Kerala High Court
Association Of Planters Of Kerala vs Commissioner Of Income-Tax on 6 February, 1990
Equivalent citations: [1991]188ITR192(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT Varghese Kalliath, J.
1. The Income-tax Appellate Tribunal, Cochin Bench, has referred the following common question to this court under Section 256(2) of the Income-tax Act, 1961, as directed by this court in O.P. Nos. 3256 and 3257 of 1981 F :
"On the facts arid in the circumstances of the case, was the Tribunal right in its decision that subscriptions received by the assessee from its members was income liable to be taxed under the Income-tax Act, 1961 ?"
2. The question was referred at the instance of the assessee. These cases relate to the assessment years 1972-73 and 1973-74,
3. The assessee is a trade association of planters. This association is registered as a company under Section 25 of the Companies Act, 1956. For the assessment years 1972-73 and 1973-74, the assessee had received Rs. 2,48,372 and Rs. 2,49,589, respectively, by way of subscriptions from its members and Rs. 13,034 and Rs. 14,010, respectively, by way of interest on deposits with banks. The assessee spent in furtherance of the objects of the association, a total amount of Rs. 2,56,019 for the year 1972-73 and Rs. 2,56,529 for the year 1973-74, thus leaving an excess income of Rs. 5,387 and Rs. 7,070 over the expenditure, respectively, for the two assessment years,
4. The assessee contended that the subscriptions received by it from its members were not income. The Income-tax Officer, however, while accepting that the subscriptions received by the assessee from its members are not income, treated the entire accumulation of Rs. 5,387 and Rs. 7,070 as relating to the assessee's interest income and brought the said amount to tax since the assessee had not followed the procedure prescribed in Section 11 for claiming exemption in respect of the accumulation.
5. The assessee filed appeals before the Appellate Assistant Commissioner. The appeals were dismissed upholding the assessments made by the Income-tax Officer. In second appeal before the Income-tax Appellate Tribunal (for short "the Tribunal"), the Tribunal held that there was no material to show that the entire accumulation was from the assessee's interest income and, accordingly, directed that such accumulation should be allocated proportionately as between subscription and interest, and only the portion of accumulation attributable to the interest income is taxable by its order dated December 7, 1976, in Income-tax Appeals Nos. 359 to 362 (Cochin) of 1975-76 as amended by order dated March 23, 1977, in M. P. No. 18 (Cochin) of 1976-77.
6. The Income-tax Officer reopened the assessments under Section 147(b) read with Section 148 of the Income-tax Act, 1961, on the ground that income in the form of subscriptions received by the assessee from its members had escaped assessment. In the revised assessments, the Income tax Officer brought to tax the entire accumulation of Rs. 5,387 and Rs. 7,070, respectively, for the assessment years 1972-73 and 1973-74. The assessee filed appeals before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the revised assessments were without jurisdiction under Section 147(b) and so bad in law. The Appellate Assistant Commissioner also held that, in the absence of any fresh materials, it was not open to the Income-tax Officer to deviate from the practice followed by the Department for the past many years- of treating the assessee as a mutual concern, the subscription receipts of which were not income.
7. The Department filed appeals before the Tribunal for the assessment years, in question. It was contended that the reopening of the assessments had been validly made and the subscription received by the assessee from its members was liable to be taxed. It was also contended that the assessee was not a mutual association. It was urged that, in the earlier years, the subscription received by the assessee had been excluded from tax, only on account of the finding that the assessee was considered not as a mutual association but such subscription was treated as a voluntary contribution. The assessee contended that the reopening of the assessments was not valid on the ground that it had been made only because of a change of opinion. It was also contended that the assessee was a mutual association and that, therefore, the subscription received by it was not taxable.
8. The Tribunal considered the validity of the question of reopening and held that the decisions of the Madras and Gujarat High Courts holding that subscription received by the assessee' association from the members was of income nature and hence taxable arid that such information was received by the Income-tax Officer subsequent to the making of the assessments and the information could have led the Income-tax Officer to believe that income had escaped assessment in so far as the subscription received by the assessee from its members was not brought to tax in the original assessment year 1972-73. So far as the assessment years 1973-74 to 1975-76 are concerned, the Tribunal held that the reopening made on the basis of the definition of the expression "income" in Section 2(24) of the Income-tax Act, as amended is valid since the information was such as to lead the Income-tax Officer to entertain a reasonable belief that income had escaped assessment Accordingly, the Tribunal held that the reopening of the assessments was valid.
