CHAKRAVARTTI, J. - (1.) THIS is a reference under s. 66(1) of the Indian IT Act by which the Calcutta Bench of the Tribunal has asked for the opinion of this Court on the following question of law :-- "Whether in the facts and circumstances of this case, the Tribunal was right in disallowing Rs. 2,00,000 as a deduction under s. 10(2)(xv) of the Indian, IT Act."
(2.) I shall, have to say something presently about the scope of the question but before doing so, I should like to state the facts in outline and the course which the proceedings have taken. The assessee is a Banking Company carrying on business at, among other places, Calcutta and Allahabad. On the 15th of March, 1946, it executed a deed by which it purported to create a trust for the payment of pensions to members of its staff. The deed declared that a pension fund had been constituted and established. It then recited that a sum of Rs. 2,00,000 had already been made over to three persons who were referred to as the " present trustees" and proceeded to state that the fund would consist in the first instance of the said sum of Rs. 2,00,000 and that there would be added to it such further contributions as the Bank might make from time to time though it would not be bound to make such contributions. In the course of the accounting year 1946-47, the Bank made a further payment of Rs. 2,00,000 to this fund, and in its assessment for the asst. yr. 1947-48, it claimed deduction of that amount under s. 10(2)(xv) of the IT Act on the ground that it was an item of expenditure laid out or expended wholly and exclusively for the purposes of its business. We were informed that no similar claim had been made in the earlier assessment in respect of the initial payment. The claim, when it was made in the assessment for 1947-48, was put forward in the form that the money had been paid to a fund constituted under an irrevocable trust and the contention apparently was that by the provisions of the deed, the Bank had bound itself irrevocably to provide for pensions for members of its staff and since the payment had been made under those provisions, it was allowable as an expenditure and a business expenditure. On the claim being made in that form, the ITO examined the provisions of the trust deed and came to the conclusion that by it the Bank had not bound itself to pay any pensions or to make any payment at all. He held further that the payment was "entirely voluntary and ex-gratia and more in the nature of a capital payment to the fund," and so could not be regarded as an allowable deduction in the Bank's assessment. The assessee then appealed to the AAC and before that officer its representative took the somewhat strange course of relying entirely on certain instructions contained in the Income-tax Manual. The AAC held that those instructions were of no avail to the assessee company, inasmuch as it had retained an effective control over the fund in respect of the management and payment of the pensions. He held further that, in any event, the deduction could not be allowed by reason of the prohibition contained in s. 10(4) (c): of the Act inasmuch as no arrangement had been made for the deduction at source of tax from payments that might be made out of the fund. The assessee thereafter appealed to the Tribunal and once again relied upon the irrevocable trust. On behalf of the Department it was contended that the trust was void, because the beneficiary had not been indicated with reasonable certainty and, further, that the deduction could not be claimed inasmuch as the Bank had retained the control of the fund in its own hands by reserving the right to nominate all the trustees. It was also urged that s. 10(4)(c) of the Act was a bar to the claim. The Tribunal upheld the first two objections but said nothing about the third. Thereafter the assessee made an application for a reference to this Court of three questions of law, one of which asked in a broad form whether deduction of the amount concerned was allowable under s. 10(2)(xv), another put in issue the true construction of the trust deed and, the third questioned the view taken by the AAC of s. 10(4)(c) of the Act. The CIT objected to the inclusion of the third question on the ground that it did not arise out of the Tribunal's order, inasmuch as the Tribunal had not dealt with it at all. In the ultimate event, the Tribunal referred the question in the form I have already read. On those facts the first question that arises is, what is the scope of this reference? In view of the wide terms in which the question has been framed, one possible view is that all considerations relevant to s. 10(2)(xv) which arise out of the facts of the case can and ought to be gone into by this Court. The other view is that the question does not ask whether the deduction claimed is allowable or disallowable in any circumstances under s. 10(2)(xv), but only whether the Tribunal was right in rejecting the claim on the grounds it did.
