The Petlad Turkey Red Dye Works Co. Ltd., Petlad v. The Commissioner Of Income-Tax, Bombay, Ahmedabad

I S.C.R. SUPREME COURT REPORTS THE PETLAD TURKEY RED DYE WORKS CO. LTD., PETLAD THE COMMISSIONER OF INCOME-TAX, BOMBAY, AHMEDABAD (S. K. DAS, J. L. KAPUR, A. K SARKAR, M. HIDAYATULLAH and RAGHUBAR DAYAL, JJ.) Income Tax-Reference to High Court-Order calling for supplemental statement. of case and allowing further evidence-Validity-Appeal against the order to Supreme Court-Compe-tence-Indian Income-tax Act, 1922 (11 of 1922), ss. 66, 66A(2). The assessee company carried on the business of dyeing and selling dyed yarn as Petlad in the erstwhile State of Baroda and its status during the relevant assessment years was that of a hon-resident. In respect of sales made to purchasers in what was British India the Income-tax Officer found that the sale price was received by the company at Petlad by means of cheques, drafts and hundis which were admittedly sent by post. These cheques etc., were sent back by the compauy 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 assessee company claimed that as the sale price was re-ceived by it at Petlad, the profits on the aforesaid sales were not taxable in the taxable territories. The Appellate Tribunal held that the cheques etc., which were sent by the assessee to its bankers and er editors were received by them as agents of the assessee and therefore the profits were received in British India and were liable to tax. On an application made by the asse!See under s. 66(1) of the Indian Income-tax Act, 1922, the Tribu-nal referred the question to the High Court as to whether the profits or any part thereof were received by or on belialf of the assessee company in British India. In the statement of the case the Tribunal pointed out that no attempt had been made at a previous stage to investigate as to whether the post office had acted as the agent of the company or of the buyers. On September 23, 1955, the High Court passed an order calling for a supplemental otatement of the case and giving the parties liberty to adduce further evidence. The Tribunal, after reco-rding evidence as directed by the High Court, sent a supple-mental statement in which a finding was given that "in the circumstances of the case and on the evidence and in the 'lhsencc 872 SUPREME COURT REPORTS [1963] SUPP. of correspondence we must necessarily infer an implied request by the assessee to remit by post ........ " On April 21, 1960, the High Court :mswered the question referred in the affirma-tive and against the assessee. In the appeal filed against that judgment the assessee challenged the validity of the order of the High Court dated September 23, 1955, asking for a Sltpplemen-tal statement of case after taking additional evidence, on the ground that it was without jurisdiction. For the Commi~sioner of Income-tax, it was contended that as no appeal had been filed against the order of the High Court dated September 23, 1955, the question as to the validity of that order could not be raised at the later stage. /962 Pttlad Turkey Red Dye Works Co. Ltd. 1 Petlad v. Commissioner of lncom~-tux, "1ombay. Ahmed:Jbad. Held, that the order of the High Court dated September 23, 1955, calling upon the Appellate Tribunal to make a supplemental statement of the case was not a final order, nor a judgment within the meaning of s. 66( 5) or s. 66A(2) of the Indian Income-tax Act, 1922, and was not appealable. Tata Iron & Steel Co. v. Chief Revenue Authority, (1923) L. R. 50 I. A. 212, Delhi Cloth & Oeneral Mills Co. Ltd. v. Income-tax Commissioner, (1927) L. R. 54 l. 1;.. 421 and Sardar Syedna Taher SaifwUin Sahib v. State of Bombay, [1958] S. C. R. 1007, relied on. Held, further, that though the High Court had power to direct a supplemental statement ·to be made, it was not compe-tent to direct additional evidence to be taken. 1962 1962 1962 1962 875 1962 Section: CONCLUSION Under s. 66 of the Act when the High Court finds it necessary to have a supplenental statement of the case in order to answer the question of law which is raised, it can direct such statement to be submitted with such additions and altera-tions as it may direct, but the statement must be based on facts which are already on the record, and the High Court cannot a'k for additional facts to be brought in, because those would not be in regard to a question which arises from the order of the Tribunal but would be a statement based on some: thing which was not before the Appellate Tribunal when it passed its appellate order. The 'New Jehangi.r Vakil Mills v. The Commissioner of Income-tax, (1960] 1 S.C.R. 249,Mrs. Kusumben D. Malwdevia v. Commis.Wne1· of Income-tax, Bombay, [1960] 3 S.C.R. 417 and Zoraster &; Co. v. Commissioner of Income-tax, [1961] I S.C.R. 210, followed. Crvn. APPELLATE j URISDICTION : Civil Appeals Nos. 158 and 159 of 1962. 1 S.C.R. SUPREME COURT REPORTS . 873 Appeals from the judgment and order dated 21, 1960, of the Bombay High Court in lucome-tax Reference No. 16 of l \l55. PUJrshottam TricUJmdas, R. J. Kolah and/. N. Shrofl, for the appellant. Gopal Singh and R. N. Sachthey, for the respon- dent. l!Jo2. November 2. The Judgment of the Court was delivered hy KAPUR, ].