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TMI Blog1961 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ention does not involve reframing of the issues. On the very terms of the question as referred which are specific, the question is permissible and was open to the respondents. Indeed the very order of reference shows that the Tribunal was conscious that this point also might bear on the controversy so that it cannot be said to be foreign to the scope of the question as framed. In the result, we are of opinion that the question of the applicability of the proviso is really implicit, as was held by Chagla, C.J., in the question which was referred, and, therefore, it was one which the court had to answer. Appeal dismissed. - C.A. 501 OF 1957 - - - Dated:- 6-4-1961 - Judge(s) : T. L. VENKATARAMA AYYAR, S. K. DAS., J. L. KAPUR., M. HIDAYATULLAH., J. C. SHAH JUDGMENT [The judgment of DAS, KAPUR, HIDAYATULLAH and VENKATARAMA AIYAR, JJ., was delivered by VENKATARAMA AIYAR, J., SHAH, J., delivered a separate judgment.] VENKATARAMA AIYAR, J.---The respondents were the owners of a steamship called " El Madina. " That was requisitioned by the Government during the last world war, and was lost by enemy action on March 16, 1944. As compensation therefor, the Government paid the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by them with reference to this very matter, the Board of Revenue had directed that for the purpose of rule 4, Schedule II of the Excess Profits Tax Act, 1940, the amount payable as compensation (both the initial advance as well as any further payment that may be made) should be taken into account as though it had actually been received within thirty days of the date of the loss of the ship ; and that, in consequence, the amount should be deemed to have been received on April 16, 1944. If that contention is correct, the amounts would have been received not in the year of account which was July 1, 1944, to June 30, 1945, but in the year previous thereto, and they could not, therefore, be included in the income of the company for the year of assessment. This contention, however, was rejected by all the income-tax authorities. Dealing with it, the Appellate Tribunal observed in its order dated July 15, 1953, that the concession which the Board of Revenue had intended to give was limited to excess profits tax, and could not in any event be relied on for the purpose of cutting down the operation of the statutory provision enacted in the relevant proviso in section 10(2)(vii) ; and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een argued before the Tribunal, it was implicit in the question as framed, and that, therefore, the assessee could raise it. On the merits they held that as the proviso was not retrospective in its operation, the amount in question was not liable to be included in the taxable income and answered the question in the negative. It is against this decision that the present appeal by special leave is directed. The main contention urged before us by the appellant is that it was not open to the High Court in the present reference to go into the question as to the applicability of the proviso to section 10(2)(vii), as it was neither raised before the Tribunal nor considered by it, and could not, therefore, be said to be a question arising out of the order of the Tribunal, which alone could be referred for the decision of the court under section 66(1). The court had no jurisdiction, it is argued, to allow a question to be raised before it, which could not be referred to it under the section. The contention of the respondents is that all questions of law which arise on the findings given by the Tribunal in its order can properly be said to arise out of its order, and that in making a refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry for drawing up a statement of the case, are stated in the enclosure for ready reference. 4. that the following questions of law arise out of the order of the Tribunal: (1) (2) (3) 5. that the applicant, therefore, requires under sub-section (1) of section 66 of the aforesaid Act that a statement of the case be drawn up and the questions of law numbered ... out of the questions of law referred to in paragraph 4 above be referred to the High Court. " On these provisions, the question that arises for decision is whether in a reference under section 66, the High Court can consider a question which had not been raised before the Tribunal and/or dealt with by it in its order even though it be one of law. On the answer to be given to it there has been a difference of opinion among the High Courts and that turns on the meaning to be given to the words, " any question of law arising out of " the order of the Tribunal. There is no pronouncement of this court which concludes this question, though there are decisions which afford guidance in the determination thereof. These decisions will now be considered. In Commissioner of Income-tax v. Arunachalam Chettiar an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not necessary " to express any opinion on the larger question as to the scope, meaning and import of the words ' any question of law arising out of ' the Tribunal's order, on the interpretation of which there exists a wide divergence of judicial opinion ". There was accordingly no decision on the point now under consideration. In New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax the point under discussion was whether the High Court was competent under section 66(4) to call for additional statement with reference to a question which had not been referred to it under section 66(1) or section 66(2). This court held that the scope of a reference under section 66(2) was co-extensive with that of one under section 66(1) of the Act, that therefore the court had