# BOMBAY v. THE SCINDIA STEAM NAVIGATION CO. LTD

- **Citation:** [1962] 1 S.C.R. 788
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Civil Appeal No. 501of1957
- **Bench:** S. K. Das, J. L. Kapur, M. Hidayatullah, J.C. Shah, T. L. VENKATARAMA ArYAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bombay-v-the-scindia-steam-navigation-co-ltd-2092
- **Pages:** 36

## Headnote

Income-tax-Reference-Scope-"Any question of law arising
out of such order", Meaning of-Indian Income Tax Act, I922 (II
of I922), as amended by Income-tax (Amendment) Act, I946 (VIII
of I946), ss. 66, rn(2)(vii) proviso.
Bys. 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 shal] ... draw up a statement of the case and refer it to
•
•
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...
I
)
I S.C.R. SUPREME COURT REPORTS
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. ro(2)(vii) of the Indian Income-tax Act, which was
inserted into the Act by the Income-tax (Amendment) Act, 1946
(VIII of 1946) that came into force on May 4, r946.
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:-
"\Vhether the sum of Rs. 9,26,532 was properly included
in the assessee company's total income computed for the assessment 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, Hidayatul!ah 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 questio:is 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"
ins. 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, 1922, is not in pari materia with
the British Statute and in view of the difference betweens. 66(1)
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. 206, referred to.
Attorney-General v. Avelino Armarn & Co., [r925) r K.B. 86,
considered.
r96r
Conunissioner of
I ncoine-tax,
Bombay
v.
Scindia Steam
Navigation
Co. Ltd.
•
. Contmissioner of
I11come·tax,
Bombay
v.
Scindia Stea1n
Navigation
Co. Ltd.
790
SUPREME COURT REPORTS
[1962]
The power the High Court has under s. 66(2) of the Act to
dire.ct a reference can n:a~e n_o difference since such power is
sub1ect to the same 111mtat10ns as that of the Tribunal under
s. 66( l) of the Act.
Commissioner of Income-tax, Madras v. Mtt. Ar. 5. Ar.
Arunachalam Chettiar, [ 1953] S.C.R. 463, New Jehangir Vakil
Mills Ltd. v. Commissioner of Income-tax, [1960] l S.C.R. 249,
K11sumben D. Mahadevia v. Commissioner of Income-tax, [1960]
S.C.R. 417 and Zoraster & Co. v. Commissioner of Income-tax,
'[1961] l S.C.R. 2

## Text

_Characters 0–39,815 of 81,933. This is a partial read: ask again with offset=39815 for what follows._

788
SUPREME COURT REPORTS
[1962]
z96z
The question is whether it could possibly fall with'1n
Subba,.;;;;;;; Naidu ~he second. pa~t of ?I. (c}, that is, whe.ther the award
v.
rs "otherwise mvahd". In order to brmg the objection
Siddamma Naidu within this clause learned counsel contended that the
award was bad on its face. It is difficult for us to
Mudholkar J. appreciate how the award could be said to be bad on
its face.
When a dispute is referred to arbitration,
the arbitrator has to decide it to the best of his judgment, of course acting honestly. Here, in his judgment the arbitrator has allotted to t,he appellant
certain lands the total area of which is less than half
that of the entire land in suit. The appellant's contention is that he is entitled to half the entire land.
This contention was before the arbitrator. In spite of
that he has made the award in the terms in which he
has made it. There appears to be no suggestion that
the arbitrator acted dishonestly. How can it then be
said that this award is on its face bad?
Agreeing with the High Court we dismiss this
appeal with costs to the contesting respondent.
Appeal dismissed.
THE COMMISSIONER OF INCOME-TAX,
BOMBAY
v.
THE SCINDIA STEAM NAVIGATION CO. LTD.
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,
J.C. SHAH and T. L. VENKATARAMA ArYAR, JJ.)
