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V. Ramaswamy Iyengar and Another Vs. Commissioner of Income-tax, Madras. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberCase Referred No. 26 of 1957
Reported in[1960]40ITR377(Mad)
AppellantV. Ramaswamy Iyengar and Another
RespondentCommissioner of Income-tax, Madras.
Cases Referred and Raghavalu Naidu and Sons v. Commissioner of Income
Excerpt:
- - ..in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this act shall apply accordingly :provided that where any such income, profits or gains or any part thereof are not specifically receivable on behalf of any person, or where the individual shares of the persons on whose behalf they are receivable are indeterminate or unknown, the tax shall be levied and recoverable at the maximum rate, but where such persons have no other personal income chargeable under this act and none of them is an artificial juridical person, as if such income, profits or gains or such part thereof were the total income of an association of persons :[second proviso.....ramachandra iyer, j. - this reference under section 66(2) of the indian income-tax act relates to the assessment years, 1939-40 and 1941-42 to 1946-47, the relative year of account ending on the 12th of april of each year of assessment. one arunachalam chettiar (senior) and his son, arunachalam (junior), constituted members of a hindu undivided family. they were residents in india. the family had considerable properties in india and outside, comprising tea and rubber estates, coconut gardens and several money-lending businesses. arunachalam chettiar (junior) died in 1934, leaving behind him his widow, umayal achi. arunachalam chettiar (senior), who survived his son, died on february 22, 1938. on his death, the claimants to the properties were his two widows, lakshmi achi and nachiar achi,.....
Judgment:

RAMACHANDRA IYER, J. - This reference under section 66(2) of the Indian Income-tax Act relates to the assessment years, 1939-40 and 1941-42 to 1946-47, the relative year of account ending on the 12th of April of each year of assessment. One Arunachalam Chettiar (senior) and his son, Arunachalam (junior), constituted members of a Hindu undivided family. They were residents in India. The family had considerable properties in India and outside, comprising tea and rubber estates, coconut gardens and several money-lending businesses. Arunachalam Chettiar (junior) died in 1934, leaving behind him his widow, Umayal Achi. Arunachalam Chettiar (senior), who survived his son, died on February 22, 1938. On his death, the claimants to the properties were his two widows, Lakshmi Achi and Nachiar Achi, and widowed daughter-in-law, Umayal Achi. Some time prior to his death, that is. on February 22, 1938, Arunachalam Chettiar (senior) executed a will, making certain dispositions. Under the will, the executors were directed to arrange for the adoption of a son to each of the three ladies (such multiple adoption being presumably sanctioned by the custom of the Nattukottai Chettiar community). The will directed that, after the payment of legacies, the three adopted sons were to divide the properties equally.. Umayal Achi, however, did not accept the will. She filed a suit in the Sub-court, Devakottai, claiming a half share in the estate, left by her deceased father-in-law. The claim was laid on the basis of the rights conferred by the Hindu Womens Right to Property Act, 1937, under which the widow of the pre-deceased son of an individual who died after the coming into force of the Act was entitled to certain rights. Pending the suit, that is, on August 18, 1938, two advocates, Ramaswami Iyengar and Subramania Iyer, were appointed joint receivers to manage the properties involved in the suit. As a part of their management, the receivers continued the various businesses, which Arunachalam (senior) had carried on in his lifetime.

The suit was resisted by the two widows of Arunachala (senior), who denied the right of Umayal Achi to inheritance. The trial court found that the will executed by the deceased was a genuine one, but that Umayal Achi would be entitled to one half share in all the properties in India and in the movable properties situate outside India, subject to the payment of the legacies mentioned in the will. As regards the immoveable properties situate outside India, the court held that succession to the properties would be governed by the law of the place where the properties would be governed by the law of the place where the properties were situate. In accordance with the judgment, a preliminary decree was passed on October 26, 1940. There were appeals against the decrees to this court,; this court modified the decree of the lower court, restricting it to the non-agricultural and movable properties situate in India. The judgment of the High Court is reported in Umayal Achi v. Lakshmi Achi. Umayal Achi filed an appeal against the decree of the High Court to the Federal Court. The Federal Court by its judgment dated January 8, 1945, held that Umayal Achi would be entitled to one-half share in the separate non-agricultural properties left by the deceased and in the moveables. The court directed that there should be an ascertainment by the Subordinate Judge as to what where the separate properties that belonged to the deceased, in which the lady would have a right to a share. (The judgment of the Federal Court is reported in Umayal Achi v. Lakshmi Achi). In June, 1945,. each of to three ladies adopted a son, as directed by the will. It is stated that there was an ante adoption agreement in each case, defining the rights inter se between the son to be adopted and the respective adoptive mother. Aggrieved by the judgment of the Federal Court, Umayal Achi filed an appeal to the Privy Council, after obtaining leave for the same.

