1991 (8) TMI 7 - SC - Income Tax

It is now well-settled law that the jurisdiction of the High Court in a reference under the Income-tax Act is in the nature of advisory jurisdiction and only such issues can be and are answered as arise properly on the facts and the questions referred to the High Court. In the circumstances, we are unable to permit the assessee to raise the question before us.

Summary

Issues:
1. Whether the assessee's right of tenancy constitutes a capital asset under the Income-tax Act.
2. Whether there was a transfer of the assessee's right of tenancy within the meaning of the Act.
3. Whether the sum received by the assessee represented capital gains assessable under the Act for a specific assessment year.

Analysis:
The case involved an appeal from a judgment of the Calcutta High Court concerning the Income-tax Act. The assessee, a tenant in Calcutta, transferred his tenancy rights to a new lessee in exchange for a sum of Rs. 4,50,000. The Income-tax Officer treated a portion of this amount as capital gains for the assessment year 1967-68. The High Court upheld this treatment, leading to the present appeal before the Supreme Court.

The Tribunal had referred three questions to the High Court, primarily focusing on whether the tenancy right was a capital asset, whether there was a transfer, and if the sum received constituted capital gains. The assessee contended, based on precedent, that the entire sum should not be taxed as capital gains as the actual cost of the asset was not ascertainable. However, the Tribunal rejected this argument as the assessee had not provided evidence of the actual cost.

The Supreme Court noted that the assessee had not raised the specific argument regarding actual cost before the High Court. As such, the Court could not entertain this argument as it was not presented at the earlier stage. The Court emphasized that the jurisdiction of the High Court in an income tax reference is advisory and limited to issues raised at the appropriate time. Despite acknowledging the strength of the assessee's argument, the Court could not consider it due to procedural reasons.

Ultimately, the Supreme Court dismissed the appeal, citing the technicalities that prevented them from addressing the substantive merits of the case. However, the Court suggested that the assessee could seek administrative relief from the Central Board of Direct Taxes to potentially avoid the tax levied on the disputed amount. No costs were awarded in the case.