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PETITIONER: THE COMMISSIONER OF INCOME-TAX, BOMBAY

       Vs.

RESPONDENT: THE SCINDIA STEAM NAVIGATlON CO.  LTD.

DATE OF JUDGMENT: 05/04/1961

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA DAS, S.K. KAPUR, J.L. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1961 AIR 1633            1962 SCR  (1) 788  CITATOR INFO :  RF         1963 SC1356  (121)  R          1963 SC1484  (9)  R          1965 SC1636  (18)  R          1966 SC1385  (11)  R          1966 SC1466  (7)  F          1967 SC 509  (6)  F          1967 SC 657  (6)  F          1967 SC1554  (7)  R          1967 SC1626  (10)  F          1968 SC 139  (4)  E          1968 SC 779  (9)  F          1969 SC 917  (16)  F          1969 SC1068  (6)  R          1970 SC2067  (11)  R          1977 SC1259  (13)  R          1980 SC 769  (8)  RF         1986 SC 421  (24)  F          1988 SC1305  (6)  R          1990 SC1451  (11)

ACT: Income-tax-Reference-Scope-"Any question of law arising  out of  such order", Meaning of Indian Income Tax Act, 1922  (11 1922), as amended by Income-tax (Amendment) Act, 1946  (VIII of 1946),ss. 66, 10(2)(vii) proviso.

HEADNOTE: By  s.  66  (1)  of the Indian  Income-tax  Act,  1922  "the assessee  or  the Commissioner may, by  application  in  the prescribed  form  ...... require the Appellate  Tribunal  to refer  to the High Court any question of law arising out  of such  order and the Appellate Tribunal shall ... draw  up  a statement of the case and refer it to 789 the High Court." The respondents, who received  compensation from  the Government as owners of a requisitioned  steamship lost in enemy action, were assessed to tax under the  fourth proviso to S. 1O(2)(Vii) of the Indian Income-tax Act, which was inserted into the Act by the Income-tax (Amendment) Act,

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1946  (VIII  Of 1946) that came into force on May  4,  1946. Before the Tax Authorities the respondents sought to  resist the liability on the ground that the income was received not in the year of account but in the previous year but  failed. No question as to the applicability of the said proviso  was either raised before the Tribunal or dealt with by it.   The question  that  was  referred  to  the  High  Court  was  as follows:- "Whether  the sum of Rs. 9,26,532 was properly  included  in the assessee company’s total income computed for the assess- ment year 1946-47." In  the High Court the respondents contended that  the  said proviso   had   no  application.   The  appellant   took   a preliminary objection to this contention being raised on the ground that it was not raised and argued before the Tribunal but the High Court overruled the objection and held that the compensation amount was not liable to charge as the  proviso in question was not in force on the material date.   Against this decision the Commissioner of Income-tax appealed. The  point for determination in the appeal was  whether  the High Court in answering a reference under s. 66 could decide a question not raised or argued before the Tribunal. Held  (per Das, Kapur, Hidayatullah and  Venkatarama  Aiyar, jj.), that the jurisdiction of the High Court under s. 66 of the  Indian Income-tax Act is purely advisory and  therefore different  from its ordinary jurisdiction as a Civil  Court. It  is of the essence of such a jurisdiction that  the  High Court  can decide only such questions as are referred to  it and  that  implies that the questions  must  necessarily  be those that the Tribunal had occasion to consider. The words "any question of law arising out of such order" in s.  66(1) of the Indian Income-tax Act, 1922, do not in  the context mean any question of law arising out of the findings in the order of the Tribunal but only such questions as were raised before, or decided by the Tribunal. The  Indian  Income-tax Act, I 922, is not in  Pari  materia with  the  British  Statute and in view  of  the  difference between  s.  66(i) and the corresponding provisions  of  the British Statute no useful purpose can be served by referring to  English decisions for interpreting s. 66 of  the  Indian Act. Commissioner  of  Income-tax v. Shaw Wallace &  Co.,  (1932) L.R. 59 I.A. 2o6, referred to. Attorney-General v. Avelino Armavo & Co., [1925] 1 K.B.  86, considered. 790 The  power the High Court has under s: 66(2) Of the  Act  to direct  a reference can make no difference since such  power is  subject to the same limitations as that of the  Tribunal under s.  66(i) of the Act. Commissioner  of  Income-tax,  Madras v.  Mtt.  Ar.  S.  Ar. Arunachalam Chettiar, (1953] S.C.R. 463, New jehangir  Vakil Mills  Ltd. v. Commissioner of Income-tax, [1960]  1  S.C.R. 249,  Kusumben D. Mahadevia v. Commissioner  of  Income-tax, [1960]  S.C.R.  4I7 and Zoraster & Co.  v.  Commissioner  of Income-tax, [1961] 1 S.C.R. 210, referred to. Madanlal Dharnidharka v. Commissioner of Income-tax,  [1948] 16 I.T.R. 227, disapproved. Case-law reviewed. The  jurisdiction of the High Court in deciding a  reference under  s.  66(5)  is  co-extensive with  the  right  of  the litigant  to ask for a reference and the power of the  court to make one.  Therefore the High Court has jurisdiction in a reference  to  decide questions of law arising  out  of  the order  of the Tribunal, that is question of law  raised  and

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decided  by the Tribunal, or question of law  raised  before the  Tribunal  but  not decided by it  or  question  of  law decided  by Tribunal, though not raised before it,  but  not questions not raised or decided by the Tribunal even  though it may arise from its findings. A question of law may have more than one aspect and s. 66(1) of  the  Act  does not contemplate that  each  aspect  of  a question is by itself a distinct question.  It only requires that the question of law which is referred to the Court must have been in issue before the Tribunal.  It does not further require  that  the  reference should  be  limited  to  those aspects  of  the question which had been argued  before  the Tribunal. The Commissioner of Income-tax, Bombay South v. M/s.   Ogale Glass  Works Ltd. [1955] I S.C.R. 185 and Zoraster & Co.  v. Commissioner of Income-tax, [1961] 1 S.C.R. 210, approved. In the instant case, the question referred to the High Court was  wide  enough  to cover the  contention  raised  by  the respondent and the High Court was right in holding that  the fourth  proviso  to  S. 10(2)(Vii) Of  the  Act,  not  being retrospective in operation, bad no application. Per Shah, J.-Section 66 of the does not contemplate that the question  which tire Tribunal may refer, or which  the  High Court may call upon the Tribunal to refer, must be one  that is  raised  and argued before the Tribunal  at  the  hearing under   s.  33(4)  Of  the  Act.   The  section  does   riot specifically  impose such a restriction nor is  it  implied. To  import into the expression "any question of law  arising out  of  such order" any limitation that the  question  must either have been argued before the Tribunal or dealt with by it,   would  be  not  only  to  impose  fetters   upon   the jurisdiction of the High 791 Court which were plainly not intended by the statute and  in certain cases might involve gross injustice to the parties. Madanlal Dharnidharka v. Commissioner Of Income-tax,  [1948] 16 I.T.R. 227, approved. Under  s.  66(5)  Of the Act, the court has  to  record  its opinion  on  the questions arising out of the order  of  the Tribunal  and not on the arguments advanced before  it.   In the instant case the High Court, on the question arising out of  the  order  of  the Tribunal and  referred  to  it,  had jurisdiction  to  decide  that the proviso  which  made  the amount taxable was not in operation at the material date.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 501 of 1957. Appeal  by special leave from the judgment and  order  dated September  13, 1954, of the Bombay High Court in  Income-tax Reference No. 13 of 1954. K. N. Rajagopala Sastri and D.  Gupta, for the appellant. A. V. Viswanatha Sastri and P. L. Vohra, for the respondent. 1961.   April 6. The Judgment of S. K. Das, J. L. Kapur,  M. Hidayatullah and T. L. Venkatarama Aiyar, JJ. was  delivered by Venkatarama Aiyar, J. J.   C.   Shah,  J.   delivered   a separate Judgment. VENKATARAMA  AIYAR, J.-The respondents were the owners of  a steamship called "El Madina".  That was requisitioned by the Government during the last world war, and was lost by  enemy action  on March 16, 1944.  As compensation  therefore,  the Government  paid the respondents Rs. 20,00,000 on  July  17, 1944; Rs. 23,00,000 on December 22, 1944; and Rs. 33,333  on August  10,  1946.  The original cost of the  ship  was  Rs.