While the appeal was pending in the Privy Council, the ladies, on behalf of themselves and their respective adopted son, entered into a compromise, under which each of the widows, representing herself and her adopted son, agreed, to take one-third share of the entire estate, left by the deceased. The compromise was dated December 17, 1947. It is claimed that the ladies subsequently divided what they obtained under the compromise with their adopted sons in accordance with the ante adoption agreement. In October, 1945, the receivers were discharged.

In the meanwhile, proceedings for the assessment of income from the business and properties left by the deceased were initiated against the receivers. For the assessment year 1939-40, the officers of the Income-tax Department assessed the receivers under section 41 of the Indian Income-tax Act. They held that the shares of the widows being in dispute should be held to be indeterminate, and therefore levied the maximum tax on the total income under the first proviso to section 41. That assessment was duly taken on appeal to the Appellate Tribunal. By its order dated January 28, 1943, the Appellate Tribunal held that there three widows were the legal heirs of the deceased, that their shares could not be said to be indeterminate, though it might be that they had not yet been determined by the court; and that, therefore, the levy of tax at the maximum rate was not justified. There was, however, some defect in the order of the Appellate Tribunal as, in the final paragraph, it did not give effect to the finding referred to above. This was rectified, on an application under section 35, on February 11, 1946. The order on the rectification petition made it clear that the assessment was to be made on the shares of each of the widows, By the earlier order referred to above, the Tribunal directed the Income-tax Officer to compute the income, in accordance with the findings given. The Income-tax Officer held that, on the material dates, the beneficiaries of the estate were only the two widows of Arunachalam Chettiar (senior), the rights of Umayal Achi having come into existence under the compromise long thereafter. The Officer, therefore, allocated the income equally in two shares between the widows, and assessed the receivers to tax thereon. On this point, the Appellate Assistant Commissioner concurred with the Income-tax Officer. This was not accepted by the receivers, who filed an appeal to the Appellate Tribunal.. That appeal was heard along with the appeals for subsequent years, to which we shall make reference presently.

For the years subsequently, namely, 1941-42 to 1945-46, during which period neither the adoptions nor the compromise had come into existence, the Income-tax Officer likewise held that the income should be divided into two shares for the purpose of assessment. Individual assessments on Lakshmi Achi and Nachiar Achi were made directly. As stated already, the adoption was made by the widows on June 16, 1945, that is, during the year of account relative to the assessment year 1946-47. The Income-tax Officer assessed the income received by the receivers from April 13, 1945, to June 16, 1945, on two individuals, namely, Lakshmi Achi and Nachiar Achi, and the income for the subsequent period, namely, from June 17, 1945, to April 17, 1946, on the three persons, namely, Lakshmi Achi, Nachiar Achi and Umayal Achi. The assessee contested the propriety of the assessment on the ground that is should have been made on 6 units, namely, the widows and their respective adopted sons. The basis of the contention was (1) that Umayal Achis rights should be held to date back to the date when the succession opened, and (2) that the rights of the respective adopted sons should date back to the dates of death of their adoptive fathers. The Appellate Assistant Commissioner rejected the contention of the assessee, and confirmed the assessment as made by the Income-tax Officer. Appeals were, thereupon, filed by the receivers to the Appellate Tribunal. The only matter, which formed the subject-matter of the appeals, was as to the number of shares in which the assessment on the receivers should be divided. There was no objection on the part of either the assessee or the Department to the assessment itself being made under section 41. There was an appeal on behalf of the Department either that the assessment under section 41 was wrong, and that the proper way of assessing the profits from the businesses carried on by the receivers was to assess them directly under section 10.

The Appellate Tribunal, which heard the appeals for the assessment year 1941-42 to 1946-47, along with the appeal for the assessment year 1939-40, called for a report from the Income-tax Officer as to whether the businesses which the deceased carried on were continued by the receivers during the relevant years. The Income-tax Officer reported in the affirmative, namely, that the businesses of the deceased were carried on by the receivers jointly. On that finding, which the Appellate Tribunal accepted, it came to the conclusion that the proper way of making the assessment was to assess the receivers directly under section 10 as an association of persons. In that view, the Tribunal canceled the assessment made under section 41, and directed the Income-tax Officer to make fresh assessment under section 10 on the receivers as an association of persons in respect of the businesses carried on by them.

The following question was, thereupon, referred to this court for opinion :

'Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing the assessment to be made on the receivers under section 10 of the Indian Income-tax Act as an association of persons ?'