9. The Tribunal considered the more important question whether the subscription received by the assessee during the relevant assessment years is to be taxed. This question depended upon the fact as to whether the test of mutuality is satisfied in the case of the assessee. The Tribunal found that the assessee herein is not a mutual association. In regard to this question, the Tribunal held that a mutual association is an association of persons who agrees to contribute funds for some common purposes mutually beneficial and receive back the surplus left out of these funds in the same capacity in which they have made the contributions. The crux of the matter is that the capacity as contributors and recipients remains the same. The members contribute not with an idea to trade but with an idea to render mutual help. They receive back the surplus which is left after meeting the expenditure which they have incurred for their common purpose, in the same capacity in which they have contributed. The Tribunal has recorded a finding, after considering the relevant factual position, that it is not possible for the Tribunal to accept the assessee's contention that it is a mutual association and that therefore, the subscription received by it from its members is not taxable. Holding so, the Tribunal held that the subscriptions paid by the members of the association are voluntary contributions and, therefore, are deemed to be income for the purpose of Section 11 and such voluntary contributions are also included in the expression "income" in Section 2(24) of the Income-tax Act. Ultimately, the Tribunal held, that the Income-tax Officer was justified in bringing to tax the subscriptions received by the assessee during the relevant previous years. The order of the Appellate Assistant Commissioner was reversed and that of the Income-tax Officer was restored,
10. The assessee wanted the Tribunal to refer, according to counsel for the assessee, as questions of law (a) whether the finding of the Tribunal that the assessee cannot be treated as a mutual association is legally valid and correct and also (b) whether the Tribunal was right in its decision that the subscriptions received by the assessee from its members as income are liable to be taxed under the. Income-tax Act, 1961. Since the Tribunal refused to refer the questions, the assessee filed Original Petitions Nos. 3257 and 3256 of 1981 before this court. This Court directed the Tribunal to state the case and refer the question now referred in this case.
11. We heard counsel. Counsel for the assessee submitted before us that we should consider the question now referred as one which takes in its compass also the question whether the finding of the Tribunal that the assessee is not a mutual association is correct or not, Further, counsel submitted that there cannot be such a finding in view of the fact that for the earlier years of assessment, with regard to subscriptions received from the members, the assessee was treated as a mutual association and the question, whether the subscription received by the assessee from its members is not taxable has been answered in Income-tax Reference No. 149 of 1980 and Original Petition No. 6627 of 1981, in favour of the assessee. According to counsel, this fact ought to have been taken note of by the Tribunal and the Tribunal has gone wrong in holding that the assessee is not a mutual association.
12. Before us, the only question referred is whether the Tribunal was right in its decision that the subscription received by the assessee from its members is income liable to be taxed under the Income-tax Act, 1961. This question has to be answered on the basis of the findings recorded by the Tribunal. The question whether the finding recorded by the Tribunal on certain facts is with no material or no evidence, is a separate question, and so long as such a question has not been referred for our decision, we have to consider the question now referred on the basis of the finding recorded by the Tribunal. We cannot decide the question on the basis that, the finding of fact by the Tribunal that the assessee is not a mutual association is wrong. Further, it has to be noted that the Tribunal in its order had stated that, for the assessment year 1976-77, the subscription was sought to be taxed by the Income-tax Officer and the Tribunal, by its order dated January 15, 1977, in Income-tax Appeal Ho. 478 of 1976-77, had held that such an attempt should not be made. After observing that the attempt made by the Income-tax Officer to tax, the subscription was bad, the Tribunal held that, at that time, it did not, consider the question whether the subscription received by the assessee from its members was taxable in its hands. Nor did it consider the question whether the assessee was a mutual association or not. It is very specifically stated that the Tribunal has noticed that, in all the earlier years, the assessee had been treated as a mutual association and that enough materials had not been brought on record by the Income-tax Officer for taking a contrary view for those assessment years. Further, it is stated that, the Tribunal did not advert to the fact that the assessee's claim that it was a charitable institution constituted for the advancement of general public utility and, therefore, the income derived by it from the properties held in trust was not liable to be taxed had been accepted by this court. So, the above order of the Tribunal is no bar to the Department raising the contention for the assessments under consideration that the subscription received by the assessee from its members is liable to be taxed. So, it is clear that the Tribunal was aware of the fact that, for the earlier years, the assessee was treated as a mutual association.
