Mrs. Kusumben D. Mahadevia Vs. The
Commissioner of Income-Tax, Bombay [1960] INSC 60 (30 March 1960)
30/03/1960 HIDAYATULLAH, M.
HIDAYATULLAH, M.
DAS, S.K.
KAPUR, J.L.
CITATION: 1960 AIR 907 1960 SCR (3) 417
CITATOR INFO :
R 1961 SC 107 (13) RF 1961 SC1633 (13,26) RF
1963 SC1356 (121) R 1963 SC1484 (7) RF 1973 SC1023 (13)
ACT:
Income tax--Reference--High Court's
jurisdiction-If can decide a question not decided by the Tribunal--Indian
Income-tax Act, 1922 (XI of 1922), s. 66--The States (Taxation Concessions)
Order, 1949, Para. 4.
HEADNOTE:
The appellant was a shareholder of a company
known as Mafatlal Gagalbhai and Co., Ltd. The Company with its registered
office at Bombay was at all material times resident in British India. It was
also doing business in the former Baroda State and used to keep its profits
derived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari.
In the year 1949 Mafatlal Gagalbhai and Co. Ltd. declared dividends out of
profits which had accrued partly in British India and partly in the Indian State. The appellant was assessed to income-tax on the dividends earned by her. She
did not bring those dividends into British India and claimed the benefit of
para. 4 of the Merged States (Taxation Concessions) Order. The Tribunal held
that the income did not accrue to the appellant in the Baroda State but it did not decide the question whether she was entitled to the benefits of the
Taxation Concessions Order. The High Court on a reference to it held that para.
4 of the Taxation Concessions Order. did not
apply to the assessee but it did not decide the other question as to where the
income had accrued to the assessee. On appeal by special leave the appellant
contended, inter alia, that since the Tribunal had not gone into the question
of the applicability to the assessee of the Concessions Order and had not
expressed any opinion thereon, the High Court could not raise the question on
its own and decide it:
Held, that the High Court exceeded its
jurisdiction in going outside the point of law decided by the Tribunal and
deciding a different point of law.
Section 66 of the Income-tax Act which
confers jurisdiction upon the High Court only permits a reference of a question
of law arising out of the order of the Tribunal. It does not confer
jurisdiction on the High Court to decide a different question of law not
arising out of such order.
New Jehangir Vakil Mills Ltd. v. Commissioner
of Income-tax, [1959] 37 I.T.R. 11, Scindia Steam Navigation Co. Ltd. v. Commissioner
of Income-tax, [1954] 26 I.T.R. 686, Commissioner of Incometax v. Breach Candy
Swimming Bath Trust, [1955] 27 I.T.R. 279 and Ismailia Grain Merchants
Association v. Commissioner of Incometax, [1957] 31 I.T.R.
433, distinguished.
Mash Trading Co. v. Commissioner of
Income-tax, [1956] 30 I.T.R. 388, considered.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 507 of 1957.
Appeal by special leave from the order and
judgment dated September 28, 1955, and February 20, 1956, of the Bombay High
Court in Income-tax Reference No. 28 of 1955.
R.J. Kolah and I. N. Shroff, for the
appellant.
C. K. Daphtary, Solicitor - General of
India,B. Ganapathy lyer and D. Gupta, for the respondent.
1960. March 30. The Judgment of the Court was
delivered by HIDAYATULLAH, J.-This is an appeal with the special leave of this
Court, and is directed against an order dated September 28, 1955, and a
judgment dated February 20, 1956, of the High Court of Bombay. By the order,
the High Court reframed a question referred to it by the Appellate Tribunal at
Bombay, which it answered by its judgment.
