Rajasthan High Court - Jaipur
Commissioner Of Income Tax vs Oil & Natural Gas Commission. on 11 July, 1996
Equivalent citations: (1996)135CTR(RAJ)233
ORDER
OF TRIBUNAL--Scope.
Ratio :
(i) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.
(ii) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it and, is, therefore, one arising out of its order. (iii) When a question is not raised before the Tribunal, but the Tribunal deals with it, that will also be a question arising out of its order. (iv) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it.
Held :
Any question of law arising out of such order' cannot be construed as meaning any question of law arising out of the findings in the order of the Tribunal, but they properly mean a question of law which must have been raised before the Tribunal and considered by it. A Tribunal cannot legitimately ask for advice on a question which it was called upon to consider, but which it deliberately refused to decide although it had an opportunity of deciding it. When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it and, is, therefore, one arising out of its order. When a question is not raised before the Tribunal, but the Tribunal deals with it, that will also be a question arising out of its order. When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it.
Case Law Analysis :
New Piecegoods Bazar Co. Ltd. v.
CIT (1947) 15 ITR 319 (Bom) relied on. Educational & Civil List Reserve Fund v. CIT AIR 1964 Raj 59 followed.
Application :
Also to current assessment years.
A. Y. :
1983-84 to 1985-86 Income Tax Act 1961 s.256 Reference--MAINTAINABILITY--Reference against cancellation of order under s. 263.
Ratio & Held :
In the facts and circumstances of the case the Tribunal did not commit any error by relying purportedly on only one issue and without giving finding on all the issues on which the order of the assessing officer was based, in cancelling the direction to the assessment being done over again under section 263. Hence, all these applications for reference under section 256(2) are liable to be rejected.
Application :
Also to current assessment years.
A. Y. :
1983-84 to 1985-86 Income Tax Act 1961 s.256 Income Tax Act 1961 s.263 Revision under s. 263--ERRONEOUS AND PREJUDICIAL ORDER--Assessment under s. 44AB.
Ratio :
Order passed under section 263 was not erroneous and prejudicial as profits were correctly computed in terms of section 44B, perquisite value of surtax was not rightly added and grossing up was properly done in the circumstances of the case.
Held :
In terms of section 44BB it is indeed true that a sum equal to 10% of the aggregate of the amounts mentioned in the statutory provision could be deemed to be profits and gains of such business chargeable to tax under the head `Profits and gains of business or profession'. Therefore, section 44BB could not assist the revenue in coming to a conclusion that the assessments were erroneous and prejudicial to the revenue. Had it been a case of failure to make enquiry by the assessing officer, which rendered an order erroneous in terms of section 263, but there was no finding by the Commissioner in the present context that there was failure on the part of the assessing officer to make enquiry. The Notification No. 307(E), dt. 31-3-1983 was also attracted in the case of the present assessee and hence, surtax was not payable by it. Hence, it was not necessary for the assessing officer to take into account the perquisite value of surtax which aspect of the matter was not really probed through by the Commissioner at all. When no surtax was payable by the foreign company there was no error on the part of the Tribunal to have exempted the assessee from the liability to pay surtax. As regards the point of grossing up, the Tribunal has rightly held that the notice under section 263 of the Income Tax Act served on the assessee did not mention this aspect of the matter and the assessee was not called upon to make answer with regard to this question. It was correctly observed by the Tribunal that the income determined by the assessing officer on the basis of the agreement should be taken only on single stage grossing up and there was no question of resorting to multiple stage grossing up.
Application :
Also to current assessment years.
A. Y. :
1983-84 to 1985-86 Income Tax Act 1961 s.263 ORDER M. G. MUKHERJI, ACTG. C. J. :
DB IT Ref. Appln. No. 15/95 under s. 256(2) of the IT Act, 1961 is directed against an order dt. 21st July, 1993 passed by the Tribunal in RA Nos. 15, 16 & 17/Jp/92 arising out of ITA Nos. 420, 421 & 422/Jp/88 for the asst. yr. 1985-86.
2. DB IT Ref. Appln. No. 19/95 is also directed against the self-same order passed by the Tribunal in RA Nos. 15, 16 & 17/Jp/92 arising out of ITA Nos. 420, 421 & 422/Jp/88 for the asst. yr. 1984-85.
