Case: M/S. Zoraster And Co Vs. The Commissioner Of Income Tax, Delhi, Ajmer, Rajasthan A

2. The assessee, Messrs. S. Zoraster and Co., Jaipur consists of three partners. Two of them are coparceners of a joint Hindu family, and the third is a stranger. They had formed this partnership in June, 1940 for the manufacture and sale of blankets, felts and other woollen articles. A deed of partnership was also executed on March 16, 1944. The assessee entered into contracts with Government for the supply of goods, and in the assessment year 1942-43, Rs. 10,80,658 and in the assessment year 1943-44, Rs. 17,45,336 were assessed as its income by the Income-tax Officer, Contractors Circle, New Delhi. The supplies to Government were made f.o.r. Jaipur by the assessee, and payment was by cheques which were received at Jaipur and were endorsed in favour of the joint Hindu family which acted as the assessees bankers. The contention of the assessee was that this income was received at Jaipur outside the then taxable territories. This contention was not accepted by the Income-tax Appellate Tribunal, Delhi.3. The assessee then applied for a reference to the High Court under S. 66(1) of the Indian Income-tax Act, and by its order dated December 10, 1952, the Income-tax Appellate Tribunal referred the following question for the decision of the High Courton the facts and circumstances of the case the profits and gains in respect of the sales made to the Government of India were received by the assessee in the taxableTribunal had stated in the statement of the case as followspayment was made by the Government of India by cheques drawn on the Reserve Bank of India, Bombay Branch. These cheques were received inmay be pointed out that in the contract of sale between the assessee and the Government of India the following clause was included to determine the system of paymentSystem of payment : - Unless otherwise agreed between the Purchaser and the Contractor payment for the delivery of the stores will be made by the Chief Auditor, Indian Stores Department, New Delhi, by cheque on a Government treasury in India or on a branch of the imperial Bank of India or the Reserve Bank of India transacting Government business.In dealing with the Reference the High Court passed an order under S. 66(4) of the Income-tax Act. . . . it would be necessary for the Appellate Tribunal to find, inter alia, whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assessee firm given to the Department in theHigh Court thereafter remanded the case to the Tribunal for a supplemental statement of the case on the lines indicated. This order is questioned on the authority of the decision of this Court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax, 1960-1 SCR 249  : (AIR 1959 SC 1177 ) which, it is claimed, completely covers this case. In that case also, the High Court of Bombay had called for a supplemental statement of the case, and it was ruled by this Court that the High Court had exceeded its jurisdiction.

Reasoning: 8. Jagdish Mills case, 1960-1 SCR 236  : (AIR 1959 SC 1160 ) and the New Jehangir Vakil Mills case 1960-1 SCR 249  : (AIR 1959 SC 1177 ) were decided by this Court on the same day. In the latter case, the Department had to deal with a non-resident Company which, at all material times, was situate at Bhavnagar, one of the Indian States. Cheques in payment for supplies to Government were sent from British India to Bhavnagar. The Department contended in the case that though the cheques were received at Bhavnagar, they were, in fact, cashed in British India and until such encashment, income could not be said to have been received but that on encashment in British India, the receipt of income was also in British India. The Tribunal held that the cheques having been received at Bhavnagar the income was also received there. In doing so, the Tribunal followed the Bombay decision in Kirloskar Brothers case, 1952-21 ITR 82  : (AIR 1952 Bom 306 ). The Tribunal, however, observed that if the Bombay view which was then under appeal to this Court were not upheld, then an enquiry would have to be made as to whether the Mills bankers at Ahmedabad acted as the Mills agents for collecting the amount due on the cheques. The question whether the posting of the cheques from British India to Bhavnagar at the request, express or implied, of the Mills or otherwise, made any difference was not considered at any stage before the case reached the High Court of Bombay.The reference was held back by the Tribunal till the decision of this Court in Ogale Glass Works case, 1955-1 SCR 185  : (AIR 1954 SC 429 ) and Kirloskar Brothers case, 1954-25 ITR 547  : (AIR 1954 SC 504 ). Even after seeing that in those two cases the request for payment by cheques to be sent by post made all the difference, the Tribunal did not frame its statement of the case or the question to include this aspect, because that aspect of the matter was never considered before. The question referred was thus limited to the legal effect of the receipt of the cheques at Bhavnagar without advertence to the fact whether the cheques were so sent by post at the request, express or implied, of the Mills.the question as framed and the statement which accompanied it brought into controversy the only point till then considered by the Tribunal and the taxing authorities. When the case was heard by it, the High Court desired to consider it from the angle of the Kirloskar Brothers. 1952-21 ITR 82  : (AIR 1952 Bom 306 ) and Ogale Glass works, 1955-1 SCR 185  : (AIR 1954 SC 429 ) cases. It called for a supplemental statement of the case. In doing so, the High Court went beyond the ambit of the controversy as it had existed till then and also the statement of the case and the question.It was also pointed out that the facts admitted and or found by the Tribunal could alone be the foundation of the question of law which might be said to arise out of the Tribunals order. The case thus set two limits to the jurisdiction of the High Court under S. 66(4), and they were that the advisory jurisdiction was confined (a) to the facts on the record and/or found by the Tribunal and (b) the question which would arise from the Tribunals order. It was pointed out by this Court that it was not open to the High Court to order a fresh enquiry into new facts with a view to amplifying the record and further that it was equally not open to the High Court to decide a question of law, which did not arise out of the Tribunals order. This was illustrated by comparing the question as framed by the Tribunal with the question which the High Court desired to decide.It follows from this that the enquiry in such cases must be to see whether the question decided by the Tribunal admits the consideration of the new point as an integral or even an incidental part thereto. Even so, the supplemental statement which the Tribunal is directed to submit must arise from the facts admitted and/or found by the Tribunal, and should not open the door to fresh evidence. The fact that in Ogale Glass Works case, I. T. Ref. No. 19 of 1949, D/- 17-9-1951 (Bom), the Bombay High Court had asked for a supplemental statement in the same way as in the Jehangir Vakil Mills case, 1960-1 SCR 249 : (AIR 1959 SC 1177 ), and this Court did not rule out the new matter, cannot help the assessee in the present cases because the jurisdiction of the High Court was not questioned, as it had been done in the Jehangir Vakil Mills case, 1960-1 SCR 249  : (AIR 1959 SC 1177 ), or has been done here. We have thus to see whether in this case the question which was decided and which has been referred to the High Court admits the return of the case for a supplemental statement on the lines indicated by the High Court in the order under appeal.It is thus quite plain that the question as framed in this case can include an enquiry into whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works case, 1955-1 SCR 185 : (AIR 1954 SC 429 ), or Jagdish Mills case, 1960-1 SCR 236 : (AIR 1959 SC 1160 ).The first limit to the jurisdiction of the High Court as laid down by this Court is thus not exceeded by the High Court in exercising its powers under S. 66(4) of the Income-tax Act. The question is wide enough to include the alternative line of approach that if there was a request, express or implied, to send the amount due under the bills by cheque, the post office would be the agent of the assessee, and the income was received in the taxable when the cheques were posted.