# COMMISSIONER 01' INCOME-TAX, DELHI AND RAJAS111AN v. TIU: :\1EWAR TEXTILE MILLS LTD

- **Citation:** [1966] 3 S.C.R. 34
- **Court:** Supreme Court of India
- **Decided:** 1965-12-10
- **Case number:** CIVIL APPELI.ATF. JURISDICTION : Civil Appeal No. 969 of 1964
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-01-income-tax-delhi-and-rajas111an-v-tiu-1ewar-textile-mills-ltd-3712
- **Pages:** 6

## Headnote

COMMISSIONER 01' INCOME-TAX, DELHI AND
RAJAS111AN
v.
TIU: :\1EWAR TEXTILE MILLS LTD.
December 10, 1965
IK. ScHBA RAo. J.C. SHAH ANDS. M. S1KRI, JJ.]
Income Tax Act, ( 11 vf 1922). s. 66( 1 )-Procedure for refertnce of
queslions of law by J'ribunal to l/igh Court-At the instance of asJU.Stt
Tribu11a/ an11exin1? frt•Jh dcx:111nenrs, not discussed, to statement of ca.ttPropriety of.
At the time of making an upplication lo the Income-tax
Appellate
Tribunal under s. 66( 1) of the Income-tax Act, 1922, to refer ce.W.
questions of law to the High Court, the asse~sce filed certain document&
as annexures to hi• application and the Tribunal attached these documeut&
to the Statement of Case.
There wa.• no mention of any of the documcol<
either in the Appellate order of the Tribunal or in the body of the Statement of Case.
The High Court decided
the questions referred to it ia
favour of the asses5ec.
On an appeal to thi' Court.
HELD : (i) The case must be remanded to the High Coun a• the
relevant facts were not clear, nor agreed upon by the parties.
(ii) II is not consistent with the advisory juri5diction of a High Uiurt
under the Act that the Appellate Tribunal should attach to the Statement
A
B
c
D
of Case document•. other than the proceeding<; of the Income-tax authoE
ritjes, which are not mentioned or discussed either in its own appellate
order or in the Statement ot Case, If the High Court were to decide any
di•pute concerning the interpretation of any such document, it would be
deciding question• not decided by the Tribunal and which the High Courl
is incompetent to decide under the A.ct [3 8 G, HJ
CIVIL APPELI.ATF. JURISDICTION : Civil Appeal No. 969 of
1964.
F
Appeal from the judgment and order, dated March 21, 1963
of the Rajasthan High Court in D. B. Civil Income-tax Ref. No. 41
of 1960.
A. V. Viswanatha Sastri, S. K. Aiyar, B. R. G. K. A char, and
R. N. Sachthey, for the appellant.
S. T. Desai, Z. S. Meeratival and Naunit Lal, for respondent.
The Judgment of the Coun was delivered by
G
Sikri, J. This appeal, by certificate granted under s. 66A(2)
of the Indian Income Tax Act, 1922, hereinafter referred to as
H
the Act, read with s. 261 of the Indian Income Tax Act, 1961, a
<lirected against the judgment of the Rajasthan High Court in a
'
'
•
..
.....__ __ _
•
. '
C.I.T. V. MEWAR MILLS (Sikri, J.)
35
A consolidated reference made to it by the Income Tax Appellate
Tribunal, Delhi Branch, under s. 66 (1) of the Act. This appeal
relates to the assessment year 1943-44 and the relevant question
with which we are concemed is as follows :-
"Whether the profit on the amounts received by the
B
assessee's bankers in British India as price of goods
sold by the assessee on railway receipts in the _names of
the consignees or as price of goods delivered ex-godown
Bhilwara was liable to tax under the Indian Income-Tax
Act?"
C
This question was referred at the instance of the appellant and
the item in dispute now before us is the item amounting to
Rs. 2,73,488, which was held not liable to taxation by the
Appellate Tribunal.
