KAPUR, J. - This is a reference by the Income-tax Appellate Tribunal, Bombay Bench, in the matter of assessment for the years 1942-43 and 1943-44 of Sir Sobha Singh of New Delhi.
The question of law that has been referred to this Court is :-
'Whether the profit made by the assessee from the contracts executed in the Bhopal state was received or deemed to be received in British India by or on behalf of the assessee under Section 4(1)(a) of the Income-tax Act ?'
The facts giving rise to this reference are that the assessee obtained some contracts from the Government of India for the supply of vegetables, eggs etc. to the Italian Prisoners Camp at Bairagarh in Bhopal State. The tender forms were issued from Mhow (Indore State), and were accepted either at Bairagarh or at Mhow. The contract deeds were also executed at Mhow, and the assessee supplied in the accounting years the articles contracted for under these contracts. The bills were submitted at Bairagarh but the cheques in payment for these bills were issued by the Controller of Military Accounts, Meerut, and were drawn on the Reserve Bank of India, Bombay branch. These cheques were sent and were received by the assessee at Bairagarh, and he sent them to the Imperial Bank of India, Bhopal branch, 'for collection.' After these monies were collected they were credited to the assessees account with the Imperial Bank of India at Bhopal. The bank charged its usual commission for collection.
The vegetables, meat, etc. which the assessee was to supply were purchased in Bhopal State though some portions of these articles were purchased in British India and supplied at the Prisoners Camp.
No accounts were produced before the Income-tax Officer, New Delhi. The assessee alleged that he had lost them, and the Income-tax Officer refused to accept the assessment made on the assessee by the Income-tax Officer, Bhopal State, and assessed the tax at 17 1/2 per cent. of the total receipts from the military authorities. There was no dispute as to the income on which it was assessed.
The Income-tax Appellate Tribunal in its appellate order found that the profits had accrued and arisen outside British India but the payments were received in British India because (1) according to the terms of the contract of the payments were to be made to the assessee at the office of the Reserve Bank, Bombay; (2) the bills were paid for by the Controller of Military Accounts, Meerut, by means of cheques issued on the Reserve Bank, Bombay; (3) these cheques, although received by the assessee at Bairagarh within Bhopal State, were sent for collection by the assessee to the Imperial Bank of India, Bhopal, and after, as I have said before, deduction of commission were credited to the account of the assessee; and (4) the Imperial Bank of India, Bhopal, was acting as agent on behalf of the assessee and, therefore, 'the sale proceeds were received by the assessee in British India' and therefore, the whole of the 'sale proceeds which included income' should be held to have been received in Bombay within British India and would become taxable under Section 4(1)(a) of the Income-tax Act. With these findings the case was stated for determination of the question which I have quoted above. It is not necessary to refer to another question which was sought to be raised but which the Income-tax Appellate Tribunal did not agree to refer to this Court. It may be stated here that after the statement of the case was drawn up it was agreed to by the parties, as the Tribunal says that 'parties agree that the facts have been correctly stated.'
The counsel for the assessee had stated that the necessary implication of a contract of this kind is that money has to be paid at the place where the contract was entered into and was performed, in other words that the bills were to be paid for at Bairagarh, and in support of this argument he relied on a judgment of their Lordships of the Privy Council, Soniram Jeetmul v. R. D. Tata and Co. Ltd. In this judgment the observations of Lord Blanesburgh made in Bansilal Abirchand v. Ghulam Mahbub Khan were referred to and they were as follows :-
'There is no promise either by the principal debtor or the surety to make any payment at Secunderabad, and, so far as the principal debtor is concerned, the bond above abstracted is the only promise on his part which is forthcoming. It is quite true that, on failure of any instalment, there is doubtless an implied promise by him to repay the loan. But there is no implied promise to repay it as Secunderabad. Even by British law the duty of a debtor to find and pay his creditor is only imposed upon him when the creditor is within the realm. And the plaintiff has not contended that if there be any such duty at all imposed by Indian law upon a debtor, it extends in this respect further than in England. Accordingly, so far as the principal debtor is concerned, there is no obligation upon him either express or implied to make any payment to the plaintiff at Secunderabad.'
These observations show that in this case unless there was an express or implied contract to show that the monies were to be paid in Bairagarh no duty was cast upon the debtor to find his creditor and pay him without the realm. I cannot derive much assistance from this case.
