M/s. Bharath and Co. vs Commr. of Income Tax, Kerala

P. Govindan Nair, J.—The Income Tax Appellate Tribunal has drawn up a statement of the case and referred the following question to this Court acting u/s 66(1) of the Indian Income Tax Act, 1922: Whether the Appellate Assistant Commissioner had jurisdiction to entertain the appeals in question u/s 30(1A) of the Indian Income Tax Act, 1922, notwithstanding the fact that the assessee had not paid the taxes in respect of the relevant years?

The order of the Income Tax Appellate Tribunal dated with a series of appeals pertaining to the assessment years 1125 M. E. and 1950--''51 to 1954-''55. The assessee had adjusted in each of the years in its books amounts as interest due to persons not resident in the taxable territories. These amounts were added back by the assessing authority in each of those years and the assessments were made by including the above sums. The assessment for the first of those years was under the Travancore Income Tax Act, 1121 M. E., and those for the subsequent years 1950-''51 to 1954-''55 were in accordance with the provisions of the Indian Income Tax Act, 1922. 2. Thereafter the Income Tax Officer issued demand notices u/s 29 of the Indian Income Tax Act claiming tax on the various amounts adjusted towards interest in each of those years. Appeals from such demands were taken by the assessee before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner by his order dated 22-11-1957 directed the Income Tax Officer to make certain enquiries and to pass appropriate orders in the light of the conclusions reached after such enquiry. The Department appealed before the Income Tax Appellate Tribunal and it was contended that the Appellate Assistant Commissioner erred in entertaining the appeals against levy of tax u/s 18(3B) of the Indian Income Tax. Act on the ground that an appeal to the Appellate Assistant Commissioner u/s 30(1A) lies only if the disputed tax u/s 18(3B) has been paid. The above sections were quoted in the appeals relating to the assessment years 1950-''51 to 1954-''55 and the corresponding sections 22(4) & (5) and Section 43(2) of the Travancore Income Tax Act, 1121 M. E. were relied on in the appeal from the assessment for the year 1125 M. E. The Tribunal by its order dated 16-2-1959 accepted the contention of the Department and held that the Appellate Assistant Commissioner erred in entertaining the appeals.

By way of an application u/s 66(1) of the Indian Income Tax Act, the assessee prayed that a statement of the case be drawn up and certain questions of law said to arise out of the Tribunal''s order be referred to the High Court and the Tribunal has drawn up a statement of the case and has referred the above question for our decision.

It was never contended by the assessee before the Tribunal that the appeals the assessee filed before the Appellate Assistant Commissioner were not u/s 30(1A); neither did he contend in the application for reference, that any question should be referred to the High Court on the basis that the appeals before the Appellate Assistant Commissioner were not u/s 30(1A). However, apparently at the time of the hearing of the application u/s 66(1), the counsel for the assessee sought reference to the following question as well:

Whether in an appeal u/s 30(1) denying liability under the I. T. Act, payment of tax arising u/s 18(3B) is a condition precedent if it is proved that no sum by way of interest has been paid to non-resident.

This was not allowed by the Tribunal and in paragraph 10 of the agreed statement of the case it is mentioned that the representative of the assessee at the time of the hearing of the appeal before the Tribunal did not resist the same on the ground that the appeals before the Appellate Assistant Commissioner were u/s 30(1) and not u/s 30(1A). The Tribunal has also stated that the above question sought to be raised did not find a place in the reference application filed by the assessee within the time limit prescribed. The Appellate Tribunal took the view that in the circumstances the above question of law did not arise out of the Tribunal''s order.

Apparently realising the difficulty with which the assessee is confronted, an application--C. M. P. No. 6893 of 1961--has been filed before us by the assessee praying that this Court be pleased to reframe the question referred by deleting the words "under Section 30(1A) of the Indian Income Tax Act, 1922." It is clear from Section 66(1) of the Indian Income Tax Act that only questions of law arising out of the Tribunal''s order can be referred to the High Court. The Supreme Court in a recent judgment, after discussion of the case law on the subject, summed up its conclusions thus in Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., :

(1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.

(2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order.

(3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.

(4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the finding given by it.

It is evident from conclusion No. 4 that the question sought to be raised now by referring the question referred cannot be said to arise out of the order of Tribunal. There is not even any finding given by the Tribunal from which this question can be said to arise. We are, therefore, of the view that the question now sought to be raised is not one arising out of the Tribunal''s order and are unable to allow the application of the assessee for reframing the question referred. As we said earlier, the assessee had also not applied before the Tribunal u/s 66(1) praying that any such question as he seeks to raise now may be referred to the High Court. Even if his prayer at the time of the hearing of the application u/s 66(1) is considered to be an oral application, assuming such an application is tenable, the prayer in that application has been negatived by the Tribunal in passing its order u/s 66(2) before this Court for directing the Tribunal to refer any other question that referred to us by the Tribunal. For these reasons we feel compelled to deal only with the question that has been referred to us by the Tribunal. The question referred to us necessarily implied that the appeals before the Appellate Assistant Commissioner were u/s 30(1A). On that basis, the only conclusion possible is the one reached by the Tribunal in its order that the appeals before the Appellate assistant Commissioner were incompetent. We answer the question referred to us in the negative. In the circumstances of the case, we make no order as to costs.