Mrs. Kusumben D. Mahadevia (hereinafter
referred to as the assessee) who has filed this appeal, was, at all material
times, residing in Bombay. She was a shareholder, holding 760 shares of Mafatlal
Gagalbhai & Co., Ltd., Bombay. For the assessment year 1950-51 (the
previous year being the calendar year 1949), she was assessed to income-tax on
a total income of Rs. 1,50,765 which included a grossed-up dividend income of
Rs. 1,47,026. In the latter income was included a sum of Rs. 47,120 being the
dividends declared by Mafatlal Gagalbhai & Co., Ltd., Bombay. Mafatlal
Gagalbhai & Co., Ltd., is a private limited Company with its registered
office at Bombay. It was, at all material times, 'resident and ordinarily
resident' in British India. It was also doing business in the former Baroda
State, and used to keep its profits derived in that State with Mafatlal
Gagalbhai Investment Corporation, Navsari. In the year 1949 Mafatlal Gagalbhai
& Co., Ltd., declared dividends out of these accumulated profits by three
resolutions, which are reproduced:
25-3-1949. " That a further dividend of
Rs. 17 per ordinary share free of income-tax for the year 1947 be and is hereby
declared absorbing Rs. 4,29,250 419 and the same be payable in Navsari out of
the profits of the year 1947 lying at Navsari." 24-9-1949. " That a
further dividend of Rs. 24 per ordinary share free of income-tax for the year
1948 be and is hereby declared absorbing Rs. 6,06,000 and the same be payable
in Navsari out of the profits of the year 1948 lying at Navsari with Messrs.
M.G. Investment Corporation Ltd. on -or after 30th April, 1949."
24-9-1949. " Resolved that an Ad-interim dividend of Rs. 21 per ordinary
share free of income-tax absorbing Rs. 5,30,250 be and is hereby declared for
the year 1949 out of the income of the Company for the year 1949 remaining
unbrought with Messrs. M. G. Investment Corporation Ltd., Navsari, and that the
same be payable in Navsari on or after 30th April, 1949." The assessee did
not bring these dividends into British India. She claimed the benefit of para.
4 of the Merged States (Taxation Concessions) Order, 1949 (hereinafter referred
to briefly as the Concessions Order); but the Tribunal held that the income did
not accrue to her in the Baroda State. The Tribunal pointed out that the
dividends were declared by Mafatlal Gagalbhai & Co., Ltd., out of its
profits which had accrued partly in, what was then called, British India and
partly in the Indian State. The dividend was thus declared out of ' composite
profits'. It further pointed out that the assessee had paid for and acquired
the shares of a Company in British India and was thus holding an asset in
British India, and that the income was from that asset. The Tribunal, however,
at the instance of the assessee drew up a statement of the case under s. 66(1)
of the Indian Income-tax Act, and referred the following question to the High
Court:
" Whether the net dividend income of Rs.
47,120 accrued to the assessee in the former Baroda State, or whether it is
income accrued or deemed to have accrued to the assessee in British India
?" When the reference was heard, the High Court was of the opinion that
the Tribunal ought to have decided and referred also the question whether the
Concessions 420 Order applied to the assessee. The High Court recognised the
grievance of the assessee that no such point was raised before the Tribunal.
The High Court, however, by its order dated September 28, 1955, decided that
there was no need to send the case back for a supplemental statement, since all
the facts necessary to decide the two questions were before the High Court. The
High Court then reframed the question, as it said, to comprehend the two points
of law in the following words:
" Whether the assessee is entitled to
any concession under the Merged States (Taxation Concessions) Order, 1949, with
regard to the net dividend income of Rs. 47,120?" The reference then came
up for final disposal on February 20, 1956, and the High Court answered the
question in the negative, holding that para. 4 of the Concessions Order did not
apply to the assessee. The High Court did not decide where the income had
accrued to the assessee. Leave to appeal to this Court was refused by the High
Court, but the assessee applied to this Court for special leave against both
the order and the judgment and obtained it, and the present appeal has been
filed.
At the very outset, the assessee has
questioned the jurisdiction of the High Court to frame and deal with a question
of law not arising out of the order of the Tribunal. The assessee points out
that the Tribunal had decided that the income had accrued in British India. The
assessee had challenged this part of the decision, and if the Commissioner felt
it necessary, he should have obtained the decision of the Tribunal and asked
for a reference on the other point also. Since the Tribunal had not gone into
the question of the applicability to the assessee of the Concessions Order and
had not expressed any opinion thereon, the assessee contends that the High
Court could not raise the question on its own, and decide it. The assessee
strongly relies upon a decision of this Court in New Jehangir Vakil Mills Ltd.
v. Commissioner of Incometax (1).
In that case, the Bombay High Court had (1)
[1959] 37 I.T.R. 11.
421 directed the Tribunal to submit a
supplementary statement of the case on points not arising from the order of the
Tribunal, and this Court held that the High Court had no jurisdiction to do so.
