CHAKRAVARTTI, C. J. - This reference under Section 66 (1) of the Income-tax Act raises a point which is utterly unarguable and the learned Counsel for the assessees, at the end, could not but help conceding that it was so.
The facts are as follows. There are two assessees, namely, the Samnugger Jute Factory Company Limited and the Titaghur Jute Factory Company Limited, both members of the Indian Jute Mills Association. Both, we are informed, keep their accounts by the English calendar year. It appears that in the accounting year 1947, the Samnugger Jute Factory Company Limited paid a sum of Rs. 20,130 to the Indian Jute Mills Association as its contribution to the Calcutta Rehabilitation Fund, which was being administered by the Association and similarly the Titaghur Jute Factory Company Limited paid a sum of Rs. 17,940 to the same Association for the same purpose. The Calcutta Rehabilitation Fund, we understand, was started for the purpose of giving relief to the persons affected by the communal riots of 1946 and 1947. After the necessary disbursements had been made for the purposes of the Rehabilitation Fund, the Indian Jute Mills Association found itself left with a surplus of about Rs. 4,00,000. Of that sum we understand a sum of Rs. 12,078 was taken to be the sum of the Samnugger Jute Factory Company Limited and a sum of Rs. 10,764 was taken to be the share of the Titaghur Jute Factory Company Limited. How these surplus amounts came to be regarded as shares of the contributories is not very clear but the proceedings before the authorities below were all had on the basis that either the amounts contributed by the various members of the Association remained their property or the surplus amounts were returned to them and thus came to belong to them again.
It appears further that during the accounting year 1948-49 the Indian Jute Mills Association decided to make a contribution of Rs. 50,00,000 to the Gandhi National Memorial Fund and framed a scheme of obtaining that amount from its constituent members by imposing on them a subscription, based on the number of looms owned and worked by each. It is not necessary for the purposes of this case to explain what the scheme exactly was. It will be sufficient to say those mills which owned over two hundred and twenty looms were asked to pay at the rate of Rs. 70 per loom and those who owned less than two hundred and twenty looms were asked to pay at the rate of Rs. 35 per loom. To that amount were to be added the amounts which stood respectively to the credit of the members on account of the surplus left from the contributions made by them to the Calcutta Rehabilitation Fund. The total contribution made by the Samnugger Jute Factory Company Limited to the Gandhi National Memorial Fund was Rs. 1,52,988 of which Rs. 1,40,910 was contributed in the year 1948-49 and Rs. 12,078 was the amount left over from the contributions made by the company to the Calcutta Rehabilitation Fund. Similarly, the total contribution of the Titaghur Jute Factory Company Limited to the Gandhi National Memorial Fund was Rs. 1,36,344 of which Rs. 1,25,580 was actually paid in the accounting year concerned and the balance of Rs. 10,764 was the surplus standing to the credit of the company out of the contributions made by it to the Rehabilitation Fund. The present case is concerned only with the two sums of Rs. 12,078 and 10,764.
The two cases have been consolidated and a single reference has been made, because the point involved is common. The inconvenience of such consolidation when the assessees are a totally different bodies is patent and we hope that the procedure of such consolidation will in future be avoided.
The assessment year with which we are concerned is 1949-50. Since the assessees keep their accounts by the English calendar year, the relevant accounting year was 1948. It appears that in the course of their assessments the assessees claimed exemption from tax under the proviso to Section 15B (2) of the Act in respect of the whole of the two sums of Rs. 1,52,988 and Rs. 1,36,344 respectively contributed by them to the Gandhi National Memorial Fund. The Income-tax Officer allowed exemption only in respect of the sums actually paid in relevant accounting year, that is to say, he granted the Samnugger Jute Factory Company Limited an exemption in respect of a sum of Rs. 1,49,910 and the Titaghur Jute Factory Company Limited an exemption in respect of Rs. 1,25,580. The rest of the claim was rejected.
The whole question in the reference is whether the assessees were entitled under the proviso to Section 15B (2) of the Act to exemption in respect of the two sums to which the Income-tax Officer refused to extend the privilege. The principal provision is, however, Section 15B (1).
