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Rajkot Seeds, Oil and Bullion Merchants Association Ltd. Vs. Commissioner of Income-tax, Gujarat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 11 of 1962
Judge
Reported in(1964)GLR1; [1965]56ITR685(Guj)
ActsIncome Tax Act, 1922 - Sections 9(1)
AppellantRajkot Seeds, Oil and Bullion Merchants Association Ltd.
RespondentCommissioner of Income-tax, Gujarat
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate J.M. Thakore, Adv.
Cases ReferredNew Jehangir Vakil Mills Ltd. v. Commissioner of Income
Excerpt:
direct taxation - assessment - section 9 (1) of income tax act, 1922 - whether interest paid as per resolution dated 17.11.1956 be allowed under section 9 (1) (iv) as interest on borrowed capital with which property was constructed - building in question constructed on and after 1945 and completed in 1948 - assessee-company came into existence long after completion of said building - as such could not be said to have constructed that building with borrowed capital - assessee-company cannot be said to have constructed building much less with borrowed capital - held, interest paid not allowed under section 9 (1) (iv) as interest on borrowed capital with which property was constructed. - - 9. now it is quite clear from a plain reading of clause (iv) of section 9(i) of the act that an.....j.m. shelat, c.j. 1. this reference is under section 66(1) of the income-tax act and the question referred to this court is : 'whether, on the facts of the case, interest paid as per the resolution dated november 17, 1956, could be allowed under section 9(1)(iv) as interest on borrowed capital with which the property was constructed ?' 2. the relevant assessment years are 1958-59 and 1959-60 of which the relative accounting years are samvat years 2013 and 2014. the facts relevant to this reference are as follows : prior to april 25, 1951, certain merchants trading in oil, seeds, etc., formed themselves into an association. under the rules of that association, those who wished to become members of the association and carry on the business of forward contracts in the aforesaid commodities.....
Judgment:

J.M. Shelat, C.J.

1. This reference is under section 66(1) of the Income-tax Act and the question referred to this court is : 'Whether, on the facts of the case, interest paid as per the resolution dated November 17, 1956, could be allowed under section 9(1)(iv) as interest on borrowed capital with which the property was constructed ?'

2. The relevant assessment years are 1958-59 and 1959-60 of which the relative accounting years are Samvat years 2013 and 2014. The facts relevant to this reference are as follows :

Prior to April 25, 1951, certain merchants trading in oil, seeds, etc., formed themselves into an association. Under the rules of that association, those who wished to become members of the association and carry on the business of forward contracts in the aforesaid commodities were required to pay the association Rs. 30 as entrance fees, and Rs. 3,000 as deposit, in addition to the subscription fees as may be fixed from time to time. Since the assessee-company did not produce the rules or regulations of that association, it is not possible to say that what were the terms and conditions upon which the members of the aforesaid association were required to pay the deposits. It is also not shown whether that association was registered or not, either under the Societies Registration Act or under any other statute. It appears from the resolution dated November 20, 1945, passed at an extraordinary general meeting of the association that the 1945. The association had, at that time, rupees three and a half lakhs lying in current account with a bank and that account was lying as a deposit fund to the credit of its members. The resolution provided that, 'Out of our association's membership deposit of approximately 3-1/2 lakhs of rupees which is lying in current account in the bank, Rs. 3,30,000 should be given as a loan towards building account at 3% interest'. The building was completed some time in 1948 at a total cost of Rs. 8,74,866. The position at that stage was that the said association had a building reserve fund of Rs. 6,45,851 which was utilised towards the cost of construction of the building. Therefore, only Rs. 2,29,015 had to be used from the deposit fund in pursuance of the aforesaid resolution dated November 20, 1945, towards the cost of construction. According to that resolution, the association was to pay interest at the rate of 3 per cent. per annum on the deposit fund given as a loan for construction purposes. In spite of that resolution, however, no amount by way of interest was paid from 1945 to 1956. The effect of that fact would be that, so far as the said association was concerned, it did not have in fact to pay any amount as and by way of interest all throughout that period in respect of the amount of Rs. 2,29,015 which was taken from the aforesaid deposit and spent towards the cost of construction of the building. It is nobody's case that the amount of interest payable under the said resolution was either allowed to accumulate or that it was decided by any resolution of the said association or otherwise that it was to be paid in future. It would, therefore, appear that interest payable upon the aforesaid sum of Rs. 2,29,015 was allowed to lapse and no member of the association either claimed it or was paid.