Before proceeding to answer the question referred, it is necessary to ascertain the scope of section 41, under which the Department had chosen to assess the receivers for all the years. Section 41, omitting the words which are not necessary for the present purpose, runs thus :

'In the case of income, profits or gains chargeable under this Act which............... any receiver.............. appointed by or under any order of a court.................. are entitled to receive on behalf of nay person, the tax shall be levied upon and recoverable from such.............. receiver................. in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act shall apply accordingly :

Provided that where any such income, profits or gains or any part thereof are not specifically receivable on behalf of any person, or where the individual shares of the persons on whose behalf they are receivable are indeterminate or unknown, the tax shall be levied and recoverable at the maximum rate, but where such persons have no other personal income chargeable under this Act and none of them is an artificial juridical person, as if such income, profits or gains or such part thereof were the total income of an association of persons :

[Second proviso omitted.]

(2) Nothing contained in sub-section(1) shall prevent either the direct assessment of the person on whose behalf income, profits or gains therein referred to are receivable, or the recovery from such person of the tax payable in respect of such income, profits or gains.'

The section creates a vicarious liability. Where an estate is vested in or managed by another person (whom we shall hereafter refer as the representatives), that person could be assessed to tax, in respect of the income of the estate. The section is an enabling one, conferring a power on the Department to assess the representative of a party in such cases. This is made clear by sub-section (2) which states that the provisions of section 41 will not prevent the alternative course of assessing directly the person, on whose behalf the income is received. Thus, so far as the beneficial owner of the estate is concerned, there can, at the opinion of the Department be a direct assessment of income under the appropriate heads or the legal owner or the representative can be assessed, the beneficial owner being indirectly assessed through such person. In either case the assessment is in substance against the beneficial owner. It would, therefore, follow that, where the Department proceeds to take advantage of the provisions of section 41, and assessee, the representatives liability would be the same, as if the beneficiaries concerned had received the amount. A case, where the beneficiary is a single person, would present no difficulty, for the assessment of the representative would be the same as that of the beneficiary. But, where there are several beneficiaries, the assessment will depend upon the fact, whether the interest of the beneficiaries is distinct or at least determinable. In that case, the measure of liability of the representative would be that of each one of the beneficiary. As the beneficiaries would, if separately assessed, have to pay tax only at the rate relative to their share of income (if the share of the income is less than the taxable limit, there would be an exemption from tax), the representative, proceeded against under section 41, will have the same liability. If however, the shares of the beneficiaries are indeterminate, the entire income received by the representative would be taxed at the maximum rate, as prescribed by the first proviso to section 41(1). As recourse to section 41 is only optional with the Department, the Department could directly assess the beneficiaries. But where the income received by the representative is from a business concern, a direct assessment could not be made, unless the business is carried on by the beneficiaries by their own volition, as, otherwise, they could not be said to constitute a firm or an association of persons.

In Saifudin Alimohamed v. Commissioner of Income-tax : [1954]25ITR237(Bom) a Mohammadan carrying on business died, leaving behind him two minor daughters. The court appointed two guardians for the minors, and the former were authorised to continue to carry on the business. It was held that it was open to the Department to assess the income of the guardians under section 10, on the basis that the business was carried on by the guardians in their own right, pursuant to the order of the court; but that, if the Department elected to proceed against the guardians in their representative character under section 40, they could not be assessed as an association of persons, but that the share of each minor should be assessed separately through her guardian. The same principle would apply to a case under section 41. Thus, where a receiver or receivers carried on business on behalf of certain beneficiaries or persons entitled to it under the directions from court, the parties who have beneficial interest in the business would not constitute an association of persons, because the essential element of a volition to carry on the business jointly would be absent; a fortiori a case where there are minors. In all such cases, the Department, in order to assess the profits as a whole, could assess the receivers as carrying on business in their own right under orders of court. But, where the assessment is not made on that footing; but the provisions of section 41 are applied and the receivers are assessed not as principals concerned in the business but as representatives of the beneficiaries, tax could be assessee and levied on the receivers only on the footing that each of the beneficial owners was assessed separately (i.e. in a case where shares are determinate) in regard to his or her share. In the present cases, the Income-tax Department elected to assess the beneficiaries indirectly through their representatives the receivers.

The question, then, is whether it would be open to the Appellate Tribunal to change the mode of assessment so as to make it direct one on the receivers as principal parities to the assessment. In regard to that matter, different principal would apply to the assessment year 1930-40 and the years 1941-42 to 1946-47.

