COMMISSIONER OF INCOME-TAX VS J N SARMA, 2000 PTD-GAUHATI-HIGH-COURT-INDIA 1972 (1997)

(a) Income-tax---

----Capital or revenue expenditure---Tea estate---Expenditure on replanting-- Finding by Tribunal that there was no evidence that replanting was done on virgin area---Expenditure was deductible---Indian Income Tax Act, 1961-- Indian Income-tax Rules, 1962, R.8(2).

(b) Income-tax---

----Reference---Finality of findings of fact---Powers of High Court---Power to reframe question---Power cannot be exercised for reopening question of fact or law closed by order of Tribunal---Indian Income Tax Act, 1961, S.256.

The Appellate Tribunal is the final fact-finding authority under the Income-tax Act and the Court has no jurisdiction to go behind the statements of facts made by the Tribunal in its appellate order. The Court may do so only if there is no evidence to support the findings or the Appellate Tribunal has misdirected itself in law in arriving at the findings of fact. But even there, the Court cannot disturb the findings of fact given by the Appellate Tribunal unless a challenge is directed specifically by a question framed in a reference against the validity of the impugned findings of fact on the ground that there is no evidence to support them or that they are the result of a misdirection in law.

It is open to the High Court to reframe a question. But this power to reframe a question can be exercised to clarify some obscurity in the question referred, or to pinpoint the real issue between the taxpayer and the Department or for similar other reasons; it cannot be exercised for reopening an enquiry on questions of fact or law which is closed by the order of the Tribunal.

Held, that, in the instant case, the Tribunal had found that there was no evidence that the replanting was done in a virgin area. This finding had not been challenged as being perverse and was final. The Tribunal was justified in allowing deduction of the expenditure incurred in replanting in the tea estate.

CIT v. Anusuya Devi (Sint.) (1968) 68 ITR 750 (SC); CIT v. Basanta Kumar Agarwalla (1983) 140 ITR 418 (Gauhati); CIT v. Mahavir Plantations Ltd. (1995) 213 ITR 485 (Ker.); Kilasho Devi Burman. (Smt.) v: CIT (1996) 219 ITR 214 (SC) and Patnaik & Co. Ltd. v. CIT (1986) 161 ITR 365 (SC) ref.

U. Bhuyan for the Commissioner.

R.P. Agarwalla and D.K. Misra for the Assessee.

JUDGMENT

V.D. GYANI, J.---It was in compliance with the direction of this Court under section 256(2) of the Income Tax Act, 1961, as made in Civil Rule No.25(M) of 1993, that the following questions based on statements of facts were drawn by the Department:

"Whether, in view of the wording of Rule 8(2) of the Income-tax Rules, 1962, the Tribunal was right in coming to the finding that the claim of the assessee was rightly allowed by the Commissioner of Income-tax (Appeals) on the facts of the case?"

Learned counsel appearing for the assessee, at the very outset submitted that notwithstanding the fact that this statement of case has been sought by the High Court and the above question referred for its opinion, the Court is not bound to answer the question. Before we deal with this contention, it would be pertinent to note the basic facts. The assessee had three tea gardens. In the assessment year 1985-86, the Assessing Officer held that the expenditure incurred on en bloc replantation was capital expenditure in nature. On appeal being preferred by the assessee, the Commissioner of Income-tax (Appeals) held that replantation expenditure was revenue expenditure and as such allowed the expenditure incurred on replantation. On further appeal by the Revenue, the' Tribunal held that the assessee's claim was correctly allowed by the Commissioner (Appeals) on the facts of the case. It was pointed out that the Assessing Officer had not recorded a finding to the effect that the replanting was done on virgin area of the tea garden and in the absence of necessary finding of facts the contention advanced by the Revenue was accepted. It was in pursuance to this Court's direction that the statement of case has been submitted.

We have heard learned standing counsel for the Revenue, Mr. Bhuyan, and learned counsel, Mr. Agarwalla for the assessee.

It is a cardinal rule that the High Court in reference proceedings does not and cannot be behind the facts found. It cannot look at the evidence that was not before the Tribunal when it reached the impugned findings. The jurisdiction of this Court in a reference under the taxation statute is purely advisory. The posed question of law whether it really arises out of the finding given by the Appellate Tribunal?

Adverting to the order passed by the Tribunal, the following findings are demonstrably clear---

"It is seen that the Assessing Officer himself has noted, amongst other things, that the replanting expenses is regarded as capital expenditure because the replantation is expenses of en bloc area as good as new cultivation.

