DIRECTOR OF INCOME-TAX (EXEMPTION) VS C.C.M. KOTHARI EDUCATION TRUST, 2000 PTD-MADRAS-HIGH-COURT-INDIA 1009 (1996)

Income-tax---

----Reference---Powers of High Court---Power to reframe question-- Question to be refrained must arise out of order of Tribunal---Tribunal holding that assessee was entitled to exemptions under S.10(22)---Question could not be refrained to determine whether assessee was entitled to exemption under S.11 read with S.13---Indian Income Tax Act, 1961, Ss.10(22). 11 & 256(2).

The powers of the High Court under section 256(2) of the Income Tax Act, 19.61, for directing a reference to be made to the Court, are not confined only to form of the question as raised before the Tribunal. The Court can also direct the Tribunal to refer such other question which was debated before the Tribunal and which arises out of appellate order, provided, of course, it is a question of law. The Court can reframe the question of law so as to bring out the real nature of the controversy. However, if the question framed by the parties does not reflect the real controversy that arises out of the order of the Tribunal, it is not possible to frame or reframe the question:

Held, that, in the instant case, the Tribunal following the decision of this Court in Addl. CIT v. Aditanar Educational Institution (1979) 118 ITR 235, held that the assessee was entitled to exemption under section 10(22). The Tribunal had not decided whether the assessee was entitled to exemption under section 11 read with section 13(1)(d) of Income Tax Act, 1961. The question whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to exemption under section 11 which extended the time limit up to March 31, 1993, for converting the deposits into permissible mode of investment even though the non-specified assets had not been acquired during the previous year, did not arise out of the order of the Tribunal, and could not be referred.

CIT (Addl.) v. Aditanar Educational Institution (1979) 118 ITR 235 (Mad.); CIT v. Modipon Ltd. (No. 2) (1995) 212 ITR 656 (Delhi); CIT v. Shadi Lal Puri (1995) 214 ITR 552 (P & H); CIT v. Union Bank of India (1990) 186 ITR 129 (Bom.) and Shiv Parkash v. CIT (1983) 139 ITR 844 (J&K) ref.

C. V. Rajan for Petitioner.

R. Janakiraman for Respondent. .

JUDGMENT

K. A. THANIKKACHALAM, J.----Inthis tax case petition, the Department requests this Court to direct the Tribunal to refer the following question of law said to arise out of the order of the Tribunal for the opinion of this Court under section 256(2) of the Income Tax Act, 1961:

"Whether, on the facts and in the circumstances of case, the Appellate Tribunal was right in law in holding that the assessee is entitled to exemption under section 11 of the Income-tax Act in view of the amended provisions of section 13(1)(d) of the Act extending the time limit up to March 31, 1993, for converting the deposits into permissible mode of investments even though the no specified assets had not been acquired during the previous year?"

Before the Tribunal the question was whether the assessee is entitled to exemption under section 10(22) of the Income Tax Act, 1961. The Tribunal following the decision of this Court in the case of CIT (Addl.) v. Aditanar Educational Institution (1979) 118 ITR 235, held that the 4ssessee is entitled to exemption under section 10(22) of the Income Tax Act, 1961. Aggrieved by this order, the Department filed a reference application under -section 256(1) of the Act, wherein the Department framed a question which is as under:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee is entitled to exemption under section 11 of the Act extending the time limit up to March 31, 1993 for converting deposits into permissible mode of investment even though the non-specified assets had not been acquired during the previous year?"

While considering the reference application filed by the Department, the Tribunal pointed out that the real question that arose for consideration out oforder of the Tribunal was whether the assessee is entitled to exemption under section 10(22) of the Act. However, the Department pointed out before the Tribunal that the real question that came up for consideration before the Tribunal was 'whether the assessee is entitled to exemption under section 11 of the Act in view of the amended provisions of section 13(1)(d) of the Act. Even instatement of facts drawn by the Department in the reference application, it went on saying that the Tribunal was not correct in granting exemption to the assessee under section 11 of the Income-tax in view of the amended provisions of section 13(1)(d) of the Act.

In the petition filed under section 256(2) of the Income-tax Act before this Court also, a similar question as raised before the Tribunal was raised alongwith a statement of facts stating that the Tribunal was not correct in granting exemption under section 10(22) of the Act. It was also requested in the statement to reframe the question, since the question framed and suggested by the Department does not reflect the true controversy that arises between the assessee and the Department.

Learned standing counsel appearing for the Department submitted that due to inadvertence the question was framed mistakenly and does not reflect the true controversy that arose between the assessee and- the Department. This Court, according to learned standing counsel, has got ample jurisdiction to reframe the question so as to reflect the true controversy that arises between contesting parties. However, learned counsel appearing for the assessee submitted that the question as framed and suggested by the Department does not arise out of the order of the Tribunal and, therefore, the tax case petition is liable to be dismissed in limine. It was further submitted that this Court can reframe any question only within the framework of the question suggested by any one of the parties. If the refraining of the question is not possible within the frame-work of the question suggested by the parties, it would not be possible for this Court to frame altogether a new question.