Taking the assessment year 1939-40, the assessment was made on a Hindu undivided family, but the tax was computed on the footing that the income belonged to the two widow, Lakshmi Achi and Nachiar Achi half and half of the rates applicable to their respective income. The proper mode of assessment for that year was ultimately decided by the Appellate Tribunal on January 28, 1942. the order of the tribunal, read in the light of its rectification contained in the order dated February 11, 1946, finally upheld the assessment under section 41 - indeed there was no controversy about it-and declared that the assessment should be made in three shares, namely, Lakshmi Achi, Nachiar Achi and Umayal Achi. What was left to be determined was the actual division of the total income between three units. that order having become final under section 33(6), it would be no longer open either to the Department now to contend that the basis of assessment should change for the receivers to say that the basis of assessment should be distributed into more than three shares. We, therefore, consider that the tribunal had no jurisdiction to direct reassessment of the income under section 10 directly on the receivers for the year 1939-40.

As regards the assessment years 1941-42 to 1946-47, the officers of the Income-tax Department had the undoubted option to assess the beneficiaries directly or the receivers under section 41. they had also further option to assess the receivers directly under section 10 in the regard to the businesses. In the former case, they could assess the entire income from the estate, namely, its income under all heads, including the income earned in the business conducted by receivers. In the latter case, the receivers could be assessed only on the income earned latter case, the receivers could be assessed only on the income earned from the business, and that could not include the income from the other heads, for then it would be a hybrid assessment partly direct and partly indirect. The order of the Tribunal does not, however, advert to this aspect of the matter. Recourse to section 10, at the present stage, would mean a slitting up of the assessment, the assessment under section 41 being retained in regard to other heads of income, while in regard to the business income it would be on a wholly different assessee, namely, the receivers in their personal capacity. whether a course is permissible, is doubtful. Even if it is permissible, whether it could be allowed in the circumstances of the case, has to be considered. the Department had made its choice as to the mode of assessment; even if that was found to be ultimately detrimental to the revenue, they could have filed a appeal against the order of the appellate Assistant commissioner by seeking to assess the receivers under section 10. This, however, was not done. It must, therefore, be taken that the Department was satisfied with the assessment being made under section 41. would it be open the Tribunal under those circumstances to take up the matter suo motu ?

Mr. Rama Rao Sahib, the learned counsel for the Department, urged that, as the Appellate Tribunal had all the powers of Officers of the Department, it was open to them to change the mode of assessment. The learned counsel contended that, as the question, whether the receivers were to be assessed as persons carrying on the businesses or whether they were to be assessed vicariously by resorting to the provisions of section 41, was a fundamental thing to be decided in respect of the assessment, the Appellate tribunal was well within its rights to direct the assessment to be done in such manner. The learned counsel, however, conceded that it would not be open to the tribunal, in the absence of an appeal by the Department, to change the mode of assessment, so as to enhance the tax liability. But the contended that a mere order of remand giving directions to change the mode of assessment would not amount to enhancement of tax liability, though, as a result thereof, the final order of the assessing authority enhanced the tax liability.

A remand by the appellate Tribunal might, sometimes, be intended to the benefit of the assessee, though ultimately the actual assessment might be higher than before. In such case, the higher assessment might be said to be incidental result of an order of remand which was prima facie intended for the benefit of the appellant assessee. an instance of that kind is the case reported in Gajalakshmi ginning Factory Ltd. v. Commissioner of Income-tax : [1952]22ITR502(Mad) . But there might be cases where the remand will directly lead to an enhanced tax. The present case affords an example of such cases.

The remand which was directed by the Appellate Tribunal was intended to assess the receivers under section 10. There could be no doubt that such an assessment would enhance the tax liability. Taking, for example, the assessment for the year 1941-42, the Income-tax Officer assessed the income in two shares, namely that of Lakshmi Achi and Nachiar Achi, and the tax liability was calculated on that basis. The assessees case was that more persons were entitled to the property in determinate shares, and that, therefore, the assessment should be apportioned according to the shares. If the income from the business is to be assessed under section 10 on the receivers, the shares would be amalgamated and assessed as the profits of the receivers-at a higher rate and presumably attracting a higher amount by way of super tax as well.

The question that arises is, whether in the absence of an appeal by the Department the Tribunal would have power to make the position of an appellant worse than what it was before he filed the appeal. In other words, the question is whether the Tribunal can dispose of an appeal by directing an assessment in such a manner that it would inevitably result in the enhancement of the tax liability. It is necessary, in this connection, to refer briefly to the provisions of the Indian Income-tax Act.