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24,95,016 and its written-down value at the commencement  of the  year  of  account was Rs.  15,68,484.   The  difference between the cost price and the written. down value viz., Rs. 9,26,532  represents the deductions which had  been  allowed year  after year on account of depreciation.  As  the  total compensation   received   exceeded  the  cost   price,   the respondents   have  recouped  themselves  all  the   amounts deducted for depreciation. 792 On  these  facts,  the  point  in  controversy  between  the respondents and the Department is whether the amount of  Rs. 9,26,532 is liable to be included in the total income of the company  for the year of assessment which is  1946-47.   The provision  of  law under which the charge is  sought  to  be imposed is s. 10(2)(vii) of the Indian Income-tax Act, 1922, hereinafter  referred to as the Act, and that  is,  omitting what is not relevant, as follows:-               "(2)  Such profits or gains shall be  computed               after   making   the   following   allowances,               namely:-               (vii)   in  respect  of  any  such   building,               machinery  or  plant which has  been  sold  or               discarded  or  demolished  or  destroyed,  the               amount by which the written down value thereof               exceeds  the  amount for which  the  building,               machinery  or  plant, as the case may  be,  is               actually sold or its scrap value:               Provided  further  that where  any  insurance,               salvage or compensation moneys are received in               respect  of  any such building,  machinery  or               plant  as  aforesaid, and the amount  of  such               moneys  exceeds  the  difference  between  the               written  down  value and the  scrap  value  no               amount  shall be allowable under  this  clause               and  so much of the excess as does not  exceed               the  difference between the original cost  and               the  written-down value less the  scrap  value               shall be deemed to be profits of the  previous               year in which such moneys were received:". It  is not disputed by the respondents that the sum  of  Rs. 9,26,532  would  be profits liable to be  taxed  under  this proviso,  if it applies.  Equally it is not disputed by  the appellant  that  apart  from  this  proviso  the  amount  in question  could  only be regarded as  capital  receipt,  not liable to be taxed.  Before the income-tax authorities,  the respondents sought to avoid the application of this  proviso on  the  ground that on representations made  by  them  with reference  to  this very matter, the Board  of  Revenue  had directed that for the purpose of Rule 4, Schedule II, of the Excess Profits Tax Act, 1940, the amount payable as                             793 compensation  (both  the  initial advance  as  well  as  any further  payment  that  may be made) should  be  taken  into account  as  though  it had actually  been  received  within thirty days of the date of the loss of the ship; and that in consequence  the  amount  should  be  deemed  to  have  been received on April 16, 1944.  If that contention is  correct, the  amounts  would have been received not in  the  year  of account which was July 1, 1944, to June 30, 1945, but in the year  previous  there to, and they could  not  therefore  be included  in  the  income of the company  for  the  year  of assessment.   This contention, however, was rejected by  all the income-tax authorities.  Dealing with it, the  Appellate Tribunal observed in its Order dated July 15, 1953, that the concession  which the Board of Revenue had intended to  give

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was  limited  to excess profits tax, and could  not  in  any event  be  relied  on for the purpose of  cutting  down  the operation of the statutory provision enacted in the relevant proviso ins. 10(2)(vii); and that the material date was when the  compensation was in fact received-and that was  in  the year  of account and not when it became due and payable,  in the year previous thereto.  In the result, the Tribunal held that  the  amount  was liable to be included  in  the  total income of the company. The   respondent  then  filed  an  application  before   the Tribunal,  under  s.  66(l) of the  Act,  requiring  certain questions to be referred to the -court, and one of them was as follows:-               "Whether  in  view of the fact  that  the  4th               proviso  to section 10(2)(vii) of  the  Indian               Income-tax Act did not apply to the assessment               for the Assessment year 1945-46 and under  the               law in force as applicable to that  assessment               year the sum of Rs. 9,26,532 which accrued  in               the previous year relevant to that  Assessment               year was not taxable at all, and the fact that               having  regard  to the  Assessee’s  method  of               accounting the said sum should not be assessed               in  any other year, the Assessment in  respect               of the’ said sum in the subsequent  Assessment               year 1946-47 was valid in law."               794                By  its  order dated February  9,  1954,  the               Tribunal   referred the following question for               the opinion of the court:-               "whether the sum of Rs. 9,26,532 was  properly               included  in  the  assessee  company’s   total               income computed for the assessment year  1946-               47." The  reference  came up for hearing before a  Bench  of  the Bombay High Court consisting of Chagla, C.J., and Tendolkar, J., and then the respondents raised the contention that  the proviso  to  s. 10(2)(vii) under which the charge  was  made could  not  be  taken into account  in  making  the  present assessment,  as the same had been introduced by the  Income- tax  (Amendment) Act, 1946 (VIII of 1946), which  came  into force  on May 4, 1946, whereas the liability of the  company to be taxed fell to be determined as on April 1, 1946,  when the  Finance  Act,  1946, came into  force.   The  appellant raised a preliminary objection to this question being raised for  the first time before the court, on the ground that  it did not arise out of the Order of the Tribunal, having  been neither  raised  before it nor dealt with by  it,  and  that further  it had not been referred to the court.   Overruling this objection, the learned Judges observed that the form in which the question was framed was sufficiently wide to  take in the new contention, that even if the particular aspect of the question had not been argued before the Tribunal, it was implicit in the question as. framed, and that therefore  the assessee  could raise it.  On the merits they held  that  as the  proviso  was not retrospective in  its  operation,  the amount  in  question was not liable to be  included  in  the taxable  income and answered the question in  the  negative. It  is  against  this decision that the  present  appeal  by special leave is directed. The  main  contention urged before us by  the  appellant  is -that  it  was  not open to the High Court  in  the  present reference to go into the question as to the applicability of the  proviso  to  s. 10(2)(vii), as it  was  neither  raised before  the  Tribunal nor considered by it,  and  could  not

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therefore be said to be a question arising out of the  order of the Tribunal, which alone could be 795 referred for the decision of the court under s. 66(l).   The court had no jurisdiction, it is argued, to allow a question to  be raised before it, which could not be referred  to  it under  the  section.  The contention of the  respondents  is that all questions of law which arise on the findings  given by  the Tribunal in its order can properly be said to  arise out  of its order, and that in making a reference  under  s. 66(l),  the Tribunal is not limited to those questions  only which were raised before it and dealt with in its order, nor even to those questions which were raised in the application for reference under s. 66(l).  It is further contended  that in  the present case, the question as framed  and  refer-red was  wide  enough  to  take in  the  contention  as  to  the applicability of the proviso and that the High Court was  in consequence within its power in entertaining it and deciding the reference on it. We  may  now refer to the provisions of law bearing  on  the question.  Section 66(l) of the Act confers on the  assessee and the Commissioner a right to apply to the Tribunal in the prescribed form to refer any question of law arising out  of its  order  for  the decision of the  High  Court.   If  the Tribunal is satisfied that a question of law arises, then it has to draw up a statement of the case, and refer it to  the decision  of  the High Court.  But if it considers  that  no question  of  law  arises on its order,  and  dismisses  the application  under  s.  66(l),  then  the  assessee  or  the Commissioner,  as the case may be, has a right to  move  the court  under  s. 66(2), and if the court  is  not  satisfied about  the correctness of the decision of the  Tribunal,  it can  require  it  to  state the case and  refer  it  to  its decision.   Under  s.  66(4) the High  Court  can,  for  the purpose  of  disposing of the reference which  comes  to  it under  s. 66(l) and (2), call for additional statement  from the  Tribunal.  Under s. 66(5) the High Court is  to  decide the  question of law raised in the case and send a  copy  of its  judgment  to  the Tribunal and the latter  is  to  pass appropriate orders for giving effect to it. Section  59  of  the Act confers on  the  Central  Board  of Revenue power to make rules for carrying out the purpose  of the Act and under sub-section (5), the rules 796 made thereunder shall on publication in the official gazette have  effect as if enacted under the Act.  Rule  22A  framed under this section provides that: "An application under sub- ,section  (1) of section 66 requiring the Tribunal to  refer to  the  High  Court any question Of law  shall  be  in  the following form." The form is R(T) of which paragraphs 3 to 5 are  relevant  for the present discussion, and they  are  as follows:-               "3.  that the facts which are admitted  and/or               found by the Tribunal and which are  necessary               for  drawing up a statement of the  case,  are               stated in the enclosure for ready reference.               4.....that  the  following  questions  of  law               arise out of the order of the Tribunal:-               (3)               5.....that the applicant, therefore,  requires               under  sub-section  (1) of section 66  of  the               aforesaid Act that a statement of the case  be               drawn up and the questions of law numbered out               of  the  questions  of  law  referred  to   in               paragraph  4  above be referred  to  the  High