3. DB IT Ref. Appln. No. 29/95 is also directed against the self-same order passed by the Tribunal in RA Nos. 15, 16 & 17/Jp/92 arising out of ITA Nos. 420, 421 & 422/Jp/88 for the asst. yr. 1983-84.
4. In all these income-tax reference applications, common questions of fact and law are involved and they have been taken up for hearing analogously.
5. M/s Compagnie Generala-De-Geophysique is a foreign company assessed through its Indian agent, Oil and Natural Gas Commission (ONGC), which is a Corporation owned by the Government of India. M/s Compagnie Generala-De-Geophysique, the non-resident company, entered into a contract with ONGC for carrying out seismic survey for processing of data for ONGC in North-West Himalaya. It deployed its specialised equipment and personnel for carrying out the said work. The ONGC as the agent for M/s Compagnie Generala-De-Geophysique declared income of Rs. 84,740 for the asst. yr. 1985-86 and the assessment was completed under s. 143(3) of the IT Act on income of Rs. 2,94,053 on 18th Nov., 1985, Rs. 3,90,890 for the asst. yr. 1984-85 and the assessment was completed under s. 143(3) of the IT Act on income of Rs. 13,56,400 on 18th Nov., 1985 and Rs. 28,77,530 for the asst. yr. 1983-84 and the assessment was completed under s. 143(3) of the IT Act on income of Rs. 49,42,170 on 9th Dec., 1985.
6. The CIT, Jodhpur, initiated proceedings under s. 263 of the IT Act vide show cause notice issued on 21st March, 1988 for the following reasons :
"(1) While income-tax perquisite value has been added in determining the income of the non-resident company, the surtax leviable on the foreign company which was payable by the ONGC was not added.
(2) For application of net profit rate, the payment received by the foreign company from ONGC on account of other services including supply of spares and materials, and mobilisation and demobilisation charges etc., had been excluded by the Assessing Officer (AO) on the ground that they were non-taxable and without any element of profit."
7. Before the CIT, it was contended by the assessee that s. 44BB overrides the provisions of s. 28, under which the perquisite is required to be included in the profits and gains of the business. Further, it was contended that the surtax is not payable by ONGC as representative-assessee of the non-resident company. However, the CIT held that s. 44BB does not override the entire provisions of s. 28 and, therefore, besides income-tax, the AO ought to have added the value of perquisite on account of surtax borne by the ONGC on behalf of the foreign company. Further, relying on the Supreme Court decisions in Smt. Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) and Smt. Taradevi Agarwal vs. CIT (1973) 88 ITR 323 (SC), the CIT held that the assessment orders were erroneous and prejudicial to the interest of the Revenue and set aside the assessments and directed it to be made afresh. While doing so, the CIT also mentioned that it should also be kept in view that while framing fresh assessments, it was to be found out whether it was a case of single or multiple grossing up, even though this point was not specifically mentioned in the show cause notice.
8. The assessee filed an appeal before the Tribunal against the order of the CIT and the Tribunal vide its order dt. 14th May, 1991 quashed the order of the CIT under s. 263. As regards the perquisite on account of surtax, the Tribunal found that in view of the Notification No. GSR 307(E) dt. 31st March, 1983, the foreign company was not liable to surtax and there was no question of adding any perquisite on that account. As regards the other issue, the Tribunal has observed that the income was computed by taxing 15% of the net receipts of the non-resident company as taxable, although in terms of s. 44BB, a sum equal to 10% of the aggregate of the amounts mentioned in s. 44BB could be deemed to be the profits and gains of such business. Therefore, s. 44BB could not assist the CIT in arriving at a conclusion that the assessments were erroneous and prejudicial to the interest of the Revenue. As regards the issue of single or multiple grossing up, the Tribunal observed that it was not mentioned in the notice under s. 263 nor was it held specifically by the CIT that the assessments were erroneous and prejudicial to the interest of Revenue.
9. The Department filed reference applications under s. 256(1), which were rejected by the Tribunal vide its order dt. 21st July, 1993 and hence, these three applications were filed under s. 256(2) before this Court craving a reference on the following question :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order of the AO was not erroneous relying only on one issue and without giving a finding on all the issues on which the order of the AO was cancelled under s. 263 of the IT Act, 1961 ?"
