TaxTMI 
TaxTMI 
1956 (8) TMI 46
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner of Income-tax, Trivandrum, and the third respondent is the Commissioner of Income- tax, Mysore, Travancore-Cochin and Coorg. 2. The Sacred Heart's Monastery, Thevara, is a religious institution. It is conducting an educational institution called the Sacred Heart's College, Thevara. Notices were issued by the first respondent to the petitioner under section 44 of the Cochin Income-tax Act, 1117, to the effect that the income of the Monastery in respect of the assessment years 1123 and 1124 had escaped assessment. Pursuant to those notices the Monastery was assessed to income-tax for the years 1123 and 1124 on donations received by the Prior for the construction of the college and also on Mass stipends. It was contended on behalf of the petitioner that the donations and Mass stipends were not "income" for which the Monastery could be taxed. The Income-tax Officer held that donations and Mass stipends were voluntary contributions and that, under the Cochin Income-tax Act, 1117, as amended by Act XXII of 1122, such voluntary contributions were liable to be assessed to income- tax. For the years 1123 and 1124 the petitioner was assessed to income- tax on Rs. 1,17,997 an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nations and Mass stipends are liable to be assessed to income-tax under the Cochin Income-tax Act as amended in 1122 and dismissed the revision petitions on 15th February, 1955. The petitioner was not heard before the revision petitions were disposed of. This petition was filed on 21st April, 1955. 3. The main grounds urged in the petition are that donations received by the petitioner for the construction of the college and Mass stipends are not "income" for which the Monastery is liable to be taxed, that the Income-tax Officer had jurisdictions to assess income-tax on those amounts, that in any case they are receipts of a casual and nonrecurring nature and, therefore, exempted under section 5(3) (vii) of the Cochin Income-tax, that the orders of the Income-tax authorities are the result of a misconception regarding the scope of clause (iii) of section 5(3) of the Cochin Income-tax Act, 1117, and the effect of the deletion of the clause by Act XXII of 1122, that they misunderstood the nature of Mass stipends, and that the orders are erroneous on the face of the record. It was also stated in the petition that since the question as to whether donations and Mass stipends are liable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me-tax authorities the plea that donations and Mass stipends did not constitute 'Income' for which the petitioner could be assessed to income-tax. 6. The question for consideration is whether this is a fit case in which this Court should exercise the jurisdiction vested in it under article 226 of the commissioner and issue a writ of certiorari quashing the order of the Income-tax Authorities. The mere fact that the impugned orders are wrong will not be a ground for this Court to interfere in the exercise of its extraordinary jurisdiction. This Court will interfere only if the Income-tax Authorities had no jurisdiction to assess the petitioner to income-tax or if they acted illegally in the exercise of their jurisdiction or if there is an error apparent on the face of the record in their order. The question whether the petitioner has other effective remedy will also be taken into consideration by this court in deciding whether this is a fit case in which it should exercise its extraordinary jurisdiction. 7. The law relating to the question has been laid down by the Supreme Court in T.C. Basappa v. T. Nagappa [1955] 1 S.C.R. 250 and in Hari Vishnu v. Ahmad Ishaque [1955....
