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Issues Involved:
1. Jurisdiction of the High Court to order the Chief Revenue Authority to state a case. 2. Interpretation of Section 51 of the Indian Income Tax Act, 1918, as applied by the Excess Profits Duty Act, 1919. 3. Whether the Chief Revenue Authority had a duty to state a case for the opinion of the High Court. 4. Whether there was a serious point of law involved in the assessment of excess profits duty. 5. Whether profits intended to be employed in the business should be treated as capital. Issue-wise Detailed Analysis: 1. Jurisdiction of the High Court to order the Chief Revenue Authority to state a case: The initial question addressed by the High Court was whether it had the jurisdiction to compel the Chief Revenue Authority to state a case. This was argued based on Section 51 of the Indian Income Tax Act, 1918, applicable under the Excess Profits Duty Act, 1919. The broader argument presented before their Lordships suggested that even if the Authority had a duty, the Court could not compel him to exercise it, citing the general exclusion of revenue matters from ordinary Civil Courts' consideration as exemplified in Spooner v. Juddow and Section 106(2) of the Government of India Act. However, their Lordships concluded that the High Court had the power under Section 45 of the Specific Relief Act to compel a public officer to perform a statutory duty, and this did not constitute exercising "original jurisdiction in any matter concerning the revenue." 2. Interpretation of Section 51 of the Indian Income Tax Act, 1918: Section 51 of the Indian Income Tax Act, 1918, was pivotal in determining whether the Chief Revenue Authority was obligated to state a case. The section allows the Authority to refer a question of law to the High Court either on its own motion or upon the assessee's application unless the application is frivolous or unnecessary. The High Court of Bombay interpreted this section to mean that there was a duty to state a case if a point of law arose. Their Lordships agreed with this interpretation, stating that the Authority must state a case if there is a serious point of law, and failure to do so would be a misfeasance and a breach of statutory duty. 3. Duty of the Chief Revenue Authority to state a case: Their Lordships emphasized that if an assessee applies for a case to be stated, the Authority must comply unless the application is frivolous or unnecessary. The Authority's discretion to state a case is coupled with a duty to do so in appropriate circumstances. The principle laid down by Lord Cairns in Julius v. Lord Bishop of Oxford was cited, indicating that the power given to a public authority might entail a duty to exercise it when called upon. 4. Serious point of law involved in the assessment of excess profits duty: The High Court had to determine whether there was a serious point of law in the appellants' case. The High Court of Bombay seemed to have concluded that no serious point of law was involved. However, their Lordships disagreed, stating that the question of whether profits intended to be employed in the business should be treated as capital was an important question of law requiring proper adjudication. 5. Treatment of profits intended to be employed in the business as capital: The core issue revolved around whether profits retained in the form of cash and investments, intended for future business expansion, should be considered part of the business capital under the Excess Profits Duty Act. The Revenue Authorities had excluded such investments from the business capital, leading to a higher assessment of excess profits. Their Lordships noted that this involved a significant legal question about the construction of the statute, particularly regarding the treatment of interest-bearing securities as part of the business assets. They referenced the English Excess Profits Act and the differences in legislative language, suggesting that these differences might reflect deliberate variations due to different business conditions in India and England. Conclusion: Their Lordships concluded that the Chief Revenue Authority should have been ordered to state a case, recognizing the existence of an important legal question. They advised that the appeal be allowed, converting the Rule nisi into an order absolute, and awarded costs to the appellants both in the High Court and before the Board.
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