10. Mr. Shisodia, learned senior advocate, who appeared in the matter with Mr. Sandeep Bhandawat, for the petitioner-CIT, Jodhpur contended before us that the Tribunal has erred in law in setting aside the CITs order without meeting all the reasons given in the said order and that itself amounted to a question of law. Even if it could be said that the perquisite on account of surtax was not to be included but on exclusion of payments on other services and facilities for the purpose of determining the income under s. 44BB, the assessments were clearly erroneous and prejudicial to the interest of Revenue. The Tribunal has simply relied on the fact that the income was taken at 15% as against 10% provided under s. 44BB. The real question involved was not the percentage at which the profit is to be computed, but the receipts on which the profit is to be worked out. It was further submitted before us that the impugned payments related to the following services :
"(a) Data processing done abroad;
(b) Mobilisation and demobilisation of machinery and equipments; and
(c) Supply of machinery and spare parts."
11. It was further contended before us that the Tribunal has erred in law in not appreciating that the foreign company was engaged to make seismic survey and oil exploration. The survey data essentially required processing before a final report was given. The data processing was got done in France and it is a part of survey. Therefore, the payments made for data processing are directly related to the services and facilities referred and, as such, the payments made had to be included for determination of income under s. 44BB. As regards the mobilisation and de-mobilisation charges, the foreign company brought certain machinery and equipments for survey and oil exploration and installed such machinery and equipments at a particular site. When these were not required any further, they were dismantled and installed at another site. The payments made for such mobilisation and demobilisation were also directly relatable to the services and facilities referred under s. 44BB. As regards the supply of machinery and spare parts, the AO had failed to make enquiry so as to enable him to give a finding as to whether such payments were really covered under sub-s. (2) of s. 44BB. The following aspects were not duly adverted to at all :
"(i) As to whether the said equipments and spare parts were used in making survey and oil exploration by the foreign company for which service charges have been paid; and
(ii) Whether the said equipments were required to be supplied by the foreign company for assigned contract work as per terms of the contract."
12. Mr. Shisodia further argued that the Tribunal has erred in law in not recording any finding as to whether non-inclusion of such receipts has really rendered the assessments completed by the AO erroneous and prejudicial to the interest of Revenue. Regard being had to the very many features of the case, which were earlier adverted to, it was contended that the CIT had rightly taken the stand that the assessments were erroneous and prejudicial to the interest of Revenue and, in that context, the Tribunal was not justified in quashing the order of the CIT under s. 263 and, thereafter, in rejecting the Departmental reference applications made under s. 256(1).
13. We have heard Mr. N. P. Gupta, learned advocate appearing for the respondent, who took us through the judgment and order of the Tribunal dt. 14th May, 1991. As regards the question of perquisite value of surtax leviable on M/s Compagnie Generala-De-Geophysique, which was payable by the ONGC, it was submitted by him on behalf of the assessee that the sur-tax was not payable by the ONGC under the Companies (Profits) Surtax Act, 1964 and the amount of surtax wrongly paid was liable to be refunded. It was further pointed out that s. 44BB had no application and that perquisite value of surtax could not be included in the computation of total income. That apart, only 10% of the amount paid/payable on account of the provision of services and facilities in connection with supply of machinery or hire in India could be deemed to be profits and gains of the business and, therefore, there was no scope for further addition on account of the value of tax perquisite. Even though the learned CIT held that s. 44BB did not override the entire provisions of s. 28 and that the perquisite value of surtax should also have been added and in that context, the assessments were found to be erroneous and prejudicial to the interest of Revenue leading ultimately to his taking a decision of setting-aside the assessment orders, Mr. Gupta contended that the learned CIT was not justified in treating the orders passed by the IAC (Assessment) as erroneous and prejudicial to the interest of Revenue particularly in view of the special provisions of s. 44BB. The surtax was not chargeable from the assessee in view of the notification dt. 31st March, 1983 issued by the CBDT which notification had been duly examined by the Tribunal vide para 11 of its order dt. 20th June, 1990 in similar appeals decided by the Delhi Bench of the Tribunal. The direction regarding multiple grossing up did not find any mention whatsoever in the notice under s. 263 and the Delhi Bench of the Tribunal has also negatived the contention regarding its sustainability even on its merits. Mr. Gupta further submitted that even the single stage grossing up done by the assessee voluntarily was not warranted. Regarding the work executed outside India, the facts had been taken note of by the IAC (Assessment) and which had not been made the subject-matter of his application of mind under s. 263 by the learned CIT. In the subsequent assessment years, the AO had himself taken 10% of the receipts as taxable and also pointed out that the assessment orders as framed were prejudicial to the interest of Revenue as the assessments had been framed on larger incomes, which eventually could not be said to be erroneous or prejudicial to the interest of Revenue. We took into consideration the decisions reported in CIT vs. Trustees of Anupamam Charitable Trust (1987) 167 ITR 129 (Raj) and CIT vs. Kashinath & Co. (1988) 170 ITR 28 (All).
