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Commissioner of Income-tax Vs. K. Ravindranathan Nair - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference Case Nos. 229 of 1979 and 74 of 1980
Judge
Reported in(1984)43CTR(Ker)95; [1985]152ITR138(Ker)
ActsIndustrial Disputes Act, 1947 - Sections 25FF
AppellantCommissioner of Income-tax
RespondentK. Ravindranathan Nair
Appellant Advocate P.K.R. Menon, Adv.
Respondent Advocate B.S. Krishnan, Adv.
Excerpt:
direct taxation - business - section 25 ff of industrial disputes act, 1947 and section 37 of income-tax act, 1961 - whether assessee entitled to claim deduction of amount under section 37 - outgoings of business chargeable against income of business which assessee carried on in previous year - in case assessee carries on several distinct and independent business and one of them closed down the outgoings attributable to business cannot be charged against income the assessee had received from his other businesses - held, assessee not entitled to deduction claimed in return. - - 4,18,107. in this context it is interesting to note that the ito in the meantime had disallowed the deduction for gratuity claimed by the assessee in computing the taxable income of the assessee for the years.....radhakrishna menon, j. 1. these references are at the instance of the commissioner of income-tax, kerala-i, ernakulam.facts of the case 2. the assessee, an individual, has been carrying on the business in processing cashewnuts. he owned ten processing units, one in andhra pradesh, five in tamil nadu and four in kerala. out of these ten units, five were held on lease. the labour trouble in the units in kerala resulted in a lock-out in those units from october 7, 1969. on november 21, 1970, the dispute was settled and the payments to be made as per the settlement was scheduled to be made on or before november 30, 1970. the agreement is dated november 21, 1970.3. while the lock-out continued, the assessee as per an agreement (annexure a) dated march 9, 1970, with messrs. pratap cashew.....
Judgment:

Radhakrishna Menon, J.

1. These references are at the instance of the Commissioner of Income-tax, Kerala-I, Ernakulam.

FACTS OF THE CASE

2. The assessee, an individual, has been carrying on the business in processing cashewnuts. He owned ten processing units, one in Andhra Pradesh, five in Tamil Nadu and four in Kerala. Out of these ten units, five were held on lease. The labour trouble in the units in Kerala resulted in a lock-out in those units from October 7, 1969. On November 21, 1970, the dispute was settled and the payments to be made as per the settlement was scheduled to be made on or before November 30, 1970. The agreement is dated November 21, 1970.

3. While the lock-out continued, the assessee as per an agreement (annexure A) dated March 9, 1970, with Messrs. Pratap Cashew Company (P.) Ltd. of which the assessee and his wife are the only directors, leased out two units in Kerala to the said company. Clause 3 of the said agreement provided that the company should treat the services of the employees in these units as continuous without any break and that the terms and conditions of service of the employees shall not in any way be less favourable to them. The said clause further provided that the company will be liable to pay the retrenched employees retrenchment compensation as if their services under the company continued uninterruptedly. The two other units in Kerala, which the assessee was holding under lease, were surrendered before the expiry of the period. By a further agreement (annexure B) dated November 21, 1970, clause 3 in annexure' A was modified and after modification it read that in the event of the retrenchment of the employees, compensation on the basis that the employees continued to be in the service of the assessee up to October 1969, will be paid by him.

4. The assessee and the employees settled their disputes as per the memorandum of settlement dated November 21, 1970 (annexure C). The clausesin the said agreement in regard to payment of compensation, etc., are consistent with the clauses in annexure A as modified by annexure B.