Income-tax-Reference-Scope-"Any question of law arising
out of such order", Meaning of-Indian Income Tax Act, I922 (II
of I922), as amended by Income-tax (Amendment) Act, I946 (VIII
of I946), ss. 66, rn(2)(vii) proviso.
Bys. 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 shal] ... draw up a statement of the case and refer it to
•
•
'
I
...
I
)
I S.C.R. SUPREME COURT REPORTS
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. ro(2)(vii) of the Indian Income-tax Act, which was
inserted into the Act by the Income-tax (Amendment) Act, 1946
(VIII of 1946) that came into force on May 4, r946.
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:-
"\Vhether the sum of Rs. 9,26,532 was properly included
in the assessee company's total income computed for the assessment 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, Hidayatul!ah 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 questio:is 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"
ins. 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, 1922, is not in pari materia with
the British Statute and in view of the difference betweens. 66(1)
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. 206, referred to.
Attorney-General v. Avelino Armarn & Co., [r925) r K.B. 86,
considered.
r96r
Conunissioner of
I ncoine-tax,
Bombay
v.
Scindia Steam
Navigation
Co. Ltd.
•
. Contmissioner of
I11come·tax,
Bombay
v.
Scindia Stea1n
Navigation
Co. Ltd.
790
SUPREME COURT REPORTS
[1962]
The power the High Court has under s. 66(2) of the Act to
dire.ct a reference can n:a~e n_o difference since such power is
sub1ect to the same 111mtat10ns as that of the Tribunal under
s. 66( l) of the Act.
Commissioner of Income-tax, Madras v. Mtt. Ar. 5. Ar.
Arunachalam Chettiar, [ 1953] S.C.R. 463, New Jehangir Vakil
Mills Ltd. v. Commissioner of Income-tax, [1960] l S.C.R. 249,
K11sumben D. Mahadevia v. Commissioner of Income-tax, [1960]
S.C.R. 417 and Zoraster & Co. v. Commissioner of Income-tax,
'[1961] l S.C.R. 210, referred to.
Madan/al 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 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 ot the
question which had been argued before the Tribunal.
The Commissioner of Income-tax, Bombay South v. M/s. Ogale
Glass Works Ltd. [1955] l S.C.R. 185 and Zoraster & Co. v. Commissioner of Income-tax, [1961] l 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, had no application.
Per Shah, ].-Section 66 of the Indian Income-tax Act
does not contemplate that the question which the 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 not
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
....
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I S.C.R. SUPREME COURT REPORTS
791
Court which were plainly not intended by the statute and in
certain cases might involve gross injustice to the parties.
Madan/al 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.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
501of1957.
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.•
I96I
Commissioner of ·
Income· tax,
Bombay
v.
Scindia Steam
Navigation
Co. Ltd.
VENKATARAMA AIYAR, J.-The respondents were
Venkatarama
the owners of a steamship called "El Madina''.
That
Aiyar, J.
was requisitioned by the Government during the last
world war, and was lost by enemy action on March
16, 1944. As compensation therefor, 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. 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
SUPREME COURT REPORTS
[1962]
I96I
On these facts, the point in controversy between the
C
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respondAnts and the Department is whether the
· ommtrnon" of
f R
9 26 32 · l" bl
b · 1 d d .
Income-tax,
amount o
-s. , . ,5 · IS 1a e to e me u e m the
Bombay
total income of the company for tho year of assessv.
ment which is 1946-47. The provision of law under
Scindia Steam which the charge is sought to be imposed is s. 10(2)(vii)
Navigation
of the Indian Income-tax Act, 1922, hereinafter refer.
Co. Ltd.
red to as the Act, and that is, omitting what is not
Venkatarama
relevant, as fo!lows:-
Aiyar J.
