Can I argue a point in the High Court that was never taken before the Tribunal, if it arises on the facts the Tribunal found?
Not as a new question, but you may take a new contention within the question referred. The Supreme Court held that only a question raised before or decided by the Tribunal arises out of its order. A question neither raised before nor considered by the Tribunal is not one arising out of its order, even though it arises on the findings. But where the question referred is itself wide enough, a fresh contention within its framework may be advanced. Here the referred question - whether Rs 9,26,532 was properly included in the 1946-47 assessment - covered the argument that the charging proviso was not yet in force.
Decided by the Supreme Court (Supreme Court of India - judgment delivered by T.L. Venkatarama Aiyar, J, with a separate concurring opinion by J.C. Shah, J; the harvested page also names J.L. Kapur, M. Hidayatullah and S.K. Das, JJ) on 1961-04-06, reported as AIR 1961 SC 1633; (1961) 42 ITR 589 (SC); (1962) 1 SCR 788. It bears on section 66(1) of the Indian Income-tax Act, 1922, section 10(2)(vii) of the Indian Income-tax Act, 1922, section 260A, section 254 of the Income Tax Act 1961, in Appeals matters.
This is the case that fixes the boundary of the reference and appeal jurisdiction, and its four propositions are quoted in almost every argument about new grounds. A question raised and dealt with arises out of the order; a question raised but not dealt with is deemed to have been dealt with, on the principle that relief asked for and not granted is refused; a question not raised but dealt with by the Tribunal also arises out of the order; a question neither raised nor considered does not, however clearly it emerges from the findings. Alongside that it holds that the right of the litigant to ask for a reference, the Tribunal's power to make one and the court's jurisdiction to decide it are co-extensive. And it gives the practical escape route: a contention, as distinct from a question, may be new if it lies within the framework of the question referred.
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The respondent owned the steamship El Madina, requisitioned by the Government during the war and lost to enemy action on 16 March 1944. The Government paid compensation of Rs 20,00,000 on 17 July 1944, Rs 23,00,000 on 22 December 1944 and Rs 33,333 on 10 August 1946. The ship had cost Rs 24,95,016 and its written down value at the start of the year of account was Rs 15,68,484, the difference of Rs 9,26,532 representing depreciation allowed over the years. As the compensation exceeded cost, the company had recouped the whole of that depreciation. The question was whether Rs 9,26,532 was assessable for 1946-47 under the fourth proviso to section 10(2)(vii). It was common ground that apart from that proviso the receipt was capital and not taxable. Before the authorities the company argued only that, because the Board of Revenue had directed for excess profits tax purposes that the compensation be treated as received within thirty days of the loss, it must be taken to have been received on 16 April 1944, in the earlier year. The Tribunal rejected that, holding the concession confined to excess profits tax and the material date being actual receipt, and held the amount taxable. On the company's application the Tribunal referred the question whether Rs 9,26,532 was properly included in the total income for 1946-47. Before the Bombay High Court the company raised for the first time that the proviso, introduced by the Income-tax (Amendment) Act, 1946 with effect from 4 May 1946, was not in force on 1 April 1946 when liability for the assessment year crystallised. Chagla CJ and Tendolkar J overruled the Revenue's objection to that being raised, held the proviso not retrospective, and answered in the negative.
The appeal was dismissed with costs. On the scope of a reference the Court summed up the position in four propositions: a question raised before the Tribunal and dealt with by it arises out of its order; a question raised but not dealt with must be deemed to have been dealt with and so arises out of its order; a question not raised but dealt with by the Tribunal also arises out of its order; and a question neither raised before the Tribunal nor considered by it does not arise out of its order, notwithstanding that it may arise on the findings given. Compendiously, only a question raised before or decided by the Tribunal arises out of the order. But the question actually referred here - whether the sum was properly included in the 1946-47 assessment - was specific and wide enough to cover the contention that the proviso did not apply, which involved no reframing of the issues; it was competent to the court to allow a new contention within the framework of the question referred. On the merits, the proviso was in terms not retrospective and matters outside the statute could not be imported to alter its effect. The Revenue's further argument, that the depreciation previously allowed could be treated as profits of the year of assessment, was disallowed as an entirely new point not covered by the question.