3. On April 25, 1951, the association was incorporated as a limited company under the provisions of the Indian Companies Act (VII of 1913). The assessee-company did not produce any agreement or other deed to show that it took over the business and assets of the said association and if so, under what terms and conditions. The only thing relied upon by Mr, Kaji for the assessee-company was the memorandum and the articles of association of the assessee-company. Clause III of the memorandum of association recites the objects for which the assessee-company was established and sub-clause (I) thereof, relied upon by Mr. Kaji, provides inter alia that one of the objects of the company was 'to take over with its existing assets and liabilities of the existing Rajkot Oil Seeds and Bullion Merchants' Association (situated at Commercial Chambers, Rajkot) which was so far recognised by the State of Rajkot and Saurashtra and to get the same registered under the Indian Companies Act, 1913.' Though one of the objects of the assessee-company thus was to take over the existing assets and liabilities of the said association and to get it incorporated under the Companies Act, the assessee-company did not produces aforesaid any document nor did it lead any evidence to show on what terms and conditions the company took over those assets and liabilities. In the absence of any rules or regulations of the said association also, it is impossible to know what were the liabilities of that association in connection with the deposits which the members had paid to that association and out of which the sum of Rs. 2,29,015 was spent towards the cost of construction. It is, therefore, impossible to say what was the liability of the assessee-company vis-a-vis the amount of Rs. 2,29,015 spent by the said association towards the cost of construction of the said building which was one of the assets presumably taken over by the assessee-company after its incorporation.

4. On or about December 17,1955, the assessee-company received a letter from the Forward Markets Commission directing the assessee-company to stop its business of trading in forward contracts in view of the impending proposed merger of all such associations throughout Saurashtra into a new representative association. The company accordingly ceased to carry on its business as from December 17, 1955, with the result that the only income that the assessee-company had hence forward was the income arising from the aforesaid building. On November 17, 1956, at an extraordinary general meeting, the assessee-company passed a resolution which was to the following effect :

'It is resolved that all members who have deposits with the association should be paid interest at the rate of 6% per annum with effect from Asho Sudi I, S. Y. 2012. The amount should be paid by the association at the end of the year on Diwali.'

5. The assessee-company having stopped its business, which was its principle object in the relevant previous year for the assessment year 1958-59, it was no longer competent to retain the deposits of its members. Therefore, it had to pass the aforesaid resolution agreeing to pay to its members interest at the aforesaid rate of 6%.

6. The company claimed interest paid during the two accounting years i.e., Samvat years 2013 and 2014, as an allowance under section 9(1)(iv) of the Act. Section 9(1)(iv) provides, inter alia :

'9. (1) The tax shall be payable by an assessee..... in respect of the bona fide annual value of property consisting of any buildings....... of which he is the owner....... subject to the following allowances, namely : - ....... (iv)... where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital.'

6. The question that had to be considered by the income-tax authorities was whether the interest paid by the assessee-company in pursuance of the resolution dated November 17, 1956, was an allowance permissible under clause (iv) of section 9(1). The Income-tax Officer disallowed the claim made by the assessee-company on the ground that interest chargeable on deposits paid by the association's members was not an allowable deduction against the property involved. He was of the view that the money utilised for building the property was never borrowed as capital for the construction of the building, that the amount was received by way of deposits from the members of the association, that it was this deposit which was utilised in constructing the property and since the money was received from the members, not as borrowed capital for the purpose of the construction but as deposit which had only been incidentally utilised by the association for the construction of the property, the claim of the assessee-company was untenable. He also found that as no interest had been claimed during the entire period from 1945 to 1956, during which period the association had received the income from the property, the claim made by the assessee-company was not allowable. On an appeal filed by the assessee-company against the aforesaid order, the Appellate Assistant Commissioner partially allowed that appeal and held that the amount of Rs. 2,29,015, could be treated as an amount invested out of the deposits of the members and directed allowance of the amount of interest thereon at the rate of 6 per cent. per annum. The reasons given by him for his order were that the building had admittedly been constructed after the resolution dated November 20, 1945, had been passed, by which it had been resolved to give a loan of Rs. 3,30,000 out of the deposit money of the members, that the building had been constructed out of the deposits of the members and that, therefore, there could be no doubt 'that the nature of that portion of the membership deposit which was utilised in the construction of the building was converted into borrowed capital from the date of the aforesaid resolution dated November 20, 1945.' He was further of the view that the fact that no interest had been paid upon the aforesaid amount right from 1945 to 1956 was not material and that merely upon that ground it could not be said that the building was not constructed with borrowed capital.