"(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 writtendown 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 reeeived 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 d..es not
exceed the difference between the original cost and
tho written-down value less the scra.p 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
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1 S.C.R. SUPREME COURT REPORTS
'793
compensation (both the initial advance as well :l any
r961
further payment that may be made) should be taken
.-.
into account as though it had actually been received c7misszoner of
within thirty days of the date of the loss of the ship;
"~
0
,:'b-!~x,
and that in consequence the amount should be deemed
v.
to have been received on April 16, 1944. If that conScindia Steam
tention is correct, the amounts would have been
Navigation
received not in the year of account which was July 1,
Co. Lid.
1944, to June 30, 1945, but in the year previous thereVenkatarnma
to, and they could not therefore be included in the
Aiyar J.
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 was limited to excess profits tax,
and could not in any event be relied on for the purpose of cutting down the operafon o'f the statutory
provision enacted in the.relevant,1 ·oviso 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(1) of the Act, reqniring 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 Asses~ment 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 1946-4 7
was valid in law."
100
794
SUPREME COURT REPORTS
[1962]
i96i
By its order dated February 9, 1954, the Tribunal
C
.-.
f referred the following question for the opinion of the
ommissioner o
Income-tax
oourt:-
Bombay '
"Whether the sum of Rs. 9,26,532 was properly
v.
included in the assessee company's total income
Scindia Steam
computed for the assessment year 1946-4 7."
Navigation
Th
c
f
h
·
b ,_.
e re1erence came up or earmg eiore a Bench of
Co. Ltd.
the ·Bombay High Court consisting of Cha.gla, C.J.,
Venkatarama
and Tendolkar, J., and then the respondents raised
Aiyar J.
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 therefore be said to be a question arising
out of the order of the Tribunal, which alone could be
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t
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,
1 S.C.R.
SUPREME COURT REPORTS
795
referred for the decision of the court under s. 66(1).
r96r
The court had no jurisdiction, it is argued, to allow a c
-. -.
f
,
•
.
ommissioner o
question to be raised before it, whwh could not be
Income-tax.
referred to it under the section. The contention of the
Bombay
respondents is that all questions of law which arise on
v.
the findings given by the Tribunal in its order can
Scindia Steam
properly be said to arise out of its order, and that in
Navigation
making a reference under s. 66(1), the Tribunal is not
Co. Ltd.
limited to those questions only which were raised
venkatarama
before it and dealt with in its order, nor even to those
Aiyar J.
questions which were raised in the application for
reference under s. 66(1). It is further contended that
in the present case, the question as framed and referred 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 enter.
taining it and deciding the reference on it.
We may now refer to the provisions of law bearing
on tho question. Section 66(1) 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 ifit considers that no question oflaw arises
on its order, and dismisses the application under
s. 66(1), 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(1) 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
SUPREME COURT REPORTS
[1962]
i96 1
made thereunder shall on publication in the official
C
~-:-
/ gazette have effect as if enacted under the Act. Rule
on1nnssioner o
,
.
.
Income-tax,
22A framed under this sect10n provides that: "An
Bombay.
application under sub-section (1) of section 66 requiring
v.
the Tribunal to refer to the High Court any question
Scind_ia Steam of law shall be in the following form."
The form is
Navigation
R(T) of which paragraphs 3 to 5 are relevant for the
Co. Ltd.
present discussion, and they are as follows:-
Venkatarama
"3. that the facts which are admitted and/or
Aiyar J.
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:-
(1 ) .............................................................. .
(2) ....•............................ : .... ........................ .
(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 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 question, 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,
•
1 S.C.R. SUPREME COURT REPORTS
797
s. 35.
The Commissioner being dissatisfied with the
r 96'
order applied for a ~e~erence under s.
~6(1).