The majority reasoned from the advisory character of the jurisdiction. The High Court gives advice on a reference properly before it; it decides only the questions referred. If its function is to advise when asked, the Tribunal must have had occasion to consider the question, so that it could decide whether to seek the court's opinion. The power to compel a reference is subject to the same limits, being in the nature of mandamus, which requires a prior demand for the very relief sought; and the prescribed form requires the applicant to set out the questions, which must arise out of the Tribunal's order. To let the court entertain a new question would give the applicant a right denied to him at both earlier stages and would assimilate the jurisdiction to that of an ordinary appellate court. The Court noted too that the power once given to the Commissioner to refer a question of his own motion had been taken away in 1939. The litigant's right to ask, the Tribunal's power to refer and the court's jurisdiction to decide are therefore co-extensive. Against the objection that this works injustice where the Tribunal overlooks a point actually argued, the Court held such a point is deemed decided against the party. It also accepted that where a Tribunal decides an appeal on a point of law not argued before it, that point arises out of the order. Shah, J, concurring in the result, took the wider view associated with Chagla CJ in Madanlal Dharnidharka: the statute imposes no requirement that the question have been argued before the Tribunal, the source of the question need only be the order, and questions frequently arise for the first time out of an order where the Tribunal applies the wrong law, invokes an inapplicable provision, misconceives the question or ignores a provision that applies.
it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order
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Handle my notice → Ask a CA on WhatsAppNot as a new question, but you may take a new contention within the question referred. The Supreme Court held that only a question raised before or decided by the Tribunal arises out of its order. A question neither raised before nor considered by the Tribunal is not one arising out of its order, even though it arises on the findings. But where the question referred is itself wide enough, a fresh contention within its framework may be advanced. Here the referred question - whether Rs 9,26,532 was properly included in the 1946-47 assessment - covered the argument that the charging proviso was not yet in force. This was decided by the Supreme Court (Supreme Court of India - judgment delivered by T.L. Venkatarama Aiyar, J, with a separate concurring opinion by J.C. Shah, J; the harvested page also names J.L. Kapur, M. Hidayatullah and S.K. Das, JJ) and bears on section 66(1) of the Indian Income-tax Act, 1922, section 10(2)(vii) of the Indian Income-tax Act, 1922, section 260A, section 254 of the Income Tax Act 1961. It is reported as AIR 1961 SC 1633; (1961) 42 ITR 589 (SC); (1962) 1 SCR 788. This is the case that fixes the boundary of the reference and appeal jurisdiction, and its four propositions are quoted in almost every argument about new grounds. A question raised and dealt with arises out of the order; a question raised but not dealt with is deemed to have been dealt with, on the principle that relief asked for and not granted is refused; a question not raised but dealt with by the Tribunal also arises out of the order; a question neither raised nor considered does not, however clearly it emerges from the findings. Alongside that it holds that the right of the litigant to ask for a reference, the Tribunal's power to make one and the court's jurisdiction to decide it are co-extensive. And it gives the practical escape route: a contention, as distinct from a question, may be new if it lies within the framework of the question referred. If it applies to you, the first step is this: Raise every point before the Tribunal and get it into the order; that is what determines what can be argued later.