8. Aggrieved by this order, the department went into appeal before the Income-tax Appellate Tribunal who, disagreeing with the Appellate Assistant Commissioner, disallowed the claim of the assessee-company. The Tribunal was of the view that borrowed capital, within the meaning of clause (iv) of section 9(1), must postulate the existence of relationship of a lender and borrower and that a borrower can only arise by means of an agreement whereby the borrower would get the funds belonging to the lender. The Tribunal was of the view that by reason of article 16 of the articles of association of the assessee-company, the deposits received from the members belonged to the company, the company having absolute discretion to deal with these funds and that, furthermore, the deposits were in the nature of share capital of the assessee-company. The Tribunal was also of the view that even on the assumption that the said sum of Rs. 2,29,015 was borrowed capital, there was no link between the borrowal and the construction and that the resolution dated November 20, 1945, was not acted upon at all as no interest was ever paid thereunder and that that resolution merely amounted to an authority for dealing with the funds of the company in a particular way, namely, towards the cost of construction of the building. As regards the resolution dated November 17, 1956, the Tribunal was of the view that there was nothing in that resolution to show that payment of interest thereunder was with reference to any money borrowed from the members of the assessee-company for the purpose of construction and that that resolution was merely a general authority to the assessee-company to pay interest to the members of the assessee-company. The assessee-company, according to the Tribunal, was dealing with its own funds and that resolution could not be interpreted as if it involves a return of the moneys to the members and a return of the same by the members to the assessee-company as a loan. It was also of the view that the resolution dated the 20th of November 1945, was ultra vires of the assessee-company as it was inconsistent with article 16 of the articles of association.

9. Now it is quite clear from a plain reading of clause (iv) of section 9(I) of the Act that an allowance permitted under this clause is clearly in respect of interest payable on borrowed capital where the property is acquired, constructed, repaired, renewed or reconstructed with borrowed capital. There can be no doubt that it was the said association which constructed the property and not the assessee-company and the said association did so by spending a part of the deposits lying with it to the credit of its members. Therefore even assuming that the amount of Rs. 2,29,015 was borrowed capital, it would be the said association and not the assessee-company which could be said to have constructed the property in question with borrowed capital. The utmost that can be said is that after its incorporation, the assessee-company took over the building as part of the assets of the said association in pursuance of clause III of its memorandum of association. In other words, the assessee-company can be said to have acquired in 1951 the property, but, by that time, it is an undisputed fact, that the building was already completed. The question then is, can it, in these circumstances, be said that the assessee-company constructed the said building with borrowed capital, and even if it were so, can it further be said that the assessee-company is entitled to the allowance in respect of interest paid by it to its members by virtue of the resolution dated the 17th of November, 1956.