~he Com;,,;:-;:.,, of
Tribunal was of the opm10n that the order m quest10n
Income-tax,
could be made in the exercise of its inherent jurisdicBombay
tion and referred the question of its legality to the
v.
court under s. 66(1). The Madras High Court declined Scindia Steam
d
h
d
t
Navigation·
to answer it on the groun that as t e or er was no
6( )
Co. Ltd.
one passed in an appeal, the reference under s. 6 1
was incompetent, as under that provision the power of
VenkatMama
the Tribunal to refer was limited to questions of law
Aiyar J.
arising out of an order passed in an appeal. In affirming 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.('), the question
referred by the Tribunal under s. 66(1) was whether
certain amounts received by the assessee from the
Government by cheques drawn on the Reserve Bank
at Bombay were income received in British India
withins. 4(l)(a) of tho Act. The High Court had hold
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, tho income must be held tu
have been received in British India. An objection was
put forward to this cont,ention 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 bys. 66(1).
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] I S.C.R, 185, 197.
798
SUPREME COURT REPORTS
(1962]
'96'
been properly referred -under s. 66(1), it could be decic
-. -. ' / ded under s. 66(5), and that in that view, it was not
ommissioner o
•
Income-tax
necessary "to express any opimon on the larger quesBombay '
tion as to the scope, meaning and import of the words
v.
'any question of law arising out of' the Tribunal's
Scindia Steam order on "the interpretation of which there exists a
Navigation
wide divergence of judicial opinion". There was accorCo. Ltd.
dingly no decision on the point now under consideraVenkatarama
tion.
Aiya' J.
In New Jehangir Vakil Mills Ltd. v. Commissioner
of Income-tax (1) the point under discussion was w hether 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(1) ors. 66(2). This Court held that the scope of a
reference under s. 66(2) was coextensive with that of
one under s. 66(1) of the Act, that therefore the court
had no power under s. 66(2) to travel beyond the
ambit of s. 66(1), 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(1) 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( 1) 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('}, the question actually referred under
s. 66(1) to the court was whether a sum of Rs. 4 7,120
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 re-settled
the question so as to raise the contention as to w hether the assessee was entitled to any concession under
the Merged States (Taxation Concessions) Order, 1949,
as regards the income of R,s. 47,120, and holding that
she was not, answered the reference against her
(1) [1960] I s.c.R. 249.
(2) [1960] 3 S.C.R. 417, 422.
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1 S.C.tt. SUPREME COUR'r REPORTS
799
without deciding the question as to where the income
'96'
accrued. Against this J udgmeut, the assessee appealCommissioner of
ed to this Court and contended that the High Court
Income-tax,
was in error in not deciding the question which was
Bombay
actually referred.
This Court accepted this contenv.
tention and remanded the case to the High. Court for
Scindia Steam
h
S f
h
d
d
]\T avigation
hearing on t at point.
o ar t is
ecision
oes not
Co. Ltd.
bear on the present controversy. But a further point
was discussed and considered by this Court, and that
Venkatarama
was that it was not open to the court to raise the
Aiyar J.
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(1). 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 ques-
. tion 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
Conrt 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 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
(I) [1961) I S.C.R. ZIO,
BOO
SUP:RF;M:E COURT :REPORTS
[1962]
r96r
"it would be necessary for the Appellate Tribunal to
C
-. -.
f find, inter alia, whether the cheques were sent to the
ommtssioner o
b
.
Income-ta.r,
a_ssess~e firm
y post or by han? and what d1recBombay
twns, 1f any, had the assessee firm given to the Departv.
ment in the matter." The correctness of this order was
Scindia Steam challenged by the assessee on the ground that the
Navigation
court had no power to call for a fresh statement for
Co. Ltd.
the investigation of a new point and reliance was
Venkatarama
pfaced on the decision in New Jehangir Vakil Mills
Aiyar J.
Ltd. v. Commissioner of Income-tax (' ).
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. Abbay Chetty and Co. v. Commissioner of
Income-tax, Madras (2 ), the application of the assessee
under s. 66(1) required the Tribunal to refer a question
of res judicata to the court. '!.'he Tribunal declined to
do so on the ground that 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 he 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
(•) [1960), s.c.R. 249.