It was next submitted that the Appellate Tribunal found that in accordance with the terms of the contract payments were to be made at the office of the Reserve Bank of India, Bombay, and that in fact no such contract was produced before the Tribunal and there was no evidence in support of this finding. In support it was sought to rely the fact that for the subsequent years of assessment copies of contracts had been produced which showed that the payment was to be made at the Treasury in Bairagarh. In reply to this submission the Commissioners counsel contended that the assessee was not entitled to go into this matter now because he had agreed that the facts contained in the statement of the case were correct and this part of the order of the Income-tax Appellate Tribunal was part of the statement of the case; and that the jurisdiction of this Court being merely advisory it was not open to the Court to go into this matter, and that whether such a term was contained in the subsequent contracts or not is not relevant because it may be that the contracts in the subsequent years were different.
The second submission was that in subsequent assessment years it had been proved that the cheques had been given to the Imperial Bank of India not for the purposes of collection but for discounting, and that the bank allowed the assessee to draw against the cheques so sent. With regard to this second submission it appears that no accounts were produced before the Income-tax Officer although he repeatedly asked the assessee to do so and gave him several opportunities, and that at no stage excepting in the arguments of the counsel for the assessee was it ever suggested or alleged that the cheques were not sent for collection but they were given to the bank for discounting and were in fact discounted, or that the bank was a holder in due course having allowed short term credit to the assessee against the cheques so given to it. It was admitted by the learned counsel for the assessee that the question in this form had never been debated before. It had been held in Keshav Mills Co., Ltd. v. Commissioner of Income-tax, Bombay, that if a bill is given to a bank for the purposes of collecting, the receipt of the money is at place where the bank on which the cheque is drawn is situate. Chagla, C.J., had said at page 420 :-
'If a cheque is received by a creditor on a British Indian bank and the creditor is outside British India he gives the cheque to his bank and asks the bank to collect the cheques for him. Then the bank acts as his collecting agent and the money is received by the creditor when the same is collected by the bank. So in this case if the facts are that the assessee handed over the cheques and hundis for collection to the banks..... and the banks.... acted merely as collecting agents and realised the cheques and hundis from the banks or shroffs in British India, then the payments is in British India and not in the Baroda State. On the other hand, if the creditor treated the cheques and hundis as negotiable instruments and cashed them as such with the banks or shroffs, then the payment was received by the assessee in the Baroda State, they having negotiated the cheques and hundis.'
With this statement of the law I most respectfully agree. Grant on Banking, 1924 Edn., at page 52, has said that the character in which a bank receives payment of a cheque is a question of fact, and at page 53 it is said that in order to get protection under Section 82 of the Negotiable Instruments Act, the cheque should be received for collection, and in that case even if a customer is allowed to draw against the cheques so given the bank will be protected.
The fact whether the cheques were given to the Imperial Bank of India, Bhopal, for collection or were discounted is one of fact and it not having been challenged at any stage of the proceedings before, it is not, in my opinion, open to us to determine whether as a matter of fact this finding is correct or otherwise.
The counsel for the assessee submitted that the answer which this Court is called upon to give to the question submitted depends on facts and inferences from certain facts, and it there is no evidence to support the findings which have been given by the Tribunal, then it would be the duty of this Court or at least it would be open to this Court to send back the case under Section 66(4) of the Income-tax Act for a better statement and to ascertain whether the findings are supported by any evidence or not. The relevant part of Section 66 may here be quoted with advantage :-
'66. (1).....the assessee or the Commissioner may.......require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a statement of the case and refer it to the High Court :
(2) If on any application being made under sub-section (1) the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may........ apply to the High Court, and the High Court may, if it is not satisfied of the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it and on receipt of any such requisition the Appellate Tribunal shall state the case and refer it accordingly.
(4) If the High Court is not satisfied that the statements in a case referred under this section are sufficient to enable it to determine the question raised thereby, the Court may refer the case back to the Appellate Tribunal to make such additions thereto or alterations therein as the Court may direct in that behalf.'
The other sub-sections are not relevant for purposes of this case.
As I see it the High Court can only ask for a further statement of the case if it is not satisfied that the statements already made are sufficient to enable it to determine the question raised thereby. This section does not, in my opinion, authorise the High Court to go into the question whether the findings which have been arrived at are or are not supported by evidence. No doubt, if they are not so supported it is open to the assessee or to the Income-tax Department to get a reference made to the High Court but the provisions of this sub-section come into play only when the High Court feels the necessity of a supplemental statement in order to answer the question referred. Two cases were relied on by Sir Noshirwan Engineer in support of his submission, Govindram Bros., Ltd. v. Commissioner of Income-tax, Central, Bombay and Keshav Mills Co. Ltd. v. Commissioner of Income-tax, Bombay. In the first case the High Court had found that in the statement of the case made by the Appellate Tribunal there were inconsistencies and it was, therefore, sent back for a supplemental statement, and when it came back Kania, J., as he then was, delivering the judgment of the Court said :-
'The question whether the business is the same under Section 24(2) is a question of fact. It is a conclusion to be drawn from various facts which are established from the records produced before the Tribunal. The question which this Court can consider is whether any evidence exists for the conclusion of the Tribunal. Apart from that, the Tribunal being the final fact-finding authority, this Court cannot go into the question. From that aspect the two statements found in the statement of the case appear to be conflicting.......'
