P L D 1959 (W (PLP)

The Tribunal, therefore, dismissed the appeal and maintained the assessment quo‑ad hoc. Thereupon the assessee made an application on 1st June 1954 under section 66 (1) Income‑tax Act, and suggested 3 questions for reference to the High Court. One of the questions was as under: (2) Whether in view of the fact that the 5th proviso to section 10 (2) (vii) of the Indian Income‑tax Act did not apply to the assessment for the assessment year 1946 47 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." The Tribunal, however, formulated the question itself. The question referred to us is the one set out in the earlier part of the judgment. Mr. Ibrahim, the learned counsel for the assessee, has contend ed that the proviso on the basis of which the assessment was made, came into force on 4‑5‑1946, that it was not in operation on 1‑4‑1946, when the assessment year of the assessee commenced and, therefore, the amount in dispute cannot be said to have been received in the account year 1944‑1945, within the meaning of the fourth proviso to section 10 (2) (vii) (as it stands after its amend ment in 1946) and is not assessable to tax in the assessment year 1946‑

47. Mr. Abdul Aziz, the learned counsel for the Department, has raised a preliminary objection that this point is not covered by the question referred to this Court for its opinion, that this aspect of the case was not raised and argued before the Income‑tax Tribu nal, that the question referred to this Court was framed with the consent of the assessee and a new point of law cannot be allowed to be taken in the High Court if it does not arise from the order of the Income‑tax Tribunal. The learned counsel referred us to the following observation of the Tribunal in the statement of the case: "It may here be pointed out that the question whether the amendment of section 10 (2) (vii) as made in 1946 could apply to an assessment for the year 1946‑47 was not canvassed before the Tribunal nor was it pressed for the purposes of the present application fur reference," to show that the point raised before us was not argued before the Tribunal and has even been abandoned. The learned counsel further argued that the function of the High Court in cases referred to it under section 66 is advisory only and is confined to consider ing and answering the actual question referred to it and relied for this purpose on the decision of their Lordships of the Privy Council in Raja Bahadur Sir Rajendra Narayan Bhang Deo v. Commissioner of Income‑tax, Bihar and Orissa (A I R 1940 P C 158). The learned counsel in support of his other contention that a new plea on point of law cannot be allowed to be raised for the first time in the High Court, relied on Commissioner of Income‑tax v. Sind Light Rly. Co. Ltd. (A I R 1932 Sind 189) ; National Mutual Life Association of Australasia, Ltd. v. Commissioner of Income‑tax, Bombay (1936 P C 55) ; Gurumukh Singh v. Commissioner of Income‑tax, Lahore (1944 Lah. 353) ; Commissioner of Income- tax and Excess Profits Tax, Madras v. The Modern Theatres Ltd., Salem ((1951) 201 T R 588 (Mad.)); Commissioner of Excess Profits Tax, West Bengal v. Jeewanlal Ltd., Calcutta ((1951) 201 T R 39 (Cal.)); Mash Trading Co. v. Commissioner of Income‑tax Delhi ((1956) 30 I T R 388 (F B)) and Commissioner of Income‑tax, West Bengal v. State Bank of India ((1957) 31 I T R 545). There is conflict of opinion on the question whether in a case where the Income‑tax Tribunal has refused to refer a point of law, the High Court is entitled to ask the Tribunal to formulate a ques tion of law not raised before it for opinion under section 66 (2) of the income‑tax Act. The Bombay High Court view expressed in Vadilal Lallubhai Mehta v. Commissioner of Income‑tax, Bombay (A I R 1935 Bow. 170), is that the High Court can do so, but the preponder ance of judicial authority is that the High Court under subsec tion (2) of section 66 had no jurisdiction to order the Commissioner to refer new questions of law not raised by the assessee before the Income‑tax Tribunal. These cases have been discussed in details in a Full Bench decision of the Punjab High Court Mash Trading Co. v. Commissioner of Income‑tax, Delhi. To this effect is also the view expressed in a Full Bench decision reported in Gurumukh Singh v. Commissioner of Income‑tax, Lahore. We are in respectful agreement with the view expressed in the Lahore case. But the position in this case is a little different. In this case the argument advanced before us was touched before the income tax Officer. The following portion of the Income‑tax Officer's order throws light on it: "Another point raised by the company is that since the ship was lost during the fiscal year 1945‑46, the law to be applied should be the law as it was applicable to that fiscal year. Here to I cannot agree with the Company. It is the taw in force at the time of assessment (i.e. assessment year) which governs an assessment and not the law in force during the account year see C. I. T. Madras v. Maharaja of Pitham Puram (1942 I T R 1) Also Jattu shah Nathushah v. C. I. T., Punjab ((1932) 14 Lah. 134=A I R 1932 Lah. 575)." It appears that this contention was neither agitated before the Appellate Assistant Commissioner nor the Income‑tax Tribunal but was again raised in the application made under section 66 (1). Income‑tax Act, and on this point a