1. The Commissioner has made this reference application under Section 256(1) of the Income-tax Act, 1961 ('the Act') and thereby requested the Tribunal to draw up a statement of the case and to refer the following question, said to be question of law arising out of the order of the Tribunal, dated 30-6-1983, in IT Appeal No. 105 (Mad.) of 1983, for the opinion of the Hon'ble High Court : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that only the net dividend received from foreign companies and not the gross dividend should be taken as the taxable income 2. The relevant facts in brief are that the assessee is a resident and ordinarily resident. He filed a return on 21-6-1980 admitting a foreign income of Rs. 83,736, which represented gross dividends received at UK, How-ever, vide his letter, dated 24-2-1982, the assessee contended that only the net income after deduction of tax deducted at source should be taxed and not the gross income. The ITO rejected the assessee's plea and thereby taxed the gross amount of dividend income received in U.K.On appeal, the AAC reversed the order of the ITO and directed him to tax only the net dividend. The Tribunal dismissed the appeal filed by the department and thereby agreed with the AAC that only the net dividend and not the gross dividend received by the assessee from foreign companies could be taxed in India. The Tribunal placed reliance on its earlier order in this very case, wherein a similar decision was rendered.
3. At the time of hearing, it is contended by the learned counsel for the assessee that the reference application is to be dismissed in view of the fact that the Tribunal in deciding the issue involved in the appeal followed its own order dated 22-1-1081 in the assessee's own case for the assessment years 1975-76 and 1978-79 and the Tribunal decided the issue in favour of the assessee and the reference is to be allowed if the same has been allowed in the case followed by the Tribunal in deciding the appeal. The Tribunal has not allowed reference in the assessment year 1975-76. However, on the other hand, Shri M.Narayanan, the learned departmental representative, contends that the decision of the Tribunal has not been accepted by the department and, therefore, the decision of the Tribunal for the assessment year 1975-76 has not become final ; hence, the reference application is to be allowed. On hearing the parties and going through the record, we directed the departmental representative to file the copy of the order of the Tribunal in the reference applications for the assessment year 1975-76 and the departmental representative has failed to do so up to 31-1-1984. Therefore, we hold that the contention of the learned counsel for the assessee is substantiated and as such we accept it. The reason is that the reference is to be allowed if it is proved that the application in the case, which is followed by the Tribunal in deciding the assessee's appeal in passing the impugned order, has been allowed, otherwise not. The departmental representatives are not at all filing copies of order relied upon by them to substantiate their contentions even if time is given to do so, rather they take it lightly and go on criticising the Commissioner stating therein that their demands are not met by him. It is for the Commissioner to look into it as the Tribunal is to allow or accept a contention if the same is substantiated, otherwise to reject it.
Accordingly, we hold that the reference application of the revenue is liable to be rejected.
5. I regret with great respect that J am unable to agree with my learned brother, the Judicial Member's order. In my view, a clear question of law, as proposed by the Commissioner, arises. In this case the Tribunal had allowed the assessee's appeal, following the earlier order of the Tribunal in the assessee's own case for the assessment years 1975-76 and 1978-79 [C-Bench's order, dated 11-11-1982, in IT Appeal Nos. 390 and 391 (Mad.) of 1982] confirming the Commissioner (Appeals)'s order, dated 22-12-1981, in his IT Appeal Nos. 118 and 617 of 1981-82 based on the Kerala High Court decision in CIT v. Y.N.S.Hobbs [1979] 116 ITR 20. In the Commissioner's statement of the case enclosed to the present reference application, it is stated that the department's reference application on the earlier order of the Tribunal is pending. It is also seen that in fact the Tribunal has referred a question of law under Section 256(1) in the statement of the case, dated 14-7-1983, in R.A. Nos. 97 and 98 (Mad.) of 1983 arising from IT Appeal Nos. 390 and 391 (Mad.) of 1982, cited supra. Having regard to the foregoing, I am of the view that the question proposed by the Commissioner should be referred to the High Court. Order under Section 255(4) of the income-tax act, 1961. Whereas we are unable to agree on the point set out below for the assessment year 1979-80, we refer the following point of difference of opinion to the President for reference to Third Member, under Section 255(4) of the Act : Whether, on the facts and in the