J.D Jain, J.:— The above mentioned four income-tax references have been made by the Income-tax Appellate Tribunal (Delhi Bench “C”) (for short “the Tribunal”), under section 256(1) of the Income-tax Act, 1961, vide reference order dated June 29, 1974. References Nos. 162 and 163 of 1914 have been made on the application of the assessee, M/s. Shanker Dass Sethi and Sons (for short “the assessee”), while References Nos. 164 and 165 of 1974 have been made at the instance of the Additional Commissioner of Income-tax. These references have been made for a decision of this court on the following questions:

“1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of 1/7th or any other portion of the lease money paid by it for taking the land on lease as an item of allowable expenditure against the income derived from the brick-kiln?

2. Whether, on the facts and in the circumstances of the case, the expenditure incurred by the assessee on the construction of a chimney for its brick-kiln business is allowable as an item of revenue expenditure?’ The facts germane to the decision of these references succinctly are that the assessee was carrying on the business as a building contractor in the relevant assessment years, viz., 1967-68 and 1968-69. The assessee was also running a brick-kiln and deriving income therefrom. The assessee took on lease various parcels of land, total measuring 23 bighas and 8 biswas for excavation of earth for the manufacture of bricks and also for installation of brick-kiln. All the lease agreements were couched in identical terms and, therefore, the relevant terms and conditions of one such agreement which was dated October 31, 1966, have been extracted by the Tribunal in its order dated March 20, 1973. The assessee was entitled under the lease agreements in question to use the said land for the manufacture of bricks and establish a brick-kiln thereon on payment of a total amount of Rs. 44,822. He could excavate earth up to a total depth of 6’ over a period of seven years and on the expiry of the said period, the land was to revert to the lessor. It was, inter alia, stipulated that the lessee could make use of the land for erection of a bhatta and temporary huts but he would have no right whatsoever to the ownership of the land and he could do nothing more than use the said land and dig up earth up to a depth of 6 feet for manufacture of bricks. Of course, he was allowed to put a tube-well for his brick-kiln but he had to leave the same on the expiry of the period of seven years. However, he was allowed one year as a period of grace for complying with the aforesaid terms of the lease. Further, the lessee had no right or interest in the trees standing on land. The lease also provided that in case the area of the land was less than 23 bighas 8 bis was, the lessor would be responsible and due allowance for the shortage in area would be given to the lessee in the payment of the total consideration by proportionate reduction. Accordingly, the assessee constructed a chimney and established a kiln on the said land. He also sunk a well in the land. The assessee claimed deduction of 1/7th amount of the total lease money payable under the aforesaid agreements by way of revenue expenditure for the assessment year 1967-68 and the deduction of a similar amount was claimed for the next following year 1968-69. He also claimed that the expenditure incurred on construction of the well and chimney was revenue expenditure. However, his plea did not find favour with the Income-tax Officer who, following a decision of the Allahabad High Court in United Commercial Corporations. CIT, [1970] 78 ITR 800, came to the conclusion that the lease money paid by the assessee for the land was in the nature of capital expenditure and, as such, the same was not deductible out of the revenue receipts. Similarly, he found that the cost of construction of the kiln as well as the installation of chimney, etc., constituted capital expenditure.

