1. Dispute regarding whether sale proceeds received via cheques in an Indian State constituted receipt in British India under Section 4(1)(a) of the Indian Income-tax Act. (Para 1 , 2 , 3 , 4 , 5 , 8 )
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1959 Supreme(SC) 112
SUPREME COURT OF INDIA
12th May, 1959.
S.R. DAS, C.J.I., N.H. BHAGWATI, AND M. HIDAYATULLAH, JJ.
The New Jehangir Vakil Mills Ltd., Appellant
Veruss
The Commissioner of Income-tax, Bombay North, Kutch and Saurashtra, Respondent.
Civil Appeal No. 50 of 1957.
Advocate Appeared
M/s. R. J. Kolah and I. N. Shroff, Advocates, for Appellant; Mr. H. N. Sanyal, Addl. Solicitor-General of India, (Messrs. K. N. Rajagopala Sastri, and D. Gupta, Advocates, with him), for Respondent.
Advocates:
H.N.SANYAL, I.M.SHROFF, K.N.RAJAGOPAL SASTRI, R.J.KOLAG
H.N.SANYAL, I.M.SHROFF, K.N.RAJAGOPAL SASTRI, R.J.KOLAG
The High Court's jurisdiction under Section 66(4) of the Indian Income-tax Act is limited to requesting additions or alterations to a statement of case to resolve the referred question; it cannot be used to introduce new questions of law or direct investigations into previously uncanvassed facts.
Headnote:(A) Indian Income-tax Act (XI of 1922) - Sections 66(1), 66(2), and 66(4) - Jurisdiction of High Court in references from Tribunal - Scope of power to direct supplementary statement of case - High Court cannot use Section 66(4) to raise a new question of law or direct the Tribunal to investigate new facts not previously canvassed before the tax authorities or the Tribunal (Paras 24, 25).
(B) Nature of Jurisdiction - The jurisdiction of the High Court under Section 66 is consultative or advisory and must be exercised within the four corners of the section; it cannot be used to embark upon a new line of enquiry to enable a party to make out a case never previously made (Para 25).
(C) Reference of Question of Law - Only questions of law arising out of the order of the Tribunal can be referred to the High Court; the facts admitted or found by the Tribunal form the substratum of the reference (Para 24).
Facts of the case:
A dispute arose regarding whether the receipt of cheques at a company's location, which were subsequently cashed in another jurisdiction, amounted to the receipt of sale proceeds in that other jurisdiction. The Tribunal held that the money was received where the cheques were received. The High Court, observing that a specific factual detail regarding whether the cheques were sent by post at the request of the assessee was missing, directed the Tribunal to submit a supplementary statement of case to find these new facts, despite such points not having been raised during the original proceedings before the tax authorities or the Tribunal.
Findings of Court:
The High Court exceeded its jurisdiction by directing the Tribunal to investigate new facts and raise a new question of law that did not arise out of the Tribunal's original order.
Issues: Whether the High Court has jurisdiction under Section 66(4) of the Act to call for a supplemental statement of case to determine facts not previously canvassed before the Tribunal.
Ratio Decidendi: The power under Section 66(4) to make additions or alterations to a statement of case is limited to providing sufficient material to determine the question already referred. It does not empower the High Court to introduce new issues or direct the Tribunal to record fresh findings on evidence not previously adduced. The High Court cannot use this provision to allow a party to advance a case that was never made before the income-tax authorities or the Tribunal.
Result: Appeal allowed.
Legal Category Hierarchy
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2. Revenue argued receipt occurs where cheques are cashed; appellant contended receipt occurs upon physical delivery of cheques. (Para 5 , 6 )
3. The High Court's power to supplement a statement of case is limited to clarifying existing issues and cannot be used to introduce new factual inquiries. (Para 24 , 25 , 26 , 27 , 28 , 29 , 31 , 32 , 33 , 34 )
4. Section 66(4) does not permit the High Court to raise new questions of law or direct investigation into facts not arising from the Tribunal's order. (Para 25 , 30 )
5. Appeal allowed; High Court's order for a supplementary statement set aside; matter remanded to High Court to decide the original question of law. (Para 37 , 38 )
6. Can the High Court under Section 66(4) of the Indian Income-tax Act direct the Tribunal to investigate new facts?
No. Section 66(4) allows additions or alterations to a statement of case only to determine the question already referred. It cannot be used to embark upon a new line of enquiry or find new facts not canvassed before the tax authorities or Tribunal. (Para 25 , 30 )
7. What is the nature of the High Court's jurisdiction when hearing a reference under Section 66 of the Indian Income-tax Act?