5. Pursuant to the agreement with the unions settling the disputes which had resulted in the lock-out of the factories, the assessee paid Rs. 4,18,107 in 1970 as retrenchment compensation. In the return filed for the assessment year 1972-73, corresponding to the accounting year ending September 30, 1971, the assessee, however, claimed only a portion of the retrenchment compensation paid to the employees, namely, Rs. 2,71,421.13, pursuant to the settlement of disputes as a deduction because the balance amount of Rs. 1,46,686 had been claimed as deduction for gratuity payable in the years of assessments 1970-71 and 1971-72. The ITO rejected the claim, the reasons noted being (1) the employees to whom the payments were made were not employees of the assessee during the relevant period, (2) the expenditure was not incurred wholly or exclusively for the purpose of the business of the assessee, and (3) the payment was not covered by Section 36(1)(v) of the I.T. Act, 1961 ('the Act'). The ITO, accordingly, treated the aforesaid amount as income attracting tax.

6. Holding that the deduction of Rs. 2,71,421 claimed by the assessee as compensation falling under Section 25-FF of the Industrial Disputes Act, the AAC, before whom the assessee had filed an appeal against the order of assessment, directed that the aforesaid claim should be allowed as an item of deduction. However, it is relevant to note that the AAC had refused to entertain the plea of the assessee that he was entitled to get deduction of the entire amount of Rs. 4,18,107. In this context it is interesting to note that the ITO in the meantime had disallowed the deduction for gratuity claimed by the assessee in computing the taxable income of the assessee for the years of assessments 1970-71 and 1971-72.

7. The Revenue challenged this order of the AAC before the Appellate Tribunal in so far as it related to the deduction of Rs. 2,71,421. The assessee also had filed an appeal against the order of the AAC disallowing his plea that he was entitled to claim the entire amount of Rs. 4,18,107 as deduction as claimed by him in the revised return. The Tribunal disposed of both the appeals by a common order. The Tribunal found that the above claim of the assessee was not covered by Section 25FF of the Industrial Disputes Act, but it held that it was a payment which 'the assessee had to make by way of commercial expediency for the industrial health of the business as a whole.'

8. In the petition filed by the Revenue under Section 256(1) of the Act, six questions had been raised. The Tribunal, however, referred only the following question to this court:

' Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction of Rs. 4,18,107 under Section 37 of the Income-tax Act ?'

9. Regarding the other five questions, the Tribunal held as follows: ' In the reference application the only issue questioned by the Commissioner of Income-tax is the decision that the assessee is entitled to this deduction. But this issue had been split up into six questions. We think the issue being whether the assessee is entitled to the deduction, that is the only question which could be referred.'

LAW STATED

10. It is a well established principle of income-tax law that the outgoings of a business are chargeable only against the income of that business which the assessee carried on in the previous year. Similarly, if an assessee carries on several distinct and independent businesses and if one of them is closed down in the previous year, the outgoings attributable to the said business cannot be charged against the income the assessee had received from his other businesses in the said previous year notwithstanding the fact that the ventures carried on by him at its various centres or units are identical. This is well elucidated by the Supreme Court in L. M. Chhabda and Sons v. CIT : [1967]65ITR638(SC) . The Supreme Court has stated thus (p. 640):

' If the income of a business is not taxable under Section 10 as income of a particular year because the business was not carried on in that year, the assessee can obviously not seek to debit the expenditure incurred for carrying on that business, against his other income, for the outgoings are chargeable only against the income of a business which was carried on in the previous year. It follows that if an assessee carries on several distinct and independent businesses, and one of such businesses is closed before the previous year, he cannot claim allowance under Section 10 of the Act of an outgoing attributable to the business which is closed against the income of his other businesses in that year. '

11. Relying on the above decision of the Supreme Court, the counsel for the Revenue submitted that the assessee should establish that the two units he had transferred to the company as per annexure A agreement and the two units he surrendered before the expiry of the lease (all the four units were situated in Kerala) along with the other six units constituted one single business if he wanted the outgoings, namely, Rs. 4,18,107, charged against the income he earned in the previous year from the units where he continued to carry on the business. In other words, the assessee in order to get a verdict in his favour, should establish that the different ventures carried on by him at the ten places were ' so interlaced and sodovetailed into each other as to make them into the same business '. In support of this contention, the learned counsel cited the decision of the Supreme Court in Chhabda's case : [1967]65ITR638(SC) . The Supreme Court has held thus (p. 641):