14. In terms of s. 44BB it is indeed true that a sum equal to 10% of the aggregate of the amounts mentioned in the statutory provision could be deemed to be profits and gains of such business chargeable to tax under the head Profits and gains of business or profession. Therefore, s. 44BB could not assist the Revenue in coming to a conclusion that the assessments were erroneous and prejudicial to the assessee (sic Revenue). Had it been a case of failure to make enquiry by the AO, which rendered an order erroneous in terms of s. 263, we could have understood, but there was no finding by the CIT in the present context that there was failure on the part of the AO to make enquiry. The failure to make enquiry was mainly centering around the question regarding surtax and the exclusion of the charges for supply of spares and materials and mobilisation and demobilisation. It is indeed a fact that by Notification No. GSR 307(E) dt. 31st March, 1983 issued by the Central Government in exercise of the powers conferred by s. 24AA of the Companies (Profits) Surtax Act, 1964 granted exemption from surtax in respect of foreign companies with whom Central Government had entered into agreements for participation in the business of prospecting or for extraction of mineral oils. We have to come to a specific finding that the said notification was also attracted in the case of the present assessee and hence, surtax was not payable by it. Hence, it was not necessary for the AO to take into account the perquisite value of surtax, which aspect of the matter was not really probed through by the CIT at all. There was no finding that the profits of the assessee exceeded 50% of the capital. Even though the ONGC had itself paid surtax on behalf of the foreign contractors and the notification dt. 31st March, 1983 had not been brought to the notice of the learned CIT, that does not make the assessee liable for surtax, inasmuch as, the CIT is expected to know all such notifications holding the field. When no surtax was payable by the foreign company and merely on account of the fact that the assessee had paid the surtax when the foreign companies were exempted from paying the surtax vide notification dt. 31st March, 1983 issued by the Central Government under s. 24AA of the Companies (Profits) Surtax Act, 1964, without recording any finding that the surtax was actually payable by the assessee, we do not think that there was any error on the part of the Tribunal to have exempted the assessee from the liability to pay surtax.
15. As regards the point of grossing up, the Tribunal has rightly held that the notice under s. 263 of the IT Act served on the assessee did not mention this aspect of the matter and the assessee was not called upon to make an answer with regard to this question. The CIT did not actually give out by way of any firm finding in his order that the assessments were erroneous and prejudicial to the interest of Revenue for grossing up and all he did was that while setting aside the assessments so as to make it redone, he directed the AO to keep in view whether these were cases of single or multiple grossing up. It was correctly observed by the Tribunal that the income determined by the AO on the basis of the agreement should be taken only on single stage grossing up and there was no question of resorting to multiple stage grossing up and the Tribunal has rightly placed reliance on the decision in ONGC vs. IAC (1990) 35 ITD 31 (Del), where a similar agreement had been entered into between ONGC and foreign contractors.
16. Mr. Shisodia drew our attention to the decision in the CIT vs. Indian Woollen Textiles Mills AIR 1964 SC 735 for the proposition that the refusal of the Tribunal to state a case for the opinion of the High Court, on the view that a question of law does not arise out of the order is not conclusive. The High Court has the power to call upon the Tribunal to state the case if in its view a question of law arises out of the order of the Tribunal. Such a question may arise out of the findings of the Tribunal, and also if the Tribunal has misdirected itself in law in arriving at its finding. It is not open to the Court to discard the Tribunals finding of fact, if there is some evidence to support the finding of the Tribunal on a question of fact, even if on a review of the evidence the Court might have arrived at a different conclusion. It must, however, appear that the Tribunal had considered evidence covering all the essential matters before arriving at its conclusion. If the conclusion of the Tribunal is based upon some evidence ignoring other essential matters, it cannot be regarded as a finding not giving rise to a question liable to be referred to the Court. Thus, where the conclusion of the Tribunal suffers from a double infirmity, namely, that it assumes the only fact on which its conclusion is founded and ignores the other relevant matters on which the AAC relied in support of his conclusion, the Tribunal must be held to have misdirected itself in law in arriving at its finding and the High Court can require the Tribunal to state the case to it. Developing this point, Mr. Shisodia argued that the conclusion of the Tribunal was based really on one issue and not on the relevant points upon which the CIT based his finding for directing reassessments and setting aside the assessments already made by the AO.
