# COMMISSIONER OF INCOME-TAX, PUNJAB v. INDIAN WOOLLEN TEXTILE MILLS

- **Citation:** [1964] 5 S.C.R. 427
- **Court:** Supreme Court of India
- **Decided:** 1963-11-18
- **Case number:** Civil Appeal No. 96 of 1963
- **Bench:** A.K. Sarkar, M. Hidayatullah, J.C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-punjab-v-indian-woollen-textile-mills-2985
- **Pages:** 5

## Headnote

Income Tax-Tribunal ignores essential evidence-Refusal
to state case-Power of High Court-Income-tax Act, 1922(11 of
1922), ss. !SC & 66(1) (2).
'Eldee', one of the branches of the respondent had advanced
a loan to another concern, 'Castle'. The respondent claimed
under s. I SC of the Income Tax Act, exemption from tax in respect
of 6 % of the capital employed in 'ElcJee' as a newly established
undertaking and sought to include in the computation of the
capital so employed the amount advanced to 'Castle'. The Incometax Appellate Tribunal directed inclusion of the amount advanced
to 'Castle' in the computation of capital invested for the purpose
of s. !SC .. The Commissioner's application under s. 66(1) of the
Act to the Tribunal to refer a question which arose out of the order
of the Tribunal was rejected and his petition under s.66(2) for
an order directing the Tribunal to state the case and refer it to
the High Court was also dismissed.
The question in dispute before the Revenue Authorities was
whether 'Castle' was a branch of the assessee. The Appellate
Assistant Commissioner thought that the same eight persons
were partners in these two undertakings and that the constitution
of both the undertakings being the same, 'Castle' could not be
regarded as a separate entity. The Tribunal disagreed with that
view relying upon only one circumstance that in the assessment
for the year 19Sl-S2 the income from 'Castle' had not been computed and included in the assessment of the respondent.
Held : Under the Income-tax Act it is for the Tribunal to
decide all questions of fact: the High Court has the power merely
to advise the Tibunal on questions of law arising out of the order
of the Tribunal.
In so advising the
High Court must
accept the findings of the Tribunal on matters of appreciation
of evidence. But the refusal of the Tribunal to state a case for
the opinion of the High Court, on the view that a question of law
does not arise out of the order is not conclusive. The High Court
has the power to call upon the Tribunal to state the case if in its
view a question of law arises out of the order of the Tribunal,
and also if the Tribunal has misdirected itself in law in arriving
at its findings. It is not open to the court to discard the Tribunal's
finding of fact, if there is some evidence to support the finding
of the Tribunal on a question of fact, even if on a review of the
evidence the court might have arrived at a difficult conclusion.
It must however appear that the Tribunal had considered evidence covering all the essential matters before arriving at its con1963
. November 18
428
SUPREME COURT REPORTS
[1964]
1963
clusion. If the conclusion of the Tribunal is based upon some
evidence ignoring other essential matters it cannot be regarded
Commissioner of as a finding not giving rise to a question liable to be referred to the
Income-tax,
Court.
·
Punjab
(ii) The conclusion of the Tribunal suffers from a double
infirmity: it assumed the only fact on which its conclusion was
v ·
founded and ignored other relevant matters on which the Appellndian Woollen late Assistant Commissioner relied. The Tribunal had therefore
Textile Mills misdirected itself in law in arriving at its finding, and in refusing
to require the Tribunal to state the case and to refer it, the High
Court was in error.
Shah J.