' It is true that the question whether different ventures and activities of business carried on by an individual constitute one business or different businesses is not a pure question of fact. As pointed out by this court in Setabganj Sugar Mitts Ltd.'s case : [1961]41ITR272(SC) , in determining whether different ventures may be said to constitute the same business it has to be seen whether there was any interconnection, any interlacing, any interdependence, any unity embracing the ventures, and whether the different ventures were so interlaced and so dovetailed into each other as to make them into the same business. These principles have to be applied to the facts before a legal inference can be drawn that different business ventures constitute one business. In the determination of the question, findings of fact are involved, because a variety of matters bearing on the unity of the business have to be investigated, such as unity of control and management, conduct of the business through the same agency, the interrelation of the business, the employment of the same staff to run the business, the nature of the different transactions, the possibility of one being closed without affecting the texture of the other and so forth. '

12. Having expounded the law thus, the counsel for the Revenue called our attention to the peculiar facts of the case. He submitted that the materials and evidence already on record would establish that the ventures carried on by the assessee in the ten units did not constitute one business. It is discernible from the order of the Tribunal that the assessee has not placed before the Tribunal any material or evidence except certain accounts in proof of his contention that the different ventures and activities carried on by him in the ten units constituted one business. The assessee has not established any of the conditions enumerated in the decision of the Supreme Court referred to above. It is seen that the finding of the Tribunal that there was 'unity of management and control ' is based on the accounts the assessee is said to have produced before it. Were all the ten ventures in fact interlinked and interlaced, it was un-understandable how the assessee could hand over the accounts, registers, books and vouchers to the company (Pratap Cashew Company (P.) Ltd.) which had purchased only two business units the assessee carried on in Kerala. In this connection it is necessary to refer to clause 10 of annexure A. It reads :

' The party of the first part hereby hand over all the accounts, registers, books and vouchers and the party of the second part acknowledge receipt of the same. '

13. Annexure A virtually clinches the issue. The circumstance is telling. It proves beyond doubt that there was no unity of management or control. The ventures carried on by the assessee in the ten units, therefore, did not constitute one business. The outgoings of Rs. 4,18,107 of the transferred units cannot, accordingly, be charged against the income of the assessee from the other businesses he carried on in the six units situated in Andhra Pradesh and Tamil Nadu.

14. The learned counsel for the Revenue raised yet another point. It is this. The assessee is not, in any event, eligible for the deduction, for, the deduction claimed represents retrenchment compensation which, however, did not arise in the carrying on of the business but on the transfer of the units to Pratap Cashew Company (P.) Ltd. as per annexure A as modified by annexure B. He, in this connection, made specific reference to annexure B and Clauses 1 and 4 of annexure C. (Annexure B is a supplemental agreement modifying annexure A and annexure C is the memorandum of settlement between the assessee and his workmen in the two units transferred to the company). Annexure B reads :

'Further to the agreement dated 9th March, 1970, in view of the negotiations with the workers before the District Labour Officer, Quilon, and the compromise arrived at on November 21, 1970, it is agreed as follows :

Messrs. Pratap Cashew Company (Private) Limited shall be liable to pay the employees in the event of their retrenchment, compensation on the basis that their service was continuous from October, 1969, only. Any liability up to October, 1969, shall be discharged by Shri K. Ravindra-nathan Nair, Vijayalakshmi Cashew Company, Quilon. Clause 3 of the agreement dated March 9, 1970, shall stand amended to this extent.'

15. Clauses 1 and 4 of annexure C read 3

' 1. The management agrees to pay the workmen, excluding the staff, five days' wages per year of service in full and final settlement of all their claims for past services till October, 1969. ......