2. Feeling aggrieved, the assessee went in appeal but met with no success. The Appellate Assistant Commissioner too, following the decision of the Allahabad High Court in United Commercial Corporation's case, [1970] 78 ITR 800, rejected the claims for deduction made by the assessee. Undaunted by the decision of the Appellate Assistant Commissioner, the assessee preferred an appeal to the Tribunal and he again urged his claim to the deduction of 1/7th of the total amount of Rs. 44,822 alleged to have been paid as price of the earth to be extracted from the land in question in advance. In other words, the argument put forth was that the advance payment of so-called lease money constituted nothing but a revenue disbursement in lump sum for the raw material to be obtained over a period of seven years. The assessee also claimed that the expenditure on the installation of the chimney was in the nature of revenue expense and it was a permissible deduction. On a consideration of the matter, the Tribunal taking notice of certain observations made by the Supreme Court in Seth Moolchand Suganchand v. CIT, [1972] 86 ITR 647, found that the so-called lease money was just an advance payment in lump sum for obtaining the raw material, viz., earth for manufacture of bricks and the quantity of earth to be so extracted was easily determinable in view of the fact that the area of the land had been specified and even the depth up to which earth could be excavated had been precisely mentioned in the agreement of lease itself. Thus, according to the Tribunal, what the assessee paid for was only cost of the quantity of the raw material worked, out rationally in advance as possibly available to the assessee in the course of next seven years. However, the claim of the assessee to the deduction of the cost of chimney, etc., was disallowed. Hence, the Commissioner of Income-tax sought a reference to this court for the decision with regard to the true nature of the transaction, viz., the agreement of lease entitling the assessee to extract earth from the land in question during the period of seven years. On the other hand, the assessee approached the Tribunal to make a reference to this court as to whether the expenditure incurred on the installation of a chimney for the brick-kiln business of the assessee is allowable deduction as revenue expense or not. Consequently, the Tribunal has made these references posing the twin questions reproduced above. We have heard the counsel for the Revenue but there is no appear ance on behalf of the assessee. However, to be fair to the counsel for the Revenue, we must say that he has brought to our notice several reported decisions both for and against the Revenue.

3. The distinction between capital and revenue either on the receipt or expenditure side is almost a perennial problem in income-tax law. Although the distinction between the two is, generally speaking, well recognised being based on certain principles which are not easy of application, no conclusive tests have been laid down which can apply to all the cases. Indeed, some cases lie on the border and the borderline is not clearly marked out. However, the following statement of law contained in the speech of Viscount Cave in Atherton v. British Insulated and Helsby Cables Ltd., [1925] 10 TC 155 at page 192, seems to have been accepted almost universally in this country as the test for determining what is capital expenditure as distinguished from revenue expenditure:

“When an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable, not to revenue, but to capital.”

4. Lord Cave further pointed out in the said case that the dictum of Lord Dunedin in Vallambrosa Rubber Co. Ltd. v. Farmer, [1910] 5 TC 529 that (at p. 192 of 10 TC):

“capital expenditure is a thing that is going to be spent once and for all, and income expenditure is a thing which is going to recur every year” was obviously not intended to be a decisive test in every case although it was often a material consideration.

5. His Lordship further elucidated the point saying (at p. 192 of 10 TC):

“it is easy to imagine many cases in which a payment, though made ‘once and for all’, would be properly chargeable against the receipts for the year”

6. Reference in this context may be made to Assam Bengal Cement Co. ‘Limited v. CIT, [1955] 27 ITR 34 (SC) and Pingle Industries Ltd. v. CIT, [1960] 40 ITR 67 (SC). Several decisions, both of English and Indian courts, were noticed in these authorities and the various tests laid down by a Full Bench of the Lahore High Court in Benarsidas Jagannath, In re, [1947] 15 ITR 185, were quoted with approval. (As shall be presently seen, the decision in Benarsidas Jagannath's case has a lot of bearing on the decision of the instant case). Bhagwati J., delivering the judgment of the Supreme Court in Assam Bengal Cement Co. Ltd. v. CIT, [1955] 27 ITR 34 (SC), observed that (p. 45):

“This synthesis attempted by the Full Bench of the Lahore High Court truly enunciates the principles which emerge from the authorities. In cases where the expenditure is made for the initial outlay or for extension of a business or a substantial replacement of the equipment, there is no doubt that it is capital expenditure If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits, it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence, it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital These tests are thus mutually exclusive and have to be applied to the facts of each particular case”

7. In Benarsidas Jagannath's case, [1947] 15 ITR 185 (Lah) the assessee, who was a manufacturer of bricks, had obtained certain lands on leases for the purpose of digging out earth for the manufacture of bricks. Under the deeds he had the right to dig earth up to three to three and a half feet. He had no interest left in the lands as soon as the earth was dug out and removed. The periods of the leases varied from six months to three years. On a reference to the High Court, the Full Bench held that (headnote):

“the main object of the agreements was the procuring of earth for manufacturing bricks and not the acquisition of an advantage of a permanent nature or of an enduring character, that the payments made were the price of raw material and that the assessee was, therefore, entitled to claim them as business expenditure under section 10(2)(xii).”

