Full Judgment Text
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PETITIONER:
M/S. ZORASTER AND CO.
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME TAX, DELHI, AJMER, RAJASTHAN AND
DATE OF JUDGMENT:
17/04/1960
BENCH:
HIDAYATULLAH, M.
BENCH:
HIDAYATULLAH, M.
DAS, S.K.
SHAH, J.C.
CITATION:
1961 AIR 107 1961 SCR (1) 210
CITATOR INFO :
RF 1961 SC1633 (14,26,27,32)
R 1963 SC1356 (121)
R 1963 SC1484 (8)
R 1965 SC1636 (16)
R 1966 SC1466 (7)
RF 1972 SC2048 (5)
R 1990 SC1451 (5)
ACT:
Income-tax Reference--Power of High Court to call for
supplemental statement of case--Indian Income-tax Act, 1922
(11 of 1922), s. 66(4).
HEADNOTE:
The appellant entered into contract with Government for the
supply of goods, and in the assessment year 1942-43 Rs.
10,80,653 and in the assessment year 1943-44, Rs. 7,45,336
were assessed as its income by the Income-tax Officer. The
supplies to Government were made for. Jaipur by the
appellant, and payment was by cheques which were received at
Jaipur. The contention of the appellant was that this
income was received at Jaipur outside the then taxable
territories. This contention was not accepted by the
Income-tax Appellate Tribunal, Delhi. The appellant then
applied for a reference to the High Court under s. 66(1) of
the Indian Income-tax Act, and by its order dated December
10, 1952, the Tribunal referred the following question for
the decision of the High Court.
" Whether on the facts and circumstances of the case
the profits and gains in respect of the sales made to the
Government
211
of India were received by the assessee in the taxable terri-
tories ?"
The High Court remanded the case to the Tribunal for a
supplemental statement of case calling for a finding on the
question " whether the cheques were sent to the assessee
firm by post or by hand and what directions, if any, had the
assessee firm given to the department in the matter ". The
appellant questioned the order of the High Court relying on
the decision in New Jehangir Vakil Mill’s case, [1960] 1
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S.C.R. 249.
Held, that the enquiry in such cases must be to see whether
the question decided by the Tribunal admits of the
consideration of the new point as an integral or an
incidental part thereof. The supplemental statement which
the Tribunal is directed to submit must arise from the facts
admitted and/or found by the Tribunal and should not open
the door to fresh evidence.
Held, further, that the question as framed in this case was
wide enough to include an enquiry into whether there was any
request, express or implied, that the amount of the bills be
paid by cheques so as to bring the matter within the dicta
of this Court in the Ogale Glass Works case, [1955] 1 S.C.R.
185 or Jagdish Mills case, [1960] 1 S.C.R. 236.
In the absence of anything expressly said in the Order of
the High Court to the contrary, it cannot be held that the
direction given would lead inevitably to the admitting of
fresh evidence as that has been prohibited by the New
Jehangir Vakil Mills case.
The New Jehangir Vakil Mills Ltd. v. The Commissioner of
Income-tax, [1960] 1 S.C.R. 249, distinguished.
Jagdish Mills Ltd. v. Commissioner of Income-tax, [1960] 1
S.C.R. 236, Keshav Mills Co. Ltd., v. Commissioner of
Income-tax, [1950] 18 I.T.R. 407, Sir Sobha Singh v.
Commissioner of Income-tax, [1950] 18 I.T.R. 998, Kirloskar
Bros. Ltd.v. Commissioner of Income-tax, [1952] 21 I.T.R.
82, Commissioner of Income-tax v. Ogale Glass Works Ltd.
[1955] 1 S.C.R. 185, Commissioner of Income-tax v. Kirloskar
Bros. Ltd., [1954] 25 I.T.R. 547 and Mrs. Kusumben D.
Mahadevia, Bombay v. Commissioner of Income-tax, Bombay,
[1960] 3 S.C.R. 417, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 30 of 1958.
Appeal by special leave from the judgment and order dated
March 24, 1955, of the Punjab High Court in Civil Reference
No. 3 of 1953.
