P L D 1969 Supreme Court 514 (PLP)

MUHAMMAD YAOUB ALI, J.‑This appeal arising from an application moved by the assessee‑company, appellant herein, under section 66(2) of the Income‑tax Act in the High Court of East Pakistan is not properly constituted. The assessee‑company disputed their liability to pay tax in respect of the income earned by them in the years 1949‑50, 1950‑51 and 1951‑52 by way of commission for managing, supervising and controlling in India and Pakistan the business of the Rivers Steam Navigation Company Limited with its principal office in London. The plea was overruled by the Income‑tax Officer, Companies Circle II, Chittagong, and finally by the Tribunal by their order dated the 18th April 1959. The assessee‑company thereupon applied under section 66 (1) of the Income‑tax Act for referring the following questions of law to the High Court for determination: (1) Whether on the facts and in the circumstances of this case the Tribunal was right in law in holding that the Agency Commission arose through or from a business connection in Pakistan under section 42(1) of the Income‑tax Act. (2) If the answer to Question No. (1) is in the affirmative was the Tribunal right in ignoring the 'applicability of the provisions of section 42 (3) for the purpose of determining the extent if any to which the Agency Commission could be deemed to accrue or arise in Pakistan. The Tribunal agreed to refer the first of the two questions as involving interpretation of section 42 of the Income‑tax Act, but declined to refer the second question on the view that the extent of the income deemed to accrue or arise to the assessee‑company in Pakistan has been stated in their order dated the 18th April 1959. It was said in that order that it should be in proportion to the managed company's income arising in Pakistan vis‑a‑vis its total income in India and Pakistan. An error which had crept in the order of the Income‑tax Officer while apportioning the income between Pakistan and India was corrected by the Tribunal on the concession made by the departmental Representative. In the circumstances, the Tribunal considered that the second question proposed by the assessee company did not call for reference to the High Court. The assessee‑company thereupon moved a consolidated application in the High Court under section 66 (2) of the Income tax Act in respect of each of the three assessment years 1949‑50, 1950‑51 and 1951‑52 which appears at pages 101‑107 of the printed paper‑book. A Division Bench consisting of the learned Chief Justice and A. S. Chowdhury, J., dismissed the application by their order dated the 19th July 1961, on the view that even if a question of law arose within section 66 (2), it was of academic nature as the answer was apparent on the face of it. On the 13th November 1961, the assessee‑company applied to the High Court under Article 158 of the 1956‑Constitution read with sections 109 (c), 110 and Order XLV, rules 3 and 4 of the Code of Civil Procedure and section 66‑A of the Income‑tax Act for a certificate to prefer an appeal to this Court. The applica tion came up for hearing along with the application moved separately by the assessee‑company for a certificate in Supreme Court Appeal No. 189 of 1961 (O. S.) by which the first of the two questions referred by the Tribunal was answered by the High Court in the affirmative whereupon the following order appearing at pages 134‑135 of the printed record was passed on 9th February 1965: "This application is directed against a judgment of a Division Bench of this Court given in respect of a reference under section 66(1) of the Income‑tax Act. The applicant. Messrs Macneill & Barry Limited, Calcutta, was taxed by the Income‑tax Authorities in East Pakistan. A reference under the aforesaid section was made to this Court and the point of reference was stated as follows: `Whether on the facts and in the circumstances of this case the Tribunal was right in law in holding that the agency commission arose through or from a business‑connection in Pakistan under section 42 (1) of the Income‑tax Act.' The relevant fact with regard 'to this case is that the said Macneill & Barry Limited, Calcutta, carries on business of managing agency and is resident at the aforesaid place in India. The said company manages several businesses in Pakistan. The question that arose was whether the commission that was paid to the aforesaid company in Indian currency in Calcutta as remuneration for management of business in Pakistan would be assessable section 66(1) f the Income‑tax Act. On a reference this Court held that was so assessable. This application is directed against the aforesaid decision. On a perusal of the petition and upon hearing the learned Advocate, we find that this application raises a very substantial point of law. The point, which we consider to be substantial, may be stated thus. Whether remuneration paid outside the taxable territories of Pakistan to a non‑resident company, as commission for agency work in respect of company resident in Pakistan, would be deemed to be income accruing and arising within Pakistan under the provisions of section 42(1) of the Income‑tax Act. We, therefore, allow this application and grant the leave prayed for without any order as to costs. Accept one set of security for this appeal and S. C. A. No. 189 of 1961 (O. S.). Let the preparation of the paper‑book be expedited. S. M. Murshed. Abu Md. Abdulla‑I agree." The subject‑matter of the application dated the 13th November 1961, directed against the order of the High Court refusing to issue a rule ni4 to the Tribunal calling upon it to show cause why it should not state a case and refer the second question of law reproduced above to the High Court was thus not adverted to at all. The order relates entirely/to Supreme Court Appeal No. 189 though towards the end it is said : "Accept one set of security for this appeal and S. C. A. No. 189 of 1961 (O. S.)" On merits too we find little substance in the prayer for a certificate as it was contradictory in terms to reject the prayer for issuance of a nisi to the Tribunal to state a case and refer the question of law proposed by the assessee and yet certify it as a fit case for appeal to this Court. In the circumstances the certificate granted by the High Court on the 9th February 1965, in Supreme Court Appeal No. 190 A of 1961 being not drawn up in accordance with law, the appeal arising, therefore, is not properly constituted and is dismissed as such. In the circumstances we refrain from burdening the assessee, company with the costs of the respondent in this appeal. K. B. A. Appeal dismissed.