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PETITIONER: MRS.  KUSUMBEN D. MAHADEVIA

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX,BOMBAY.

DATE OF JUDGMENT: 30/03/1960

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. DAS, S.K. KAPUR, J.L.

CITATION:  1960 AIR  907            1960 SCR  (3) 417  CITATOR INFO :  R          1961 SC 107  (13)  RF         1961 SC1633  (13,26)  RF         1963 SC1356  (121)  R          1963 SC1484  (7)  RF         1973 SC1023  (13)

ACT: lncome-tax--Reference--High   Court’s  jurisdiction-If   can decide  a  question  not  decided  by  the  Tribunal--Indian Income-tax  Act,  1922  (XI  of  1922),  s.  66--The  States (Taxation Concessions) Order, 1949, Para. 4.

HEADNOTE: The  appellant  was  a shareholder of  a  company  known  as Mafatlal  Gagalbhai  and  Co., Ltd.  The  Company  with  its registered  office  at  Bombay was  at  all  material  times resident  in British India.  It was also doing  business  in the former Baroda State and used to keep its profits derived in   that   State   with   Mafatlal   Gagalbhai   Investment Corporation,  Navsari.  In the year 1949 Mafatlal  Gagalbhai and  Co.  Ltd. declared dividends out of profits  which  had accrued  partly  in British India and partly in  the  Indian State.   The  appellant was assessed to  income-tax  on  the dividends earned by her.  She did not bring those  dividends into British India and claimed the benefit of para. 4 of the Merged  States (Taxation Concessions) Order.   The  Tribunal held that the income did not accrue to the appellant in  the Baroda State but it did not decide the question whether  she was  entitled  to the benefits of the  Taxation  Concessions Order.  The High Court on a reference to it held that  para. 4  of the Taxation Concessions Order. did not apply  to  the assessee  but  it did not decide the other  question  as  to where the income had accrued to the assessee.  On appeal  by special  leave  the appellant contended,  inter  alia,  that since  the  Tribunal had not gone into the question  of  the applicability  to the assessee of the Concessions Order  and had not expressed any opinion thereon, the High Court  could not raise the question on its own and decide it: Held, that the High Court exceeded its jurisdiction in going outside  the  point  of  law decided  by  the  Tribunal  and deciding a different point of law.

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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. New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax, [1959]  37 I.T.R. 11, Scindia Steam Navigation Co.  Ltd.  v. Commissioner   of   Income-tax,  [1954]   26   I.T.R.   686, Commissioner  of  Incometax v. Breach  Candy  Swimming  Bath Trust,  [1955]  27 I.T.R. 279 and Ismailia  Grain  Merchants Association  v. Commissioner of Incometax, [1957] 31  I.T.R. 433, distinguished. Mash  Trading Co. v. Commissioner of Income-tax,  [1956]  30 I.T.R. 388, considered. 418

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 507 of 1957. Appeal  by special leave from the order and  judgment  dated September  28,  1955, and February 20, 1956, of  the  Bombay High Court in Income-tax Reference No. 28 of 1955. R.J. Kolah and I. N. Shroff, for the appellant. C.   K. Daphtary, Solicitor - General of India,B. Ganapathy lyer and D. Gupta, for the respondent. 1960.  March 30.  The Judgment of the Court was delivered by HIDAYATULLAH, J.-This is an appeal with the special leave of this Court, and is directed against an order dated September 28,  1955,  and a judgment dated February 20, 1956,  of  the High Court of Bombay.  By the order, the High Court reframed a  question  referred  to it by the  Appellate  Tribunal  at Bombay, which it answered by its judgment. Mrs.  Kusumben D. Mahadevia (hereinafter referred to as  the assessee)  who has filed this appeal, was, at  all  material times,  residing in Bombay.  She was a shareholder,  holding 760  shares of Mafatlal Gagalbhai & Co., Ltd., Bombay.   For the  assessment  year 1950-51 (the previous year  being  the calendar  year  1949), she was assessed to income-tax  on  a total  income  of Rs. 1,50,765 which included  a  grossed-up dividend  income of Rs. 1,47,026.  In the latter income  was included a sum of Rs. 47,120 being the dividends declared by Mafatlal Gagalbhai & Co., Ltd., Bombay.  Mafatlal  Gagalbhai &  Co.,  Ltd.,  is  a  private  limited  Company  with   its registered office at Bombay.  It was, at all material times, ’resident and ordinarily resident’ in British India.  It was also doing business in the former Baroda State, and used  to keep  its  profits  derived  in  that  State  with  Mafatlal Gagalbhai Investment Corporation, Navsari.  In the year 1949 Mafatlal  Gagalbhai & Co., Ltd., declared dividends  out  of these  accumulated profits by three resolutions,  which  are reproduced: 25-3-1949.  " That a further dividend of Rs. 17 per ordinary share free of income-tax for the year 1947 be and is  hereby declared absorbing Rs. 4,29,250 419 and the same be payable in Navsari out of the profits of the year 1947 lying at Navsari." 24-9-1949.  " That a further dividend of Rs. 24 per ordinary share free of income-tax for the year 1948 be and is  hereby declared  absorbing Rs. 6,06,000 and the same be payable  in Navsari out of the profits of the year 1948 lying at Navsari with Messrs.  M.G. Investment Corporation Ltd. on -or  after 30th April, 1949." 24-9-1949.  " Resolved that an Ad-interim dividend of Rs. 21

