INDIA MACHINERY STORES (P) LTD. versus COMMISSIONER OF INCOME-TAX, BIHAR

Citation: [1971] 1 S.C.R. 539 · Decided: 06-05-1970 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

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INDIA MACHINERY STORES (P) LTD. 
V, 
COMMISSIONER OF INCOME-TAX, BIHAR 
May 6, 1970 
539 
[J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] 
income-tax Act, 1922, s. 66A(2)-Certificate of fitness to appeal to 
S11pren1e Court-High Court tn11st 1nention grounds-Certificate justified 
only l-v·hen question of great public or private importance is at issue. 
The appellant was a private limited company incorporated with the 
object of taking over the business carried on by another company. By an 
agreement dated August 2, 1956, the appellant company agreed to pur-
chase all the assets goodwill etc. of the vendors. 
By cl. 4 of the agree-
ment it was provided that all assets of the vendors in respect of their busi· 
ness "shall be taken over at the book value standing in the book• of 
accounts of the vendors" as on August 1, 1956. The Income-tax Officer 
in proceedings 'for the assessment year 1958-59 found that in the books 
of the vendors the 'value of stock' as on August 1, 1956 was Rs. 1,77,285 
but in the books of the appellant company the opening stock taken one 
was valued on the same day at Rs. 2,10,225. 
The latter valuation also 
appeared in the Schedule annexed to the deed of transfer. 
The Income-
tax Officer observed that the valuation by the appellant company of the 
opening stock was in "clear violation of the agreement between the vendors 
and the Company". 
He accordingly added a sum of Rs. 33,000/ • repre-
senting the difference between the value of the closing stock in the books 
of account of the ;endors and the opening stock in the books of account 
of the Company. 
The order 
was confirmed in appeal by the Appellate 
Assistant Commissioner and by the Income-tax 
Appellate Tribunal. In 
reference the High Court of Patna upheld the view taken by these autho-
rities. 
A Division Bench of the High Court certified the 
case under 
s. 66A(2) of the Indian Income-tax Act, 1922, obse·rving that the case 
fulfilled all the requirements of the said section and was a fit case 
for 
appeai to the Supreme Court. The Revenue contended in this Court that 
the certificate was incompetent as the question of law which had to be de· 
cided was not set out and no question of public or private importance had 
;,ecn disclosed. 
HELD : (i) In granting the certificate the High Court merely observ. 
ed that is was 'a fit case for appeal to the Supreme Court' : they did not 
indicate the grounds which persuaded them to hold that it was a fit case 
for appeal to this Court. Ir would be conducive to better administration 
of justice i'f in certifying a case under s. 66A(2) of the Indian Income· 
tax AC'. as a fit case for appeal. the High Court sets out the question of 
law which they regard as of public or private importance which falls to be 
decided by this Court. [543 Gl 
(ii) It is true that under s. 66(]) and (2) of the Indian Income-tax 
Act. 1922 only a question of law mav be referred to the High Court 'for 
opinion, but the right to obtain a certificate under s. 66A(2) arises only 
\vhen in the proposed appeal a question of great puhlic and nrivate im-
portance arises. 
It cannot be held that because a auestion of Jaw alone 
mav he referred to the High Court under s 66 of the Indian Income-tax 
Act. in the proposed appeal a question of iaw of great public or private 
importance necessarily arises. 
An\' other view. would make every opinion 
of the High Court in a refcrccce undor s. 66 appealable to this Court. 
[544 B CJ 
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540 
SUPREME COURT REPORTS 
[1971] l S.C.R. 
The practice followed in some of the High Courts of issuing certificates 
under s. 66,-\(2). wi~hout recording reasons or grounds for certifying rhe 
c.J~c ~cuJd not JUstlfy a departure in the present case from the pr<.\C-
t1ce lu~d dO\\·n many years ago by decision o:C the Judicial Committee of 
the Privy Council according to \vhich a certificate under s. 66A(2) \Vhich 
does !1Cl ~~t out precisely the grounds or raise a question of great public 
or pnvate importance does not comply with the requirements of the A.:t. 
[544 EJ 
Con11nissio11er of lnco1ne-tax. Central Provinces of Berar v. Sir S. Al. 
Chitnavis, J .. R. 59 1.A. 290, follo\h:ed. 
Delhi Cloth and General Mills Co111pany Ltd. v. Inco1ne-tax Con11nis-
sioncr, Delhi, L.R. 54 I.A. 421, Banarsi Pars/tad v. Kashi Krisi111a Narain 
& Anr .. LR. 28 I.A. 11. Radha Krishn Das v. Rai Krishn Challil, LR. 48 
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1.A. 31 and Radhakrishna Ayyar v. s~van1inatha Ayyar, L.R. 48 LA. 31

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