8. As stated above, this decision was approved by the Supreme Court in Assam Bengal Cement Co. Ltd., [1955] 27 ITR 34 (SC) but in Pingle Industries Ltd., [1960] 40 ITR 67 (SC) Hidayatullah J. (as his Lordship then was) sounded a note of caution that (p. 87 of 40 ITR):

“The approval given to Benarsidas' case by this court does not extend beyond the summary of the tests settled in it, and the tests have to be applied to the facts of each case in the manner indicated by this court. But the actual decision was not before this court, and cannot be said to have been approved.”

9. Obviously, these observations were made by his Lordship in order to bring home the fact that the decision in each case must turn on its own facts although the broad tests summed up in Benarsidas Jagannath's case, [1947] 15 ITR 185 (SC) should serve as guiding principles. However, on a careful examination of the facts in Benarsidas Jagannath's case and those in the case on hand, I am of the view that there is a lot of resemblance between the two. As pointed out by Mahajan J., who spoke for the court, and I may say with respect, rightly so that (p. 203 of 15 ITR):

“If a man who is carrying on the business of selling earth purchases or takes a long lease of the land to excavate earth, the land would be a fixed asset in his hands and cannot be regarded as his stock-in trade; but the case is quite different when a brick-kiln manufacturer acquires earth by an agreement which in substance amounts to purchase of earth but assumes the shape of a lease The assessee would have no interest whatsoever left in the land as soon as earth is dug out and removed.”

(emphasis* supplied)

10. Their Lordships also noticed the distinction between purchase of a coal mine or a quarrying lease and an arrangement just to excavate a certain quantity of earth for the purpose of manufacturing bricks in the kiln over a period of years and held that the transactions amounted to mere purchase of unloosened earth from the land and to no more, as distinguished from purchasing an interest in the land itself with a right to use and extract raw material. Their Lordships further said that (p. 199 of 15 ITR):

“If what is got rid of by a lump sum payment is an annual business expense chargeable against revenue, the lump sum payment should equally be regarded as a business expense, but if the lump sum payment brings in’ a capital asset, then that puts the business on another footing altogether.”

11. Yet another factor which was taken note of was that the outlay was not made for the initiation of the business but the transaction to dig out earth from the specified area up to certain depth over a period of some years had been made during the course of running a business and the basic purpose was to ensure supply of raw material in order to produce bricks expeditiously and economically. All these factors, to my mind, are quite apposite and germane to the decision of the case on hand as the stipulations embodied in the transaction are by and large similar.

12. Raj Singh Baldev Kishan v. CIT, [1969] 72 ITR 735 (P&H), is yet another case of the same kind. The assessee therein took on lease certain pieces of land for a period of ten years for the purpose of extracting earth for the manufacture of bricks. On a reference, the High Court of Punjab and Haryana held that: “the entire expenditure in question was revenue in nature It may be noticed that the brick-kiln owner in the said case was entitled to dig earth five feet deep for manufacturing bricks and he could even bring the land to cultivation for a period of ten years. However, on the expiry of the period of ten years, he was to have no concern with the land which was to revert to the owner. Relying upon Benarsidas Jagannath's case, [1947] 15 ITR 185 (Lah) [FBJ their Lordships held that it was an acquisition of raw material for the purpose of manufacturing bricks and thus a revenue expense. In the instant case too, there is nothing on the record to suggest that any capital outlay was made by the assessee for the initiation of the business and the primary consideration basically was to ensure regular supply of earth for being used as a raw material in the manufacture of bricks over a sufficiently long period.

