowable deduction under section 9(1)(iv) and section 9(1)(v) of the Indian Income-tax Act. An objection was raised before the court that the question as to the application of section 9(1)(iv) had not been argued before the Tribunal and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority, I should have stated that a question of law arose out of the order of the Tribunal if such a question was apparent on the order itself or it could be raised on the facts found by the Tribunal and which were stated in the order. I see no reason to confine the jurisdiction of this court to such questions of law as have been argued before the Tribunal or are dealt with by the Tribunal. The section does not say so and there is no reason why we should construe the expression ' arising out of such order ' in a manner unwarranted by the ordinary grammatical construction of that expression. This court has no jurisdiction to decide questions which have not been referred by the Tribunal. If the Tribunal does not refer a question of law under section 66(1) which arises out of the order then the only jurisdiction of the court is to require the Tribunal to refer the same under section 66(2). It is true that the court has jurisdiction to resettle questions of law so as to bring out the real issue between the parties but it is not open to the court to raise new questions which have not been referred to it by the Tribunal. " Expressing next his disagreement with the decision of the Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to deciding questions referred to it. The narrow ground over which the High Courts differ is as regards the question whether it is competent to the Tribunal to refer, or the High Court to decide, a question of law which was not either raised before the Tribunal or decided by it, where it arises on the facts found by it. On this question, two divergent views have been expressed. One is that the words, " any question of law arising out of " the order of the Tribunal signify that the question must have been raised before the Tribunal and considered by it, and the other is that all questions of law arising out of the facts found would be questions of law arising out of the order of the Tribunal. The latter is the view taken by the Bombay High Court in Madanlal Dharnidharka v. Commissioner of Income-tax and approved by the Nagpur High Court in Mohanlal Hiralal v. Commissioner of Income-tax. The former is the view held by all the other High Courts. Now the argument in support of the latter view is that on the plain grammatical construction of section 66(1), any question of law that could be raised on the findings of fact given by the Tribunal, would be a question that arises out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er it, and that the court is to decide questions of law raised by it, must break down when the real purpose of a statement in a reference is kept in view. A statement of case is in the nature of a pleading wherein all the facts found are set out. There is nothing in it which calls for a decision by the court. It is the question of law referred under section 66(1) that calls for decision under section 66(5) and it is that that constitutes the pivotal point on which the jurisdiction of the court hinges. The statement of the case is material only as furnishing the facts for the purpose of enabling the court to decide the question referred. It has been repeatedly laid down by the Privy Council that the Indian Act is not in pari materia with the British statute and that it will not be safe to construe it in the light of English decisions : vide Commissioner of Income-tax v. Shaw Wallace & Co. In view of the difference between section 66(1) and the corresponding provision in the British statute, we consider that no useful purpose will be served by referring to the English decisions for interpreting section 66. But the main contention still remains that the language of section 66(1) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , subject to the same limitations as section 66(1). That has been held by this court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax and in Zoraster & Co. v. Commissioner of Income-tax. Moreover, the power of the court to issue direction to the Tribunal under section 66(2) is, as has often been pointed out, in the nature of a mandamus and it is well settled that no mandamus will be issued unless the applicant had made a distinct demand on the appropriate authorities for the very reliefs which he seeks to enforce by mandamus and that had been refused. Thus, the power of the court to direct a reference under section 66(2) is subject to two limitations---the question must be one which the Tribunal was bound to refer under section 66(1) and the applicant must have required the Tribunal to refer it R(T) is the form prescribed under rule 22A for an application under section 66(1) and that shows that the applicant must set out the questions which he desires the Tribunal to refer and that further, those questions must arise out of the order of the Tribunal. It is, therefore, clear that under section 66(2), the court cannot direct the tribunal to refer a question unless it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. But we see no difficulty in holding that in those cases the Tribunal must be deemed to have decided the question against the appellant, as Falshaw, J., was disposed to do in Mash Trading Co. v. Commissioner of Income-tax .... This is only an application of the principle well known to law that a relief asked for and not granted should be deemed to have been refused. It is on this footing that Kania, J., held in New Piecegoods Bazaar Co. Ltd. v. Commissioner of Income-tax that, in the circumstances stated above, the court could call upon the Tribunal to state a supplemental case after giving its own decision on the contention. That was also the procedure adopted in Mohanlal Hiralal v. Commissioner of Income-tax. Such cases