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             Court." On  these provisions, the question that arises for  decision is  whether in a reference under s. 66, the High  Court  can consider  a  question which had not been raised  before  the Tribunal and/or dealt with by it in its order even though it be  one of law.  On the answer to be given to it  there  has been a difference of opinion among the High Courts and  that turns on the meaning to be given to the words, "any question of law arising out of" the order of the Tribunal.  There  is no  pronouncement of this Court which concludes  this  ques- tion,  though there are decisions which afford  guidance  in the  determination thereof.  These decisions will        now be   considered. In  Commissioner  of  Income-tax, Madras  v.  Mtt.Ar.  S.Ar. Arunachalam Chettiar (1), an order of assessment made by the income-tax  officer was corrected by the Appellate  Tribunal not  in  an  appeal under s. 33(4) but  in  a  miscellaneous application presented to it under (1)  (1953] S.C.R. 463 471.                             797 s.   35. The Commissioner being dissatisfied with the  order applied  for a reference under s. 66(l).  The Tribunal  -was of  the opinion that the order in question could be made  in the  exercise of its inherent jurisdiction and referred  the question  of its legality to the court under s. 66(l).   The Madras  High Court declined to answer it on the ground  that as the order was not one passed in an appeal, the  reference under s. 66(l) was incompetent, as under that provision  the power  of the Tribunal to refer was limited to questions  of law arising out of an order passed in an appeal.  In affirm- ing this decision, this Court observed:               "The  jurisdiction of the Tribunal and of  the               High  Court is conditional on there  being  an               order  by the Appellate Tribunal which may  be               said  to  be  one under section  33(4)  and  a               question of law arising out of such an order." This is an authority for the position that the  jurisdiction of  the Tribunal to make, and of the High Court to  hear,  a reference must be strictly sought within the four corners of s. 66. In  The Commissioner of Income-tax, Bombay South v.  Messrs. Ogale,  Glass Works Ltd. (1), the question referred  by  the Tribunal under s. 66(l) was whether certain amounts received by the assessee from the Government by cheques drawn on  the Reserve  Batik  at Bombay were income  received  in  British India within s. 4(l)(a) of the Act.  The High Court had held that. as the cheques were received in the State of Aundh, in unconditional discharge of the claim, the receipt was not in British  India.  On appeal to this Court, it  was  contended that as the cheques were posted in British India, the income must  be  held to have been received in British  India.   An objection  was put forward to this contention being  raised, on the ground that it was not argued before the Tribunal  or decided by it and that therefore it did not arise out of its order as required by s. 66(l).  But this Court hold that  as the  question  as  framed and  referred  was  of  sufficient amplitude to cover the new point urged, and as no contention was raised that the question had not (1)..[1955] 1 S.C.R. 185, 197. 798 been  properly referred under s. 66(l), it could be  decided under s. 66(5), and that in that view, it was not  necessary "to  express  any opinion on the larger question as  to  the scope, meaning and import of the words ’any question of  law arising. out of’ the Tribunal’s order on the  interpretation

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of  which  there  exists  a  wide  divergence  of   judicial opinion".   There was accordingly no decision on  the  point now under consideration. In New Jehangir Vakil Mills Ltd. v. Commissioner of  Income- tax  (1)  the point under discussion wag  whether  the  High Court  was competent under s. 66(4) to call  for  additional statement  with reference to a question which had  not  been referred to it under s. 66(l) or s. 66(2).  This Court  held that the scope of a reference under s. 66(2) was coextensive with  that of one under s. 66(l) of the Act, that  therefore the  court had no power under s. 66(2) to travel beyond  the ambit  of s. 66(l), that under both these provisions  it  is only  a question of law arising out of the order that  could be  referred, that the object of s. 66(4) was to enable  the court  to obtain additional statements only for the  purpose of  deciding questions referred under s. 66(l) and  (2)  and that  accordingly  no  investigation  could  be  ordered  in respect of new questions which were not and could not be the subject-matter of a reference under s. 66(l) and (2).   Here again  there  was no decision on the meaning of  the  words, "any  question  of  law arising out of"  the  order  of  the Tribunal. In Kusumben D. Mahadevia v. Commissioner of Income-tax  (2), the question actually referred ’under s. 66(l) to the  court was whether a sum of Rs. 47,120 received by the assessee had accrued  to her in the former State of Baroda or whether  it had  accrued or should be deemed to have accrued to  her  in British  India.  On this reference the High Court  resettled the question so as to raise the contention as to whether the assessee  was  entitled to any concession under  the  Merged States  (Taxation Concessions) Order, 1949, as  regards  the income of Rs. 47,120, and holding that she was not, answered the reference against her (1) [1960] 1 S.C.R. 249. (2) [196O] 3 S.C.R. 417. 422. 799 without  deciding  the  question  as  to  where  the  income accrued.   Against this Judgment, the assessee  appealed  to this Court and contended that the High Court was in error in not deciding the question which was actually referred.  This Court accepted this contention and remanded the case to  the High Court for hearing on that point.  So far this  decision does  not  bear on the present controversy.  But  a  further point  was discussed and considered by this Court, and  that was that it was not open to the court to raise the  question about  the  applicability  of the  Merged  States  (Taxation Concessions)  Order, 1949, as that was not a question  which was raised before or considered by the Tribunal or  referred under  s.  66(l).  In agreeing with  this  contention,  this Court observed:-               "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               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." These   observations   bear  on  the  question   now   under consideration but the actual decision was one remanding  the

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case  with  a  direction to the High  Court  to  decide  the question that was referred to it. In  Zoraster  & Co. v. Commissioner of Income-tax  (1),  the assessees  were manufacturers of certain kinds of  goods  in Jaipur.   The Government of India purchased  these  articles and  paid the price by cheques on the Bombay branch  of  the Reserve  Bank of India.  The Tribunal held that the  profits of  these sales had been received in British India,  but  on the  application of the assessees referred that question  to the  court.   The  High  Court remanded  the  case   to  the Tribunal under s.   66(4) for a supplemental statement observing that (1) [1961] 1 S.C. It. 210. 800 "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 correctness of this order was challenged by the assessee on  the  ground that the court had no power to  call  for  a fresh  statement  for the investigation of a new  point  and reliance  was placed on the decision in New  Jehangir  Vakil Mills  Ltd. v. Commissioner of Income-tax (1).   This  Court held, following that decision, that the jurisdiction to call for supplemental statement was confined (a) to the facts  on record and/or found by the Tribunal, and (b) to the question which  would  arise  from the  Tribunal’s  order;  and  that further  it  could  be exercised with  reference  to  a  new question,  if it was an integral or even incidental part  of the  question which had been referred.  This  decision  also proceeds  on the view that a question which  is  unconnected with  the question already referred cannot be  agitated  for the first time in the reference. There  being  thus no direct decision of this Court  on  the precise  meaning of the words "any question of  law  arising out  of"  the  order of the Tribunal, we  must  examine  the decision of the High Courts on the question, and as  already stated they are in a state of conflict. In  A. Abboy Chetty and Co. v. Commissioner  of  Income-tax, Madras  (2), the application of the assessee under s.  66(l) required the Tribunal to refer a question of res judicata to the  court.   The Tribunal declined to do so on  the  ground that  question had not been argued before it.  The  assessee then  moved the court under s. 66(2) for an order  requiring the  Tribunal  to  refer  that  question.   Dismissing  that application, Patanjali Sastri, J., as be then was,  observed as follows:-               "   Mr.  Radhakrishnayya  for  the  petitioner               contends  that a question, though  not  raised               before  the  Appellate Tribunal, can  well  be               said  to ’arise out of its order’, if, on  the               facts  of the case appearing from  the  order,               the question fairly arises.  I am unable               (1) [1960] 1 S.C.R. 249.               (2) [1947] 15 I.T.R. 442,444. 801               to agree with that view.  I am of opinion that               a question of law can be said to arise out  of               an  order  of the Appellate Tribunal  only  if               such  order  discloses that the  question  was               raised before the Tribunal." Adverting to the contention that the Privy Council had in M. E. Moola Sons Limited v. Burjorjee (1) allowed a question of law  arising on the facts found, to be raised for the  first time  before  it,  the learned  Judge  observed:  "The  case

