THE COMMISSIONER OF INCOME-TAX, BOMBAY vs. THE SCINDIA STEAM NAVIGATION CO. LTD.

CIVIL APPEAL No. 501/1957Supreme Court[1962] 1 S.C.R. 78806 April 1961Bench: 5 JudgesAuthor: T.L. VENKATARAMA AIYYAR, S.K. DAS, J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH COMMISSIONER OF INCOME36 pages
AI SummaryDismissed

What were the facts?

The assessee, The Scindia Steam Navigation Co. Ltd., received compensation from the Government for a requisitioned steamship lost in enemy action. The Commissioner of Income-tax assessed this compensation to tax under the fourth proviso to Section 10(2)(vii) of the Indian Income-tax Act, 1922, as amended in 1946. The assessee argued that the income was received in the previous year, not the year of account, but this was rejected by the tax authorities. The question referred to the High Court was whether the sum of Rs. 9,26,532 was properly included in the assessee's total income for assessment year 1946-47. In the High Court, the assessee raised a new contention that the said proviso was not in force on the material date. The Commissioner objected, stating this was not raised before the Tribunal. The High Court overruled the objection and held the proviso was not applicable, leading to the Commissioner's appeal to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the jurisdiction of the High Court under Section 66 of the Indian Income-tax Act, 1922, is purely advisory and limited to questions of law that arise out of the order of the Appellate Tribunal. The phrase "any question of law arising out of such order" means questions that were either raised before, or decided by, the Tribunal. The Court ruled that the High Court cannot decide a question of law that was neither raised nor argued before the Tribunal, even if it arises from the Tribunal's findings. However, in this specific case, the question referred to the High Court was broad enough to encompass the contention regarding the proviso's applicability. The Court agreed with the High Court's finding that the fourth proviso to Section 10(2)(vii) was not retrospective and therefore did not apply to the compensation received by the assessee. The appeal was dismissed.

What were the issues?

1. Whether the High Court, in answering a reference under Section 66 of the Indian Income-tax Act, 1922, can decide a question of law that was not raised or argued before the Appellate Tribunal? (Question of law) Assessee's contentions: - The High Court correctly overruled the preliminary objection as the question of the proviso's applicability arose from the Tribunal's order and was a question of law. - The High Court's jurisdiction under Section 66 is not limited to questions argued before the Tribunal; it can consider all questions of law arising from the order. - The proviso to Section 10(2)(vii) was not in force on the material date, rendering the compensation not taxable. Revenue's contentions: - The High Court erred in entertaining a question of law that was not raised or argued before the Appellate Tribunal, thereby exceeding its jurisdiction under Section 66.

Which sections of the Income-tax Act were involved?

Section 66,Section 10(2)(vii)

AI-generated summary — verify with the full judgment below

788 SUPREME COURT REPORTS [1962] z96z The question is whether it could possibly fall with'1n Subba,.;;;;;;; Naidu ~he second. pa~t of ?I. (c}, that is, whe.ther the award v. rs "otherwise mvahd". In order to brmg the objection Siddamma Naidu within this clause learned counsel contended that the award was bad on its face. It is difficult for us to Mudholkar J. appreciate how the award could be said to be bad on its face.

When a dispute is referred to arbitration, the arbitrator has to decide it to the best of his judg- ment, of course acting honestly. Here, in his judg- ment the arbitrator has allotted to t,he appellant certain lands the total area of which is less than half that of the entire land in suit. The appellant's con- tention is that he is entitled to half the entire land.

This contention was before the arbitrator. In spite of that he has made the award in the terms in which he has made it. There appears to be no suggestion that the arbitrator acted dishonestly. How can it then be said that this award is on its face bad? Agreeing with the High Court we dismiss this appeal with costs to the contesting respondent.

Appeal dismissed. THE COMMISSIONER OF

The order continues below.

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