THAKKAR, J. - (1.) THE question of law as to whether a contribution made to a municipality by a company for providing a pipeline through the municipal land for the disposal of the effluents discharged by the company so as to guard against health hazards to the citizens is a revenue expenditure (as contended by the assessee) or a capital expenditure (as contended by the revenue) gets elbowed out for the time being (for being dealt with later) for reasons which will come to the surface presently. (1) An exercise in futility is a 'must and the Appellate Tribunal should be required to state the case and refer the suggested question of law to the High Court when the High Court's powers under s. 256(2) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), are invoked either by the assessee or by the revenue. (2) And this 'must' has an option less content, even if the view taken by the Tribunal giving rise to the suggested question of law, is unimpeachable on merits and is wholeheartedly endorsed by the High Court. (3) We can agree with the opinion formed by the Tribunal after and only after we require the Tribunal to state the case and again regret the parties (we have already heard them at this stage of issuing the 'rule', but that is not enough. In other words we must rehear them once again after the case is formally stated and we formally rehear them, and at this stage the 'rule' must be made absolute as a matter of course. These three propositions, we must assent to, if we are to aside to the request of requiring the Tribunal to state a case and refer the suggested question of law to this court. We feel no hesitation, or entertain no misgiving on the score, and negative all the three proposition. We propose to give or reasons for doing so, as also for concluding that the opinion formed by the Tribunal, in regards to the question of law suggested by the applicant, is unexceptionable.
(2.) WE propose to settle this seminal question at the threshold at this juncture before we enter upon a discussion on the question of law which the applicant persuaded the Tribunal to refer to the High Court but failed in his attempt. Under sub -s (1) of s. 256, the Appellate Tribunal is enjoined to refer the case to the High Court upon any question of laws arising out of its order. The expression employed is : 'the Appellate Tribunal shall....... draw up a statement of case and refer it to the High Court.' Notwithstanding the fact that the expression 'shall' has been employed the courts have taken the view that it is not incumbent upon the Tribunal to invariable make a reference to the High Court merely upon it being shown that a question of law arises out of an order passed by it in appeal, (1) if the point is concluded or covered by a decision of the Supreme court; or (2) if the High Court of the concerned State has upheld or sustained the view taken by the Tribunal in an earlier matter and the question is not pending in the Supreme Court from an appeal carried by the aggrieved party from the said decision; or (3) if it is merely academic and has no impact on the validity of the order passed by it; or (4) if it is frivolous or patently unarguable. For the moment we want to highlight the difference in the language employed by the Legislature in regard to the power conferred on the High Court to require the Appellate Tribunal to state the case and refer the same to it for it opinion as envisaged by sub -s. (2) of s. 256 of the Act, as contra distinguished from the language employed by the Legislature in the aforesaid provision. So far as sub s. (2) of s. 256 of the Act is concerned, it is enjoined that the High Court 'may' if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, upon the power under the said provision being invoked. The meaningful works in which the provision concerned is engaged in the Act, clearly, in the first place, show that the High Court has a 'discretion' in the matter as is indicated by the expression 'may' employed by the Legislature in adverting to the powers of the High Court to call for a refrain as contra distinguished from the expression 'shall' employed by the Legislature in adverting to the obligation cast on the Tribunal to refer a question of law upon the Tribunal being required to do so by ways of an application under sub -s. (1) of s. 256 of the Act. In the second place what stares one in the eye is the use of the expression 'if it is not satisfied with the correctness of the decision of Appellate Tribunal'. The High Court has, therefore, to apply its mind to both these aspects unless it is expected to mechanically grant an application invoking the powers of the High Court under sub -s. (2) of s. 256 of the Act. Whether or not the High Court should exercise the power liberally, almost for the asking of it, without attaching too much importance to the dimension as regards the discretion invested in the High Court (the expression used being 'may' and not 'shall' unlike sub -s. (1) of s.256 and without regard to the consideration as regards the correctness or otherwise of the decision to the Appellate Tribunal, is not a question which can be resolved in an unrealistic manner unmindful of the existing burden of arrears of cases of various categories in the high Court, which has almost brought the machinery of law to a grinding halt. So much so, that the citizens who are victims of serious injustice have to wait for a number of year (if they do not depart from the world meanwhile) before their causes come up for hearing. Then there are appeals and further appeals (which cannot be avoided) during the tendency of which even those citizens who have succeeded, are deprived of the fruits of the litigation by reason of stay orders that may be granted by the appellate courts. Every unworthy cause which is admitted in the queue of causes awaiting decisions results in greater delay postponing the day of deliverance for the genuine victims of injustice. We cannot shut our eye as to the aforesaid realities of life and live in a world of make -believe. Under these circumstances the power under s. 256(2) of the Act cannot be exercised in disregard of the mandate of Parliament which enjoins that the High Court : (1) exercise the discretion taking into account the pros and cons of the matter on sound principles, and (2) is also aware of the mandate of Parliament to do so provided only if it is not satisfied with the correctness of the decision of the Appellate Tribunal. On first principles, therefore, on a plain reading of sub -s. (2) of s. 256 of the Act, the High Court cannot be asked to require the Appellate Tribunal to state the case and refer the same to it merely because a question of law arises. The High Court must exercise its discretion on principles and in the light of its satisfaction as regards the correctness or otherwise of the decision of the Appellate Tribunal. Since there are a number of authorities, which buttress the view which has commended to us, we deem it proper to advert to these decision albeit briefly.
(3.) IT was some 28 years back, as early as on September 14, 1953, that a Full Bench of the Bombay High Court in Mangaldas N. Varma v. CIT : [1954]25ITR175(Bom) , expressed a similar view in the context of the relevant provisions contained the Taxation on Income (Investigation Commission) Act (XXX of 1947) in s. 8(5) of the said Act which is in pari materia with sub -s. (1) of s. 256 of the Act and which enjoins that the Commissioner may be required to refer to the High Court any question of law arising out of an order passed by him of the specified nature. In the context of this provision, Chagla C.J., speaking for the Full Bench, negatived the contentions that if it was shown that the question of law did arise, the Commissioner was bound to refer the question to the High Court regardless of, (1) however frivolous it was, (2) however insupportable it was, and (3) however unarguable it was, merely because such a question such a question of law did arise. The opinion was expressed by him that, (1) if the court finds that the question of law answers itself, or (2) that it is patently unarguable, there is no reason why the time of the Commissioner or of the court should be wasted in asking the Commissioner to refer to the High Court question of law. 'Ingenuity of lawyers', says Chagla C.J. (p. 191) 'will always suggest questions of law arising out of the findings of the Commissioner. It is only when the court is satisfied that a question of law arises and that it requires consideration by the court that the court would direct the Commissioner to arise a question of law.' Needless to say that the aforesaid statement of law is made in the context of the duty cast of the Commissioner to make a reference to the High Court upon being required to do so (which corresponds to sub -s. (1) of s. 256 of the Act), whereas we are concerned with the power of the High Court to require the Tribunal to refer a question to it under sub -s. (2) of s. 256 of the Act, which itself confers powers upon the High Court with a rider to use its discretion in a judicial manner (the expression used is 'may') and upon the High Court not being satisfied with the correctness of the decision of the Tribunal. It is, therefore, evident that we are on much firmer footing in the view that we are taking. The test laid down by the Full Bench can usefully be applied in exercising the discretion conferred by sub -s. (2) of s. 256 of the Act, when the powers of the High Court are invoked in this behalf, provided the High Court is not satisfied with regard to the correctness of the decision of the Tribunal.;