4. It is agreed that the workers will have no claim against M/s. Pratap Cashew Co. Private Ltd. with respect to the claims settled by this agreement and that the notices given to the unions and the workers to the contrary will stand cancelled. '

16. He also referred us to a decision of this Court in CIT v. Pratap Cashew Co. P. Ltd. : [1979]116ITR733(Ker) , where this court had occasion to consider the character of annexure A. This court held that ' annexure A ' evidenced a transfer of the rights of the assessee over the two units in Kerala to the company. On the said finding, this court answered the questions in favour of the company and allowed the provision made by thecompany for payment of the gratuity. The liability for payment of retrenchment compensation thus did not arise in the course of business but arose on account of the transfer of the business. The retrenchment compensation paid by the assessee thus falls under Section 25FF of the Industrial Disputes Act. The liability is not of a revenue nature. The assessee accordingly is not entitled to claim this payment as an item of deduction. The ITO, therefore, rightly disallowed this claim. CIT v. Gemini Cashew Sales Corpn. : [1967]65ITR643(SC) , supports this view. In this case the Supreme Court has stated thus (p. 649):

' As already observed, the liability to pay retrenchment compensation arose for the first time after the closure of the business and not before. It arose not in the carrying on of the business, but on account of the transfer of the business. During the entire period that the business was continuing, there was no liability to pay retrenchment compensation. The liability which arose on transfer of the business was not of a revenue nature. Profits of a business involve a comparison between the state of the business at two specific dates. Normally, the liability which occurs after the last date, unless its source is in a pre-existing definite obligation, cannot be regarded as a part of the outgoing of the business debitable in the profit and loss account. A deduction which is proper and necessary for ascertaining the balance of profits and gains of the business is undoubtedly properly allowable, but where a liability to make a payment arises not in the course of the business, not for the purpose of carrying on the business, but springs from the transfer of the business, it is not, in our judgment, a properly debitable item in its profit and loss account as a revenue outgoing. The claim of the firm to treat it as an item in the determination of the profits of the firm under Section 10(1) of the Income-tax Act cannot, therefore, be sustained. '

17. We could normally have closed the discussion here and disposed of the matter in the light of the above findings but for certain contentions raised by the learned counsel for the assessee. He submitted that inasmuch as the Revenue accepted the order of the Tribunal rejecting its application under Section 256(1) of the Act seeking reference of the question challenging the finding of fact, namely :

' Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in drawing an inference, without entering a positive finding that ' these units are one business only' and is not the above ' finding ' wrong, unreasonable and without materials ?'

18. The Revenue, under law, was estopped from challenging the said finding before us in these proceedings. He submitted that the said finding, inthe circumstances, is binding upon this court. In support of this contention he relied on the decision of the Supreme Court in Aluminium Corporation of India Ltd. v. CIT : [1972]86ITR11(SC) . The Supreme Court has stated thus (p. 13):

' If any party wants to challenge the correctness of the findings given by the Tribunal either on the ground that the same is not supported by any evidence on record or is based on irrelevant or inadmissible evidence or is unreasonable or perverse, a question raising any one of those grounds must be sought for and obtained. It is needless to say that the jurisdiction of the High Court in a reference under Section 66 is only an advisory jurisdiction. '

19. This principle, however, has certain exceptions. If the Tribunal has otherwise misdirected itself in law in entering the finding or the Tribunal has overlooked or ignored a clinching document which amounts to a misdirection in law, the said findings are not binding on this court. They can be eschewed while considering the real question that arises out of the order of the Tribunal. If the Tribunal has wrongly cast the burden of proving a fact on a party, then the conclusion thus recorded by the Tribunal cannot be regarded as binding upon the High Court in a reference under Section 256 of the Act. The Supreme Court in Parimisetti Seetharamamma v. CIT : [1965]57ITR532(SC) , has held so.