The counsel strongly relied on the words 'the question which this Court can consider is whether any evidence exists for the conclusion of the Tribunal.' Taken out of its context it may support the submission of the counsel, but reading the passage as a whole I do not think much assistance can be obtained from this passage. The learned Judge there definitely said that the Tribunal was the final fact-finding authority and that the High Court cannot go into any question. But reliance is placed on the words 'apart from that.' I am unable to draw the conclusion that I am asked to draw. I find no authority for the proposition in any part of Section 66 of the Income-tax Act, that if a statement of fact is not supported by any evidence the Court can consider whether evidence exists or not except in one case where the matter is so referred by a question raised before the Income-tax Appellate Tribunal.
In the second case again the findings of the Tribunal were not clear and contained statements which were contradictory of each other, and it was in those circumstances that the High Court called upon the Income-tax Appellate Tribunal to send up a supplemental statement.
Counsel for the Income-tax Commissioner submitted that under Section 66 of the Income-tax Act, the findings of the Tribunal are binding on this Court and no question which has not been referred to this Court can be raised unless it was raised in the first instance before the Tribunal. In support he has relied on several cases. In Commissioner of Income-tax, Madras v. D. Arokiaswami Chetti & Co., the Madras High Court held that 'the assessee was not entitled to be heard on the question whether the finding of the Tribunal that the deed of partnership ceased to be in force after the expiry of the period of three years was right or wrong inasmuch as the assessee had not applied for a reference on that question.' In Benoy Ratan Banerji v. Commissioner of Income-tax, it was held that the High Court is bound by the statement of facts and has no jurisdiction to reopen these facts. At page 104 it was observed :-
'We are bound to accept the facts given us by the Tribunal and we have no jurisdiction to reopen those facts and to entertain conclusions of fact differing from those of the Tribunal itself.'
In Commissioner of Income-tax, C.P.& U. P. v. Shri Dwarka Dheesh Temple Cawnpore, it was held that under Section 66 the Court has no jurisdiction either to go behind or to question statements of fact made by the Appellate Tribunal in the statement of the case submitted by it to the High Court. At page 446 it was said :-
'We have been pressed hard by Mr. Pathak to go behind the statement of facts set out in the statement of the case by the Appellate Tribunal. The suggestion is that if we were to do this, we might find other facts which might or might not shake the conclusions of fact stated to us. As a matter of principle we do not think that any jurisdiction is entrusted to us by Section 66 of the Income-tax Act, either to go behind or to question statements of fact made by the Appellate Tribunal in the statement of a case. Our only jurisdiction is that, if in any case we are not satisfied that the statements contained in the statement of the case are sufficient to enable us to determine the question raised by it, we have power to send it back to the Appellate Tribunal for a second helping of facts.'
In a Full Bench judgment of the Lahore High Court in Gurmukh Singh v. Commissioner of Income-tax, it was held that the High Court cannot raise any question suo motu, and for any question to be raised before the High Court it must first have been raised before the Tribunal and the jurisdiction of the High Court is confined to the questions raised by the assessee before the Tribunal. Din Mohammad, J., observed as follows :-
'It follows therefore, that in a reference under sub-section (2) the Commissioner cannot travel beyond the question originally indicated by the assessee nor can the High Court raise any question suo motu which is not covered by the reference..... The High Court may formulate the question itself but its substance must be the same though the form may be modified either to give the question indicated by the assessee a proper shape, or to bring out most prominently the legal aspect of the case, discarding all reference to facts.'
In Commissioner of Income-tax, Bihar & Orissa v. Maharajadhiraj of Darbhanga, their Lordships observed :-
'The Commissioner unfortunately omitted to formulate any question of law arising out of this transaction. The duty of the High Court under Section 66(5) is to decide the question of law raised by the case referred to them by the Commissioner and it is for the Commissioner to state formally the questions which arise. Here the High Court itself formulated the question to be decided as being.... Their Lordships deprecate this departure from regular procedure.'
