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Honb'le Chief Justice Sri B. Malik Vs. Commissioner of Income-tax (01.09.1970 - ALLHC) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberSupreme Court Appeal No. 102 of 1967 (arising out of Income-tax Reference No. 2 of 1958)
Judge
Reported in[1971]82ITR255(All)
ActsIncome Tax Act, 1922 - Sections 3(3), 4(3) and 66A(2); Code of Civil Procedure (CPC) , 1908 - Sections 109
AppellantHonb'le Chief Justice Sri B. Malik
RespondentCommissioner of Income-tax
Appellant AdvocateR.R. Misra and ;B.L. Gupta, Advs.
Respondent AdvocateShanti Bhusan, ;S.C. Agarwal and ;M.C. Gupta, Advs.
Excerpt:
....., and myself) had overcome this difficulty after perusing the tentative opinion of the other. thus, the case did present us with some difficulties in arriving at the interpretation we finally reached as better than other possible interpretation of section 4(3)(viii) of the act. 6. in reply, it was contended for the department that the illustrations given, in a passage cited in mishrimal gulab chand's case, of questions of wide public importance, such as, those relating to religious rites and ceremonies, to caste and family rights, or such matters as the reduction of the capital of companies as well as questions of wide public importance in which the subject-matter in dispute cannot be reduced into actual terms of money',were of a type which was not likely to arise at all under the..........section 109(c) of the civil procedure code to hold that the case must raise questions of wide public importance. he pointed out that we had based our opinions on the ratio decidendi of a full bench decision of this very court in in re lala indra sen : [1940]8itr187(all) , where question whether a vocation or an occupation of an assessee existed, which could be said to have yielded an income, was declared to be a question of fact for a determination of which no single decisive or conclusive test could be laid down. he submitted that, as our opinions were specifically confined to the special and peculiar facts of the case before us, and these could not be expected to recur in the case of any assessee in future, no question deserving a certificate of fitness of the case for an appeal.....
Judgment:

M.H. Beg, J.

1. This is an application by the Commissioner of Income-tax, U.P., for grant of a certificate, under Section 66A(2) of the Indian Income-tax Act (hereinafter referred to as 'the Act'), of fitness of the case for an appeal to the Supreme Court. The question raised in the reference out of which this application arises was framed as follows :

'Whether, on a true interpretation of Section 4, Sub-section (3)(viii) of the Income-tax Act, the sum of Rs. 20,000 received by the assessee as remuneration was revenue income liable to tax under the Indian Income-tax Act?'

2. The answer of a Bench of which one of us (i.e., Beg J.) was a member, is in Malick v. Commissioner of Income-tax, : [1968]67ITR616(All) . It is true that, in order to give our opinions on the particular facts of the case of the assessee, who happened to be a former Chief Justice, this court had to interpret the provisions of Section 4 of the Income-tax Act. These provisions are reproduced in Section 10(3) of the Income-tax Act of 1961, with slight alteration in phraseology, which was held by us to be intended only to clarify and not to alter the law. It was contended, on behalf of the department, that, although the assessee, a High Court judge, was permitted by the President of India and had agreed, under exceptional circumstances, to act as an arbitrator, the question of taxability of whose fees paid for arbitration was considered in this case by us, our interpretation of Section 4(3)(viii) of the Income-tax Act, was likely to affect cases of assessees claiming either the benefit of the provision interpreted by us or of Section 10(3) of the Act of 1961 in either and less exceptional or special circumstances. In other words, the submission was that the applicability of the interpretation we had placed upon Section 4(3)(viii) of the Act of 1922 was much wider than one confined to the special facts of the case.

3. Our attention was drawn to the difficulty felt by Manchanda J., due to certain observations in a decision of the Supreme Court in P. Krishna Menon v. Commissioner of Income-tax : [1959]35ITR48(SC) , in interpreting the word 'occupation', and to the fact that I had some difficulty in determining the precise meaning of the word 'casual' and its applicability to a case where there was an understanding to pay a certain amount for working as an arbitrator before the work was undertaken. But, each of us (i.e., Manchanda J., and myself) had overcome this difficulty after perusing the tentative opinion of the other. Thus, the case did present us with some difficulties in arriving at the interpretation we finally reached as better than other possible interpretation of Section 4(3)(viii) of the act. We had also dissented from some of the observations of the Madras High Court in Commissioner of Income-tax v. V.P. Rao : [1950]18ITR825(Mad) and had also distinguished that case on facts.