17. Referring to the decision in CIT vs. Princess Usha Trust (1984) 145 ITR 203 (MP), Mr. Shisodia argued that whether the Tribunal was justified in setting aside the order passed by the CIT under s. 263 and whether the Tribunal was correct in holding that the order of the ITO, though erroneous, was not prejudicial to the interest of the Revenue, were questions of law fit for reference. That was a case where the CIT set aside under s. 263 the assessment and directed the ITO to make a fresh assessment after complying with the provisions of s. 144B, since the CIT was of the view that the order of the ITO was erroneous and prejudicial to the interests of the Revenue. On appeal by the assessee, the Tribunal set aside the order of the CIT on the ground that the ITOs order, though erroneous, was not prejudicial to the interests of the Revenue. On an application by the Revenue under s. 256(2) for directing the Tribunal to refer certain questions of law, it was so held by a Division Bench of the Madhya Pradesh High Court that whether or not the Tribunal was correct in holding that the order of the ITO though erroneous, was not prejudicial to the interests of the Revenue, was question of law fit for reference.
18. It was held in CWT vs. Sri Venkatesa Mills Ltd. (1965) 56 ITR 384 (Mad) at 387 that in an application for reference, the High Court is not concerned with the correctness of the decision of the Tribunal on the merits of the appeal which was disposed of by the Tribunal, but the High Court is only concerned with the correctness or otherwise of the order of the Tribunal in holding that no question of law arises out of its order warranting a reference under s. 256(1) of the IT Act. As was held in the famous decision of the Bombay High Court in Central Talkies Circuit vs. CIT (1939) 7 ITR 628 (Bom) by the Chief Justice Beaumont, that the ultimate decision on a point of law whether for or against the CIT, can have no bearing on the question whether there was a point of law upon which a case should have been stated. This decision has been followed in Dhanrajmal Chatandas vs. CIT (1942) 10 ITR 384 (Sind) and R. B. L. Banarsi Dass & Co. Ltd. vs. ITAT (1959) 35 ITR 624 (Punj), even though in the latter decision, it was held that the Court is not concerned with the merits or ultimate decision or objection, whether it would be in favour of or against the assessee, and that what is crucial to consider is whether there is a point of law upon which a case should have been stated.
19. In Vittaldas Moonji vs. CIT (1958) 33 ITR 222 (Ker), a Division Bench of the Kerala High Court held that the jurisdiction of the High Court under s. 66(2) [now s. 256(2) of the IT Act] only arises when on an application made under sub-s. (1) the Tribunal refuses to state the case on the ground that no question of law arises. It is only when there is such a refusal that the assessee or the CIT may apply to the High Court under s. 66(2) [now s. 256(2)]. If the High Court is not satisfied with the correctness of the decision of the Tribunal then the Court can require the Tribunal to state the case. But, the High Court has no jurisdiction to require the Tribunal to state a case on a question of law which the assessee or Department never asked the Tribunal to refer.
20. In Bansilal on behalf of Shri Ekling Cotton Ginning & Pressing Factory vs. CIT AIR 1957 Raj 326, it was held that the High Court has the authority to require a reference from the Tribunal upon a question of law and in the words of their Lordships of the Privy Council in Alcock Ashdown & Co. vs. Chief Revenue Authority AIR 1923 PC 138 "always supposing that there is a serious point of law to be considered, there lies a duty upon the Chief Revenue Authority to state a case for the opinion of the Court and if he does not appreciate that there is such a serious point, it is in the power of the Court to control him and to order him to state the case" and further that if there is such a point of law "it ought to be decided in a regular manner and upon proper materials". But, it is equally true that a point of law on which a reference ought to be made or may be required to be made, must properly arise out of the order of the Tribunal within the meaning of s. 256(1). It further seems to us that whether a question of law arises on an order of the Tribunal would depend upon the facts and circumstances of a given case, but we are disposed to think that as a rule in order that such a point should arise, it must have been pleaded before the Tribunal and it must have been properly before it, so that the Tribunal should have been in a position to apply its mind to the question sought to be raised. It follows that where a point of law has not been raised before the Tribunal at the proper stage and in a proper manner or it was never taken up at all before any of the IT authorities, so that the necessary materials for founding a conclusion thereon are absent or exist only in an incomplete form such a question cannot be held to arise out of the order of the Tribunal within the meaning of s. 256(1), and to such a question the provisions of s. 256(2) can hardly be made applicable so that the High Court would have no authority or jurisdiction to requisition a reference on a point of law not so raised before the Tribunal and, therefore, not arising out of its order.