It is a fundamental principal that no litigant has an inherent right of appeal against a judicial order, unless such right is given by a statue. It is an equally settled principle that, where the whole or part of an orders has not been appealed against, it would be final; and the appellate authority, in case there is an appeal against a part of an order, would have no jurisdiction in the absence of statutory provision to interfere with the other part which does not form the subject of the appeal. Where a statue confers a right to appeal to an appellate authority, its powers and functions are limited by the terms of that statute.

Section 30 gives a right of appeal only to the assessee against an order of assessment by an Income-tax Officer; the Department has no right to appeal against the order of the Income-tax Officer, even if it were prejudicial to the revenue. That presumably is for the reason that the Appellate Assistant Commissioner being an officer of the Department would be vigilant in protecting interest of the revenue, provided a power is given to him enhance the tax in an appeal by the assessee. Section 33B enable the Commissioner to suo motu revise an order of assessment which is prejudicial to the revenue. Section 31 (3) which enumerates the powers of the Appellate Assistant commissioner, says;

In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, -

(a) confirm, reduce, enhance or annul the assessment, or

(b) set aside the assessment the direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer think fit or the Appellate Assistant Commissioner may direct, and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment.'

(The rest of the section is omitted as unnecessary).

Thus, the power of the Appellate Assistant commissioner is not confined to the subject-matter of appeal by the assessee. It is much wider. He might examine all matters and dispose of the appeal, even to the prejudice of the assessee by himself enhancing the tax or remanding the case of the Income-tax Officer, with a view to increase the tax liability. But when the matter comes before a judicial tribunal by way of appeal the same principle cannot apply. The jurisdiction of the Appellate Tribunal should, on the absence of express words in the statute, be governed by the subject-matter of the appeal. Section 33 declares that there would be a right of appeal against an order of the appellate assistant commissioner both to the powers of the tribunal, runs :

'The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such order thereon as it thinks fit, and shall communicate any such order to the assessee and to the Commissioner.'

Section 33(4), unlike section 31(3), does not vest power in the Appellate tribunal to enhance the tax except when there is an appeal by the Department. Where the decision of the Appellate Assistant commissioner is detrimental to the revenue, the Department could itself appeal to the Tribunal under section 33(30). In the absence of such appeal, the Appellate Tribunal under section 33(3). In the absence of such appeal, the appellate Tribunal could only deal with the actual subject-matter before it, namely, the appeal of the assessee.

Rules have been framed under provisions of section 5A(8) regulating the procedure to be followed by the tribunal rule 12 states that an appellant shall not, except by leave of the tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but that the Tribunal should not be confined to the grounds set forth in the memorandum of appeal in disposing of the matter. This power of the tribunal to rest its order on a ground, not taken in the memorandum of appeal, is subject to the limitation that it should, before doing so, give sufficient opportunity to the party that may be affected for being heard on that ground. Rule 27 states :

'The respondent, though he may not have appealed, may support the order of the appellate Assistant Commissioner on any of the grounds decided against him.'

Rule 28, which confers powers of remand, runs :

'Where the Tribunal is of opinion that the case should be remanded, it may remand it may remand it to the Appellate Assistant Commissioner, or the Income-tax Officer, with such directions as the Tribunal may think fit.'

The aforesaid rules, including the power to remand, would be governed by the provisions of section 33(4), and, therefore, the jurisdiction of the Tribunal would be circumscribed by the subject-matter of the appeal-the subject-matter of the appeal being that contained in the original grounds of appeal, together with such other grounds as may be raised by the assessee by leave of the Tribunal. As the right of the respondent is only to support the order of the Appellate Assistant Commissioner on other grounds, it would follow that the Tribunal would have no jurisdiction to pass an order, so as to permit a ground to be raised by respondent which, if allowed, would make the position of the appellant worse than what it was before. It would however be open to Appellate Tribunal to permit a ground of appeal by an appellant, so as to enable him to obtain the same or lesser relief; but it would have no power to expand the appeal, so as to benefit the respondent. The distinction is pointed out in New India Life Assurance Co. v. Commissioner of Income-tax : [1957]31ITR844(Bom) . In that case, the assessee, a life insurance company, carried on business partly in what was then in British India, and partly in the Indian States. The Appellate Assistant Commissioner in an appeal from the order of the Income-tax Officer, held that the income from the policies in the Indian States could not be taxed in British India. There was an appeal by the Department to the Tribunal on the ground that the income from the policies effected in the States should be taken as having accrued in India. But when the case was heard by the Tribunal, the Department urged, as an alternative ground, that, although the policies were effected outside British India, a portion of the process for earning the income had taken place in British India, and, therefore, there should be allocation of the profits, and that portion thereof referable to the work done in India should be rendered liable to tax. The Tribunal accepted the alternative case, and remanded the case, directing the Appellate Assistant Commissioner to consider the question of apportionment. It was held that the Appellate Tribunal had power to give leave to the appellant to raise the question of apportionment, and that it was within its competence to reverse the decision of the Appellate Assistant Commissioner, on the ground that the liability to tax should be determined, after deciding the question whether the income earned could be apportioned. It will be noticed that, in that case, the Appellate Tribunal was concerned only with the question whether the relief could be given to an appellant on a ground not taken by him. The interference was well within the subject-matter of appeal, the relief granted being less than what the grounds of appeal justified. Dealing with section 33(4), the learned judges observed at page 856 :

