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Civil Miscellaneous Petition No. 19‑C of 1954, decided on 2nd July, 1954, under sections 109, 110 and Order 45, Rule 2, Civil Procedure Code, for leave to appeal to the Federal Court of Pakistan, against the order of D. B. consisting Muhammad Khurshid Zaman and Kaikaus, JJ., in Civil Miscellaneous Case No. 173 of 1952, passed on the 23rd November 1953, dismissing the application with costs.
Income‑Tax Act (XI of 1922), Ss. 66 (2) and 66A (2) Right of appeal to Federal Court from order of High Court refusing to direct Tribunal to state case‑Letters Patent, Lahore High Court, Clause 29‑Civil Procedure Code (V of 1908), Ss. 109 and 110 and O. X LV r. 2.
The High Court under section 66 (2) refused to direct the Income Tax Appellate Tribunal to state the case and to refer it.
Held : Per Kaikaus, J.‑The Legislature while enacting section 66‑A said nothing about an order dismissing an application under section 66 (2). It would have been quite proper to deal with that kind of order also in section 66‑A. However from the fact that there is no mention of such an order it does not necessarily follow that the intention was to exclude the right of appeal. While an anomaly is being created if the petitioner is, in cases like the present, entitled as of right to file an appeal the situation will also be open to serious objection if the right of appeal will be altogether taken away in such cases. The order of the High Court may not be correct. The question whether a question of law arises or not is a question of law and not of fact. There is no reason why if the High Court makes a mistake in the first instance in not finding question of law at all the matter should not be open to review by a higher Court. In any case we are to interpret the law as it stands and from the absence of any reference in section 66‑A to an order dismissing an application under section 66‑A it does not necessarily follow that there was an intention to exclude appeals in such cases. If that was the intention it was easy to say so.
The order that the High Court passes on an application under section 66 (2) refusing to direct the Income‑tax Appellate Tribunal to state a case is a final one and cannot in any sense be regarded as an interlocutory.
.‑In my opinion the present case is clearly covered by section 66‑A (2), which refers to any judgment under section 66'. When a High Court refuses to call upon the Appellate Tribunal "to state the case and refer to it", it passes a judgment under one of the subsections of section 66, viz. (2).
[Case‑law referred to].
Allah Din Malik, for Petitioner.
Muhammad Hussain Malik, for Respondent.
‑This order will dispose of Civil Miscellane ous Nos. 19‑C to 22‑C of 1954 which are applications for leave to appeal to the Federal Court, Pakistan, in four connected cases, as well as Civil Miscellaneous 23‑C of 1954 which is an application to consolidate proceedings in all the above mentioned applications.
'The applications for leave to appeal arise out of four applications filed by Khushab‑Nowshera Bus Service Limited under section 66 (2) of the Income‑tax Act praying that the Income‑tax Appellate Tribunal be required to state certain questions of law arising out of the orders of the Ap pellate Tribunal with respect to the assessments of the Company for the assessment years 1945‑46, 1945‑47, 1947‑48 and 1948‑49. The questions mentioned in all the four applica tions were identical. We came to the conclusion in agree ment with the Income‑tax Appellate Tribunal that no such questions of law as were mentioned in the applications arose from the orders of the Appellate Tribunal and we dismissed all the four applications. These four applications have been filed under sections 109, 110 and Order 45 rule 2 C. P. C. for grant of leave to appeal to the Federal Court against our orders on the applications under section 66 (2).