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furnishes no useful analogy as the scope of the remedy under s. 66 of the Indian Income-tax Act has to be determined with reference  to the language of the statute".   This  decision was  followed  by the Madras High Court in  Commissioner  of Income-tax v. Modern Theatres Ltd., (2) and in The Trustees, Nagore Durgah v. Commissioner of Incometax (3). In  G. M. Chenna Basappa v. Commissioner of Income-tax  (4), the  Andhra  High Court followed the decision  in  A.  Abboy Chetty and Co. v. Commissioner of Income-tax, Madras (5) and observed  that  a question not raised  before  the  Tribunal "cannot  be said to arise out of its order even if it  could be  sustained on the facts in the statement of the  case  by the  Tribunal", and that further the order of  the  Tribunal should disclose that the point of law was raised before  it. The same view was adopted by the Patna High Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-(ax (6).  There, discussing the question with reference to the language of s. 66(1) and (2) and Rule 22A, the court observed as follows:-               "The  provisions of Section 66(1) and  Section               66(2)  do  not confer upon the  High  Court  a               general jurisdiction to correct or to decide a               question of law that may possibly arise out of               the income-tax assessment.The section, on  the               contrary,   confers  a  special  and   limited               jurisdiction upon the High Court to decide any               specific question of law which (1)   [1932] I.L.R. 10 Rang. 242. (3)  [1954] 26 I.T.R. 805. (5)  [1947] 15 I.T.R. 442, 444. (2)  [1951] 20 I.T.R. 588. (4)  [1958] 34 I.T.R. 576. (6)  [1954] 26 I.T.R. 79, 86. 802               has  been raised between the assessee and  the               Department before the Income-tax Tribunal  and               upon which question the parties are at issue." It  was accordingly held that only a question of  law  which had  been  actually raised before the Tribunal  or  actually dealt with by it could be referred under s. 66(1). This is also the view consistently held by the Calcutta High Court,  III Commissioner of Excess Profits Tax v.  Jeewanlal Ltd.  (1),  it was held, agreeing with the  decision  in  A. Abboy Chetty and CO.  V. Commissioner of Income-tax,  Madras (2),  that a question of law not raised before the  Tribunal could  not be said to arise out of its order even if on  the facts  of  the case appearing from the  order  the  question fairly  arises.   In Chainrup Sampatram v.  Commissioner  of Income,-tax (3), the assessee had applied under s. 66(1)  of the Act to refer the question whether a sum of Rs.  2,20,887 was  on  a  true  construction of s.  14(2)(c)  of  the  Act assessable  to tax.  The Tribunal dismissed the  application on the ground that the question sought to be raised had  not been mentioned at the hearing of the appeal and had not been dealt  with by the Tribunal and was therefore not one  which arose out of its order.  The question having been brought up before the court under s. 66(2), Chakravartti, J. held  that under s. 66(1) it was only a question that arose out of  the Tribunal’s order that could be referred, and that that  must be  some  question  which was  actually  raised  before  the Tribunal  and dealt with by it; and that under s. 66(2)  the words, "no question of law arises" could only mean that  the question  of  which  reference had been  asked  for  by  the applicant did not arise,, and that the High Court could  not require  the Tribunal to refer some question which  was  not proposed  before  it.   The learned Judge then  went  on  to

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observe:               "The Indian Income-tax Act has not charged the               High  Court with the duty of setting right  in               all  respects ill assessments that might  come               to its notice; its jurisdiction is not  either               appellate or revisional; (1) [1951] 20 I.T R. 39. (2) [1947] 15 I.T.R. 443,444. (3) [1951] 20 I.T. R. 484, 495. 803               nor has it a general power of  superintendence               under  Section 66.  Its sole duty is to  serve               as  the appointed machinery for resolving  any               conflict  which may arise between an  assessee               or  the Commissioner on the one hand  and  the               Tribunal on the other regarding some  specific               question  or  questions  of law.   If,  on  an               application  under  section  66(2),  the  High               Court  finds  that  the  question  which   the               applicant  required the Tribunal to refer  was               not   a  question  that  arose  out   of   the               Tribunal’s  appellate order, it ought,  in  my               view,  to  refuse to require the  Tribunal  to               refer any such question." The   same  view  was  taken  in  Allahabad  Bank  Ltd.   v. Commissioner  of  Income-tax  (1)  and  in  Commissioner  of Income-tax v. State Bank of India (2). In  Mash  Trading Co. v. Commissioner of Income-tax  (3),  a Full Bench of the Punjab High Court had to consider the true character  of the jurisdiction under s. 66.  Therein  Kapur, J.,  as he then was, held, on an examination of the  section and on a review of the authorities that under s. 66(1) it is only  questions which had been raised before and dealt  with by  the Tribunal that could be referred to the High,  Court, that the power of the High Court under s. 66(2) to direct  a reference  is limited to questions which could  be  referred under s. 66(1) and which the applicant required it to refer, that the Tribunal has no power to raise a question suo motu, and likewise the High Court cannot raise any question  which had  not  been referred to it either under s.  66(1)  or  s. 66(2),  but  when  once a question is  properly  raised  and referred  to  the  High Court, the High Court  is  bound  to answer  that  question.  In this view, it was  held  that  a reference  to  the High Court on a question  which  was  not raised  before or considered by the Tribunal was not  compe- tent.  Falshaw, J., while generally agreeing with this  view considered  that  there  might  be  cases  in  which  strict adherence to this view might work injustice, as for  example when  a point raised before the Tribunal had not been  dealt with by it owing to mistake or (1) [1952] 21 I.T.R. 169.   (2) [1957] 31 I.T.R 545. (3) [1956] 30 I.T.B. 388. 804 inadvertence,  or  when its jurisdiction  itself  was  ques- tioned.  The learned Judge added that in the former case the point  might  be  deemed to have been  decided  against  the assessee in the order, thereby attracting s. 66.  It  should be  noted  that all the Judges agreed in  holding  that  the reference  in question was incompetent as the point had  not been raised before the Tribunal. We  must  now  consider the decisions  which  have  taken  a somewhat   different  view.   Vadilal  Lallubhai  Mehta   v. Commissioner of Income-tax (1) was a case under s. 66 of the Act, as it stood prior to the amendment of 1939 and what was held there was that even though the assessee had not  stated

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in his application for reference the questions which  really arose  out  of  the order, it was for  the  Commissioner  to formulate the correct questions and refer them to the court, and where he had failed to do so, the court could direct him to  do  so.  This is not a decision on the  question  as  to whether  questions  not  raised before  or  decided  by  the Commissioner  could be held to be questions arising  out  of his order. In  New  Piece  goods Bazar Co.  Ltd.  V.   Commissioner  of Income-tax  (2),  the question that was  referred  under  s. 66(1) was whether taxes paid on urban immovable property  by the  assessee were an allowable deduction under s.  9(1)(iv) and  s. 9(1)(v) of the Indian Income-tax Act.  An  objection was  raised  before the court that the question  as  to  the application  of s. 9(1)(iv) had not been argued  before  the Tribunal and therefore it could not be referred.   Repelling this  contention, Kania, J., as he then was,  observed  that the  specific question had been put forward as a  ground  of appeal,  and  that  was  "quoted  by  the  Tribunal  in  its judgment"  but  not  dealt  with by  it,  and  that  in  the circumstances the proper order to pass was to refer the case back to the Tribunal and "invite it to express’ its  opinion on this aspect of the contention and raise a proper question of law on that point also." This judgment. again proceeds on the view that it is only a question raised before and  dealt with by the Tribunal (1) [1935] 3 I.T.R. 152. (2) [1947] 15 I.T.R. 319. 805 that-could  be  referred under s. 66(1), and that  is  clear from  the  observations  of  the  learned  Judge  that   the decisions of the Privy Council in Commissioner of Income-tax v.  Kameshwar Singh(1) and National Mutual Life  Association V.  Commissioner of Income-tax (2), deprecating the practice of  raising new questions in the, stage of argument  on  the reference in the High Court did not stand in the way of  the case being referred back to the Tribunal. In Madanlal Dharnidharka V.  Commissioner of Income-tax (3), the Tribunal referred under s. 66(1) the following  question for the decision of the court:               "Whether the remittance of Rs. 2,01,000 out of               profits,  made  by the assessee in  the  years               preceding   the  Maru  year  1999-2000  as   a               nonresident, could be included tinder  section               4(1)(b)(iii)  of the Indian Income-tax Act  in               his  total  income of the year of  account  in               which he was a resident in British India?" This  question had not been argued before the Tribunal,  but the  Tribunal itself referred it because it considered  that it  arose  out  of its order.  The reference  was  heard  by Chagla, C. J. and Tendolkar, J. Before them an objection was raised that the Tribunal could not refer this question under s. 66(1) as the same had not been raised before it.  Chagla, C. J., observed:               "In my opinion it is necessary clearly to  re-               state the jurisdiction of this court.  This is               not  a  Court of appeal.   This  court  merely               exercises   an  advisory  jurisdiction.    Its               judgments are in the nature of advice given on               the questions submitted to it by the Tribunal.               Its  advice  must  be  confined  to  questions               referred  by  the Tribunal to this  court  and               those questions must be questions of law which               must  arise  out  of the  order  made  by  the               Tribunal.  Now, looking at the plain  language