13. On the other side of the borderline are several reported decisions of the Supreme Court pertaining to acquisition of mining/quarrying leases and in all those cases, the payments made by way of lease money, etc., were held to be in the nature of capital outlay in order to acquire a capital asset of an enduring nature. In Assam Bengal Cement Co. Ltd., [1955] 27 ITR 34 (SC) the assessee-company had acquired from the Government of Assam for the purpose of carrying on manufacture of cement a lease of certain limestone quarries for a period of twenty years. It was held that (p. 47):

“It was an enduring benefit for the benefit of the whole of the business of the company and came well within the test laid down by Viscount Cave. It was not a lump sum payment but was spread over the whole period of the lease and it could be urged that it was a recurring payment. The fact, however, that it was a recurring payment was immaterial, because one had got to look to the nature of the payment which in its turn was determined by the nature of the asset which the company had acquired. The asset which the company had acquired in consideration of this recurring payment was in the nature of a capital asset, the right to carry on its business unfettered by any competition from outsiders within the area.”

14. Pingle Industries Ltd., [1960] 40 ITR 67 (SC) was a case in which the assessee-company had obtained from a jagirdar under a contract the right to extract stones from quarries situated in six villages for a period of twelve years on an annual payment of Rs. 28,000. Contrasting facts of the said case with those in Benarsidas Jagannath's case, [1947] 15 ITR 185 (Lah) [FB], Hidayatullah J., who spoke for the majority, pointed out that (p. 86):

“In Benarsidas' case, [1947] 15 ITR 185, the person sought to be assessed was a manufacturer of bricks He had no interest in the land, and as soon as the earth was removed, his right was at an end.”

15. However, the agreements in the case before their Lordships were longterm contracts and they gave right to extract stones in six villages without any limit by measurement or quantity. They gave the right exclusively to quarry for a number of years and, therefore, it was very different on facts.

16. Similarly, K.T.M.T.M Abdul Kayoom v. CIT, [1962] 44 ITR 689 (SC), in which the assessee-firm which was carrying on the business of purchase and sale of conch (chank) shells took on lease from the Government the exclusive rights, liberty and authority to fish or take and carry away all chank shells in the sea off the coastline of certain area specified in the lease, is distinguishable on facts. It was observed by Hidayatullah J., who spoke for the majority, that (p. 703):

“…none of the tests is either exhaustive or universal. Each case depends on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo—The Nature of the Judicial Process, p. 20) by matching the colour of one case against the colour of another What is decisive is the nature of the business, the nature of the expenditure, the nature of the right acquired, and their relation inter se, and this is the only key to resolve the issue in the light of the general principles which are followed in such cases.”

17. His Lordship, inter alia, took note of the fact that the said case was not as one of so much clay or so much salt-petre or a dump of tailings or leaves on the trees in a forest. The agreement was to reserve a source, where he hoped to find shells which, when found, became his stock-in-trade but which in situ, were no more the firm's than a shell in the deepest part of the ocean beyond the reach of divers and nets.

18. Reference may also be made in this context to a later decision of the Supreme Court in R.B Seth Moolchand Suganchand, [1972] 86 ITR 647 (SC) in which the assessee-firm had paid a sum of Rs. 1,53,800 to acquire lease of certain areas of land bearing mica for a period of twenty years. Those areas had already been worked for 15 years by other lessees. It was held that the amount was paid for acquiring a right of an enduring nature to extract and remove the mica and bring it to the surface. However, the following observations appearing in the judgment are very pertinent to note (p. 651):