10. Some reliance was placed on articles 4, 15 and 16 of the articles of association of the assessee-company. But on a proper construction of these three articles, the deposits paid to the assessee-company did not belong to the company nor did the ownership therein vest in the company. If it was so, it was not necessary to resort to the fiction of deeming clauses in article 16, namely, (a) that the deposits shall be deemed to be under the absolute control of the company, and (b) as if they belonged to the association absolutely. These deeming words were used presumably to confer absolute control over these deposits in the assessee-company which otherwise it would not have. But article 16 itself provides that the assessee-company was to have control over these deposits subject to the provisions of the other articles. Article 15 provides for a lien, first in favour of the association and then, if there is a surplus after paying the dues due to the association, in favour of the members. There can, therefore, be no doubt that these deposits were deposits lying to the credit of the members, paid as and by way of security towards the performance by the members of their obligations towards the performance by the members of their obligations towards the assessee-company and the members, arising under the transactions entered into by them through the machinery provided by the assessee-company. Article 12 lays down as to when a member would cease to be a member and inter alia provides that in the circumstances stated in sub-clauses (ii) and (iii) thereof, the deposit of the removed member shall be refundable to him subject to any lien on the same under the article and subject to such terms and conditions as the board might deem fit and proper. This article clearly shows that the deposit amounts paid by the members of the assessee-company were refundable to them in certain events. If a member, therefore, ceased to be a member on resignation, death or otherwise, or if the assessee-company ceased to carry on its business, as it did in December, 1955, the company would have to refund the deposits to the members on a demand made therefor. Since the assessee-company ceased to carry on its business in December, 1955, and thereafter, there was no question of its retaining the deposits thereafter, as the deposits would no longer be required as security for the performance of obligations arising from transactions entered into by its members. It would, therefore, seem that it was because the assessee-company had no longer the power to retain the deposits that it had to pass the resolution dated the 17th of November, 1956, agreeing to pay interest at the rate of 6 per cent. per annum on the deposits paid by the members. On these facts stated by the Tribunal and which facts are undisputed, the question is, whether the assessee-company can be said to have constructed the aforesaid property with borrowed capital The Appellate Assistant Commissioner was obviously in error because he thought that since, in 1945, the said association had passed a resolution to lend Rs. 3,30,000 out of the deposit fund to the building account, the property was constructed by the assessee-company with borrowed capital. His error was two-fold : (I) that he was oblivious of the fact that it was the said association and not the assessee-company which constructed the building with borrowed capital, assuming that the aforesaid resolution amounted to borrowing, and (2) that he was also oblivious of the fact that in the absence of proof that the association was a registered body, it was no more than a collection of its members and it is, therefore, doubtful whether when the members resolved that Rs. 3,30,000 should be lent to the building account, that resolution amounted to a loan to the association or whether they were giving a loan to themselves in respect of moneys belonging to themselves. The Appellate Assistant Commissioner also forgot that the said association did not pay interest on such capital so that any allowance could be made in respect of such interest, nor was there any evidence that the assessee-company took over any liability from the association in respect of that interest. This confusion appears to have arisen because of the Appellate Assistant Commissioner mixing up the two bodies, namely, the said association and the assessee-company, and treating them as if they were one and the same.

11. On the other hand, the Tribunal also was not correct in observing that the deposits paid earlier to the said association or to the assessee-company by the members were in the nature of share capital. As we have already pointed out, these deposits were required, both under the rules of the association as also under the articles of association of the assessee-company, as and by way of security for the performance of the obligations arising under the transactions entered into by the members of the respective bodies.

12. Mr. Kaji challenged the correctness of the order passed by the Tribunal and his contention was that the deposits paid by the members were in the nature of borrowers inasmuch as borrowed capital would mean capital which the assessee-company received with a liability to repay and since the deposits were refundable to the members, there was a liability upon the assessee company to repay and, therefore, these deposits amounted to borrowed capital. There are, however, two difficulties in the way of Mr. Kaji. The first difficulty is, as we have already pointed out, that these deposit amounts under the rules were paid by the members as and by way of security for the performance of the obligations arising under the transactions entered into by them through the machinery provided by the said association and later on by the assessee-company and, therefore, there could be no relationship of a lender and a borrower or of a creditor and a debtor. The second and real difficulty in the way of Mr. Kaji is that the deposits in respect of which allowance is claimed, namely, Rs. 3,30,000, were not paid and could not have been paid as a loan to the assessee-company, the assessee-company, at the time when the said resolution dated the 20th November, 1945, was passed, not having even come into existence. The only thing that the resolution of the 20th November, 1945, can properly be said to have done was to transfer Rs. 3,30,000 from the deposit fund lying with the said association to its building account and which transfer the resolution declared to be a loan over which interest was agreed to be paid at 3% per annum. The utmost, therefore, that could be said was that the assessee-company took over the liability to refund those deposits but not as capital borrowed by it for the construction of the said property. The construction of the building having been commenced in 1945 and completed in 1948 and the assessee-company not having been incorporated until the 25th of April, 1951, the assessee-company could not possibly be said to have constructed the aforesaid building with borrowed capital.

