Judgement

Appeal (No. 87 of 1922) from a judgment of the High Court (February 28, 1921) upon a reference by the Chief Revenue-authority under s. 51 of the Indian Income Tax Act (VII. of 1918).

The appellant Company, which was formed under the Indian law and had its registered office in

Law Rep. 50 Ind. App. 212 ( 1922- 1923) Tata Iron and Steel Company Ltd. v. Chief Re Venue-Authority 56

Bombay, by a resolution passed in November, 1918, decided to increase its capital by the issue of 700,000 preference shares of Rs.100 each. Under an agreement made with underwriters of the shares the Company paid to them Rs.28,00,000 as discount. The accounts of the Company for the official year 1918-19 showed this sum as an item of expense on account of underwriting commission. The Collector of Income Tax, Bombay, in arriving at the income for the official year 1919-20, which was to be computed upon the basis of the income of the preceding year, disallowed any deduction on account of this item in assessing the Company. The Company appealed to the Commissioner of Income Tax, Bombay, under s. 21 of the Income Tax Act, against the assessment, on the ground that the deduction of Rs.28,00,000 should have been allowed, but the Commissioner rejected the appeal. The Company then petitioned the Chief Revenue-authority to reverse the decision of the Commissioner under s. 23 of that Act, or in the alternative to refer the case to the High Court under s. 51 (For terms of the Indian Income Tax Act, 1918, s. 51, see p. 234.) of the Act on the question whether the deduction should be allowed. The Chief Revenue-authority refused to interfere with the Commissioners order, and declined to refer the case to the High Court under s. 51 on the ground that, as the law seemed clear and the question involved was more or less one of fact, it was unnecessary to do so. The Company then applied to the High Court for an order to be made under s. 45 of the Specific Relief Act, 1877, requiring the Chief Revenue-authority to refer the question to the High Court. The application was opposed on behalf of the Chief Revenue-authority, but the High Court on January 12, 1921, made an order requiring the Chief Revenue-authority to refer the case, and a reference was submitted accordingly. The point at issue was stated in the reference as being whether the item of Rs.28,00,000 could or could not be allowed under s. 9, sub-s. 2 (ix.), of the Indian Income Tax Act, 1918, as an item of expenditure.

The reference was heard by the Chief Justice (Sir Norman Macleod) and Shah J., who on February 21, 1921, delivered judgment affirming the decision of the Chief Revenue-authority. The learned judges were of opinion that the sum of Rs.28,00,000 was not a deduction authorized by the Act. The reference is reported at I. L. R. 45 B. 1306.

The appellant Company applied to the Court for leave to appeal, which was granted. The learned judges were of opinion that a decision of the High Court on a reference made by the Chief Revenue-authority under s. 51 of the Indian Income Tax Act, 1918, was a "final judgment" within the meaning of cl. 39 of the Letters Patent; the Court considered that the word " judgment" was there used in a wider sense than that in which it is used in the Civil Procedure Code

1923. Feb. 8, 9. Dunne K.C. and Reginald Hills for the respondent. There is a preliminary objection to the appeal as not being competent. The Government of India Act, 1915; s. 106, sub-s. 2 (continuing the policy which dates from 1780), excludes the jurisdiction of the High Court in revenue matters. Although under s. 131, sub-s. 3, and Sch.V. that exclusion can be modified by the Indian Legislature,

s. 51 of the Indian Income Tax Act, 1918, has not that effect. Consequently, the High Court had no power under s. 45 of the Specific Relief Act, 1877, to order the present respondent to state a case. That view is supported by s. 52 of the Indian Income Tax Act, 1918. In any case there was no power where, as in th