TaxTMI 
TaxTMI 
1960 (5) TMI 29
X X X X Extracts X X X X
X X X X Extracts X X X X
....idows, Lakshmi Achi and Nachiar Achi, and widowed daughter-in-law, Umayal Achi. Some time prior to his death, that is, on February 8, 1938, Arunachalam Chettiar (senior) executed a will, making certain dispositions. Under the will, the executors were directed to arrange for the adoption of a son to each of the three ladies (such multiple adoption being presumably sanctioned by the custom of the Nattukottai Chettiar community). The will directed that, after the payment of legacies, the three adopted sons were to divide the properties equally. Umayal Achi, however, did not accept the will. She filed a suit in the Sub-Court, Devakottai, claiming a half share in the estate, left by her deceased father-in-law. The claim was laid on the basis of the rights conferred by the Hindu Women's Right to Property Act, 1937, under which the widow of the pre-deceased son of an individual who died after the coming into force of the Act was entitled to certain rights. Pending the suit, that is, on August 18, 1938, two advocates, Ramaswami Iyengar and Subramania Iyer, were appointed joint receivers to manage the properties involved in the suit. As a part of their management, the receivers continue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t they obtained under the compromise with their adopted sons in accordance with the ante adoption agreement. In October, 1954, the receivers were discharged. In the meanwhile, proceedings for the assessment of income from the businesses and properties left by the deceased were initiated against the receivers. For the assessment year 1939-40, the officers of the Income-tax Department assessed the receivers under section 41 of the Indian Income-tax Act. They held that the shares of the widows being in dispute should be held to be indeterminate, and therefore levied the maximum tax on the total income under the first proviso to section 41, That assessment was duly taken on appeal to the Appellate Tribunal. By its order dated January 28, 1943, the Appellate Tribunal held that the three widows were the legal heirs of the deceased, that their shares could not be said to be indeterminate, though it might be that they had not yet been determined by the court; and that, therefore, the levy of tax at the maximum rate was not justified. There was, however, some defect in the order of the Appellate Tribunal, as, in the final paragraph, it did not give effect to the finding referred to above....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, thereupon, filed by the receivers to the Appellate Tribunal. The only matter, which formed the subject-matter of the appeals, was as to the number of shares in which the assessment on the receivers should be divided. There was no objection on the part of either the assessee or the Department to the assessment itself being made under section 41. There was an appeal on behalf of the Department either that the assessment under section 41 was wrong, and that the proper way of assessing the profits from the businesses carried on by the receivers was to assess them directly under section 10. The Appellate Tribunal, which heard the appeals for the assessment years 1941-42 to 1946-47, along with the appeal for the assessment year 1939-40, called for a report from the Income-tax Officer as to whether the businesses which the deceased carried on were continued by the receivers during the relevant years. The Income-tax Officer reported in the affirmative, namely, that the businesses of the deceased were carried on by the receivers jointly. On that finding, which the Appellate Tribunal accepted, it came to the conclusion that the proper way of making the assessment was to assess the rece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all hereafter refer as the representatives), that person could be assessed to tax, in respect of the income of the estate. The section is an enabling one, conferring a power on the Department to assess the representative of a party in such cases. This is made clear by sub-section (2) which states that the provisions of section 41 will not prevent the alternative course of assessing directly the person, on whose behalf the income is received. Thus, so far as the beneficial owner of the estate is concerned, there can, at the option of the Department, be a direct assessment of income under the appropriate heads or the legal owner or the representative can be assessed, the beneficial owner being indirectly assessed through such person. In either case the assessment is in substance against the beneficial owner. It would, therefore, follow that, where the Department proceeds to take advantage of the provisions of section 41, and assess, the representative, the measure of the representative's liability would be the same, as if the beneficiaries concerned had received the amount. A ease, where the beneficiary is a single person, would present no difficulty, for the assessment of the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....siness would not constitute an association of persons, because the essential element of a volition to carry on the business jointly would be absent; a fortiori a case where there are minors. In all such cases, the Department, in order to assess the profits as a whole, could