The question which arises in this appeal is
wltether the Tribunal was right. The first submission, however,
of Mr. A. V. Viswanatha Sastri, the learned counsel for the
D
appellant, is that the High Court has not dealt with this question
insofar as it relates to this sum. Mr. Desai, on the other hand,
·contends that the appellant has not appealed as far as this item is
concerned; and, therefore, before we attempt to answer the question
we must first see whether the appellant's appeal covers this item.
E
Mr. Desai refers us to the petition for leave to appeal to the
Supl'C'"1e Court, filed in the High Court, and says that there is no
express mention of the item of Rs. 2,73,488. He is right as far
as this is concerned, but the appellant apparently felt it was not
necessary to mention expressly this item.
Mr. Sastri poin1!! to
:r
paras 12 and 13 of the petition which read as follows:
G
H
"12. That on account of applying the pri

## Text

COMMISSIONER 01' INCOME-TAX, DELHI AND
RAJAS111AN
v.
TIU: :\1EWAR TEXTILE MILLS LTD.
December 10, 1965
IK. ScHBA RAo. J.C. SHAH ANDS. M. S1KRI, JJ.]
Income Tax Act, ( 11 vf 1922). s. 66( 1 )-Procedure for refertnce of
queslions of law by J'ribunal to l/igh Court-At the instance of asJU.Stt
Tribu11a/ an11exin1? frt•Jh dcx:111nenrs, not discussed, to statement of ca.ttPropriety of.
At the time of making an upplication lo the Income-tax
Appellate
Tribunal under s. 66( 1) of the Income-tax Act, 1922, to refer ce.W.
questions of law to the High Court, the asse~sce filed certain document&
as annexures to hi• application and the Tribunal attached these documeut&
to the Statement of Case.
There wa.• no mention of any of the documcol<
either in the Appellate order of the Tribunal or in the body of the Statement of Case.
The High Court decided
the questions referred to it ia
favour of the asses5ec.
On an appeal to thi' Court.
HELD : (i) The case must be remanded to the High Coun a• the
relevant facts were not clear, nor agreed upon by the parties.
(ii) II is not consistent with the advisory juri5diction of a High Uiurt
under the Act that the Appellate Tribunal should attach to the Statement
A
B
c
D
of Case document•. other than the proceeding<; of the Income-tax authoE
ritjes, which are not mentioned or discussed either in its own appellate
order or in the Statement ot Case, If the High Court were to decide any
di•pute concerning the interpretation of any such document, it would be
deciding question• not decided by the Tribunal and which the High Courl
is incompetent to decide under the A.ct [3 8 G, HJ
CIVIL APPELI.ATF. JURISDICTION : Civil Appeal No. 969 of
1964.
F
Appeal from the judgment and order, dated March 21, 1963
of the Rajasthan High Court in D. B. Civil Income-tax Ref. No. 41
of 1960.
A. V. Viswanatha Sastri, S. K. Aiyar, B. R. G. K. A char, and
R. N. Sachthey, for the appellant.
S. T. Desai, Z. S. Meeratival and Naunit Lal, for respondent.
The Judgment of the Coun was delivered by
G
Sikri, J. This appeal, by certificate granted under s. 66A(2)
of the Indian Income Tax Act, 1922, hereinafter referred to as
H
the Act, read with s. 261 of the Indian Income Tax Act, 1961, a
<lirected against the judgment of the Rajasthan High Court in a
'
'
•
..
.....__ __ _
•
. '
C.I.T. V. MEWAR MILLS (Sikri, J.)
35
A consolidated reference made to it by the Income Tax Appellate
Tribunal, Delhi Branch, under s. 66 (1) of the Act. This appeal
relates to the assessment year 1943-44 and the relevant question
with which we are concemed is as follows :-
"Whether the profit on the amounts received by the
B
assessee's bankers in British India as price of goods
sold by the assessee on railway receipts in the _names of
the consignees or as price of goods delivered ex-godown
Bhilwara was liable to tax under the Indian Income-Tax
Act?"
C
This question was referred at the instance of the appellant and
the item in dispute now before us is the item amounting to
Rs. 2,73,488, which was held not liable to taxation by the
Appellate Tribunal.