specific question was asked to be raised for consideration of the High Court. Mr. Aziz, the learned counsel for the Department, argued that the Income‑tax Tribunal refused to refer it and also contended that the assessee abandoned it, and for this reason urged that this Court is not entitled to allow it to be raised and has no jurisdiction to take it into consideration for purposes of answering the question referred to it for opinion. Mr. Ibrahim, the learned counsel for the assessee, on the other hand urged that the question was raised before the Income‑tax Officer, the Income‑tax Tribunal was also asked to refer it and as the question formulated covered it, no question of abandoning it arises. He further urged that the point argued is covered by the question, that the assessee was throughout agitating that the amount in dispute does not fall within the meaning of the amended fourth proviso, and this is exactly what is now sought on the ground that the amended proviso does not apply to the amount in dispute. There are large number of cases both in Pakistan and in the Indian Dominion where the High Court has refused to permit the parties in a reference to advance arguments on questions of law not dealt by the Commissioner or the Tribunal on the ground that it cannot be said to arise out of its order. This view was taken in Commissioner of Income‑tax v. Sind Light Railway Co. Ltd.; Muhammad Mehdi and another v. Governor‑General‑in‑Coun cil (P L D 1950 Sind 103); Commissioner of Income‑tax and Excess Profits Tax Madras v. The Modern Theatreo Ltd., Salem and Commissioner of Excess Profits Tax West Bengal v. Jeewanlal Ltd., Calcutta. The extreme view is expressed in Commissioner of Income‑tax, West Bengal v. State Bank of India. In that case the assessee in a suit filed by his wife agreed to a consent decree for judicial separation and to pay Rs. 800 p.m. to his wife as alimony. Three years later he executed a deed of charge whereby he made the payment of this alimony Rs. 9,600 per year a charge on two house properties owned by him and the question was whether this charge was an admissible deduction under section 9 (1) (iv) of Income‑tax Act in computing the assessee's income from property. The Income -tax Officer disallowed it but on appeal it was allowed and the Tribunal upheld this view. The Department got this question referred to the High Court. The counsel for the Department con tended that the charge was a capital charge but the learned Judges of the Calcutta High Court did not allow this question to be raised. Chakravarti, C. J. in that connection observed :‑ "We intimated to Mr. Mayer as soon as he formulated his points that he could not be allowed to take the first of them, since it did not appear to have been taken on behalf of the Department at any stage of the proceedings and certainly not before the Tribunal. It could not, therefore, be said to arise out of the Tribunal's order. The practice followed in this Court in references under section 66 (l) of the Act has always been to limit the party, at whose instance a reference has been made, to the points raised and canvassed before the Tribunal. Ques tions are often framed in a general form, such as whether the assessment for a particular year made in a certain manner was valid in view of the provisions of a certain section of the Act. A question framed in that form might be said to comprise all possible contentions to which the terms of the relevant section might give rise, but this Court has always refused to treat matters arising out of questions so framed as entirely at large. It has adopted and acted on that view for the reason that this Court is only an advisory body and the advice which it can be properly asked to give is only advice on matters which had been in con tention before the Tribunal and which had been decided in one way or another such advice being sought in order that the parties interested might know whether the decisions on those conten tions had been in accordance with law. In hearing a reference under section 66 (1), this Court does not sit in appeal from the assessment and it is not called upon to give its advice on matters which the Tribunal was not asked to decide and which the Tribunal neither decided nor included in the statement of case for the opinion of this Court. Mr. Mayer did not suggest that we should depart from the principle which we had always followed, but he contended that the question as to the charge in the present case being a "capital charge" had, in fact, been raised before the Tribunal although no reference to the contention had been made in the Tribunal's order. He pointed out that in the enclosure or appendix submitted to the Tribunal along with the application for a reference, the Commissioner of Income‑tax had specifically stated that this question had been raised before the Tribunal. That appears to be true, because the statement of "facts which are admitted and found by the Tribunal and which are necessary for drawing up a statement of the case" ends with the following sentence: "But the question whether it was a `capital charge' was not gone into, although this question was specifically raised by the Depart mental Representative and the Tribunal dismissed the appeal." I think, however, that in spite of that statement in the enclo sure to the Commissioner's application, we cannot treat the ques tion as