Case: I.C.I. Private Ltd Vs. The Commissioner of Income Tax, West Bengal

on the facts and in the circumstances of the case and on a proper construction of the documents referred to and/or considered by it the Tribunal was right in arriving at the finding that the transfer of the shares to Imperial Chemical Industries Ltd., London at the issue price or par was throughout the basis of the advance of loans to the assessee? 2. Whether, in arriving at the said finding the Tribunal misdirected itself in law in basing the said finding on evidence covering some matters only and ignoring evidence on other essential matters? 3. Whether, on the facts and in the circumstances of the case and particularly on view of the finding that there was no enforceable agreement making it obligatory upon the assessee to transfer the shares to Imperial Chemical Industries Ltd., London at par or issue price the conclusion of the Tribunal that the transfer of the shares by the assessee to the latter company at par was not effected with the object of avoidance or reduction of the liability of the assessee to capital gains tax was unreasonable or perverse? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Section 52 of the Income-tax Act, 1961, was not applicable to the facts of the case?" On the analysis of Section 52 of the Act made by us at a previous stage and the clear, cogent and precise findings and conclusions of the Appellate Tribunal, we are wholly unable to comprehend, how any question of law of the nature sought to be referred arose or arises from the order of the Appellate Tribunal. It is unfortunate that in a case of this nature and magnitude, the High Court did not choose to record a speaking order to enable us to appreciate the reasons which prevailed with it for directing the four questions to be referred. The Jurisdiction in the matter of reference can be exercised (i) when the point for determination is a pure question of law such as construction of a statute or document of title; (ii) when the point for determination is a mixed question of law and fact; while the finding of the Tribunal on the facts is final its decision as to the legal effect of those findings is a question of law (iii) a finding on a question of fact is open to attack as erroneous in law when there is no evidence to support it or if it is perverse. Where, however, the finding is one of fact, the fact that it is an inference from other basic fact will not alter its character as one of fact (See Sree Meenakshi Mills Ltd. v. Commr. of Income-tax, Madras, 31 ITR 28 = (AIR 1957 SC 49 ).In that case it was held that there was no question of construction of any statutory provision or document of title. The issues which arose for determination, whether the sales entered in books of the appellant in the names of the intermediaries were genuine, and if not, to whom the goods were sold and for what price, were all questions of fact. Their determination did not involve the application of any legal principles to facts established by the evidence. The findings of the Tribunal were amply supported by evidence and were eminently reasonable. It, therefore, followed that there was no question which could be referred to the Court under Section 66 (1) of the Income-tax Act 1922.The same principles will apply when a reference is sought under Section 256 of the Act. We are altogether unable to see how findings of the Appellate Tribunal that the transfer of shares in the present case was not made with the intention or object of avoidance or reduction of liability to capital gains were not question of fact and did not depend on inference of facts from the evidence or the material before the Tribunal. It can well be said that the determination of the question whether the object of the assessee was to avoid or reduce its liability to capital gains by making the transfers in question did not involve the application of any legal principles to the facts established by the evidence. The findings of the Tribunal were amply supported by evidence and were eminently reasonable. It is true that the amount involved is very large but that cannot justify a reference as under Section 256 of the Act neither the Appellate Tribunal could make a reference nor could the High Court direct the reference to be made to it by the Tribunal on pure questions of fact. 15. The learned counsel for the Commissioner has sought to invite our attention to certain parts of the order of the Tribunal and, in particular, to the statement extracted by us at an earlier stage about the question whether the assessee had held the shares beneficially and the point which was debated before the Tribunal whether there was any binding legal agreement between the assessee and I. C. I for transfer of the shares at par. We are unable to see how these matters were relevant for the purpose of determining the intention or object underlying the transfer of the shares to I. C. I. the assessee. Once the Tribunal came to the conclusion which was purely one of fact that before there was any proposal to reimpose capital gains tax which came to be embodied in the Finance Bill towards the end of November 1956, the scheme had been fully evolved between the assessee and I. C. I of making the loans by the later to the former for being invested in the three companies and that the shares would be transferred at par by the assessee to I. C. I. Whenever desired, the applicability of Section 52 could not be attracted as the same depended on certain facts which must exist or must be found and which had not been so found by the Tribunal.