The question which arises in this appeal is
wltether the Tribunal was right. The first submission, however,
of Mr. A. V. Viswanatha Sastri, the learned counsel for the
D
appellant, is that the High Court has not dealt with this question
insofar as it relates to this sum. Mr. Desai, on the other hand,
·contends that the appellant has not appealed as far as this item is
concerned; and, therefore, before we attempt to answer the question
we must first see whether the appellant's appeal covers this item.
E
Mr. Desai refers us to the petition for leave to appeal to the
Supl'C'"1e Court, filed in the High Court, and says that there is no
express mention of the item of Rs. 2,73,488. He is right as far
as this is concerned, but the appellant apparently felt it was not
necessary to mention expressly this item.
Mr. Sastri poin1!! to
:r
paras 12 and 13 of the petition which read as follows:
G
H
"12. That on account of applying the principle of
accrual basis and allowing apportionment of profit
between the manufacturing and selling processes in the
ratio of 75% : 25% the revenue that would be lost to
the Department would be approximately Rs. 36,000.
13. That the point of law decided by this Hon'ble
Court while returning the answer to question No. 2,
namely, whether the liability to pay tax can be fastened
on the assessee on receipt basis or accrual basis is a
substantial question of law and is of great public and
private importance and would form important precedent
governing the numerous other cases. The tax effect ia
also of considerable value."
36
SUPREME COURT
REPOl\TS
(1966] 3 S.C.R.
Further, Mr. Sastri points out that the first seven paras of tho
petition which deal with the facts and the proceedings before the
Income Tax Authorities are general and cover the ~<j_id item of
Rs. 2,73,488; also the grounds of appeal, Nos. I and 2, are very
general and cover the item in dispute. It is true, as pointed out
by Mr. Desai, that the High Court in granting leave to appeal to
the Supreme Court did not expressly deal with this item at all,
but then the High Court was dealing with the question of law as
such and was not adverting to the facts in detail.
Be that as it
may, the appeUant has filed an appeal in respect of the assessment
year 1943-44 and the only possible question that can arise in this
appeal is regarding the disputed item of Rs. 2,73,488, and we
do not feel justified in accepting this technical objection and
debarring the appellant from urging that this item is taxable.
Now, coming co the merits of the submission of Mr. Sastri, we
find that the Rajasthan High Court has omitted to consider the
question of the taxability of this item.
This item was exempted
by the Appellate Tribunal.
In this connection the Appellate
Tribunal observed as follows :
" ... but the assessee would not be liable to tax in
respect of goods sold by the assessec to the purchasers
on railway receipts in the names of consignees.
In
respect of these goods, the delivery of the goods was in
Bhilwara, the goods were appropriated there and not in
British India and the title in the goods had passed in the
Indian State and not in British India.
The assessee
cannot, therefore, be assessed on the amounts received by
the assessee from consignees on railway receipts in the
names of the consignees. It is true that the consignees did
pay the price of the goods to the assessee's bankers in
British India but thereby the bankers in British India had
become the a[:enls of the consignees and not the agents
of the assessee. In this view of the matter the inclusion
of the receipts on railway receipts addressed to the consignees cannot be justified.
In the assessment years
1944-45 and 1945-46 none of the railway receipts wa<;
in the name of the consignees.
The sales were on
railway receipt' in the name of self or were in cash. It
was only in the assessment year 1943-44 that
the
railway receipts were in the name of the consi<?.nees and
they were to the tune of Rs. 2,73 ,488. The amount will.
therefore, be excluded from the total receipts of
Rs. 12,62,911."
A
I
'
B
c
•
D
F
G
..
H
•
C.I.T. v. MEWAR MILLS (Sikri, !.)
37
A
The High Court noticed exclusion of Rs. 2,73,488 in these
words:
"The Tribunal also found that it was only in the
assessment years 1944-45 and 1945-46 that sales were
effected by assessee on railway receipts in the names of
B
the consignees and that such sales amounted to
Rs. 2,73,488.