In Law of Income Tax by Sampath Iyengar, Eighth edition, Volume 5, page 5581, the pre-conditions for a reference are stated in following manner:

"There are three pre-conditions for a reference:

(1) There must be an order under section 254 (of the Appellate Tribunal).

(2) A question of law should arise there from, and

(3) That question of law should have been raised before and decided by the Tribunal. The pre-conditions have been specifically enacted to ensure that High Courts are not flooded with such applications. They should be strictly complied with before the High Court will entertain any question under the section."

When these three ingredients co-exist, a reference to the High Court is permissible.

In CIT v. Modipon Ltd. (No. 2) (1995) 212 ITR 656 (Delhi), while, considering the refraining of the question, the Delhi High Court held that (page 661):

"We cannot also accept the suggestion of counsel for the Revenue that the question may be refrained because, it is beyond the jurisdiction of this Court in these proceedings to alter the basic frame of the question."

''In CIT v. Union Bank of India (199) 186 ITR 129, the Bombay High Court while considering the refraining of the question held that (headnote):

"While the High Court had power to reframe questions to bring out the real controversy between parties, the question to be refrained must be a question which is sought to be raised by the party. The manner in which the Department suggested refraining of the question meant the framing of an altogether new question which could not be raised by the High Court under section 256(2) of the Act. "

In CIT v. Shadi Lal Puri (1995) 214 ITR 552 (P & H), while considering he provisions of section 256 of the Income Tax Act, 1961, the Punjab and Haryana High Court held that (headnote):

"For exercise of the powers under section 256 of the Income Tax Act, 1961, it is required that a question of law should arise fr6m the order passed by the Appellate Tribunal and that such a question of law has not been decided earlier either by the jurisdictional High Court or the apex Court. It is also a condition precedent that such question of law should have been raised before the Tribunal by the party seeking reference to the High Court."

However, learned standing counsel appearing for the Department relied upon a decision of the Jammu and Kashmir High Court in Shiv Parkash v. CIT (1983) 139 ITR 844. In that case it was held that (head-note):

"The powers of the High Court under section 256 of the Income Tax Act, 1961, for directing a reference to be made to the Court are not confined only to the form of the question as raised before the Tribunal. The Court can also direct the Tribunal to refer such other question which was debated before the Tribunal and which arises out of the appellate order, provided, of course, it is a question of law. The Court can even reframe the question of law so as to bring out the real nature of the

controversy. "

In the present case the question that came up for consideration before the Appellate Tribunal was whether the assessee is entitled to exemption under section 10(22) of the Act. The Tribunal held following an earlier decision of this Court in the case of CIT (Addl.) v. Aditanar Educational Institution (1979) 118 ITR 235, that the assessee is entitled to exemption under section 10(22) of the Act. But, while framing the question in the reference application, the Department stated that the Tribunal was not correct in granting exemption under section 11 of the Act as per the amended provisions of section 13(1)(d) of the Act. In fact the Tribunal has not dealt with the question relating to exemption under section 11 read with section 13(1)(d) of the Act. Even in the statement of facts submitted before the Tribunal in the reference application, the Department has stated that the Tribunal decided a question relating to exemption under section 11 read with section 13(1)(d) of the Act. In the course of the hearing of the reference application, the Tribunal pointed out that the real question is with regard to exemption under section 10(22) of the Act.

Even before this Court in the petition filed under section 256(2) of the Act in the question framed it is stated that the real controversy is with regard to the exemption granted by the Tribunal under section 11 read with section 13(1)(d) of the Act. However, in the statement of facts, the Department, after realising the mistake, requested this Court to reframe the question so as to reflect the true controversy that arises between the parties. The Tribunal has not decided whether the assessee is entitled to exemption under section 11 read with section 13(1)(d) of the Income Tax Act, 1961. The Tribunal decided the question whether the assessee is entitled to relief under section 10(22) of the Act. As against the question framed and suggested before this Court, it is not possible to frame altogether a question which is extraneous to the order of the Tribunal. If the question framed by the parties does not reflect the real controversy that arises out of the order of the Tribunal, it is not possible to frame or reframe a question as suggested by the Department, since that would go beyond the jurisdiction of this Court. This was the view expressed by the Supreme Court and various High Courts cited supra.

In view of the foregoing reasons, we are unable to accede to the request made by learned standing counsel appearing for the Department to reframe the question. In the result, the tax case petition is rejected, since the question suggested by the Department does not arise out of the order of the Tribunal.

M.B.A./3342/FCPetition rejected.