20. Dictum reads (p. 539):

'The conclusion of the Tribunal is, therefore, based on matters which may at the highest create some suspicion, and upon its view that the burden of proving that the receipts were not taxable lay upon the appellant. But a conclusion recorded by the Tribunal by wrongly throwing the burden of proof upon the assessee cannot be regarded as binding upon the High Court in a reference under Section 66 of the Income-tax Act. '

21. Here the Tribunal has wrongly cast the burden of establishing that the four units in Kerala are separate businesses, on the Department. The Tribunal has stated thus :

' In order to say that the payments are not allowable, the Department will have to establish that these four units are separate businesses apart from the other six units and the processing units run by the asses-see.'

22. Again the agreement, annexure A as modified by annexure B, transferring the units to the company read along with annexure C settlement deed fastening the liability of retrenchment compensation on the assessee, has not even been referred to by the Tribunal while considering the question whether ' all the units are fully interlinked and interlaced'. In short, the Tribunal overlooked or ignored these documents which clinchthe issue. The Tribunal thus has misdirected itself in law in arriving at the aforesaid findings. These findings, therefore, are erroneous. They are not binding upon the court and, hence, liable to be eschewed while considering the question whether the assessee is entitled to have the outgoings charged against the income from units other than those four units where he had closed down the businesses either due to the surrender of the lease or due to transfer as per annexure A. An erroneous approach to the issue is a misdirection in law. A finding arrived at in such circumstances cannot be treated as a finding of fact 'which should bind this court in its decision'. In Mahesh Anantrai Pattani v. CIT : [1961]41ITR481(SC) , the Supreme Court has held thus (p. 485):

' It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a contemporaneous document and because of this erroneous approach, the finding that it has given cannot be treated as a finding of fact which should bind -the court in its decision.' (emphasis*, supplied)

23. Finding it difficult to grapple with this problem, the learned counsel for the assessee submitted that the matter should then be remitted to the Tribunal for a de novo consideration of the facts without answering the question. In support of this contention, he cited Raghunath Prasad Poddar v. CIT : [1973]90ITR140(SC) . In that case the Supreme Court found that: ' Neither the Income-tax Officer nor the Appellate Assistant Commissioner and nor even the Tribunal has gone into the questions, firstly, as to what was the trade practice......' and on the basis of the said finding vacated theanswers given by the High Court and remanded the cases to the Tribunal for fresh disposal according to law. This decision has no application to the facts of the case before us because here the Tribunal had gone into the matters in great detail before it arrived at the above findings. In CIT v. Seshasayee Bros. (Travancore) Pvt. Ltd. : [1976]102ITR372(Ker) , another decision cited at the bar, this court found that the finding of the Tribunal was defective and instead of directing the Tribunal to submit a further statement of the case, ordered that the Tribunal should dispose of the appeal taking into account the materials placed by the parties before it and in accordance with law. In doing so, this court declined to answer the question. In Raghunath Prasad Poddar's case : [1973]90ITR140(SC) , the Supreme Court found that the Tribunal had not gone into the relevant issue at all. In Seshasayee Bros.' case this court, though it made a reference to the decisions of the Supreme Court in Keshav Mills Co. Ltd. v. CIT : [1965]56ITR365(SC) , Petlad Turkey Red Dye Works Co. Ltd. v. CIT[963] 48 ITR 92 and New Jehangir Vakil Mills Ltd. v. CIT : [1959]37ITR11(SC) , had notpointedly considered the question whether this court can direct the Tribunal to dispose of the case afresh after giving the parties an opportunity of producing fresh evidence. In Keshav Mills' case : [1965]56ITR365(SC) , the Supreme Court, after reviewing the case law with particular reference to Petlad Turkey's case : [1963]48ITR92(SC) and New Jehangir Vakil Mills' case : [1959]37ITR11(SC) , has held that 'though the High Court had power to direct a supplemental statement to be made, it was beyond its competence to direct additional evidence to be taken '. The Supreme Court has held (p. 380 of 56 ITR):