'The expression thereon has come in for considerable judicial comment and observation, and the authorities lay down that the power of the Tribunal is confined to dealing with the subject-matter of the appeal and the subject-matter of the appeal is constituted by the grounds of appeal prepared by the appellant. This subject-matter cannot be expanded even by the appellant unless leave is granted to him do so by the Appellant Tribunal. The subject-matter cannot be expanded even by the appellant unless leave is granted to him to do so by the Appellate Tribunal. The subject-matter can certainly not be expanded by respondent, as already pointed out, if he has not either appealed or cross objected'.

Recently, we had occasion to consider a similar question in Periannan Chettiar v. Commissioner of Income-tax (R. C. 75 of 1957) [1954] 13 ITR 272. In that case, an assessee was having a dual capacity : (1) as the sole surviving member of a Hindu undivided family, and (2) as an individual. He was assessed as an individual in respect of certain foreign profits received in India. The assessee objected to the assessment on the ground that the profits being received by Hindu undivided family, they could not be included in the individual assessment. He also contested the position that remittances were received during the year of account. The Appellate Assistant Commissioner upheld the legality of the inclusion in the assessment of the individual the income of the family. He, however, held that the remittances of foreign profits were not received during the year of account. The Department filed an appeal to the Tribunal. The only point taken by the Department related to the question of remittance of the foreign profits. There was no objection on the part of the Department that the assessment should be made separately on the assessee in regard to the two distinct capacities he possessed, namely, that of an individual and that of the sole surviving member of the Hindu undivided family. The tribunal did not decide the question raised in the appeal, namely, whether the monies were received in the year of account. It held that the Income-tax Officer committed a fundamental mistake in clubbing the assessment of the individual with the Hindu undivided family and remitted the case to enable the Income-tax Officer to make a fresh assessment on the family and the individual separately. We held that the Tribunal would have no power to travel outside the subject-matter in the controversy in the appeal and decide the appeal in favour of the appellant on a ground which was not the subject matter of dispute before it.

In Motor Union Insurance Co. Ltd. v. Commissioner of Income-tax : [1945]13ITR272(Bom) , it was held that it was not open to the Tribunal itself to raise a ground or permit the party, who had not raised a ground, which would work adversely to the appellant. Referring to rule 21, the learned judges held that, while it recognised the principle that the judgment of the lower court could be supported on any ground not raised in the memorandum of appeal, it could not permit the Tribunal to suggest another mode of assessment altogether. The question again came up for consideration in Puranmal Radhakishan v. Commissioner of Income-tax : [1957]31ITR294(Bom) . It was held that the Appellate Tribunal could only decide on the basis of the grounds of appeal raised or permitted to be raised, but that it was not open to the Tribunal itself to raise a ground or permit a party who has not appealed to raise a ground, which would work adversely to the appellant. In that case, the question related to the extent to which loss could be allowed in favour of the assessee who was a dealer in shares. In the previous year, the assessee had purchased the shares at Rs. 1,100 per share. In the following year, he sold them at Rs. 225 per share. The controversy between the Department and the assessee was whether the loss allowable to the assessee should be calculated on the difference between the cost price, Rs. 1,100, and the sale price, Rs. 225, or on the difference between the market value of the shares on the date of the purchase, that is, Rs. 715, and the price of Rs. 225 for which it was sold. The officers of the Department held in favour of the latter contention. In an appeal by the assessee, the Tribunal gave a finding that the proper method of calculating the loss was to ascertain the market value of the shares on the date on which the assessee treated them as his stock-in-trade and the sum for which it was sold. It was held that the market value of the shares on the date on which it was brought into the account of the assessee as part of stock-in-trade was Rs. 524. The result of the finding of the Appellate Tribunal was that not merely the assessees appeal stood rejected, but there was a finding making the position of the assessee worse, in that he was held entitled only to a loss calculated at a difference between Rs. 524-6-0 and Rs. 225. It was held that the Tribunal could not have directed in the Income-tax Officer to assess the assessee on the basis of the price of the share Rs. 524-6-0, that what it could not do directly it could not do indirectly either, and that, therefore, it had no power to give a finding that the price of the share was only Rs. 524 for the purpose of directing the Income-tax Officer to reassess the assessee on the basis of that price.