X X X X Extracts X X X X
X X X X Extracts X X X X
....available in such cases. An error in the decision or determination itself may also be amenable to a writ of certiorari but it must be a manifest error apparent on the face of the proceedings, e.g. when it is based on clear ignorance or disregard of the provisions of law. In other words, it is patent error which can be corrected by certiorari but not a mere wrong decision. The essential features of the remedy by way of certiorari have been stated with remarkable brevity and clearness by Morris, L.J., in the recent case of Rex v. Northumberland Compensation Appeal Tribunal [1952] 1 K.B. 338, at p. 357. The Lord Justice says: 'It is plain that certiorari will not issue as the cloak of an appeal in disguise. It does not lie in order to bring up an order or decision for rehearing of the issue raised in the proceedings. It exists to correct error of law when revealed on the face of an order or decision or irregularity or absence of or excess of jurisdiction when shown.'" His Lordship then quoted with approval the following passage from the judgment in Veerappa Pillai v. Raman and Raman Ltd. [1952] S.C.R. 582:  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rong and that he has no jurisdiction to levy income-tax on the items which are not "income" coming with in the purview of the Act. We are unable to accept this argument. We do not think that the jurisdiction of the income-tax Officer to assess a person to income-tax on particular items of receipt depends upon the existence of some collateral fact which the Officer has to decide first before proceeding to assess the person to income-tax. Under the Income-tax Act, the Income-tax Officer has full jurisdiction to decide whether a person is liable to be assessed to income-tax in respect of particular items of receipt. If the decision is wrong the remedy of the party is to appeal to the higher authorities. It cannot be said to be a case of the Income-tax Officer assuming jurisdiction which he does not in law possess. The question was discussed by Lord Esher, M.R. in Reg. v. Commissioners for Special Purposes of the Income Tax [1888] 21 Q.B.D. 313 at p. 319. His Lordship observed: "When an inferior court or tribunal or body, which has to exercise the power of deciding facts, is first established ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....matters which, whether apparent on the face of the proceedings or brought before the superior court by affidavit, are extrinsic to the adjudication impeached. But an objection that the judge has erroneously found a fact which, though essential to the validity of his order, he was competent to try, assumes that, having general jurisdiction over the subject matter, he properly entered upon the enquiry, but miscarried in the course of it. The superior court cannot quash an adjudication upon such an objection without assuming the functions of the court of appeal, and the power to re-try a question which the judge was competent to decide." 11. The law is thus stated in Halsbury's Laws of England, second edition, Volume IX, at page 88: "The case is more difficult where the jurisdiction of the court below depends not upon some preliminary proceeding, but upon the existence of some particular fact. If the fact be collateral to the actual matter which the lower court has to try, that court cannot, by a wrong decision with regard to it, give itself jurisdiction which it would not otherwise possess. The l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....950] 18 I.T.R. 618, by Bhargava, J., in Sundarlal v. Hindustan Commercial Bank and by Teja Sing, C.J., in Roller Flour Mills v. Income-tax Officer, Patiala. We have no doubt, that under the Income-tax act, the income-tax Officer has jurisdiction to determine whether a particular item of receipt is "income" liable to be assessed to income-tax and that it is not a collateral fact but a part of the very question which the Officer has to inquire into in the exercise of the jurisdiction vested in him under the act. If the decision of the Officer on the question is wrong the remedy of the party is what is provided in the act itself. It follows that even if two items of receipt in respect of which the petitioner was assessed to income-tax do not constitute "income" it cannot be said that the income-tax Officer acted without jurisdiction in assessing the petitioner to income-tax on those items. 14. The next and the more important question is whether there is an error apparent on the face of the record in the orders of the Income- tax Authorities. It is settled law that the High Court can interfere with the decision of an inferior tribunal in the exercise of its supervisory jurisdiction if ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aised in the proceedings. It exists to correct error of law where revealed on the face of an order or decision, or irregularity, or absence of, or excess of, jurisdiction where shown. The control is exercised by removing an order or decision, and then by quashing it." As stated already, the principle laid down in this case was affirmed by the supreme Court in T.C. Basappa v. T. Nagappa and in Hari Vishnu v. Ahmad Ishaque. 