4. A decision of the Calcutta High Court in Commissioner of Income-tax. v. Kamal Singh Rampuria [1967] 64 I.T.R. 527 (Cal.) was cited on behalf of the department. In this case, after a review of a number of authorities on the question, twelve classes were given (at pages 538 to 539) of the types of cases in which certification under Section 66A(2) of the Act could be said to be proper. The case before us would certainly come under several of those classes, so that, if we were to agree with the views expressed there, this would be a fit case for certification.

5. Mr. Shanti Bhushan, appearing for the opposite party, however, not only vehemently urged that the kind of question we had decided, on the very special and peculiar facts of this case, could not be expected to arise again, but relied on a Division Bench decision of this court in Mishrimal Gulab Chand v. Commissioner of Income-tax : [1951]20ITR91(All) , where it was held that the tests of fitness for certification of a case under Section 66A(2) of the Act are the same as those under Section 109(c) of the Civil Procedure Code. Reliance was placed there on the pronouncements of the Privy Council on cases falling under Section 109(c) of the Civil Procedure Code to hold that the case must raise questions of wide public importance. He pointed out that we had based our opinions on the ratio decidendi of a Full Bench decision of this very court in In re Lala Indra Sen : [1940]8ITR187(All) , where question whether a vocation or an occupation of an assessee existed, which could be said to have yielded an income, was declared to be a question of fact for a determination of which no single decisive or conclusive test could be laid down. He submitted that, as our opinions were specifically confined to the special and peculiar facts of the case before us, and these could not be expected to recur in the case of any assessee in future, no question deserving a certificate of fitness of the case for an appeal to the Supreme Court arose.

6. In reply, it was contended for the department that the illustrations given, in a passage cited in Mishrimal Gulab Chand's case, of questions of wide public importance, such as, 'those relating to religious rites and ceremonies, to caste and family rights, or such matters as the reduction of the capital of companies as well as questions of wide public importance in which the subject-matter in dispute cannot be reduced into actual terms of money', were of a type which was not likely to arise at all under the Indian Income-tax Act. Hence, it was suggested that the test of fitness of a case for certification under Section 66A(2) of the Act is bound to be different from that under Section 109(c) of the Civil Procedure Code. It was also said that a question affecting the revenues of the State would be, for that reason alone, one of public importance.

7. We were disposed at one stage to refer this case to a larger Bench for decision of the question whether the tests of fitness of a case under Section 66A(2) of the Act were so different from those contemplated by Section 109(c) of the Civil Procedure Code that the Division Bench decision of this court in Mishrimal Gulab Chand v. Commissioner of Income-tax could not be said to lay down the summer vacation and this case remained part-heard. After the vacation, when this application was listed again for hearing, learned counsel for the department cited before us a decision of the Supreme Court in India Machinery Stores P. Ltd. v. Commissioner of Income-tax [1970] 79 I.T.R. 50 (S.C.), which has not yet been reported. Here, the Supreme Court proceeded on the assumption that the rules applicable for testing fitness of a case for a certificate under Section 109(c), Civil Procedure Code, are also applicable to cases falling under Section 66A(2) of the Act. It is true that the particular decision turned more on the form in which the certificate was to be granted, with adequate reasons to be given for it, rather than on the nature of the test under Section 66A(2) of the Act and Section 109(c), Civil Procedure Code. But pronouncements of the Privy Council, which were also applicable to cases falling under Section 109(c), Civil Procedure Code (e.g., Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Income-tax and Radhakrishna Aiyar v. Swaminatha Aiyar, [1921] L.R. 48 I.A. 31 ; A.I.R. 1921 P.C. 25) were relied upon. Indeed, the Privy Council had also held in Delhi Cloth Mill's case, with regard for certification under Section 66A(2) of the Act, that 'the High Court is justified in refusing a certificate in a case which in its view does not raise any question of such importance as would warrant a certificate under Section 109(c) of the Code of Civil Procedure, 1901.'

8. In India Machinery Stores' case, the Supreme Court held :

''It is true that under Section 66(1) and (2) of the Indian Income-tax Act, 1922, only a question of law may be referred to the High Court for opinion, but the right to obtain a certificate under Section 66A(2) arises only when in the proposed appeal a question of great public or private importance arises. It cannot be held that because a question of law alone may be referred to the High Court under Section 66 of the Indian Income-tax Act, in the proposed appeal a question of law of great public or private importance necessarily arises. Any other view would make every opinion of the High Court in a reference under Section 66 appealable to this court.'

