T. L. YENKATARAMA AIYAR, J. : - (1.) THE following Judgment of the court was delivered by
(2.) THESE two appeals arise out of proceedings taken under S. 34, Income-tax Act 1922, hereinafter referred to as the Act, to bring to tax a sum of Rs. 27,30,094.00 received by the appellant during the account year 1942-1943. The appellant is a public limited Company incorporated in 1921 under the provisions of the Gwalior Companies Act in what was then the independent State of Gwalior, and carries on business in the manufacture and sale of textiles. Its registered office is at Gwalior, and it is a non-resident Company for the purposes of the Act. Its managing agents are Birla Brothers, Ltd., which is a private limited Company registered in British India. The point in dispute in these proceedings is whether sums of money received by the appellant during the account year 1942-1943 and aggregating to Rs. 27,30,094.00 are liable to be taxed under the Act. The appellant admits that it received those monies during that period, and further that they represent profits made by it on certain 271 forward contracts in Jarilla cotton. But it contends that these contracis were entered into at Gwalior with three brokers vis.,. Lashkar Trading. Company, Banwarilal shiv kumar and Meghraj Mundra, that the agreements between the parties specially provide that the goods are to be delivered and prices paid at Gwalior, that, in fact, the sum of Rs. 27,30,094.00 is made up of differences paid in settlement of the contracts at Gwalior that thus the profits accrued and were received wholly at Gwalior, and that, in consequence, they were not liable to be charged under the Act. The Department, on the other hand, contends that the contracts which resulted in the profits of Rs. 27,30,30,094.00 were as a fact entered into by the managing, agents of the appellant with the fires of jwaladutt Kishanprasad at Bombay, that those profits accured in Bombay, and that they were therefore taxable under the Act It is common ground that the sum of Rs. 27,30,094.00 received by the appellant as profits analysis traceable to the firm of jwaladut Kishanprasad, and camefrom it. But it is contended the appellant that this cannot settle the question whether the profits ac crued to it in Bowhay. According to it, the course of dealings relating' to these transctions was as follows: 'The appellant placed its orders for the ssle or purchase of cotton with the three brokers mentioned above in Gwalior. They in then' turn placed orders for the sale or purchase of the same quantity of goods with the firm J.R. Pillani Gwalior. This firm is a branch office of Jwaladutt Kishan prasad of Bombay and. communicated the orders received from the brokers to its head office in Bombay' when the contracts were finally settled on the clearing day day and movies became payable Jwaladutt Kishanprasad of Bombay sentt the same to J. R. Pillani , Gwalior which paid them over to the brokers, who in their turn paid the amounts due to the appellant under their contracts. Now, the contention of the appellant is that the contracts under whch the profits sought to be taxed accrued were not entered into by it with jwaladutt Kishanprasad, Bombay, that the sum of Rs. 27,30,094.00 though traceable to that firm was due from that firm not to it but to the three brokers in Gwalior, a.nd that, in consequencer, it was not liable to be taxed under the Act. If the facts were as stated by the appellant, then there can be no doubt that the sum of Rs. 27,30,094.00 received by it as profits is not liable to be taxed under the Act, because no portion thereof would then have accured or arisen in British India. The question there fore really is whether those facts have been established. The income-tax officer who investigated the matter held by his order dated 23/03/1948 that the forward contracts in question had really been entered into by the managing agents of the appellant at Bombay, that the profits thereon had accrued at Bombay, and that the the three brokers of Gwalior were mere dummies who had been put up to conceal the true character of the transactions. This order was confirmed by the Appellate Assistant Commissiouer on appeal on 14/11/1949. The appellant took the matter in further appeal to the Appellate tribunal which by its order dated 2 6/07/1950 remanded the case for further investigation of the true part played by the several intermediaries, who formed the links in the chain of contracts beginning with those of the appellant with the three brokers of Gwalior and of the payments ending with those by the brokers to the appellant. Pursuant to this order, the Appellate Assisstant Commissioner took fresh evidence, and examined as many as seven witnesses, and on a careful and detailed analysis of their evidence, held in his report dated 17/08/1951 that the forward contracts in question had been entered into with Jwaladutt Kishanprasad by G. D. Birla and R. D. Birla in person or by phone at Bombay, and that the contract notes with the three brokers were bogus transactions On this report, the appeal came up for further hearing before the Appelate tribunal, which by its, order dated 28/02/1952 agreed with the conclusions of the appellate Assistant Commissioner and affirmed its decision. 