-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 question referred by the Income-tax Appellate Tribunal in the affirmative and against the assessee company. The appellant in both the appeals is the assessec company and the Cc.mmissioner of Income-tax is the respondent. 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 relevent assessment y~ars were 1941-42 and 1942·43 the previous years being the calendar years Hl40 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}J9(i/. and Rs. 19,22,107 in the pre· vious years relevant to the assessment years 1941 ·42 and 1942-43 respectively. The sales were made to pur-chasers 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 1962 Plllad Tork1y Rttl Dyt Works Co. Ltd .. Pet/ad v. CommissiOMT vf lucome·tax, Bom6ay, AhFMtl•bM 1962 Petlatf Tur"key Red D1tWorks Co . Lttl., Pet/ aef v. Commissioner of lneM'lll-tax, ollombay, A/n,,,ikbad --.-Kapur, J. 874 SUPREME COURT REPORTS [1963]SUPP. 1962 1962 1962 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 the total sales of a sum of Rs. 6,04,588/- 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 sale price was received by the assessee company at Petlad in the erstwhile Baroda State by means of cheques, drafts and hundis in the years relevant to the two assessment years and it is not disputed that they were sent by post. These cheques, drafts and hur1dis were sent back by the assessee company either to its creditors in British India jn 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 Petlad in the erstwhile Baroda State and therefore the profits on these sales were not taxable in the taxable territories in asmuch as they were received in an Indian State. After appeal .was taken to the Appellate Assistant Com.aissioner appeal to the Income-tax Appellate Tribunal which held that the cheques and hundis which were sent by the assessee company to its bankers and creditors were received by them as agents of the assessee com-pany and therefore the profits were received in Bri-tish India and were liable to tax. Against that order the assessee 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:- "Whether the proportionate profits on the sale proceeds aggregating Rs. 9,53.304/- for the assessm!'nt year 1941-42 and Rs. 6,04,588/- for the assessment year 1942-43 or any part there-of were received by or on behalf of the assessee company in British India • " The Appellate Tribunal in the statement of the case remarked that no attempt had been made at a pre-vious stage to investig:ite as to whether the post office had acted as the agent of the assessee company or of the buyers. The High Court on September 23, 1955, made the following order calling for a supplemental statement : "The same question arises on this reference as in the last reference (I.T. Reference No. 15 of 1955) and we want a supplemental statement of the case on the same lines as we have indicated in the last reference. The supplemental state-ment of the case will be confined to the two amounts mentioned in the question raised on this reference viz., Rs. 9,53,304/- for the assess-ment year 1941-42 and Rs. 6,0i,585 for the year 1942-43." The parties by this order were allowed to adduce further evidence. Thereupon the case was sent hack to the Appellate Tribunal for a supplemental state-ment of the case and after recording evidence as directed by the High Court the Tribunal gave the following findings :- "Therefore in the circumstances of the case and on the evidence and in the absence of corres-pondeuce we must necessarily infer an implied request by the assessee to remit by post, the parties having adopted the normal accepted commercial practice for making the payment in such type of cases". The High Court on April 21, 1960, answered the question in the affirmative and against the assessee. It also observed that the mode of payment accepted by the assessee company was that the payment had to be made by sen?~ng the .cheque~, drafts and hundis by post from Bnosh India ;md 1t could not be said that 1962 P1tl•d Turk•J Rtd Dye Works Co. Ltd., Plllad v. Commis.doner of lneome·lox, Bombay, A"""dobad Kapur,J. 876 SUPREME COURT REPORTS [1963) SUPP. 1962 1962 there was no evidence before the Appellate Tribunal for holding that there was an implied request by the assessee company to the buyer to send the cheques etc., by ,post. Against that judgment and order these two appeals have been brought pursuant to a certificate by the High Court. 1962 Petlad Turkey Red Dye Works Co. Ltd., Pet/ad v. GommissiMier oj lncome·tJx, Bombay, Ahm1dabad Kapur, J. For the appellant two contentions were raised : ( l) 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 (1) of that section provides that if any question oflaw arises out of the order of the Appellate Tribunal and it is required by the assessec or the Commisssoncr to be referred to the High Court the Appellate Tribunal shall draw up a statement of the case and refer it