15. What then is an error apparent on the face of the record which will justify interference by the High Court? In Rex v. Northumberland Compensation Appeal Tribunal already referred to, Lord Goddard, C.J., stated the law thus: "Where a tribunal, especially one created by the statute, states in its order the grounds on which the order has been made and when those grounds are not such as to warrant the decision arrived by the tribunal certiorari will issue for quashing the order." In K.P. Mushram v. B.C. Patil Chagla, C.J., said. "The error of law which can be considered to be apparent on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r apparent on the face of the record cannot be defined precisely or exhaustively, there being an element of indefiniteness inherent in its very nature, and it must be left to be determined judicially on the facts of each case." 17. The question came up for consideration before Sinha, C.J., and Hidayatullah, J., in Sagatmal Bhikchand v. M.V. Deo***. That was a case under the Central Provinces and Berar Letting of Houses and Rent Control Order, 1949. The petitioner was occupying a rented house for residential purposes and running a shop in another rented house. For his convenient residence and for carrying on his business he purchased a house which was in the occupation of the respondents. He made an application to the Rent Controller, Nagpur, for recovery of possession of the house after determining the tenancy under clause 13(3)(vi) of the Rent Control Order. The petition was opposed by the respondents who contended that there was no necessity for the petitioner to occupy the house. The Rent Controller rejected the petition holding that the petitioner did not require the house for his residence and for his business. The appeal filed by the petitioner before the Additional Deputy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....warranted by law. In other words, the order is a speaking order, an expression used by Earl Cairns, L.C., in Overseers of the Board of Walsall v. L. and N.W. Railway Company##. It is no doubt not necessary in all cases to set out evidence or facts on which the decision was based, but if once they are so set out and if from the evidence set out or from the facts found the conclusion does not follow in law it is open to interfere with the order and quash it by issuing a writ of certiorari." "Errors apparent on the face of the proceedings", said the learned judge, "are always treated as errors of jurisdiction for the purpose of quashing by issuing a writ of certiorari." The learned judge added: "Of course, the error which is apparent should not be a mere accidental or formal error which could always be set right by amendment; it must be a substantial error and one which goes to the root of the matter". In Pattabhi Rama v. Govinda it was held that where a Tribunal commits a patent error in respect of propositions of law and its conclusion has been reached on the basis of such erroneous premises whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case. There is no dispute as to facts. They are stated thus in the first assessment order of the Income-tax Officer: "During the year it is admitted that the Monastery has collected donation of Rs. 1,17,997. The entire donation has come from foreign countries and the donations were made in response to an appeal made by the Monastery to the charitably disposed public for putting additional structures and carrying out improvements for their newly started college at Thewara." The ground on which the Monastery was sought to be assessed to income-tax on these donations was stated thus by the Income-tax Officer: "It was put forward to the assessee's advocate that by the amendments introduced to the Act by the Amendment Act XXII of 1122, these donations fall under the head, voluntary contributions' and as such they fall liable to be taxed. In fact, this position is the natural corollary of deletion of the exemption provided by sub-clause (iii) of sub-section (3) of sub-section 5 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons given in the order relating to the assessment for 1123. 23. The Appellate Assistant Commissioner's order shows that the following contentions were raised before him by counsel appearing for the assessee: "(1) Neither the Mass stipends nor donations form income and cannot therefore be taxed; (2) even if they are to be regarded as income they do not arise from any definite source; (3) donations or contributions to the college are in the nature of gifts and are not taxable at the hands of the donee unless they are part of the emoluments of an office, employment or vocation; and (4) the receipts under both the heads are of a casual and non-recurring nature and hence exempt." The Appellate Assistant Commissioner did not discuss any of the points raised in these contentions. This is what is stated in his order: &n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estion that arose for decision before them. This Court will interfere only if the decision is the result of an error which is apparent on the face of the record-an error which is patent from the orders themselves. We are of opinion that the orders of the Income-tax Authorities in this case are the result of such an error. They have misconceived the scope of clause (iii) of section 5(3) of the Cochin Income-tax Act 1117, and the effect of its deletion by the Amendment Act, XXII of 1122. They did not decide the one question they were called upon to decide viz., whether the donations received by the Monastery for the construction of the college and Mass stipends were "income" at all. This question they ought to have decided apart from the effect of the deletion of clause (iii) of section 5(3) by the Amendment Act. Failure to decide this question which goes to the very root of the matter is not only an error apparent on the face of the record but also amounts to an illegal exercise of jurisdiction by the Income-tax Authorities which by itself as a sufficient ground for interference by this Court in the exercise of its supervisory jurisdiction. The Income-tax Authorities have also misun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplied, or finally set part for application, thereto; (ii) Any income derived from business carried on, on behalf of a religious or charitable institution when the income is applied solely to the purpose of the institution; and (a) the business is carried on in the course of