Gopal Singh, for the appellants.
K. N. Rajagopala Sastri and D. Gupta, for the respondent.
212
1960. August 17. The Judgment of the Court was delivered
by
HIDAYATULLAH J.-This appeal, by special leave of this Court,
is against the judgment ’and order dated March 24, 1955, of
the Punjab High Court by which the High Court, purporting
to act under s. 66(4) of the Indian Income-tax Act, called
for a supplemental statement of the case from the Income-tax
Appellate Tribunal. The special leave granted by this Court
is limited to the question whether the High Court had
jurisdiction in this case to call for the supplemental
statement.
The assessee, Messrs. S. Zoraster & Co., Jaipur, consists
of three partners. Two of them are coparceners of a joint
Hindu family, and the third is a stranger. They had formed
this partnership in June, 1940, for the manufacture and sale
of blankets, felts and other woollen articles. A deed of
partnership was also executed on March 16, 1944. The
assessee entered into contracts with Government for the sup-
ply of goods, and in the assessment year 1942-43, Rs.
10,80,658-0-0 and in the assessment year 1943-44, Rs.
17,45,336-0-0 were assessed as its income by the Income-tax
Officer, Contractor’s Circle, New Delhi. The supplies to
Government were made for. Jaipur by the assessee, and
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payment was by cheques which were received at Jaipur and
were endorsed in favour of the joint Hindu family, which
acted as the assessee’s bankers. The contention of the
assessee was that this income was received at Jaipur outside
the then taxable territories. This contention was not
accepted by the Income-tax Appellate Tribunal, Delhi.
The assessee then applied for a reference to the High Court
under s. 66(1) of the Indian Income-tax Act, and by its
order dated December 10, 1952, the Income-tax Appellate
Tribunal referred the following question for the decision of
the High Court:
" Whether on the facts and circumstances of the case the
profits and gains in respect of the sales made to the
Government of India were received by the assessee in the
taxable territories ? "
213
The Tribunal had stated in the statement of the case as
follows:
"The payment was made by the Government of India by cheques
drawn on the Reserve Bank of India, Bombay Branch. These
cheques were received in Jaipur."
It may be pointed out that in the contract of sale between
the assessee and the Government of India, the following
clause was included to determine the system of payment:
" 21. System of payment:-Unless otherwise agreed
between the Purchaser and the Contractor payment for the
delivery of the stores will be made by the Chief Auditor,
Indian Stores Department, New Delhi, by cheque on a
Government treasury in India or on a branch of the Imperial
Bank of India or the Reserve Bank of India transacting
Government business."
In dealing with the Reference, the High Court passed an
order under s. 66(4) of the Income-tax Act observing,
"........ it would be necessary for the Appellate Tribunal
to find, inter alia, whether the cheques were sent to the
assessee firm by post or by hand and what directions, if
any, had the assessee firm given to the Department in the
matter ".
The High Court thereafter remanded the case to the Tribunal
for a supplemental statement of the case on the lines
indicated. This order is questioned on the authority of the
decision of this Court in The New Jehangir Vakil Mills Ltd.
v. The Commissioner of Income-tax(1) which, it is claimed,
completely covers this case. In that case also, the High
Court of Bombay had called for a supplemental statement of
the case, and it was ruled by this Court that the High Court
had exceeded its jurisdiction.
Before dealing with this question, it is necessary to go
back a little, and refer briefly to some cases decided
earlier than The New Jehangir Vakil Mills case (1) and
Jagdish Mills Ltd. v. Commissioner of Income-tax (2), on
which reliance has been placed in this case. ID
(1) [1960] 1 S.C.R. 249.
(2) [1960] 1 S.C.R. 236.
214
Keshav Mills Co., Ltd. v. Commissioner of Income-tax (1),
the High Court of Bombay called for a supplemental statement
of the case, but it expressed the view that if a cheque was
received by a creditor on a British Indian Bank and he gave
the cheque to his bank for collection, the bank must be
treated as his agent and that, on the realisation of the
amount of the cheque in the taxable territory, the creditor
must be regarded as having received it in the taxable
territory, even if he was outside it. In Sir Sobha Singh v.
