COMMISSIONER OF INCOME-TAX, PUNJAB versus INDIAN WOOLLEN TEXTILE MILLS

Citation: [1964] 5 S.C.R. 427 · Decided: 18-11-1963 · Supreme Court of India · Bench: A.K. SARKAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

5 S.C.R. 
SUPREME COURT REPORTS 
427 
COMMISSIONER OF INCOME-TAX, PUNJAB 
v. 
INDIAN WOOLLEN TEXTILE MILLS 
(A.K. SARKAR, M. HIDAYATULLAH AND J.C. SHAH, JJ.) 
Income Tax-Tribunal ignores essential evidence-Refusal 
to state case-Power of High Court-Income-tax Act, 1922(11 of 
1922), ss. !SC & 66(1) (2). 
'Eldee', one of the branches of the respondent had advanced 
a loan to another concern, 'Castle'. The respondent claimed 
under s. I SC of the Income Tax Act, exemption from tax in respect 
of 6 % of the capital employed in 'ElcJee' as a newly established 
undertaking and sought to include in the computation of the 
capital so employed the amount advanced to 'Castle'. The Income-
tax Appellate Tribunal directed inclusion of the amount advanced 
to 'Castle' in the computation of capital invested for the purpose 
of s. !SC .. The Commissioner's application under s. 66(1) of the 
Act to the Tribunal to refer a question which arose out of the order 
of the Tribunal was rejected and his petition under s.66(2) for 
an order directing the Tribunal to state the case and refer it to 
the High Court was also dismissed. 
The question in dispute before the Revenue Authorities was 
whether 'Castle' was a branch of the assessee. The Appellate 
Assistant Commissioner thought that the same eight persons 
were partners in these two undertakings and that the constitution 
of both the undertakings being the same, 'Castle' could not be 
regarded as a separate entity. The Tribunal disagreed with that 
view relying upon only one circumstance that in the assessment 
for the year 19Sl-S2 the income from 'Castle' had not been com-
puted and included in the assessment of the respondent. 
Held : Under the Income-tax Act it is for the Tribunal to 
decide all questions of fact: the High Court has the power merely 
to advise the Tibunal on questions of law arising out of the order 
of the Tribunal. 
In so advising the 
High Court must 
accept the findings of the Tribunal on matters of appreciation 
of evidence. But 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, 
and also if the Tribunal has misdirected itself in law in arriving 
at its findings. It is not open to the court to discard the Tribunal's 
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 difficult conclusion. 
It must however appear that the Tribunal had considered evi-
dence covering all the essential matters before arriving at its con-
1963 
. November 18 
428 
SUPREME COURT REPORTS 
[1964] 
1963 
clusion. If the conclusion of the Tribunal is based upon some 
evidence ignoring other essential matters it cannot be regarded 
Commissioner of as a finding not giving rise to a question liable to be referred to the 
Income-tax, 
Court. 
· 
Punjab 
(ii) The conclusion of the Tribunal suffers from a double 
infirmity: it assumed the only fact on which its conclusion was 
v · 
founded and ignored other relevant matters on which the Appel-
lndian Woollen late Assistant Commissioner relied. The Tribunal had therefore 
Textile Mills misdirected itself in law in arriving at its finding, and in refusing 
to require the Tribunal to state the case and to refer it, the High 
Court was in error. 
Shah J. 
CIVIL APPELLATE JURISDICTION: Civil Appeal 
No. 96 of 1963. 
Appeal by special leave from the judgment 
dated October 13, 1960, of the Punjab High Court 
in Income-tax Case No. 21 of 1958. 
K.N. Rajagopala Sastri and R.N. Sachthey, for the 
appellant. 
A. V. Viswanatha Sastri and N.N. Keshwani, 
for the respondent. 
November 18, 1963. The Judgment of the Court 
was delivered by 
· SHAH J.-M/s Indian Woollen Textiles Mills 
Amritsar-hereinafter 
called 
'the 
assessee' - had 
at different places in India, branches one of which 
was an industrial undertaking conducted in the name 
of Eldee Velvet and Silk Mills---<:alled for the sake 
of brevity 'Eldee'. "Eldee" had advanced Rs. 3,21,460 
to another concern, the Bombay Fine Worsted Manu-
facturers' Castle Mills-hereinafter called 'Castle'. In 
the assessment year 1951-52, the assessee claimed 
under s. 15C of the Indian Income-tax Act,1922, 
exemption from tax in 

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