There is no finding by the Income-tax Officer that the replanting was in virgin area of the tea garden. In the absence of necessary finding the contention of the Revenue cannot be accepted. "

This finding can by no means be said to be unreasonable much less perverse. The Income-tax Officer in his assessment order has concluded that:

"The replanting expenses is regarded as capital expenditure, 'because the replantation is expenses of en bloc area as good as new cultivation. This is added back as capital expenses."

There are no reasons assigned for this conclusion.

The Supreme Court in Patnaik & Co. Ltd. v. CIT (1986) 161 ITR 365, has held that the High Court was wrong in re-appreciating the evidence, the question referred was itself framed on the assumption that it had to be decided on the factual matrix as detected by the Tribunal. The Supreme Court held (headnote):

"It is now well-settled that the Appellate Tribunal is the final fact finding authority under the Income-tax Act and that the Court has no jurisdiction to go behind the statements of facts made by the Tribunal in its appellate order. The Court may do so only if there is no evidence to support the findings or the Appellate Tribunal has misdirected itself in law in arriving at the findings of fact. But even there, the Court cannot disturb the findings of fact given by the Appellate Tribunal unless a challenge is directed specifically by a question framed in a reference against the validity of the impugned findings of fact on the ground that there is no evidence to support them or they are the result of a misdirection in law."

What is a perverse finding? Strictly speaking we do not have to go into the question of perverse finding since no such direct challenge has been posed in the question as formulated.

Perverse. A perverse verdict may probably be defined as one that is not only against the weight of evidence but is altogether against the evidence. (see Stroud's Judicial Dictionary).

Perverse finding-A finding cannot be said to be perverse, if it is against the weight of evidence. It is perverse if it is altogether against evidence.

It was strenuously urged by learned counsel for the Revenue that the question as referred is not in its proper form and it is open to this Court to reframe the question. As a proposition of law, there can be no quarrel with the submission made by learned standing counsel, but this power to reframe a question can be exercised to clarify some obscurity in the question referred, or to pinpoint the real issue between the taxpayer and the Department or for similar other reasons: it cannot be exercised for reopening an enquiry on questions of fact or law which is closed by the order of the Tribunal. (See CIT v. Smt. Anusuya Devi (1968) 68 ITR 750 (SC)). The same judgment also holds that the High Court is not bound to advise the Tribunal on a question which did not arise-out of the order of the Tribunal merely because the High Court called upon the Tribunal to state a case on that question.

In the same vein, a judgment of this Court in CIT v. Basanta Kumar Agarwalla (1983) 140 ITR 418" has held -that (headnote): "The question must be a disputed or disputable question of law. The object of a reference is to get a decision from the High Court on a problematic or debatable question and not on an obvious and simple point of law, although somehow the determination is somewhere linked up with a provision of law. The meaning of the term 'question', in the context, means a subject or point of investigation, examination or debate, a problem, as a delicate or doubtful question. The Tribunal need not refer every 'point of law'. The Tribunal is obliged to refer only a question of law which calls for investigation, examination, debate or when it is a dubious problem. However, if a point of law decided by the Tribunal is positive, certain, definite and sure, there is no obligation on the part of the Tribunal to refer the matter; as the point cannot be termed as a question of law. When a decision is apparently correct and there is no scope for any debate or dispute or difference, it does not fall within the expression 'a question of law"'.

If the expenditure incurred for replacement of tea bushes that have died or become permanently useless in an arp4 the tea garden and if the area has not previously been abandoned, .the gala High Court in CIT v. Mahavir Plantations Ltd. (1995) 213 ITR 485 has held that the expenditure is allowable under Rule 8(2) of the Income-tax Rules, 1962, and the Tribunal was right in allowing deduction of the expenditure on replacement of tea bushes. No question of law arose from the order.

What is the scope and jurisdiction of the High Court to examine the findings of facts contrary to one given by the Tribunal and how far the High Court can interfere under section 256(1) if the findings or conclusion of the Tribunal are perverse. This is what the Supreme Court said in Kilasho Devi Burman (Smt.) v. CIT (1996) 219 ITR 214 (headnote):

"The High Court in a reference under the taxation statutes exercises advisory jurisdiction in regard to questions of law. It is only when it has before it a question that asks whether the Tribunal has, upon the evidence on record before -it, come to a conclusion which is perverse, that it may go into facts, for this is a question of law. A conclusion is perverse only if it is such that no person, duly instructed, could, upon the record before him, have reasonably come to it. "

For the foregoing reasons on the statements of case and the findings of facts as recorded by the Tribunal which can by no stretch of imagination be said to be unreasonable much less perverse, the question as referred does not arise, therefore, no question of our opinion thereon.

Reference answered accordingly.

M.B.A./4066/FC Reference answered.