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(In the matter of 1942/43 assessment against Messrs Rai Sahib Munshi Gulab Singh & Sons)

Civil Miscellaneous Petition No. 581 of 1946, decided on 27th June 1950.

(a) Income‑tax Act (XI of 1922)-------

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S. 66‑Only a question raised before Tribunal can be referred to High Court.

(b) Income‑tax Act (XI of 1922)

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----S. 33 (4) & 66 ( )‑Time -barred application asking Tribunal to state case‑Whether Tribunal has jurisdiction to state case.

(c) Income‑tax Act (XI of 1922)----

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Ss. 33 (4) & 66‑Whether Tribunal and High Court empowered to condone delay in reference under S. 66 (1).

A. Abboy Chetty and others v. Commissioner of Income‑tax A I R 1948 Mad. 181 ; Jamna Dhar Patdas & Co. v. Commissioner of Income‑tax A I R 1935 Lah. 201; Gurmukh Singh v. Commissioner of Income‑tax A I R 1944 Lah. 353 ; S. A. Subbish Ayyar v. Commissioner of Income‑tax I L R 53 Mad. 510 ; In the matter of the Income tax assessment of P. Thirurendgala Mudaliar A I R 1928 Mad. 889 and Merchant Mohini Flour Mills Co. Ltd. v. Commis sioner of Income‑tax A I R 1937 Lah. 876 ref.

Yaqub Ali Khan for Petitioner.

Malik Muhammad Hussain for Respondent.

MUHAMMAD MUNIR, C. J.

‑This is an assessee's application under subsection (2) of section 66 of the Income‑tax Act praying that the Appellate Tribunal be required to state a question of law arising out of their order under section 33 of that Act.

The assessee is a Hindu undivided family carrying on the business of printing, publishing and selling of books at Lahore under the firm named R. S. Munshi Gulab Singh & Sons. For several years before the assessment in question the assessee had been making some payment to a rival concern called Uttar Chand Kapur & Sons under arrangements the object of which was to eliminate competition and to ensure a substantial monopoly in a particular line of the business. These payments were claimed by the assessee as admissible deductions under section 10 (2) (xii) on the ground that they were business expenses. The Income‑tax authorities, however, consistently disallowed these payments on the ground that they were "hush money to stop competition or an expenditure to secure business." On the assessee's application the question whether this view of the Income‑tax authorities was correct was referred to the High Court under section 66 (1) in respect of assessments for the years 1938‑39, 1939‑40, 1940‑41 and 1941‑42.

In the case of the assessment for the year 1942‑43 with which we are concerned in the present case the assessee took up a different position by setting up a partnership with Utter Chand Kapur & Sons and claiming that the profits of the alleged partner ship business should be computed separately and the assessee's share therein added to hit income from other business. The Income‑tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal all found that no genuine partnership had been entered into by the assessee with Uttar Chand Kapur & Sons and that the arrangements set up were merely intended to comouflage the position that had hitherto existed in regard to such payments. The profits of the alleged partnership business were therefore added to the assessee's profits from the publishing business. During these proceedings the assessee did not claim these pay ments to be business expenses under section 10 (2) (xii).

The Tribunal's appellate order was passed on 19th February 1945, and notice of that order was served on the assessee on 31^st March 1945. On 12^th May 1945, the assessee put in an application before the Tribunal under section 66 (1) requiring the Tribunal to state the following two questions of law to the High Court :‑

(1) Whether there was material for the Tribunal to hold that the agreement (between R. S. Munshi Gulab Singh & Sons and Messrs Uttar Chand Kapur & Sons) was not intended by the parties to have real effect as governing their rights and obligations and

(2) Whether the amount of the share received by Messrs Uttar Chand Kapur & Sons has rightly been included in the assessable income of the assessee

On 19th October 1945, the High Court replied to the reference which had been made to it for the four assessment years preced ing 1942‑43, saying that the payments made by the assessee to Uttar Chand Kapur & Sons under the arrangements disclosed in the proceedings for assessments for those years were not a capital expenditure but a revenue expenditure admissible under section 10 (2) (xii). On 28th February 1946 the assessee made another application to the Appellate Tribunal requiring them to refer to the High Court the following question in place of the original two questions :‑

" Whether the deduction claimed on account of payment to Messrs Uttar Chand Kapur & Sons is not permissible under section 10 (2) (xii) of the Act "

By their order, dated the 4th April 1946, the Appellate Tribunal held that the new question suggested by the assessee had never been raised by him either before them or before the Appellate Assistant Commissioner or the Income‑tax Officer and that therefore, it could not be referred to the High Court. The assessee then made the present application to the High Court.

There can be no doubt that in the course of assessment proceedings for the year 1942‑43 the assessee never raised the question he now requires the Appellate Tribunal to state. In fact the position taken up by him was wholly inconsistent with the position that he has now adopted after the decision of the High Court. His case before the Income‑tax authorities was that there existed a partnership between him and Uttar Chand Kapur & Sons and that his own share in the profits of that partnership business should be added to his other income. Not one word was said by him before those authorities in regard to the payments made to Uttar Chand Kapur & Sons. The Tribunal were, there fore, right in refusing to state the case. The law is clear on the point that it is only a question raised before the Appellate Tribunal that can be referred to the High Court under section 66. Reference may in this connection be made to Messrs A. Abboy Chetty and others v. Commissioner of Income‑tax Madras (A I R 1948 Mad. 181) and Jamna Dhar Potdar & Co. v. Commissioner of Income‑tax. Punjab (A I R 1935 Lah. 201). To the same effect are observations in the Full Bench case of five Judges in Gurmukh Singh v. Commissioner of Income‑tax, Lahore (A I R 1944 Lah. 353).

The petition must also fail on another ground. Under section 66 (1) the assessee can require the Tribunal to state the case within sixty days of the date upon which he is served with the notice of an order under subsection (4) of section 33. Such notice was served on the assessee on March 31st 1945. Therefore the time for the assessee to require the present question to be stated expired on 30th May 1945. The application requiring this part of the case to be stated, however, was made by the assessee long after wards, namely, on 28th February 1946, qua this question, there, fore, the application before the Tribunal was barred by time and they had no jurisdiction to state the case. This result follows from the plain terms of the section as well as from S. A. Subbish Ayar v. Commissioner of Income‑tax, Madras (I L R 53 Mad. 510) ; In the matter of the Income‑tax assessment of P. Thiruvendgata Mudaliar (A I R 1928 Mad. 889) and Merchant Mohini Flour Mills Co. Ltd. v. Commissioner of Income‑tax (A I R 1937 Lah. 876). We have been asked to condone the delay but we have no jurisdiction to do so because subsection (7‑A), which gives to this Court the power to apply section 5 of the Limitation Act, is applicable only to applications to the High Court under subsection (2) or sub section (3) of section 66 of the Income‑tax Act, and it is not at all applicable to applications before the Tribunal. Even if we had the jurisdiction to extend time, this is obviously not a fit case in which we should have exercised our discretion because the point now raised is wholly inconsistent with the position that the assessee had taken throughout the proceedings for assessment for the year in question.

The application is dismissed with costs.

Application dismissed.

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