# MRS. KUSUMBEN D. MAHADEVIA v. THE COMMISSIONER OF INCOME-TAX, BOMBAY

- **Citation:** [1960] 3 S.C.R. 417
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Civil Appeal No. 507 of 1957
- **Bench:** S. K. D.As, J. L. Kapur, M. Hiday.A.Tull.Ah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mrs-kusumben-d-mahadevia-v-the-commissioner-of-income-tax-bombay-1707
- **Pages:** 7

## Headnote

Income-tax-Reference-High Court's jurisdiction-If can decide
a question not decided by the Tribunal-Indian Income-tax Act, I922
(XI of I922), s. 66-The States (Taxation Concessions) Order, I949,
para. 4.
The appellant was a shareholder of a company known as
Mafatlal Gagalbhai and Co., Ltd. The Company with its registered office at Bombay was at all material times resident in British
India. It was also doing business in the former Baroda State and
used to keep its profits derived in that State with Mafatlal
Gagalbhai Investment Corporation, Navsari. In the year 1949
Mafatlal Gagalbhai and Co. Ltd. declared dividends out of profits
which had accrued partly in British India and partly in the
Indian State. , The appellant was assessed to income-tax on the
dividends earned by her. She did not bring those dividends into
British India and claimed the benefit' of para. 4 of the Merged
States (Taxation Concessions) Order. The Tribunal held that the
income did not accrue to the appellant in the Baroda State but
it did not decide the question whether she was entitled to the
bene:fits of the Taxation Concessions Order. The High Court on
a;reference to it held that para. 4 of the Taxation Concessions Order
did not apply to the assessee but it did not decide the other question as to where the income had accrued to the assessee. On
appeal· by special leave the appellant contended, inter alia, that
since the Tribunal had not gone into the question of the applicability to the assessee of the Concessions Order and had not expressed any opinion thereon, the High Court could m>t raise the question on its own and decide it :
'
Held, that the High Court exceeded its jurisdiction in going
outside the point of law decided by the Tribunal and deciding a
different point of law.
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 question of law not
arising out of such order.
New f ehangir Vakil Mills Ltd. v. Commissioner of Income-tax,
[1959] 37 I.T.R. II, .Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax, [1954] 26 I.T.R. 686, Commissioner of Incometax v. Breach Candy Swimming Bath Trust, [1955] 27 I.T.R. 279 and
Ismailia Grain Merchants Association v. Commissioner of Incometax, [1957] 31 I.T.R. 433, distinguished,
Mash Trading Co. v. Commissioner of Income-taxi [1956] 30
I.T.R. 388, considered.
March 30.
Mrs. /( 1'su1nben
D. JYI ~hadevia
v.
Comniissioner of
Inco1ne~tax,
Bombay
H ida yatullah J.
418
SUPREME COURT HEPORTS
[1960]
C1v1L APPELLATE JURISDICTION:
Civil Appeal
No. 507 of 1957.
Appeal by special leave from the order and judgment dated September 28, 1955, and February 20,
1956, of the Bombay High Court in Income-tax Refer·
ence No. 28 of 1955.
·
. ·
R. J. Kolah and I. N. Shroff, for the appell11nt.
C. K. Daphtary,
Solicitor . GenP-ral of
India,
R. Ganapathy Iyer and D. Gupta, for the respondent.
1960. March 30.
The Judgment of the Court was
delivered by
HIDAYATULLAH, J.-This is an appeal with the
special leave of this Court, and is directed against an
order dated tieptember 28, 1955, and a judgment dated
February 20, 1956, of the High Court of Bombay. By
the order, the High Court reframed a question referred
to it by the Appellate Tribunal at Bombay, which it
answered by its judgment.
Mrs. Kusumben D. Mahadevia (hereinafter referred
to as the assessee) who has filed this appeal, was, at
all material times, residing in Bombay. She was a
shareholder, holding 760 shares of Mafatlal Gagalbhai & Co., Ltd., Bombay.
For the assessment year
1950-51 (the previous year being the calendar year
1949), she was assessed to income-tax on a total income
of Rs. 1,50,765 which included a grossed-up dividend
income of Rs. 1,47,026. In the latter income was
included a sum of Rs. 47,120 being the dividends
declared by Mafatlal Gagalbhai & Co., Ltd., Bombay.
Mafatl

## Text

-
-
'
3 S.C.R.
SUPREME COURT REPORTS
417
MRS. KUSUMBEN D. MAHADEVIA
v.
THE COMMISSIONER OF INCOME-TAX,
BOMBAY.
(S. K. D.As, J. L. KAPUR and M. HIDAY.A.TULL.AH, JJ.)