13. The allowance under section 9(I)(iv) would be in respect of interest paid on borrowed capital with which the assessee-company must be said to have constructed the property. The admitted facts show that there was no question of the assessee-company constructing the building but that the building was constructed by the said association with the building reserve fund which the association had at that time and the amount of Rs. 2,29,015 transferred by it from the deposit fund to the building account in pursuance of the resolution dated the 20th of November, 1945. The admitted facts on record, on the contrary, clearly show that the assessee-company took over the property after its incorporation in 1951, when it took over the other assets and liabilities of the said association. Obviously, therefore, the case of the assessee-company cannot fall within clause (iv) of section 9(1) as it cannot be said to have constructed the property with capital borrowed by it for that purpose.

14. The next difficulty in the way of the assessee-company is that the allowance claimed by it is in respect of interest payable by it under its resolution dated the 17th of November, 1956. Under that resolution, interest is payable upon all deposits paid by the members and not upon that part of the deposits which the said association had utilised for the construction of the building, namely, Rs. 2,29,015. It is clear from the resolution itself that it was not as if interest was to be paid thereunder on capital borrowed for the purpose of construction of the building, but on all deposits paid by the members. There was, therefore, no relation or nexus between the so-called borrowed capital and the interest payable under the resolution dated the 17th of November, 1956. Interest thus was payable under the said resolution, not on borrowed capital used for the construction of the property, but was payable on moneys received by the assessee-company as and by way of deposits and which were refundable to the members on the company ceasing to do its business, its substratum having disappeared on and after the 17th of December, 1956.