21. In New Jehangir Vakil Mills Ltd. vs. CIT (1959) 37 ITR 11 (SC) : AIR 1959 SC 1171, it was held that the scope and subject-matter of the reference under s. 66(2) [now s. 256(2) of the IT Act] is co-extensive with that of the reference under s. 66(1) [now s. 256(1) of the IT Act) and the High Court has no power or jurisdiction under s. 256(2) to travel beyond the ambit of s. 256(1). The statute does not enable the High Court to raise a new question of law which does not arise out of the Tribunals order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it either under s. 256(1) or s. 256(2) and direct the Tribunal to submit a supplementary statement of case. Even though the terms of the statute in s. 258 are wide enough to comprise such additions thereto or alterations therein as the Court may direct in that behalf, the scope of such directions has to be read in the context of and in conjunction with the provisions of ss. 256(1) and (2) and under the guise of a direction under s. 258 if the High Court does not satisfy itself that the statements in a case referred to it are sufficient to enable it to determine the questions raised thereby, the Court may refer the case back to the Tribunal for the purpose of making such additions thereto or alterations therein as it may direct in that behalf, the High Court cannot refer the case back to the Tribunal to find new facts or embark upon a new line of enquiry which would enable either the assessee or the CIT to make out a case which had never been made during the course of the proceedings before the IT authorities or the Tribunal so far. Such additions thereto or alterations therein as the High Court may direct in that behalf are additions of facts to the statement of case or alterations therein which though they were part of the record before the IT authorities or the Tribunal were not incorporated in the statement of case drawn up by the Tribunal either because such facts or statements, though contained in the record, were not found by the Tribunal or were omitted to be incorporated in the statement of case drawn up by it. We cannot fall in error to direct the Tribunal to submit a supplementary statement of case on the points not mentioned in its judgment.
22. In CIT vs. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 (SC) at 611 : AIR 1961 SC 1633 it was held that only in exceptional cases the Court could call upon the Tribunal to state a supplemental case after giving its own decision on the contention. When a question was already raised before the Tribunal, that could be said to arise out of its order and notwithstanding results in a great injustice where the applicant having raised question before the Tribunal, it had failed to deal with it owing to mistake or inadvertence. In such a case, the applicant would be deprived for no fault of his, of a valuable right which the legislature had intended to give him. But then we could construe that when the relief was asked and not granted should be deemed to have been refused and in that view Kania, J. held in New Piecegoods Bazaar Co. Ltd. vs. CIT (1947) 15 ITR 319 (Bom) that in the circumstances stated above, the Court could call upon the Tribunal to state a supplemental case after giving its own decision on the contention. But then we have always to consider whether the question which was raised before the High Court was one which arose out of the order of the Tribunal as interpreted above. When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it and, is, therefore, one arising out of its order. When a question is not raised before the Tribunal, but the Tribunal deals with it, that will also be a question arising out of its order. When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it.
23. In Lakshmiratan Cotton Mills Co. Ltd. vs. CIT (1969) 73 ITR 634 (SC) at 645, the question arose as to whether the High Court acted with jurisdiction in calling for a second statement of case on questions which were not incorporated in the applications under ss. 256(1) and (2) after the Tribunal had submitted a statement of case in response to the order under s. 256(2). It was held that under s. 66(1) [now s. 256(1) of the IT Act], the assessee or the CIT may by application in the prescribed form within the period provided require the Tribunal to refer to the High Court any question of law arising out of such order and the Tribunal is enjoined by law to draw up a statement of case and refer it to the High Court. If on any application made under sub-s. (1), the Tribunal refuses to state a case on the ground that no question of law arises, the assessee or the CIT may, if he is not satisfied with the correctness of the decision of the Tribunal, make an application to the High Court to require the Tribunal to state the case and to refer it to the High Court and on receipt of any such requisition the Tribunal shall state the case and refer it. If the High Court is not satisfied with the statement of case referred under sub-ss. (1) and (2) of s. 256 and the facts are not sufficient to enable determination of the question raised thereby, the Court may in exercise of the power under the then sub-s. (4) (now s. 258) refer the case back to the Tribunal to make such additions thereto or alterations therein as the Court may direct in that behalf. Under sub-s. (5) of s. 66 (now the s. 260), the High Court upon hearing any such case shall decide the question of law raised thereby.