Commissioner of Income-tax (2), it was held by the Punjab
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High Court that where cheques were given to a bank for
purposes of collection, the receipt of the money was at the
place where the bank on which the cheques were drawn was
situated.
These views found further amplification, and were applied in
two other cases by the Bombay If high Court. They are
Kirloskar Bros. Ltd. v. Commissioner of Income-tax (3 ) and
Ogale Glass Works Ltd. v. Commissioner of Income-tax (4).
In both these cases, it was held that unless the payee
expressly constituted the post office as his agent, the mere
posting of the cheque did not constitute the post office the
agent of the payee, and that the amount of the cheque was
also received at the place where the cheque was received.
In Kirloskar Bros. Ltd. v. Commissioner of Income-tax(3),
it was held that the mere posting of the cheque in Delhi was
not tantamount to the receipt of the cheque in Delhi,
because the payee had not requested the Government to send
the cheque by post. In Ogale Glass Works case (4), the
Bombay High Court asked for a supplementary statement of the
case from the Tribunal as to whether there was any express
request by the assessee that the cheque should be sent by
post, and held that as there was no such express request,
the receipt of the money was not where the cheque was posted
but at the place where the money was received.
(1) [1950] 18 I.T.R. 407.
(2) [1950] 18 I.T.R. 998.
(3) [1952] 21 I.T.R. 82.
(4) I. Tax Reference No. 10 of 1949 of the Bombay H. C.
decided on September 17, 1951.
215
The last two decisions of the Bombay High Court were
reversed by this Court, and it was held that an intimation
to the payer " to remit " the amount by cheque was
sufficient nomination of the post office as the agent of the
payee: vide Commissioner of Income-tax v. Ogale Glass Works
Ltd. (1) and Commissioner of Income-tax v. Kirloskar Bros.
Ltd. (2). Later, the principle was extended still further
by this Court in Jagdish Mills case(3). It was held that
where the bills had an endorsement Government should pay the
amount due by cheque and the cheques were received in full
satisfaction unconditionally, this constituted a sufficient
implied request for the purpose of the application of the
rule in Ogale Glass Works case of this Court.
Jagdish Mills case (3) and the New Jehangir Vakil Mills case
(4) were decided by this Court on the same day. In the
latter case, the Department had to deal with a non-resident
Company which, at all material times, was situate at
Bhavnagar, one of the Indian States. Cheques in payment for
supplies to Government were sent from British India to
Bhavnagar. The Department contended in the case that though
the cheques were received at Bhavnagar, they were, in fact,
cashed in British India and until such encashment, income
could not be said to have been received but that on
encashment in British India, the receipt of income was also
in British India. The Tribunal held that the cheques having
been received at Bhavnagar the income was also received
there. In doing so, the Tribunal followed the Bombay
decision in Kirloskar Brothers case (5). The Tribunal,
however, observed that if the Bombay view which was then
under appeal to this Court were not upheld, then an enquiry
would have to be made as to whether the Mills’ bankers at
Ahmedabad acted as the Mills’ agents for collecting the
amount due on the cheques. The question whether the posting
of the cheques from British India to Bhavnagar at the
request, express or
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(1) [1955] 1 S.C.R. 185.
(3) [1960] 1 S.C.R. 236.
(2) [1954] 25 I.T.R. 547.
(4) [1960] 1 S.C.R. 249.
(5) [1952] 21 I.T.R. 82.
216
implied, of the Mills or otherwise, made any difference was
not considered at any stage before the case reached the High
Court of Bombay. This was expressly found to be so by this
Court in these words:
" The only ground urged by the Revenue at all
material stages was that because the amounts which were
received, from the merchants or the Government were received
by cheques drawn on banks in British India which were
ultimately encashed in British India, the monies could not
be said to have been received in Bhavnagar though the
cheques were in fact received at Bhavnagar."