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per ordinary share free of income-tax absorbing Rs. 5,30,250 be  and  is  hereby declared for the year 1949  out  of  the income of the Company for the year 1949 remaining  unbrought with  Messrs.  M. G. Investment Corporation  Ltd.,  Navsari, and  that  the same be payable in Navsari on or  after  30th April, 1949." The  assessee  did not bring these  dividends  into  British India.   She  claimed the benefit of para. 4 of  the  Merged States  (Taxation  Concessions)  Order,  1949   (hereinafter referred  to  briefly  as the Concessions  Order);  but  the Tribunal  held that the income did not accrue to her in  the Baroda  State.  The Tribunal pointed out that the  dividends were declared by Mafatlal Gagalbhai & Co., Ltd., out of  its profits  which had accrued partly in, what was then  called, British India and partly in the Indian State.  The  dividend was  thus declared out of ’ composite profits’.  It  further pointed out that the assessee had paid for and acquired  the shares of a Company in British India and was thus holding an asset  in British India, and that the income was  from  that asset.   The  Tribunal,  however, at  the  instance  of  the assessee  drew up a statement of the case under s. 66(1)  of the  Indian  Income-tax  Act,  and  referred  the  following question to the High Court: "  Whether the net dividend income of Rs. 47,120 accrued  to the  assessee in the former Baroda State, or whether  it  is income accrued or deemed to have accrued to the assessee  in British India ?" When  the  reference was heard, the High Court  was  of  the opinion that the Tribunal ought to have decided and referred also the question whether the Concessions 420 Order  applied to the assessee.  The High  Court  recognised the grievance of the assessee that no such point was  raised before the Tribunal.  The High Court, however, by its  order dated September 28, 1955, decided that there was no need  to send  the case back for a supplemental statement, since  all the facts necessary to decide the two questions were  before the High Court.  The High Court then reframed the  question, as  it  said,  to comprehend the two points of  law  in  the following words: "  Whether the assessee is entitled to any concession  under the  Merged States (Taxation Concessions) Order, 1949,  with regard to the net dividend income of Rs. 47,120?" The  reference then came up for final disposal  on  February 20,  1956, and the High Court answered the question  in  the negative, holding that para. 4 of the Concessions Order  did not  apply to the assessee.  The High Court did  not  decide where  the  income had accrued to the  assessee.   Leave  to appeal to this Court was refused by the High Court, but  the assessee  applied  to this Court for special  leave  against both  the  order and the judgment and obtained it,  and  the present appeal has been filed. At  the  very  outset,  the  assessee  has  questioned   the jurisdiction  of  the High Court to frame and  deal  with  a question  of  law  not  arising out  of  the  order  of  the Tribunal.   The  assessee points out that the  Tribunal  had decided  that the income had accrued in British India.   The assessee  had challenged this part of the decision,  and  if the Commissioner felt it necessary, he should have  obtained the  decision of the Tribunal and asked for a  reference  on the other point also.  Since the Tribunal had not gone  into the  question  of the applicability to the assessee  of  the Concessions Order and had not expressed any opinion thereon, the  assessee contends that the High Court could  not  raise the  question  on  its own, and  decide  it.   The  assessee

