Commissioner of Income-Tax, Delhi and
Rajasthan Vs. The Mewar Textile Mills Ltd.  INSC 287 (10 December 1965)
10/12/1965 SIKRI, S.M.
CITATION: 1966 AIR 1559 1966 SCR (3) 34
Income Tax Act, ( 11 of 1922), s.
66(1)-Procedure for reference of questions of law by Tribunal to High Court-At
the instance of assessee Tribunal annexing fresh documents, not discussed, to
statement of case Property of.
At the time of making an application to the
Income-tax Appellate Tribunal under s. 66(1) of the Income-tax Act, 1922, to
refer certain questions of law to the High Court, the assessee filed certain
documents as annexures to his application and the Tribunal attached these
documents to the Statement of Case. There was no mention of any of the
documents either in the Appellate order of the Tribunal or in the body of the
Statement of Case. The High Court decided the questions referred to it in
favour of the assessee.
On an appeal to this Court,
HELD : (i) The case must be remanded to the
High Court as the relevant facts were not clear, nor agreed upon by the
(ii)It is not consistent with the advisory
jurisdiction of a High Court under the Act that the Appellate Tribunal should
attach to the Statement of Case documents. other than the proceedings of the
Income-tax authorities, which are not mentioned or discussed either in its own
appellate order or in the Statement of Case. If the High Court were to decide
any dispute concerning the interpretation of any such document, it would be
deciding questions not decided by the Tribunal and which the High Court is
incompetent to decide under the Act. [38 G, H]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 969 of 1964.
Appeal from the judgment and order, dated
March 21, 1963 of the Rajasthan High Court in D. B. Civil Income-tax Ref. No.
41 of 1960.
A. V. Viswanatha Sastri, S. K. Aiyar, B. R.
G. K. Achar, and R. N. Sachthey, for the appellant.
S. T. Desai, Z. S. Meeratwal and Naunit Lal,
The Judgment of the Court was delivered by
Sikri J. This appeal, by certificate granted under S. 66A(2) of the Indian
Income Tax Act, 1922, hereinafter referred to as the Act, read with S. 261 of
the Indian Income Tax Act, 1961, is directed against the judgment of the
Rajasthan High Court in a 35 consolidated reference made to it by the Income
Tax Appellate Tribunal, Delhi Branch, under s. 66(1) of the Act.
This appeal relates to the assessment year
1943-44 and the relevant question with which we are concerned is as follows :-
"Whether the profit on the amounts received by the assessees bankers in
British India as price of goods sold by the assessee on railway receipts in the
names of the consignees or as price of goods delivered ex-godown Bhilwara was
liable to tax under the Indian Income-Tax Act ?" This question was
referred at the instance of the appellant and the item in dispute now before us
is the item amounting to Rs. 2,73,488, which was held not liable to taxation by
the Appellate Tribunal. The question which arises in this appeal is whether the
Tribunal was right. The first submission, however, of Mr. A. V. Viswanatha
Sastri, the learned counsel for the appellant, is that the High Court has not
dealt with this question insofar as it relates to this sum. Mr. Desai, on the
other hand, contends that the appellant has not appealed as far as this item is
and, therefore, before we attempt to answer
the question we must first see whether the appellant's appeal covers this item.
Mr. Desai refers us to the petition for leave
to appeal to the Supreme Court, filed in the High Court, and says that there is
no express mention of the item of Rs. 2,73,488. He is right as far as this is
concerned, but the appellant apparently felt it was not necessary to mention
expressly this item. Mr. Sastri points to paras 12 and 13 of the petition which
read as follows :
"12. That on account of applying the
principle of accrual basis and allowing apportionment of profit between the
manufacturing and selling processes in the ratio of 75% : 25% the revenue that
would be lost to the Department would be approximately Rs. 36,000.
13.That the point of law decided by this
Hon'ble Court while returning the answer to question No. 12. namely, whether
the liability to pay tax can be fastened on the assessee on receipt basis or
accrual basis is a substantial question of law and is of great public and
private importance and would form important precedent governing the numerous
other cases. The tax effect is also of considerable value." 36 Further,
Mr.sastri points out that the first seven parts of the petition which deal with
the facts and the proceedings before the Income Tax Authorities are general and
cover the said item of Rs. 2,73,488; also the grounds of appeal, Nos. 1 and 2
are very general and cover the item in dispute. It is true, as pointed out by
Mr. Desai, that the High Court in granting leave to appeal to the Supreme Court
did not expressly deal with this item at all, but then the High Court was
dealing with the question of law as such and was not adverting to the facts in
detail. Be that as it may, the appellant has filed an appeal in respect of the
assessment year 1943-44 and the only possible question that can arise in this
appeal is regarding the disputed item of Rs. 2,73,488, and we do not feel
justified in accepting this technical objection and debarring the appellant
from urging that this item is taxable.
