1960 PLP 1045 (PTD)

This is an application under section 66, subsection (2) of the Income‑tax Act 1922, praying that the Income‑tax Tribunal be directed to state the case and to refer it to the High Court on the following questions of law, arising out of the appellate order of the Tribunal, dated 5th January 1949 :‑ "(i) Whether in the circumstances of the case the construc tion put on section 4 (a) (v) (b) was justifiable and rightly made. (ii) Whether there is any material on the record to warrant the finding that the ownership of the property under assessment and of the business as carried on in Pakistan rests on the same association of persons. (iii) Whether the Indian State income has been rightly and justifiably assessed under section 12 (2) (c) of the Income tax Act. (iv) Whether the material evidence put before the department has been rightly assessed and scrutinized according to the rules of law. (v) Whether on the circumstances of the case and in view of the material on the record the assessment made by the depart ment is in accordance with law fair and proper." The facts of the case, briefly, are that Badshah Muhammad Sardar Muhammad, Muhammad Shoeb and Ghulam Shoeb, the four brothers, carry on an extensive business in Dir State, where they also own considerable landed property. They export ghee, hides, skins, timber, etc., to Pakistan, where their goods are sold by Commission agents on their behalf. They also hold permits to import salt in Dir and Chitral States. Apart from the above business they own immovable property in the shape of a house in Sabzi Mandi, Peshawar City. The Income‑tax Officer, Peshawar, has assessed the total income of these four brothers, which according to him comprises the income from the house property in British India, the business carried on in British India, and the business carried on without it. The Income‑tax Officer held that four brothers, whom he called as association of persons were resident in British India under sections 4‑A (b) and 4‑B (c) of the Income‑tax Act, and, therefore, they were liable to be assessed to Income‑tax in British India. The assessees appealed against this order, and the appeal was dismissed by the Appellate Assistant Commissioner of Income‑tax, Rawalpindi. The assessees filed a further appeal before the Income‑tax Appellate Tribunal Pakistan, Lahore which was also dismissed on 5th January 1949. The assessees then made an application under section 66 (1) of the Income‑tax Act to the A Income‑tax Appellate Tribunal asking them to refer to the High Court the question of law, which according to them had arisen out of the appellate orders of the Tribunal passed on 5th January 1949. This application was dismissed on 13th July 1949. The assessees have now come up to this Court under section 66 (2) of the Income‑tax Act. A preliminary objection has been raised by the learned counsel appearing for the Income‑tax Commissioner N.‑W. F. P. and Punjab that the assessee's application is barred by time. Under section 66 (2), if the Appellate Tribunal on an appli cation made in that behalf by the assessee or the Commissioner as the case may be refuses to state the case to the High Court on the ground that no question of law arises, the assessee or the Commissioner may within six months from the date on which he is served with notice of refusal apply to the High Court that the Appellate Tribunal may be required to state the case and refer the case to it. The period of six months under the above section commences from the date when the notice of refusal is served on the assessees. As to how the notices under the Income‑tax Act are to be served, reference is made to section 63 of the Act, which provides that a notice under this Act may be served on the person therein named either by post or, as if it were a summons issued by a Court, under the Code of Civil Procedure. Under subsection (2) of the same section any notice which is meant for an association of persons has to be addressed to the principal officer of such association of persons. In the case before me the Appellate Tribunal dismissed the application, as has already been observed, on 13th July 1949. There is nothing on the record to show as to how was this order of refusal communicated to the assessees, and to whom was it addressed. There are, however, three affidavits of Sardar Muhammad, one of the assessees, one Faiz Muhammad Khan and of one Muhammad Akram Khan, a Moharrir in the Octroi Post in Dir State, placed on the record. These three affidavits disclose that a certain order from the Income‑tax Appellate Tribunal was delivered to Muhammad Akram Khan, who forgot to hand it over to the person concerned. Sardar Muhammad, one of the assessees, came to know that the Appellate Tribunal had passed some order on his application. He deputed Faiz Muhammad Khan to make inquiries as to what this order was; and to get a copy of it. They applied for the copy on 21st January 1950, and received it on 24th January 1950. It was then that the assessees came to know that their application under section 66 (1) of the Income‑tax Act had been refused. The assessees claim that their application in this Court, which was instituted on 18th March 1950, is within time from the date of their knowledge. The learned counsel appearing for the Income‑tax Commis sioner, N.W.F.P. and Punjab, has conceded that the notice of refusal was sent to the assessees by post, but he has declined to produce before me any postal receipt, or the acknowledgment receipt, if