'The appeallant then aplied under S.66(1) of the Act for refering certain questions for the opinioin of the court ,but the said application was dismissed by the tribunal on 13/06/1952 on. the ground that the points raised were pure questions of fact. The appellant then applied to the High court of Bombay under S. 66 (2) of the Act to direct the tribunal to refer certain questions to the court and that application was dismissed by Chagla C. j. and Bhagwati. J., on 6/08/1952, and against that order, Civil Appeal No, 204 of 1954 has been preferred on leave granted by this court. By way of abundant caution the appellant also applied for and obtained special leave to appeal against the order of the tribunal dated 28th February 1952, and that is Appeal No. 163 of 1958. Mr. Kolah, the learned counsel for the appellanmt, stated that as the matter arising for decision both the appeals is the same, he would address one 272 argument with reference to both of them. Likewise, this judgment will govern both of them. At the very outset, the question calls for nil answer, does any question of law arise on the order of the tribunal ? It is only if it does, that the decision of the tribunal will be open to consideration by the court under S. 68 of the Act. Stating the same proposition in a different form, it that decision is one of fact turning on the appreciation of evidence, this court would not interfere with it in appeal under Art. 136 of the Constitution. Now, the point in dispute in these proceedings is whether the sum of Rs. 27,30,094.00 received by the appellant as profits in 1942-1943 is taxable under the Act, and that, in turn, depends on whether the forward contracts which resulted in these profits were made at Gwalior as contended by the appellant or at Bombay as held by the tribunal. That would clearly be a question of fact, and the decision of the tribunal thereon would not be liable to be challenged in these proceedings. Counsel for the appellant does not dispute this position, but he contends that a finding of the tribunal even on a question of fact would be erroneous in law, if there is no evidence whatsoever to support it or if it is perverse. This question was quite recently considered by this court in Meenakshi Mills, Madurai v. Commissioner of Income-tax, Madras, 1956 S C R 691 : A I R 1957 S C 49), and the law was thus stated: "The position that emerges on the authorities may thus be summed up : (1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the tribunal is open to reference to the court under section 66 (1). (2) When the point for determination is a mixed question of law and fact, while the finding of the tribunal on the facts found is final its decision as to the legal effect of that finding is a question of law which can be reviewed by the court. (3) A finding on a question of fact is open to attack under section 63 (1) as erroneous in law when there is no evidence to support it or if it is perverse. (4) When the finding is one of fact, the act that it is itself an Inference from other basic facts will not alter its character as one of fact." Mr. Kolah contends that the finding of the tribunal in the present case is erroneous in law in that there is no evidence to support it, and even if there is some, the finding based thereon is perverse, and that that is a contention which falls within proposition No. 3 stated above, and is open to him. That renders it necessary that we should examine the record, not indeed with a view to decide whether the tribunal has properly appreciated the evidence, or whether its conclusion is a right one to come to on that. evidence, but with a view to see whether there is evidence to support its finding and whether that finding is one which could, on that evidence, be reasonably reached. Approaching the question from this standpoint, we pose the question, what is the evidence in support of the finding of the tribunal that the forward contracts which resulted in the profits of Rs. 27,30,094.00 were made in Bombay and not in Gwalior? The answer given is that there is the direct testimony of J. R. Pillani and that is supported by circumstantial evidence. Pillani is the proprietor of both the firms of Jwaladutt Kishanprasad at Bombay and of J. R. Pillani at Gwalior, and his evidence must obviously he important, because whether the contracts of the appellant were really entered into at Gwalior or at Bombay must to a considerable extent depend on whether the transactions of these two firms which are linked up with those contracts so as to form a chain, are genuine. Pillani stated in his evidence that the forward contracts in question were made with the firm of Jwaladutt Kishanprasad at Bombay by G. D. Birla and R. D. Birla sometimes in person and sometimes over the phone, that the profits earned thereon were at first paid to Cotton Agents, Ltd., which is a concern of the Birlas at Bombay but that later on, it was considered advisable that no payment should be made at Bombay, and that accordingly these amounts were returned by the Cotton Agents, Ltd., to the Bombay firm and then sent at the direction of the Birlas, to J. R. Pillani, Gwalior. J. R. Pillani also deposed that at the beginning of the transactions it had not been decided in whose name they should stand, and that, therefore, when the contracts were originally entered in the books of Jwaladutt Kishanprasad, the names of the parties were left blank, and it was later on that the name of J. R. Pillani, Gwalior was written. If this evidence is accepted, as it has been by the Income-tax authorities, then ths contracts in question must be held to have been made at Bombay, and the interposition of J. R. Pillani, Gwalior would be a mere device for concealing that fact.