A power to remand is not expressly given by section 33(4). But such power is implicit in the words pass such orders thereon Rule 28 confers the power of remand upon the Tribunal. On a reading of section 33(1), together with rules 9, 12, and 27, it would be clear that the power of remand conferred on the Tribunal by rule 28 is only incidental to its power to hear and dispose of appeal. If in an appeal the Tribunal could interfere in favour of the appellant, a remand could be made as incidental to that power, that is, for the purpose of giving relief to the appellant. But a power of remand could not be exercised so as exceed the jurisdiction of the Tribunal under section 33(1). We have already pointed out that the Tribunal has no jurisdiction to enhance assessment, except when there is an appeal by the Department itself. It would follow that it could not exercise the power of remand for the purpose of enhancing the tax.

Mr. Rama Rao Sahib, the learned counsel for the Department, placed considerable reliance on the decision in Gajalakshmi Ginning Factory v. Commissioner of Income-tax : [1952]22ITR502(Mad) . In that case, the assessee realised a profit or Rs. 13,197. The Income-tax Officer treated a sum of Rs. 3,800 under the head of income from the business. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer in regard to the capital receipt, and reduced the assessment to Rs. 2,800. The assessee filed an appeal to the Appellate Assistant Commissioner. On remand, the Appellate Assistant Commissioner held that both sums of Rs. 9,397 and Rs. 3,800 were assessable to ax as income from the business, that is, making the position of the assessee worse than what it was before the appealed to the Tribunal. A Bench of this court, of which one of us (Rajagopalan, j.) was a party, held that the entire sum of Rs. 13,197 was a capital, and it was, therefore, exempt from tax. But, incidentally, while considering the question of the powers of the Appellate Tribunal, the learned judges held that, even though no the appeal was preferred by the Commissioner in respect of the portion of the order of assessment of the Income-tax Officer, which contained an adverse decision against the Department, the matter having been remanded, it would be open to the Appellate Assistant Commissioner to deal with the whole of the assessment order of the Income-tax Officer, even to enhance the assessment, as under section 31 there was no even to enhance the assessment, as under section 31 there was no distinction between the case where the Appellate Assistant Commissioner was dealing with the subject-matter which was remanded and the appeal which was heard by him in the first instance. As we have pointed out already, there may be cases where a remand has to be made for giving relief to the appellant himself. For example, an assessee may attack the entire basis of the assessment. The Appellate Tribunal, in order to give relief to the appellant, might direct a remand. Once a remand, is made, the power of the Appellate Assistant Commissioner on remand, unless restricted by the order of the remand itself, would be governed by the provisions of section 31. That section, conferring as it does unlimited powers of assessment on the Appellate Assistant commissioner, would enable him to enhance the assessment. But such an enhancement could only be a fortuitous result of an order which was intended for the benefit of the appellant. The decision in Sri Gajalakshmi Ginning Factory Ltd. v. Commissioner of Income-tax : [1952]22ITR502(Mad) belongs to that category of cases.

That principle cannot apply to a case, where a remand is intended for the benefit of the respondent, or where it would inevitably result in a prejudice to the appellant. There can obviously be no power to remand in such a case. To recognise such a power would be to enable the Appellate Tribunal to do indirectly what it cannot do directly, that is, enhance the liability.

In the present case, there is no doubt that the result of the remand would be only to enhance the tax, and it can never operate to the benefit of the appellant. We are of opinion that the order of the Tribunal is one passed without jurisdiction. The Tribunal has not yet decided the appeal before it on the basis of the grounds raised therein. We are of opinion that the Tribunal had no jurisdiction to direct the assessment to be made on the receivers under section 10 of the Indian Income-tax Act, as an association of persons, and that it can only dispose of the appeal on the footing that there has been a proper assessment of the receivers under section 41 of the Indian Income-tax Act. In the result, we answer the question referred to us in the negative, and in favour of the assesses. The assessees will be entitled to their costs. Advocates Rs. 250.

Question answered in the negative.

[This case having been set down for being mentioned the court delivered the following order] :

It was a consolidated reference that we answered based on sixteen separate applications preferred by the assessees under section 66(1) of the Act. As reference was answered in favour of the assessees we directed that they should get their costs. The learned counsel for the assessees now represents that the institution fee of Rs. 1,600 paid by the assessees when they presented their applications under section 66(1) of the Act to the Tribunal should be directed to be taxed as costs of the reference to enable them to recover that amount also from revenue.