no power under section 66(2) to travel beyond the ambit of section 66(1), that under both these provisions it is only a question of law arising out of the order that could be referred, that the object of section 66(4) was to enable the court to obtain additional statements only for the purpose of deciding questions referred under section 66(1) and (2) and that accordingly no investigation could be ordered in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter Co. v. Commissioner of Income-tax the assessees were manufacturers of certain kinds of goods in Jaipur. The Government of India purchased these articles and paid the price by cheques on the Bombay branch of the Reserve Bank of India. The Tribunal held that the profits of these sales had been received in British India, but on the application of the assessees referred that question to the court. The High Court remanded the case to the Tribunal under section 66(4) for a supplemental statement observing that " it would be necessary for the Appellate Tribunal to find, inter alia, whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assessee firm given to the Department in the matter. " The correctness of this order was challenged by the assessee on the ground that the court had no power to call for a fresh statement for the investigation of a new point and reliance was placed on the decision in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax. This court held, following that decision, that the jurisdiction to call for supplemental statement was confined (a) to the facts on record and/or found by the Tribunal, and (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to arise out of its order even if it could be sustained on the facts in the statement of the case by the Tribunal and that further the order of the Tribunal should disclose that the point of law was raised before it. The same view was adopted by the Patna High Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax. There, discussing the question with reference to the language of section 66(1) and (2) and rule 22A, the court observed as follows : " The provisions of section 66(1) and section 66(2) do not confer upon the High Court a general jurisdiction to correct or to decide a question of law that may possibly arise out of the income-tax assessment. The section, on the contrary, confers a special and limited jurisdiction upon the High Court to decide any specific question of law which has been raised between the assessee and the Department before the Income-tax Tribunal and upon which question the parties are at issue. " It was accordingly held that only a question of law which had been actually raised before the Tribunal or actually dealt with by it that could be referred under section 66(1). This is also the view consistently held by the Calcutta High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Mash Trading Co. v. Commissioner of Income-tax a Full Bench of the Punjab High Court had to consider the true character of the jurisdiction under section 66. Therein, Kapur, J., as he then was, held, on an examination of the section and on a review of the authorities, that under section 66(1) it is only questions which had been raised before and dealt with by the Tribunal that could be referred to the High Court, that the power of the High Court under section 66(2) to direct a reference is limited to questions which could be referred under section 66(1) and which the applicant required it to refer, that the Tribunal has no power to raise a question suo motu, and likewise the High Court cannot raise any question which had not been referred to it either under section 66(1) or section 66(2), but when once a question is properly raised and referred to the High Court, the High Court is bound to answer that question. In this view, it was held that a reference to the High Court on a question which was not raised before or considered by the Tribunal was not competent. Falshaw, J., while generally agreeing with this view, considered that there might be cases in which a strict adheren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il in Commissioner of Income-tax v. Kameshwar Singh and National Mutual Life Association v. Commissioner of Income-tax, deprecating the practice of raising new questions in the stage of argument on the reference in the High Court, did not stand in the way of the case being referred back to the Tribunal. In Madanlal Dharnidharka v. Commissioner of Income-tax the Tribunal referred under section 66(1) the following question for the decision of that court : " Whether the remittance of Rs. 2,01,000 out of profits, made by the assessee in the years preceding the Maru year 1999-2000 as a non-resident, could be included under section 4(1)(b)(iii) of the Indian Income-tax Act in his total income of the year of account in which he was a resident in British India ? " This question had not been argued before the Tribunal, but the Tribunal itself referred it because it considered that it arose out of its order. The reference was heard by Chagla, C. J., and Tendolkar, J. Before them an objection was raised that the Tribunal could not refer this question under section 66(1) as the same had not been raised before it. Chagla, C. J., observed: " In my opinion it is necessary clearly to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omalous result. " In Mohan Hiralal v. Commissioner of Income-tax a Bench of the Nagpur High Court, hearing a reference under section 66(1), held that on the statement of the case by the Tribunal, the question of law as framed was not correct. Then, observing that in view of the decision of the Privy Council in Commissioner of Income-tax v. Kameshwar Singh it could not itself resettle it, it called for a fresh statement from the Tribunal under section 66(4) : vide pages 