# COMMISSIONE,R OF INCOME.TAX, WEST BENGAL v. JNDIAN MOLASSES (P) LTD. August 12, 19]0 ••!

- **Citation:** [1971] 1 S.C.R. 773
- **Court:** Supreme Court of India
- **Decided:** 1971
- **Bench:** J.C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissione-r-of-income-tax-west-bengal-v-jndian-molasses-p-ltd-august-12-19-0-5283
- **Pages:** 10

## Headnote

Income-tax Act (II of 1922), '"· 10(2)(.iv), 10(4A). 66(1)
111111
06(5)-lntredients of ·'· Hl(2) (xv )-Amounts paid to 'tru"t"" for 11.rr 011
tht happrning of a /uturt event-Wiren deemetl lo he expemliture 11nder
s.10(2)(xv).
'Question of law wising out of it.• order' in s.66(! ), scope of-A.•pect
1101 •xprossly raisedj be/or• tbe Tribunal-When coultl be 11rR•d llf/Ore
High Court on reftrence.
Ht1h Court wrung/111/y refu.ring pltt1 to he 11rgetl--Prot·td11rt to he
follow1d by Supflme Court .
. The respondent-company appointed a manaaina dire,tor who was 10
retire at the aae of 55.
The company arranged to provide a pension tC\
him on retirement, or a pension to his widow if he died hefore attaining
the aae of 55. 1t executed a trust deed c.n September 16. 1948, and paid
to the trustees certain amoup.ts to enable the trustees to take out an an11uit\
policy to cover the pension. On Octohcr 29. 1954, the company arrangetl
to 1ivc enhanced pension to the director or his wife and set <ipart an
additional sum on the ~ame terms.
The director died in
195~ before attaining the age of 55. and the
company claimed. in the return of its taxable income for the assessn1cnt
year 1956-57, the total amount paid by it to the trustees as a pcrmissihlc
expenditure in the ·CQmputation of the company's husin>!ss profits in th~
·pre\iotL1 year.
•,, ·
The Appellate Trihunal, held; (i) that the s•:ttin~ apart of the funds
amounted to expenditure within the meaning of s.10(2)(xv). and (ii)
that it amountc<I to revenue expenditure ~nd not carital expendi:ure. The
Tribunal did not however consider wilether the outgoing represented expenditure laid out or expended whollv and exc1usivelv for the purpose of the
busint91S and whether it was auth0rioed under s.10( 4A).
The Trihunal
referred to the High Court two questions. namely: · (1) whether the
amounts constitute<l cxocnditure during the relevant accounting year 1955
within the meaning of the section: and (2) .whether it resorescnted
a
revenue expenditure. 'The High Court held 1n favour of the company.
When the Department sought to urge the plea that hcfore the se·:tion could
he called in aid, it had also to he established that. the expenditure was
wholly and exclusivelv fo• the ,nurnose of .the hnsine.s. and that 1t was
authorised hv s.10(4A). the HIJh Court did not permit the plea to ht
raised as it was not expr .. slv raised before the Trihunal.
Jn appeal to this Court.
HELD: (1 \ The amounts set •!>•rt became subject "? the o~liQatiM
to pav the pensio" arrani!ed to be give". O"IY when the director died. and
since he died in Mav 1955. they m•~•t he deemed to have hccn (Xn<nde~
only then, that is durin~ the aecountm~ year 1955. {776 H: 777 .~·Rl
774
SUPREME COURT REPORTS
{1971) l S.C.R.
Indian Molasses Co. (P). Ltd. v.' Com1n;s.<>ioner· Of iff.co1ne~tax, West
Bengal, 37 I.T.R. 66, referred to.
(2) An amount proved to be expended by a tax-payer carrying on
husincss is a permissible allowal)ce under -s.10(2) (iv) in the computation
of the taxable income of the business if it is established; (i) that the
&.Jlowance claimed is expenCiiture which is not of the nature described
in els. (i) to (xiv) of s. 10(2); (ii) that it is not of the nature of capital
expenditure or personal expenses of the assessee; (iii) that the expenditure was laid out or expended wholly and exclusively for the purposes of
such business; and (iv) that it was authorised under s. 10 ( 4A). [778 C-.F]
· · (3) The expression 'question of law arising out of such order'.' in
q:66(1), is not restricted to take in only those questions which have been
expressly argued before and decfded bv the Tribunal. If a question of Jaw
is raised before the Tribunal, even if ari aspect of the question was not
raised, that aspect may be urged before the High Court.