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             of  the  section apart from any  authority,  I               should  have  stated that a  question  of  law               arose out of the order of the Tribunal if such               a question was apparent on the order itself or               it could be raised on the facts found by the (1) [1933] 1 I.T. R. 94.   (2) [1936] 4 I.T.R. 44- (3) [1948] 16 I.T.R. 227, 233, 234. 806               Tribunal  and which were stated in the  order.               I see no reason to confine the jurisdiction of               this  court to such questions of law  as  have               been  argued before the Tribunal or are  dealt               with  by the Tribunal.  The section  does  not               say  so and there is no reason why  we  should               construe  the expression ’arising out of  such               order’ in a manner unwarranted by the ordinary               grammatical  construction of that  expression.               This court has no jurisdiction to decide ques-               tions  which  have not been  referred  by  the               Tribunal.   If the Tribunal does not  refer  a               question  of  law under  section  66(1)  which               arises   out  of  the  order  then  the   only               jurisdiction  of the court is to  require  the               Tribunal  to  refer  the  same  Under  section               66(2).    It  is  true  that  the  court   has               jurisdiction  to resettle questions of law  so               as  to  bring out the real issue  between  the               parties  but  it is not open to the  court  to               raise  new  questions  which  have  not   been               referred to it by the Tribunal." Expressing  next his disagreement with the decision  of  the Madras High Court in A. Abboy Chetty and Co. v. Commissioner of Income-tax, Madras (1), the learned Judge observed:               "The  decision of the Madras High Court  would               also  result in this extraordinary  situation.               An assessee may raise a question and argue  it               before  the  Tribunal,  but  if  the  Tribunal               thought fit to ignore that argument and not to               refer to that point of law in its order,  then               the  court would have no jurisdiction to  call               upon  the Tribunal to refer that  question  of               law  to the High Court.  It is true  that  the               Income-tax  Act is a very  technical  statute,               but  I  see  no  reason  why  when  the  plain               grammatical  construction of the section  does               not   make  it  necessary  to  come  to   that               conclusion it is necessary to do so and arrive               at such an anomalous result." In  Mohanlal  Hiralal v. Commissioner of  Income-tax  (2)  a Bench of the Nagpur High Court, hearing a reference under s. 66(1),  held  that  on  the statement of  the  case  by  the Tribunal,  the  question of law as framed was  not  correct. Then observing that in view (1) [1947] 15 I.T.R. 442. (2) [1952] 22 I.T.R. 448, 452-453. 807 of  the  decision of the Privy Council  in  Commissioner  of Income-tax  v.  Kameshwar  Singh (1), it  could  not  itself resettle it, called for a fresh statement from the  Tribunal under s. 66(4).  Thus far the judgment is on the same  lines as New Piecegoods Bazar Co. Ltd. v. Commissioner of  Income- tax (2) and an earlier decision of the Nagpur High Court  in Beohar  Singh v. Commissioner of Income-tax (3).   When  the case  came  back on the further statement  under  s.  66(4), criticising  certain remarks therein, that the court had  no

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power to direct the Tribunal to refer a question not  argued before  it, the Court observed that they were made  under  a misconception,  and quoted the observations of Chagla  C.J., in  Madanlal Dharnidharka v. Commissioner of Income-tax  (4) extracted above, with approval.  This can hardly be said  to be a decision on the present point. It  will be seen from the foregoing review of the  decisions that  all  the High Courts are agreed that s. 66  creates  a special jurisdiction, that the power of the Tribunal to make a  reference  and the right of the litigant to  require  it, must be sought within the four corners of s. 66(1), that the jurisdiction of the High Court to hear references is limited to  questions  which are properly referred to  it  under  s. 66(1),  and  that such jurisdiction is purely  advisory  and extends  only  to deciding questions referred  to  it.   The narrow  ground  over  which the High  Courts  differ  is  as regards the question whether it is competent to the Tribunal to  refer,  or the High Court to decide, a question  of  law which  was not either raised before the Tribunal or  decided by  it, where it arises ’on the facts found by it.  On  this question,  two divergent views have been expressed.  One  is that  the  words, "any question of law arising out  of"  the order  of the Tribunal signify that the question  must  have been  raised before the Tribunal and considered by  it,  and the  other is that all questions of law arising out  of  the facts  found  would be questions of law arising out  of  the order of the Tribunal.  The 1latter is the view (1)  [1933] 1 I.T.R. 94 (3)  [1948] 16 I.T.R. 433. (2)  [1947] 15 I.T. R 319. (4)  [1948] 16 I.T.R. 227, 233. 234. 808 taken  by the Bombay High Court in Madanlal Dharnidharka  v. Commissioner  of Income-tax(1), and approved by  the  Nagpur High Court in Mohanlal Hiralal v. Commissioner of Income-tax (2).   The  former is the view held by all  the  other  High Courts.   Now the argument in support of the latter view  is that on the plain grammatical construction of s. 66(1),  any question of law that could be raised on the findings of fact given by the Tribunal, would be questions that arise out  of the  order,  and  that, to hold that  they  meant  that  the question  must  have  been raised before  the  Tribunal  and decided by it, would be to read into the section words which are not there. In  support  of  this  contention  Shri  Viswanatha  Sastri, learned  Counsel for the respondents, argued that it  was  a fundamental principle of jurisprudence that the duty of  the litigants  was only to state the facts and that it  was  for the  court to apply the appropriate law to the facts  found, arid  he  relied  on the observations of Atkin,  L.  J.,  in Attorney-General v. Avelino Aramavo & Co.(1), that the court was  not  limited  to particular  questions  raised  by  the Commissioners in the form of questions on the case, and that if  the  point  of  law  or  the  erroneous  nature  of  the determination  of the point of law was apparent on the  case as  stated and there were no further facts to be found,  the court could give effect to it. , He also maintained that the position  under  the Indian law was the same  as  under  the British  statute,  because under s. 66(1) of  the  Act,  the Tribunal has to refer not only questions of law arising  out of  its order, but also a statement of the case, that  under s.  66(2)  the court can likewise require  the  Tribunal  to state  the  case and refer it and that under  s.  66(5)  the court has to decide the question of law raised by the  case. We  are  unable to agree with this  contention.   Under  the

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British  statute  when  once  a decision  is  given  by  the Commissioners,  it  is sufficient that the  assessee  should express his dissatisfaction with it and ask that the  matter be referred to the decision of the High Court. (1) [1948]16 I.T.R. 227.      (2) [1952] 22 I.T.R. 448. (3) [1925] 1 K.B. 86. 809 It  is then for the Commissioners to draw up a statement  of the  case and refer it for the decision of the  court.   The British statute does not cast, as does s. 66(1) of the  Act, a duty on the assessee to put in an application stating  the questions of law which he desires the Commissioners to refer to the court and requiring them to refer the questions which arise  out  of that order.  In Commissioner  of  Income-tax, Madras v. Mtt.  Ar.  S. Ar.  Arunachalam Chettiar (1),  this Court  has  decided that the requirements of  s.  66(1)  are matters affecting the jurisdiction to make a reference under that section.  The attempt of the respondents to equate  the position  under  s.  66(1) of the Act with  that  under  the British statute on the ground that the Tribunal has to  draw up a statement of the case and refer it, and that the  court is to decide questions of law raised by it, must break  down when the real purpose of a statement in a reference is  kept in  view.   A  statement  of case is  in  the  nature  of  a pleading,  where in all the facts found are set out.   There is  nothing in it which calls for a decision by  the  court. It is the question of law referred under s. 66(1) that calls for decision under s. 66(5) and it is that that  constitutes the  pivotal  point on which the jurisdiction of  the  court hinges.   The  statement  of the case is  material  only  as furnishing  the facts for the purpose of enabling the  court to  decide  the question referred.  It has  been  repeatedly laid down by the Privy Council that the Indian Act is not in pari  materia with the British statute and that it will  not be  safe to construe it in the light of  English  decisions, vide  Commissioner of Income-tax v. Shaw Wallace & Co.  (2). In  view  of  the  difference  between  s.  66(1)  and   the corresponding provision in the British statute, we  consider that  no useful purpose will be served by referring  to  the English decisions for interpreting s. 66. But  the main contention still remains that the language  of s.  66(1) is wide enough to admit of questions of law  which arise  on the facts found by the Tribunal and that there  is no justification for cutting (1) [1953] S.C.R. 463, 471. (2) (1932) L.R. 59 I. A. 206.102 810 down  its  amplitude by importing in effect  words  into  it which  are not there.  There is considerable force  in  this argument.   But  then  there  are  certain  features,  which distinguish  the jurisdiction under s. 66, and they have  to be taken into consideration in ascertaining the true  import of  the  words,  "any question of law arising  out  of  such order." The jurisdiction of a court in a reference under  s. 66   is   a  special  one,  different  from   its   ordinary jurisdiction  as a civil court.  The High Court,  hearing  a reference   under  that  section,  does  not  exercise   any appellate or revisional or supervisory jurisdiction over the Tribunal.   It  acts purely in an advisory  capacity,  on  a reference which properly comes before it under s. 66(1)  and (2).   It gives the Tribunals advice, but ultimately  it  is for  them  to  give effect to that advice.   It  is  of  the essence  of  such a jurisdiction that the court  can  decide only  questions which are referred to it and not  any  other question.   That  has  been decided by  this  Court  in  New