Although in the applications for leave the provisions of the C. P. C. alone have been mentioned, learner' counsel for the petitioners has during arguments also relied upon Clause 29 of the Letters Patent, the provisions of which, so far as the present application is concerned are similar to those contained in sections 109 and 110 C. P. C. According to Clause 29, an appeal lies against any final judgment, decree or order passed in the exercise of original jurisdiction if the value of the subject‑matter not less than Rs. 10,000. Accord ing to sections 109 and 110 C. P. C. a right of appeal exists against any decree or final order' passed in the exercise of original jurisdiction if the value of the subject‑matter in the High Court as well as on appeal to the Federal Court is not less than Rs. 10,000. The petitioner's claim that the jurisdic tion exercised by the High Court under section 66 (2) of the Income‑tax Act is original jurisdiction and that as the condition as to value of subject‑matter is satisfied, they are entitled to the certificate applied for. On the question whether, under Clause 29 of the Letters Patent, the peti tioners are entitled to a certificate on the dismissal of an application under section 66 (2) of the Income‑tax Act, there is, in favour of the petitioners, a Full Bench decision of our High Court reported as Feroze Shah v. The. Com missioner of Income‑tax (I L R 12 Lah. 166.). It was held in that case that an order dismissing an application under section 66 (2) is a final judgment passed in the exercise of original jurisdiction and that if the value of the subject‑matter be not less than Rs. 10,000 the party is entitled, as of right, to a certificate for appeal. Learned counsel for the respondents concedes that the Full Bench decision governs the present case. He argues, however, that it is a fit case for a reference to a larger Bench. In support of this argument learned counsel for the respondents relies in the first place on the appeal to the Privy Council in the same case in which leave to appeal had been granted in Feroze Shah v. The Commissioner of Income‑tax. The Privy Council judgment is reported as Mian Feroze Shah v. Commissioner of Income‑tax Punjab (I L R 14 Lah. 683,) The following passage occurs at the end of the judgment :‑
"The result is that the appeal fails on the merits and it becomes unnecessary for Their Lordships to deal with the objection to its competence, already referred to. The objection is a serious one. Admittedly, such an appeal as the present is not authorised by the Indian Income‑tax Act itself. If open at all, it must be justified under Clause 29 of the Letters Patent of the Lahore High Court, as being an appeal "from a final judgment, decree or order made in the exercise of original jurisdiction" by a Division Bench of tree Court. And this present appeal was held by the Full Court to be so justified. Before the Board the question was not fully argued, and Their Lordships accord ingly refrain from expressing any opinion whatever upon it. It is desirable, they think, that it should await final determination it, a case whether where it is not, as it has here become, purely academic".
Learned counsel argues that Their Lordships of the Privy Council, when they said that the question was a serious one, were really casting doubts on the correctness of the decision. Reliance has also been placed upon the following judgments in which the correctness of Feroze Shah v. The Commissioner of Income‑tax has been doubted :‑
(i) Seth Premchand Satramdas v. The State of Bihar (1951 I T R 108.).
(ii) Sri Mahanth Harihar Gir v. Commissioner of Income -tax Bihar and Orissa (A I R 1941 Pat. 225 (F B).) and
(iii) The Commissioner of Income‑tax. Punjab & N.‑W.F. P. v. Messrs. Bombay Cloth House, Anarkali, Lahore (P L R 1953 Lah. 383 P L D 1954 Lah. 32.).
In the two first mentioned cases the Full Bench judgment has been held not to be good law. So far as the case of our own High Court is concerned there are observations in the judgment which cast some doubt on the correctness of Feroze Shah v. The Commissioner of Income‑tax. Learned counsel for the petitioners also relies upon Tata Iron and Steel Company Limited v. Chief Revenue Authority of Bombay (I L R 47 Bom. 724 (P C).) for the proposition that the order made by the High Court on a reference by the Income‑tax authority is not a final judgment, decree or order within the meaning of Clause 29 of the Letters Patent. Delhi Cloth and General Mills CO. Ltd v. Income‑tax Commissioner Delhi and another (I L R 9 Lah. 284 (P C).) is relied upon for the proposition that question of leave to appeal is to be decided only on the wording of section 66‑A of the Income‑tax Act.
In order to appreciate the argument put forward it is necessary to refer to the history of law on the subject. In the Income‑tag Act of 1918 there existed with respect to the reference of questions of law to the High Court only by section 51 which ran as follows :‑
"51. (1) If, in the course of any assessment under this Act or any proceeding in connection therewith other than a proceeding under Chapter VII, a question has arisen with reference to the interpretation of any of the provisions of this Act or of any rule thereunder, the Chief Revenue authority may, either on its own motion or on reference from any Revenue‑officer subordinate to it, draw up state ment of the case, and refer it, with its own opinion thereon, to the High Court, and shall so refer any such question on the application of the assessee, unless it is satisfied that the application is frivolous or that a reference is unnecessary.