In the present
case, the second question as framed and referred. does not exclude· an
enquirv whether the expenditure was whollv and exclusively laid out or
expended for the purpose of the busines

## Text

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773
COMMISSIONE,R OF INCOME.TAX, WEST BENGAL
v.
JNDIAN MOLASSES (P) LTD.
August 12, 19]0
••!
[J.C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.J
Income-tax Act (II of 1922), '"· 10(2)(.iv), 10(4A). 66(1)
111111
06(5)-lntredients of ·'· Hl(2) (xv )-Amounts paid to 'tru"t"" for 11.rr 011
tht happrning of a /uturt event-Wiren deemetl lo he expemliture 11nder
s.10(2)(xv).
'Question of law wising out of it.• order' in s.66(! ), scope of-A.•pect
1101 •xprossly raisedj be/or• tbe Tribunal-When coultl be 11rR•d llf/Ore
High Court on reftrence.
Ht1h Court wrung/111/y refu.ring pltt1 to he 11rgetl--Prot·td11rt to he
follow1d by Supflme Court .
. The respondent-company appointed a manaaina dire,tor who was 10
retire at the aae of 55.
The company arranged to provide a pension tC\
him on retirement, or a pension to his widow if he died hefore attaining
the aae of 55. 1t executed a trust deed c.n September 16. 1948, and paid
to the trustees certain amoup.ts to enable the trustees to take out an an11uit\
policy to cover the pension. On Octohcr 29. 1954, the company arrangetl
to 1ivc enhanced pension to the director or his wife and set <ipart an
additional sum on the ~ame terms.
The director died in
195~ before attaining the age of 55. and the
company claimed. in the return of its taxable income for the assessn1cnt
year 1956-57, the total amount paid by it to the trustees as a pcrmissihlc
expenditure in the ·CQmputation of the company's husin>!ss profits in th~
·pre\iotL1 year.
•,, ·
The Appellate Trihunal, held; (i) that the s•:ttin~ apart of the funds
amounted to expenditure within the meaning of s.10(2)(xv). and (ii)
that it amountc<I to revenue expenditure ~nd not carital expendi:ure. The
Tribunal did not however consider wilether the outgoing represented expenditure laid out or expended whollv and exc1usivelv for the purpose of the
busint91S and whether it was auth0rioed under s.10( 4A).
The Trihunal
referred to the High Court two questions. namely: · (1) whether the
amounts constitute<l cxocnditure during the relevant accounting year 1955
within the meaning of the section: and (2) .whether it resorescnted
a
revenue expenditure. 'The High Court held 1n favour of the company.
When the Department sought to urge the plea that hcfore the se·:tion could
he called in aid, it had also to he established that. the expenditure was
wholly and exclusivelv fo• the ,nurnose of .the hnsine.s. and that 1t was
authorised hv s.10(4A). the HIJh Court did not permit the plea to ht
raised as it was not expr .. slv raised before the Trihunal.
Jn appeal to this Court.
HELD: (1 \ The amounts set •!>•rt became subject "? the o~liQatiM
to pav the pensio" arrani!ed to be give". O"IY when the director died. and
since he died in Mav 1955. they m•~•t he deemed to have hccn (Xn<nde~
only then, that is durin~ the aecountm~ year 1955. {776 H: 777 .~·Rl
774
SUPREME COURT REPORTS
{1971) l S.C.R.
Indian Molasses Co. (P). Ltd. v.' Com1n;s.<>ioner· Of iff.co1ne~tax, West
Bengal, 37 I.T.R. 66, referred to.