assess the receivers as carrying on business in their own right under orders of court. But, where the assessment is not made on that footing, but the provisions of section 41 are applied, and the receivers are assessed not as principals concerned in the business, but as representatives of the beneficiaries, tax could be assessed and levied on the receivers only on the footing that each of the beneficial owners was assessed separately (i.e., in a case where shares are determinate) in regard to his or her share. In the present case, the Income-tax Department elected to assess the beneficiaries indirectly through their representatives, the receivers. The question, then, is whether it would be open to the Appellate Tribunal to change the mode of assessment so as to make it a direct one on the receivers as principal parties to the assessment. In regard to that matter, different principles would apply to the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er such a Course is permissible, is doubtful. Even if it is permissible, whether it could be allowed in the circumstances of the case, has to be considered. The Department had made its choice as to the mode of assessment; even if that was found to be ultimately detrimental to the revenue, they could have filed an appeal against the order of the Appellate Assistant Commissioner by seeking to assess the receivers under section 10. This, however, was not done. It must, therefore, be taken that the Department was satisfied with the assessment being made under section 41. Would it be open to the Tribunal under those circumstances to take up the matter suo motu ? Mr. Rama Rao Sahib, the learned counsel for the Department, urged that, as the Appellate Tribunal had all the powers of Officers of the Department, it was open to them to change the mode of assessment. The learned counsel contended that, as the question, whether the receivers were to be assessed as persons carrying on the businesses or whether they were to be assessed vicariously by resorting to the provisions of section 41, was a fundamental thing to be decided in respect of the assessment, the Appellate Tribunal was well wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... refer briefly to the provisions of the Indian Income-tax Act. It is a fundamental principle, that no litigant has an inherent right of appeal against a judicial order, unless such right is given by a statute. It is an equally settled principle that, where the whole or part of an order has not been appealed against, it would be final; and the appellate authority, in case there is an appeal against a part of an order, would have no jurisdiction in the absence of statutory provision to interfere with the other part which does not form the subject of the appeal. Where a statute confers a right to appeal to an appellate authority, its powers and functions are limited by the terms of that statute. Section 30 gives a right of appeal only to the assessee against an order of assessment by an Income-tax Officer; the Department has no right to appeal against the order of the Income-tax Officer, even if it were prejudicial to the revenue. That presumably is for the reason that the Appellate Assistant Commissioner being an officer of the Department would be vigilant in protecting the interests of the revenue, provided a power is given to him to enhance the tax in an appeal by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Assistant Commissioner is detrimental to the revenue, the Department could itself appeal to the Tribunal under section 33(3). In the absence of such appeal, the Appellate Tribunal could only deal with the actual Subject-matter before it, namely, the appeal of the assessee. Rules have been framed under provisions of section 5A(8) regulating the procedure to be followed by the Tribunal. Rule 12 states that an appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but that the Tribunal should not be confined to the grounds set forth in the memorandum of appeal in disposing of the matter. This power of the Tribunal to rest its order on a ground, not taken in the memorandum of appeal, is subject to the limitation that it should, before doing so, give sufficient opportunity to the party that may be affected for being heard on that ground. Rule 27 states: "The respondent, though he may not have appealed, may support the order of the Appellate Assistant Commissioner on any of the grounds decided against him." Rule 28, which confers powers of remand, runs: "Where the Tribunal is of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant to raise the question of apportionment, and that it was within its competence to reverse the decision of the Appellate Assistant Commissioner, on the ground that the liability to tax should be determined, after deciding the question whether the income earned could be apportioned. It will be noticed that, in that case, the Appellate Tribunal was concerned only with the question whether the relief could be given to an appellant on a ground not taken by him. The interference was well within the subject-matter of appeal, the relief granted being less than what the grounds of appeal justified. Dealing with section .33(4), the learned judges observed at page 856: "The expression 'thereon' has come in for considerable judicial comment and observation, and the