(2) If the High Court is not satisfied that the statements contained in the case are sufficient to enable it to determine the questions raised thereby, the Court may refer the case back to the Revenue authority by which it was stated, to make such additions thereto, or alterations therein as the Court may direct in that behalf.
(3) The High Court upon the hearing of any such case shall decide the questions raised thereby, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and shall send to the Revenue‑authority by which the case was "stated a copy of such judgment under the seal of the Court and the signature of the Registrar ; and the Revenue‑authority shall dispose of the case accordingly, or, if the case arose on reference from any Revenue‑officers, subordinate to it, shall forward a copy of such judgment to such officer, who shall dispose of the case conformably to such judgment.
(4) Where a reference is made to the High Court on the application of an assessee, costs shall be in the discretion of the Court".
It may be observed that under this section it was in the discretion of the Chief Revenue‑authority to make a reference to the High Court. Tata Iron and Steel Company Limited v. Chief Revenue‑authority of Bombay was a case decided under the Income‑tax Act of 1918, though at the time the decision was given the Income‑tax Act of 1922 was already in force. Their Lordships of the Privy Council had in that case to decide the question whether an order made by the High Court on a reference under section 51 of the Income‑tax Act of 1918 was a "final judgment, decree or order" made in the exercise of original civil jurisdiction within the meaning of Clause 39 of the Letters Petent of the Bombay High Court which is the same as Clause 29 of this High Court. Their Lordships held that the order was passed in the exercise of original jurisdiction. So far as the word 'judgment' is concerned Their Lordships held that it referred to a decision in an action by which the already existing rights and liabilities of parties ere ascertained. The order in dispute was therefore not a judgment. Their Lordships also held that it was obviously not a final decree and then addressed themselves to the question whether it was a 'final order'. Their Lordships held that the jurisdiction of the High Court in this matter was an advisory or consultative one. Their Lordships were of the opinion that the orders deciding the rights of the assessee were to be passed by the Chief Revenue‑authority, who in his discretion was entitled to secure the opinion of the High Court on questions relating to interpretation of the Income -tax Act and the rules arising during the course of assessment proceedings. Their Lordships stressed the fact that the opinion of the Revenue‑authority controlled the question of reference saying, "the opinion of the Revenue authority thus dominates and conditions the right of the assessee". Their Lordships also emphasised the fact that the reference was to be, made during the course of an assessment saying," Again it Is the duty of the Revenue Official to make the assessment, and it is in 'course' of making it that the question which mad be referred must arise" Considering these matters Their Lordships came to the conclusion that the order was an interlocutory one. This will appear from the following paragraph in Their Lordships' judgment :‑
"Should the tax‑payer be sued for the Income‑Tag for which he has been assessed, proof of the assessment would be but the first step in the litigation, not the final one. These circumstances would, according to the judgment of Cotton L. J., in Standard Discount Company v. La Grange go to show that however the order of decision might definitely and finally fix the amount of the assessment, it was only interlocutory. The Revenue‑authorities are undoubt edly bound to act up to the decision of the Court made under section 51 of the Income‑tax Act."