(2) An amount proved to be expended by a tax-payer carrying on
husincss is a permissible allowal)ce under -s.10(2) (iv) in the computation
of the taxable income of the business if it is established; (i) that the
&.Jlowance claimed is expenCiiture which is not of the nature described
in els. (i) to (xiv) of s. 10(2); (ii) that it is not of the nature of capital
expenditure or personal expenses of the assessee; (iii) that the expenditure was laid out or expended wholly and exclusively for the purposes of
such business; and (iv) that it was authorised under s. 10 ( 4A). [778 C-.F]
· · (3) The expression 'question of law arising out of such order'.' in
q:66(1), is not restricted to take in only those questions which have been
expressly argued before and decfded bv the Tribunal. If a question of Jaw
is raised before the Tribunal, even if ari aspect of the question was not
raised, that aspect may be urged before the High Court.
In the present
case, the second question as framed and referred. does not exclude· an
enquirv whether the expenditure was whollv and exclusively laid out or
expended for the purpose of the business of the company .. Tt cannot be
held that. because before the Tribunal. stress was not pointedly laid 11pon
the ingredients which enable an expenditure to be claimed and allowed,
the question did not arise out of the order of the Tribunal. Therefore, the
f{i~h Court was in error in refusing to allow the argument to be raised that
the requirements of s. 10(2) (xv) were not satisfied. r779 H'. 780 A; 781,
B-F)
Commissioner of lnco1ne.fa,t. Bo1nhay v;· Scindia ·Steam Navii:ntion
Co. Ltd. 42 !.T.R. 589. explained and followed.
( 4) Since the Tribunal gave no finding on tha• part of the case. a
•npplementarv statement could be called from it. but such a supplementary
statement would be restricted to the- eviden('e 011 record alld may result in
injustice to the . parties. r781 Fl
New !ahan1<ir Vakil
Mills Ltd. v. Commissioner
of Income-tax.
'Bomhav North, Kutch & Saurashtra. 37 I.T.R. t 1. Pet,la1 Twkev Red
Dye Wbrks Co. Ltd. v. Commissioner of Income-tax, 48 I.T.R. 92(S.C.)
and Ke,rhav Mills Co. Ltd. v. Commisioner of Income-tax. Bomhay North.
Ahm,dahad. 56 T.T.R. 365. referred to.
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(5) Therefore. it is approoriate to decline to answer the secood quesJi
!ton on the ground that the Tribunal ha<l failed to co"Siclcr and decide the
question whether the expenditure was laid out or expended whonv· and
exdusivelv for the purpose of the business of t'1e company and tliat it
had not considerert all aooronriate statutorv provision~. a'1d to leave it· to
the Tribunal to dispose of the anpeal under S. 66(5) of the' Act rn2
A-Cj
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.CivrL APPELLATE JURISDICTION : Civil Appeal No. 2555 of
G
1966.
Appeal .from the judgment ·and order dated March 16, 1966
of the Calcutta High Court in Income Tax Reference No 76- of
1962.
S. C. Manchanda. G. C. Sharma, R. N. Sachthev and 8 D.
S1''1rma; for the appellant
R
A. K. Sen, T. A. Ramachandran-and D. N. Gupta, for the
respondent.
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C.I.T. V, INDIAN MOLASSES (P) LTD. (Shah, J.)
775
The Judgment of the Court was delivered by
Shah, J,
The respondent Company appointed one Harvey its
Managing Director.
Under the terms of agreement, Harvey was
to retire on attaining the age of 55 year~. The Company arranged
to provide a pension to Harvey on retirement, and executed a deed
of trust on September 16, 1948 appointing three trustees to carry
out that object.
The respondent
Company set apart in 1948
Rs. 1,09,643/-
and in each of the six subsequent years Rs.
4,364/-, and delivered the various amounts' to the trustees who
were authorised to take out a deferred annuity policy to secure an
annuity of £ 720 per annum payable to Harvey for life from the
date he attained the age of 55 years, and in the event of his death
before that date an annuity of £ 611.l 2 anrlually to his widow.
In its return for the assessment year 1949-50 the Company
claimed that in the computation of its taxable income Rs.
l,09,643/- paid in 1948 to the trustees under the deed of trust
were allowable as an amount wholly and exclusively expended for
the purpose of its business.
