LexLAKSHMIRATTAN COTTON MILLS versus COMMISSIONER OF INCOME-TAX, U.P.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
• A LAKSHMIRATIAN COTION MILIS v. COMMISSIONER OF INCOME-TAX, U.P. September 3, 1968 B (J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] c D E F G H Income-tax Act (11 of 1922), ss. !0(2)(xv), 66(1), (2) and (4)- T ermination of managinJ? agency-No evidence of services don~ by managing agent-Payment of compensation fvr termination-If permis- sible deduction under s. 10(2) (xv). Questions not raised in application under s. 6Gf 1) and (2)-:-lurisdic- tion of High Court to direct Tribunal to state case on such question under s. 66(4). The shares in the a·ssessee-company were held in equal moieties by nvo families. Four members of each family, together, formed a partnership firm and by a managing agency agreement the ao;~ss<e appointed the fir!" as· its managing agent. In 1943, one of the fatnll!es was represented m tb.e firm by two women and two minors. The management o~ the asses.see was carried on by two df the four members of the other farruly who were the partners in the fi'rm. Those two members were also directors of the assessee-company. Disputes arose between the two families and the assessee terminated the managing agency with effect from September 30, 1944. Thereupon the members of the two families asserting that they, as partners of the firm we're interested in the mdD.agiug agency, claimed compensation from the assessee for wrongful ts1niuation of the agency. The dispute between the firm and the assessee was referred to arbitration, and in pursuance of the award the assessee paid Rs. 18,90,000 to the firm and Rs. 13,300 were disbW:sed as expenses of arbitration. The assessee claimed the payment of Rs. 19,03,300 as a permissible allowance under s. 10(2) (xv) of the Income-ta>. Act, 1922, but the Income-tax Offioer, Appellate Assistant Comm '.ssioner and the Appellate Tribunal disallowed the claim. The assessee thcu filed an application under s. 66(1) for stating a case for the opinion ot tile High Court, but the Tribunal rejected the apolication. The assessee then moved the High Court under s. 66(2) for directing the Tribunal to state a case in respect of two questions. On the direction of the High Court, the Tribunal referred to the High Court the question : Whether there was material on which the Tribunal could haye come to the conclusion that Rs. 19,03,300 were not spent by the assessee wholly and exclusively for the purpose of its business. The assessee, thereafter, filed another appli· cation before the High Court for referring additional questions which were not incorporatqj. in ~he applications under s. 66(1) or (2); and the High Court, in purported exercise of the power under s. 66( 4) directed the Tribunal to submit another statement with respect to the additional questions and the Tribunal complied with the order. At the hearing of the reference, the High Court was of the view that it had no jurisdiction under s. 66( 4) to direct the Tribunal to submit the second st-atement and declined to record format answers on the additional questions. On the original question, the Hip;h Court held that there was material on which the Tribunal could hold that the allowance claimed \ras not spent wholly and exclusively for the purpose of the asS>essee's businesil and confirmed the Tribunal's order. .. • • .. • • 952 SUPREME COURT REPORTS (1969] J S.C.R . , In appeal ~o this. C"-?ui: •. on !he qu_estions : \I) \V'hcthcr th!! High C~oun acted vtnhout 1un'id1cllon, 1n calling for 1he second statement of '?s7; .and (2) ~hether there was material before the Ttihunal h· justify 11 1n 1ls conclu\1on. A HELD : (I) In an application under s. 66(2). the High C.ourl cannot cft<lcr rhat a case he stated on auestion<; which \\.·ere not inclu<.!i.!<l ia the application under s. 66(1). Po"·er under s. 66(-1l. n1;1y he cxcr~ised lo call for a supplementary statement only when the t:ourt is :,Jlisl~-:d that B the !itatcmcnt in 1he cac;e referred under s. 66( 1) or (2) is not '.:1.,;ffic:cnt to enable it to determine the question raised by that stalcmrnr. The power cannot he exercised for calling for anoth\.T ~1:1:..:1n~nt on "-!Uestion~ not referred hy lh·;! ·rribunal. Therefore, the t1(ocedurc rollov;c~ by the l·ligh Court. in exercise of the power under s. 66( 4), ~3iiin2 for ::n addi- tional statement of case on questions which \Vere not 111cor?orat-:d in the applications umkr s. 66(1) and (2) was irregular. (963 G-H; 964
Excerpt shown. Read the full judgment & AI analysis in Lexace.