15. Mr. Kaji, however, contended that the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal had all along proceeded on the assumption that the said association and the assessee-company were one and the same, that the acts of the said association were the acts of the assessee-company and that we would not be justified nor would it be within our jurisdiction to permit at this stage a new question to be raised, namely, that it was not the assessee-company which constructed the building or that it was not the assessee-company which obtained the loan from the deposit fund, but the said association, for the purpose of constructing the said building. He contended that since the department and the Tribunal had assumed that the said association and the assessee-company were one and the same, we also had to proceed to answer the question referred to us upon the same basis. In support of his contention, Mr. Kaji pointed out to us certain statements made by the Tribunal, both in its order and in the statement of the case and also certain statements in the orders passed by the Income-tax Officer and the Appellate Assistant Commissioner. These statements, no doubt, disclose that the income-tax authorities as also the Tribunal had fallen into an error in considering the said association and the assessee-company as one and the same body. The error was committed owing to the failure to perceive that the assessee-company came into existence for the first time on perceive that the assessee-company came into existence for the first time on the 25th of April, 1951, and therefore, the assessee-company and the said association could not in law be one and the same body. Mr. Kaji in support of his contention that we would not be justified to consider the question that it was not the assessee-company but the said association which constructed the building, assuming that the capital with which the building was constructed was borrowed capital, relied upon certain decisions which lay down the scope of the jurisdiction of the High Court under section 66 of the Income-tax Act. He placed considerable reliance upon the decision in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. There the Supreme Court observed that the jurisdiction of the High Court in a reference under section 66 is a special one, different from its ordinary jurisdiction as a civil court. The High Court hearing a reference under that section does not exercise any appellate or revisional or supervisory jurisdiction over the Tribunal. It acts purely in an advisory capacity on a reference which properly comes before it under section 66(1) and (2). It gives the Tribunal advice but ultimately it is for the Tribunal to give effect to that advice. It is of the essence of such a jurisdiction that the High Court can decide only questions which are referred to it and not any other questions and the Tribunal should have had an occasion to consider the question so that it may decide whether it should refer it for the decision of the court. Relaying upon these observations, Mr. Kaji contended that if we were to treat the said association and the assessee-company as separate bodies and decide, even on the admitted facts stated in the statement of the case, that by reason of the assessee-company having come into existence in 1951 only, it was not even physically possible for the assessee-company to have constructed the building with borrowed capital, the building having been completed in 1948, even then it would be a question not arising form the order of the Tribunal and the Tribunal not having either referred such a question to us or not having dealt with such question, it would be beyond our jurisdiction to consider that question or even a contention based upon admitted facts on record. It is no doubt true that the High Court, while exercising it special jurisdiction, can decide only the questions which are referred to it and not any other questions. But the pint to consider is, whether the contention that it was not the assessee-company which constructed the building with borrowed capital, can be said to be a question, different form the one considered by the Tribunal or independent and different from the one referred to us by the Tribunal, or whether it is merely another aspect of the question arising from the order passed by the Tribunal and the question referred to us by the Tribunal. It should be observed that in the very case of Scindia Steam Navigation Co. Ltd. The Supreme Court has also observed that a question of law might be a simple one, having its impact on one paint or it may be a complex one, trenching over an area with approaches leading to different points therein. Such a question might involve more than one aspect requiring to be tackled form different standpoints. All that section 66(1) requires is that the question of law which is referred to the court for decision and which the court has to decide must be the question which was in issue before the Tribunal. Where the question itself was under issue, there is no further limitation imposed by the section that that reference should be limited to those aspects of the question which had been argued before the Tribunal, and it would be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purposes of section 66(1) of the Act. The next decision relied upon by Mr. Kaji was the decision of the Supreme Court in Dhandhania Kedia and Co. v. Commissioner of Income-tax, where the Supreme Court held on the facts of that case that the High Court had gone beyond its jurisdiction under section 66(1), inasmuch as it had taken into consideration a question which was not referred for its opinion by the Tribunal nor had it been dealt with by the Tribunal and, therefore, that question could not be said to arise out of its order. The question there which was not dealt with by the Tribunal was whether the Mewar Industries Limited was company as defined by the Indian Income-tax Act and that was a question over which the parties were in considerable controversy. That question not having been dealt with by the Tribunal nor referred by the Tribunal to the High Court, obviously it was question which did not fall within the scope of section 66(1) of the Act and, in those circumstances, it was held that the High Court had no jurisdiction to go into that question under its special jurisdiction in income-tax references. We do not understand as to how this decision can be relied upon by Mr. Kaji as the contention raised by the learned Advocate-General cannot be said to be a question which is not referred to us by the Tribunal or is one which has not been dealt with by the Tribunal or one which cannot be said to arise from the order of the Tribunal. Reliance was also placed upon the decision in Kusumben D. Mahadevia v. Commissioner of Income-tax, where the Supreme Court reiterated the principle that section 66 of the Act permits a reference of a question of law arising out of the order of the Tribunal and does not confer jurisdiction upon the High Court to decide a different question of law not arising out of such order. Here also, the Supreme Court observed that it would be possible that a question of law referred to the High Court might involve different approaches for its solution and in such a case the High Court