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Jehangir Vakil Mills Ltd. v. Commissioner of  Income-tax(2); Kusumben  D. Mahadevia v. Commissioner of Income-tax(2)  and Zoraster  & Co. v. Commissioner of Income-tax (3).   If  the true scope of the jurisdiction of the High Court is to  give advice  when  it  is sought by the Tribunal,  it  stands  to reason  that  the Tribunal should have had  an  occasion  to consider  the  question  so that it may  decide  whether  it should  refer it for the decision of the court.  How can  it be  said  that  the Tribunal should seek  for  advice  on  a question  which  it was not called upon to consider  and  in respect  of which it had no opportunity of deciding  whether the decision of the court should be sought? It was argued for the respondents, that, in view of the fact that the court could compel the Tribunal to refer a question of   law  under  s.  66(2)  for  its  decision,   not   much significance could be attached to the advisory character  of its jurisdiction.  It is not conceivable, it was said,  that any  authority  should  have  a  right  to  compel   another authority  to  take  its advice.  We see no  force  in  this contention.  Section 66(2) (1) [1960] 1 S.C.R. 249.     (2) [1960] 3 S.C.R. 417. (3) [1961] 1 S.C.R. 210. 811 confers  on  the court a power to direct  a  reference  only where the Tribunal was under a duty to refer under s. 66(1), and it is, therefore, subject to the same limitations as  s. 66(1).   That  has been held by this court in  New  Jehangir Vakil  Mills Ltd. v. Commissioner of Income-tax (1)  and  in Zoraster & Co. v. Commissioner of Income-tax (2).  Moreover, the  power of the court to issue direction to  the  Tribunal under  s.  66(2) is, as has often been pointed out,  in  the nature of a mandamus and it is well settled that no mandamus will  be  issued unless the applicant had  made  a  distinct demand  on the appropriate authorities for the very  reliefs which  he  seeks to enforce by mandamus and  that  had  been refused.  Thus, the power of the court to direct a reference under  s. 66(2) is subject to two limitations  the  question must  be one which the Tribunal was bound to refer under  s. 66(1)  and the applicant must have required the Tribunal  to refer it.  R(T) is the form prescribed under Rule 22A for an application  under  s.  66(1),  and  that  shows  that   the applicant  must set out the questions which he  desires  the Tribunal  to  refer and that further, those  questions  must arise  out of the order of the Tribunal.  It is,  therefore, clear  that  under  s. 66(2), the court  cannot  direct  the Tribunal  to refer a question unless it is one which  arises out  of the order of the Tribunal and was specified  by  the applicant  in his application under s. 66(1).  Now,,  if  we are  to hold that the court can allow a new question  to  be raised  on  the  reference, that would in  effect  give  the applicant a right which is denied to him under s. 66(1)  and (2),  and  enlarge the jurisdiction of the court  so  as  to assimilate it to that of an ordinary civil court of appeal. It is again to be noted that, whereas s. 6P(1), as it  stood prior   to   the  amendment  of  1939,  conferred   on   the Commissioner a power to refer a question of law to the court suo  motu, that power has been taken away under the  present section  and  it  has accordingly been held  that  under  s. 66(1),  as it now stands, there is no power in the  Tribunal to refer a question of law suo motu for the decision of  the court.  If, as contended (1) [1960] 1 S.C.R. 249. (2) [1961] 1 S.C.R. 210. 812 for  by  the respondents, the court is to be  held  to  have

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power  to  entertain in a reference, any  question  of  law, which  arises  on  the  facts found  by  the  Tribunal,  its jurisdiction  under s. 66(5) must be held to be  wider  than under  s. 66(1) and (2).  The correct view to take,  in  our opinion,  is  that the right of the litigant to  ask  for  a reference,  the power of the Tribunal to make one,  and  the jurisdiction of the court to decide it are all  co-extensive and, therefore, a question of law which the applicant cannot require the Tribunal to refer and one which the Tribunal  is not  competent to refer to the court, cannot be  entertained by  the  court  under  s.  66(5).   In  view  of  the  above considerations,  we are unable to construe the  words,  "any question  of law arising out of such order," as meaning  any question of law arising out of the findings in the order  of the Tribunal. One  of  the  reasons given by Chagla, C.  J.,  in  Madanlal Dharnidharka v. Commissioner of Income-tax(1) for  differing from the decision in A. Abboy Chetty and Go. v. Commissioner of  Income-tax, Madras (2) that it is only a question  which was  raised before the Tribunal that could be said to  arise out  of  its order was that that view must result  in  great injustice  in  a case in which the applicant  had  raised  a question before the Tribunal but it had failed to deal  with it  owing to mistake or inadvertence.  In such a,  case,  it was  said, the applicant would be deprived, for no fault  of his, of a valuable right which the legislature had  intended to  give him.  But we see no difficulty in holding  that  in those cases the Tribunal must be deemed to have decided  the question against the appellant, as Falshaw, J. was  disposed to do in Mash Trading Co. v. Commissioner of Income-tax (3). This  is only an application of the principle well-known  to law that a relief asked for and not granted should be deemed to have been refused.  It is on this footing that Kania,  J. held  in  New Piecegoods Bazar Co. Ltd. v.  Commissioner  of Income-tax (4) that, in the circumstances stated above,  the court could call upon (1)   [1948] 16 I.T.R. 227, 233, 234. (3)  [1956] 30 I.T.R. 388. (2)  [1947] 15 I.T.R. 442. (4)  [1947] 15 I.T.R. 319. 813 the  Tribunal to state a supplemental case after giving  its own decision on the contention.  That was also the procedure adopted  in  Mohanlal  Hiralal v.  Commissioner  of  Income- tax(1).   Such  cases  must be  exceptional  and  cannot  be founded  on for putting a construction different  from  what the language of s. 66(1) would otherwise warrant. There  was  also some argument as to the position  under  s. 66(1)  when the Tribunal decides an appeal on a question  of law  not  raised  before it.  That would  undoubtedly  be  a question  arising  out  of the order, and not  the  less  so because  it  Was not argued before it, and  this  conclusion does not militate against the construction which we have put on the language of s. 66(1). The result of the above discussion may thus be summed up: (1)  When  a question is raised before the Tribunal  and  is dealt  with  by  it, it is clearly one arising  out  of  its order. (2) When a question of law is raised before the Tribunal but the  Tribunal  fails to deal with it, it must be  deemed  to have been dealt with by it, and is therefore one arising out of its order. (3)  When a question is not raised before the  Tribunal  but the  Tribunal  deals with it, that will also be  a  question arising out of its order.