The first question that we have to consider is whether we have jurisdiction to issue such a direction in exercise of the powers vested in this court by section 66(6) of the Act, which declares that directions as to costs are within the discretion of court. The learned counsel for the Department submitted that, as the amount in question represented the costs incurred by the assessees in the proceedings before the Tribunal and not in any proceedings in this court, those costs would be outside the scope of any direction possible under section 66(6) of the Act.

Before section 66(1) was amended vesting in the Tribunal the jurisdiction to submit a reference to the High Court, it was the Commissioner that exercised a similar statutory power. At that stage also an assessee was required to deposit a fee of Rs. 100 when he required the Commissioner to submit a reference to the court. That payment was treated as incidental to the reference itself, and it was taken as well settled that the court could in proper cases direct a refund to that amount to the assessee who succeeded in the reference. In Commissioner of Income-tax v. J. I. Milne [1934] 2 ITR 25, Page, C.J., reviewed the position thus :

'Now, it has been the practice of the Income-tax authorities in Burma to retain this fee of Rs. 100 whether or not a reference to the High Court is made under section 66; and if the matter had been free from authority I should have been inclined to think that the view taken by the Income-tax authorities was right..... On the other hand the High Courts of Madras, Allahabad, Patna and Lahore have held that this fee of Rs. 100 is to be treated as part of the costs of the reference deposited by way of security, and for this reason it has been held that the fee forms part of the costs of, and incidental to, the reference which may be refunded to the assessee in the discretion of the court under section 66(6). In matters of procedure it is important, wherever it is possible, that the practice of the High Courts should be uniform and we are not prepared to differ upon this matter from the Madras, Allahabad, Patna and Lahore High Courts. The result is that, in our opinion, the fee of Rs. 100 which must accompany an application for a reference under section 66(2) forms part of the costs of, and incidental to, the reference which the court in its discretion may award in a proper case to the assessee.'

To mention only some of the cases, this court directed such a refund in Alaganatha Mudaliar v. Commissioner of Income-tax : [1940]8ITR69(Mad) , Commissioner of Income-tax v. Md. Ismail Rowther : [1940]8ITR150(Mad) , and Commissioner of Income-tax v. Murugappa Chettiar [1940] 8 ITR 292.

The principle that the deposit of Rs. 100 made by the assessee, who seeks a reference under section 66(1) of the Act, is incidental to the reference which is ultimately disposed of by the High Court, remains unchanged, even though the position now is that it is no longer the Commissioner but the Tribunal that is the statutory authority vested with the jurisdiction to submit a reference under section 66(1) to the High Court. In Chidambaram Chettiar v. Commissioner of Income-tax : [1945]13ITR177(Bom) and in Raghavalu Naidu and Sons v. Commissioner of Income tax : [1945]13ITR194(Mad) , where the reference was by the Tribunal, this court directed, no doubt without any discussion, the refund to the assessee of the fee of Rs. 100 that the assessee had paid under section 66(1) of the Act.

It may not be quite accurate to call it a refund if the costs are taxed and the Commissioner is directed to pay the institution fee to the successful assessee. The Commissioner never got the amount deposited with the Tribunal, and therefore no question of refund as such by the Commissioner could arise. If, however, it is the Tribunal that is directed to pay that amount to the assessee, it would be a case of refund. The real question is, whether the assessee who has succeeded in the reference can get back the amount he deposited with the Tribunal when he sought the reference under section 66(1) of the Act. Who should be called upon to pay the amount to the assessee is only a question that affects the form of the order and not the substance. We are unable to accept the contention of the learned counsel for the Department, that section 66(6) does not vest a jurisdiction in this court to give relief to the assessee and enable him to get back the institution fee. As we said, the payment was incidental to the reference, which commenced with the application preferred by the assessee under section 66) 1 of the Act and terminated with its disposal by this court under section 66(5). The proviso to section 66(1) enables the Tribunal to order refund in certain cases when the proceedings terminate before the Tribunal and do not come up before the High Court. When the reference does come up before the High Court and is finally disposed of there, section 66(6) enables the High Court to deal with all the costs of the reference including what had been deposited with the Tribunal as the institution fee. The proper order, in our opinion, is to direct the Tribunal to refund that amount and continue the practice sanctioned by precedent in Chidambaram Chettiar v. Commissioner of Income-tax and Raghavalu Naidu and Sons v. Commissioner of Income-tax : [1945]13ITR194(Mad) .

There will therefore be a direction to the Tribunal to refund to the assessees the institution fee of Rs. 1,600.

Order accordingly.


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