The assessees naturally did not accept the assessments and appealed to the Appellate Assistant Commissioner. That officer held that the two sums of Rs. 12,078 and Rs. 10,764 had not been, as they could not have been, included in the total income for 1949-50 assessment and, consequently, no question of granting the assessees any exemption in respect of those two sums could possibly arise. He held further that those two sums had not in fact been contributed by the assessees to the Gandhi National Memorial Fund at all, because the money had previously been paid to the Calcutta Rehabilitation Fund and it was to that Fund that they belonged. On further appeal however the Tribunal held in favour of the assessees on both of these questions. The findings of the Tribunal as summarised in the statement of the case are (a) that the amounts were really paid by the assessees and not by the Indian Jute Mills Association, and (b) that it was not necessary that the amounts should have been paid out of the income of the previous years relevant to the assessments.
The Commissioner of Income-tax thereupon required the Tribunal to refer the question to this Court which had been done in the following form :-
'Whether on the facts and in the circumstances of these cases, the assessees are entitled to claim an exemption for the sums of Rs. 12,078 and Rs. 10,764 respectively contributed towards the Gandhi National Memorial Fund under the provisions of Section 15B (1) of the Income-tax Act? '
It appears that the Commissioner asked the Tribunal to refer a further question as regards the ownership of the two sums concerned at the time they were contributed to the Gandhi National Memorial Fund and as regards the person or persons who had actually made the contributions. The Tribunal declined to include that question in the reference in the view that it was concluded by a finding of fact and also that the Department had not contested that finding in the statement of facts filed by it along with the application for a reference. The last statement is obviously incorrect and the Tribunal must have misread the application. As regards the main ground, I am inclined to think that the finding, if any finding be traceable at all in the appellate order, is certainly not a finding of pure fact, and were it necessary for the purpose of this case to re-open that matter, I should have been prepared to do so on the strength of the recent decision of the Supreme Court that a finding of fact recorded by the Tribunal on an erroneous view of the law is not binding on the High Court. Even on the footing that it is a finding of fact, the question does not seem to me to be concluded by the decision of the Tribunal, because there is no reference whatsoever to any evidence or material upon which the decision was based. Prima facie at least, it is difficult to see how an amount of money contributed to a fund created for charitable purpose could remain the property of the contributor and how any surplus paid by the administrator of that fund to another charitable fund could be treated as a contribution of the original contributory to the former of the two funds. The question referred to this Court asks-whether the two sums contributed towards the Gandhi National Memorial Fund were entitled to exemption 'in the circumstances of the case'. If it were necessary, I should have been prepared to regard that question as wide enough to cover the point regarding the identity of the person who had made the contribution, but, as I have stated, it is possible to dispose of the question without reopening the so-called finding of fact.
It appears to me that the view taken by the Tribunal is an extra-ordinary one. It say that it could not agree with the Department that in order that any sum might be entitled to exemption under Section 15B, it had to be a sum which was includible and included in the assessable income for the year and that a question of exemption could arise only in respect of sums which would otherwise be assessable in the year in question. The Tribunal dispose of the argument on behalf of the Department by saying that the 'main section' itself, by which probably it meant either section 15B (1) or Section 15B (2), proviso, speaks of 'any sums'. It goes on to add its own commentary on that language of the section in the following words :-
'Any sum, in our opinion, connotes a large idea and is not restricted to sums paid out of the assessable income. The proviso, in our opinion, only contemplates those sums paid out of assessable income.'
By 'proviso' the Tribunal is obviously referring to the second proviso to Section 15B (1) which says that the exemption shall be from only income-tax but not from super-tax as well.
It is surprising to a degree that anyone having even a workable knowledge of the Income-tax Act should have taken the view which commended itself to the Tribunal. Section 15B belongs to a series of sections which deal with exemptions from tax. The introductory words in each one of those sections are : 'The tax shall not be payable by an assessee, etc.' That language contrasts noticeably with the language of Section 4 (3) of the Act which says that income, profit or gains, falling within certain classes shall not be included in the total income, profits or gains, falling within certain classes shall not be included in the total income of the person receiving them. It is thus clear that while sums to which Section 4 (3) applies are not to be brought into the computation at all and are not to be treated as a part of the assessable income those to which the exemption sections apply are not only sums in respect of which no tax is payable, although the income represented by them is assessable income. It is but common sense that sums in respect of which an exemption from tax is granted must be sums which would be liable to taxation but for the exemption. Exemption from tax in respect of sums not assessable to tax at all is something wholly meaningless. That the sums, in respect of which exemptions are provided for by Section 14 onwards, are and must be part of the assessable income of the assessee, is placed beyond doubt by the provisions of Section 16 (1) (a) of the Act, which lays down how the total income is to be computed. That section provides that any sum exempted under a number of sections, of which Section 15B is one, shall be included in computing the total income of an assessee, although such inclusion will be only for purposes of rate and for purposes of super-tax. I am stating the effect of Section 16 (1) (a) broadly, because so far as super-tax is concerned there is a further exemption in favour of sums covered by Section 15A, but the broad point to notice is that the sums concerned are all sums which are assessable to tax and must be brought into the computation for the purpose of determining the assessable income, although in levying tax after the rate has been determined an exemption from income-tax but not from the super-tax will be granted in respect of them. There can be no question whatsoever of bringing any sum into the computation or granting any exemption in respect of it, if it is not a part of the income assessable for the year at all. Indeed, no question could arise of charging super-tax on it, which, under the second proviso to Section 15B (1) itself, must be done in respect of sums exempted from income-tax under the section.