These observations of their Lordships of the Privy Council clearly debar the High Court from taking into consideration any matter which has not been raised by the Appellate Tribunal while stating the case.
In National Mutual Life Association of Australasia Ltd. v. Commissioner of Income-tax, where a case was decided by the High Courts on an argument submitted to them for the first time their Lordships said at page 53 that any claim as to liability to tax based on that argument was a matter outside the letter of reference and was irrelevant to the question submitted. So also in Rajendra Narayan v. Commissioner of Income-tax, Bihar & Orissa where their Lordships said that the function of the High Court in cases referred to it under Section 66 is merely advisory and is confined to considering and answering the actual question referred to it. In Commissioner of Income-tax, Bengal v. Shaw Wallace & Co., where the question had not been framed properly and the High Court had recognised it in order to make it more precise it was held by their Lordships that this was not objectionable. In Commissioner of Income-tax v. Sarangpur Cotton ., a reference had been made by the Commissioner under sub-section (3) of Section 66 on a question formulated by the High Court. The Commissioner in the statement of case drawn up by him suggested the substitution of another question, and the High Court without remanding the case amended the question originally formulated by it and gave its decision thereon. Their Lordships in disposing of the appeal themselves recast the question so as to make it conform to the true state of affairs as disclosed in the case and answered it accordingly. In Trustees Corporation (India), Ltd. v. Commissioner of Income-tax, the High Court remanded the case to the Commissioner directing him to deal in particular with a further question, which in its opinion arose in the case, and the Commissioner in compliance with the order of the High Court referred two further questions. Their Lordships made the following observations :-
'Their Lordships are fully alive to the circumstances in which the High Court was constrained to direct that these further questions should be referred to it for consideration and the result in the present case of the order then made merely serves to confirm the view of the Board that the High Court will, in future cases, be well advised to require, before they seek to entertain any question under Section 66 of the Income-tax Act that the preliminary requirements of the section are strictly complied with.'
All these cases show that the jurisdiction of the High Court can only be exercised in accordance with the provisions of Section 66 of the Income-tax Act and all formalities must be observed before a question is raised, and unless and until a question is duly referred to the High Court under the provisions of Section 66(1) or the High Court calls upon the Appellate Tribunal to refer under Section 66(2) the High Court is incompetent to raise any question suo motu.
In support of his prayer asking us to send back the case for a supplemental statement of the case by the Appellate Tribunal the argument of the counsel for the assessee is, no doubt, very attractive, but in fact the attempts is to circumvent the law contained in Section 66 of the Income-tax Act and the way it has been interpreted by their Lordships of the Privy Council. In reality what Sir Noshirwan Engineer wishes us to do is that we must go behind the statement of fact set out in the case referred by the Appellate Tribunal so that the assessee may have a chance of finding fault with the statement of the case which he has accepted to be correct and of leading evidence to support his contention. This, in my opinion, we are not entitled to do, because in the words of their Lordships of the Privy Council before we seek to entertain any such question we must see that the preliminary requirements of the section are strictly complied with, and again in the words of their Lordships of the Privy Council 'the stringency of these requirements' (of the provisions of Section 66 of the Income-tax Act) is clearly deliberate. It is the intention of the enactment that the High Court is not to be flooded with such applications. The object is salutary and before we entertain any question under the section we must see that the preliminary statutory conditions have been fully observe : [See Trustees Corporation (India), Ltd. v. Commissioner of Income-tax]. I am, therefore, unable to give effect to the submission of the learned counsel for the assessee that we must send back the case for a supplemental statement.
On the statement of the case as sent up by the Appellate Tribunal it seems clear that there was a term in the contract that the payment would be made to the assessee at the office of the Reserve Bank of India, Bombay. But even if this condition was not there the fact that the cheques were issued by the Controller of Military Accounts on the Reserve Bank of India at Bombay and when sent to the assessee were sent by him (the assessee) for collection to the Imperial Bank of India, Bhopal, the inference is clear that the receipt was in British India at Bombay. The cheques given to the Imperial Bank of India for collection were really given to the Bank as agent of the assessee and its receiving the money in Bombay must be held to be receipt by the assessee in British India. In view of this, I would answer the question in the affirmative and hold that the profit made be the assessee from the contracts executed in the Bhopal State was received or deemed to Section 4(1)(a) of the Income-tax Act.
As the decision is in favour of the Commissioner of Income-tax he is entitled to his costs which I would assess at Rs. 250.
SONI, J. - I agree.
Reference answered in the affirmative.