Skip to content


Commissioner of Wealth-tax Vs. Gangadhar Sikaria - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberCivil Rule Nos. 6(M) to 15(M) of 1981
Judge
ActsWealth Tax Act, 1957 - Sections 27, 27(1) and 27(3); Indian Trusts Act, 1882; Income Tax Act - Sections 256(1)
AppellantCommissioner of Wealth-tax
RespondentGangadhar Sikaria
Appellant AdvocateG.K. Talukdar and D.K. Talukdar, Advs.
Respondent AdvocateB.P. Saraf, H.N. Bharadwaj and G.K. Joshi, Advs.
Excerpt:
.....this is a strong factor to hold that these are questions of law. 13. for the foregoing reasons we hold that we are not satisfied with the correctness of the decision of the tribunal......the revenue to the tribunal who dismissed the appeals by a common order dated june 20, 1980. the, tribunal held that in its previous orders dated march 7, 1976, in i.t.a. nos, 235 and 236 (gau) of 1974-75, relating to the assessment years 1965-66 and 1966-67 and again by an order dated september 5, 1977, in i.t.a. nos. 633, 634 and 635 (gau) of 1976-77, relating to the assessment years 1973-74 to 1975-76 and also in i.t.a. no. 123 (gau) of 1978-79, relating to the assessment year 1975-76, it had held that the trust was valid and the income arising out of the trust property could not be added to theincome of the huf, the present assessee. those were proceedings under the i.t. act. in short, the learned tribunal held that it had earlier decided in the income-tax appeals of the trust that.....
Judgment:

Lahiri, J.

1. We propose to dispose of these applications under Section 27(3) of the W.T. Act, 1957, by a common order, with the concurrence of the learned counsel for the parties; they involve common questions of law and facts and are off-shoots of a common order passed by the Income-tax Appellate Tribunal rejecting the reference applications under Section 27(1) of the W.T. Act, 1957, thereby refusing to state the cases and refer the questions of law said to have arisen out of the order passed by it. The petitioner claims a reference of the following 'questions of law' to this High Court, for its decision : Questions of law :

'(i) Whether, on the facts and in the circumstances of the case, and on a proper construction of the relevant clauses of the trust deed the Tribunal is right in holding that the trust created under the said deed is valid and not inconsistent with any of the provisions of the Indian Trusts Act, 1882

(ii) If the answer to question No. (i) above is in the negative, whether the value of the properties comprised in the said trust was rightly included in the assessment of the assessee-HUF ?' Pertinent facts leading up to the application:

The HUF, consisting of Shri Gangadhar Sikaria the karta, his wife, Sita Devi Sikaria, and his sons, Bhagwati Prasad'Sikaria, Santosh Kumar, Ramautar and Ashok Kumar, was the owner of a rice mill named and styled as 'Shankar Rice Mills'. The major members of the HUF formed a partnership, by the deed executed on 20-0-1959 (sic) in the name and style of Shri Shankar Rice Mills for running the mill business and also a grinding machine-shop under the name and style of 'Shri Ganga Industries'.

2. Besides the said property, the joint family owned a building at Gauhati as well. Subsequently by a registered deed dated April 19, 1964, the major members of the said joint family settled a trust under the name and style of 'Gangadhar Sikaria Family Trust', ('the trust' for short), for the benefit of Srimathi Sita Devi Sikaria, wife of the karta, Bhagwati Prasad Sikaria, major son of the karta and three minor sons of the karta, namely, (a) Santosh Kumar Sikaria, (b) Ramautar Sikaria, and (c) Ashok Kumar Sikaria and also for the benefit of the sons of the karta to be born thereafter, equally in their individual capacities. In the course of income-tax assessment for the assessment year 1965-66, the ITO held that the trust was invalid, inter alia, on the grounds that there had been no partition in the HUF, so it was not open to the karta and other members of the HUF to alienate the properties of the joint family and to settle in trust, and the trust was not a valid trust under the Indian Trusts Act, 1882. The ITO took the same view in the income-tax assessment proceedings of the trust, not only for the assessment year 1965-66 but also for the subsequent assessment years.

3. The WTO while making the wealth-tax assessment of Shri Gangadhar Sikaria, HUF, followed the same principles and included the value of the said property in the hands of the assessee-HUF. The WTO accordingly made assessments for the years 1965-66, 1966-67, 1967-68, 1968-69, 1969-70, 1970-71, 1971-72, 1972-73 and 1974-75 which correspond to Civil Rules Nos. 6(M) to 15(M) respectively. On appeal to the AAC, the orders of the WTO were set aside by a common order. The AAC held that he had upheld the validity of the trust in the income-tax proceedings of the trust and his order was confirmed by the Income-tax Appellate Tribunal. The AAC, inter alia, observed :

'On verification of income-tax records it is seen that the trust was held to be a valid trust by the I.T.A.T., Gauhati Bench. Since the trust was a valid trust the ITO is not justified in assessing the trust property in the hands of the appellant.'

