Case: India Machinery Stores (P) Ltd Vs. Commissioner Of Income-Tax, Bihar

value of the subject matter and the nature of the question involved, the case fulfils the requirements of Ss. 109 and 110 of the Code of Civil Procedure, and that the case is fit one for appeal to His Majesty in Council." The Judicial Committee observed that where any certificate is granted certifying a case, it is of the utmost importance that the certificate should show clearly upon which ground it is granted. In dealing with the argument that the case covered by Section 109 (c) of the Code of Civil Procedure, 1908, their Lordship observed :"There is no indication in the certificate of what the nature of the question is that it is thought was involved in the hearing of this appeal, nor is there anything to show that the discretion conferred by S. 109 (c) was invoked or was exercised. Their Lordships think x x that these certificates are of great consequences, that they seriously affect the rights of litigant parties, and that they ought to be given in such a form that it is impossible to mistake their meaning upon their face." 10. Again, the Judicial Committee observed in Commr. of I. T. Central Provinces and Berar v. Sir S. M. Chitnavis 59 Ind App 290 = (AIR 1932 PC 178 ) that when a certificate is granted under S. 66A of the Income-tax Act it must be on a question affecting not only a particular assessee and depending upon the state of the evidence in a particular case, but a question of great public importance affecting assessee generally and depending upon general principles. 11. In granting the certificate the High Court merely observed that it was "a fit case for appeal to the Supreme Court"; they did not indicate the grounds which persuaded them to hold that it was a fit case for appeal to this Court. It would be conducive to better administration of justice if in certifying a case under Section 66A (2) of the Indian Income-tax Act as a fit case for appeal, the High Court sets out the question of law which they regard as of great public or private importance which falls to be decided by this Court. 12. Mr. Chagla contended that the rules laid down by the Judicial Committee applicable to a certificate issued under Section 109 (c) of the Code of Civil Procedure, 1908, and under S. 596 of the Code of 1882, in regard to appeals in civil matters have no bearing in determining the meaning of S. 66A (2), for the High Court exercises advisory jurisdiction on a reference on questions of law and on that account even if the question of law which in the view of the High Court arises is not stated in the certificate, it may be presumed when the High Court has certified a case to be fit for appeal, that a substantial question of law is involved, and the technical defect in the certificate may be ignored. We are unable to accept that argument. It is true that under S. 66 (1) and (2) of the Indian Income-tax Act, 1922,only a question of law may be referred to the High Court for opinion, but the right to obtain a certificate under S. 66A (2) arises only when in the proposed appeal a question of great public or private importance arises.It cannot be held that because a question of law alone may be referred to the High Court under S. 66 of the Indian Income-tax Act, in the proposed appeal a question of law of great public or private importance necessarily arises. Any other view, would make every opinion of the High Court in a reference under S. 66 appealable to this Court. In our view, the certificate granted by High Court was defective. 13. It was also urged that a practice is fairly common in some of the High Courts to certify a case under S. 66 A (2) without recording any reasons or the grounds for certifying the case, and we may not penalise the Company when we are enunciating the true rule for the first time. But the practice, in our judgment, was laid down many years ago by the decisions of the Judicial Committee that a certificate under S. 66A (2) which does not set out precisely the grounds or raise a question of great public or private importance does not comply with the requirements of the Act. The jurisdiction of this Court to entertain an appeal from the opinion recorded under the Indian Income-tax Act arises only when a certificate is properly issued by the High Court or when this Court grants special leave under Art. 136 of the Constitution. 14. In our judgment, there is again no merit in the appeal. By cl. 4 of the agreement dated August 2, 1956, it was expressly provided :"That all assets of the vendors in respect of all its business shall be taken over at the book value standing in the book of accounts of the vendors as on the 1st August One Thousand Nine Hundred Fifty-six." It is undisputed that the stock-in-trade was entered in the books of account of the vendors on the date of transfer of the undertaking at Rs. 1,77,285/- and the Company valued the stock-in-trade at Rs. 2,10,285/-. It is true that to the deed of transfer is annexed a Schedule of the assets and liabilities taken over by the Company and in the Schedule the value of stocks at Patna, Muzaffarpur and Purnea is shown at Rs. 2,10,285.87. No attempt was made to explain the discrepancy between the operative part of the agreement and the valuation shown in the Schedule. The Income-tax Officer was of the view that the Company had inflated the opening stock so as to reduce the ultimate profits. That view was confirmed by the Appellate Assistant Commissioner and by the Tribunal. No question of law arose out of the order of the Tribunal. The reference itself was incompetent.

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

Explanation:
0[ds]12. Mr. Chagla contended that the rules laid down by the Judicial Committee applicable to a certificate issued under Section 109 (c) of theCode of Civil Procedure, 1908, and under S. 596 of the Code of 1882, in regard to appeals in civil matters have no bearing in determining the meaning of S. 66A (2), for the High Court exercises advisory jurisdiction on a reference on questions of law and on that account even if the question of law which in the view of the High Court arises is not stated in the certificate, it may be presumed when the High Court has certified a case to be fit for appeal, that a substantial question of law is involved, and the technical defect in the certificate may be ignored. We are unable to accept that argument. It is true that under S. 66 (1) and (2) of the IndianIncome-taxAct,1922,only a question of law may be referred to the High Court for opinion, but the right to obtain a certificate under S. 66A (2) arises only when in the proposed appeal a question of great public or private importance arises.It cannot be held that because a question of law alone may be referred to the High Court under S. 66 of the IndianIncome-taxAct,in the proposed appeal a question of law of great public or private importance necessarily arises. Any other view, would make every opinion of the High Court in a reference under S. 66 appealable to this Court14. In our judgment, there is again no merit in the appeal. By cl. 4 of the agreement dated August 2, 1956, it was expressly provided :"That all assets of the vendors in respect of all its business shall be taken over at the book value standing in the book of accounts of the vendors as on the 1st August One Thousand Nine Hundred Fifty-six."It is undisputed that the stock-in-trade was entered in the books of account of the vendors on the date of transfer of the undertaking at Rs. 1,77,285/- and the Company valued the stock-in-trade at Rs. 2,10,285/-. It is true that to the deed of transfer is annexed a Schedule of the assets and liabilities taken over by the Company and in the Schedule the value of stocks at Patna, Muzaffarpur and Purnea is shown at Rs. 2,10,285.87. No attempt was made to explain the discrepancy between the operative part of the agreement and the valuation shown in the Schedule. TheIncome-taxOfficer was of the view that the Company had inflated the opening stock so as to reduce the ultimate profits. That view was confirmed by the Appellate Assistant Commissioner and by the Tribunal. No question of law arose out of the order of the Tribunal. The reference itself was incompetent.