would be competent to amplify the question to take in all the approaches to the question. No doubt, the question must still be one which was before the Tribunal and was decided by it and must not be entirely a different question which the Tribunal never considered. Mr. Kaji referred to us also the decision in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax. That decision in obviously not applicable to the case before us. The relevant decision on the point raised by Mr. Kaji is however, the one in Commissioner of Income-tax v. Ogale Glass Works Ltd, where the point raised was almost similar to the one raised by Mr. Kaji before us. The Supreme Court there was concerned with the question whether an alternative argument raised before the High Court, though not expressly taken before the Tribunal, could be said to be a question not arising out of the order of the Tribunal or a question different from the one referred to by the Tribunal. The contention there raised was almost identical in terms to the one raised by Mr. Kaji before us and, therefore, the observations made in this decision must be considered as instructive. The Supreme Court at page 540 of the report observed that the Tribunal had referred a question of law which question of law did arise admittedly out of its order and was therefore, properly referred by the Tribunal under section 66(1) and the High Court, therefore, had to deal with and answer it in exercises of its jurisdiction under sub-section (5) of section 65. The income-tax department therefore advanced the argument based on the facts of the case that the cheques in that case had been accepted only conditionally. Certainly, therefore, there was no payment until the cheques had been cashed and, they having been cashed in Bombay, payment must be regarded as having been received in Bombay. When the department found that that argument did not find favour with the High Court, it sought to raise an alternative argument also based on facts that the cheques having, at the request of the assessee, been posted at Delhi, the mere posting of the cheques in such circumstances operated as payment in Delhi. It was contended that this alternative argument was a new question of law which did not arise from the order of the Tribunal and, in any event, had not been dealt with by the Tribunal. The Supreme Court repelled this contention by observing that no new question of law was sought to be raised, for the question of law still was whether, on the facts of the case, income, profits and gains in respect of sales made to the Government of India was received in British India within the meaning of section 4(1)(a) of the Act. The Supreme Court further observed that the argument was that as the cheques were posted at Delhi at the request of the assessee, payment was received by it in British India. It was argued that, although the language in which the question had been framed was wide enough to include this branch of the argument, the question should, nevertheless, be read as circumscribed by the facts on which the Tribunal's decision was made and not be regarded as at large. The Supreme Court observed that such suggestion meant that the question must be read as limited only to those facts on which alone reliance was placed in support of the argument actually advanced before the Tribunal and on which the Tribunal's decision was founded, leaving out all other facts appearing on the record and even referred to in the Tribunal's order and the statement of the case. It was held that there was no warrant for such a suggestion and the language of the question clearly indicated that the question of law had to be determined on the facts of the case. The Supreme Court was also of the view that to accede to the assessee's contention would amount to undue cutting down of the scope of the question by altering its language. It also held that there would have been considerable force in the contention on behalf of the assessee if the facts necessary to support the new argument advanced by the revenue were not on record, but such was not the case. These observations afford a clear and unambigous answer to the contention raised by Mr. Kaji on behalf of the assessee-company. The question referred to by the Tribunal is whether, on the facts of the case, interest paid as per the resolution dated the 17th of November, 1956, could be allowed under section 9(1)(iv) as interest on borrowed capital with which the property was constructed. That question was based upon the facts placed before the Tribunal and as stated by it in the statement of the case. The question is based upon admitted facts and facts which cannot be disputed and which are also on record, namely, (1) that, in or about 1945, the said association had been formed by certain merchants of Rajkot trading in forward contracts in certain commodities, (2) that on the 25th of April, 1951, the assessee-company was incorporated, and (3) that the building in question was constructed on and after 1945 and was completed in 1948, which necessarily means that the assessee-company, which came into existence long after the completion of the said building, could not possibly be said to have constructed that building with borrowed capital. It is no doubt true that the contention now raised by the learned Advocate-General, namely, that the assessee-company did not construct the building with borrowed capital, was not expressly taken before the Tribunal, but the question still was before the Tribunal, viz., 'Whether, on the facts and circumstances of the case, the claim made by the assessee-company in respect of interest paid by it in pursuance of the resolution dated the 17th of November, 1956, was allowable under clause (iv) of section 9(1).' That being the question of law which the Tribunal had decided and which the Tribunal has referred to us, it cannot possibly be said that the contention raised by the learned Advocate-General is a contention raising a new question which the Tribunal did not refer to us, nor could it be said that it is a question different from the one arising from the order of the Tribunal. As the Supreme Court, observed, a question of law might have several aspects and merely because only certain aspects were touched upon by the Tribunal in its order, it does not mean that if the other aspects of the same question of law are also considered by the High Court, the High Court would be dealing with a question not arising from the order of the Tribunal or a question not referred to the High Court by the Tribunal. As we have already pointed out, the facts upon which this contention is based are admitted facts and it cannot possibly be gainsaid by Mr. Kaji that the assessee-company came into existence about three years after the building in question had been completed. That being so, it is an obvious fact that the assessee-company cannot be said to have constructed the building, much less with borrowed capital. Therefore, we do not see any validity in the contention raised by Mr. Kaji.

16. Our answer to the question referred to us, for the reasons aforesaid, is in the negative. The petitioner will pay to the opponent the costs of this reference.

17. Question answered in the negative.


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