4. Accordingly, he excluded the value of the said properties and allowed all the appeals.

5. Thereafter, the matter was taken by the Revenue to the Tribunal who dismissed the appeals by a common order dated June 20, 1980. The, Tribunal held that in its previous orders dated March 7, 1976, in I.T.A. Nos, 235 and 236 (Gau) of 1974-75, relating to the assessment years 1965-66 and 1966-67 and again by an order dated September 5, 1977, in I.T.A. Nos. 633, 634 and 635 (Gau) of 1976-77, relating to the assessment years 1973-74 to 1975-76 and also in I.T.A. No. 123 (Gau) of 1978-79, relating to the assessment year 1975-76, it had held that the trust was valid and the income arising out of the trust property could not be added to the

income of the HUF, the present assessee. Those were proceedings under the I.T. Act. In short, the learned Tribunal held that it had earlier decided in the income-tax appeals of the trust that the trust deed was valid, the trust was a legal entity liable to pay tax and the present HUF could not be saddled with the tax liabilities of the trust. The Tribunal also held that the matters were 'sub judice' before the Gauhati High Court in pending references.

6. Counsel for the parties admit that such references are pending in various references and the self-same questions as posed in these applications are pending adjudication in Income-tax Reference Case Nos. 3 and 4 of 1978 and No. 10 of 1978.

7. On the dismissal of the appeals, the Revenue prayed to the Tribunal for making references under Section 27(1) of the Act but the Tribunal turned down the prayer by making the following observations:

' From the above findings as are found out from the orders of the lower authorities as also that of the Tribunal, it follows that the ' facts of the case ' as have been relied upon and annexed to the present reference applications are not found out, hence, are not clear. The questions as have been proposed by the Commissioner of Wealth-tax, as such, do not arise from the order of the Tribunal. We are of the opinion that our order dated 20-6-1980 (supra) does not give rise to the proposed questions, we decline to draw up a statement of the case and refer the questions to the Hon'ble High Court at Gauhati for its esteemed opinion:

Since the facts as are found out from the orders of the lower authorities as also that of the Tribunal do not give out the facts as have been annexed as ' facts of the case' with the reference applications, the proposed questions do not He, the reference applications are misconceived, hence are rejected.'

8. The conclusion reached by the Tribunal was that no questions of law arose out of the order of the Tribunal. The learned Tribunal reached the finale on the ground that the findings of the wealth-tax authorities as well as the order of the Tribunal did not reveal any facts of the case. According to the learned Tribunal, apart from relying on its decision or the precedent referred to in its order, it did not deal with the facts and circumstances of the case, therefore, the Tribunal had no occasion to consider the facts of the appeal but merely reached the conclusion on the basis of its earlier decisions. Hence, no questions of law arose out of its order and, as such, it had no jurisdiction vested in it by law to make the references under Section 27 of the Act.

9. Dr. Saraf, learned counsel for the assessee, has made intrepid efforts to persuade us to accept the findings of the learned Tribunal. Do the

reasonings fit in with any known principles of law This is precisely the focal point for our determination in the bunch of applications.

10. Could the Tribunal decide the appeals without considering the facts and law of the cases emerging from the proceedings The appeals before the Tribunal were adversary proceedings. There were two parties. The appellant based its claim on the facts of the cases and invited the Tribunal to give decisions on the points. There cannot be any decision of any authority unless the disputed matter is decided on facts. In every adversary system of proceedings, two parties must be there and they must contend their respective cases. The Tribunal is bound to decide the case according to law and not in violation of law. In the instant appeals the common question was whether the present assessee should be saddled with the wealth-tax. The appellant contended that the properties were of the assessee whereas the assessee claimed that it belonged to the trust--a different legal entity. The learned Tribunal decided that question. It held that the trust was a different entity, having a different status and the trust properties were not includible in, and cannot be treated as, the properties of the assessee-HUF, under the Act. The reasons for arriving at the conclusion are not far to seek. It held that in the I.T. assessment proceedings of the trust, it had the occasion to decide the very question whether the trust was valid or not. If the trust was non-existent, the authors of the trust should be held as the owners of the properties liable to pay the taxes. The Tribunal held that it had decided on earlier occasions in the I.T. proceedings of the trust and/or the assessee, that the trust was valid. It follows, therefore, that it had held earlier on the facts of the case and having had the trust deed before it that the trust was valid. It applied the decisions of the earlier cases in the appeals. Instead of detailed discussions of the facts in the judgment, it dismissed the appeals upon holding that the liabilities of the assessee vis-a-vis the trust had been decided in the earlier appeals. It was held that the trust was an independent and distinct entity having a separate status. The Tribunal, however, held that the act of reliance on its earlier decisions was no decision, either on law or on facts. This is a seeming contradiction, a paradox. Admittedly, there is a decision by the Tribunal. Can it be said that it was neither a decision on law nor a decision on facts? Can such a decision exist The issues involved in the appeals could not have been decided without resolving the questions of fact and/or law. It is a misgiving to assume that issues can be decided without a determination of the questions of fact and/or law. An appeal cannot be decided on abstract law, severed from the facts of the case. A precedent is an authority for the proposition as to what it decides and not what can be deduced from it. While applying the principles of law in a decided case, the authority