there was any. If these two receipts had been produced this Court would have been in a position to know whether the notice of refusal was addressed to the principal officer of the association of persons as is Laid down in section 63 (2) of the Income‑tax Act, and was therefore delivered to the right person and the time on account of that reason started running immediately as Laid down in section 66 of the Act. The Income‑tax Commissioner has also not cared to reply to the three affidavits, by a counter‑affidavit. In the absence of the two receipts and the counter‑affidavit of the Income‑tax Commissioner, I am constrained to hold that the assessees came to know of the refusal of their application by the Income‑tax Appellate Tribunal on 24th January 1950, when they received the copy of the final order, and from that date their application in this Court is within time. The preliminary objection is consequently overruled. The only point which requires determination at this stage is whether any question of law arises out of the order of the Appellate Tribunal, because it is only on a question of law that a reference can validly be made to the High Court. Although five questions of law have been referred to in the application by the assessees, the learned counsel appearing for them has confined himself to only two questions of law raised in parts 1 and 2 of paragraph 5 of the application. The Income‑tax Officer, the Appellate Assistant Commissioner of Income‑tax and the Appellate Income‑tax Tribunal have all arrived at the conclusion that the association of persons which consists of four brothers, is resident in British India, which now means Pakistan under sections 4‑A (b) and 4‑B (c) of the Income tax Act. Section 4‑A (b) runs as follows: "A Hindu undivided family, firm or other association of persons is resident in British India unless the control and management of its affairs is situated wholly without British India." Section 4 B (c) is to the following effect: "A company, firm or other association of persons is ordinarily resident in British India if it is resident in British India." The Appellate Assistant Commissioner, while confirming the` decisions of the Income‑tax Officer, that the assessees were residents in Pakistan, held "They seem to have been coming tot British India to supervise the construction of their properties, which took place during the year of account, and also to supervise the sale of their goods. Sometimes they came with the goods themselves." This paragraph has been quoted with approval by the Income‑tax Appellate Tribunal, and it can safely be taken that these are the facts found by them. On these facts the question is whether it can be held that the association of persons in question in this case is resident in Pakistan. The learned counsel for the Income‑tax Commissioner has argued that it is not a question of law. It is a settled principle of law that the accuracy or other wise of an inference from the given facts is always a question of law. In my view it is a question of law, whether on account of the facts that the assessees have been coming into Pakistan to supervise the construction of their properties and also to supervise the sale of their goods and sometimes bringing the goods with themselves, the assessees can be said to be the residents of Pakistan within the meaning of sections 4‑A (b) and 4‑B (c), I consequently require the Income‑tax Appellate Tribunal to state the case and to refer it to High Court on the following question of law :‑ "Whether on the facts found and the circumstances of the case the finding of the Income‑tax Appellate Tribunal that the petitioner, the association of persons, is resident in Pakistan is tenable in law?" It was next contended on behalf of the petitioner that it has been found by the Income‑tax Officer and confirmed by the two Appellate Tribunals that the property in Peshawar was held by four brothers while the business was being carried on by the four brothers and their sons, and they, therefore, together could not be called the same association of persons. The Income‑tax Appellate Tribunal, while rejecting the contention, wrote in their order "This is hair‑splitting argument and the loose expression in the Appellate Assistant Commissioner's order is contrary to actual facts. Mr. Sardar Muhammad, who was present at the hearing admitted before us that his sons have no interest in the business. In our opinion on the facts found by the Income‑tax authorities, there can be no escape from the conclusion that the status of association of persons had been correctly assigned to the appellant and the business profits rightly assessed in its hands." From the above paragraph one can see that the finding is that the property belongs to the four brothers and so does the business. It has not been found that the business is the property of the four brothers and their sons. It is a matter of common knowledge that the words "and sons" and sometimes "and brothers" are merely ornamental additions to association of persons' name; and have little or no significance. In any case, on the facts found viz.,' that the sons have no interest in the business, I do not think any question of law arises in this case on account of that matter. I consequently reject the second contention of the learned counsel for the petitioner. The petition is allowed to the extent mentioned above. As the petitioner has only partially succeeded, I order the parties to bear their own costs. Reference answered accordingly.