## Text

5 S.C.R.
SUPREME COURT REPORTS
427
COMMISSIONER OF INCOME-TAX, PUNJAB
v.
INDIAN WOOLLEN TEXTILE MILLS
(A.K. SARKAR, M. HIDAYATULLAH AND J.C. SHAH, JJ.)
Income Tax-Tribunal ignores essential evidence-Refusal
to state case-Power of High Court-Income-tax Act, 1922(11 of
1922), ss. !SC & 66(1) (2).
'Eldee', one of the branches of the respondent had advanced
a loan to another concern, 'Castle'. The respondent claimed
under s. I SC of the Income Tax Act, exemption from tax in respect
of 6 % of the capital employed in 'ElcJee' as a newly established
undertaking and sought to include in the computation of the
capital so employed the amount advanced to 'Castle'. The Incometax Appellate Tribunal directed inclusion of the amount advanced
to 'Castle' in the computation of capital invested for the purpose
of s. !SC .. The Commissioner's application under s. 66(1) of the
Act to the Tribunal to refer a question which arose out of the order
of the Tribunal was rejected and his petition under s.66(2) for
an order directing the Tribunal to state the case and refer it to
the High Court was also dismissed.
The question in dispute before the Revenue Authorities was
whether 'Castle' was a branch of the assessee. The Appellate
Assistant Commissioner thought that the same eight persons
were partners in these two undertakings and that the constitution
of both the undertakings being the same, 'Castle' could not be
regarded as a separate entity. The Tribunal disagreed with that
view relying upon only one circumstance that in the assessment
for the year 19Sl-S2 the income from 'Castle' had not been computed and included in the assessment of the respondent.
Held : Under the Income-tax Act it is for the Tribunal to
decide all questions of fact: the High Court has the power merely
to advise the Tibunal on questions of law arising out of the order
of the Tribunal.
In so advising the
High Court must
accept the findings of the Tribunal on matters of appreciation
of evidence. But the refusal of the Tribunal to state a case for
the opinion of the High Court, on the view that a question of law
does not arise out of the order is not conclusive. The High Court
has the power to call upon the Tribunal to state the case if in its
view a question of law arises out of the order of the Tribunal,
and also if the Tribunal has misdirected itself in law in arriving
at its findings. It is not open to the court to discard the Tribunal's
finding of fact, if there is some evidence to support the finding
of the Tribunal on a question of fact, even if on a review of the
evidence the court might have arrived at a difficult conclusion.
It must however appear that the Tribunal had considered evidence covering all the essential matters before arriving at its con1963
. November 18
428
SUPREME COURT REPORTS
[1964]
1963
clusion. If the conclusion of the Tribunal is based upon some
evidence ignoring other essential matters it cannot be regarded
Commissioner of as a finding not giving rise to a question liable to be referred to the
Income-tax,
Court.
·
Punjab
(ii) The conclusion of the Tribunal suffers from a double
infirmity: it assumed the only fact on which its conclusion was
v ·
founded and ignored other relevant matters on which the Appellndian Woollen late Assistant Commissioner relied. The Tribunal had therefore
Textile Mills misdirected itself in law in arriving at its finding, and in refusing
to require the Tribunal to state the case and to refer it, the High
Court was in error.
Shah J.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 96 of 1963.
Appeal by special leave from the judgment
dated October 13, 1960, of the Punjab High Court
in Income-tax Case No. 21 of 1958.
K.N. Rajagopala Sastri and R.N. Sachthey, for the
appellant.
A. V. Viswanatha Sastri and N.N. Keshwani,
for the respondent.
November 18, 1963. The Judgment of the Court
was delivered by
· SHAH J.-M/s Indian Woollen Textiles Mills
Amritsar-hereinafter
called
'the
assessee' - had
at different places in India, branches one of which
was an industrial undertaking conducted in the name
of Eldee Velvet and Silk Mills---<:alled for the sake
of brevity 'Eldee'. "Eldee" had advanced Rs. 3,21,460
to another concern, the Bombay Fine Worsted Manufacturers' Castle Mills-hereinafter called 'Castle'. In
the assessment year 1951-52, the assessee claimed
under s. 15C of the Indian Income-tax Act,1922,
exemption from tax in respect of 6 % of the capital
employed in 'Eldee' as a newly established undertaking and sought to include in the computation of
the capital so employed Rs. 3,21,460 advanced to
'Castle'.
The Income-tax Officer, Special
Circle
Amritsar, and the Appellate Assistant Commissioner
rejected the claim. But the Income-tax Appellate
Tribunal modified the assessment and directed inclusion of the amount advanced to 'Castle' in the
computation of capital invested for the purpose of
'
5 S.C.R.
SUPREME COURT REPORTS
429
s. 15C. An application submitted under s. 66(1)
of the Indian Income-tax Act to the Tribunal to refer
1963
a question which it was contended by the Commis- Commissioner 01
sioner arose out of the order of the Tribunal was
Income-tax
rejected and the petition of the Commissioner under
Punjab
s. 66(2) for an order directing the Tribunal to state
v.
the case and refer it to the High Court was also dis- Indian Woollen
missed. With special leave the Commissioner has Textile Mills
appealed to this Court.
The question in dispute before the Revenue
authorities was whether the business called 'Castle'