It will be observed, apart from the considerations that arise on account of the difference in language between section 51 of the old Act and section 66 of the present Income‑tax Act, that Their Lordships were dealing with an order made on a reference. In Feroze Shah v. The Commis sioner of Income‑tax the question to be decided was whether on the dismissal of an application to the High Court under section 66 (2) of the petitioner had a right of appeal if the value of the subject‑matter was Rs. 10,000 or more. The learned judges came to the conclusion that this order was a 'final judgment'. Tata Iron and Steel Company Limited v. Chief Revenue‑authority of Bombay was referred to in the judgment in support of the argument that the jurisdiction exercised by the High Court in cases under section 66 (2) was its original jurisdiction. In support of the view that the order was a final judgment the learned judges relied upon a Division Bench judgment of this Court reported in 2 Income‑tax Cases 301 wherein it had been held, after a reference to Tata Iron and Steel Company Limited v. Chief Revenue‑authority of Bombay, that an order dismissing an application under section 66 (2) was a judgment within the meaning of Clause 10 of the Letters Patent of the Lahore High Court. It had been pointed out in that case that Their Lordships of the Privy Council were considering in Tata Iron and Steel Company Limited v. Chief Revenue‑authority of Bombay section 51 of the old Income‑tax Act and had on a consideration of the wording of that section held the jurisdiction of the High Court to be advisory but that the same considerations did not apply to an order passed under section 66 of the present Income‑tax Act. Now, while there may be force in the argument that the word "judgment" had been defined by Their Lordships of the Privy Council to mean a judgment determining already existing rights and liabilities in an action and, therefore, the order in dispute could not be a judgment, it cannot be said on the basis of Tata Iron and Steel Company Limited v. Chief Revenue‑authority of Bombay that it may not be a 'final order'. Their Lordships while regarding the jurisdiction as advisory and the order as interlocutory had, as I have already stated, emphasised firstly that the discretion to refer a case to the High Court was that of the Chief Revenue‑authority and secondly that it was during the course of assessment that a question could be referred. 'Both these conditions have ceased to exist. Now an order can be passed by the High Court directing a reference and there are no words in section 66 with reference to the course of any assessment, There is no doubt that there are, as will appear from Sri Mahanth Harihar Dir v. Com missioner of Income‑tax Bihar and Orissa observations in two Privy Council judgments delivered after the coming into force of the Income‑tax Act of 1922 that the jurisdiction of the High Court under section 66 is advisory but the question before Their Lordships in these cases were different and the observations cannot be regarded as laying down a rule for guidance in cases like the present. In any case the orders that the High Court passes on an application under section 6610 (2) refusing to direct the Income‑tag Appellate Tribunal to state a case is a final one and cannot in any sense be regarded as interlocutory. It would be clear from the judgment of Their Lordships in Tata Iron and Steel Company Limited v. Chief Revenue‑authority of Bombay that the word "final" is used in Clause 29 in contra‑distinction to the word 'interlocu tory' just as 'original' is used in contra‑distinction to the word 'appellate'. I concede that the order by which a question of law is answered is of greater importance than an order merely refusing to direct a reference. But if the word 'final' is used in contradiction to interlocutory, as I have no doubt it is used, it cannot be said that the order dismissing an application under section 66 (2) is not final.
The next argument of learned counsel for the petitioners is that the right of appeal should in the case of proceedings under the Income‑tax Act be found only in the Income‑tax Act and not outside it. To appreciate the argument it is necessary first to refer to the relevant provisions as they exist at present in the Income‑tax Act. The Income‑tax Act was amended in 1922 and section 66 was substituted for section 51. It runs as follows :‑
"66. (1) Within sixty days of the date upon which he is served with notice of an order under subsection (4) of section 33 the assessee or the Commissioner may, by applica tion in the prescribed form, accompanied where application is made by the assessee by a fee of one hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a statement of the case and refer it to the High Court.
Provided that, if, in the exercise of its powers under subsection (2), the Appellate Tribunal refuses to state a case which it has been required by the assessee to state, the assessee may, within thirty days from the date on which he receives notice of the refusal to state the case, withdraw is application and, if he does so, the fee paid shall be refunded.
(2) If on any application being made under subsection (1) the Appellate Tribunal refused to state the case on the ground that no question of law arises, the assessee or the Commissioner as the case may be, may within six months from the date on which he is served with notice of the refusal, apply to the High Court, and the High Court may, if it is not satisfied of the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition the Appellate Tribunal shall state the case and refer it accordingly.
(3) If on any application being made under subsection (1) the Appellate Tribunal rejects it on the ground that it is time‑barred, the assessee or the Commissioner, as the case may be, may, within two months from the date on which he is served with notice of the rejection, apply to the High Court, and the High Court, if it is not satisfied of the correctness of the Appellate Tribunal's decision, may require the Appellate Tribunal to treat the application as made within the time allowed under subsection (1).