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(4)  When  a question of law is neither  raised  before  the Tribunal  nor considered by it., it will not be, a  question arising  out of its order notwithstanding that it may  arise on the findings given by it. Stating  the position compendiously, it is only  a  question that has been raised before or decided by the Tribunal  that could be held to arise out of its order. In this view, we have next to consider whether the  question which  was raised before the High Court was one which  arose out of the order of the Tribunal, as interpreted above.  Now the only question on which the parties were at issue  before the  income-tax  authorities  was whether  the  sum  of  Rs. 9,26,532 was assessable to tax as income received during the year of (1) [1952] 22 I.T.R. 448. 814 account  1945-46.   That having been decided  against    the respondents,  the  Tribunal referred  on  their  application under  s.  66(1),  the  question, whether  the  sum  of  Rs. 9,26,532  was  properly included in the  assessee  company’s total  income for the assessment year 194647, and  that  was the very question which was argued   and decided by the High Court.   Thus  it cannot be said that  the  respondents  had raised any new question before the court.  But the appellant contends  that while before the income-tax  authorities  the respondents disputed their liability on the ground that  the amount in question had been received in the year previous to the year of account, the contention urged by them before the court was that even on the footing that the income had  been received  in  the  year  of  account,  the  proviso  to   s. 10(2)(vii)  had  no  application,  and that  it  was  a  new question  which they were not entitled to raise.  We do  not agree  with  this  contention.  Section 66(1)  speaks  of  a question  of  law  that  arises out  of  the  order  of  the Tribunal.   Now  a question of law might be  a  simple  one, having its impact at one point, or it may be a complex  one, trenching over an area with approaches leading to  different points therein.  Such a question might involve more than one aspect, requiring to be tackled from different  standpoints. All that s. 66(1) requires is that the question of law which is referred to the court for decision and which the court is to decide must be the question which was in issue before the Tribunal.  Where the question itself was under issue,  there is  no  further limitation imposed by the section  that  the reference should be limited to those aspects of the question which  had been argued before the Tribunal.  It will  be  an over-refinement of the position to hold that each aspect  of a question is itself a distinct question for the purpose  of s. 66(1) of the Act.  That was the view taken by this  Court in The Commissioner of Income-tax, Bombay v. Messrs.   Ogale Glass  Works Ltd. (1) and in Zoraster & Co. v.  Commissioner of Income-tax (2), and we agree with it.  As the question on which the parties were at issue, which was referred (1) [1955] 1 S.C.R. 185. (2) [1961] 1 S.C.R. 210. 815 to the court under s. 66(1), and decided by it under s.66(5) is whether the sum of Rs. 9,26,532 is liable to be  included in  the  taxable income of the respondents,  the  ground  on which  the respondents contested their liability before  the High  Court  was  one  which was within  the  scope  of  the question, and the High Court rightly entertained it. It is argued for the appellant that this view would have the effect of doing away with limitations which the  legislature has advisedly imposed on the right of a litigant to  require

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references  under s. 66(1), as the question might be  framed in  such  general manner as to admit of  new  questions  not argued being raised.  It is no doubt true that sometimes the questions  are framed in such general terms that,  construed literally, they might take in questions which were never  in issue.  In such cases, the true scope of the reference  will have  to be ascertained and limited by what appears  on  the statement of the case.  In this connection, it is  necessary to emphasize that, in framing questions, the Tribunal should be  precise and indicate the grounds on which the  questions of  law  are  raised.   Where,  however,  the  question   is sufficiently  specific, we are unable to see any ground  for holding that only those contentions can be argued in support of  it  which had been raised before the Tribunal.   In  our opinion,  it  is competent to the court in such  a  case  to allow a new contention to be advanced, provided it is within the framework of the question as referred. In  the  present case, the question  actually  referred  was whether  the  assessment  in respect  of  Rs.  9,26,532  was proper.   Though  the  point argued  before  the  Income-tax authorities was that the income was received not in the year of account but in the previous year, the question as  framed is  sufficient  to  cover the question  which  was  actually argued  before the court namely that in fact the  assessment is  not proper by reason of the proviso being  inapplicable. The  new  contention  does not  involve  re-framing  of  the issues.  On the very terms of the question as referred which are  specific, the question is permissible and was  open  to the respondents.  Indeed the very order of reference 816 shows  that the Tribunal was conscious that this point  also might  bear on the controversy so that it cannot be said  to be  foreign to the scope of the question as framed.  In  the result,  we  are  of  opinion  that  the  question  of   the applicability of the proviso is really implicit, as was held by  Chagla, C.J., in the question which was  referred,  and, therefore, it was one which the court had to answer. On  the  merits, the appellant had very little to  say.   He sought to contend that the proviso though it came into force on May 5, 1946, was really intended to operate from April 1, 1946,  and  he referred us to certain  other  enactments  as supporting  that  inference.  But  we  are  construing   the proviso.   In terms, it is not retrospective, and we  cannot import  into  its construction matters which  are  ad  extra legis,  and  thereby  alter its true effect.   Then  it  was argued  that the amount of Rs. 9,26,532 having been  allowed as  deduction in the previous years, may now be  treated  as profits received during the year of assessment, and  thereby subjected to tax.  But this is a point entirely new and  not covered  by the question, and on the view taken by us as  to the  scope  of  a  reference under  s.  66(1),  it  must  be disallowed.   In the result, this appeal is  dismissed  with costs. SHAH, J.-The Income-tax Appellate Tribunal, Bombay Bench "A" referred  the  following  question  to  the  High  Court  of Judicature at Bombay under s. 66(1) of the Indian Income-tax Act:               "Whether the sum of Rs. 9,26,532 was  properly               included  in  the  assessee  company’s   total               income computed for the assessment year  1946-               47." The  question comprehends two component parts,  (1)  whether the  amount  of Rs. 9,26,532 was properly  included  in  the assessee’s  income, and (2) whether the amount was  properly included  in  the taxable income of the  assessees  for  the

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assessment year 1946-47.  The amount sought to be taxed was- part  of  compensation received by the  assessees  from  the Government  of  India for loss in 1944 by  enemy  action  of their ship "El Madina." The assessees maintained before the 817 taxing  authorities and the Tribunal that  the  compensation accrued to them on April 16, 1944.  This plea was  rejected, but  rejection of that plea was not sufficient to  make  the amount  taxable.  it  had still to be  decided  whether  the amount  which  was  received  in  the  months  of  July  and December, 1944, war, taxable as income.  It is common ground that before the amendment by Act 8 of 1946 of s. 10,  sub-s. (2),  cl.  (7),  by the inclusion  of  the  fourth  proviso, compensation  received  for loss of a capital asset  like  a ship  was not taxable as income under the Indian  Income-tax Act.   The tribunal observed that the  compensation  accrued when it was ascertained and was received by the assessees in the  year of account and the amount, was  therefore  rightly brought   to  tax  in  the  year  of   assessment   1946-47. Manifestly,  the  tribunal its attention  to  the  statutory provision on the application of which the exigibility of the tax depended.  But proviso IV to s. 10, sub-s. (2), cl.  (7) came  into  force on May 4, 1946.  It was not  in  force  on April 1, 1946, the day on which the liability to pay tax for the  year of assessment 1946-47 crystallized.  The  tribunal erroneously  assumed that the amending Act was in  force  at the  date of commencement of the year of assessment and  the assessees  did not attempt to remove  that  misapprehension. But  the question whether the amount sought to be taxed  was properly  included  did  arise  out  of  the  order  of  the tribunal,  the  tribunal  having held  that  the  amount  of compensation was taxable by virtue of s. 10, sub-s. (2), cl. (7),  proviso IV.  The question whether the  statutory  pro- vision  relied upon to tax the assessees was  applicable  to the  amount  sought to be assessed as income was as  much  a question  arising  out of the order of the tribunal  as  the question  whether the interpretation placed by the  tribunal upon that proviso was correct, may be. The assessees had maintained that they were not liable to be taxed  under s. 10, sub-s. (2), el. (7), proviso IV  because the  amount sought to be taxed was received before the  year of account relevant for the      103 818 assessment year 1946-47.  The tribunal held, negativing  the contention, that it was taxable under s. 10, sub-s. (2), el. (7),  proviso IV.  A question of law whether the amount  was properly  included  in the taxable income for  the  year  of assessment  clearly arose and that question was referred  by the tribunal to the High Court.  The High Court under s. 66, cl.  (5) of the Income-tax Act has to record its opinion  on the  questions arising out of the order of the tribunal  and not  on  the  arguments  pro and  con  advanced  before  the tribunal.   In my view, the High Court had  jurisdiction  on the  question arising out of the order of the  tribunal  and referred,  in  deciding that the Act which made  the  amount taxable was not in operation at the material date. This  would  be  sufficient to dispose  of  the  appeal  but counsel  for the revenue submits that as it was never  urged before the tribunal by the assessees that the amending Act 8 of  1946  which  made  the  compensation  received  by   the assessees,  taxable  as income, was brought  into  operation after  the commencement of the year of  assessment  1946-47, and the tribunal never directed its attention to that  plea, it  had no jurisdiction to refer that question to  the  High