The respondent owned the steamship El Madina, requisitioned by the Government during the war and lost to enemy action on 16 March 1944. The Government paid compensation of Rs 20,00,000 on 17 July 1944, Rs 23,00,000 on 22 December 1944 and Rs 33,333 on 10 August 1946. The ship had cost Rs 24,95,016 and its written down value at the start of the year of account was Rs 15,68,484, the difference of Rs 9,26,532 representing depreciation allowed over the years. As the compensation exceeded cost, the company had recouped the whole of that depreciation. The question was whether Rs 9,26,532 was assessable for 1946-47 under the fourth proviso to section 10(2)(vii). It was common ground that apart from that proviso the receipt was capital and not taxable. Before the authorities the company argued only that, because the Board of Revenue had directed for excess profits tax purposes that the compensation be treated as received within thirty days of the loss, it must be taken to have been received on 16 April 1944, in the earlier year. The Tribunal rejected that, holding the concession confined to excess profits tax and the material date being actual receipt, and held the amount taxable. On the company's application the Tribunal referred the question whether Rs 9,26,532 was properly included in the total income for 1946-47. Before the Bombay High Court the company raised for the first time that the proviso, introduced by the Income-tax (Amendment) Act, 1946 with effect from 4 May 1946, was not in force on 1 April 1946 when liability for the assessment year crystallised. Chagla CJ and Tendolkar J overruled the Revenue's objection to that being raised, held the proviso not retrospective, and answered in the negative. The matter was decided on 1961-04-06 by the Supreme Court (Supreme Court of India - judgment delivered by T.L. Venkatarama Aiyar, J, with a separate concurring opinion by J.C. Shah, J; the harvested page also names J.L. Kapur, M. Hidayatullah and S.K. Das, JJ). On those facts the Supreme Court held as follows. The appeal was dismissed with costs. On the scope of a reference the Court summed up the position in four propositions: a question raised before the Tribunal and dealt with by it arises out of its order; a question raised but not dealt with must be deemed to have been dealt with and so arises out of its order; a question not raised but dealt with by the Tribunal also arises out of its order; and a question neither raised before the Tribunal nor considered by it does not arise out of its order, notwithstanding that it may arise on the findings given. Compendiously, only a question raised before or decided by the Tribunal arises out of the order. But the question actually referred here - whether the sum was properly included in the 1946-47 assessment - was specific and wide enough to cover the contention that the proviso did not apply, which involved no reframing of the issues; it was competent to the court to allow a new contention within the framework of the question referred. On the merits, the proviso was in terms not retrospective and matters outside the statute could not be imported to alter its effect. The Revenue's further argument, that the depreciation previously allowed could be treated as profits of the year of assessment, was disallowed as an entirely new point not covered by the question.
The majority reasoned from the advisory character of the jurisdiction. The High Court gives advice on a reference properly before it; it decides only the questions referred. If its function is to advise when asked, the Tribunal must have had occasion to consider the question, so that it could decide whether to seek the court's opinion. The power to compel a reference is subject to the same limits, being in the nature of mandamus, which requires a prior demand for the very relief sought; and the prescribed form requires the applicant to set out the questions, which must arise out of the Tribunal's order. To let the court entertain a new question would give the applicant a right denied to him at both earlier stages and would assimilate the jurisdiction to that of an ordinary appellate court. The Court noted too that the power once given to the Commissioner to refer a question of his own motion had been taken away in 1939. The litigant's right to ask, the Tribunal's power to refer and the court's jurisdiction to decide are therefore co-extensive. Against the objection that this works injustice where the Tribunal overlooks a point actually argued, the Court held such a point is deemed decided against the party. It also accepted that where a Tribunal decides an appeal on a point of law not argued before it, that point arises out of the order. Shah, J, concurring in the result, took the wider view associated with Chagla CJ in Madanlal Dharnidharka: the statute imposes no requirement that the question have been argued before the Tribunal, the source of the question need only be the order, and questions frequently arise for the first time out of an order where the Tribunal applies the wrong law, invokes an inapplicable provision, misconceives the question or ignores a provision that applies. In the words reproduced by the source cited on this page: "it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order"