(3.) ALTHOUGH at the end of the hearned the learned Counsel for both parties agreed that we should limit ourselves to the questions dealt with by the Tribunal, there was some discussion at the Bar as to the scope of the High Court's jurisdiction in such cases. Both sides referred to the wide language in which the question had been expressed. Mr. Mitter, on behalf of the assessee, while he did not ask us to consider any question other than the validity of the trust, suggested at one stage of his argument that we should at least add a rider to our answer to the effect that, whether affirmative or negative, it would not conclude the question of the assessability of the amount concerned in either way. That course, he contended, we should adopt in the interests of justice. In my opinion, it is not proper to overlook the fact that the jurisdiction of the High Court upon a reference under s. 66(1) of the IT Act is purely advisory, that the sole task of the Court is to answer the question actually referred on the case stated and that it is no part of its duty or right to give further advice or to set about raising other questions and proceedings to decide them. Oftener than not, questions are framed in such a way as to ask whether a particular order is warranted by a particular section of the IT Act. As is well-known, questions which may conceivably arise under any, section of the Act are legion and it would be intolerable if the High Court, in dealing with a reference, was called upon, and took it upon itself, to consider and decide all such questions. In my view, the proper course for the High Court to adopt is to limit itself severely to the questions arising out of the order of the Tribunal and to proceed on the view that only those questions arise out of the order which have been dealt with by it and that of such questions again, those only should be considered and answered by the High Court which have been actually referred. It must certainly be conceded that the High Court may re-frame a question referred in order to clarify its meaning or to bring the real controversy to the surface ; but it cannot and ought not to re-settle the issues, as it were, and add some questions to those referred whether on the ground that they were dealt with by the Tribunal or on the ground that though not so dealt with, they arise out of the facts of the case. If the Tribunal fails to make a proper reference or refers a question in an imperfect or a partial form, the Act provides a remedy to the party affected and he can, on making out a proper case, compel the Tribunal to refer the question he desires to be referred. When such remedy has not been availed of, the High Court, in my view, ought to take the question referred as it stands and give its opinion only on that question on which its opinion had been sought. In dealing with a reference, it is not revising the assessment itself but only answering a particular question or questions. Accordingly, no question of doing justice between the parties in a general sense arises, although the question or questions referred will be justly, fully and properly answered. I am aware that because of a difference in language between s. 66(1) which speaks of questions of law " arising out of such order" and s. 66(5) which speaks of questions " raised by the case" and because of some uncertainty as to whether the word "case " means the whole assessment case or the case stated, two opposite trends of judicial opinion have grown up, one favouring the view that all questions of law arising out of the facts of the case can and ought to be gone into in a reference, irrespective of whether they were dealt with by the Tribunal or not, and the other insisting that the jurisdiction of the High Court is limited to the questions actually referred. The recent decision of the Bombay High Court in Madanlal Dharnidharka vs. CIT, Bombay (1948) 16 ITR 227, is an example of the former view, while the latter view is reflected in the decision of the Madras High Court in the case of Abboy Chetty and Co. vs. CIT, Madras (1947) 15 ITR 442 : ILR 1948 Mad 249. The Privy Council has had occasion more than once to deprecate the practice of departing from the strict terms of the question referred. [See for example, CIT, Bihar and Orissa vs. Maharajadhiraj Kameshwar Singh (1933) 1 ITR 94 at 107 and National Mutual Life Association of Australasia vs. CIT, Bombay Presidency (1936) 4 ITR 44 at 53]. In a third case, Sir Rajendra Narayan Bhanja Deo vs. CIT, Bihar and Orissa (1940) 8 ITR 495 Lord Justice Luxmoore, delivering the judgment of the Board, observed that although the question actually referred did not arise, but some other question might emerge with regard to the assessee's liability to income-tax in respect of the same income, it would be clearly contrary to their Lordships' practice to attempt to formulate any such question even if they had before them the materials for so doing. These cases may perhaps be distinguished on the facts, and the case last cited, it is true, has reference only to the practice of the Privy Council. But it so happens that the question came to be considered recently by a Division Bench of this Court, constituted of the learned Chief Justice and Mr. Justice Banerjee in the case of CEPT, West Bengal vs. Jeewanlal (1951) 20 ITR 39 : 55 CWN 237, and their Lordships pronounced decisively in favour of the view which may be called the stricter view of s. 66(1). In matters of this kind, it is eminently desirable that there should be consistency in the practice of the Court and even if the other view, which I may call the liberal view, was a possible one, I should have greatly hesitated to differ from what another Division Bench of this Court has held, unless I felt bound by some compelling reason to do so. But, as I have already indicated, the view taken by this Court accords completely with what I conceive to be the true character of the jurisdiction of the High Court upon a reference under s. 66(1) of the IT Act. In my opinion, we ought to limit ourselves to those out of the question dealt with by the Tribunal which have actually been referred.;