circumstances of the case, the question of law proposed by the Commissioner of Income-tax does arise out of the order of the Tribunal and should be referred to the Madras High Court 1. There being difference of opinion between the learned Judicial Member and the learned Accountant Member, the following question has been referred to me for decision, as Third Member : Whether, on the facts and in the circumstances of the case, the question of law proposed by the Commissioner of Income-tax does arise out of the order of the Tribunal and should be referred to the Madras High Court 2. In the course of assessment proceedings for the assessment year 1979-80, the assessee submitted before the ITO that only the net dividend income, after deduction of tax at source and not the gross dividend income derived by him from a foreign company, should be taxed in India. The ITO rejected the claim of the assessee. However, the AAC accepted the same. On an appeal by the department, the Tribunal, following its order in the case of the assessee for the assessment years 1975-76 and 1978-79, confirmed the order of the AAC.3. Thereafter, the Commissioner, by R.A. No. 1271 (Mad.) of 1983, required the Tribunal to refer the following question of law to the High Court of Judicature at Madras, under Section 256(1) : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that only the net dividend received from foreign companies and not the gross dividend should be taken as the taxable income The contention of the department was that since the matter had already been referred to the High Court for the assessment years 1975-76 and 1978-79, in R.A. Nos. 97 and 98 (Mad.) of 1983, the present case should also be referred to the High Court. On this request, the learned Judicial Member observed as under : On hearing the parties and going through the record, we directed the departmental representative to file the copy of the order of the Tribunal in the reference applications for the assessment year 1975-76 and the departmental representative has failed to do so up to 31-1-1984. Therefore, we hold that the contention of the learned counsel for the assessee is substantiated and as such we accept it.
The reason is that the reference is to be allowed if it is proved that the application in the case, which is followed by the Tribunal in deciding the assessee's appeal in passing the impugned order, has been allowed, otherwise not. The departmental representatives are not at all filing copies of the orders relied upon by them to substantiate their contentions even if time is given to do so, rather they take it lightly and go on criticising the Commissioner of Income-tax stating therein that their demands are not met by him.
It is for the Commissioner to look into it as the Tribunal is to allow or accept a contention if the same is substantiated, otherwise to reject it. Accordingly, we hold that the reference application of the revenue is liable to be rejected.
The learned Judicial Member, accordingly, proposed that the reference application should be dismissed. The learned Accountant Member did not agree with him. He observed that since the Tribunal had, in fact, referred the matter to the High Court in R.A. Nos. 97 and 98 (Mad.) of 1983 [arising out of IT Appeal Nos. 390 and 391 (Mad.) of 1982], the question of law, as proposed by the department in the present case, should also be referred to the High Court.
4. With this background, the aforesaid point of difference has been referred to me for decision.
5. Before me, it is conceded by the learned representative of the assessee that a reference has, in fact, been made in R.A. Nos. 97 and 98 (Mad.) of 1983 in the case of the assessee for the assessment years 1975-76 and 1978-79, on which the Tribunal has placed reliance in deciding the case for the assessment year under consideration. It is further conceded by him that on the basis of the order of the Tribunal in R.A. Nos. 97 and 98 (Mad.) of 1983, the question of law, as proposed by the department in the present case, has to be referred to the High Court. I am, therefore, of the opinion that when the very point at issue has been referred to the High Court in the case of the assessee for the assessment years 1975-76 and 1978-79, it is necessary, for the sake of consistency, that the present case should also be referred to the High Court. I, therefore, agree with the learned Accountant Member.
6. The learned representative of the department states that the observations made by the learned Judicial Member, reproduced in para 3 above, are factually incorrect and so the same should be expunged. The learned representative of the assessee has no objection to the same.
However, I feel that I would be exceeding my jurisdiction as a Third Member if I were to exclude the aforesaid remarks of the learned Judicial Member from this order, even though they may be incorrect. I, therefore, decline to accept the prayer of the learned departmental representative, in this behalf.
7. The case will now go to the Bench for disposing of the reference application.