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Civil Appeal No. 54‑D of 1968, decided on 3rd June 1970.
(On appeal from the judgment and order of the High Court of East Pakistan, Dacca, dated the 16th August 1965, in Income tax Application No. 4 of 1964).
------S. 66(1)‑Reference Question whether amount in question constituted revenue receipt Question of fact‑Leave refused by Supreme Court to consider question.
------S. 66(1)‑Reference Limitation‑Question of limitation not being raised before Tribunal nor even specifically raised in petition for making reference to High Court‑ Tribunal's order refusing reference to High Court, held, did not give rise to question of limitation so as to be considered by Supreme Court.
received in 1947 but allocated for first time in balance‑sheet of 1954 as revenue receipt Income‑tax Officer, held, perfectly justified in treating it as income in 1954 and assessing it on that basis.
-------S. 66(1)‑Reference‑Every question of law need not be referred to High Court‑Only. question having some substance need be so referred.
Md. Nurul Huq, Advocate‑on‑Record for Appellant.
Abdul Matin Khan Chowdhury, Advocate‑on‑Record for Respondent.
Dates of hearing : 2nd and 3rd June 1970.
‑This appeal by special leave is directed against the order of the High Court of East Pakistan in Income‑tax Application No. 4 of 1964 dated the 16th August 1965. By this order; the High Court of East Pakistan held that ‑no question of law arises out of the order of the Income‑tax Appellate Tribunal and no interference with the impugned order was called for.
Briefly, the facts leading to this appeal are that the appellant is a Sterling Company having its head office in London and carry ing on business of growing, manufacturing‑ and sale of tea in the District of Sylhet. It was treated for income‑tax purposes as resident in Pakistan as its income in Pakistan has exceeded the income outside Pakistan. The assessment year 'in the dispute is 1955‑56 for which the corresponding accounting year .is 31st December 1954. The Income7tax Officer, Companies Circle II, Chittagong, completed the assessment for the assessment year 1955‑56 on the 30th June 1960: While computing‑the total income, the Income tax Officer assessed the amount of 12,874 equivalent to Pak. Rs. 1,71,660 which formed part of the amount of 90,254 received from the Government of India from time to time up to 1947 as compensation for acquisition of a past of the Tea Estate during the World War II, including standing crops, labour lines, staff quarters, etc., as income of the assessment year 1955‑56. According to the Income‑tax Officer, this, amount was treated by the assessee in the balance‑sheet of the year 1954 as revenue receipts. The appellant challenged this order in appeal before the Income‑tax Appellate Tribunal, Dacca, and the Tribunal by its order dated the 6th April 1961, came to the conclusion that the aforesaid amount represented the revenue receipts, and as such it was taxable. The appellant thereafter 'moved the Income‑tax Appellate Tribunal to refer the following questions‑ to the High Court :‑
(1) Whether the sum of 90,254 or any part thereof paid by the Government of India to the applicant as compensation, from time to time up to the year 1947 were revenue receipts in the bands of the applicant, comprising any element of income.
(2) If so, whether part of the above compensation money treated for business expediency in the Appropriation Account and not the Profit and Loss Account in the year 1954 as a revenue item by way of adjustment only, could be held to be revenue receipt of the year 1954 liable‑to assessment.
The Tribunal by its order dated the 21st October 1963, came to the conclusion that‑text-align:justify; font-family:Arial, Helvetica, sans-serif;text-indent:.3in; of the above questions was a question of law and refused to refer the matter to the High Court. Then the appellant moved the High Court of East Pakistan by Income. tax Application No. 4 of 1964‑and submitted: that the Income‑tax Appellate Tribunal should be directed to refer the, following question of law to the High Court for its opinion :‑
Whether the sum of 12,874 out of 90;264 paid to the applicant by the 'Government of India as compensation from time to time up to 1917 were revenue receipts in the hands of the applicant for‑ the year 1954 and as such liable‑ to assessment.
