Commissioner Of Income Tax vs Bharti Devi Sarabhai
- SCC(1998) 8 SCC 631
Ratio decidendi
The rule this decision rests on
Where a decision of a High Court relied upon in answering a referred question has been reversed by the Supreme Court in a subsequent decision, the answer given by the High Court to that question must be reversed, and the matter must be remitted to the High Court to decide any remaining referred questions that were left unanswered as a consequence of its answer to the reversed question.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
1. Two questions of law arising out of the Tribunal's order were referred under Section 256(1) of the Income Tax Act, 1961 to the Gujarat High Court for its decision. These questions are the following:
"(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sum of Rs. 53,122 received by the assessee from various discretionary trusts could not be taxed in the hands of the assessee under Section 166 of the Income Tax Act?
(2) If the answer to Question 1 is against the assessee, whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the said sum of Rs. 53,122 was exempt from tax inasmuch as the said sum was paid out of dividends received by the trusts, which were exempt from tax under Section 80K of the Income Tax Act, 1961?"
2. The High Court answered the first question in the affirmative in favour of the assessee. As a consequence of its answer to Question 1, the High Court by the impugned judgment dated 1-3-1978 did not answer Question 2 stating that the answer to it was not necessary. This appeal by special leave is against that judgment.
3. The decision which was relied on by the High Court in answering the above-quoted first question in favour of the assessee has been reversed by this Court in CIT v. Kamalini Khatau, . Accordingly following the decision of this Court, Question 1 has to be answered in favour of the Revenue and against the assessee and the decision of the High Court has to be reversed on that point. Since Question 2 referred to the High Court was left unanswered by it in view of its answer to Question 1, the matter has to go back to the High Court for deciding the above-quoted Question 2 in accordance with law.
4. Consequently, the appeal is allowed. Question 1 is answered in favour of the Revenue and against the assessee; and Question 2 would now be decided by the High Court in accordance with law. The matter is remitted to the High Court to this limited extent.
5. No costs.
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