Steel Rolling Mills of Hindusthan (P.) Ltd. vs Commissioner of Income Tax

Sen, J.—The assessee has made this application u/s 256(2) of the income tax Act, 1961 (''the Act'') for referring two questions of law to this Court. The rule was issued on 13-9-1988 in respect of two following questions, stated to have arisen out of the order passed by the Tribunal :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in remanding the matter to the income tax Officer for fresh consideration to assess the rental income received by the assessee either under the head ''Income from house property'' or ''Profits and gains of business or profession'' ?

Whether, the Tribunal was misdirected in law in not holding that the income was assessable under the head ''Business'' on the facts as found by the Commissioner of income tax (Appeals) in his order dated 25-3-1988 ?

It appears that the Tribunal has merely remanded the case back to the ITO. The reasons for remanding the case by the Tribunal have been stated in its order dated 20-12-1985. In paragraph 8, the Tribunal in its order held that:

It is necessary to examine all the relevant factors including the objections and memorandum of association of the assessee-company, the period for which the tenancies have been created, whether the tenancies were in existence earlier before the assessment year under consideration, whether the tenancy continued thereafter also, etc. So we are of the opinion that the matter should be remitted back to the ITO for fresh consideration. As such we set aside the order of the lower authorities on this point and remit the matter back to the ITO for fresh decision. During such hearing the assessee shall be permitted to adduce further evidence on the point.

The Tribunal in its earlier part of the order has stated that the assessee has a factory at premises No. 47, Hide Road, Calcutta; during the previous year relevant to the assessment year under consideration, i.e., 1979-80 the assessee-company realised rent of Rs. 6,86,247.60 from several tenants to whom godown was let out. From the materials on record it is not clear whether one godown was let out to all these tenants or separate godowns were let out to all these tenants. The assessee-company treated this amount of Rs. 6,86,248 as business income but the ITO treated the same as income from house property.

Before the Commissioner (Appeals) the argument advanced on behalf of the assessee was that the receipts were earned from hiring out surplus vacant place to transport concerns and unutilised godowns at the assessee''s factory premises at 47, Hide Road, Calcutta to a number of commercial concerns for their business use. It was pointed out that the entire premises was a commercial asset of the assessee for its business purposes and originally it was used entirely by the assessee for its own business. Finding some surplus space in the areas and in the godowns, the assessee was hiring out space or godown to other commercial establishments, depending upon their needs and there was no question of permanent tenancy. This contention of the assessee was accepted by the Commissioner. But the Commissioner did not investigate the facts stated on behalf of the assessee, while making the order. The Tribunal while making the order of remand had made the observations that :

We have carefully examined the decisions relied upon by the authorised representatives of the parties and considered the materials on record, facts and circumstances of the case. In our opinion, the decisions in the case of Sri Luxmi Silk Mills Ltd. (supra), Karanpura Development Co. Ltd., S.G. Mercantile Corpn. (P.) Ltd., Premchand Jute Mills Ltd. and Katihar Jute Mills (P.) Ltd. are not strictly applicable to the instant case as the facts are different. In most of the aforesaid decisions the entire mill was let out after suspension of business. But admittedly in this case the business of the assessee-company is carried on as usual in the factory premises and only one or more godowns which are not required by the assessee-company have been let out. On the other hand the decision in the case of Tinsukia Dev. Corporation Ltd. is an authority for the proposition that whatever the nature of the activity or the nature of the income, the income of an assessee has to be classified and computed under the specific heads. In our opinion, this is a question of fact which requires consideration.

It has been argued by Dr. Pal that the Tribunal is entitled to remand a case but it must be done only in exercise of judicial discretion. In the instant case, the order of remand has been made without keeping in mind the judicial principles for making an order of remand. He relied on several decisions in support of his contentions, to which I need not refer at this stage.

On behalf of the Department our attention has been drawn to several decisions for the proposition that where a power of remand has been exercised, the Court will be reluctant to interfere with that.

There is no dispute that the Tribunal has jurisdiction to pass an order of remand. There is also no dispute that this power should not be exercised arbitrarily. It is also true that while making an order for remand, the Tribunal should not lay down any wrong principle of law.

But in this case, in our view, the Tribunal has not laid down any principle of law. The Tribunal has directed certain facts to be found out for the purpose of computation of the income. No specific principle of law was laid down by the Tribunal. Several decisions were cited before the Tribunal. The Tribunal held that those cases were distinguishable on facts. The principles laid down in those decisions will have to be followed by the ITO if the facts of the case are similar. The effect of the order of remand is that the ITO will now have to find out the facts.

We are unable to hold that the Tribunal has laid down any principles of law which must be applied irrespective of the findings of fact. Whether the principles laid down in the decision in the cases of Karanpura Development Co. Ltd., S.G. Mercantile Corporation (P.) Ltd. and Premchand Jute Mills Ltd. as also Katihar Jute Mills (P.) Ltd. will apply will depend on the findings of fact that will have to be made by the ITO on remand.

In that view of the matter, since we are of the view that the Tribunal has not laid down any principles of law to be followed by the ITO but has only remanded the case back to him for a fresh decision, this reference application should not be entertained.

The rule is, thus, discharged.

There will be no order as to costs.

Jain, J.

I agree.