“The determining factor will depend largely on the nature of the trade in which the asset is employed… The principles enunciated for determining the nature of the expenditure have been sought to be applied to different situations arising on the facts of each case, but the difficulty in matching them with the seeming irreconcilability are perhaps explicable only on the ground that the determination in any particular case is dependent on the character of the lease or agreement, the nature of the asset, the purpose for which the expenditure was incurred and such other factors as in the facts and circumstances of that case would indicate. If we confine our attention to the mining leases, what appears to us to be an empirical test is that where minerals have to be won, extracted and brought to surface by mining operations, the expenditure incurred for acquiring such a right would be of a capital nature. But, where the mineral has already been gotten and is on the surface, then the expenditure incurred for obtaining the right to acquire the raw material, that is, the mineral, would be a revenue expenditure laid out for the acquisition of stock-in-trade.”

19. Applying these tests to the case on hand, there can be no manner of doubt that the instant is not a case where the earth has to be won, extracted and brought to surface by any kind of quarrying operation. The soil is very much there in a defined area and the mere fact that it has to be dug up to a certain extent to procure supply of earth which is in the nature of raw material for the manufacture of bricks would not make it a transaction analogous to that of a mining or quarrying lease; rather as held by the Full Bench of the Lahore High Court, it is a case where payment has been made in advance by the assessee to ensure regular supply of earth over a period of seven years. He was to get no right or interest in the land and he was to deliver back the possession of the same on the expiry of the stipulated period. Hence, I am of the considered view that as held by the Tribunal, the expenditure incurred by the assessee in the instant case is a revenue disbursement rather than capital outlay in order to acquire an asset of an enduring benefit.

20. I now turn to some reported decisions of the Allahabad High Court which run counter to the decisions in Benarsidas Jagannath's case, [1947] 15 ITR 185 (Lah) [FB] and Raj Singh Baldev Kishan's case, [1969] 72 ITR 735 (P&H). These are all cases of brick-kilns and, therefore, they need to be examined. In CIT v. Tika Ram & Sons Ltd., [1937] 5 ITR 544 (All), the assessee-company was carrying on the business of manufacturing bricks. It owned as proprietor a part of the land from which earth was taken for manufacture of bricks and it also held a lease of the other portion of the land. It claimed that a sum of Rs. 2,500 representing the value of the earth used up in the manufacture of bricks during the year of account should be deducted in computing its income for the purposes of income-tax. On a reference, it was held by the Allahabad High Court that the assessee was not entitled to the deduction claimed. Their Lordships observed that (p. 548):

“The case of a brickfield is very similar to that of a quarry or a mine and the proprietor of the land or the lessee is not a mere purchaser of raw materials but a person who has acquired certain rights in the land, and the amount invested by him must, therefore, be treated as capital expenditure within the meaning of section 10(2)(ix).”

21. A perusal of the judgment would show that the decision was primarily influenced by certain observations appearing in Alianza Company v. Bell, [1904] 2 KB 666, which was eventually affirmed by the House of Lords in Alianza Company v. Bell, [1906] AC 18 and Golden Horse Shoe (New) Limited v. Thurgood, [1933] 18 TC 280. In the former case, the assessee was the owner of land in Chili containing deposits of a substance called caliche from which they extracted by a process of manufacture nitrates and iodine for the market. The process of manufacture could ultimately result in the exhaustion of the whole of the caliche available in which event the land and the, machinery and plant used for the purpose of manufacture would have been practically of no value. Channell J. pointed out that at p. 673 of [1904] 2 KB:

“If it is merely a manufacturing business, then the procuring of the raw material would not be a capital expenditure. But if it is like the working of a particular mine or bed of brick earth, and converting the stuff worked into a marketable commodity, then the money paid for the prime cost of the stuff so dealt with is just as much capital as the money sunk in machinery or buildings. In my opinion, the particular adventure here belongs to the latter category.”