included in the reference and open to the Commissioner, since even after the Commissioner had made that statement in his application for a reference, the Tribunal did not include any question as to the charge not being a "capital charge" in the statement of the case drawn up by it, As far as 1 am aware, according to the rules of the Tribunal, draft statements are allowed to be seen by the parties and suggestions are invited from them. In any event, the Commissioner must have come to know of the statement of the case, as drawn up and submitted to this Court and he took no steps either to have the statement of case amended or supplemented or co have a question regarding the charge being or not being a "capital charge" referred to this Court. Mr. Mayer asked by what procedure he could either get the state ment of case amplified or cause a reference of his point about the charge not being a "capital charge" to be referred. It appears to me that, for the first, he could come to this Court for a writ of mandamus and for the second, he could make an application under section 66 (2) if his client was so advised, because on the facts stated by him, the statement of case, as drawn up by the Tribunal, amounted to a refusal to state a question which the Com missioner thought ought to have been referred. No such step was taken. I am accordingly of opinion that on the statement of case, as drawn up and submitted by the Tribunal, which is the only state ment before us, it is not possible to allow Mr. Mayer to contend that one of the reasons for which the assessee's claim would not be admissible was that the charge concerned was a "capital charge." Mr. Abdul Aziz, the learned counsel for the Department has also canvassed this view before us. The learned counsel strongly urged that this view is in consonance with the view of their Lord ships of the Privy Council expressed in National Mutual Life Association of Australasia Ltd. v. Commissioner of Income‑tax, Bombay. He invites our attention to the following observations of their Lordships at page 59 of the report, which reads :‑ "While Beaumont, C. J. expressed himself as inclined to accept the contentions of the appellants as above stated, both the learn ed Judges decided the case adversely to the appellants on an argument submitted to them for the first time by the Advocate General, that income earned in Australia on moneys remitted by the Indian branches and invested in Australia was liable to tax under section 42 of the Act. In their Lordships' opinion, any claim as to liability to tax under section 42 is a matter out side the letter of reference and is irrelevant to the questions submitted. It is an altogether different matter that, in making a valuation of the Indian business, it is necessary to consider the reserves held against the liability on the Indian policies, which in fact are held and invested by the head office. Their Lordships are not concerned in the present case with any possible liability of the company to tax under section 42, and they express no opinion on the matter." We have carefully considered these observations. They are in a different context altogether. In that case for the first time it was argued in the High Court that the amount in dispute was liable to tax under section 42 of the Income‑tax Act. This plea was accepted by the High Court and their Lordships observed that it is a matter outside the letter of reference and is irrelevant to the question submitted. In that case the Income‑tax Officer resorted to the method of computation provided in rule 35 of the Income -tax Rules, and the only question referred to the High Court was whether he was justified in doing so. In such circumstances the argument that the income was taxable under some other provisions was obviously irrelevant. In our opinion their Lordships did not lay down that the High Court should limit itself to contention and argument advanced before the, Tribunal. It appears to us that it only lays down that only those questions should be answered which are referred to it, and the High Court should not travel outside those questions. It appears to us, and we say so with respect, that the observa tions in the abovementioned Calcutta case are self‑imposed restric tions and are neither warranted on the language of section 66, Income‑tax Act nor on any pronouncement of their Lordships of the Privy Council. There is no doubt that on a reference to the High' Court a party is not entitled to raise a new question of law not covered by the question. But that does not mean that if a ques tion of law has been referred to the High Court and it was can vassed before the Income‑tax Tribunal in a particular manner, the parties are debarred to canvass the same question of law on different set of arguments. A distinction has to be drawn between those cases where a new question of law for the first time is raise, in the High Court and those cases where the question of law is the same which is referred by the Tribunal, but an alternative argument is advanced though not advanced before the Income‑tax Tribunal, based on the same facts, relevant and helpful for the answer of the question referred to the High Court. In our opinion there is no warrant for the proposition that the question must be read as limited only to those arguments which were advanced before the Tribunal and to no other arguments. Section 