Now, coming to the merits of the submission
of Mr. Sastri, we find that the Rajasthan High Court has omitted to consider
the question of the taxability of this item. This item was exempted by the
Appellate Tribunal. In this connection the Appellate Tribunal observed as
". . but the assessee would not be
liable to tax in respect of goods sold by the assesses to the purchasers on
railway receipts in the names of consignees. In respect of these goods, the
delivery of the goods was in Bhilwara, the goods were appropriated there and
not in British India and the title in the goods had passed in the Indian State
and not in British India. The assessee cannot, therefore, be assessed on the
amounts received by the assessee from consignees on railway receipts in the
names of the consignees. It is true that the consignees did pay the price of
the goods to the assessee's bankers in British India but thereby the bankers in
British India had become the agents of the consignees and not the agents of the
In this view of the matter the inclusion of
the receipts on railway receipts addressed to the consignees cannot be
justified. In the assessment years 1944-45 and 1945-46 none of the railway
receipts was in the name of the consignees. The sales were on railway receipts
in the name of self or were in cash.
It was only in the assessment year 1943-44
that the railway receipts were in the name of the consignees and they were to
the tune of Rs. 2,73,488. The amount will, therefore, be excluded from the
total receipts of Rs.
12,62,911." 37 The High Court noticed
exclusion of Rs. 2,73,488 in these words :
,,The Tribunal also found that it was only in
the assessment years 1944-45 and 1945-46 that sales were effected by assessee
on railway receipts in the names of the consignees and that such sales amounted
to Rs. 2,73,488. The Tribunal accordingly deleted from the aggregate amount
sales of Rs. 12,72,911 and Rs. 2,73,488 obviously treating the amounts deleted
as not liable to tax." Apparently the mention of 1944-45 and 1945-46 is a
clerical mistake and we should read it as 1943-44. Apart from the above words,
we do not find any reference to the figure of Rs. 2,73,488 in the rest of the
judgment. Further, the main reasoning of the High Court concerns the items of
1,14,687 in the year 1945-46 and Rs. 3,55,289
during the year 1946-47. These amounts had been received by the assessee by
discounting hundies with the Bharat Bank, Bhilwara, and the Rajasthan High
Court held that the assessee was liable to tax in respect of these items not on
receipt basis but on accrual basis. The item of Rs.2,73,388 was not realised in
Bhilwara by discounting of hundies but in other circumstances.
Two courses are open to us in this appeal;
either we should on the material here on the record decide whether Rs. 2,73,488
is taxable or not or remand the case to the High Court for decision. We have decided
to take the latter course because the relevant facts in respect of this item of
Rs. 2,73,488 are not clear and the counsel for the assessee and for the revenue
have not been able to agree upon the facts on which we should decide this
question. We regret having to adopt the latter course because this appeal
concerns the assessment year 1943-44 and it is now 1965; but under the
circumstances we have no choice except to send the case back to the High Court.
We may mention, however, that Mr. Desai
contends before us that the facts are clear and he relies on six documents
which are printed in the paper book, namely :- (1) The Contract form--Annexure
(2) Copy of the postcard from Shiv Nath Radha
Krishna Somani, Beawar, to M./s Mewar Textile 38 Mills, Bhilwara, dated March
7, 1942-Annxure Ex. 'U';
(3) Copy of the advice from Umedmal Abheymal
Ajmer to Mewar Textile Mills, dated March 7, 1942-Annexure Ex. 'V';
(4) Copy of the despatch instructions from
Shiv Nath Radha Krishna Beawar to M/s Mewar Textile Mills Ltd. Bhilwara, dated
March 11, 1942; Annexure Ex. 'W';
(5) Copy of letter to M/s Shivnath Radha
Krishna Beawar, dated March 12, 1942, Annexure Ex. 'X'; and (6) Copy of the
Journal Entry in the Books of the Mills of Rs. 9,000 Annexure Ex. 'Y'.
He invites us to treat these documents as a
sample of the manner in which the goods were sent from Bhilwara, to the
consignee in British India and the amount of Rs. 2,73,488 was received. But we
notice that these very documents were filed as annexures to the assessee's
application under s. 66(1) of the Act in respect of questions other than
question No. 2, which was referred by the Tribunal at the instance of the
appellant and, therefore, we feel a doubt whether these documents could safely
be treated as relating to the item of Rs. 2,73,488.
Before we conclude we must mention a matter
The Appellate Tribunal at the instance of the
assessee attached a number of documents to the statement of the case, including
the six documents mentioned above, but we find no mention of these documents
either in the Appellate Order of the Appellate Tribunal or in the body of the
statement of the case. We feel that it is not consistent with the advisory
jurisdiction of a High Court under the Act that the Appellate Tribunal should
attach to the statement of the case documents, other than the proceedings of
the Income Tax authorities, which are not mentioned and discussed either in its
own appellate order or in the statements of the case.
Suppose a dispute arises as to the
interpretation of a document which is annexed in the manner above mentioned. If
the High Court decides the dispute it would be deciding questions not decided
by the Tribunal, and which the High Court would be incompetent to decide,
Linder the Indian Income Tax Act.
39 In the result we accept the appeal, set
aside the order of the High Court of Rajasthan as far as the assessment year
1943-44 is concerned and remand the case to the High Court.
The High Court will dispose of the reference
in accordance with law. In view of the circumstances of the case, there will be
no order as to costs.