THE PETLAD TURKEY RED DYE WORKS CO. LTD., PETLAD vs. THE COMMISSIONER OF INCOME-TAX, BOMBAY, AHMEDABAD

CIVIL APPEAL No. 158/1962Supreme Court1962 INSC 30902 November 1962Bench: 5 JudgesAuthor: S.K. DAS, J.L. KAPUR, A.K. SARKAR, M. HIDAYATULLAH, RAGHUBAR DAYAL S.C.R. SUPREME COURT REPORTS14 pages
AI SummaryAllowed

What were the facts?

The assessee, Petlad Turkey Red Dye Works Co. Ltd., a non-resident company, carried on business in the erstwhile Baroda State. For assessment years 1941-42 and 1942-43, it sold dyed yarn to purchasers in British India. The Income-tax Officer noted that sale proceeds were received at Petlad via cheques, drafts, and hundis sent by post, which were then used to pay creditors or credited to bank accounts in British India. The assessee claimed profits were not taxable in British India as they were received in Baroda State. The Appellate Tribunal held profits were taxable in British India, deeming the recipients of the remittances as the assessee's agents. The High Court, on reference, allowed a supplemental statement of case and further evidence, ultimately answering the reference in favour of the revenue. The assessee appealed to the Supreme Court, challenging the High Court's order allowing additional evidence as being without jurisdiction.

What did the Supreme Court hold?

The Supreme Court held that the High Court's order dated September 23, 1955, was not a final order or a judgment appealable under Section 66(5) or Section 66A(2) of the Indian Income-tax Act, 1922. While the High Court has the power to direct a supplemental statement of the case to clarify facts already on record to answer a question of law, it is not competent to direct the taking of additional evidence. Such a direction goes beyond the scope of Section 66, which confines the High Court's jurisdiction to answering questions of law arising from the Appellate Tribunal's order based on facts already on record. The Court allowed the appeals and remitted the matter to the High Court to give its decision on the question of law referred to it, without expressing an opinion on whether a supplemental statement confined to existing facts should be sought. The Court noted that the High Court's jurisdiction is advisory and limited to the questions referred.

What were the issues?

1. Whether the High Court's order dated September 23, 1955, calling for a supplemental statement of case and allowing further evidence was valid and within its jurisdiction under Section 66 of the Indian Income-tax Act, 1922. Assessee's contention: The High Court's order was without jurisdiction as it permitted the taking of additional evidence, which is not permissible under Section 66. The High Court's power is limited to directing a supplemental statement based on facts already on record. Revenue's contention: Since no appeal was filed against the High Court's order dated September 23, 1955, the assessee could not raise the question of its validity at a later stage. The High Court had the power to direct a supplemental statement and allow further evidence.

Which sections of the Income-tax Act were involved?

Section 66,Section 66A(2),Section 66(1),Section 66(5)

AI-generated summary — verify with the full judgment below

I S.C.R. SUPREME COURT REPORTS 871 THE PETLAD TURKEY RED DYE WORKS CO. LTD., PETLAD ·v. THE COMMISSIONER OF INCOME-TAX, BOMBAY, AHMEDABAD (S. K. DAS, J. L. KAPUR, A. K SARKAR, M. HIDAYATULLAH and RAGHUBAR DAYAL, JJ.)

Income Tax-Reference to High Court-Order calling for supplemental statement. of case and allowing further evidence- Validity-Appeal against the order to Supreme Court-Compe- tence-Indian Income-tax Act, 1922 (11 of 1922), ss. 66, 66A(2).

The assessee company carried on the business of dyeing and selling dyed yarn as Petlad in the erstwhile State of Baroda and its status during the relevant assessment years was that of a hon-resident.

In respect of sales made to purchasers in what was British India the Income-tax Officer found that the sale price was received by the company at Petlad by means of cheques, drafts and hundis which were admittedly sent by post.

These cheques etc., were sent back by the compauy either to its creditors in British India in payment of its liabilities or to the credit of its accounts with its bankers in British India.

The assessee company claimed that as the sale price was re- ceived by it at Petlad, the profits on the af

The order continues below.

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