The jurisdiction is consultative or advisory. The court provides an opinion on questions of law arising out of the Tribunal's order based on facts admitted or found by the Tribunal, rather than sitting in appeal. (Para 25 , 26 )
8. What is the prerequisite for a question of law to be referable to the High Court under Section 66(1)?
The question of law must arise out of the order of the Tribunal. If the question does not arise from the Tribunal's order, the Tribunal is not bound to refer it. (Para 24 )
Judgement
N. H. BHAGWATI J. : This appeal with special leave arises out of a judgment and order of the High Court of Judicature at Bombay dated 23-9-1955, delivered in Income-tax Reference No. 19 of 1955 made by the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") to the High Court under S. 66 (1) of the Indian Income-tax Act (XI of 1922) (hereinafter referred to as "the Act ) whereby the High Court directed the Tribunal to submit a supplementary statement of case on the points mentioned therein.
2. The appellant is a limited liability company manufacturing textile goods at Bhavnagar which was an Indian State during the assessment years 1943-44 and 1944-45. For the said assessment years the appellant was held to be a non-resident, its years of account being calendar years 1942 and 1943. For the assessment years 1943-44 and 1944-45 (account years 1942 and 1943), the Income-tax Officer computed the British Indian Income of the appellant on a proportionate basis under S. 4 (1) (a) of the Act. In the account year 1942 its total sales amounted to Rs. 66,14,852 out of which sale proceeds amounting to Rs. 35,92,157 as detailed below were held by the Income-tax Officer to have been received in British India:
Cheques on the Imperial Bank issued by the Supply Department of the Government of India Rs. 2,58,987
Sale proceeds received through Trikamlal Mahasukhram Rs. 20,24,190
Other cheques received at Bhavnagar but drawn on Banks in British India Rs. 13,08,980
Rs. 35,92,157
3. The Income-tax Officer computed the income of the appellant at Rs. 27,11,136 on a proportionate basis i. e., proportionate to the sales in and outside British India. He held that the income amounting to Rs. 14,72,267 was received in British India under S. 4 (1) (a) of the Act. There was no dispute in regard to the sale proceeds received through Trikamlal Mahasukhram.
4. In respect of the assessment year 1944-45 corresponding to the account year 1943 the Income-tax Officer held that sale proceeds amounting to Rs. 16,72,693 received by the appellant by cheques from the Supply Department of the Government of India on British India Banks were taxable under S. 4 (1)(a) of the Act. The figure of Rs. 16,72,693, according to the appellant, was a mistake for Rs. 12,97,631.
5. The appellant had contended that the amounts had been received at Bhavnagar, by cheques drawn on banks in British India. The Revenue had not disputed the fact that the cheques had been actually received at Bhavnagar but had contended that payments by cheques, though such cheques were received at Bhavnagar, were received in British India at the time and the place where the cheques were ultimately cashed and honoured by the banks on which the cheques were drawn and that until such encashment of the cheques, the monies could not be said to have been received by the appellant.
6. The appellant preferred appeals to the Appellate Assistant Commissioner, Ahmedabad Range, against this order of the Income-tax Officer for the said two assessment years. The Appellate Assistant Commissioner by his two separate orders confirmed the orders of the Income-tax Officer and held that the cheques were not legal tender and were not monies or monies worth as such and that the receipt of cheques at Bhavnagar was not receipt of money. The receipt of money, according to the Appellate Assistant Commissioner, took place on actual payments by the drawee Banks and he therefore held that the said amounts were taxable under S. 4 (1) (a) of the Act.
7. A further appeal was taken by the appellant to the Tribunal against the said orders of the Appellate Assistant Commissioner and the Tribunal by its consolidated order for both the years, dated 17-7-1952, held that the cheques for the said amounts of Rs. 2,58,987 and Rs. 13,08,987 in respect of the assessment year 1943-44, were received at Bhavnagar and that the sale proceeds were also received in Bhavnagar. The Tribunal stated inter alia as follows:
"There is no evid