Income-tax-Reference-High Court's jurisdiction-If can decide
a question not decided by the Tribunal-Indian Income-tax Act, I922
(XI of I922), s. 66-The States (Taxation Concessions) Order, I949,
para. 4.
The appellant was a shareholder of a company known as
Mafatlal Gagalbhai and Co., Ltd. The Company with its registered office at Bombay was at all material times resident in British
India. It was also doing business in the former Baroda State and
used to keep its profits derived in that State with Mafatlal
Gagalbhai Investment Corporation, Navsari. In the year 1949
Mafatlal Gagalbhai and Co. Ltd. declared dividends out of profits
which had accrued partly in British India and partly in the
Indian State. , The appellant was assessed to income-tax on the
dividends earned by her. She did not bring those dividends into
British India and claimed the benefit' of para. 4 of the Merged
States (Taxation Concessions) Order. The Tribunal held that the
income did not accrue to the appellant in the Baroda State but
it did not decide the question whether she was entitled to the
bene:fits of the Taxation Concessions Order. The High Court on
a;reference to it held that para. 4 of the Taxation Concessions Order
did not apply to the assessee but it did not decide the other question as to where the income had accrued to the assessee. On
appeal· by special leave the appellant contended, inter alia, that
since the Tribunal had not gone into the question of the applicability to the assessee of the Concessions Order and had not expressed any opinion thereon, the High Court could m>t raise the question on its own and decide it :
'
Held, that the High Court exceeded its jurisdiction in going
outside the point of law decided by the Tribunal and deciding a
different point of law.
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 question of law not
arising out of such order.
New f ehangir Vakil Mills Ltd. v. Commissioner of Income-tax,
[1959] 37 I.T.R. II, .Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax, [1954] 26 I.T.R. 686, Commissioner of Incometax v. Breach Candy Swimming Bath Trust, [1955] 27 I.T.R. 279 and
Ismailia Grain Merchants Association v. Commissioner of Incometax, [1957] 31 I.T.R. 433, distinguished,
Mash Trading Co. v. Commissioner of Income-taxi [1956] 30
I.T.R. 388, considered.
March 30.
Mrs. /( 1'su1nben
D. JYI ~hadevia
v.
Comniissioner of
Inco1ne~tax,
Bombay
H ida yatullah J.
418
SUPREME COURT HEPORTS
[1960]
C1v1L APPELLATE JURISDICTION:
Civil Appeal
No. 507 of 1957.
Appeal by special leave from the order and judgment dated September 28, 1955, and February 20,
1956, of the Bombay High Court in Income-tax Refer·
ence No. 28 of 1955.
·
. ·
R. J. Kolah and I. N. Shroff, for the appell11nt.
C. K. Daphtary,
Solicitor . GenP-ral of
India,
R. Ganapathy Iyer and D. Gupta, for the respondent.
1960. March 30.
The Judgment of the Court was
delivered by
HIDAYATULLAH, J.-This is an appeal with the
special leave of this Court, and is directed against an
order dated tieptember 28, 1955, and a judgment dated
February 20, 1956, of the High Court of Bombay. By
the order, the High Court reframed a question referred
to it by the Appellate Tribunal at Bombay, which it
answered by its judgment.
Mrs. Kusumben D. Mahadevia (hereinafter referred
to as the assessee) who has filed this appeal, was, at
all material times, residing in Bombay. She was a
shareholder, holding 760 shares of Mafatlal Gagalbhai & Co., Ltd., Bombay.
For the assessment year
1950-51 (the previous year being the calendar year
1949), she was assessed to income-tax on a total income
of Rs. 1,50,765 which included a grossed-up dividend
income of Rs. 1,47,026. In the latter income was
included a sum of Rs. 47,120 being the dividends
declared by Mafatlal Gagalbhai & Co., Ltd., Bombay.
Mafatlal Gagalbhai & Co., Ltd., is a private limited
Company with its registered office at Bombay. It was,
at all mater-ial times, 'resident and ordinarily resident'
in British India. It was also doing business in the
former Baroda State, and used to keep its profits
derived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari. In the year 1949 Mafatlal Gagalbhai & Co., Ltd., declared dividends out of
these accumulated profits by three resolutions, which
are reproduced :
25-3-1949. "That a further dividend of Rs. 17
per ordinary share free of income-tax for the year
1947 be and is hereby declared absorbing Rs. 4,29,250
·- -
..
3 S.O.R. SUPREME COURT REPORTS
419
and the same be payable in Navsari out of the
profits of the year I 947 lying at Navsari." ·
24-9-1949. "That a further dividend of Rs. 24
per ordinary share free of income-tax for the year
1948 be and is hereby declared absotbing Rs. 6,06,000
and the same be payable in N avsari out of the profits
of the year 1948 lying at Navsari with Messrs. M.G.