The learned counsel for the Commissioner, on the other hand, contends that the
question was the assessability of the assessee, who claimed the benefit of the
Concessions Order. The main question was thus the applicability of the
Concessions Order, and the question of the accrual of the income, whether in
British India or in Baroda, was merely ancillary. The latter question was,
according to the respondent, included in the first question, and the High Court
was right when it framed a comprehensive question and answered it in the
sequence it did. The respondent points out that the High Court having held that
the Concessions Order did not apply, was not required to decide the other limb
of the question, as it became unnecessary to do so.
In our opinion, the objection of the assessee
is well- founded. The Tribunal did not address itself to the question whether
the Concessions Order applied to the assessee. It decided the question of
assessability on the short ground that the income had not arisen in Baroda but
in British India. That aspect of the matter has not been touched by the Bombay
High Court. The latter has, on the other hand, considered whether the
Concessions Order applies to the assessee, a matter not touched by the
Tribunal.
Thus, though the result is the same so far as
the assessment is concerned, the grounds of decision are entirely different.
The High Court felt that the question framed
by it comprehended both the aspects and, perhaps it did. But the two matters
were neither co-extensive, nor was the one included in the other. The question
of accrual of income has to be decided under the Income tax Act, and has but
little to do with the Concessions Order. That question can be adequately
decided on the facts of this case without advertence to the Concessions Order.
It cannot, therefore, be said to be either coextensive with or included in the
decision of the question actually considered by the High Court to wit, whether
the Concessions Order applied or not.
If this 54 422 be so, it is manifest that the
Tribunal decided something which stands completely outside the decision of the
Bombay High Court. The High Court also decided a matter which was not
considered by the Tribunal even as a step in the decision of the point actually
decided. The two decisions are thus strangers to each other, though they lead
to the same result.
Section 66 of the Income-tax Act which
confers jurisdiction upon the High Court only permits a reference of a question
of law arising out of the order of the Tribunal. It does not confer
jurisdiction on the High Court to decide a different question of law Dot
arising out of such order. It is possible that the same question of law may
involve different approaches for its solution, and the High Court may amplify
the question to take in all the approaches. But the question must still be one
which was before the Tribunal and was decided by it. It must not be an entirely
different question which the Tribunal never considered.
The respondent attempted to justify the
action taken by contending that the decision of the question of the accrual of
the income with reference to the place of accrual implied the applicability of
the Concessions Order. We do not agree. If this were so, there would be no
necessity to frame the question again. Indeed, the High Court itself felt that
there were two limbs of the question of assessability, and reframed the
question to cover both the limbs. Where the High Court went wrong was in not
deciding both the limbs but one of them and that too, the one not decided by
the Tribunal. The resulting position can be summed up by saying that the High
Court decided something which the Tribunal did not, and the Tribunal decided
something which the High Court did not. This is clearly against the provisions
of s. 66. The respondent referred to Scindia Steam Navigation Co. Ltd. v.
Commissioner of Income- tax (1), Commissioner of Income-tax v. Breach Candy
Swimming Bath Trust (2 ) and Ismailia Grain Merchants Association v.
Commissioner of Income-tax (3). They (1)
[1954] 26 I.T.R. 686. (2) [1955] 27 I.T.R. 279.
(3) [1957] 31 I.T.R. 433.
423 were all decisions of the same Court, and
arose in different circumstances. In two of them, the question was wide enough
to take in a line of reasoning not adopted by the Tribunal, and in the third,
the question was widened by deleting a reference to a section, when another
section was also material. They were not cases where the issues of law as
decided by the Tribunal and the High Court were entirely different, which is
the case here. The Punjab High Court has taken a contrary view in Mash Trading
Co. v. Com- missioner of Income-tax (1).
For the reasons given above, we are of
opinion that the High Court exceeded its jurisdiction in going outside the
point of law decided by the Tribunal and deciding a different point of law. The
order of the High Court will, therefore, be set aside, and the case will be
remitted to the High Court to decide the question framed by the Tribunal. In
view of the fact that both the assessee and the Commissioner pointed out the
anomaly to the : High Court and the question was reframed in spite of this, the
costs of this appeal shall be costs in the reference to. be heard by the High
Court, and will abide the result.
Appeal allowed.
Case remitted.
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