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1923 Supreme(SC) 27
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
VISCOUNT HALDANE, LORD PHILLIMORE, AND LORD CARSON.
ADCOCK, ASHDOWN AND COMPANY LIMITED - Appellant
Versus
CHIEF REVENUE-AUTHORITY, BOMBAY - Respondents
On Appeal from the High Court at Bombay.
Decided On : June 7. 1923
Solicitors for appellants:Rawle, Johnstone & Co. Solicitor for respondent: Solicitor, India Office.
A revenue authority's power to refer a case to court is coupled with a duty when a serious point of law arises. Determining whether investments constitute "capital employed in the business" is a question of law or mixed law and fact, not a pure question of fact.
Headnote:(A) Excess Profits Duty Act, 1919 - Sections 6 and 15; Indian Income Tax Act, 1918 - Section 51; Specific Relief Act, 1877 - Section 45; Government of India Act, 1915 - Section 106(2) - Jurisdiction of High Court to compel revenue officer - An order by a High Court to a revenue officer to perform a statutory duty does not constitute the exercise of "original jurisdiction in any matter concerning the revenue" and is therefore not barred by legislation excluding civil court jurisdiction in revenue matters.
(B) Indian Income Tax Act, 1918 - Section 51 - Duty to state a case - Where a public authority is granted the power to refer a question of law to a court, such power may be coupled with a duty to exercise it if a serious point of law is involved. If the authority refuses to refer a non-frivolous and necessary question, the court may control the authority and order a case to be stated.
(C) Excess Profits Duty Act, 1919 - Section 6 - Capital employed in business - The determination of whether specific investments or cash held for future expansion constitute "capital employed in the business" is not a pure question of fact but a question of law or mixed law and fact, and is therefore subject to judicial review.
Facts of the case:
An assessee was assessed for excess profits duty. The assessee claimed a deduction based on an increase in average capital employed, arguing that cash and investments held for the purpose of future business expansion should be treated as capital employed in the business. The revenue authority rejected the application and refused to state a case for the opinion of the High Court, asserting the law was clear. The High Court subsequently discharged a rule nisi, holding that the question was one of fact and that the revenue authority had reasonable grounds to refuse the reference.
Findings of Court:
The court found that the High Court had the jurisdiction to compel the revenue authority to perform its statutory duty under the Specific Relief Act. It held that the revenue authority's discretion to refer a case is coupled with a duty when a serious point of law is raised. Furthermore, the court determined that the classification of investments as business capital is a matter of statutory construction and not a mere finding of fact.
Issues: Whether the High Court could order a revenue authority to state a case despite statutory bars on original jurisdiction in revenue matters, and whether the determination of "capital employed in the business" is a question of fact or a question of law.
Ratio Decidendi: The power to refer a case under the tax statute is coupled with a duty when a serious point of law is raised. The interpretation of what constitutes "capital employed in the business" involves the construction of the statute and is thus a question of law or mixed law and fact, requiring a regular judicial determination rather than a conclusive factual finding by the revenue authority.
Result: Appeal allowed.
Legal Category Hierarchy
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administrative law
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mandamus
- statutory duty
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mandamus
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tax law
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excess profits duty
- capital employed
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excess profits duty
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practice and procedure
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jurisdiction
- revenue matters
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jurisdiction
Judgement
Appeal (No. 62 of 1922) from an order of the High Court (October 21, 1920) discharging a rule nisi obtained by the appellants for an order under s. 45 of the Specific Relief Act (I. of 1877).
Law Rep. 50 Ind. App. 227 ( 1922- 1923) Adcock, Ashdown and C o. Ltd v. C hief Revenue-Authority
64
The appellants were assessed by the collector of income tax to excess profits duty for the accounting period of twelve months ending on December 31, 1918, at Rs.8,79,582. For the purpose of the assessment they had elected to have the standard profits of the business ascertained under s. 6, sub-s. 1 (b) (iii.), of the EXCESS PROFITS DUTY ACT (X. of 1919). They applied to the Chief Revenue-authority to discharge the assessment under s. 23 of the Indian Income Tax Act (VII. of 1918), as applied by s. 15 of the EXCESS PROFITS DUTY ACT , 1919, on the ground that a deduction ought to have been made in accordance with the first proviso to s. 6, sub-s. 1 (6), of the EXCESS PROFITS DUTY ACT , 1919, in computing the profits chargeable on account of an increase of average capital employed in the business at the end of the accounting period, or in the alternative to state a case for the opinion of the High Court under s. 51 of the Income Tax Act, 1918, as applied to excess profits duty by s. 15 of the EXCESS PROFITS DUTY ACT , 1919. The circumstances in which the appellants claimed the deduction appear from the judgment of the Judicial Committee.
The Chief Revenue-authority rejected the application to discharge the assessment, and declined to state a case as in his view the Act of 1919 was clear and a reference unnecessary.
The appellants applied to the High Court by petition praying under s. 45 of the Specific Relief Act, 1877, that the Chief Revenue-authority might be ordered under the enactments above mentioned to state a case and refer to the Court the following question—namely " whether the cash and investments on December 31, 1918, should be taken into consideration for purposes of excess profits duty " ; alternatively they prayed that the Chief Revenue-authority should be ordered to hear and determine their application to him to refer the said question.
The High Court granted a rule, which was subsequently argued before a Division Bench (Macleod
C.J. and Fawcett J.). On October 21, 1920, the learned judges delivered judgment discharging the rule on the ground that the question was one of fact. The proceedings are reported at I. L. R. 45 B. 881 under the title In re EXCESS PROFITS DUTY ACT ,
1923. May 4, 7. Clauson K.C., Latter K.C. and Cyril King for the appellants. The High Court had jurisdiction to make an order in the nature of a mandamus under s. 45 of the Specific Relief Act, 1877, since there was a statutory duty upon the respondent under s. 51 of the Indian Income Tax Act, 1918. The question was not one of fact, but of the true construction of the EXCESS PROFITS DUTY ACT , 1918. The appellants under their memorandum of association had power to invest surplus capital. Sums so invested were capital "employed in the business" within the meaning of s. 6 of the EXCESS PROFITS DUTY ACT , 1919. That Act differs materially from the English Acts dealing with excess profits duty see Finance (No. 2) Act (5 & 6 Geo. 5, c. 89), Sch. IV. [They were stopped.]
Dunne K.C. and Reginald Hills for the respondent. The High Court had no jurisdiction to issue any proceedings in the matter having regard to s. 106, sub-s. 2, of the Government of India Act, 1915, which excludes jurisdiction " in any matter concerning the revenue " Spooner v. Juddow (( 1850) 4 Moo. I. A. 353.) ; Chief Commissioner of Income Tax v. North Anantapur Gold Mines . (( 1921) I. L.
R. 44 M. 718.) Sect. 52 of the Indian Income Tax Act, 1918, supports the view that there was no jurisdiction. Further, s. 51, sub-s. 1, of that Act does not cast a duty upon the Revenue-authority to state a case upon application, but gives him a discretion in the matter. The language of the sub-secti