authorities lay down that the power of the Tribunal is confined to dealing with the subject-matter of the appeal and the subject-matter of the appeal is constituted by the grounds of the appeal prepared by the appellant. This subject-matter cannot be expanded even by the appellant unless leave is granted to him to do so by the Appellate Tribunal. The subject-matter can certainly not be expanded by the respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt could be supported on any ground not raised in the memorandum of appeal, it could not permit the Tribunal to suggest another mode of assessment altogether. The question again came up for consideration in Puranmal Radhakishan v. Commissioner of Income-tax [1957] 31 ITR 294 . It was held that the Appellate Tribunal could only decide on the basis of the grounds of appeal raised or permitted to be raised, but that it was not open to the Tribunal itself to raise a ground, or permit a party who has not appealed to raise a ground, which would work adversely to the appellant. In that case, the question related to the extent to which loss could be allowed in favour of the assessee who was a dealer in shares. In the previous year, the assessee had purchased the shares at Rs. 1,100 per share. In the following year, he sold them at Rs. 225 per share. The controversy between the Department and the assessee was whether the loss allowable to the assessee should be calculated on the difference between the cost price, Rs. 1,100, and the sale price, Rs. 225, or on the difference between the market value of the shares on the date of the purchase, that is, Rs. 715, and the price of Rs. 225 for whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....97. The Income-tax Officer treated a sum of Rs. 3,800 under the head of income from the business. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer in regard to the capital receipt, and reduced the assessment to Rs. 2,800. The assessee filed an appeal to the Appellate Tribunal, contesting the propriety of the assessment of even that sum of Rs. 2,800. The Tribunal remanded the matter to the Appellate Assistant Commissioner. On remand, the Appellate Assistant Commissioner held that both sums of Rs. 9,397 and Rs. 3,800 were assessable to tax as income from the business, that is, making the position of the assessee worse than what it was before he appealed to the Tribunal. A Bench of this court, of which one of us (Rajagopalan, J.) was a party, held that the entire sum of Rs. 13,197 was a capital receipt, and it was, therefore, exempt from tax. But, incidentally, while considering the question of the powers of the Appellate Tribunal, the learned judges held that, even though no appeal was preferred by the Commissioner in respect of the portion of the order of assessment of the Income-tax Officer, which contained an adverse decision against the Department, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the question referred to us in the negative, and in favour of the assessees. The assessees will be entitled to their costs. [This case having been set down for being mentioned the court delivered the following order]: It was a consolidated reference that we answered based on sixteen separate applications preferred by the assessees under section 66(1) of the Act. As the reference was answered in favour of the assessees we directed that they should get their costs. The learned counsel for the assessees now represents that the institution fee of Rs. 1,600 paid by the assessees when they presented their applications under section 66(1) of the Act to the Tribunal should be directed to be taxed as costs of the reference to enable them to recover that amount also from revenue. The first question that we have to consider is whether we have jurisdiction to issue such a direction in exercise of the powers vested in this court by section 66(6) of the Act, which declares that directions as to costs are within the discretion of court. The learned counsel for the Department submitted that, as the amount in question represented the costs incurred by the assessees in the proceedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 66(1) of the Act, is incidental to the reference which is ultimately disposed of by the High Court, remains unchanged, even though the position now is that it is no longer the Commissioner but the Tribunal that is the statutory authority vested with the jurisdiction to submit a reference under section 66(1) to the High Court. In Chidambaram Chettiar v. Commissioner of Income-tax [1945] 13 ITR 177 and in Raghavalu Naidu and Sons v. Commissioner of Income-tax [1945] 13 ITR 194, where the reference was by the Tribunal, this court directed, no doubt without any discussion, the refund to the assessee of the fee of Rs. 100 that the assessee had paid under section 66(1) of the Act. It may not be quite accurate to call it a refund if the costs are taxed and the Commissioner is directed to pay the institution fee to the successful assessee. The Commissioner never got the amount deposited with the Tribunal, and therefore no question of refund as such by the Commissioner could arise. If, however, it is the Tribunal that is directed to pay that amount to the assessee, it would be a case of refund. The real question is, whether the assessee who has succeeded in the reference can get....