13. In the light of these circumstances, it is difficult for us to consider the question whether the assessee is a mutual association or not without a specific question on that point referred to us for our decision. We need not say that the duty to find facts is on the Tribunal. The Income-tax Act has made the Tribunal the final fact-finding forum. It is plain and clear that it is for the Tribunal to find facts and that the court's obligation is to lay down the law applicable to the facts found. This court has no jurisdiction to go behind or to question statement of facts made by the Tribunal in its appellate order or the statement of the case, unless there is no evidence to support them. As we said earlier, there is no question raised on the ground that the finding of fact is based on no evidence, since no question challenging the finding of fact has been raised in these cases. We are of the opinion that the court cannot disturb or go behind any finding of fact given by the Tribunal, even on the ground that there is no evidence to support it, unless it has been specifically referred as a question of law to be decided by this court under Section 256(1) of the Income-tax Act. Counsel for the assessee confined his submissions exclusively to the question that the assessee is a mutual association and the finding of the Tribunal that it is not a mutial association is illegal, since it was made without reference to the earlier findings on the said question by the Tribunal for the earlier assessment years.
14. Counsel for the assessee referred us to the decision in Punjab University v. Vijay Singh Lamba, AIR 1976 SC 1441, and wanted to draw our attention to the following passage (at p. 1446) :
"It is quite true that judicial consistency is not the highest state of legal bliss. Law must grow, it cannot afford to be static and, therefore, judges ought to employ an intelligent technique in the use of precedents. Precedents, as observed by Lord Macmillan, should be 'stepping stones and not halting places'. But Justice Cardozo's caution should not go unheeded that the weekly change in the composition of the court ought not to be accompanied by changes in its rulings."
15. Obviously, counsel has drawn our attention to the above passage to emphasise the fact that in fact when this court directed the Tribunal to refer the question while disposing of the Original Petitions (O. P. Nos. 3257 and 3256 of 1981), this court really assumed that the assessee is a mutual association and so omitted to make it clear that the Tribunal should refer a question whether the Tribunal's finding that the assessee is not a mutual association is justified or not.
16. In CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589, the Supreme Court has observed that (headnote) "the power of the court to issue a direction to the Tribunal under Section 66(2) of the Income-tax Act is in the nature of a mandamus and it is well settled that no mandamus will be issued unless the applicant had made a distinct demand on the appropriate authorities for the very reliefs which he seeks to enforce by mandamus and that had been refused. Thus, the power of the court to direct a reference under Section 66(2) is subject to two limitations--the question must be one which the Tribunal was bound to refer under Section 66(1) and the applicant must have required the Tribunal to refer it. The form prescribed under rule 22A of the Income-tax Rules for an application under Section 66(1) shows that the applicant must set out the questions which he desires the Tribunal to refer and that, further, those questions must arise out of the order of the Tribunal. It is, therefore, clear that, under Section 66(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 Section 66(1)."
17. It is difficult for us to hold that the question now referred to us will elicit a question "whether the finding of the Tribunal that the assessee is not a mutual association is correct or not ?" In Karnani Properties Ltd. v. CIT [1971] 82 ITR 547, the Supreme Court has very plainly stated thus (headnote) :
"When the question referred to the High Court speaks of 'on the facts and in the circumstances of the case', it means on the facts and circumstances found by the Tribunal and not facts and circumstances that may be found by the High Court on a reappraisal of the evidence. In the absence of a question whether the findings were vitiated for any reason being before the High Court, the High Court has no jurisdiction to go behind or question the statement of facts made by the Tribunal."
18. This court in Haji A. Abdul Khader Sahib v. CIT [1973] Tax LR 1410, held thus (at p. 1411);
"It is now very well settled by a long line of decisions of the Supreme Court that the expression facts and circumstances that normally precede or preface any question that is referred to this court must take in not facts and circumstances found by this court but facts and circumstances found by the Tribunal in its order. It is equally well-settled that if there is no specific challenge of any finding of fact by the Tribunal by an appropriate question being raised and referred to this court, this court is precluded from considering whether that finding entered by the Tribunal should stand or not."
19. As we said earlier, here, there is no appropriate question challenging the crucial finding of fact made by the Tribunal. Without a proper and valid challenge by raising an appropriate question that the finding of fact by the Tribunal that the assessee is not a mutual association is incorrect, the question referred for our decision has to be answered in the affirmative to the effect that the subscription received by the assesses from its members is income liable to be taxed under the Income-tax Act, 1961, and against the assessee. We do so. The income-tax references are disposed of as above.
20. A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.