It was decided by the Supreme Court on 1961-04-06 and is reported as AIR 1961 SC 1633; (1961) 42 ITR 589 (SC); (1962) 1 SCR 788. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 66(1) of the Indian Income-tax Act, 1922, section 10(2)(vii) of the Indian Income-tax Act, 1922, section 260A, section 254, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed with costs. On the scope of a reference the Court summed up the position in four propositions: a question raised before the Tribunal and dealt with by it arises out of its order; a question raised but not dealt with must be deemed to have been dealt with and so arises out of its order; a question not raised but dealt with by the Tribunal also arises out of its order; and a question neither raised before the Tribunal nor considered by it does not arise out of its order, notwithstanding that it may arise on the findings given. Compendiously, only a question raised before or decided by the Tribunal arises out of the order. But the question actually referred here - whether the sum was properly included in the 1946-47 assessment - was specific and wide enough to cover the contention that the proviso did not apply, which involved no reframing of the issues; it was competent to the court to allow a new contention within the framework of the question referred. On the merits, the proviso was in terms not retrospective and matters outside the statute could not be imported to alter its effect. The Revenue's further argument, that the depreciation previously allowed could be treated as profits of the year of assessment, was disallowed as an entirely new point not covered by the question. It arises in Appeals matters, on section 66(1) of the Indian Income-tax Act, 1922, section 10(2)(vii) of the Indian Income-tax Act, 1922, section 260A, section 254 of the Income Tax Act 1961, and was decided by Supreme Court of India - judgment delivered by T.L. Venkatarama Aiyar, J, with a separate concurring opinion by J.C. Shah, J; the harvested page also names J.L. Kapur, M. Hidayatullah and S.K. Das, JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the Tribunal has not dealt with a point you did raise, say so and rely on the deeming rule, rather than treating the omission as fatal. Where you want to take a fresh contention, show it lies within the framework of the question as framed and needs no reframing of the issues. Press for precise questions - the Court told Tribunals to be precise and to indicate the grounds on which questions of law are raised, and said an over-wide question will be cut down by what appears in the statement of the case.
Still good law. The four propositions are the settled statement of what arises out of the Tribunal's order and are applied to appeals under the 1961 Act as well; the harvested page records the judgment as cited in some three hundred later decisions. No later decision doubting it was read as part of this exercise. The reference procedure it construes has since been replaced by an appeal to the High Court on a substantial question of law, and that provision was not before the Court. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
About 18,400 characters from the middle of the judgment are not reproduced on the harvested page. What is missing is the greater part of the majority's survey of the conflicting High Court decisions on the meaning of the words 'any question of law arising out of such order', beginning after the discussion of Abboy Chetty; the propositions the Court draws from that survey, and its own reasoning from the advisory character of the jurisdiction, are in the surviving text, but the treatment of individual High Court decisions is not. Decided under the Indian Income-tax Act, 1922 on section 66 and on the fourth proviso to section 10(2)(vii); the batch line's sections 260A and 254 of the 1961 Act are where the same ground is covered today but were not construed. The harvested page names the bench as Shah, Kapur, Hidayatullah and S.K. Das, JJ while the judgment is delivered by Venkatarama Aiyar, J, whom the page does not list; both have been recorded. The text is garbled in places, referring to clause (7) and proviso (vi) where clause (vii) and the fourth proviso are meant, and one sentence in the discussion of the referred question breaks off mid-way. The Court left the Revenue's alternative argument on the previously allowed depreciation undecided, disallowing it as outside the question. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed with costs. On the scope of a reference the Court summed up the position in four propositions: a question raised before the Tribunal and dealt with by it arises out of its order; a question raised but not dealt with must be deemed to have been dealt with and so arises out of its order; a question not raised but dealt with by the Tribunal also arises out of its order; and a question neither raised before the Tribunal nor considered by it does not arise out of its order, notwithstanding that it may arise on the findings given. Compendiously, only a question raised before or decided by the Tribunal arises out of the order. But the question actually referred here - whether the sum was properly included in the 1946-47 assessment - was specific and wide enough to cover the contention that the proviso did not apply, which involved no reframing of the issues; it was competent to the court to allow a new contention within the framework of the question referred. On the merits, the proviso was in terms not retrospective and matters outside the statute could not be imported to alter its effect. The Revenue's further argument, that the depreciation previously allowed could be treated as profits of the year of assessment, was disallowed as an entirely new point not covered by the question.
TaxSphere, “CIT v Scindia Steam Navigation Co Ltd”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-scindia-steam-navigation-co-ltd/ (validity last checked 2026-08-29)
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