1. This is an appeal with the special leave of this Court, and is directedagainst an order dated September 28, 1955, and a judgment dated February 20,1956, of the High Court of Bombay. By the order, the High Court reframed aquestion referred to it by the Appellate Tribunal at Bombay, which it answeredby its judgment.
2. Mrs. Kusumben D. Mahadevia (hereinafter referred to as the assessee) whohas filed this appeal, was, at all material times, residing in Bombay. She wasa shareholder, holding 760 shares of Mafatlal Gagalbhai & Co., Ltd.,Bombay. For the assessment year 1950-51 (the previous year being the calendaryear 1949), she was assessed to income-tax on a total income of Rs. 1,50,765which included a grossed-up dividend income of Rs. 1,47,026. In the latterincome was including a sum of Rs. 47,120 being the dividends declares byMafatlal Gagalbhai & Co., Ltd., Bombay. Mafatlal Gagalbhai & Co., Ltd.,is a private limited Company with its registered office at Bombay. It was, atall material times, 'resident and ordinarily resident' in British India. It wasalso doing business in the former Baroda State, and used to keep its profitsderived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari.In the year 1949 Mafatlal Gagalbhai & Co., Ltd., declared dividends out ofthese accumulated profits by three resolutions, which are reproduced :
25-3-1949. 'That a furtherdividend of Rs. 17 per ordinary share free of income-tax for the year 1947 beand is hereby declared absorbing Rs. 4,29,250 and the same be payable in Navsariout of the profits of the year 1947 lying at Navsari.'
24-9-1949. 'That a furtherdividend of Rs. 24 per ordinary share free of income-tax for the year 1948 beand is hereby declared absorbing Rs. 6,06,000 and the same be payable inNavsari out of the profits of the year 1948 lying at Navsari with Messrs. M.G.Investment Corporation Ltd. on or after 30th April, 1949.'
24-9-1949. 'Resolved that anAd-interim dividend of Rs. 21 per ordinary share free of income-tax absorbingRs. 5,30,250 be and is hereby declared for the year 1949 out of the income ofthe Company for the year 1949 remaining unbrought with Messrs. M.G. InvestmentCorporation Ltd., Navsari, and that the same be payable in Navsari on or after30th April, 1949.'
3. The assessee did not being these dividends into British India. Sheclaimed the benefit of para. 4 of the Merged States (Taxation Concessions)Order, 1949 (hereinafter referred to briefly as the Concessions Order); but theTribunal held that the income did not accrued to her in the Baroda State. TheTribunal pointed out that the dividends were declared by Mafatlal Gagalbhai& Co., Ltd., out of its profits which had accrued partly in, what was thencalled, British India and partly in the Indian State. The dividend was thus declaredout of 'composite profits'. It further pointed out that the assessee had paidfor and acquired the shares of a Company in British India and was thus holdingan asset in British India, and that the income was from that asset. TheTribunal, however, at the instance of the assessee drew up a statement of thecase under section 66(1) of the Indian Income-tax Act, and referred thefollowing question to the High Court :
'Whether the net dividend income of Rs. 47,120accrued to the assessee in the former Baroda State, or whether it is incomeaccrued or deemed to have accrued to the assessee in British India ?'
4. When the reference was heard, the High Court was of the opinion that theTribunal ought to have decided and referred also the question whether the ConcessionsOrder applied to the assessee. The High Court recognised the grievance of theassessee that no such point was raised before the Tribunal. The High Court,however, by its order dated September 28, 1955, decided that there was no needto send the case back for a supplemental statement, since all the factsnecessary to decide the two questions were before the High Court. The HighCourt then reframed the question, as it said, to comprehend the two points oflaw in the following words :
'Whether the assessee is entitled to any concessionunder the Merged States (Taxation Concessions) Order, 1949, with regard to thenet dividend income of Rs. 47,120 ?'
5. The reference then came up for final disposal on February 20, 1956, andthe High Court answered the question in the negative, holding that para. 4 ofthe Concessions Order did not apply to the assessee. The High Court did notdecide where the income had accrued to the assessee. Leave to appeal to thisCourt was refused by the High Court, but the assessee applied to this Court forspecial leave against both the order and the judgment and obtained it, and thepresent appeal has been filed.