In the subsequent years of assessment
the Co1J1pany claimed allowance of the annual payment of Rs.
4,364/-.
The Income-tax
Officer disallowed the claim.
The
Company disputed the decision and carried it to the Income-tax
Appellate Tribunal. The Tribunal submitted a statement of case
to the High Court of Calcutta on the question whether the payments
"constituted 'expenditure' within the meaning of that word in s.
10(2)(xv) of the Indian Income-tax Act, 1922, in respect of which
a claim for deduction can be made subject to the other conditions
mentioned in that clause being satisfied". The High Court answered the question in the negative. The view taken by the High Court
was confirmed by this Court in appeal : Indian Molasses Co. ( P)
Ltd. v. Commissioner of Income-tax, West Bengal('). This Court
held that the ewenditure deductible for income-tax purposes is one
towards a liability actually existing at the· ·
, but a sum of money
set apart which may be
na d to a purpose for which
it was intended on the happening of a f ure event was not expended within the meaning of s. 10(2)(xv) o the Act, until the everit
occurs, and since the Company had dominion through the trustees
over the funds and there was a possibility of a trust resulting in it·;
favour, by setting apart the funds no "expenditure" within the
meaning of s. l 0(2)(xv) of the Indian Income-tax Act, 1922, may
be deemed incurred.
During the j'lendency. of those proceedings the Company ar·
ranged to give an "enhanced pension" t,o Harvey and executed a
supplemeJJl~i:y deed of trust on October 29, 1954 and set apart an
additional sum of Rs. 47.607/- to enable the trustees to take out
an annuity policy in the names of the trustees in favour of Harvey
(I) 37 I. T. R. 66.
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SUPREME COURT
REPORT~
[ 1971] I S.C.R.
and his wife to cover the "enhanced pension". The terms of the
original trust deed were made applicable
to the supplementary
deed.
Harvey died in May 1955 (before he was due to retire) and in
the return of its taxable income for the assessment year 1956-57
the Company claimed that Rs. 1,83,434/- being the total amoun
paid by the Company to the trustees in terms of the original trust
deed dated September 16, 1948 and the supplementary deed dated
October 29, 1954, be allowed as a permissible expenditure in the
computation of the Company's business profits in the previous year
ending D~cember 31, 1955. The Income-tax Officer disallowed the
claim without assigning any reasons. In appeal the Appellate Assistant Commissioner confirmed the order observing that the amount
paid long before the commencement of the previ!JUS year were not
admissible under s. I 0(2)(xv) of the Income-tax Act, 1922. The
Income-tax Appellate Tribunal in appeal reversed the order and
allowed the claim of the Company holding that the ~ount of Rs.
1,83,434/- was "effectively disbursed during the accounting year"
and was on that account an admissible allowance in the computation of the Company's business profits.
·
At. the instance of the Commissioner of Income<rax, the Tribunal submitted a statement of the case to the High Court of
Cal.cutta on the following two questions :-
"(!) Whether on the facts and in the circumstances
of the case, the sum of Rs. l ,83,434/-
was an expenditure effectively laid out or expended during the accounting year 1955 within the meaning of s. I 0(2)(xv) of
the Income-tax Act ?
•
(2) If the answer to Question No. (I) is in the affirmative,
then whether
the said
expenditure
of Rs.
1,83,434/- represented a revenue expenditure?"
The High Court of Calcutta recorded answers in the affirmative on
holh the questions.
With certificate granted by the High Court
under s .. 66A(2) of the Indian Income-tax Act, 1922, this appeal
is preferred by the Commissioner of Income-tax.
Answer recorded by the High Court on the first question was.
in our judgment, correct. This.Court had in the earlier decision
Indian Molasses Co. (Private) Ltd. v. The Commissioner of Income-tax(') held that the Company had not parted with control
over the amounts set apart between the years 19-48 and 1954 for
securing the pension benefit to Harvey, and on that account no
amount was appropriated to make it expenditure within the meaning of ~- I 0(2)(xv) of the Act.
At the date when different sums of
monev ~e sef'apart there was no existing liability and the sums
fl) 37!.T.R. 66.
