1991 (8) TMI 7 - SC - Income Tax

Tax reference limited to referred questions under section 256(1); no expansion from section 45(1) to section 48

SC dismissed the assessee's appeal, holding that the HC's advisory jurisdiction in a tax reference is confined strictly to the specific questions actually ... Transfer of the Right of tenancy under the landlords within the meaning of section 2 (47) - capital asset within the meaning of section 2 (14) - capital gains - HELD THAT:- Unfortunately, the assessee did not pursue the matter further under section 256(2) of the Income-tax Act. It is no doubt true that the mention of section 45(1) in the question referred to the High Court, if widely interpreted, may also carry with it, by implication, a consideration of the deductions permissible under section 48. But the question referred to the High Court has to be understood in the context of the facts before the Tribunal and the manner of disposal of the application under section 256(1). A question, the reference of which was declined by the Tribunal, cannot be read into one of the other questions referred. It is now well-settled law that the jurisdiction of the High Court in a reference under the Income-tax Act is in the nature of advisory jurisdiction and only such issues can be and are answered as arise properly on the facts and the questions referred to the High Court. In the circumstances, we are unable to permit the assessee to raise the question before us. As we have stated earlier, it does appear that, on merits, the assessee has a good case in view of the decision of the Supreme Court earlier referred to, which we are unable to consider for the 'technical' reasons given above. If so advised, it will be open to the assessee to apply to the Central Board of Direct Taxes for administrative relief by abstaining from recovering the tax that has been levied on this amount if it has not already been recovered. If such an application is made, the Central Board will no doubt consider the same sympathetically and expeditiously. In the result, this appeal fails and is dismissed. Issues:1. Whether the assessee's right of tenancy constitutes a capital asset under the Income-tax Act.2. Whether there was a transfer of the assessee's right of tenancy within the meaning of the Act.3. Whether the sum received by the assessee represented capital gains assessable under the Act for a specific assessment year.Analysis:The case involved an appeal from a judgment of the Calcutta High Court concerning the Income-tax Act. The assessee, a tenant in Calcutta, transferred his tenancy rights to a new lessee in exchange for a sum of Rs. 4,50,000. The Income-tax Officer treated a portion of this amount as capital gains for the assessment year 1967-68. The High Court upheld this treatment, leading to the present appeal before the Supreme Court.The Tribunal had referred three questions to the High Court, primarily focusing on whether the tenancy right was a capital asset, whether there was a transfer, and if the sum received constituted capital gains. The assessee contended, based on precedent, that the entire sum should not be taxed as capital gains as the actual cost of the asset was not ascertainable. However, the Tribunal rejected this argument as the assessee had not provided evidence of the actual cost.The Supreme Court noted that the assessee had not raised the specific argument regarding actual cost before the High Court. As such, the Court could not entertain this argument as it was not presented at the earlier stage. The Court emphasized that the jurisdiction of the High Court in an income tax reference is advisory and limited to issues raised at the appropriate time. Despite acknowledging the strength of the assessee's argument, the Court could not consider it due to procedural reasons.Ultimately, the Supreme Court dismissed the appeal, citing the technicalities that prevented them from addressing the substantive merits of the case. However, the Court suggested that the assessee could seek administrative relief from the Central Board of Direct Taxes to potentially avoid the tax levied on the disputed amount. No costs were awarded in the case.