9. The Supreme Court also relied on Commissioner of Income-tax v. Sir S.M. Chitnavis for the proposition that 'when a certificate is granted under Section 66A(2) of the Income-tax Act, it must be on a question affecting not only a particular assessee and depending upon the state of the evidence in a particular case, but a question of great public importance affecting assessees generally and depending upon general principles.' Thus, it was indicated that a question of great public importance is one which involves interests of assessees in general and not of a particular assessee or of a few assessees only depending upon the particular facts proved.

10. Learned counsel for the department, relying on certain observations in the case of India Machinery Stores, went on to submit that even a question of considerable private importance may enough for granting a certificate of fitness of a case for appeal to the Supreme Court. But, in the instant case, there is no evidence at all that the question of the taxability of the amount of Rs. 20,000 in a particular year is of great private importance to the assessee before us. It is not a question which could possibly arise in the case of the assessee in every year. There is nothing to indicate the consequences of the assessment of this particular sum in a particular year on the assessee's private interests or means. We are not even apprised of the amount of tax which the assessee would have to pay if this item of Rs. 20,000 was added to his income in the particular year. Moreover, such a submission does not seem to us to be even available to the department which is only concerned with the effect of a decision upon the public exchequer. The plea of considerable private importance could only be open to an assessee whose private interests are affected. The department could not raise it at all as a ground for certification when the assessee, on whose behalf it could be advanced, objects to certification on this or any other ground.

11. Learned counsel for the assessee contended that no question of wide public importance could arise when we had expressly confined our opinion to the facts of the particular case and when our decision really turned on the assessment of the evidence before us on which we held that the assessee did not earn the particular item of income by acting as an arbitrator in the exercise of an 'occupation' he could have acquired in addition to that which he had as a Chief Justice of a High Court. We had disagreed with the view of the Tribunal that the work of an arbitrator could be said to be either an incident of or so connected with the assessee's judicial office as to be capable of being assimilated with the assessee's judicial work as judge. The question whether the income was casual or not was decided by us, with reference to the special facts of the case, after interpreting the provision before us with the help of authorities cited. The facts of each case differ generally from the facts of every other case. Questions of law did arise and were determined by us in the instant case. The narrow question before us now is whether any of these questions is one of 'wide public importance'.

12. It has not been shown to us that the question of interpretation of Section 4(3)(viii) of the Act has arisen in either a large or even in an appreciable number of cases of assessment. Indeed, beyond the possibility of the question arising in other cases, we are not informed of any other case in which, such a question has arisen or is pending consideration in this court or elsewhere. Therefore, it cannot be said that the question raised is one which has been shown to affect assessees in general. It seems to us that it can only affect exceptional cases of assessees. It may be that, if these very questions had been shown to arise or likely to arise frequently in assessments, they could be held to be of wide public importance.

13. We may observe, with great respect, that the propositions stated by a Division Bench of the Calcutta High Court in Kamal Singh Rampuria's case seem to us to be too wide. The apparent width of our discretionary powers under Section 66A(2) of the Act has been restricted by the pronouncements of the Supreme Court and of the Privy Council before that.

14. Learned counsel for the department had also relied upon certain observations of the Supreme Court in Sir Chunilal V. Mehta and Sons Ltd. v. Century Spinning and . : AIR1962SC1314 , but these were made with reference to the provisions of Section 110, Civil Procedure Code, about the meaning of a 'substantial question of law'.

15. We are also unable to hold that any change in the content of powersof High Courts to certify cases fit for appeal to the Supreme Court, under Section 66A (2) of the Income-tax Act, 1922, could possibly result from theconferment of an additional power on the Appellate Tribunal by Section 257 of the Income-tax Act of 1961 to refer cases on which views of two High Courts differ directly to the Supreme Court. This provision does not introduce a new test of fitness for purposes of certification by this court for cases arising under the Income-tax Act of 1922. It only confers a new power on the Appellate Tribunal exercisable in a class of cases to which the case before us could be said to belong as we expressed disagreement with some of, the observations of the Madras High Court in V.P. Rao's case. The new provision would enable the Appellate Tribunal to overcome its difficulty if it were to recur in future.

16. For the reasons given above, we dismiss this application with costs. Counsel's fee is assessed at Rs. 100.


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