The reference was held back by the Tribunal till the
decision of this Court in Ogale Glass Works case (1) and
Kirloskar Brothers’ case (2). Even after seeing that in
those two cases the request for payment by cheques to be
sent by post made all the difference, the Tribunal did not
frame its statement of the case or the question to include
this aspect, because that aspect of the matter was never
considered before.’ The question referred was thus limited
to the legal effect of the receipt of the cheques at
Bhavnagar without advertence to the fact whether the cheques
were so sent by post at the request, express or implied, of
the Mills. The question framed was:
" Whether the receipt of the cheques in Bhavnagar
amounted to receipt of the sale proceeds in Bhavnagar ? "
The question as framed and the statement which accompanied
it brought into controversy the only point till then
considered by the Tribunal and the taxing authorities. When
the case *as heard by it, the High Court desired to consider
it from the angle of the Kirloskar Brothers(2) and Ogale
Glass Works (1) cases. It called for a supplemental
statement of the case. In doing so, the High Court went
beyond the ambit of the controversy as it had existed till
then and also the statement of the case and the question.
The High Court directed the Tribunal as follows:
"On the finding of the Tribunal that all the cheques were
received in Bhavnagar, the Tribunal to find
(1) [1955] 1 S.C.R. 185.
(2) [1954] 25 I.T.R. 547.
217
what portion of these cheques were received by post, whether
there was any request by the assessee, express or implied,
that the amounts which are the subject matter of these
cheques should be remitted to Bhavnagar by post."
In repelling the objection that such an enquiry was alien to
the point decided by the Tribunal and might require fresh
evidence, the High Court justified itself by saying:
" But we cannot shut out the necessary inquiry which
even from our own point of view is necessary to be made in
order that we should satisfactorily answer the question
raised in the Reference. It must not be forgotten that
under section 66(4) of the Income-tax Act we have a right
independently of the conduct of the parties to direct the
Tribunal to state further facts so that we may properly
exercise our own advisory jurisdiction."
This Court pointed out that the High Court exceeded its
jurisdiction under s. 66(4) of the Indian Income-tax Act.
It was observed:
" If the question actually referred does not bring
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out clearly the real issue between the parties, the High
Court may reframe the question so that the matter actually
agitated before the Tribunal may be raised before the High
Court. But s. 66(4) does not enable the High Court to raise
a new question of law which does not arise out of the
Tribunal’s order and direct the Tribunal to investigate new
or further facts necessary to determine this new question
which had not been referred to it under s. 66(1) or s. 66(2)
and direct the Tribunal to submit a supplementary statement
of the case."
It was also pointed out that the facts admitted and/ or
found by the Tribunal could alone be the foundation of the
question of law which might be said to arise out of the
Tribunal’s order. The case thus set two limits to the
jurisdiction of the High Court under s. 66(4), and they were
that the advisory jurisdiction was confined (a) to the facts
on the record and/or found by the Tribunal and (b) the
question which
28
218
would arise from the Tribunal’s order. It was pointed out
by this Court that it was not open to the High Court to
order a fresh enquiry into new facts with a view to
amplifying the record and further that it was equally not
open to the High Court to decide a question of law, which
did not arise out of the Tribunal’s order. This was
illustrated by comparing the question as framed by the
Tribunal with the question which the High Court desired to
decide. Whereas the Tribunal had only referred the
question:
" Whether the receipt of the cheques at Bhavnagar
amounted to receipt of sale proceeds in Bhavnagar ?",
what the High Court intended deciding was:
" Whether the posting of the cheques in British
India at the request express or implied of the appellant,
amounted to receipt of sale proceeds in British India ?"
These were two totally different questions, and it was held
that the High-Court could not decide a matter which was
different from that decided by the Tribunal, nor call for a
statement of the case bearing on this new matter.
The proposition laid down in the Jehangir Vakil Mills case
(1), finds support from yet another case of this Court
decided very recently. In Kusumben D. Mahadevia v.
Commissioner of Income-tax Bombay (2), it was observed:
" 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.
(1) [1960] 1 S.C.R. 249.
(2) [1960] 3 S.C.R. 417,421.
219
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. It
is possible that the same question of law may involve
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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 the one which was before the
Tribunal and was decided by it. It must not be an entirely
different question which the Tribunal never considered."