Investment Corporation Ltd. on or after 30th April,
1949."
24-9-1949. "Resolved that an Ad-interim dividend.of Rs. 21 per ordinary share free of income-tax
absorbing Rs. 5,30,250 be and is hereby declared
for the year 1949 out of the income of the Company
for the year 1949 remaining unbrought with Messrs.
M. G. Investment Corporation Ltd., Navsari, and
that ·the same be payable in N~vsari on or after
30th April, 1949." .
The assessee did not bring these dividends into
British India. She claimed the benefit of para. 4 of
the Merged States (Taxation Concession(?) Order, 1949
(hereinafter referred to briefly as the Concessions
Order) ; but the Tribunal held that the income did not
accrue to her in the Baroda State. The Tribunal
pointed out that the dividends were declared by Mafatlal Gagalbhai & Co., Ltd., out of its profits which had
accrued partly in, what was then called, British India
and partly in the Indian State. The dividend was
thus declared out of 'composite profits'. It further
pointed out that the assessee had paid for and acquired the shares of a Company in British India and was
thus holding an asset in British India, and that the
income was from that asset. The Tribunal, however,
at the instance of the assessee drew up a statement of
the case under s. 66(1) of the Indian Income-tax Act,
ana referred the following question to the High Court :
"Whether the net dividend income of Rs. 47,120
accrued to the assessee in the former Baroda State,
or whether it is income accrued or deemed to have
accrued to the assessee in British India ?"
When the reference was heard, the High Court was
of the opinion that the Tribunal ought to have decided
'and referred also the question whether the.Concessions
..
Mrs. Kusumben
D. M ai1adevia
v.
Commissioner of
Income-tax,
Bombay
Hidayat1tllah ].
Mrs. J(usumben
D. Mahadtvia
v.
Commissioner of
Income-tax,
Bombay
Hidayatullah ].
420
SUPREME COURT REPORTS
[1960]
Order applied to the assessee.
The High Court recognised the grievance of the assessee that no such
point was raised before the Tribunal. The High Court,
however, by its order dated September 28, 1955,
decided that there was no need to send the case back
for a supplemental statement, since all tho facts necessary to decide the two questions were before the
High Court. The High Court then reframed the question, as it said, to comprehend the two points of law
in the following words :
" Whether the assessee is entitled to any concession under the Merged States (Taxation Concessions)
Order, 1949, with regard to the net dividend income
of Rs. 47,120_?"
The reference then came up for final disposal on
February 20, 1956, and the High Court answered the
question in the negative, holding that para. 4 of the
Concessions Order did not apply to the assessee.
The
High Court did not decide where the income had
accrued to the assessee. Leave to appeal to this Court
was refused by the High Court, but the assessee
applied to this Court for special leave against both the
order and the judgment and obtained it, and the present appeal has been filed.
At the very outset, the assessee has questioned the
jurisdiction of the High Court to frame and deal with
a question of law not arising out of the order of the
Tribunal. The assessee points out that the Tribunal
had decided that the income had accrued in British
India. The assessee had challenged this part of the
decision, and if the Commissioner felt it necessary, he
should have obtained the decision of the Tribunal and
asked for a reference on the other point also.
Since
the Tribunal had not gone into the question of the
applicability to the assessee of the Concessions Order
and had not expressed any opinion thereon, the
asse~see contends that the High Court could not raise
the question on its own, and decide it. The assessee
strongly relies upon a decision of this Court in New
Jehangir Vakil Mills Ltd. v. Commissioner of Incometax ('). In that case, the Bombay High Court had
(r) [19,9J 37 I.T,R. II,
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-
3 S.C.R. SUPREME COURT REPOR.TS
4;21
directed the Tribunal to submit a supplementary statement of the case on points not arising from the. order
of .the Tribunal, and this Court held that the High
Court had no jurisdiction to do so. The learned counsel
for the Commissioner, on the other hand, contends
, that the question was the assessability of the assessee,
who claimed the benefit of the Concessions Order.
The main question was thus the applicability of the
Concessions Order, and the question of the accrual of
the income, whether in British India or in Baroda,
was merely ancillary. The latter question was,
according to the respondent, included in the first .
question, and the High Court was right when it
framed a comprehensive question and answered it in
the sequence it did. The respondent points out that
the High Court having held that the Concessions
Order did not apply, was not required to decide the
other limb of the question, as it became unnecessary
to do so.
In our opinion, the objection of the assessee is wellfounded.
The Tribunal did not address itself to the
question whether the Concessions Order applied to the
assessee. It decided the question of assessability on
the short ground that the income had not arisen in
Baroda but in British India. That aspect of the matter
has not been touched by the Bombay High Court.