applying the principles of law must cogitate the facts of the previous decision and also its ratio. If the facts are the same or similar, the ratio of the prior decision may be applicable in a subsequent case. However, if the facts of the case are dissimilar or distinct, the principles of law enunciated in the proceeding cannot be made applicable in a later case. A decision is a precedent on its own facts. An adjudged case or a decision is considered as furnishing an example or authority for an identical or similar case arising afterwards on a similar question of law. It means that a principle of law actually presented to an authority for consideration and determination has, after due consideration, been declared to serve as a rule for future guidance in the same or analogous cases. Each case presents its own distinct features. The Tribunal as well as the I.T. authorities can apply the ratio of a decision to the facts of a particular case on notation of similarities and differences of the case with the facts and circumstances of the case in hand. When they find the facts to be the same or similar and the principles of law enunciated in the earlier decision are appropriate, reasonable and fitting, they should apply the principles, otherwise not. When the Tribunal applied the ratio of its earlier decisions to these appeals, it applied the ratio upon holding expressly or by necessary implication that the facts of the cases in hand were the same with those of the prior decision. As such the facts and circumstances of the earlier decision including the facts and law of the precedent got merged in the present appeals. They were engrafted by the Tribunal. Therefore, we have no hesitation in arriving at the conclusion that the learned Tribunal committed an error in assuming that the facts of the case as well as the questions of law cannot be discerned in the present appeals. In our opinion, the facts and circumstances as narrated by the Tribunal, as well as the judgment of the previous cases relied on by it, will be the facts and circumstances of the present appeals as well.

11. The second facet is that the questions of law involved in these appeals were the questions of law in the former appeals. The principles of law of the previous decisions were applied in the appeals surely upon holding that the principles of law were fit to be applicable in the appeals as well. The Revenue claims that in the previous decisions the Tribunal had referred the very same questions of law to this court upon holding that they had arisen out of the decisions. The assessee has not controverted the claim of the Revenue. It is indubitable that the aforesaid questions of law are pending in this court, in several I.T. reference cases including I.T.References Nos. 3 of 1978, 4 of 1978 and 10 of 1978, Of course, they did not arise out of the wealth-tax assessment, those were off-shoots of I.T. assessment proceedings but the fact remains that the questions referred were the same as the present appeals. As such, we find that in the earlier appeals there

were two segments of the appeal proceedings. First, the decision in the appeal which went against the Revenue. Secondly, the order of the Tribunal under Section 256(1) of the I.T. Act making reference of the very questions to this High Court for its decision. The learned Tribunal dismissed the appeals in view of its decision in the former appeals and accepted the first part of the said appeal proceedings. However, it did not follow the order pertaining to the second part of the proceedings in the instant appeal. It is difficult to accept how the learned Tribunal who had followed the first part of the order in appeals could refuse to apply the second part of the order arising out of the same proceedings. When the Tribunal had held that in the former proceedings the very questions arose out of its former decisions and they were questions of law, it had no jurisdiction to depart from its decision in respect of the second part of the proceedings. In the fitness of things, the Tribunal should have, following the known practice and principles of law, meticulously acted in accordance with the second part of the order or should have given judicious reasons for its departure. These aspects of the matter were completely overlooked by the learned Tribunal while rejecting the prayer of the Revenue under Section 27 of the Act. We are not at all satisfied with the reasons of the Tribunal in declining to refer the case. The question of multiplicity of proceedings before the High Court cannot be a valid ground for not referring the questions of law when the parties had statutory rights to obtain the reference, from that end. Convenience or inconvenience of the High Court is an irrelevant consideration in such matters. If according to law the party is entitled to get relief the doors of the High Court are always open to decide just and appropriate cases. It is the solemn obligation of the High Court to adjudicate 'cases according to law no matter, whether such duties are painful or burdensome. As such, we find that the grounds of refusal to make the present references are thin and non-existent.

12. Now, having disposed of the reasons of the Tribunal as unacceptable grounds, let us turn to consider whether the questions fashioned by the Tribunal are questions of law or not. The questions are prima facie questions of law--they are live questions of law. These questions were referred by the Tribunal as questions of law in its earlier decisions. This is a strong factor to hold that these are questions of law. We are of the view that the questions of law do arise out of the decision of the Tribunal. We have already stated that the Revenue raised the questions for the decision of the Tribunal, but the Tribunal summarily rejected them on the score that it had negatived the contentions earlier. The assessee has not filed any return to the rules stating that the questions of law were never raised by the Revenue in their memorandum of appeal or orally. In our opinion, the Tribunal has impliedly answered the questions in the

negative on the authority of its earlier decision wherein it had turned down the contentions. Without a determination of these questions expressly or impliedly, the Tribunal could not have reached the conclusion that the trust properties were not the properties of the assessee and the WTO was not justified in assessing the trust properties in the hands of the assessee-HUF. Thus the Tribunal had determined the questions impliedly against the Revenue.

13. For the foregoing reasons we hold that we are not satisfied with the correctness of the decision of the Tribunal. We are of the opinion that the questions posed do arise out of the decisions of the Tribunal. Therefore, we require the learned Tribunal to state the cases and refer the questions of law in accordance with law.

14. In the result the applications are allowed. However, there is no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //