B R SONS LIMITED Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF ALLAHABAD
B. R. SONS LIMITED, KANPUR
COMMISSIONER OF INCOME-TAX, U.P.
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DESAI, J. -
(1.)THE assessee, at whose instance the Income-tax Appellate Tribunal, Allahabad Bench, has submitted this statement of case that the court, earned income as managing agent of two companies. It is said to have earned into agreements made for adequate consideration with third parties, namely, Sri R.R. Morarka and Sri S. D. Garg, within the meaning of section 12a of the Indian Income-tax Act for sharing the managing agency commission in the proportion of 7 to 1. During the assessment proceedings it claimed that it was liable to be a assessed only on 7/8th of the income received as the managing agency commission from each of the two companies, the remaining 1/8th income being liable to be assessed in the hands of the third parties but it filed no declaration of this fact (and consequently the question of its producing sufficient evidence to prove the facts contained in the declaration did not arise). THE Income-tax Officer assessed it on the whole of the managing agency commission. On appeal, the Appellate Assistant Commissioner held that though the a assessee was not entitled to the benefit of section 12a (on account of its failure to file the declaration and proving the facts contained in it) it was entitled to deduct the money pad to this third parties out of its commission under section 10(2)(xv) as money laid out or expended wholly and exclusively for the purpose of carrying on its business. On appeal by the department the Tribunal restored the order of the Income-tax Officer. THE finding of the Income-tax Officer that the assessee had failed to fulfill the condition required for the benefit of section 12a was not challenged before the Tribunal; it was not contended before it that the condition had been fulfilled or that the failure to fulfill it was due to inadequate opportunity being allowed to it by the Income-tax Officer. THE Tribunal proceeded on the basis that the condition had not been fulfilled and that consequently the assessee was not entitled to the benefit of section 12a. As regards the benefit of section 10(2)(xv) the Tribunal did not go into the question whether, on the facts the money paid to the third third parties was liable to e deducted under section 10(2)(xv). On the other hand, it refused to go into that question, holding that a managing agent, who has interest into an a agreement for consideration to share the managing agency commission with a third party can get the benefit of only section 12a and is not entitled to fall back upon section 10(2)(xv) in the event of his failing to fulfill the condition required for the benefit of section 12a. For this decision it relied upon Jhajharia Brothers Ltd. v. Commissioner of Income-tax. In other words, the Tribunal held that if by fulfilling the condition mentioned in section 12a the assessee could get the benefit of its provision, it was not entitled to claim the benefit of section 10(2)(xv) if otherwise it would be entitled to it. So it set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. Subsequently an application was made by the a assessee under section 35 for rectification of the order; it contended that the Tribunal had not dealt in its order with its contention that it had not been given adequate opportunity by the Income-tax Officer to fulfill the condition mentioned in section 12a. THE Tribunal had no hesitation in rejecting this application, stating categorically that this point was never argued before it and that consequently it was not referred to in its order. THE assessee then applied for reference of the question of law arising out of its order to this court under section 66(1) and it submitted a statement of the case inviting this court to answer the following question :
(2.)WHETHER, on the facts in the circumstances of the case, the said sum of Rs. 23,750 was an admissible deduction in terms of section 10(2)(xv) ?
Subsequently the assessee moved this court to call for a further s tantamount of the case under section 66(4) and this court called for a further statement; in reply the Tribunal submitted another statement of the case inviting this court to answer the following question :
WHETHER, in the circumstances of the case, the Tribunal is justified in law in deciding the appeal against the assessee without recording a finding whether the assessee was or was not entitled to the benefit of section 12a of the Income-tax Act in respect of the sum of Rs. 23,750 ?
As regards the question originally framed by the Tribunal it is obvious from what we have stated above that it simply does not a rise out of the order passed by it. It never went into the merits of the claim that the money paid to the third parties was deductible under section 10(2)(xv) and never held that the it was not so deductible. Instead of going into the merits of the claim it refused to do so on the ground that the a assessee was not entitled to the benefit of that provision, it being entitled solely to the benefit of section 12a. We must, therefore, refuse to answer the question. It was suggested by Sri Brijlal Gupta that we should reframe the question; we cannot reframe the question in order to substitute quite a different question. The jurisdiction to frame a question referred by the Tribunal is distinct from the jurisdiction conferred by section 66(2) to call for a question refused to be stated by the Tribunal and the High Court cannot exercise the former jurisdiction in order to a achieve the object of the latter. If a Tribunal refers one question and refuses to refer another question, it is not open to the High Court to reframe the former question as to substitute in its place the latter question. The power of amendment cannot be exercised so a to nullify the effect of refusal. The power of amendment is to be exercised only in order to ring out the essence of the question already referred; on account of defect in the language used, the essence of the question referred may be lost and the power of amendment is to be exercised to avoid this. But it cannot be exercised in order to bring into existence quite a different question with the Tribunal expressly or impliedly refused to refer. When the Tribunal is required to refer several questions and it refers only one of them it amounts to its refusing to refer the others and the High Court can call for any of them only by exercising the jurisdiction conferred by section 66(2). The real question that a arose out of the Tribunals order was whether the assessee could be denied the benefit of section 10(2)(xv) on the ground that it would have been entitled to the benefit of section 12a if it had fulfilled the required condition. The questioned related by the Tribunal (in its original statement) is so different from it that we have no hesitation in saying that it never intended to refer it. Unless we are able to say that it intended to refer it though the question drafted by it we cannot amended the latter so as to bring into existence the former as the latter question is so entirely different from the former that we cannot say that the Tribunal intended to refer it by actually referring the other. We are supported by Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax. If the assessee wanted the other question to be formulated, its remedy was to move this court under section 66(2) for mandamus requesting the Tribunal to formulate it but it has not done so and the period of limitation for its doing so has expired. The question formulated by the Tribunal in its order dated February 22, 1957, is, therefore, returned unanswered.
Coming to the other question we fail to understand it. There is no doubt that it does not arise out of the order of the Tribunal. It is not the assessees own case that it arises out to it. It is quite different from the question that was ought by Sri Brijlal Gupta to be answered by us. We, therefore, refuse to answer the question formulated by the Tribunal in the supplementary s tenement dated April 1, 1960.
In the result, we return the reference unanswered. The assessee is to blame for the futility of the proceedings before us and must pay to the Commissioner of Income-tax his costs which we assessee at Rs. 200. Counsels fee is a assessed at Rs. 200. We direct that a copy of this judgment shall be sent under the seal of the court and the signature of the Registrar to the Income-tax Appellate Tribunal as required by the Section 66(5) of the Act.
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