It follows from this that the enquiry in such cases must be
to see whether the question decided by the Tribunal admits
the consideration of the new point as an integral or even an
incidental part thereof. Even so, the supplemental
statement which the Tribunal is directed to submit must
arise from the facts admitted and/or found by the Tribunal,
and should not open the door to fresh evidence. The fact
that in Ogale Glass Works case (1), the Bombay High Court
had asked for a supplemental statement in the same way as in
the Jehangir Vakil Mills case (2 ), and this Court did not
rule out the new matter, cannot help the assessee in the
present case, because the jurisdiction of the High Court was
not questioned, as it had been done in the Jehangir Vakil
Mills case, or has been done here. We have thus to see
whether in this case the question which was decided and
which has been referred to the High Court admits the return
of the case for a supplemental statement on the lines
indicated by the High Court in the order under appeal.
At the very start, one notices a difference in the question
of law in this case and the Ogale Glass Works case (3), on
the one hand, and the question of law in the Jehangir Vakil
Mills case (2), on the other. In the former two cases, the
question is very wide, while in the latter it is extremely
narrow. This can be Been by placing the three questions
side by side as below :
(1) I. Tax Reference No. 19 of 1949 of the Bombay H. C.
decided on September 17, 1951.
(2) [1960] 1 S.C.R. 249.
(3) [1955] 1 S.C.R. 185.
220
Jehangir Vakil Mills case " Whether the receipt
of the cheques in Bhav-
nagar amounted to receipt
of the sale proceeds in
Bhavnagar ?"
Ogale Glass Works case " Whether on the facts
of the case, income,
profits and gains in
respect of sales made
to the Government of
India was received in
British India within
the meaning of Section
4(1)(a) of the Act ?"
This case "Whether on the facts
and circumstances of
the case the profits
and gains in respect of
the sales made to the
Government of India
were received by the
assessee in taxable
territories ?"
It is thus quite plain that the question as framed in this
case can include an enquiry into whether there was any
request, express or implied, that the amount of the bills be
paid by cheques so as to bring the matter within the dicta
of this Court in the Ogale Glass Works case (2) or Jagdish
Mills case (3). The first limit to the jurisdiction of the
High Court as laid down by this Court is thus not exceeded
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by the High Court in exercising its powers under s. 66(4) of
the Income-tax Act. The question is wide enough to include
the alternative line of approach that if there was a
request, express or implied, to send the amount due under
the bills by cheque, the post office would be the agent of
the assessee, and the income was received in the taxable
territory when the cheques were posted.
(1) [1960] 1 S.C.R. 249.
(2) [1955] 1 S.C.R. 185.
(3) [1960] 1 S.C.R. 236.
221
The next question is whether the High Court has transgressed
the second limitation implicit is s. 66(4), that is to say,
that the question must arise out of the facts admitted
and/or found by the Tribunal. The High Court has observed
that,
"......... it would be necessary for the Appellate
Tribunal to find inter alia whether the cheques were sent to
the assessee firm by post or by hand and what directions, if
any, bad the assessee-firm given to the Department in that
matter."
If the Tribunal has to make a fresh enquiry leading to the
admission of fresh evidence on the record, then this
direction offends against the ruling of this Court in the
Jehangir Vakil Mills case (1). If, however, the direction
be interpreted to mean that the Tribunal in giving the
finding must confine itself to the facts admitted and/or
found by it, the direction cannot be described as in excess
of the jurisdiction of the High Court. It would have been
better if the High Court had given directions confined to
the record of the case before the Tribunal; but, in the
absence of anything expressly to the contrary, we cannot
bold that the direction would lead inevitably to the admit-
ting of fresh evidence. This, at least, now cannot be done,
since the Jehangir Vakil Mills case (1), has prohibited the
admission of fresh evidence. In our opinion, the present
case does not fall within the rule in the Jehangir Vakil
Mills case (1), and is distinguishable.
In the result, the appeal fails, and is dismissed with
costs.
Appeal dismissed.
(1) [1960] 1 S.C.R. 249.
222