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TMI Blog1986 (3) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the assessee's business was not that of money-lending, although one of the objects was to lend and advance money on property, etc. The Income-tax Officer was of the view that this object was under the main object of the assessee-company which was incidental or ancillary to the attainment of the main object. The Income-tax Officer assessed the income from the interest as income from other sources. Being aggrieved by the order of the Income-tax Officer, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The appellate court confirmed the order of the Income-tax Officer and dismissed the said appeal. Against that order of the Appellate Assistant Commissioner, the assessee preferred a second appeal before the Incometax Appellate Tribunal. The Income-tax Appellate Tribunal, vide its order dated April 18, 1980, allowed the expenditure of Rs. 8,000 as against the claim of Rs. 10,640 made by the assessee. Hence, the appeal of the assessee was partly allowed. The Commissioner of Income-tax, against the order of the Income-tax Appellate Tribunal, filed an application under section 256(1) of the Income-tax Act, framing the following questions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the income from other sources, only the expenses incurred by the assessee for earning this income, are to be allowed, and he further opined that the assessee has debited various expenses to his profit and loss account, e.g., managing director's salary, T.A., etc. He did not consider all these expenses necessary for earning the above income of Rs. 10,078 particularly, when the amount had been lying with one firm only throughout the year. He considered the expenditure of about 10% of the income earned as relating to the earning of the above income. Thus, income from interest was Rs. 10,078 and, according to the Income-tax Officer, he estimated the expenses at Rs. 1,008. Before the Commissioner of Income-tax (Appeals), it was argued by the non-petitioner-assessee that the Income-tax Officer should have allowed all the expenses claimed by the assessee. This argument was not accepted by the appellate court which was of the opinion that it was virtually not necessary to spend anything for earning the interest because the amount was lying invested for the last so many years with one firm and it did not involve any activity or expenditure worth the name on the part of the company t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Income-tax Officer was of the opinion that some expenditure on the income of the interest of the assessee was allowable. Against this opinion of the Income-tax Officer, the Revenue did not file any appeal before the Commissioner of Income-tax (Appeals). It means that the Revenue also conceded and agreed with the decision of the Income-tax Officer that the expenditure on the income of the interest was allowable. Had it felt any grievance against the order of the Income-tax Officer, the Revenue should have filed an appeal before the appellate court that the Income-tax Officer should not have deducted the expenditure incurred on the income of the interest. After the judgment of the Appellate Commissioner, the assessee further went in appeal before the Income-tax Appellate Tribunal. The Revenue did not prefer any appeal against the order of the Commissioner of Incometax (Appeals). The assessee preferred the appeal on the ground that the quantum of expenditure which was allowed by both the lower courts was very low. Even in that appeal before the Income-tax Appellate Tribunal, the Revenue did not raise any cross-objection to the effect that actually, the Income-tax Officer as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellate court that some expenses were of allowable nature. Mr. Surolia, learned counsel for the petitioner, argued that the point as to whether the expenses were allowable or not, was argued by the Revenue before the Income-tax Appellate Tribunal, as in para. 4 of the Income-tax Appellate Tribunal's judgment, it has mentioned that, in principle, the Income-tax Officer agreed that some expenses were of allowable nature. According to him, by this sentence, it means that this point was argued before the Income-tax Appellate Tribunal. We do not agree with the contention of Mr. Surolia. The entire judgment of the Income-tax Appellate Tribunal is only with regard to the facts of this case. From a perusal of the judgment of the Income-tax Appellate Tribunal, it is clear that the entire controversy before it was only with regard to the quantum of expenditure which might be allowed to the assessee. It was not at all argued there that these expenses were not allowable in law, otherwise, there would have been some decision on this aspect, by the learned Income-tax Appellate Tribunal. It was also asked of Mr. Surolia, learned counsel for the Revenue (petitioner) to file any docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or not. In the present case, the order of the Income-tax Appellate Tribunal, is annexure 3 dated April 18, 1980. The entire order was perused. There was only an argument on the point of quantum of expenditure which was raised by the Revenue in the reference application under section 256(1), and there was no argument advanced on behalf of the Revenue as to whether the expenditure was allowable or not. Had this legal point been argued, the Income-tax Appellate Tribunal would have passed some order. But, as this point was not at all argued, nor was any objection raised on behalf of the Revenue, so, the order of the Income-tax Appellate Tribunal, annexure 3, has no mention on this legal aspect. The entire order is based on the fact which relates to the quantum of expenditure to be allowed to the assessee. So, no question of law arises out of the order of the Incometax Appellate Tribunal. The question formulated by the Revenue in its application under section 256(1) of the Income-tax Act, is not a question which arises out of the order of the Income-tax Appellate Tribunal. It can be said that the first part of the application regarding the extent of expenditure to be allowed to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all maintainable. The Income-tax Appellate Tribunal has correctly held that the entire matter was purely a finding of fact and it has correctly refused to refer the matter to this court. Hence, in our considered opinion, the present application under section 256(2) of the Income-tax Act, is also not maintainable. The High Court, while hearing a reference application under section 256(2) of the Income-tax Act, does not exercise any appellate or revisional jurisdiction over the Income-tax Appellate Tribunal. It only acts as an advisory body and that too on a reference application which comes before it under section 256(1) and (2) of the Income-tax Act. In CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC), reference was made under section 66 of the Income-tax Act, 1922. The said section 66 is analogous to section 256 of the present Income-tax Act. While dealing with that section, it was observed by their Lordships of the Supreme Court as under (at pp. 591 and 592 headnote): " The power of the court to issue a direction to the Tribunal under section 66(2) of the Income-tax Act is in the nature of a mandamus and it is well-settled that no mandamus will be issued unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of section 66(1) of the Act." Therefore, in view of the above observations of their Lordships of the Supreme Court, it is clear that this court cannot direct the Incometax Appellate Tribunal to refer a question of law, unless it is one which arises out of the order of the Income-tax Appellate Tribunal and was specified by the applicant in his application under section 256(1). No doubt, the petitioner mentioned in his application under section 256(1) this legal issue, but, it does not arise out of the order of the Income-tax Appellate Tribunal dated April 18, 1980. Unless the question which is required to be referred by the Income-tax Appellate Tribunal arises out of its order, no reference application can be maintained. Only because of the fact that the Revenue raised this plea in their application under section 256(1) of the Income-tax Act, it does not authorise the Revenue to formulate a question of law, as they have done. This question could be formulated if the Income-tax Appellate Tribunal had decided it in its order. As we have discussed above, this legal issue was not raised before the Income-tax Appellate Tribunal by the Revenue, nor is there any decision on it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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