24. The Supreme Court in New Jehangir Vakil Mills Ltd. vs. CIT (supra), observed :
"It is clear...... that the only question of law which the assessee or the CIT can require the Tribunal to refer to the High Court is any question of law arising out of the order of the Tribunal...... What has, therefore, to be looked at in the first instance is whether the question of law thus required to be referred arises out of the order of the Tribunal....... s. 66(2) [now s. 256(2)] which gives the power to the High Court to require the Tribunal to state the case and refer the question of law to it also proceeds on the same basis and even where the High Court exercises the power under s. 66(2) [now s. 256(2)] it can only require the Tribunal to state the case on any question of law arising out of such order. The scope and subject matter of the reference under s. 66(2) [now s. 256(2)]..... is co-extensive with that of the reference under s. 66(1) [now s. 256(1)] of the Act and the High Court has no power or jurisdiction under s. 66(2) [now s. 256(2)] to travel beyond the ambit of s. 66(1) [now s. 256(1)]. Sec. 66(2) [now s. 256(2)] comes into play only when the Tribunal refuses to state the case on the ground that no question of law arises and if the High Court is not satisfied of the correctness of the decision of the Tribunal, it has.... the power and jurisdiction to require the Tribunal to state the case and refer the same to it.... This statement of case which is based..... on the facts which are admitted and/or found by the Tribunal may not contain sufficient material to enable the High Court to determine the question raised thereby and in that case the High Court under s. 66(4) (now s. 258) is vested with the jurisdiction to refer the case back to the Tribunal to make such additions thereto or alterations therein as the Court may direct in that behalf only for the purpose of determining the question referred to it... But s. 66(4) (now s. 258) does not enable the High Court to raise a new question of law which does not arise out of the Tribunals order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it under s. 66(1) [now s. 256(1)] or s. 66(2) [now s. 256(2)] and direct the Tribunal to submit a supplementary statement of case. This power and jurisdiction which is vested in the High Court is to be exercised within the four corners of s. 66 (now ss. 256 to 258).
25. It is also well settled that in an application under s. 66(2) [now s. 256(2)] of the IT Act, the High Court cannot order that a case be stated on questions which were not included in the application submitted under s. 66(1) [now s. 256(1)]. It was observed by the Supreme Court in CIT vs. Scindia Steam Navigation Co. Ltd. (supra) :
".... the power of the Court to direct a reference under s. 66(2) [now s. 256(2)] is subject to two limitations -the question must be one which the Tribunal was bound to refer under s. 66(1) [now s. 256(1)] and the applicant must have required the Tribunal to refer it..... It is, therefore, clear that under s. 66(2) [now s. 256(2)], the Court cannot direct the Tribunal to refer a question unless it is one which arises out of the order of the Tribunal and was specified by the applicant in his application under s. 66(1) [now s. 256(1)]."
26. The High Court was, therefore, incompetent to call upon the Tribunal to submit a statement of case on questions of fact or questions which were not incorporated in the application under s. 66(1) [now s. 256(1)].
27. In Educational & Civil List Reserve Fund No. 1 & Ors. vs. CIT AIR 1964 Raj 59, a Division Bench of our Court held that any question of law arising out of such order cannot be construed as meaning any question of law arising out of the findings in the order of the Tribunal, but they properly mean a question of law which must have been raised before the Tribunal and considered by it. A Tribunal cannot legitimately ask for advice on a question which it was called upon to consider, but which it deliberately refused to decide although it had an opportunity of deciding it.
28. We do not find in the facts and circumstances of the present case that the Tribunal did commit any error by way of relying purportedly on only one issue and without giving finding on all the issues on which the order of the AO was based, cancelled the direction to the assessment being done over again under s. 263 of the IT Act, 1961. Hence, all these applications for reference under s. 256(2) of the IT Act are liable to be rejected and we order accordingly.