1. This is a petition by Bansilal on behalf of Shri Ekling Cotton Ginning and Pressing Factory, Gangapur, under Sub-section 2 of Section 66 of the Indian Income Tax Act.
2. The material facts are these. The asses-see is a partnership firm carrying on the business of ginning and pressing of cotton at Gangapur, district Bhilwara. The Income-tax Officer, Udaipur, (Ward A) by his order dated the 31st July, 1953. assessed the firm to income-tax for the assessment year 1951-52, the relevant accounting period being the year ending on the 30th June, 1950. The assesses had made an application to the Income-tax Officer for registration of the firm and submitted a deed of partnership dated the 12th September, 1950, along with certain other documents executed between the partners in sup-port of the application.
The deed showed that the firm as on 12-9-1940 consisted of nine partners including Kashiram. father of the petitioner Bansilal, and Gauri-shanker and Shankerlal and six others. Their shares were defined in the deed. Kashiram had died in 1942. It then transpired that Gaurishan-ker who held four annas nine pies share in the concern sold two annas share thereout to Shanker-lal on the 19th February, 1949, who until this transfer he]d only four annas share.
Shankerlal who had thus acquired six annas share thereafter sold his entire six annas share by a registered document dated the 26th April, 1949 to Bansilal and his sons for a sum of Rs. 85,000/-. The sale-deed was executed in favour of Bansilal and his two sons Ramnarain and Ram-rai, who it may be mentioned, were stated to beminors under the guardianship of their fatherBansilal. It appears that both Bansilal (in his own capacity and as guardian of his minor sons) end Shankerlal sent letters to the managing partner of the factory intimating the fact of this sale and the other partners agreed to the reconstitution of the firm under a resolution recorded in the minute book on 4-5-1949 wherein it was stated that the remaining partners had no objection to Bansilal, and Ramrai and Ramnarain sons of Bansilal, being accepted as holders of Shanker-lal's six annas share in the firm.
The shares of Bansilal and his sons inter se were, however, not defined. The Income-tax Officer rejected the application for the registration of the firm chiefly on the ground that the shares field by Bansilal and Ramrai (the name of Ramnarain appears to have been omitted by an oversight) were not defined. The firm was accordingly assessed as an unregistered firm. The assessee then went in appeal to the Appellate Assistant Commissioner who dismissed the appeal.
The ground which prevailed with the Appellate Assistant Commissioner was that there was no instrument of partnership among the various persons who were the actual partners during the relevant accounting period and that the firm had undergone various changes as compared with the position set forth in the partnership instrument of 1940. Thereafter the assessee appealed to the Income-tax Appellate Tribunal.
The Tribunal also dismissed the appeal on the short ground that the individual shares of all the persons who were partners during the relevant year of accounting had not been specified either in the instrument of partnership or the later agreements recorded between them and that such failure to specify the shares was fatal to the assessee's application. This order is dated the 10th October. 1955.
The petitioner then moved an application before the Tribunal under Section 35 of the Income-tax Act in which he prayed that the Tribunal was mistaken in supposing that Bansilal, Ramrai and Ramnarain had become partners in the firm and that in fact only Bansilal had become a partner as Karta of his family including himself and his sons Ramrai and Ramnarain, and prayed for registration accordingly. This application was summarily rejected.
Thereafter the applicant moved an application before the Tribunal under Section 66 (1) of the Income-tax Act praying for the case being referred to this Court on certain points of law which were alleged to arise out of its order. After pointing out that the individual shares of certain three persons who had cumulatively purchased the share of an outgoing partner had not been specified either in any instrument of partnership or in any of the later agreements and that this position was not being challenged up to date, the learned members proceeded to observe as follows :--
'The only contention raised, is that these persons had become partners not in their individual capacity but as representatives of a joint Hindu family of which they were members. Such a contention does not appear to have been mooted before she authorities below nor was it mentioned in the grounds of appeal before us. The Tribunal has, therefore, said nothing in its order in that respect. No question of law for reference to the High Court can accordingly be said to arise out of the Tribunal's order.'