' Section 66(4), however, authorises the High Court to refer the case back to the Tribunal to make such additions to the statement of the case or alterations therein as the court may direct in that behalf. This power can be exercised by the High Court if it is satisfied that the statement of the case is not sufficient to enable it to determine the question raised by it. If the High Court feels that in order to answer satisfactorily the question referred to it, it is necessary to have additional material included in the statement of the case, the High Court can make an appropriate direction in that behalf. If the High Court is satisfied that some alterations should be made in the statement of the case to enable it to determine the question satisfactorily, it can make an appropriate direction in that behalf. The question is whether in issuing appropriate directions under Section 66(4), the High Court can ask the Tribunal to travel outside the record and call for and collect material which is not already produced on the record. If Section 66(4) is read along with Section 66(1) and Section 66(2), it may tend to show that the power of the High Court is limited to requiring the Tribunal to add to or alter the statement of the case in the light of the material and evidence already on the record. If the question that can be raised under Section 66(1) and Section 66(2) can arise only out of the order of the Tribunal and if the statement of the case required to be drawn up by the Tribunal under the said two provisions would inevitably be confined to the facts and material already on the record, it seems unlikely that Section 66(4) would authorise the High Court to direct the Tribunal to collect additional material or evidence not on the record. '

24. In view of this categoric declaration of law by the Supreme Court, weare constrained to reject the request of the learned counsel for the assesseeto remand the case for a de novo trial after permitting the assessee to letin fresh evidence.

25. Whatever that be, we could have referred the case back to the Tribunal in terms of Section 258 of the Act for a supplemental statement of the case. We, however, refrain from doing so because the statement of the case now before us contains all the material facts already on record. In short, thestatement of case before us is complete though the findings of fact set out therein are not binding on this court for the reason--as already stated--that the Tribunal has misdirected itself in law in arriving at the said findings.

26. A question then would arise whether this court in the exercise of its advisory jurisdiction could revise the aforesaid finding. We are of the view we could. We are fortified in this view by a decision of the Court of Appeal in IRC v. Korean Syndicate Ltd, [1921] 12 TC 181. Lord Sterndale M.R. has stated thus (p. 198):

' I think this appeal should be allowed. One difficulty which struck me at the outset, and the only one in the case, I think, is whether this was a question of fact on which the Commissioners have arrived at a finding with which we cannot interfere. I do not think that is so on looking at what they have done and the way they have stated the case; because what they have done is this. They have arrived at a finding which for my part I think they have arrived at by misdirecting themselves, in which case we have a right of revision. They have in fact, it seems to me, wholly ignored the effect of the agreement between the respondents and the American company, and then, having come to a conclusion of fact upon the memorandum and articles and the conduct of the company, and having ignored the effect of that agreement altogether, they simply say : ' Well, now, apart from that, what did the company do It simply had an agent who for a payment of 25 a year out in Korea ascertained whether they were getting the right sum. That is not carrying on business'. That is their only finding of fact; and if they mean, as I think they do, to say that is not carrying on business, and, therefore, the company did not carry on business at all, in my opinion they came to that conclusion by a wrong appreciation in law of the effect of the document before them '. (emphasis* supplied)

27. It is necessary to note in this context the law declared by the Supreme Court also. In Mahesh Anantrai's case : [1961]41ITR481(SC) , the Supreme Court has stated thus (p. 485) :

' ......because of this erroneous approach the finding that it(Tribunal)has given cannot be treated as a finding of fact which should bind the court in its decision '. (emphasis* supplied).