at Bombay was a branch of the assessee. The Appellate Assistant Commissioner rejected the claim
of the assessee to include the amount of Rs. 3,21,460
in the capital employed in the undertaking 'Eldee',
because in his view there were in these two undertakings the same eight partners with a share of -/2/-
(two annas) each, and that the constitution of both
the undertakings being the same, 'Castle' could not
be regarded as a separate entity. The Tribunal
disagreed with the view of the Appellate Assistant
Commissioner, relying upon only one circumstance
viz., that in the assessment for the year 1951-52 the
income from 'Castle' had not been computed and included in the assessment of the assessee.
It did
not consider the other questions whether the constitution and ownership of the two businesses "were
the same". The High Court declined to require
the Tribunal to state the case holding that the finding
of the Tribunal was one of fact as it was based on
the inference arising from the non-inclusion by the
Income-tax Officer in the assessment in question of
the income of 'Castle' and that "the factor taken
into consideration by the Appellate Tribunal in
coming to the conclusion, it did," was a relevant
factor.
Section 66(2) invests the High Court with jurisdiction to require the Appellate Tribunal to state a
case and to refer it, if the Appellate Tribunal has
refused to state the case on the ground that no question
of law arises, and the High Court being approached
Shah J.
430
SUPREME COURT REPORTS
[1964]
1963
by the aggrieved party within the period of Iimita-
--
tion prescribed, is not satisfied about the correctnes&
Commissioner of of the decision of the Appellate Tribunal refusing
Income-tax,
to state the case. Under the Income-tax Act it is
Punjab ·
for the Tribunal to decide all questions of fact: the
v.
High Court has the power merely to. advise the
Indian Woollen Tribunal on questions of law arising out of the
Textile Mills order of the Tribunal. In so advising the High
Court must accept the findings of the Tribunal on
Shah J.
matters of appreciation of evidence. But the refusal
of the Tribunal to state a case for the opinion of the
High Court, on the view that a question of law does not
arise out of the order is not conclusive. The High
Court has the power to call upon the Tribunal to state
the case if in its view a question of law arises out
of the order of the Tribunal. Such a question may
arise out of the findings of the Tribunal, and also
if the Tribunal has misdirected itself in law in arriving
at its finding.
It is not open to the Court to discard
the Tribunal's finding of fact, if there is some evidence to support the finding of tJ;ie Tribunal on a
question of fact, even if on a review of the evidence
the Court might have arrived at a different conclusion. It must however appear that the Tribunal
had considered evidence covering all the essential
matters before arriving at
its conclusion. If the
conclusion of the Tribunal is based upon some evidence ignoring other essential matters, it cannot be
r.egarded as a finding not giving rise to a question
!table to be referred to the Court.
Non-inclusion of the income of 'Castle' in the
assessment of the assessee may have been a relevant
circumstance, but its effect had to be considered in
the light of other circumstances on which the Appellate
Assistant Commissioner had relied.
Moreover,
reliance placed by the Tribunal upon the single circumstance on which its decision was founded had proceeded
on an assumption that in the previous year to the
year of assessment 1951-52, 'Castle' had carried on
business and had earned income. The observations
made by the Appellate Assistant Commissioner about
•
f -
..
5 S.C.R.
SUPREME COURT REPORTS
431
'Castle' being separately assessed at Bombay in the
1963
status of a registered firm apparently refer to assess-
--
ment of that business in subsequent years and not Commissioner of
in the year of assessment 1951-52. The conclusion
Income-tax,
of the Tribunal
therefore suffers from a double
Punjab
infirmity: it assumes the only fact on which its conv.
clusion is founded and ignores other relevant matters Indian Woollen
on which the Appellate Assistant Commissioner reTextile Mills
lied in support of his conclusion. The Tribunal
has therefore misdirected itself in law in arriving at
its finding, and in refusing to require the Tribunal
to state the case and to refer it, the High Court was,
in our view, in error.
The appeal is therefore allowed and the proceedings are remanded to the High Court with a direction
to proceed according to law. Costs in this appeal
will be costs in the High Court.
Appeal allowed and Case
remanded.
R.P. KAPUR
v.
UNION OF INDIA AND ANR.
(P.B. GAJENDRAGADKAR, K. SUBBA RAO, K.N.
WANCHOO, J.C. SHAH AND RAGHUBAR DYAL, JJ.)
Civil Service-Member of former Secretary of State's Service
suspended by Governor pending criminal proceeding-Validity
of order-Rule, if ultra vires-A// India Services (Discipline
and Appeal)
Rules,
1955,
r.7-Constitution of India,
Art.
314-Government of India
Act,
1935,
ss.241,
247-Civil
Services (Classification, Control and Appeal) Rules, rr. 49, 56Fundamental Rules, r.53-Indian Administrative Service (Recruitment) Rules. 1954, r.3-India, (Provisional Constitution) Order,
1947, Art.7(1).-Indian Independence Act, 1947, s. 10
The appellant joined the Indian Civil Service in 1939 and was
posted in the province of Madras. After the transfer of power
under the Indian Independence Act on August 15,1947, he was
Shah J.
1963
November 19