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Court  arid the High Court was not competent to answer  that question  even  if on the facts found the  question  clearly arose out of the order of the tribunal.  Counsel urges  that the  question  arising out of the order of the  tribunal  is only  that  specific  question which has  been  raise(]  and argued  before  the tribunal and on which the  tribunal  has given its decision. We have heard elaborate arguments on the true meaning of the expression  "any question of law arising out of such  order" and  the  nature of the jurisdiction exercised by  the  High Court  under  s. 66 of the Income-tax Act.   There  is  wide divergence  of opinion oil the true import of  this  clause. Before I refer to the authorities, it would be useful to set out  the scheme of the Income-tax Act relating to  reference of  questions to the High Court under s. 66, and the  nature of the jurisdiction which the High Court exercises. 819 "(1)  Within sixty days of the date upon which he is  served with  notice  of  an order under sub-s. (4)  of  s.  33  the assessee  or  the Commissioner may, by  application  in  the prescribed form  require the Appellate Tribunal to refer  to the High Court any question of law arising out of such order and the Appellate Tribunal shall  draw up a statement of the case and refer it to the High Court: Provided......... (2)  If  on any application being made under  sub-s.  (1)the Appellate  Tribunal  refuses to state a case on  the  ground that  no  question  of  law  arises,  the  assessee  or  the Commissioner  as  the  case may be, may apply  to  the  High Court, and the High Court may, if it is not satisfied of the correctness  of  the  decision of  the  Appellate  Tribunal, require the Appellate Tribunal to state a case and to  refer it,,  and on receipt of any such requisition  the  Appellate Tribunal shall state the ease and refer it accordingly. (3).............. (4)  If the High Court is not satisfied that the  statements in  a  case referred under this section  are  sufficient  to enable  it  to determine the question  raised  thereby,  the court  may refer the case back to the Appellate Tribunal  to make  such additions thereto or alterations therein  as  the court may direct in that behalf. (5)  The High Court upon the hearing of any such case  shall decide the questions of law raised thereby and shall deliver its  judgment thereon containing the ground, on which  such. decision   is  founded  and  shall  send  a  copy  of   such judgment...to  the Appellate Tribunal which shall pass  such orders  as are necessary to dispose of the case  conformably to such Judgment. (6) (7) (7A) (8)..................... Under the scheme of the Indian Income-tax Act, the appellate tribunal  is  the  sole  judge of  facts.   The  High  Court indisputably exercises a special advisory 820 jurisdiction  to record its opinion on questions  submitted, by  the  tribunal; it does not act as a court of  appeal  or revision on questions of law or fact.  After the disposal of the appeal by the tribunal under s. 33(4) of the  Income-tax Act, the revenue or the tax-payer may call upon the tribunal to state a case on  the questions of law arising out of  the order.   If the tribunal refuses to state a case, the  party aggrieved may move the High Court to call upon the  tribunal to  state a case and the High Court may so direct if  it  is

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not  satisfied as to the correctness of the decision of  the tribunal refusing to state a case.  The question must be one of law and not, of fact and not merely academic; it must  be a  concrete  problem  bearing directly  on  the  rights  and obligations  of the revenue or of the assessees.  The  power of the High Court is to require the tribunal to state a case only  if it is satisfied that the view of the tribunal  (not on the merits of the order under s. 33, el. (4)) but on  the application under s. 66(1) is erroneous.  If the tribunal is not  called upon to refer a question, the High Court  cannot arrogate  to itself the power to call upon the  tribunal  to refer questions which arise out of the findings recorded  by the  tribunal but which the tribunal was not called upon  to refer.  But there is in my judgment no warrant for the  view that the question which the tribunal may refer or which  the High Court on the refusal of the tribunal may call upon  the tribunal  to refer, must be a question which was raised  and argued  before the tribunal at the hearing under  s.  33(4). The statute does not specifically impose such a  restriction nor  is  it  implied.   To import  in  the  meaning  of  the expression  "any question of law arising out of such  order" the  concept that the question must have been argued  before and dealt with by the tribunal in its judgment deciding  the appeal,  is to impose a fetter upon the jurisdiction of  the High  Court  not warranted by the plain  intendment  of  the statute.   The source of the question must be the  order  of the tribunal; but of the question it is not predicated  that the  tribunal  must  have been asked to  decide  it  at  the hearing  of  the  appeal.   It  may  very  well  happen  and frequently 821 cases  arise  in which the question of law  arises  for  the first  time out of the order of the tribunal.  The  tribunal may  wrongly  apply  the law, may call in  aid  a  statutory provision which has no application, may even misconceive the question  to  be decided, or ignore  a  statutory  provision which expressly applies to the facts found.  These are  only illustrative   cases:   analogous  cases   may   easily   be multiplied.  It would indeed be perpetrating gross injustice in  such cases to restrict the assessee or the  Commissioner to  the questions which have been raised and  argued  before the  tribunal and to refuse to take cognisance of  questions which arise out of the order of the tribunal, but which were not  argued, because they could not (in the absence  of  any indication  as to what the tribunal was going to decide)  be argued. A  concrete question of law having a direct bearing  on  the rights  and obligations of the parties which may be  founded on the decision of the tribunal is one which in my  judgment arises  out of the order of the tribunal even if it  is  not raised  or argued before the tribunal at the hearing of  the appeal.   It  is  the  duty of the tribunal  to  draw  up  a statement of the case and to frame questions; that duty  can only be performed adequately if specific questions  relating directly to the dispute between the parties are raised.   If the  import of the question is unduly large, the High  Court has,  and is indeed bound in dealing with it to restrict  it to its true content in the light of the findings recorded by the  tribunal.  But in dealing with the question,  the  High Court may not only entertain those aspects of the case which were  argued  before the tribunal, but all such  aspects  as have   fairly  a  direct  bearing  on  the   dispute.    The jurisdiction  of the High Court is by statute not  expressly circumscribed to recording its opinion on arguments advanced before  the  tribunal, and the nature  of  the  jurisdiction

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exercised  by  the High Court does not demand  that  such  a limitation should be implied.  The court has jurisdiction to decide  questions  which  arise  out of  the  order  of  the tribunal,  not  merely those which were  raised  and  argued before the tribunal. 822 On  the meaning of the expression "question of  law  arising out  of such order," judicial opinion in the High Courts  is divided, and this court has not expressed any  authoritative opinion  thereon.   No  useful purpose  will  be  served  by entering  upon  an analysis of the decisions  of’  the  High Courts-and  there are many-on this question.  The  decisions fall into two broad divisions.  On the one hand it is  ruled that "a question of law can be said to arise out of an order of the Appellate Tribunal within the meaning of s. 66(1)  of the Indian Income-tax Act, only if such order discloses that the question was raised before the tribunal.  A question not raised  before the tribunal cannot be said to arise  out  of its  order even if on the facts of the case  appearing  from the; order the question fairly arises." The leading cases in support  of  this  view  are  A.  Abboy  Chetty  &  Co.   v. Commissioner of Income-tax, Madras (1) and The  Commissioner of  Excess  Profits  Tax, West  Bengal  v.  Jeewanlal  Ltd., Calcutta  (2).   This  view  has  been  adopted  with   some variations  in  the  norms of expression  in  the  following cases: Maharaj Kumar Kamal Singh v. Commissioner of  Income- tax (3), G. M. Chenna Basappa v. Commissioner of Income-tax, Hyderabad   (4)  and  Punjab  Distilling   Industries   Ltd. Commissioner of Income-tax, Punjab (5). On the other hand is the view expressed by Chagla, C. J.  in Madanlal  Dharnidharka  v. Commissioner  of  Income-tax  (6) where  the learned Chief Justice recorded his conclusion  as follows: "I  should have stated that a question of law arose  out  of the order of the Tribunal if such a question was apparent on the order itself or it could be raised on the facts found by the  Tribunal and which were stated in the order.  I see  no reason  to  confine the jurisdiction of this Court  to  such questions of law as have been argued before the Tribunal  or are  dealt with by the Tribunal. he section does not say  so and there is no reason why we should construe the expression arising out of such order’ in a manner unwarranted by the (1)  [1947] 15 I.T.R. 442. (3)  [1954] 26 I.T.R. 79. (5)  [1952] 22 I.T.R, 232. (2)  [1951] 20 I.T.R. 39. (4)  [1958] 34 I.T.R. 576. (6)  [1948] 16 I.T.R. 227. 823 ordinary grammatical construction of that expression." For   the  reasons  already  set  out,  in  my   view,   the interpretation  placed  by Chagla, C. J. on  the  expression "arising out of such order" is the correct one.                                      Appeal dismissed.