(4) If the High Court is not satisfied that the statements in a case referred under this section are sufficient to enable it to determine the question raised thereby, the Court may refer the case back to the Appellate Tribunal to make such additions thereto or alterations therein as the Court may direct in that behalf.
(5) The High Court upon the hearing of any such case shall decide the questions of law raised thereby and shall deliver its judgment thereon containing the grounds on which such decision is founded and shall send a copy of such judgment under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case con formably to such judgment.
(6) Where a reference is made to the High Court the costs shall be in the discretion of the Court.
(7) Notwithstanding that a reference has been made under this section to the High Court, income‑tax shall be payable in accordance with the assessment made in the case
Provided that, if the amount of an assessment is reduced as a result of such reference, the amount overpaid shall be refunded with such interest as the Commissioner may allow (unless the High Court, on intimation given by the Commissioner within thirty days of the receipt of the result of such reference that he intends to ask for leave to appeal to His Majesty in Council, makes an order authorising the Commissioner to postpone payment of such refund until the disposal of the appeal to His Majesty in Council).
(7‑A) Section 5 of the Limitation Act, 1908, shall apply to an application to the High Court by an assessee (under subsection (2) of subsection (3)).
(8) For the purpose of this section "the High Court" means‑(a) in relation to * * * (Baluchistan) the High Court of Judicature at Lahore.
The judgment of Their Lordships of the Privy Council in Tata Iron and Steel Company Limited v. Chief Revenue authority of Bombay was delivered after the passing of the Act of 1922. On account of that judgment no certificate could be granted by the High Court for appeal to the Privy Council against an order made by the High Court on a reference and the Legislature by an amending Act added the following section 66‑A in 1926 :‑
"66‑A. (1) When any case has been referred to the High Court under section 66, it shall be heard by a Bench of not less than two Judges of the High Court, and in respect of such case the provisions of section 98 of the Code of Civil Procedure, 1908, shall so far as may be, apply notwith standing anything contained in the Letters Patent of any High Court established by Letters Patent or in any other law for the time being in force:
Provided that where in any reference heard by the Bench of the Court of the Judicial Commissioner of the North --West Frontier Province, a difference of opinion arises between the Judicial Commissioner and the judge of the said Court, the opinion o‑ the judicial Commissioner shall prevail.
(2) An appeal shall lie to His Majesty in Council from any judgment under section 66 in any case which the High Court certifies to be a fit case for appeal to His Majesty in Council.
(3) The provisions of the Code of Civil Procedure, 1908, relating to appeals to His Majesty in Council shall, so far as may‑ be. apply in the case of appeals under this section in like manner as they apply in the case of appeals from decree of a High Court.
Provided that nothing in this subsection shall be deemed to effect the provisions of subsection (5) or subsection (7) of section 66:
Provided further, that the High Court may, on petition made for the execution of the order of His Majesty in Council in respect of any costs awarded thereby, transmit the order of execution in any Court subordinate to the High Court.
(4) Where the judgment of the High Court is varied or reversed in appeal under this section, effect shall be given to the order .of His Majesty in Council in the manner provided in subsections (5) and (7) of section 66 in the case of a judgment of the High Court.
(5) Nothing in this section shall be deemed‑
(a) to bar the full and unqualified exercise of His Majesty's pleasure in receiving or rejecting appeals to His Majesty in Council, or otherwise however, or
(b) to interfere with any rule made by the Judicial Committee of the Privy Council, and for the time being in force, for the presentation of appeals to His Majesty in Council, or their conduct before the said Judicial Committee.