The tribunal, as I have said, relies upon the words 'any sums paid by him'. The sums concerned in the present case are sums which were first paid by the tow assessees to the Indian Jute Mills Association in the year 1947 presumably out of their income assessable in the relevant assessment year or out of previous savings. Those sums as the Appellate Assistant Commissioner pointed out were not and could not be included in the income assessable for the year 1949-50, because they were no part of the income of the year 1948. The Tribunal seems to think that although the total assessable income, determined for a particular assessee for a particular year may not include a particular sum contributed by him to one of the approved charities and although such sum may be contributed from the saving of a previous year, the assessee will still be entitled to a deduction of tax, computed on that sum from the tax rightly assessed on him on his proper assessable income for the year. Nothing could be less tenable or less consistent with the provisions of the Act than view of that character. It is almost ludicrous. It amounts to saying that anybody can bring in any sum from his savings of previous years and contribute it to one of the approved charities and after he has done so, he can go to the Income-tax Officer and claim that he should be granted an exemption in his assessment for the true assessable income of the year to the extent of the contribution made by him of an extraneous sum out of the income of previous years. A claim of that character would not be a claim of exemption at all, but a claim of credit for something done in respect of money outside the assessment altogether. Since the Tribunal seriously put forward that view, I am inclined to think that it was making a confusion between sums which are not to be included in the total income of an assessee at all and sums which, being includible in the assessable income, are yet declared exempt from tax. It is surprising that such a confusion should have been made, but that is the only basis upon which I can find some explanation for the view taken by the learned member of the Tribunal. Even that hypothesis, I should think, would not fully explain the strange theory that an exemption from tax can be allowed in respect of the a sum not brought to tax at all or that from the tax chargeable on the assessable income of a year, an amount corresponding to tax chargeable on a sum paid to charity out of old funds in the hands of the assessee should be deducted.
Mr. Mitter who appears for the assessees adopted the argument of the Tribunal and drew our attention on his own account to the words 'any sum' as occurring not in clause (1) of Section 15B but in the proviso to clause (2) of the section. He said that 'any sum' must mean all sums, whatever their character might be and added that if the language used in the statute was capable of two constructions, one more favourable to the assessee than the other, then the more favourable construction should be preferred. All these propositions are unexceptionable as principles of the construction of statutes, but Mr. Mitter like the Tribunal overlooked the opening words of Section 15B. Those words are, as I have already said, 'The tax shall not be payable by an assessee, etc.'. It follows that if the exemption is to be asked for in respect of 'any sum', that must be a sum about which it is possible to say that the tax shall not be payable upon it which can be possible only if it is a part of the income of the year and is liable to tax. The two sums in the present case were sums which were parts of the assessees income of the year 1947 or of years even prior thereto. No one was asking them to pay tax on those sums in the 1949-50 assessment and that being so, there was no occasion for claiming or granting any exemption in respect of those sums, although they might be 'any sum', if those two words are taken in their broad general sense. It is clear from what I have so far said that 'any sums' must be sums assessable in their nature, being parts of the assessable income of the relative accounting year and sums brought into the assessment and about to be brought to charge. The two sums concerned in the present case do not obviously satisfy that requirement and to say that they can count for any claim of exemption in respect of the assessable income of the year, to which they are wholly foreign, is manifestly absurd.
For the reasons I have given, it appears to me to be beyond argument that no exemption could be claimed in respect of the two sums of Rs. 12,078 and Rs. 10,764 under Section 15B (1) of the Act read with the proviso to Section 15B (2) as claimed by the assessees. The answer to the question referred must therefore be 'No'.
The Commissioner of Income-tax will have his costs of this reference.
LAHIRI, J.-I agree.
reference answered accordingly.