COMMISSIONER OF INCOME-TAX, WEST BENGAL CALCUTTA versus CALCUTTA DISCOUNT CO., LTD.

Citation: [1973] 3 S.C.R. 952 · Decided: 10-04-1973 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

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COMMISSIONER OF INCOM&TAX, WEST BENGAL 
CALCUTTA 
v. 
CALCUITA DISCOUNT CO., LTD. 
April 10, 1973 
[K. S. HEGDE AND H. R. KHANNA, JJ.] 
lncome-tax-Riglzt of assessee to avoid tax. 
,4 ppel/ate Tribunal-Disposal of appeal on 'teclmica/ities-Duty tu con-
shirr substance of the matter. 
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The assessee company floated a subsidiary co.mpany during the ~ele-
\'ant previous year and transferred to that su}J~tdtary company vanou5 
l>harc! held by it at a certain rate. The authonttes under the lncome-tlx 
Act. 1922. held that the assessee and its subsidiary were two different 
kg01J entities that the transact:on was a bona fide transacttnn and that 
the assessee had not maJe any secret profits out of that transaction. The 
locomc-tax Officer, however, valued the shares transferred at the market 
riltc and held that the assessee company must he deemed to have made 
a profit. In appeal, the Appellate Assista~t Commissioner . set 
a.1ide 
thr order of the Income-tax Officer and rcrrutted the case to h1m for find-
in~ out whether the assessee bad really mad.: any profits from the tran-
,action.. 'The Tribunal dism~ed the appeal of the lncome-[a:t Offktr 
«l:!ain5t that order, summarily, on the ground that the Income-ta.-c Officer 
hotd not taken the necessary pleas that the dl!cision 
of the 
Appdlate 
A"i.~tant Commis~ioncr was incorrect in law. 
On reference. the High 
C..ourt held that the order of the Tribunal was an interlocutory on~ and 
that an application to male a reference to the High Court did not lie. 
Di.~missing the appeal to this Court. 
HELD: ( l) The Tribunal, instead of dealin~ with the substance or 
the matter had been unduly influenced by procedural technicalith:s. The 
conclu~ion of the Tribunal that the appeal memorandum was not in 
o.ccordance with law was al~o not correct a.'! 
no specific formula 
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r.eccsary for seeking relief at the hand of any court or tribunal if the 
necc~'ilry grounds are t-ahn. 
[.9550-E] 
(2) Dut the view of the Appellate Assistant Commissioner was cor-
red .r.n.d there was no necessity to decide whether the Tribunal errcJ. in 
d•~mJ!I.\Jng the appeal summarily. (958F-G} 
. lt is. a well ac~~~ pri~ciple o! law that an ll!i~~:ssee can sv arraol!,e 
lu' nff:urs u~ t_o mlnt_m1s_e ht~ taJt burden. 
Hc:nce, if the ass~ss~c to th1s 
4:4.-'C_:m<lngcd t_ts. Wfa1rs tn such a manner ll!i t&.l reduce it! tax liability by 
~t.;tl1mg a subsJJ,ary comp;my anJ transferring its shares to that subsidi-
".Lry coa1pa~y a.nll thU5. ~orgo1ng part of its own protl~ and at thll same 
lime tn_a~hn~; JU su})\h.Jiary to earn some profits, such a cour~c is not 
trnpermt~.aJblc under lilw. 
I957E-F] 
Commi5:.lont>r ul /ncom~ Tax, Gujarat,· v. A. Raman and Co. 67 J.T.R. 
II followed. 
, 
Sri Ri.Jmalinga ChooJumbikai Mill:J Ltd. v, Commisslonu of Jncomt· 
.u.t. J.fadral. 28 1.1 .R. 95:!. approved. 
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Sharkey (/nsprctor of Taxn) v. Wunl;~r 1956 Appeal Cases 58 and· II 
/}r~Var·s 1'~a Cu. Lrd. v.- <;:om.misslonrr of Agricullura/ Jncor; 1.:-!~~. IV1'.1·t 
tfirnNI, «. l.T . .R. G. dtst•n~Uishcd and uplainc:J. 
952 
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C.I.T, v. CALCUTTA DISCOUNT C:O. (Hegde, ],) 
953 
CIVIL APPllLLATE JURISDICTION : C.A.No. 495 of 1970. 
Appeal by certificate from the judgment and order dated 
July 2S, 1969 of the Calcutta High Court in Income.Tax Refe· 
renee No. 61 of 1966. 
S. C. Manchanda, S. P. Nayar and R. N. Sachthey, for the 
appellant. 
Sachin Chaudhuri, M. C. Chagla, T. A. Ramachandran'and 
D. N. Gupta, for the respondent. 
The Judgment of the Court was delivered by 
HEGDE, J.-This is an appeal by certificate. 
It arises from 
the decision of the Calcutta High Court in a reference under 
S. 66(1) of the Indian Income-tax Act, 1922 (to be hereafter 
referred to. as the 'Act'). Three questions of law were referred 
to the High Court for ascertaining its opinion. Those que.-stions 
are .--
0) Whether in view of the fact that the Tribunal's 
order dated 22nd July 1964 was an interlocutory order 
the Tribunal was competent to entertain an applicatioll 
purported to be under Section 66(1) of the Indian 
Income Tax Act, 1922, in respect of such order ? 
(2) If the answer to question No. 1 above be in th~ 
affirmative, whether on the facts and in the 
circum .. 
stances of the case the Tribunal exercised its discretion 
judicially in not allowing the applicant's petition for 
raising the additional grounds ? 
( 3) ,Whether on the facts a

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