PETLAD TURKEY RED DYE WORKS COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX BOMBAY NORTH AHMEDABAD

JUDGEMENT

(1.) These two appeals pursuant to a certificate are from the decision of the High Court of Bombay in Income tax Reference No. 16 of 1955 answering the qustion referred by the Income-tax Appellate Tribunal in the Affirmative and against the assessee company. The appellant in both the appeals is assessee company and the Commissioner of Income-tax is the respondent.

(2.) The facts of these appeals are shortly as follows; The assessee company was registered in the erstwhile Baroda State and its status during the assessment years was that of a non resident. The relevant assessment years were 1941-42and 1942-43 the previous years being the calendar years 1940 and 1941.It carried on the business of dyeing and selling dyed yarn. It effected sales of dyed yarn of the total value of Rs. 14,22,995/- and Rs. 19,22,107/- in the previous years relevant to the assessment years 1941-1942 and 1942-43 respectively. The sales were made to purchasers both in the Indian States and in what was British India. During the previous year relevant to 1941-42 out of the total sales of the value of Rs. 14,22,996/Rs. 11,88,063/- were, to merchants in British India and out of these some sales were to Calcutta merchants which are not now in dispute and the balance amounting to Rs. 9,53,304/- were to purchasers in other parts of British India and dispute in regard. to that year relates to the assessment on the profits of those sales. Similarly in the previous year relevant to 1942-43 out of total sales for a sum of Rs. 6,04,558/- were made to purchasers in British India and assessment in regard to profits out of that sum is in dispute. The Income-tax Officer found that the sales price was received by the assessee company at Perlad in the erstwhile Baroda State by means of cheques., Drafts and hundies in the years relevant to the two assessment years and it is not disputed that they were sent by post. These cheques Drafts and hundies were sent back by the assessee company either to its creditors in British India in payment of its Liabilities or to the credit of its accounts with its bankers in British India. The contention of the assessee company was that these sums were received by it at Perlad in the erstwhile Baroda State and therefore the profits or these sales were not taxable in the taxable territories in as much as they received in an Indian State. After appeal to the Appellate Assistant Commissioner appeal was taken to the Income-tax Appellate Tribunal which held, that the cheques and hundies which were sent by the assesses company to its bankers and creditors were received by them as agents of the assessee company and therefore the profits were received in British India and were liable to tax. Against that Order the assesses company applied under S. 66 of the Income-tax Act for a statement of the case to the High Court. On February 21, 1955 the Appellate Tribunal referred the following question to the High Court:

(3.) For the appellant two contentions were raised: (1) the Order of the High Court dated September 23, 1955 asking for a supplemental statement and allowing additional evidence was without jurisdiction; (2) that on the statement of the case the answer to the question submitted should have been in the negative and in favour of the assessee. A third question has been raised and that was by counsel for the respondent the Commissioner of Income-tax that as no objection was taken to the calling for a supplemental statement and as that Order was not appealed against, the question whether the Order was within jurisdiction of the High Court or not cannot be raised at this stage. We shall first deal with the objection taken on behalf of the commissioner of income-tax as that is of a preliminary nature and relates to jurisdiction. The nature and the amplitude of the jurisdiction of the High Court in regard to cases dealing with income-tax are contained in S.66 of the Income-tax Act. Sub-section (i) of that section provides that if any question of law arises out of the Order of the Appellate Tribunal and it is required by the assessee or the Commissioner to be referred to the High Court the appellate Tribunal shall draw up a statement, of the case, and refer it so the High Court for its opinion. If the Tribunal refuses to stale the case then under sub-section (2) of S. 66 on an application being made to it the High Court can, if it is not satisfied with the correctness of the Appellate Tribunal's decision require the Tribunal to draw up a statement of the case and refer it to the High Court. By sub-section (4) of S. 66 the High Court may if not satisfied with the statement contained in the case referred to it refer the case back to the Appellate Tribunal for additions or alterations. Under sub-section (5) of S. 66 the High Court is required to decide the question of law raised and to deliver its judgement thereon containing the grounds on which such decision is founded and thereafter a copy of the judgement is to be sent to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case in conformity with the judgement of the High Court. This shows that the jurisdiction of High Court is purely advisory. On the advice being given to it the Appellate Tribunal shall be guided by the decision given shall make the assessment accordingly, the ultimate result being that an assessment is made at an amount which, in conformity with the opinion of the High Court, is considered to be correct and it is then that the tax liability is definitely fixed or concreted. The judgement of the High Court does not in any manner enforce the discharge of that liability. The Privy Council held that the High Court's judgment is merely the expression of the opinion as to whether a certain question of law which arises during the course of assessment has to be used one way or the other and that the word "judgement" is not used in S. 51 of the Income-tax Act, now S. 66 of that Act, in its strict legal and proper sense. Tata Iron and Steel Co. Ltd. v. Chief Revenue Authority of Bombay, 50 Ind App 212 at p.223: (AIR 1923 PC 148 at p. 153), Delhi Cloth and General Mills Co. Ltd. v. Income-tax Commr., 54 Ind App 421: (AIR 1927 PC 242). In Tata Iron and Steel Co.'s case, 50 Ind App 212 at p. 223: (AIR 1923 PC 148 at p. 153) appeal was taken to the Privy Council against the judgement of the High Court given under S. 51 (3) of the Income -tax Act, now S. 66 (5) on a certificate of the High Court. A preliminary objection was taken in the Privy Council that the appeal was incompetent as the decision of the High Court on a reference made by the Chief Revenue Authority under S. 51 of the then Income tax Act was bot a final judgment within Cl.39 of the Letters Patent of the. Bombay High Court. The Privy Council held that where the case is stated for the opinion of the High Court under the Income-tax Act the judgment is merely advisory and therefore it was not a final judgment within the meaning of Cl. 39 of the Letters Patent. This led to the enactment of what is now S. 66A. of the Income-tax Act. Even after the introduction of that provision the Privy. Council held in Delhi Cloth and General Mills Co.'s case, 54 Ind App 421: (AIR 1927 PC 242) that section had no retrospective operation and therefore it did not apply to those judgements under S.51 (3) of the then Income-tax Act which had become final at the date when it came into force and that appeal was competent only if certified to be a fit one for appeal.