must be exceptional and cannot be founded on for putting a construction different from what the language of section 66(1) would otherwise warrant. There was also some argument as to the position under section 66(1) when the Tribunal decides an appeal on a question of law not raised before it. That would undoubtedly be a question arising out of the order, and not the less so because it was not argued before it, and this conclusion does not militate against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which bad been argued before the Tribunal. It will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act. That was the view taken by this court in Commissioner of Income-tax v. Ogale Glass Works Ltd. and in Zoraster & Co. v. Commissioner of Income-tax, and we agree with it. As the question on which the parties were at issue, which was referred to the court under section 66(1), and decided by it under section 66(5) is whether the sum of Rs. 9,26,532 is liable to be included in the taxable inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it was one which the court had to answer. On the merits, the appellant had very little to say. He sought to contend that the proviso though it came into force on May 5, 1946, was really intended to operate from April 1, 1946, and he referred us to certain other enactments as supporting that inference. But we are construing the proviso. In terms, it is not retrospective, and we cannot import into its construction matters which are ad extra legis, and thereby alter its true effect. Then it was argued that the amount of Rs. 9,26,532 having been allowed as deduction in the previous years, may now be treated as profits received during the year of assessment, and thereby subjected to tax. But this is a point entirely new and not covered by the question, and on the view taken by us as to the scope of a reference under section 66(1), it must be disallowed. In the result, this appeal is dismissed with costs. SHAH, J.---The Income-tax Appellate Tribunal, Bombay Bench " A ", referred the following question to the High Court of Judicature at Bombay under section 66(1) of the Indian Income-tax Act : " Whether the sum of Rs. 9,26,532 was property included in the assessee company's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal upon that proviso was correct, may be. The assessees had maintained that they were not liable to be taxed under section 10, sub-section (2), clause (vii), proviso (iv), because the amount sought to be taxed was received before the year of account relevant for the assessment year 1946-47. The Tribunal held, negativing the contention, that it was taxable under section 10, sub-section (2), clause (vii), proviso (iv). A question of law whether the amount was properly included in the taxable income for the year of assessment clearly arose and that question was referred by the Tribunal to the High Court. The High Court under section 66, clause (5), of the Income-tax Act has to record its opinion on the questions arising out of the order of the Tribunal and not on the arguments pro and con advanced before the Tribunal. In my view, the High Court had jurisdiction on the question arising out of the order of the Tribunal and referred in deciding that the Act which made the amount taxable was not in operation at the material date. This would be sufficient to dispose of the appeal : but counsel for the revenue submits that as it was never urged before the Tribunal by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions thereto or alterations therein as the court may direct in that behalf. (5) The High Court upon the hearing of any such case shall decide the questions of law raised thereby and shall deliver its judgment thereon containing the grounds on which such decision is founded and shall send a copy of such judgment ... to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. Under the scheme of the Indian Income-tax Act, the Appellate Tribunal is the sole judge of facts. The High Court indisputably exercises a special advisory jurisdiction to record its opinion on questions submitted by the Tribunal : it does not act as a court of appeal or revision on questions of law or fact. After the disposal of the appeal by the Tribunal under section 33(4) of the Income-tax Act, the revenue or the taxpayer may call upon the Tribunal to state a case on the questions of law arising out of the order. If the Tribunal refuses to state a case, the party aggrieved may move the High Court to call upon the Tribunal to state a case and the High Court may so direct if it is not satisfied as to the correctness of the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsence of any indication as to what the Tribunal was going to decide) be argued. A concrete question of law having a direct bearing on the rights and obligations of the parties which may be founded on the decision of the Tribunal is one which in my judgment arises out of the order of the Tribunal even if it is not raised or argued before the Tribunal at the hearing of the appeal. It is the duty of the Tribunal to draw up a statement of the case and to frame questions ; that duty can only be performed adequately if specific questions relating directly to the dispute between the parties are raised. If the import of the question is unduly large, the High Court has, and is indeed bound in dealing with it, to restrict it to its true content in the light of the findings recorded by the Tribunal. But in dealing with the question, the High Court may not only entertain those aspects of the case which were argued before the Tribunal, but all such aspects as have fairly a direct bearing on the dispute. The jurisdiction of the High Court is by statute not expressly circumscribed to recording its opinion on arguments advanced before the Tribunal, and the nature of the jurisdiction exercised b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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