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C.l.T. V. INDIAN MOLASSES (P) LTD. (Shah,/.)
777
of money set apart to meet an obligation which may or may nm
arise on the happening of a future event, the Company did not Jay
out or expend the sums within the meaning of s. I 0(2)(xv). The
amounts set apart became subject to the obligation to pay the pension arranged to be given only when Harvev died, and must be
deemed expended then within the meaning of s. I 0(2)1xv) of the
Indian Income-tax Act, 1922.
But on the materials before us we are unable to answer the
second question, for the Tribunal has found no facts on which the
admissibility of the allowance may be determined, and the High
Court has declined to allow the argument to be raised by the Commissioner that in the circumstances of the case the amounts expended were not admissible under s. 10(2) (xv) of the Act.
Sections 10(1) and 10(2)(xv) of the Act, insofar as they are
relevant, provide :
S. 10(1 )-"The tax shall be payable by an a~sessee
under the head 'profits and gains cf business, profession
or vocation, in respect of the profit or gains of any business, profession or vocation carried on by him."
S. 10(2)-"Such profits or gains shall be computed
after making the following allowances, namely :-
(xv) any expenditure (not being an alJowance of the
nature described in any of the clauses (i) to (xiv)
inclu~ive, and not being in the nature of capital
expenditure or personal expenses of the assessee)
laid out or expended wholJy and exclusively for
the purpose of such business, profession or vocation."
Sub-section (4A) of s. 10 which was added by the Finance Act of
1956 with effect from April l, 1956, may also be read :
"Nothing in sub-section (2) shall, in the computation
of the profits and gains of a Company be deemed to
authorise the making of-
(a) any allowance
in respect of
any exoenditure
which results directly or indirectly in the provision of any remuneration or benefit or amenity
to a director or a person who has a substantial
interest in the company within the meaning of
sub-clause (iii) of clause (6C) of section, 2, or
(b) any allowance in respect of any a~sets of the
company used by any person referred to in
778
SUPREME' COURT REPORTS
[!97 l J l $.C.R.
clause (a) either wholly or partly for his own
purposes or benefit.
if.in the opinion of the Income-tax Officer any such
. allowance is excessive or unreasonable having regard to
the legitimate business needs of the company and the
benefit derived by or accruing to it therefrom.
Explanation.-The provisions of this sub-section
shall apply notwithstanding that any amount disallowed
·under this sub-section is included in the total income of
any person referred to in clause (a)."
An amount proved to be expended by a tax-payer carrying on
business is (subject to sub-s. ( 4A) of s. 10), a permissible allowance
in the computation of taxable income of the business, if it br established· that the allowance claimed is (a) expenditure which is not
of the nature gescribed in els. (i) to (xiv) of s. 10(2); (b) that it is
not of the nature of capital expenditure or personal expenses of
the assessee; and (c) that the expenditure was laid out or expended
wholly· and exclusively for the purpose of such business, profession
or vocation.
The expenditure incurred by the Company is not
allowance of the nature described in any of the clauses (i) to (xiv)
inclusive of s. 10(2), nor is it of the nature of capital expenditure
or personal expenses of the assessee.
In our judgment, the argument advanced before the High Court that the expenditure resulting from the setting apart of the money for securing an annuity
to provide. pensionary benefit to Harvey and his wife was of a
capital expenditure was rightly negatived by the High Court.
To attract the exemption under ~. I 0(2) (xv) it had sti!l to be
established that the amount set apart was laid out or expended
wholly and exclusively for the purpose
of the business oL the
Company. On this part of the ~ase there is no discussion in the
orders of the taxing authorities and the Tribunal. To recall, the
Income-tax Officer recorded no reasons for disallowing the expenditure.
.The Appellate Assistant Commissioner disallowed it on
the ground that it was not debited in the profit and loss account
of the Company in the previous year. The Tribunal assumed, and
in our judgment erroneously, that this Court had in the earlier
judgment pronounced upon the applicability of all the conditions
of s. I 0(2)(xv) of the Act to the amount set apart when it became
expenditure.
This Court did not express any opinion on that
question.