452-453. Thus far the judgment is on the same lines as in New Piecegoods Bazaar Co. Ltd. v. Commissioner of Income-tax and an earlier decision of the Nagpur High Court in Beohar Singh Raghubir Singh v. Commissioner of Income-tax. When the case came back on the further statement under section 66(4), criticising certain remarks therein, that the court had no power to direct the Tribunal to refer a question not argued before it, the court observed that they were made under a misconception, and quoted the observations of Chagla, C.J., in Madanlal Dharnidharka v. Commissioner of Income-tax at page 233 extracted above, with approval. This can hardly be said to be a decision on the present point. It will be seen from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous nature of the determination of the point of law was apparent on the case as stated and there were no further facts to be found, the court could give effect to it. He also maintained that the position under the Indian law was the same as under the British statute, because under section 66(1) of the Act, the Tribunal has to refer not only questions of law arising out of its order, but also a statement of the case, that under section 66(2) the court can likewise require the Tribunal to state the case and refer it and that under section 66(5) the court has to decide the question of law raised by the case. We are unable to agree with this contention. Under the British statute when once a decision is given by the Commissioners, it is sufficient that the assessee should express his dissatisfaction with it and ask that the matter be referred to the decision of the High Court. It is then for the Commissioners to draw up a statement of the case and refer it for the decision of the court. The British statute does not cast, as does section 66(1) of the Act, a duty on the assessee to put in an application stating the questions of law which he desires the Commissioners to refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal or supervisory jurisdiction over the Tribunal. It acts purely in an advisory capacity, on a reference which properly comes before it under section 66(1) and (2). It gives the Tribunals advice, but ultimately it is for them to give effect to that advice. It is of the essence of such a jurisdiction that the court can decide only questions which are referred to it and not any other question. That has been decided by this court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax, Kusumben D. Mahadevia v. Commissioner of Income-tax, and Zoraster Co. v. Commissioner of Income-tax. If the true scope of the jurisdiction of the High Court is to give advice when it is sought by the Tribunal, it stands to reason that the Tribunal should have had an occasion to consider the question so that it may decide whether it should refer it for the decision of the court. How can it be said that the Tribunal should seek for advice on a question which it was not called upon to consider and in respect of which it had no opportunity of deciding whether the decision of the court should be sought ? It was argued for the respondents that, in view of the fact that the court could compel the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 66(1), as it now stands, there is no power in the Tribunal to refer a question of law suo motu for the decision of the court. If, as contended for by the respondents, the court is to be held to have power to entertain in a reference, any question of law, which arises on the facts found by the Tribunal, its jurisdiction under section 66(5) must be held to be wider than under section 66(1) and (2). The correct view to take, in our opinion, is that the right of the litigant to ask for a reference, the power of the Tribunal to make one, and the jurisdiction of the court to decide it are all co-extensive and, therefore, a question of law which the applicant cannot require the Tribunal to refer and one which the Tribunal is not competent to refer to the court, cannot be entertained by the court under section 66(5). In view of the above considerations, we are unable to construe the words, " any question of law arising out of such order , " as meaning any question of law arising out of the findings in the order of the Tribunal. One of the reasons given by Chagla, C. J., in Madanlal Dharnidharka v. Commissioner of Income- tax for differing from the decision in Abboy Chetty and Co. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its order notwithstanding that it may arise on the findings given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order. In this view, we have next to consider whether the question which was raised before the High Court was one which arose out of the order of the Tribunal, as interpreted above. Now the only question on which the parties were at issue before the income-tax authorities was whether the sum of Rs. 9,26,532 was assessable to tax as income received during the year of account 1945-46. That having been decided against the respondents, the Tribunal referred on their application under section 66(1), the question, whether the sum of Rs. 9,26,532 was properly included in the assessee company's total income for the assessment year 1946-47, and that was the very question which was argued and decided by the High Court. Thus it cannot be said that the respondents had raised any new question before the court. But the appellant contends that while before the income-tax authorities the respondents disputed their liability on the ground that the amount in question had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope of the reference will have to be ascertained and limited by what appears on the statement of the case. In this connection, it is necessary to emphasize that, in framing questions, the Tribunal should be precise and indicate