22. Obviously, the observation made by the learned judge regarding the bed of brick earth is too general in nature to admit of universal application in cases of brick-kilns and the decision in each case must rest on its own facts. As already observed, the analogy of mining leases cannot be pressed into service in the instant case because the transaction is for purchase of a quantity of earth which maybe easily ascertained in consideration of a lump sum payment. The acquisition of a mine or mining right is an enduring asset because it is not a mere purchase of mineral but is an acquisition of a source from which flows the right to extract minerals. In other words, the acquisition provides the means of obtaining the raw material rather than raw material itself. (See Pingle Industries Ltd., [1960] 40 ITR 67 (SC).

23. As for Golden Horse Shoe (New) Ltd., [1933] 18 TC 280, the facts therein were entirely different inasmuch as the appellant-company in the said case was formed for the purchase of acquiring the right to take away certain “dumps of tailings”, i.e, the residuals that remained after the extraction of gold from ore taken from certain gold mines and retreat the same for conversion into gold. It was found that the dumps were no longer in a natural condition but were in an artificial condition. So the case was considered analogous to one in which a gas manufacturer had bought a quantity of coal already extracted from the mine and stacked on the surface and the purchase price of the tailings was held to be an admissible deduction. Obviously, the said case lay on the other side of the borderline and the considerations which weighed with the High Court of Justice in coming to the aforesaid conclusion could have no bearing on the decision in Pingle Industries Ltd., [1960] 40 ITR 67 (SC), the facts in both these cases being totally different.

24. It may be pertinent to notice here that in Tika Ram's case, [1937] 5 ITR 544 (All), the assessee had obtained rights both as a proprietor as well as a lessee in the land itself and he was in possession of the land in exercise of such right. Thus, the said case came within the rule of those cases in which the right acquired is to a source from which the raw materials are to be extracted/obtained. It bears repetition to say that the sole right which the assessee has got in the instant case is to extract clay up to a certain depth and nothing more. Hence, the case of Tika Ram is clearly distinguishable. Likewise, in Sardar Bahadur Sardar Singar Singh & Sons v. CIT, [1944] 12 ITR 504 (Oudh), the assessee had taken lease of a land for the purpose of excavating earth for twelve years and had, inter alia, paid the cost of the kiln which was already in existence. So, the contention of the assessee that he had been buying clay as raw material and making it into bricks which he sold was rejected by the Division-Bench of Oudh Chief Court with the observations that (headnote):

“These were leases of property for carrying on a business sold to the lessee and the expenditure incurred was of a capital nature not exempted under section 10(2)(ix).”

25. Obviously, this case too is distinguishable on facts. Likewise, in Ganeshilal Bhattawala, [1938] 6 ITR 489 (All), it was found that the expenses debited to the profit and loss account though shown as cost of mud for moulding bricks included, in fact, the price paid for the acquisition of proprietary rights in certain plots of the village in which the brick kiln was situated.

26. Lastly, there is the case of United Commercial Corporation v. CIT, [1970] 78 ITR 800 (All). The facts therein almost resemble those in the case on hand. However, it was held that by obtaining the lease, the assessee acquired an enduring benefit for the purpose of manufacturing bricks. Their Lordships, inter alia, noticed the Full Bench decision of Lahore High Court in Benarsidas Jagannath, [1947] 15 ITR 185 (Lah) [FB], but it was distinguished on the ground that the period of leases therein varied from six months to three years whereas the period of seven years in the case before them was comparatively long and, therefore, the assessee acquired an enduring benefit for the purpose of manufacturing bricks. With respect, I am unable to subscribe to the view expressed by their Lordships in preference to that of the Full Bench in Benarsidas.

27. The expression “enduring benefit” has been judicially interpreted. Said Rowlatt J. in Anglo-Persian Oil “Co. Ltd. v. Dale (H.M Inspector of Taxes), [1932] 1 KB. 124; 16 TC 233 at p. 262:

“What Lord Cave is quite clearly speaking of is a benefit which endures, in the way that fixed capital endures; not a benefit that endures in the sense that for a good number of years it relieves you of a revenue payment. It means a thing which endures in the way that fixed capital endures.”