The language in which the question was framed in the
earlier case clearly indicated that the enquiry contemplated was
only whether the amounts set apart were expended and no other.
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C.I.T. V. INDIAN MOLASSES (P) LTD. (Shah, J.)
779
The judgment of this Court also does not imply th•1t in the view
of the C~urt if the setting apart of the amount was expenditure,
the other J conditions for the expenditure to be a permissible allowance und.er s. I 0(2) (xv) were satisfied. It cannot be assumed that
because on the death of Harvey the amounts previously set apart
were deemed expended, the outgoing was admissible as expenditure under s. I 0(2)(xv) read with s. I 0(4A). The Tribunal considered two questions oqly : ( 1) whether the setting apart of the
amounts amounted to expenditure within the meaning of s. 10(2)
(xv); and (2) if it was expenditure, whether it could be regarded
as capital expenditure and not revP.nue expenditure. On both the
contentions the Tribunal decided in favour of the Company. But
before s. 10(2)(xv) could be called in aid to support the claim of
the company it had to be established that it represented expenditure
laid out or expended wholly and exclusively for the purpose of the
business, and that it was authorised under s. 10(4A).
The High Court was of the view that because before the Tribunal the question was not expressly raised that "the other conditions inviting the application ofs. I 0(2)(xv) were not satisfied, the
allowance was not admissible",\ the Commissioner was incompetent to urge that plea before the: High Court. In support of that
view they relied upon the judgmept of this Court in Commissioner
of Income-tax, Bombay v. Scindi(l Steam Navigation Co. Ltd( 1 )'.
The High Court observed that before the Tribunal 'the plea that
E · the eKpenditure was not laid out or expended wholly and exclu'
sively· for the p!ffiJO_se of the business of the Company was not
argued, and since the question raised and referred "was not wide
enough to include that submission", the Commissioner could not
urge it before them. We are unable to hold that the decision in
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Scindia Steam Navlgation, Compan,v's case(') supports the opinion
of the High Court.
The plea that the amount claimed to have
been expended was not admissible as an allowance was raised by
the Department. The Appellate Assistant Commissioner had decided in favour of the Department and the order was sought to be
supported before the Tribunal by the Departmental representative.
Granting that an aspect of the question was not argued before the
Tribunal, the questio11 was on that account not one which did not
arise out of the order of the Tribunal. In our judgment, the expression "question of law arising out of such order" in s. 66(1) is
"not restricted to take in only those questions which have been expressly argued and decided by the Tribunal. If a question of Jaw
is raisect before .the Tribunal. even if an aspect of that question is
not raised, in our judgment, that aspect may be urged before the
II°
High Court. The judgment of this Court in Scindia Steam Navigatlon Co. Ltd.'s case(1) does not only not lend any assistance to the
0) 42 l.T.R. 589
780
SUPREME C.OURT REPORTS
(1971] l S.C.R.
v~w taken by the High Court, but negatives that view.
In that
-case certain steamships belonging to the assessee Company were
lost during the World War II by enemy action. The Government
of India paid to the Company compensation which exceeded the
written down value of the steamships. The D~partment sought to
charge the excess amount to tax under the fourth proviso of s.
10(2)(vii) of the Jncome-tax Act, 1922 insertec! by the Income-tax
(Amendment) Act, 1946, which came into force'in the year of assessment.
The Income-tax Officer t,eld that the material date for
t!:ie purpose of the fourth proviso to s. 10(2)(vii) was the date when
the compensation~ was in fact received and therefore the amount
was assessable in the assessment year 1946-47. At the instance of
the Company the Tribunal referred the question whether the difference between the written down value and compensation was properly included in the total income for the assessment year 19464 7.
Before the High Court the Company for the first time raised
the contention that the fourth proviso to s. 10(2 )(vii) did not apply
to the assessment as it was not in force on April l, 1946 and the
liability of the Company had to be determined as on April· I,
1946, when the Finance Act, 1946 was brought into force.