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. As regards the first requirement, that was admittedly satisfied in the present case. The second requirement could be satisfied only if there was any cogent material on which the Income tax Officer could have reason to believe that the transfers were effected with the object of avoidance or reduction of liability to capital gains. It is abundantly clear that the intention with which a particular transfer is made, and the object which is to be achieved by such transfer is essentially a question of fact, the conclusion relating to which is to be arrived at on a consideration of the relevant material. In other words, before the Income tax Officer can have any reason to believe that a transfer was effected with the object mentioned in the section, fact must exist showing that the object was to avoid or reduce the liability to capital gainsOn the analysis of Section 52 of the Act made by us at a previous stage and the clear, cogent and precise findings and conclusions of the Appellate Tribunal, we are wholly unable to comprehend, how any question of law of the nature sought to be referred arose or arises from the order of the Appellate Tribunal. It is unfortunate that in a case of this nature and magnitude, the High Court did not choose to record a speaking order to enable us to appreciate the reasons which prevailed with it for directing the four questions to be referred. The Jurisdiction in the matter of reference can be exercised (i) when the point for determination is a pure question of law such as construction of a statute or document of title; (ii) when the point for determination is a mixed question of law and fact; while the finding of the Tribunal on the facts is final its decision as to the legal effect of those findings is a question of law (iii) a finding on a question of fact is open to attack as erroneous in law when there is no evidence to support it or if it is perverse. Where, however, the finding is one of fact, the fact that it is an inference from other basic fact will not alter its character as one of fact (See Sree Meenakshi Mills Ltd. v. Commr. of Income-tax, Madras, 31 ITR 28  = (AIR 1957 SC 49 ).In that case it was held that there was no question of construction of any statutory provision or document of title. The issues which arose for determination, whether the sales entered in books of the appellant in the names of the intermediaries were genuine, and if not, to whom the goods were sold and for what price, were all questions of fact. Their determination did not involve the application of any legal principles to facts established by the evidence. The findings of the Tribunal were amply supported by evidence and were eminently reasonable. It, therefore, followed that there was no question which could be referred to the Court under Section 66 (1) of the Income-tax Act 1922.The same principles will apply when a reference is sought under Section 256 of the Act. We are altogether unable to see how findings of the Appellate Tribunal that the transfer of shares in the present case was not made with the intention or object of avoidance or reduction of liability to capital gains were not question of fact and did not depend on inference of facts from the evidence or the material before the Tribunal. It can well be said that the determination of the question whether the object of the assessee was to avoid or reduce its liability to capital gains by making the transfers in question did not involve the application of any legal principles to the facts established by the evidence. The findings of the Tribunal were amply supported by evidence and were eminently reasonable. It is true that the amount involved is very large but that cannot justify a reference as under Section 256 of the Act neither the Appellate Tribunal could make a reference nor could the High Court direct the reference to be made to it by the Tribunal on pure questions of fact15. The learned counsel for the Commissioner has sought to invite our attention to certain parts of the order of the Tribunal and, in particular, to the statement extracted by us at an earlier stage about the question whether the assessee had held the shares beneficially and the point which was debated before the Tribunal whether there was any binding legal agreement between the assessee and I. C. I for transfer of the shares at par. We are unable to see how these matters were relevant for the purpose of determining the intention or object underlying the transfer of the shares to I. C. I. the assessee. Once the Tribunal came to the conclusion which was purely one of fact that before there was any proposal to reimpose capital gains tax which came to be embodied in the Finance Bill towards the end of November 1956, the scheme had been fully evolved between the assessee and I. C. I of making the loans by the later to the former for being invested in the three companies and that the shares would be transferred at par by the assessee to I. C. I. Whenever desired, the applicability of Section 52 could not be attracted as the same depended on certain facts which must exist or must be found and which had not been so found by the Tribunal.