66, Income‑tax Act imposes no such restrictions. The face that the High Court acts in an advisory capacity only means that it is not entitled to frame a new question of law but all the same under subsection (5) it is the duty of the High Court to decide the question of law referred to it. The important question for consideration in this case, therefore, is whether the argument and contention raised‑ before us by the counsel for the assessee is relevant to the answer of the question referred to the High Court. The language of this question is very wide. The assessee throughout has been contend ing that the amount of Rs. 9,26,53.2 is not taxable within the meaning of proviso four to section 10 (2) (iii). His argument before the Income‑tax Tribunal was that it was not received within the meaning of this subsection as it should have been deemed to have been received on the date when it is payable and not on the date it was actually paid. In addition to this argument now his counsel argues that this amount cannot be said to have been received within the meaning of this proviso as these provisions came into force much after the commencement of the assessment year. It is thus clear that the assessee hang trot raised any new question of law. The question is the same. He has only advanced a further argument in support of his contention. Somewhat similar question also arose before the Indian Supreme Court in two reported decisions, Commissioner of Income- tax Bombay v. Messrs Ogale Glass Works, Ltd. (A I R 1954 S C 429) and United Com mercial Bank Ltd. Calcutta v. Commissioner of Income‑tax, West Bengal (P L D 1.958 S C (Ind.) 181). In both the cases the contention before the Supreme Court of India was that although the language in which the question had been framed was wide enough to include a new branch of argument, the question should nevertheless be read as circumscribed by the facts on which the Tribunal's decision was made, and should not be regarded as at large. Their Lordships of the Supreme Court of India repelled this contention, and observed in Commissioner of Income‑tax v. Messrs Ogale Glass Works Ltd. (A I R 1954 S C 429). "This suggestion means that the question must be read as limited only to those facts on which alone reliance was placed in support of the argument actually advanced before the Tribunal and on which the Tribunal's decision was founded, leaving out all other facts appearing on the record and even referred to in the Tribunal's Order and the Statement of the case. There is no warrant for such suggestion. The language of the question clearly indicates that the question of law has to be determined `on the facts of the case.' To accede to the contention of the assessee, will involve the undue cutting down of the scope of the question by altering its language. Seeing that the High Court permitted this argument to be advanced before them we are not prepared to shut it out. Sri Kolah then contends that the requisite facts on which this branch of the arguments may be based, are not to be found in the order of the Tribunal and the statements of the case, and, therefore, this argument should not be entertained. There would have been considerable force in this contention if the facts necessary to support the new argument advanced by the Revenue were not on the record. But such is not the case here as will be presently shown." United Commercial Bank Ltd. Calcutta v. Commissioner of Income‑tax, West Bengal, the Supreme Court of India observed that where certain plea was not placed before the income‑tax Appellate Tribunal for being referred to the High Court but the question framed by the Tribunal for reference to the High Court was a general one and wide enough to cover the point raised by the assessee in appeal before the Supreme Court, it was open to the assessee to canvass the point before the Supreme Court. The learned counsel for the assessee has also invited our attention to a decision of the Bombay High Court in Scindia Steam Navigation Co. v. Commissioner of Income Tax, Bombay (A I R 1955 Bom. 230). This case relates to the same dispute which is the subject matter of consideration in this case. In that case also a preliminary objection was raised that because a particular aspect of the question was not urged before the Tribunal it is not open to the assessee to urge that aspect of the case before the High Court. The learned Judges repelled this argument and observed: "It does not follow that because a particular aspect of the question was not urged before the Tribunal that it is not open to the assessee to urge that aspect before us. If all the facts necessary to decide a question from a particular aspect are before the Court, then the assessee is entitled to justify its contention that it is not liable to pay tax having regard to the provisions of the Indian Income‑tax Act. It is not incumbent upon the assessee in order to put forward a particular point of law before this Court that it should necessarily have urged that very point of law before the Tribunal. If that point of law is implicit in the question raised by the Tribunal and if no additional facts are necessary to support that point, then it is open to the assessee to urge it notwithstanding the fact that it was not considered by the Tribunal. It would be throwing an intolerable burden upon the assessee if we were to hold that although