(2) [1947] 15 l.T.R. 442, 444·
. "
I
1
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"
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j
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)
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1 S.C.R. SUPREME COURT REPORTS
801
to agree with that view. 1 am of opinion that a·
z96z
question of law can be said to arise out of an order c
:---:-
f h A
1
'b
l
l 'f
h
d ·d' l
ommissioner of
0 t e
ppel ate Trr una on y I sue or er
IS~ OSIncome-tax,
es that the question was raised before the TnbuBombay
nal."
v.
Adverting to the contention that the Privy Coun.
Scindia Steam
oil had in M. E. Moala Sons Limited v. Burjorjee (1)
Navigation
allowed a question of law arising on the facts found,
Co. Ltd.
to' be raised for the first time before it, the learned
Venkatarama
Judge observed: "The case furnishes no useful analogy
Aiyar J.
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.,(') and in The
Trustees, Nagore Durgah v. Commissioner of Incometax (').
In G,. M. Chenna Basappa v. Commissioner of Income-tax('), 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-tax (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
(r) [1932] I.L.R. IO Rang. 242.
(3) [1954] 26 I.T.R. 805.
(5) [1947] 15 I.T.R. 442. 4H·
IOI
(2) [1951] 20 I.T.R. 588.
(4) [1958] 34 I.T.R. 576.
(6) [1954] 26 I.T.R. 79, 86.
Com1nissioner of
Inco1ne·tax,
Bombay
v.
Scindia Steam
Navigation
Co. Ltd.
Venkatara»ia
Aiyar ].
802
SUPREME COURT REPORTS
[1962]
has beeri 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. In Commissioner of Excess Profits
Tax v. Jeewanlal Ltd. (1), it was held, agreeing with
the decision in A. Abbay 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 C.hainrup Sampatram v. Commissioner of
Income-tax (3), the assessee had applied under s. 66(1)
of the Act to refer the question whether a ~um 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
observe:
"The Indian Income-tax Act has not charged the
High Court with the duty of setting right in all respects all assessments that might come to its notice;
its jurisdiction is not either appellate or revisional;
(1) [1951] 20 LT.R. 39.
(2) [1947] r5 I.T.R. 443, 444•
(3) [r95r] 20 LT.R. 484, 495-
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1 S.C.R. SUPREME COURT REPORTS
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 Oommissione1·
of Income-tax v. State Bank of India (2).
In Mash Trading Go. v. Commissioner of Incometax ('), 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 competent. Falshaw, J., while generally agreeing with this
view considered that there might be cases in which a
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) [r952] ZI LT.R. 169,
(z) [1957] 31 LT.R. 545·
{3) [1956] 30 LT,R. 388,
Comtnissioner of
Income.tax,
Bombay
V,
Scindia Steam
iVavigation
Co. Ltd,
Venkatarama
Aiyar ].
804
SUPREME COURT REPORTS
[1962]
'96'
inadvertence, or when its jurisdiction itself was ques-
-
tioned. The learned Judge added that in the former
Co~missio;" of case the point might be deemed to have been decided
';;~=:~;"
against the assessee iri the order, thereby attracting
v.
s. 66. It should be noted £hat all the Judges agreed
Sci11dia Steam in holding that the reference in question was incomNavigation
petent as the point had not been raised before the
Co. Ltd.
Tribunal.
Venkalarama
·Aiyar ].
We must now consider the decisions which have
taken a somewhat different view.
Vadilal Lallubhai
Mehta v. Commissioner of Income-tax(') 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 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 Piecegoods Bazar Co. Ltd. v. Commissioner
of Income-tax ('), 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(l)(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 ques_tion of law on that point also."
This
judgment again proceeds on the view that it is only a
question ra~sed before and dealt with by the Tribunal
(I) [1935] 3 I.T.R. 152.
(2) [1947] 15 I.T.R. 319.
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l S.C.R. SUPREME COURT REPORTS
805
tnat 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 st!tge 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 Dharnidh~rka v. Commissioner of Income-tax ('), the Tribunal referred under s. 66(1) the
following question for the decision of the court:-
"Whether the remittance of Rs.