The High Court by its order dated the 16th August 1965 refused to call upon the Income‑tax Appellate Tribunal to refer the above question. The appellant have challenged this order in this appeal before us.
Leave was granted in this case on the point of limitation qua imposition of the tax.
Mr. Muhammad Nurul Huq, learned Advocate‑on‑Record, has contended that the following questions of law arise from the order of the Income‑tax Appellate Tribunal dated the 6th April 1961 :‑--
(1) Whether the sum in question constituted revenue receipts
(2) If so, whether having been received in or before 1947, it was taxable in the hands of assessee in the year 1954
So far as the first question is concerned, no leave has been granted by this Court on this point. Even otherwise both the High Court and the Income‑tax Appellate Tribunal are perfected justified in coming to the conclusion that this is a question of fact and no point of law is involved in it. The Income‑tax Officer has clearly stated in his order that he has accepted the amount of 12,b74 as revenue receipts on account of the standing crops etc. as shown in the balance‑sheet. The Income‑tax Appellate Tribunal also reached on the same conclusion. In this connection it observed as under :‑
"From the copies of correspondence or a portion thereof quoted above it would appear that the company admitted that certain proportion represented revenue receipt."
The Income‑tax Appellate Tribunal relied on the following passage in the report of the Chairman of the appellant company :‑
"Of this 90,254, 12,874 covers repayments for miscel laneous garden produce, etc., and it has been credited to Profit and Loss Accounts ; the remaining 77,380 represents the compensation received for 628 acres of land under tea acquired and as the book value of this was 43,580 there is a realised capital profit of 33,800 which as you will see has been transferred to capital Reserve on the Balance‑Sheet."
In view of this, it can be safely said that no question of law arises on this point.
Coming to the next question, it will be noticed that the question of limitation was riot raised before the Income‑tax Appellate Tribunal. It was not even specifically, raised in the petition for asking the Tribunal to refer the question of law to the High Court. The only point that was urged before the Income‑tax Appellate Tribunal was that the amount of 12,874 could not be taxed in the year 1954 when it was not received by the assessee in the year of assessment. This is entirely a different point. It is, therefore, quite clear that the question of limitation does not arise from the order of the Tribunal.
Apart from the on the facts of the present case, there ‑is not much substance in the alleged question of limitation. The amount of 90,254 was shown in the balance‑sheet of the appellant‑company on the 31st December 1947, under the head "Reserve and Surplus" in the following shape :‑
"Government of India Acquisition Account, receipt less expenditure incurred at 90,254."
This item continued to appear in this manner in the balance‑sheet up to the end of the year 1953. The balance‑sheet for the year 1954‑55 shows as under :
"Government acquisition account:
Amount received (Net) per last balance‑sheet ... 90,254
Loss amount written of fixed assets ... 43,580
Transfer to capital reserve : 33,800
Transfer to Profit and Loss account ... 12,874
Total :‑ 90,254
Profit and loss account for the year ending 31st December 1954, shows credit of 12,874 described as transfer from Govern ment Acquisition Account, being revenue portion of compensation received."
It is, therefore, quite clear that the amount of 12,874 was for the first time allocated to revenue in 1954. It was shown as income in 1954 and came on the surface in that year. The Income‑tax Officer, therefore, was perfectly justified in treating it as income in 1954 and assessing it on that basis. The contention of Mr. Narul Huq that this was received in 1947 and could not be taxed in 1954 has no force because the amount in question was allocated for the first time in the balance‑sheet of 1954, as revenue receipts.
It may be pointed out that it is not every question of law' that must be referred to the High Court. There roust be some substance in it. We are satisfied that the High Court, in the circumstances of the present case, was perfectly justified in not calling upon the Income‑tax Appellate Tribunal to refer the questions which were submitted before it.
In the result, we find no force in the appeal. The same is dismissed with no order as to costs.
Appeal dismissed.
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