6. At the very outset, the assessee has questioned the jurisdiction of theHigh Court to frame and deal with a question of law not arising out of theorder of the Tribunal. The assessee points out that the Tribunal had decidedthat the income had accrued in British India. The assessee had challenged thispart of the decision, and if the Commissioner felt it necessary, he should haveobtained the decision of the Tribunal and asked for a reference on the otherpoint also. Since the Tribunal had not gone into the question of theapplicability to the assessee of the Concessions Order and had not expressedany opinion thereon, the assessee contends that the High Court could not raisethe question on its own, and decide it. The assessee strongly relies upon adecision of this Court in New Jehangir Vakil Mills Ltd. v. Commissioner ofIncome-tax : 37ITR11(SC) . In that case, the Bombay High Court haddirected the Tribunal to submit a supplementary statement of the case on pointsnot arising from the order of the Tribunal, and this Court held that the HighCourt had no jurisdiction to do so. The learned counsel for the Commissioner,on the other hand, contends that the question was the assessability of theassessee, who claimed the benefit of the Concessions Order. The main questionwas thus the applicability of the Concessions Order, and the question of theaccrual of the income, whether in British India or in Baroda, was merelyancillary. The latter question was, according to the respondent, include in thefirst question, and the High Court was right when it framed a comprehensivequestion and answered it in the sequence it did. The respondent points out thatthe High Court having held that the Concessions Order did not apply, was notrequired to decide the other limb of the question, as it became unnecessary todo so.
7. In our opinion, the objection of the assessee is well-founded. TheTribunal did not address itself to the question whether the Concessions Orderapplied to the assessee. It decided the question of assessability on the shortground that the income had not arisen in Baroda but in British India. Thataspect of the matter has not been touched by the Bombay High Court. The latterhas, on the other hand, considered whether the Concessions Order applies to theassessee, a matter not touched by the Tribunal. Thus, though the result is thesame so far as the assessment is concerned, the grounds of decision areentirely different.
8. The High Court felt that the question framed by it comprehended both theaspects and, perhaps it did. But the two matters were neither co-extensive, norwas the one included in the other. The question of accrual of income has to bedivided under the Income-tax Act, and has but little to do with the ConcessionsOrder. That question can be adequately decided on the facts of this casewithout advertence to the Concessions Order. It cannot, therefore, be said tobe either co-extensive with or included in the decision of the questionactually considered by the High Court to wit, whether the Concessions Orderapplied or not. If this be so, it is manifest that the Tribunal decidedsomething which stands completely outside the decision of the Bombay HighCourt. The High Court also decided a matter which was not considered by theTribunal even as a step in the decision of the point actually decided. The twodecisions are thus strangers to each other, though they lead to the sameresult.
9. Section 66 of the Income-tax Act which confers jurisdiction upon the HighCourt only permits a reference of a question of law arising out of the order ofthe Tribunal. It does not confer jurisdiction on the High Court to decide adifferent question of law not arising out of such order. It is possible thatthe same question of law may involve different approaches for its solution, andthe High Court may amplify the question to take in all the approaches. But thequestion must still be one which was before the Tribunal and was decided by it.It must not be an entirely different question which the Tribunal neverconsidered.
10. The respondent attempted to justify the action taken by contending thatthe decision of the question of the accrual of the income with reference to theplace of accrual implied the applicability of the Concessions Order. We do notagree. If this were so, there would be no necessity to frame the questionagain. Indeed, the High Court itself felt that there were two limbs of thequestion of assessability, and reframed the question to cover both the limbs.Where the High Court went wrong was in not deciding both the limbs but one ofthem and that too, the one not decided by the Tribunal. The resulting positioncan be summed up by saying that the High Court decided something which theTribunal did not, and the Tribunal decided something which the High Court didnot. This is clearly against the provisions of s. 66. The respondent referredto Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax : 26ITR686(Bom) , Commissioner of Income-tax v. Breach Candy Swimming Bath Trust : 27ITR279(Bom) and Ismailia Grain Merchants Association v. Commissionerof Income-tax : 31ITR433(Bom) . They were all decisions of the sameCourt, and arose in different circumstances. In two of them, the question waswide enough to take in a line of reasoning not adopted by the Tribunal, and inthe third, the question was widened by deleting a reference to a section, whenanother section was also material. They were not cases where the issues of lawas decided by the Tribunal and the High Court were entirely different, which isthe case here. The Punjab High Court has taken a contrary view in Mash TradingCo. v. Commissioner of Income-tax .
11. For the reasons given above, we are of opinion that the High Courtexceeded its jurisdiction in going outside the point of law decided by theTribunal and deciding a different point of law. The order of the High Courtwill, therefore, be set aside, and the case will be remitted to the High Courtto decide the question framed by the Tribunal. In view of the fact that boththe assessee and the Commissioner pointed out the anomaly to the High Court andthe question was reframed in spite of this, the costs of this appeal shall becosts in the reference to be heard by the High Court, and will aside theresult.
12. Appeal allowed.
13. Case remitted.