(3.) MR. Kolah was highly critical of this evidence. He contended that it ran counter to all the other evidence in the case, and was thoroughly worthless and even demonstrably false in material particulars. He argued that there were serious infirmities in this evidence, and that there had been little or no consideration thereof by the tribunal, and that its order was accordingly bad as based on misdirections and non-directions. We shall now consider these contentions. 273 The most important of them relates to the statement of Pillani that at the earlier stages of the dealings, profits were paid to the account of Cotton Agents Ltd., Bombay, and that it was only later on that they were credited to J. R. Pillani, Gwalior. To follow the argument of MR. Kolah on this point, it is necessary to mention that J. R. Pillani had JUDGEMENT_270_AIR(SC)_1959Html1.htm Now, what is important for the purpose of the present discussion in the above extract is the entryrelating to Rs. 9,50,000.00. If this sum represents profits in cotton transactions, that would strongly corroborate the evidence of Pillani that the profits of the present transactions were paid first to Cotton Agents, Ltd., Bombay, and that it was only later on by way of afterthought that they were credited to J. R. Pillani, Gwalior after making the necessary adjustments. Therefore, cross-examination on behalf of the appellant was directed to showing that this amount had nothing to do with cotton contracts. Pillani was asked whether J. R. Pillani, Bombay had current account with Cotton Agents, Ltd. He answered "No". Then, Mahadeo Singhji, Director of the Cotton Agents Ltd., was examined and he stated that Rs. 9,50,000.00 was paid to the credit of the current account which J. R. Pillani, Bombay had with the Cotton Agents, Ltd., and that it did not represent profits in cotton contracts. Now, Mr. Kolah vehemently argues that this evidence proves that the story of payment first to Cotton Agents, Ltd., and then a transfer of the same to J. R. Pillani, Gwalior cannot be true, that the evidence of Pillani on this point was clearly false, but that the tribunal made no reference to it in its order. Now, it is true that J. R. Pillani had current account with Cotton Agents Ltd., and that this amount of Rs. 9,50,000.00 was paid to the credit of that account. When this was put to him, he stated by way of explanation : "The account you referred looks like current account but it was in relation to dealing in shares with them and not exactly current account." It may be that the previous statement of Pillani that he had no current account was inaccurate, or it may be it was false. But is two businesses in Bombay, one in cotton in the name of Jwaladutt Kishanprasad and another in shares in the name of J. R. Pillani, Bombay. Now, the position revealed in the accounts of Jwaladutt Kishanprasad with reference to the present contracts will appear from the following abstract of transactions standing in the name of J. R. Pillani, Gwalior that very material ? What is relevant to the point under consideration is whether Rs. 9,50,000.00 which was credited to Cotton Agents Ltd., related to cotton transactions or share business. Now, it was proved that the sum of Rs. 2,00,000.00 paid to Cotton Agents Ltd., on 4/2/1943 and Rs. 2,50,000.00 paid to it on 5/2/1943 were paid not by J. R. Pillani, Bombay but by Jwaladutt Kishanprasad, and that clearly shows that they related to cotton contracts and not share transactions. It is to be noted in this connection that while the payments dated 4/2/1943 and 5/2/1943, were directly by Jwaladutt Kishanprasad to Cotton Agents Ltd., the payments of Rs. 5,65,000.00 on 1/3/1943 and Rs. 4,62,750.00 on 3/3/1943, were by Jwaladutt Kishanprasad in favour of J. R. Pillani, Bombay which in its turn passed them on to Cotton Agents Ltd. The story which these entries tell is that the transactions were originally between Jwaladutt Kishanprasad ana Cotton Agents Ltd., then from 1/3/1943 they were between Jwaladutt Kishanprasad and Cotton Agents Ltd., through J. R. Pillani, Bombay, and on 11/3/1943 Cotton Agents Ltd., and J. R. Pillani, Bombay, were eliminated and J. R. Pillani, Gwalior was brought on the scene. These are facts from which the tribunal could reasonably find that the transactions took place as stated by Pillani. It was argued for the appellant that Gaurishanker Narandas, the accountant of Jawaladutt Kishanprasad, did not support the version given by Pillani. That is not quite correct. He stated at first that the dealings in question were entered in the accounts with the names left blank, but that later on, the name of J. R. Pillani, Gwalior was entered. He also deposed that some payments were made to Cotton Agents Ltd., and they 274 were received back through J. R. Pillani, Bombay and sent to J. R. Pillani Gwalior. When he was cross-examined on a later date, he said that what he had deposed to was nut from his personal knowledge but from the information given by J. R. Pillani. But he also repeated that he had seen blanks in the accounts, and they were subsequently filled up. To this extent, his evidence does support J. R. Pillani. ;