the assessee is not liable to tax under the provision of the Indian Income‑tax Act merely because it did not point out to the Tribunal the specific provision of the law or it was ignorant of the specific provision of the law therefore it should be debarred from urging that aspect of the case before us. The only question that we have to decide is whether this sum was properly included in the assessee's total income, and if the assessee satisfies us that this sum was not properly included by reference to any provision of the Indian Income‑tax Act, then the question raised must be answered in its favour." In our opinion also the preliminary objection must fail as the argument raised before us is covered by the question referred to us for opinion. As already observed, the Income‑tax Tribunal cannot place any restriction on the power of this Court to answer the question of law. This Court, as observed in A I R (1944) Lah. 353 (F. B.), while hearing the reference is not bound to answer the question In the form in which it had been propounded by the Tribunal. It has got full power to decide the question in the form it actually arises from the statement of the case. More over the aspect of the case now presented to us was raised in a different shape before the Income‑tax Officer. It was also present in the mind of the Income‑tax Appellate Tribunal as is apparent from their observation that the assessee does not say that it is not covered by an amended proviso but they did not consider it as it was not urged before them. We also find no force in the contention that the assessee has given up this aspect of the case. The mere fact that he agreed to the question formulated by the Tribunal does not show that he has abandoned it. The question was formulated in a wide language and covered the point raised in his application and the assessee was justified in not insisting upon the Tribunal to raise it specifically. We will, therefore, overrule this objection and allow the counsel for the assessee to address us on the point taken by him. On merits it is conceded by Mr. Abdul Aziz, counsel for the Department, that the amended proviso (4) to section 10 (2) (vii) came into force on 4‑5‑1946. It was not in force on 1st April 1946. As already stated, the assessment year in this case was 1946‑47, and the previous year was 1945‑46 ending on 31st March 1946. The amount in dispute was received much after 31‑3‑1946, and in law it could not attract the amended proviso to section 10 (2) (vii). According to the provisions of the Income‑tax Act the assessee is not taxed on his income in the assessment year, but in the previous year as defined in the Act The rates at which a person is taxed are not laid down in the Income‑tax Act but under the Finance Act. The Finance Act 1946 came into force on 1st January 1946, and applied only to those incomes which fell within the provisions of the Income‑tax Act in force on that date. The amended proviso was not in force on that date. It is not suggested that Act VIII of 1946 by which this amendment came into force was given a retrospec tive effect and should be deemed to be in force on 1‑4‑1946. We are fortified in our view in this respect by the decision of their Lordships of the Privy Council in A I R (1945) P C

89. Their Lordships observed at pages 90‑91. "In the second place, it should be remembered that the Income‑tax Act, 1922, as amended from time to time, forms a code, which has no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year 'by a Finance Act. This may be illustrated by pointing out that there was no charge on the 1938‑39 income either of the appellant or his daughters, nor assessment of such income, until the passing of the Finance Act of 1939, which imposed the tax for 1939‑40 on the 1938‑39 income and authorised the present assessment. By sub‑section (1) of section 6, Finance Act, 1939, income‑tax for the year beginning on 1st April 1939, is directed to be charged at the rates specified in Part I of Sch. 2, and rates of super tax are also provided for, and by subsection (3) it is provided that for the purpose of this section and of Sch. 2, the expression `total income' means total income as determined for the purposes of income‑tax or super-tax, as the case may be, in accordance with the provisions of the Income‑tax Act, 1922'. This can only refer to the Income‑tax Act, 1922, as it stood amended at the date of the Finance Act, 1939, and necessarily includes the alterations made by the Amending Act, which had already come into force on 1st April 1939." Thus the Department was not justified to tax the amount in dispute under amended provision. In these circumstances we are of the opinion that the assessee is not liable to pay tax on the income of Rs. 9,26,532 because proviso (4) to section 10 (2) (vii) under which it was taxed, was not in force in respect of the assessment year 1946‑47, and in respect of the total income of the assessee for the year 1945‑46. 1n this view of the matter the amount in dispute was not received in the account year 1944‑45 within the meaning of the amended proviso (4) to section 10 (2) (vii), and is not taxable in the assessment year 1946‑

47. For the reasons given above, we would answer the question raised in the negative. In the special circumstances of the case, we will order the parties to bear their own costs. A. H. Reference answered in negative.