The
Commissioner of Income-tax contended that the qu~stion did not
arise out of the order of the Tribunal within the meaning of s. 66
as it was not raised before nor dealt with by the Tribunal, and it
was not referred to the Court. The High Court overruled the objection. This Court held that the Higli Court had jurisdiction to
entertain the 'Company's contention raised for the first time before
it, that the fourth proviso to s. 10(2)(vii) did not apply to the assessment as the contention was within the scope of the qu~stion
as framed by the Appellate Tribunal and was really implicit therein.
The Court in that case held that the question as framed was comprehensive enough to cover the question of the applicability of the
fourth proviso to s. I 0(2)(vii) of the Income-tax Act.
Venkatarama Aiyar, J., observ~d at p. 6 I 2 :
"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 leadinl! to different points therein.
Such a
question might involve more than one aspect, requiring
to be tackled from different standpoints.
All that section 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 wa.1 undeT
issue, there is no· further limitation imposed by the section that the reference should be limited to those aspects
(I) 42 I. T. R. 589.
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C.I.'f. v. INDIAN MOLASSES (P) LT!l. (Shah, J.)
781
of the question which had oeen argued before the Tribunal.
1t 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 section 66( l) of the Act."
The second question raised in the present case, in our jud~
ment, permits an enquiry whether the amount claimed is an admissible allowance under s. 10(2)(xvJ. We are unable to hold that 1t
is restricted to an enquiry wheth~r the expendit.ure is of a capital
nature. The Tribunal did not consider whether the amount was
laid out or expended wholly and exclusively for the purpose of the
business of •.he Company. Expenditure is admissible as an allowance under s. J 0(2)(xv) 1f all tnc conditions prescribed thereby are
>atisfied and is authorised by s. l0(4A).
We are unable to hold
that the question framed and referred excluded an enquiry whether
the expenditure was wholly and exclusively laid out or expended
for the purpose of the business ()f the Company. Nor are we able
to hold that because before the Tribunal stress was not pointedly
laid upon the ingredients which enable an expenditure to be claimed and allowed, the question does not arise out of the order of the
Tribunal. The matter in dispute before the Tribunal was wheth~r
the Company was entitled to the allowance under s. 10(2){xv) of
the Indian lncome-tai- Act 1912. The ":"ribuna: considered whether the amount claimed to have been laid out or expended became expenditure within the meaning of s. I 0(2)\xv) on the death
of Harvey, and whether it was capital expenditure. They did not
consider whether the expenditure was laid out or expended wholly
and exclJsively for the purpose of the business of the Comr>any.
Since the Tribunal gave no finding on this part of the case; we
are unable to answer the question on the materials placed before
us.
The High Court was, in our judgment, in error in refusing
to allow the argument to be raised that the requirements of s.
10(2)(xv) were not satisfied, and the expenditure on that account
was inadmissible.
Two courses are now open to us : to call for a supplementary
statement of the case from the Tribunal; or to decline to answer
the question raised by the Tribunal and to leave the Tribunal to
take appropriate steps to adjust its decision under s. 66(5) in the
light of the answer of this Court. If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will, according to the decisions of this Court, (New Jehangir Vakil Mills
Ltd. v. Commission.er of Income-tax, Bombay North, Kutch and
Saurashtra( 1 ); Pet/ad Turkey Red Dye Worh Co. Ltd. v. Commissioner of Income-tax('): and Keshav Mills Co. Ltd. v. Commfrsioner of Income-tax, Bombav North. Ahmedabad('). be resCl) 37 I. T. R. 11
13) 46 I. T. R. 165.
14> I. T. R. 92(5. C.i
782
SUPREME COURT REPORTS
(1971 J I S.C.R.
tricted to the evidence on the record and may not be entitled tu
take additional evidence.
That may result in injustice. Jn the
circumstances we think it appropriate to decline to answer
the
question on the ground· that the Tribunal has failed to consider
and decide the question whether the expenditure was laid out or
e]!:pended wholly and exclusively for the purpose of the business of
the Company and has not considered all appropriate provisions· of
the statute applicable thereto. It will be open tu the Tribunai·to
dispose of the appeal ynder s. 66(5) of the Income-tax Act, 1922,
in light of the observations made by this Court after determining
the questions which ought to have been decided.
There will be no order as to costs in this appeal.
.V.P.S.
A
B