28. To meet the argument of the counsel for the Revenue that the deduction of Rs. 4,18,107 claimed by the assessee falls under Section 25FF of the Industrial Disputes Act and, hence, covered by Gemini Cashew's case : [1967]65ITR643(SC) , the learned counsel for the assesses referred to a decision of the Supreme Court in Sassoon J. David & Co. P. Ltd. v. CIT : [1979]118ITR261(SC) ,and submitted that the compensation paid must be held to be for the purpose of the business or in the course of the business. According to the assessee, the agreement, annexure A, as modified by annexure B and also clauses in the settlement between him and the employees evidenced by annexure C, go to show that at the relevant time he was carrying on the business. This argument, we are afraid, is without any foundation. After the transfer of the two units and the surrender of the other two units before the expiry of the lease period, the assessee had ceased to carry on the business and the payment of the aforesaid amount of Rs. 4 lakhs odd as retrenchment compensation was made after the transfer or surrender of the units, as the case may be. In the case of Sassoon J. David & Co. Private Ltd. : [1979]118ITR261(SC) , the Supreme Court has found that the assessee there continued to carry on business even after its control passed into the hands of the Tatas and, hence, the expenditure in question should be held to be laid out for the purpose of the company's own trade and not for the trade of the Tatas who were only the shareholders of the company. The assessee here by virtue of annexure A as modified by annexure B has ceased to carry on the business so far as the four units in Kerala are concerned and, hence, the principle of law laid down by the Supreme Court in Sassoon's case : [1979]118ITR261(SC) , has no application. The claim made by the assessee is directly covered by the Gemini Cashew's case : [1967]65ITR643(SC) . The assessee, therefore, is not entitled to deduct Rs. 4 lakhs odd as an item of revenue expenditure.

29. The learned counsel for the assessee submitted that in view of the order of the Tribunal rejecting the question challenging the finding of fact, the Revenue shall not be permitted to attack the same while considering the question referred to us in this case. This argument should also fail for the reason that the Tribunal itself has found that ' the issue had been split up into six questions '. The Tribunal has stated thus:

' In the reference application the only issue questioned by the Com-missioner of Income-tax is the decision that the assessee is entitled to this deduction. But this issue had been split up into six questions.'

30. The Tribunal while referring the question now before us, no doubt, has observed that the finding that all businesses carried on in the ten units are but one business, is based on materials before it. This finding, however, does not bind this court because, as already held, the Tribunal has misdirected itself in law in arriving at the said finding. This court, even otherwise, could consider the correctness of the said finding, for, it is but another aspect of the main question. If such a question is only another aspect of the matter covered by the question that is referred to us, we have jurisdiction to consider that question covering another aspect ofthe referred question while answering the question before us. This court in Malabar Co-operative Central Bank Ltd.'s case, I.L.R. 1974 (1) Ker 122, has held thus:

' It is no doubt true that a finding entered by the Tribunal on a question of fact is final unless in extraordinary circumstances as when the finding was entered without material or was otherwise arbitrary or perverse and the very finding was questioned before us in the reference to this court. It is equally true that if the question referred comprehends other questions so that the other questions formed aspects of the question referred, this court is entitled to go into the matter of the other aspects in answering the question referred. On the facts and in the circumstances of the case, we find it difficult to say that what has been said by the Tribunal in the paragraph that we have extracted above from its order is a finding on a question of fact. It appears to us that the Tribunal has proceeded under a misconception of the nature of the business of a banking institution. It has also cast the burden on the assessee and has blamed the assessee for not discharging that burden and the rejection of the claim for excluding the interest earned from securities under Section 80P(2)(a)(i) of the Act is exclusively based on the inability of the assessee to discharge the burden that the securities were really stock-in-trade. A reading of the order of the Tribunal as a whole indicates that this burden will get discharged only in cases where the banking institution had been able to establish that as a matter of practice it had been selling and buying securities or dealing with it otherwise often, if not frequently, as if buying and selling securities formed its basic or essential business. We think this is a completely wrong approach to the question. '

31. In the light of what is stated above, we hold that the assessee is not entitled to the deduction of Rs. 4,18,107 claimed in his return for the year of assessment 1972-73.

32. In the view we have taken, we answer the question in the negative and against the assessee. No order as to costs.

33. A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.


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