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TMI Blog1952 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj of Darbhanga [1933] I.L.R. 12 Pat. 318; 1 I.T.R. 94 we did not accept the argument of the assessee that we could resettle the question and give our opinion thereon. Acting under Section 66(4) of the Act, we therefore referred the case back to the Appellate Tribunal to state such additional facts as may be necessary and refer to us for opinion the question which we held arose from the facts of the case. Accordingly the Appellate Tribunal referred that question to us but did not add to the facts already stated. The Appellate Tribunal, however, went beyond its powers in referring the case in the manner it did. We will advert to that in some detail later on. 2. The question now referred to us is:- "Whether on the facts of the case the share loss of ₹ 7,226 arising from the Jaipur firm could be set off against his share income from the several businesses in British India in computing income of the assessee under the head 'business'?" 3. The assessee, an individual, who is a resident and an ordinary resident of British India, was a partner in various registered firms in British India in the year e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in or brought into British India in the previous year by or behalf of the assessee or is assessable under Section 42; but the income so exempt has to be included in the total income of the assessee under Section 16(1)(a). It is thus clear that the share income from British India and out of British India are both liable to tax subject to certain exemptions. 6. It was held in Commissioner of Income-tax v. Murlidhar Mathurawalla Mahajan Association [1948] 16 I.T.R. 146, that loss of profits or gains from business done out of British India has to be deducted from the profits and gains of a business in British India to arrive at the income taxable under the head "business". This case is entirely in favour of the assessee. 7. It is difficult to appreciate the submission of the learned counsel for the Commissioner, who pressed the argument which is to be found in the second reference of the Appellate Tribunal, that the share income from a firm carrying on trade is not income from business. Under Section 4 of the Indian Partnership Act, partnership is a relation between persons who have agreed to share profits of a business carried on by them or by any of them acting for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case only need recourse be had to Section 24(1)]." Their Lordships approved of the decision in Commissioner of Income-tax v. Arunachalam Chettiar [1924] I.L.R. 47 Mad. 660 and affirmed the decision in Commissioner of Income-tax v. Arunachalam [1934] 2 I.T.R. 401 ; A.I.R. 1934 Mad. 557. That assessee was carrying on money-lending business and other businesses. He was a partner with one Pillai in cotton business. There was no contribution of capital as such, but the assessee was the financing partner and these finances carried interest. The cotton business was running at a loss and in the first year the assessee claimed to deduct his share of loss from his profits of money-lending and other businesses. This deduction was not allowed by the Income-tax authorities on the ground that the share loss of an unregistered firm cannot be set off against the individual income under the same head. This view was not accepted in Commissioner of Income-tax v. Arunachalam Chettiar [1924] I.L.R. 47 Mad. 660. In a subsequent year the amount of loss due by the other partner Pillai to the firm was transferred to the account of the assessee's money-lending business and debited against the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut reference to the proviso. The proper course is to be apply the broad general rule of construction, which is that a section or enactment must be construed as a whole each portion throwing light if need be, on the rest. There is no other rule even in the case of a proviso in the strictest or narrowest sense": (Jennings v. Kelly [1940] A.C. 206, 229). As stated by their Lordships of the Privy Council in M. and S.M. Railway v. Bezwada Municipality A.I.R. 1944 P.C. 71 at p. 73. :- "The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case." Section 24(1) of the Act refers to the set-off of loss under one head against the income of the assessee under another head under Section 6. To this general rule the second proviso provides an exception that in the case of an unregistered firm any loss of that firm under one head must be set off against its income, profits and gains under another head and not against the income, profits and gains of any of its partners. If the unregistered firm still returns a loss, that loss can be carried forward under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, the High Court has no jurisdiction to allow the assessee to present the case on a correct view of the law and to move the Court to refer the case back to the Appellate Tribunal under sub-section (4) to re-submit the case with appropriate question for decision by the High Court; and that to pursue this course would be to permit the assessee to set up an entirely new case which he had not set up before the Income-tax authorities. In this view the Appellate Tribunal pointed out that this Court had no jurisdiction to refer back the case to re-submit it with the question of law that this Court though arose on the facts of the case. 15. This is a serious misconception about the duties of the Appellate Tribunal in deciding appeals and the applications under Section 66(1) of the Act. It is a fundamental principle of administration of justice that a litigant has a right to present at any stage any question of law arising on the facts found by a Tribunal. He has to plead facts and not law, and the Tribunal is always under the obligation to apply the appropriate law to the facts found by it. There is no provision either in the Indian Income-tax Act or in the rules framed by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case was required to submit his opinion on the case that he referred to the High Court. The section as now stands does not require the Appellate Tribunal to express its opinion. That opinion can be found in the order under Section 33(4) of the Act. It is unfair to the assessee that the Appellate Tribunal, which may not have given full consideration to his case in the appellate order, should supplement that order by giving additional reasons, and sometimes additional facts, to the prejudice of the assessee. In our view, the Tribunal should state all the facts which were considered by it in coming to the conclusion it did under Section 33(4), whether those facts are referred to in its order or in the orders of the Income-tax authorities and to refer to any document which may have been used in deciding the case.
It is also necessary to state the case in restrained language even though the Tribunal considers an order of the High Court under Section 66(4) erroneous. The Tribunal is not called upon by the Act to express its opinion on the correctness or otherwise of the order which under law it is bound to carry out.
Reference answered accordingly. X X X X Extracts X X X X X X X X Extracts X X X X
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