Commissioner of Income-tax Vs. H.H. Maharani Sethu Parvathi Bayi (by Legal Heir H.H. Lekshmy Bayi) - Court Judgment

Excerpt:
- k.s. paripoornan, j.1. the revenue is the petitioner herein. the petition is filed under section 256(2) of the income-tax act, 1961. the respondent is an assessee on the files of the income-tax officer, 'd' ward, trivandrum, we are concerned with the assessment year 1976-77 for which the accounting period ended on march 31, 1976. in this petition, the revenue prays for a direction to direct the income-tax appellate tribunal (in short, ' the tribunal') to refer to this court the following three questions of law, specified in paragraph 8 of the original petition:' 1, whether, on the facts and in the circumstances of the case, the tribunal is right in holding that there is a mistake apparent from the record and in rectifying its order? 2. whether, on the facts and in the circumstances of the case, does the case of the supreme court in : [1985]156itr509(sc) have direct application to the case ? 3. whether, on the facts and in the circumstances of the case, should not the tribunal have pierced the veil and considered whether the transaction was a ruse or a device to evade tax?' we heard counsel for the revenue, mr. p. k. r. menon. the case was heard yesterday and remained part heard. counsel for the respondent-assessee was not present. so we adjourned the case to today. even today, counsel for the assessee is not present. so we proceeded to decide the case on the basis of the materials available and after hearing counsel for the petitioner. the respondent-assessee transferred 4,000 shares in nirlon synthetic fibre and, chemicals ltd., by way of share capital, to a firm, messrs. padma gowri, in which the assessee became a partner. the income-tax officer took the view that capital gains arose out of this transaction. he brought to tax the capital gains arising out of the transaction by taking the value of the shares at rs. 544 per share. it is so seen from annexure a order passed by the income-tax officer. in appeal, the commissioner of income-tax (appeals) deleted the said income. in further appeal by the revenue, the tribunal, by order dated february 18, 1984 (annexure c), held that capital gains arose on the transfer of shares by the assessee to the firm, messrs. padma gowri. thereafter, the respondent-assessee filed m. p. no. 25/(coch.) of 1986 and prayed for rectification of the order passed by the tribunal, stating that the order of the tribunal suffers from a mistake apparent on the record and militates against, or is contrary to, the decision of the supreme court in kartikeya v. sarabhai v. cit : [1985]156itr509(sc) . the tribunal considered the matter in detail and, by an order dated may 6, 1987 (annexure d), held that there is a mistake in the order passed by the tribunal and concluded that no capital gains arose out of the transfer of shares by the assessee to messrs. padma gowri. it is thereafter that the revenue filed an application under section 256(1) of the income-tax act, 1961, praying to the tribunal to refer three questions of law formulated by it for the decision of this court. the petition so filed is annexure e. the tribunal, by a considered order (annexure f) dated september 9, 1989, held that no question of law arose out of the order of the tribunal. it is thereafter that the revenue has filed this petition under section 256(2) of the income tax act, 1961, praying that this court may be pleased to direct the tribunal to refer the three questions of law formulated in paragraph 8 of the original petition for the decision of this court.2. on a perusal of the relevant papers and on hearing counsel, we have no doubt that the questions of law formulated in paragraph 8 of the original petition do arise out of the order passed by the tribunal, dated may 6, 1987, in m. p. no. 25/(coch.) of 1986. the entire controversy centred round the question as to whether the decision of the supreme court in kartikeya v. sarabhai's case : [1985]156itr509(sc) , is applicable to the instantcase. even so, the further question as to how the said decision should be applied on the facts of this case necessarily arises for consideration. it is still relevant. at this stage, in considering whether a question of law arises out of the order of the tribunal, the only consideration is whether the question of law formulated can be sustained on a reasonable view of the matter. we are of the view that the question whether the ratio of the decision of the supreme court in kartikeya v. sarabhai's case : [1985]156itr509(sc) , applies to the instant case looms large on the findings entered by the tribunal, even so, the extent to which the said decision is applicable and how it should be tailored to the facts of this case require further examination. needless to say, the above aspects are pure questions of law and we, therefore, direct the income-tax appellate tribunal to refer the three questions of law, formulated in paragraph 8 of the original petition, for the decision of this court, along with the usual statement of the case and the annexures. the tribunal shall do so within three months from the date of receipt of a copy of this judgment.3. the original petition is allowed.4. the registrar shall send a copy of this judgment to the income-tax appellate tribunal, cochin bench, for compliance.