1959 (5) TMI 4 - SC - Income Tax

Whether the receipt of the cheques in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar ? Held that - The question of law which was referred by the Tribunal to the High Court for its decision was Whether the receipt of the cheques at Bhavnagar amounted to receipts of sale proceeds in Bhavnagar and it was only based on the facts admitted and/or found by the Tribunal which had relevance only to that question and not to the question which was sought to be mooted by the High Court in its judgment under appeal. If the latter question was allowed to be entertained the question would have to be recast as under Whether the posting of the cheques in British India at the request, express or implied of the appellant, amounted to receipt of sale proceeds in British India --a question quite distinct and separate from the question of law which was actually referred by the Tribunal to the High Court in the statement of case drawn on November 5, 1954. We are, therefore, of opinion that the High Court was in error in not deciding the reference before it and answering the question on the facts disclosed in the statement of case. We are also of opinion that in the circumstances of this case the High Court had no jurisdiction under section 66(4) to direct the Tribunal to submit a supplementary statement of case on the points mentioned in its judgment. The result, therefore, is that the appeal will be allowed and the matter remanded to the High Court to arrive at its decision on the question of law referred to it in the statement of case already submitted to it by the Tribunal

Issues Involved:
1. Whether the receipt of cheques in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar.
2. Whether the High Court had jurisdiction under section 66(4) of the Indian Income-tax Act to call for a supplemental statement of case.

Issue-Wise Detailed Analysis:

1. Receipt of Cheques in Bhavnagar:
The appellant, a limited liability company manufacturing textile goods, was assessed for the years 1943-44 and 1944-45. The Income-tax Officer computed the British Indian income of the appellant on a proportionate basis under section 4(1)(a) of the Indian Income-tax Act. The appellant contended that the amounts were received at Bhavnagar by cheques drawn on banks in British India. The Revenue argued that payment by cheques, though received at Bhavnagar, were received in British India when the cheques were cashed.

The Appellate Assistant Commissioner confirmed the Income-tax Officer's decision, stating that cheques were not legal tender and that receipt occurred upon encashment in British India. The Tribunal, however, held that the cheques were received at Bhavnagar, following the Bombay High Court's decision in Kirloskar Brothers Ltd. v. Commissioner of Income-tax. The Tribunal noted that there was no evidence to suggest the cheques were received elsewhere and presumed they were addressed to the appellant at Bhavnagar.

2. High Court's Jurisdiction under Section 66(4):
The High Court directed the Tribunal to submit a supplementary statement of case, questioning whether the cheques received by post were at the request of the appellant, thus constituting the post office as the appellant's agent. The appellant challenged this direction, arguing that the High Court exceeded its jurisdiction under section 66(4).

The Supreme Court analyzed the scope of section 66(4), which allows the High Court to refer the case back to the Tribunal for additional facts necessary to determine the question raised. However, the Supreme Court emphasized that this power does not extend to raising new questions or directing fresh inquiries that were not part of the original proceedings before the Income-tax authorities or the Tribunal.

The Supreme Court cited several precedents to support its interpretation, including:
- Craddock v. Zevo Finance Co. Ltd., where it was held that the Crown could not be given another chance to establish a different contention with new evidence.
- Commissioner of Income-tax v. State Bank of India, where it was stated that the High Court's advisory jurisdiction is limited to matters canvassed before the Tribunal.
- Industrial Development and Investments Co. Ltd. v. Commissioner of Excess Profits Tax, which clarified that a statement of case should not include new material or evidence not before the Tribunal initially.

The Supreme Court concluded that the High Court's direction for a supplementary statement exceeded its jurisdiction under section 66(4) and that the High Court should have decided the reference based on the existing statement of case.

Conclusion:
The Supreme Court allowed the appeal, set aside the High Court's direction for a supplementary statement, and remanded the case to the High Court to decide the question of law based on the existing statement of case. The respondent was ordered to pay the appellant's costs throughout.

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