the carrying out of a primary purpose of the institution; or (b) the work in connection with the business is mainly carried on by beneficiaries of the institution; (iii) Any income of a religious or charitable institution derived from voluntary contributions and applicable solely to religious or charitable purposes; (iv)......................................... (v)......................................... (vi)......................................... (vii) Any receipts not being receipts arising from business or the exercise of a profession, vocation, or occupation, which are of a casual and non-recurring nature, or are not by way of addition to the remuneration of an employee; (viii) Agricultural income: (ix)........................................................................... (x)........................................................................... In the sub-sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contributions while what really exempted is "income derived from" voluntary contributions. Under clause (i) income derived from property held under trust or other legal obligation wholly for religious or charitable purposes was exempted; and under clause (ii) income derived from business carried on behalf of a religious or charitable institution as exempted subject to certain conditions. Donations and Mass stipends will come within the ambit of clause (iii) only if they are "income" derived from voluntary contributions. The Income-tax Authorities took in that donations and Mass stipends were "voluntary contributions". They did not go into the question whether they are "income driven from" voluntary contributions. On the assumption that what was exempted under the clause was voluntary contributions as such they held that donations and Mass stipends came within the clause and that the effect of the deletion of the clause in 1122 was to make them liable to be assessed to income-tax. The Income-tax Authorities have clearly misconstrued the clause and misunderstood its scope. 30. Assuming that what was exempted under the clause is voluntary contributions, it does not necessarily fol....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the recipient. 31. The word "income" is not defined in the Income-tax Act. Section 3 (9) of the Cochin Act (as amended in 1122) corresponding to section 2(6C) of the Indian Act only says that "income" includes the five categories of receipts mentioned in the sub-section. Donations of this kind do not come within any of those categories. But, the sub-section does not purport to be an exhaustive definition of the term "income". Income includes not only the things which the sub-section declares that it shall include but also such things as the word signifies according to its natural impart. As observed by Barund, J., in Amrit Kunwar v. Income- tax Commissioner: "In construing the word 'income' in the Indian Income-tax Act, one has to ask one self whether, having regard to the circumstances surrounding the particular payments and receipts in question, what is received is of the character of income according to the ordinary meaning of that word in the English language or whether it is merely a casual receipt or mere windfall." In Commissioner of Income-tax v. Shaw ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Ruler of Kalsia and the sister of the Maharaja of Nabha State. In the assessment year she received a sum of Rs. 14,744 from Kalsia State and another sum of Rs. 8,910 from Nabha State. For the purpose of this case we are concerned only with the payment made by Nabha State. It was made as an annual "wardrobe allowance" and as presents on certain specified days of festival in each year. Each payment was specifically budgeted for in the annual budget of the State and the payments have been made consecutively for a period of about twenty years. The question arose as to whether the payments constituted income of the Rani. Braund, J., said: "There can be no doubt that the payments have recurred with both actual and expected regularity for the better part of twenty years. Only once have they been varied in amount and they have been paid quarterly. The sanction for their payment has appeared in the annual budget of the State. I think, therefore, that they have become 'customary' payments in the limited sense at least that they were 'habitual' payments though I am inclined to agree with respect with the learned President of the Tribunal that no fact has been proved t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ature unless there is a liability on the donor to pay, which liability may arise out of contract, a custom or some order which is binding on him." Iqbal Ahmed, C.J., agreed with the opinion of the two learned Judges. It has to be borne in mind that the Rani has been receiving the payments for about twenty years, and that the payment was provided for in the State budget. If these receipts did not constitute "income" of the recipient it cannot be contended for a moment that donations received by a person from a few individuals on different occasions for putting up a charitable institution and utilised for that purpose will constitute his income. The payments depended entirely on the him of the donors. there is also no regularity or expected regularity in the payments. It is obvious that receipts of this nature do not constitute "income" of the recipient. 