The Tribunal accordingly deleted from
the aggregate amount sales of Rs. 12,72,911 and
Rs. 2,73,488 obviously treating the amounts deleted as
not liable to tax."
c
D
E
F
G
Apparently the mention of 1944-45 and 1945-46 is a clerical
mistake and we should read it as 1943-44. Apart from the above
words, we do not find any reference to the figure of Rs. 2,73,488
in the rest of the judgment. Further, t)le main reasoning of the
High Court concerns the items of Rs. 1,14,687 in the year
1945-46 and Rs. 3,55,289 during the year 1946-47.
These
amounts had been received by the assessee by discounting hundies
with the Bharat Bank, Bhilwara, and the Rajasthan High Court
held that the assessee was liable to tax in respect of these items
not on receipt basis but on accrual basis. The item of Rs. 2,73,388
was not realised in Bhilwara by discounting of hundies but in
other circumstances.
Two courses are open to us in this appeal; either we should
on the material here on the record decide whether Rs. 2,73,488
is taxable or not or remand the case to the High Court for decision.
We have decided to take the latter course because the relevant
facts in respect of this item of Rs, 2, 73,488 are not clear and the
counsel for- the assessee and for the revenue have not been able to
agree upon the facts OR which we should decide this question.
We regret having to adopt the latter course because this ·appeal
concerns the assessment year 1943-44 and it is now 1965; but
under the circumstances we have no choice except to send the
case back to the High Court.
We may mention, however, that Mr. Desai contends before
us that the facts are clear and he relies on six documents which
are prin!OO in the paper book, namely :-
H
( 1) The Contract form-Annexure Ex. 'T';
(2) Copy of the postcard from Shiv Nath Radha
Krishna Somani, Beawar, to M/s Mewar Textile
38
(3)
( 4 I
SUPREMI!
COURT
REPORTS
[1966) 3 SCR
Mills, Bhilwara, dated March 7, 1942-Annexure
Ex. 'U';
Copy of the advice from Umedmal
Abheymal
Ajmer to Mewar Textile Mills, dated March 7,
1942-Anne:rnre Ex. 'V';
Copy of the despatch instructions from Shiv Nath
Radha Krishna Beawar to M/s Mewar Textile Mills
Ltd. Bhilwara, dated March 11, 1942; Annexure
Ex. 'W';
( 5) Copy of letter to M/ s Shivnath Radha Krishna
A
II
Beawar. dated March 12, 1942, Annexure Ex. 'X';
C
and
( 6) Copy of the Journal Entry in the Books of the
Mills of Rs. 9,000 Annexure Ex. 'Y'.
He invites us to treat these documents as a sample of the manner
in which the goods- were sent from Bhilwara, to the consignee in
British India and the amount of Rs. 2, 73,488 was received. But
we notice that these very documents were filed as annexures to
the assessee's application under s. 66( I) of the Act in respect
of questions other than question No. 2, which was referred by the
Tribunal at the instance of the appellant and, therefore, WO reel
a doubt whether these documents could safely be treated as relating
to the item of Rs. 2.73,488.
Before we conclude we must mention a matter of procedure.
The Appellate Tribunal at the instance of the assessee attached a
number of documents to the statement of the case, including the
six documents mentioned above, but we find no mention of these
documents either in the Appellate Order of the Appellate Tribunal
or in the body of the statement of the case. We feel that it is not
consistent with the advisory jurisdiction of a High Court under the
Act that the Appellate Tribunal should attach to the statement of
the case documents. other than the proceedings of the Income Tax.
authorities, which are not mentioned and discussed either in its
own appellate order or in the statements of the case.
Suppose a
dispute arises as to the interpretation of a document which is
annexed in the manner above mentioned.
If the High Court
d~cides the dispute it would be deciding questions not decided by
the Tribunal, and which the High Court would be incompetent to
decide. under the Indian Income Tax Act.
D
E
F
G
H
•
•
< • r
•
. .
•
•
C.I.T. V. MEWAR MII.I.S (Sikri, ].)
39
A
In the result we accept the appeal, set aside the order of the
B
High Court of Rajasthan as far as the assessment year 1943-44 is
concerned and remand the case to the High Court.
The High
Court will dispose of the reference in accordance with Jaw. In
view of the circumstances of the case, there will be no order as
to costs.
Appeal allowed.