28. Romer L.J concurred in this view saying at p. 274 of 16 TC.

“I agree with Mr. Justice Rowlatt that by ‘enduring’ is meant ‘enduring in the way that fixed capital endures’. An expenditure on acquiring floating capital is not made with a view to acquiring an enduring asset. It is made with a view to acquiring an asset that may be turned over in the course of trade at a comparatively early date.”

29. Obviously, in taxation matters, emphasis must be placed upon the business aspect of a transaction rather than purely legal and technical aspect and the decision in each case must turn on its own facts. It bears repetition that the lump sum payment in the instant case represents the commutation of a series of annual revenue payments rather than a capital outlay for acquiring an asset of enduring benefit. Hence, I would answer the first question in the affirmative holding that the lump sum payment made by the assessee constitutes revenue disbursement for acquiring raw material for manufacturing bricks.

30. Second Question: As stated above, this question was formulated by the Tribunal in I.T Reference Nos. 162 and 163 of 1974 at the instance of the assessee. However, the assessee has not turned up despite his case having been taken up on various dates. The learned counsel for the Commissioner of Income-tax has, therefore, urged that if the party at whose instance the reference was made does not appear at the hearing and does not take interest in the reference, the High Court is not required to answer the question referred to. Reliance in this context has been placed by him on various reported decisions of different High Courts, viz., M.M Ispahani Ltd. v. CEPT, [1955] 27 ITR 188 (Cal); Tamarind Products v. CIT, [1956] 30 ITR 348 (Mad), Arisetty Butchanna v. CIT, [1962] 46 ITR 703 (AP); Malik Singh Tirath Singh v. CIT, [1968] 70 ITR 805 (All); Gajadhar Prasad Nathu Lal v. CWT, [1970] 76 ITR 615 (MP) and K. Ch. Venkataratnam v. CGT, [1974] 95 ITR 277 (AP).

31. In M.M Ispahani Ltd., [1955] 27 ITR 188 (Cal) the question arose whether the High Court was bound to answer a reference under section 66 of the Indian Income-tax Act, 1922 (corresponding to section 256 of the present Act), if the party at whose instance the reference was made does not appear at the hearing of the reference. Chakravartti C.J, speaking for the court, said (p. 191):

“It will be noticed that the section is expressed in mandatory language and deploys the word ‘shall’ throughout its many clauses. Prima facie, therefore, it would seem that upon a reference being received, it becomes an obligation of the High Court to answer the question referred and take the further steps mentioned in the section and it becomes equally the obligation of the Appellate Tribunal to adjust its order, if necessary, to the opinion which the High Court may express on the question concerned. It seems to me, however, in spite of the apparently mandatory language of the sub-section, that its true import cannot be to require the High Court to answer the questions referred to it in all circumstances, irrespective of whether the parties appear before it or not. To take an extreme case, suppose instead of only the party who had caused the reference to be made being absent, both the parties fail to appear, would the Court still be bound to deal with the reference and answer the question referred? I cannot imagine that the section purports to impose upon the court any such obligation. It seems to me that before the duty contemplated by the section to decide the questions of law referred to can arise, a hearing of the case must take place, because the section opens with the words: The High Court upon the hearing of any such case’, etc. Where the party, who has caused the reference to be made and who is in the position of a plaintiff, fails to appear, no hearing of the case can take place and in my view, since the preliminary condition of the sub-section is not satisfied in such a case, the consequent obligation of deciding the questions of law and delivering a judgment does not also arise.”

32. These observations have been quoted with approval in the other decisions by various High Courts adverted to above. We are satisfied that this is the correct view and we find no reason why in this case we should take upon ourselves the burden of answering the references when the assessee has shown no interest. Hence, we refrain from answering this question because the assessee has not put in appearance. Therefore, the references shall be returned unanswered. Having regard to all the circumstances, however, I would leave the parties to bear their own costs.

T.P.S Chawla, J.:— I agree.