1923 (3) TMI 2 - HC - Income Tax

Appeal dismissed as not final judgment; need special leave for appeal to His Majesty.

The court held that the appeal was incompetent as the decision under Section 51 of the Indian Income Tax Act, 1918, was advisory and not a final judgment, ... - Issues Involved:1. Competence of the appeal under Section 51 of the Indian Income Tax Act, 1918.2. Nature of the expenditure (capital vs. revenue) for income tax deduction purposes.3. Interpretation of 'final judgment' under Clause 39 of the Letters Patent of the High Court of Bombay.Issue 1: Competence of the Appeal under Section 51 of the Indian Income Tax Act, 1918The primary issue was whether an appeal to His Majesty in Council from a decision of the High Court under Section 51 of the Indian Income Tax Act, 1918, was competent. The appellant argued that Clause 39 of the Letters Patent of the High Court of Bombay provided a general right of appeal to His Majesty in Council from any final judgment, decree, or order of the High Court. However, the court observed that no statute, either Imperial or Indian, explicitly or implicitly granted a right of appeal from decisions made under Section 51 of the Income Tax Act. The court further noted that the decision under Section 51 was advisory in nature, meant to guide the Revenue Authorities, and did not constitute a final adjudication on the merits between the parties.Issue 2: Nature of the Expenditure (Capital vs. Revenue) for Income Tax Deduction PurposesThe appellant company sought to deduct a sum of 28 lacs of rupees, paid to underwriters for floating preference shares, from its income for tax purposes. The Collector of Income Tax and the Chief Revenue Authority deemed this expenditure as capital expenditure, not allowable as a deduction under Section 9, Sub-section 2(ix) of the Indian Income Tax Act, 1918. The High Court upheld this view, stating that the expenditure was indeed capital in nature, incurred to procure capital rather than for earning profits. The court emphasized that allowable deductions must be solely for the purpose of earning profits and not in the nature of capital expenditure.Issue 3: Interpretation of 'Final Judgment' under Clause 39 of the Letters Patent of the High Court of BombayThe court examined whether the decision under Section 51 could be considered a 'final judgment' under Clause 39 of the Letters Patent. Citing various legal precedents, including Ex parte Moore and Onslow v. Commissioners of Inland Revenue, the court determined that a 'final judgment' is one that results in a final adjudication on the merits between the parties. The court concluded that the decision under Section 51 did not meet this criterion, as it was advisory and did not enforce any liability or direct any action. The court also noted that the decision did not constitute a 'final decree' or 'final order' but was merely a ruling for the guidance of the Revenue Authorities.ConclusionThe court concluded that the appeal was incompetent as the decision under Section 51 was advisory and not a final judgment, decree, or order as required under Clause 39 of the Letters Patent. The court also dismissed the argument that the appellant had a right to appeal by virtue of the Royal Prerogative, noting that special leave would be required, which was not granted. Consequently, the appeal was dismissed, and the appellant was ordered to pay the respondent's costs.