The latter has,. on the other hand, considered whether
the Concessions Order applies to the assessee, a matter
not touched by the Tribunal. Thus, though the result
is the same so far as the assessment is concerned, the
grounds of decision are entirely different.
The High Court felt that the question framed by it
comprehended both the aspects and, perhaps it did.
But the two ·matters were neither co-extensive, nor
was the one included in the other. The question of
accrual of income has to be decided under the Incometax Act, and has but little to do with the Concessions
Order. That question can be adequately decided on the
facts of this case without advertence to the Concessions
Order. It cannot; therefore, be said to be either coextensive with or included in the decision of the
question actually considered by the High Court to wit,
whether the Oonceesione Order applied or not. If thi!i
~·
I
Kusumben
D. Mahadevia
v.
Commissioner of
I ncome-ta:r,
Bomb4y
H idayatullah J.
I960
Kusumben
D. Mahadevia
v.
Ccmmissioner of
Income-tax,
Bombay
Hidayatullah ).
422
SUPREME COURT REPORTS
[1960]
be so, it is manifest that the Tribunal decided something which stawls completely outside the decision of
the Bombay High Court. The High Court also
decided a matter which was not considered by the
Tribunal even as a step in the decision of the point
actually decided. The two decisions are thus strangers
to each other, though they lead to the same result.
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 oft he order
of the Tribunal. It does not confer jurisdiction on the
High Court to decide a different question of law not
arising out of such order. It is possible that the
same question of law may involve different app.
roaches for its solution, and the High Court 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. It must not be
an entirely different question which the Tribunal
never considered.
The respondent attempted to justify the action
taken by contending that the decision of the question
of the accrual of the income with reference to the
place of accrual implied the applicability of the
Concessions Order.
We do not agree. If this were
so, there would be no necessity to frame the question
again. Indeed, the High Court itself felt that there
were two limbs of the question of assessability, and
reframed the question to cover both the limbs.
Where the High Court went wrong was in not deciding both the limbs but one of them and that too,
the one not decided by the Tribunal. The resulting
position can be summed up by saying that the High
Court decided something which the Tribunal did not,
and the Tribunal decided something which the High
Court did not. This is clearly against the provisions
of s. 66.
The respondent referred to Scindia Steam
Navigation Go. Ltd. v. Commissioner of Income-tax('),
Commissioner of Income-tax v. Breach Gandy Swimming Bath Trust (') and I smailia Grain Merchants
Association v. Commissioner of Income-tax (3). They
(1) [1954] 26 I.T.R. 686.
(2) [1955) 27 I.T.R. 279.
(3) [19,57) l' l.T.R. 43»
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-
-
....
3 S.C.R. SUPREME COURT REPORTS
423
were all decisions of the same Court, and arose in
different circumstances. In two of them, the question
was wide enough to take in a fine of reasoning not.
adopted by the Tribunal, and in the third, the question was widened by deleting a reference to a section,
when another section was also material. They were
not cases where the issues of law as decided by the
Tribunal and the High Court were entirely different,
which is the case here. The Punjab High Court has
taken a contrary view in Mash Trading Co. v. Commissioner of Income-tax (1 ).
For the reasons given above, we are of opinion that
theHigh Court exceeded its jurisdiction in going outside
the point of law decided by the Tribunal and deciding
a different point of law. The order of the High
Court will, therefore, be set aside, and the case -will
be remitted to the High Court to decide the question
framed by the Tribunal. In view of the fact that both
the assessee and the Commissioner pointed out the
anomaly to the : High Court and the question was
reframed in spite of this, the costs of this appeal shall
be costs in the reference to be heard by the High
Court, and will abide the result.
Appeal allowed.
Case remitted.
M/S. BURN & CO. LTD. & OTHERS
v.
THEIR EMPLOYEES.
(P. B. GAJENDRAGADKAR, K. N. W ANCHOO and
K. c. DAS GUPTA, JJ.)
Industrial Dispute-Incentive bonus-Scheme-E~clusion of
clerical and subordinate staff-Propriety-Power· of Industrial
Tribunal.
There can be no doubt from the point of view of Economics
that the clerical and subordinate staff of an industry like its'
manual workers contribute to its production and there can,
therefore, be no reason for exciuding them wholly from the benefits of a scheme of incentive bonus.
The fact that the clerical
staff are paid dearness allowance at a higher scale can be no
reason for their exclusion.
'
(1) [1956] 30 I.T.R. 388.
Kusumben.
.D. Mahadevia ·
v.
Commissioner of
Income-tax,
Bombay
H idayatullah J.
r960
March30.