The application was in this view dismissed. The petitioner has now come up before us with aprayer that we should require the tribunal to state a case on certain alleged questions of law, which have been mentioned in the application. The questions proposed are these :
'1. Whether the purchase of share (from Shri Shankerlal the outgoing partner) by Shri Bansilal Ramrai and Bamnarain was in their individual capacity or on behalf of the Hindu undivided family?
2. Was Shri Bansilai a partner in the asses-see firm in the relevant year in the capacity of Karta of the Hindu undivided family?
3. Did Ramrai and Ramnarain become partners of the asseasee firm or they were merely interested in it through the Karta, Shri Bansilai?
4. Was specification of individual shares of Shri Ramrai and Ramnarain necessary under the provisions of Section 26-A of the Indian Income Tax Act. 1922. under the circumstances of the case?
5. Is the firm entitled to registration under Section 26-A of the Indian Income Tax Act, 1932, for the relevant year'?
3. Now before we proceed to deal with the arguments raised before us, we should like to say that we find it rather difficult to make any sense out of question No. 1 as worded by the applicant, and we are unable to say what meaning it is precisely intended to convey. we also consider that questions Nos. 4 and 5 are a repetition of each other: Further, questions Nos. 1 to 3 appear to us to be substantially questions of fact, rather than of law.
Be that as it may, the main point which, to our mind, the petitioner seeks to raise in his present application is that Bansilai had purchased Shankerlal's six annas share not in his individual capacity but as a Karta Of a joint Hindu family consisting of himself and his sons and consequently it was, according to the petitioner, unnecessary in law to specify their shares inter se Now so far as this aspect of the matter is concerned, the learned members of the Tribunal have definitely stated in their order dated the 14th March. 1956, that this point was never raised by the petitioner before them in appeal nor was it raised before the subordinate income-tax authorities.
The learned members further went on to indicate that had that question been raised before them, they Would have dealt with it. In this state of affairs, we have no hesitation in holding that the question that Bansilai had purchased Shankerlal's six annas share as Karta of a joint Hindu family and that consequently any specification of shares between them inter se was not called for -- is scarcely a question which arises out of their order dated 10-10-55. The position clearly is that this particular aspect was not raised before the Tribunal in appeal so that the Tribunal had no occasion to apply its mind to this Question.
Under the circumstances, we are disposed to agree with the Tribunal that this question could not be allowed to be raised for the first time in an application under Section 66 (1), and are clearly of opinion that it is not a matter which may fairly or properly be said to emerge out of the order passed by the Tribunal disposing of the petitioner's appeal under Section 33 of the Act. The mere circumstance that this question was subsequent to the order passed on appeal sought to be raised by means of an application made under Section 35 of the Act does not and cannot, in our opinion, change the real position.
4. Now the true legal position in a situation like the present appears to us to be this. It isperfectly correct that the High Court has the authority to require a reference from the appellate tribunal upon a question of law, and in the words of their Lordships of the Privy Council in Alcock Ashdown and Co. v. The Chief Revenue Authority AIR 1923 PC 138 'always supposing that there is a serious point of law to be considered, there lies a duty upon the Chief Revenue authority to State a case for the opinion of the court and if he does not appreciate that there is such a serious point, it is in the power of the court to control him and to order him to state the case.' and further that if there is such a point of law 'it ought to be decided in a regular manner and upon proper materials'.
But it is equally true that a point of law on which a reference ought to be made or may be required to be made must properly arise out of the order of the tribunal within the meaning of Sub-section 1 of Section 66. It further seems to us that whether a question of law arises on an order of the tribunal would depend upon the facts and circumstances of a given case, but we are disposed to think that as a rule in order that such a point should arise, it must have been pleaded before the tribunal and it must have been properly before it so that the tribunal should have been in a position to apply its mind to the question sought to be raised.
It follows that where a point of law has not been raised before the tribunal at the proper stage and in a proper manner or it was never taken up at all before any of the Income-tax authorities, so that the necessary materials for founding a conclusion thereon are absent or exist only in an incomplete form such a question cannot be held to arise out of the order of the tribunal within the meaning of Section 66 (1), and to such a question the provisions of Section 66 (2) can hardly be made applicable so that the High Court would have no authority or jurisdiction to requisition a reference on a point of law not so raised before the tribunal and therefore not arising out of its order.