After this amendment Their Lordships of the Privy Council had again to decide this matter in Delhi Cloth and General Mills Co. Ltd. v. Income‑tax Commissioner, Delhi and another. That judgment was delivered after the amending Act of 1926 but the case in fact related to the period before 1st of April, 1926, when the amending Act came into force. Their Lordships dealt first with the question whether even after the enactment of section 66A an appeal would lie and then with the question whether section 66A had any retrospective effect. It was held by Their Lordships on the first question that the right of appeal was to be determined only by the provisions of section 66A. Section 66A allowed an appeal only in cases where a certificate of fitness was granted by the High Court. It was urged before Their Lordships that under sections 109 and 110 C. P. C. the petitioner had a right of appeal and reliance was placed for this argument on subsection (3) of section 66A also. Their Lordships were of the opinion that the right of appeal was regulated by section 66A alone and the use of the words "so far as may be" in subsection (3) of section 66A clearly indicated that that subsection could not avail the petitioner to enlarge a right of appeal which, by the words of subsection (2) was limited to a case which was certified to be fit one for appeal by the High Court.
There is no doubt that Their Lordships had said that the right of appeal was to be found in section 66A, but the case before Their Lordships was one of an order made on a reference and not a case of dismissal of an application under section 66 (2). Section 66A deals wit the grant of leave in a case where the High Court passes an order on a reference and, therefore, so far as that matter is concerned the section is obviously exhaustive and no right of appeal can be found beyond it. But as the section does not deal with the case of an order dismissing an application under section 66A, it cannot be said that, in view of Delhi Cloth and General Mills Co. Ltd. v. Income‑tax Commissioner, Delhi and another, this application must be dismissed. Delhi Cloth and General Mills Co. Ltd. v. Income‑tax Commissioner Delhi and another had been cited by Mr. Justice Broadway in his referring order in Feroze Shah v. The Commissioner of Income‑tax although the case is not mentioned in the judgment of the Full inch, probably because there was no need to do so.
There is no doubt that an anomaly is created there is an unfettered right of appeal in cases where an application is dismissed under section 66 and the value of the subject matter is not less than Rs. 10,000, and there is only a limited right of appeal in cases where the High Court passes an order on reference. However, that is a matter for the Legislature. The Legislature while enacting section 66A said nothing about an order dismissing an application under section 66(2). It would have been quite proper to deal with that kind of order also in section 66A. However from the fact that there is no mention of such an order it does not necessarily follow that the intention was to exclude the right of appeal. While an anomaly is being created if the petitioner is, in cases like the present, entitled as of right to file an appeal the situation will also be open to serious objection if the right of appeal will be altogether taken away in such cases. The order of the High Court may not be correct. The question whether a question of law arises or not is a question of law and not of fact. There is no reason why if the High Court makes a mistake in the first instance in not finding question of law at all the matter should not be open to review by a higher Court. In any case we are to interpret the law as it stands and from the absence of any reference in section 66A to an order dismissing an application under section 66A it does not necessarily follow that there was an intention to exclude appeals in such cases. If that was the intention it was easy to say so.
In Seth Premchand Satram Das v. The State of Bihar Their Lordships of the Supreme Court of India followed Tata Iron and Steel Company Ltd. v. Chief Revenue‑authority of Bombay. Same is the case with Sir Mahanth Harihar Gir v. Commissioner of Income‑tax Bihar and Orissa There is no reference in either judgment to the fact that Tata Iron and Steel Company Ltd. v. Chief Revenue‑authority of Bombay was based on section 51 of the Income‑tax Act and section 66 is not in the same terms as section 51. The case Seth Premchand Satramdas v. The State of Bihar was not under the Income‑tax Act but under the Bihar Sales Tax Act and it may be that the considerations in that case were similar to those under section 51 of the Income‑tax Act of 1908.
I am not inclined to make a reference to a larger Bench. It may be stated that in two of the applications the value of the subject‑matter exceeds Rs. 10,000 and the petitioners would be entitled to a certificate as of right. As regards the other two, I would accept the application for consolidation of the four applications and as a result the benefit of the accumulated value would be available in each petition. I would grant certificate in all the four cases and make no other as to costs.
In my opinion the present case is clearly covered by section 66A (2) which refers to any judgment under section 66'. When a High Court refuses to call upon the Appellate Tribunal "to state the case and refer to it", it passes a judgment under one of the subsections of section 66, viz., (2). I agree with the order proposed by my learned brother.
A. H.
Certificates granted.
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