the grounds on which the questions of law are raised. Where, however, the question is sufficiently specific, we are unable to see any ground for holding that only those contentions can be argued in support of it which had been raised before the Tribunal. In our opinion, it is competent to the court in such a case to allow a new contention to be advanced, provided it is within the framework of the question as referred. In the present case, the question actually referred was whether the assessment in respect of Rs. 9,26,532 was proper. Though the point argued before the income-tax authorities was that the income was received not in the year of account but in the previous year, the question as framed is sufficient to cover the question which was actually argued before the court, namely, that in fact the assessment is not proper by reason of the proviso being inapplicable. The new contention does not involve reframing of the issues. On the very terms of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It had still to be decided whether the amount which was received in the months of July and December, 1944, was taxable as income. It is common ground that before the amendment by Act 8 of 1946 of section 10, sub-section (2), clause (vii), by the inclusion of the fourth proviso, compensation received for loss of a capital asset like a ship was not taxable as income under the Indian Income-tax Act. The Tribunal observed that the compensation accrued when it was ascertained and was received by the assessees in the year of account and the amount was, therefore, rightly brought to tax in the year of assessment 1946-47. Manifestly, the Tribunal directed its attention to the statutory provision on the application of which the exigibility of the tax depended. But proviso (iv) to section 10, sub-section (2), clause (vii), came into force on May 4, 1946. It was not in force on April 1, 1946, the day on which the liability to pay tax for the year of assessment 1946-47 crystallized. The Tribunal erroneously assumed that the amending Act was in force at the date of commencement of the year of assessment and the assessees did not attempt to remove that misapprehension. But the question whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments on the true meaning of the expression " any question of law arising out of such order " and the nature of the jurisdiction exercised by the High Court under section 66 of the Income-tax Act. There is wide divergence of opinion on the true import of this clause. Before I refer to the authorities, it would be useful to set out the scheme of the Income-tax Act relating to reference of questions to the High Court under section 66, and the nature of the jurisdiction which the High Court exercises. " (1) Within sixty days of the date upon which he is served with notice of an order under sub-section (4) of section 33 the assessee or the Commissioner may, by application in the prescribed form, ... require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall ... draw up a statement of the case and refer it to the High Court : ..... (2) If on any application being made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may.... apply to the High Court, and the High Court may, if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not called upon to refer. But there is in my judgment no warrant for the view that the question which the Tribunal may refer or which the High Court on the refusal of the Tribunal may call upon the Tribunal to refer, must be a question which was raised and argued before the Tribunal at the hearing under section 33(4). The statute does not specifically impose such a restriction nor is it implied. To import in the meaning of the expression " any question of law arising out of such order " the concept that the question must have been argued before and dealt with by the Tribunal in its judgment deciding the appeal, is to impose a fetter upon the jurisdiction of the High Court not warranted by the plain intendment of the statute. The source of the question must be the order of the Tribunal ; but of the question it is not predicated that the Tribunal must have been asked to decide it at the hearing of the appeal. It may very well happen and frequently cases arise in which the question of law arises for the first time out of the order of the Tribunal. The Tribunal may wrongly apply the law, may call in aid a statutory provision which has no application, may even misconceive the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an order of the Appellate Tribunal within the meaning of section 66(1) of the Indian Income-tax Act, only if such order discloses that the question was raised before the Tribunal. A question not raised before the Tribunal cannot be said to arise out of its order even if on the facts of the case appearing from the order the question fairly arises. " The leading cases in support of this view are Abboy Chetty Co. v. Commissioner of Income-tax and Commissioner of Excess Profits Tax v. Jeewanlal Ltd. This view has been adopted with some variations in the norms of expression in the following cases : Maharaj Kumar Kamal Singh v. Commissioner of Income-tax , Chenna Basappa v. Commissioner of Income-tax and Punjab Distilling Industries Ltd. v. Commissioner of Income-tax. On the other hand is the view expressed by Chagla, C. J., in Madanlal Dharnidharka v. Commissioner of Income-tax where the learned Chief Justice observed his conclusion as follows : " I should have stated that a question of law arose out of the order of the Tribunal if such a question was apparent on the order itself or it could be raised on the facts found by the Tribunal and which were stated in the order. I s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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