Case: Shri K. Ravindranathan Nair Vs. Commissioner Of Income-Tax, Ernakulam

2. The assessee, an individual, carried on the business of processing cashew nuts in ten units. Four of these units were situated in Kerala. Of these four units, two were owned by the assessee and two were taken on lease. In October, 1969, the assessee faced labour problems in Kerala, consequent upon which he ordered aof the four units there. On 9th March, 1970, the assessee leased out the two units which he owned in Kerala to a private limited company whose only twowere the assessee and his wife. The agreement in this behalf provided that the workmen employed in the two units would have continuity of service. At about the same time the lessee surrendered the two units in Kerala which he had taken on lease. On 21st November, 1970, the assessee entered into a settlement with the trade unions representing the workmen of the units in Kerala and agreed to pay them for the periods of their services upto the date of thefive days wages for each year of service. An aggregate payment of Rs. 4,18,107/was made in this behalf.3. The payment having been made in the cause of the previous year relevant to the Assessment Yearthe assessee made a claim for the deduction of the said sum of Rs. 4,18,107/under Section 37 of the Income Tax Act, 1961. The Income Tax Officer disallowed the claim. In appeal, the claim was allowed. The Tribunal upheld the decision in appeal. From out of the order of the Tribunal, the questionwas referred to the High court. The High court, by the judgment and order under appeal, answered the question against the assessee. The assessee is here by the special leave.

Reasoning: 6. The High Court, surprisingly, threw out all the findings of fact that were reached by the Tribunal. It did so because, in the High Courts view, the Tribunal had misdirected itself in law in arriving at these findings. This was because, according to the High Court, the Tribunal had over looked or ignored a clinching document and because it had wrongly cast the burden of proving the facts on a party. It is difficult to appreciate what that document was that the Tribunal had supposedly overlooked or how the High Court was entitled to look at it if it had not been placed before the Tribunal. It was erroneous to say that any burden had been incorrectly cast by the Tribunal because the Tribunal had evaluated all the material that was put before it, regardless of who had put it on the record.The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact finding authority. A decision on fact of the Tribunal can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense that it is such as could not reasonably have been arrived at on the material placed before the Tribunal. In this case, there was no such question before the High Court. Unless and until a finding of fact reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it.8. The only jurisdiction of the High Court in a reference application is to answer the questions of law that are placed before it. It is only when a finding of the Tribunal on fact is challenged as being perverse, in the sense set out above, that a question of law can be said toargument would be acceptable if the Tribunal had found that these four units constituted a separate business. Having regard to the finding that these and all the other units outside Kerala formed one business, the expenditure must be held to have been incurred in regard to such business.10. Upon the facts found by the Tribunal, there is no getting away from the fact that the expenditure of Rs. 4,18,107/that was inferred by the assessee was a business expenditure and that the assessee was entitled to its deduction under Section 37.