5. The principles we have formulated above are deducible from decided cases, and we would like to invite reference to In the matter of Thiru-vengada Mudaliar AIR 1928 Mad 889, approved by a larger Bench in Subbiah Iyer v. Commr. of Income Tax AIR 1930 Mad 449, In re Radhey Lal : AIR1931All23 , Commr. of Income-Tax, B and O v. Lakshmibati AIR 1935 Pat 8 , In the matter of Babulal Raj. Garhia : 4ITR148(Cal) and Bray v. Justice of Lancashire (1889) 22 QBD 484 .
6. Now the contention sought to be raised by the petitioner in his application before us is that a specification of the shares of Bansilai and his sons was not required in law for purposes of the registration of the firm under Section 26-A in as-much as Bansilai had purchased the outgoing partner Shankerlal's share as the Karta of a joint Hindu family consisting of himself and his sons, but we have no doubt that it must stand negatived by the explicit and categorical statement of the tribunal that the point in question was never raised before them by the assessee in appeal or before the subordinate income-tax authorities.
7. That being the true situation and applying the principles we have enunciated above we cannot but hold that this particular point docs not arise out of the tribunal's order and consequently we do not see our way to compel a reference on it.
8. It was next contended before us with considerable pertinacity on behalf of the petitioner that Bansilal's sons Ramrai and Ramnarain were miners at the time Bansiial had purchased the six annas share of Shankerlal, and therefore they (the minor sons) could not have possibly become partners in the firm notwithstanding the consent of the other partners (as indeed such consent appears to have been given in the present case) and that such a possibility was entirely excluded by the general law relating to partnership, and consequently the appellate tribunal was wholly mistaken in not taking this position into consideration and in proceeding upon the footing that the minors had as well become partners and that their shares were required to be specified as a condition precedent to registration under Section 26-A.
9. Now it may be conceded that this contention involves a point of law, but here again the petitioner stands confronted with a hurdle, similar to the one we have discussed above, if not a bigger one. That hurdle is this. We do not find anywhere in the material placed before us that it was ever specifically contended on behalf of the assessee that the sons of Bansiial whose names stood mentioned as vendees in the sale-deed executed by shankerlal were minors, and that, for that reason, they could not have become partners in law with the remaining partners of the firm. It is true that in the sale-deed these two persons are mentioned as vo;LdTuesday, August 16, 2005 (minors), but, apart from that, the particular question which is intended to be raised at this stage does not appear to have been raised before any of the income-tax authorities including the Appellate Tribunal.
This is not all. This point was not taken in the form in which it was sought to be presented at the time of arguments before us even in the application presented in this Court. The principles of law formulated by us in the foregoing part of our judgment must apply a fortiori to such a case.
10. In this state of circumstances we have no hesitation in holding that the point of minority and its legal effect which is sought to be raised before this Court for the first time cannot be permitted to be so raised and we have no hesitation in saying that we have no authority to require the appellate tribunal to state a case for our opinion arising out of a point not so far taken.
11. Before concluding we may briefly refer to the contention raised before us on behalf of the Income-tax Department that the minor sons of Bansilal stood, in any case, admitted to the benefits of the partnership for the relevant period (our attention was invited to the minutes of the partnership business dated 4-5-1949) and that, that being so. their case would fall to be governed by Section 2 (6-B) of. the Income-tax Act which provides that the expression 'partner' includes any person who being a minor has been admitted to the benefits of partnership, and consequently it was urged that, granting that a question of law arose, we should not require a reference to be made to us because on the definition of the expression 'partner' set forth above, the minors would have the status of partners so far as the purposes of the Income-tax Act are concerned, and a specification of their shares would still be necessary before the benefit of Section 26 (A) could be extended to the assessee firm.
This contention appears to us to be not without some force, but we do not think it necessary to express any considered opinion upon this point inasmuch as. for the reasons already mentionedby us in the foregoing part of our judgment, wehave come to a definite conclusion that the petitioner is precluded under the circumstances of this case from raising the points in question at this stage, having not raised them at the proper time before the Appellate Tribunal or even the subordinate Income-tax' authorities.
12. Consequently this application fails andwe hereby dismiss it with costs.