33. Assuming that the donations are of the nature of "income" and not capital receipt, they clearly come within section 5(3)(vii) of the Cochin Income-tax Act which exempts receipts, which are of a casual and non-recurring nature, from liability to assessment. It cannot be contended that the receipts arise from business or the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istant Commissioner and the Commissioner of Income-tax did not consider the question at all. 34. As for Mass stipend, it is clear the Income-tax Authorities have not understood its real nature. The Income-tax Officer proceeded on the basis that it was a donation made to the Monastery and that no condition was attached to the donation. The Appellate Assistant Commissioner also took the view that it was a donation made to the Monastery but that it was earmarked for the saying of Mass. The Commissioner also took his view. It is true that Mass stipend is a donation. But it is a donation to the individual priest who says the Mass. It is given for the maintenance of the Priest. The Priest who receives the Mass stipend is under an obligation to offer Mass for the intention of the donor. In no sense can Mass stipend be said to be a donation made to the Monastery. The petitioner only received the Mass stipends for being distributed among the priests who agreed to say Masses for the intention of the donors. It is the individual priest who says the Mass who is entitled to the stipend. It cannot, therefore, be said to be a donation made to the Monastery. The misconception on the part of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to be made within sixty days of the date on which be is served with notice of the order. If no question of law will arise out of the order to be passed by the Appellate Assistant Commissioner in the appeals pending before him there will be no occasion for the assessee to make an application for reference on the basis of that order. As stated already, the question of law has already been decided by the Appellate Assistant Commissioner, and it will not arise out of the orders to be passed in the appeals now pending before him. 36. The assessee has also no right to apply for a reference in respect of the order passed by the Commissioner of Income-tax under section 43 of the Cochin Act disposing of the revision petition. In the case of an order passed under section 43 the assessee is given the right of applying for a reference only if the Commissioner enhanced the assessment or if the order has otherwise prejudiced him. In this case the Commissioner did not enhanced the assessment. Nor can the order of the Commissioner be said to be prejudicial to the assessee. The first provision to section 43 sub-section (2) says that the Commissioner shall not pass any order prejudicial to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to be made by the Income-tax Officer in all cases. From his order appeal is provided for to the Appellate Tribunal. The Commissioner of Income-tax is given the power of revision subject to certain conditions. The Central Board of Revenue has general powers of supervision. The provision relating to reference to the High Court applies only to orders of the Appellate Tribunal. Under the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, (Section 7) any reference in the law of any Merged State to an officer, authority, Tribunal or Court shall be construed as a reference to the corresponding officer, authority, Tribunal or Court appointed or constituted under the Indian Act, and if any question arises as to who such corresponding officer, authority, Tribunal or Court is the decision of the Central Government thereon shall be final. The Officer corresponding to the Income-tax Officer under the Cochin Act May be taken to be the Income-tax Officer under the Indian Act and the Officer corresponding to the Deputy Commissioner to be the Appellate Assistant Commissioner. The powers of the Commissioner in respect of second appeal must be deemed to have vested in the Appellate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for that. Having filed revision petitions he could not apply for a reference in respect of the order of the Commissioner unless the order was prejudicial to him. 38. It can now be taken to be well settled that the existence of an alternative remedy is not by itself a ground for the High Court to refuse to exercise the jurisdiction vested in it under article 226 of the Constitution although the High Court will always take that fact also into consideration in deciding whether in a particular case it should exercise that jurisdiction. The question will depend upon the facts and circumstances of each case. The law was thus laid down by his Lordship S.R. Das, J. (as he then was), in Rashid Ahmen v. Municipal Board, Kairana [1950] S.C.R. 566: "There can be no question that the existence of an adequate legal remedy is a thing to be taken into consideration in the matter of granting writs, but the powers given to this Court under article 32 are much wider and Not confined to issuing prerogative writs only." In Krishnankutty v. State of Tranvancore-Cochin his Lordship Koshi, J. (as he then w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; "We do not consider the existence of an alternative remedy a bar to the issue of a writ of prohibition in appropriate case. This is a conclusion well supported by judicial decisions and dicta spread over a long period of years." Reference may also be made to the following observation of Chagla, C.J., in Abdul Majid v. P.R. Nayak: "When there is an alternative adequate and specific remedy, it is always a factor which the court must take into consideration in deciding whether a writ of certiorari should or should not issue. If the court finds that a fundamental principle of justice has been violated that is an important factor which the court should also take into consideration and if it finds that a fundamental principle of justice has been violated it should not refuse to issue a writ merely on the ground that there is an alternative adequate remedy in existence." 39. So far as this case is concerned, the petitioner has at present no other remedy available to him. Section III of the Cochin Income-tax Act provided that no suit "shall be brought in any ....