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strongly  relies  upon  a  decision of  this  Court  in  New Jehangir Vakil Mills Ltd. v. Commissioner of Incometax  (1). In that case, the Bombay High Court had  (1) [1959] 37 I.T.R. 11. 421 directed the Tribunal to submit a supplementary statement of the  case  on  points  not arising from  the  order  of  the Tribunal,  and  this Court held that the High Court  had  no jurisdiction  to  do  so.   The  learned  counsel  for   the Commissioner, on the other hand, contends that the  question was  the  assessability  of the assessee,  who  claimed  the benefit  of  the Concessions Order.  The main  question  was thus  the  applicability of the Concessions Order,  and  the question  of the accrual of the income, whether  in  British India  or  in  Baroda, was  merely  ancillary.   The  latter question  was, according to the respondent, included in  the first question, and the High Court was right when it  framed a comprehensive question and answered it in the sequence  it did.   The respondent points out that the High Court  having held  that  the  Concessions Order did not  apply,  was  not required  to  decide the other limb of the question,  as  it became unnecessary to do so. 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. The  High  Court  felt  that  the  question  framed  by   it comprehended both the aspects and, perhaps it did.  But  the two  matters  were  neither co-extensive, nor  was  the  one included  in the other.  The question of accrual  of  income has  to  be  decided under the Incometax Act,  and  has  but little to do with the Concessions Order.  That question  can be  adequately  decided on the facts of  this  case  without advertence to the Concessions Order.  It cannot,  therefore, be  said  to be either coextensive with or included  in  the decision  of  the question actually considered by  the  High Court to wit, whether the Concessions Order applied or  not. If this 54 422 be  so, it is manifest that the Tribunal  decided  something which  stands completely outside the decision of the  Bombay High Court.  The High Court also decided a matter which  was not  considered  by  the  Tribunal even as  a  step  in  the decision  of the point actually decided.  The two  decisions are  thus strangers to each other, though they lead  to  the same result. 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 Dot arising out of such order.  It is  possible  that  the same question  of  law  may  involve 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 one which was before the Tribunal and was decided by it.  It must not be an entirely different

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question which the Tribunal never considered. The  respondent  attempted to justify the  action  taken  by contending that the decision of the question of the  accrual of the income with reference to the place of accrual implied the  applicability  of  the Concessions Order.   We  do  not agree.   If  this were so, there would be  no  necessity  to frame  the  question again.  Indeed, the High  Court  itself felt   that  there  were  two  limbs  of  the  question   of assessability,  and reframed the question to cover both  the limbs.  Where the High Court went wrong was in not  deciding both  the  limbs but one of them and that too, the  one  not decided  by  the Tribunal.  The resulting  position  can  be summed  up by saying that the High Court  decided  something which  the  Tribunal  did  not,  and  the  Tribunal  decided something  which  the High Court did not.  This  is  clearly against the provisions of s. 66.  The respondent referred to Scindia Steam Navigation Co. Ltd. v. Commissioner of Income- tax (1), Commissioner of Income-tax v. Breach Candy Swimming Bath Trust (2 ) and Ismailia Grain Merchants Association  v. Commissioner of Income-tax (3).  They (1) [1954] 26 I.T.R. 686.  (2) [1955] 27 I.T.R. 279. (3) [1957] 31 I.T.R. 433. 423 were all decisions of the same Court, and arose in different circumstances.  In two of them, the question was wide enough to take in a line of reasoning not adopted by the  Tribunal, and  in  the third, the question was widened by  deleting  a reference  to  a  section, when  another  section  was  also material.   They were not cases where the issues of  law  as decided  by  the Tribunal and the High Court  were  entirely different,  which is the case here.  The Punjab  High  Court has  taken  a  contrary view in Mash  Trading  Co.  v.  Com- missioner of Income-tax (1). For the reasons given above, we are of opinion that the High Court  exceeded its jurisdiction in going outside the  point of  law  decided by the Tribunal and  deciding  a  different point of law.  The order of the High Court will,  therefore, be  set  aside, and the case will be remitted  to  the  High Court  to  decide the question framed by the  Tribunal.   In view of the fact that both the assessee and the Commissioner pointed out the anomaly to the : High Court and the question was  reframed  in spite of this, the costs  of  this  appeal shall  be  costs in the reference to. be heard by  the  High Court, and will abide the result. Appeal allowed. Case remitted.