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b0b5f7363af5-8 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | and that was done through G.O. Ms. No. 794 dated 19th August, 1987. Thus, the ground is cleared for the State Government to exercise power to levy tax only from the date of publication of G.O. Ms. No. 794 dated 19th August, 1987, although some notices required the payment for the year 1983-84 and yet some other notices required payment for the years 1984-85 and 1985-86. On this short ground alone the notices issued by the authorities deserve to the quashed and a declaration given that the petitioners herein are not liable to pay tax till the date of publi-cation of G.O. Ms. No. 794 dated 19th August, 1987. We may state that the learned Government Pleader realising the above position did not seriously contend before this Court that the provisions in the Act relied upon conferred power upon the authorities to levy tax prior to the date of publication of G.O. Ms. No. 794 dated 19th August, 1987. We accordingly declare the law and quash the impugned notices in all the cases. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-9 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 7. Learned counsel for all the petitioners made a request that the larger issue whether the petitioners-banks are liable to pay tax at all may be considered as extensive arguments were advanced and the sales tax authorities are bound to initiate action once again for levy of tax subsequent to the period of publication of G.O. Ms. No. 794. It is pointed out that the question would have to be reagitated once again by filing writ petitions and if the larger issue is settled one way or the other multiplicity of proceedings will be avoided. Having heard the arguments in some detail we feel that it is desirable to decide the larger issue concerning the liability of the banks to pay sales tax on the charges realised by the banks for hiring safe deposit lockers. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-10 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 8. The main thrust of the argument of Sri Ananta Babu who led the arguments is that the impugned provision does not authorise the levy of tax on banks for hiring safe deposit lockers to constituents. Attention is invited to the relevant provision. Clause (29-A) of article 366 of the Constitution specifies that tax on the sale or purchase of goods include a tax on the transfer of the right to use any goods for any purpose, whether or not for a specified period, for cash, deferred payment or other valuable consideration. The amendments effected to the definition of the expression "sale" in section 2(n) of the Act and also of the expression "dealer" in section 2(e) of the Act were in line with clause (29-A) of article 366 of the Constitution. The charging section 5-E provided that every dealer who transfers right to use any goods for any purpose whatsoever, whether or not for a specified period, to any lessee or licensee for cash, deferred payment or other valuable consideration in the course of his business shall, on the total amount realised or realisable by him by way of payment in cash or otherwise on such transfer or transfers of the right to use such goods from the lessee or licensee, pay a tax at the rate of five paise in every rupee. No liability is attached if the total turnover of the dealer is less than rupees one lakh. The question for consideration is whether in the transaction of the banks hiring safe deposit lockers to constituents, there is any transfer of the right to use any goods. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-11 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 9. A copy of the agreement for hiring of the locker executed between the State Bank of India and the constituents is obtained by us. We are informed that more or less identical agreements are entered into by all the banks with their constituents for hiring of lockers. Learned Government Pleader also stated that we may proceed on the basis of the covenants in the agreement filed by the State Bank of India and it is not necessary to examine the agreement in each case. The constituent to whom the locker is provided is called the hirer and the agreement is described as "the agreement for hiring of locker". The period for which the locker is hired is specified in the agreement. Where the lockers are taken in the joint names of constitutents the agreement provides for the manner of access and the rights of each one of the joint hirers. Clause 3 of the agreement is in the following terms :
"The hirer shall have no right of property in the locker but only an exclusive right of user thereof and access thereto during the period of this agreement and in accordance therewith. The hirer shall not assign or sublet the locker or any party of it, nor permit to be used to any purpose other than for the deposit of documents, jewellery or other valuables nor shall the hirer use the locker for the deposit of any property of an explosive or destructive nature." | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-12 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | There are provisions relating to the payment of the hire and the bank's lien on all the moneys to sell the property by the safe deposit department of the bank if the rental is not paid. The agreement can be terminated by giving seven days' time by either side. If no such termination is made, the bank will consider the renewal in favour of the hirer for a further period. Clause 9 of the agreement provides that all repairs required to be done to the locker or keys shall be done exclusively by workmen appointed by the bank. Clause 11 provides that for reasons of grave or urgent necessity the bank reserves the right of closing the safe deposit department for such period as it may consider necessary. The bank also reserves the right of making charges in the working hours. Clause 12 cautions the hirers to keep the keys of the lockers in a place of safety and not to divulge the number of their lockers and their passwords and not to deliver their keys for the purpose of operating on the lockers or otherwise to any person other than their duly authorised agent. Clause 13 provides that the relation between the bank and the hirer is that of licensor and licensee and not that of a banker and customer.
10. Omitting the routine covenants in the agreement the important condition specified in clause 3 of the agreement would indicate that the hirer has no right of property in the locker. He, however, has an exclusive right of user thereof and access thereto during the period of agreement. The hirer has no right to assign or sublet the locker; nor permit it to be used to any purpose other than the deposit of documents, jewellery or other valuables. The hirer is forbidden from using the locker for the deposit of any property of an explosive or destructive character. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-13 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 11. We may now consider the arguments advanced by the learned counsel for the petitioners. It is contended that the safe deposit locker in a bank cannot be considered as "goods" within the meaning of section 2(h) of the Act. It is pointed out that the expression "goods" means all kinds of moveable property subject to the exceptions specified therein and also includes all growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Learned counsel invited attention to explanation IV to section 2(n) defining "sale" which refers to a transfer of right to use any goods. Our attention is also invited to clause (iii-b) in section 2(e) defining "dealer" as any person who may transfer the right to the use of any goods and then reference is invited to section 5-E of the Act which provides that every dealer who transfers the right to use any goods for any purpose shall pay a tax specified therein. It is thus pointed out that the exigibility to tax would depend upon the question whether there is any transfer of the right to use goods by the bankers. It is contended that if safe deposit lockers are not "goods", then, no liability to tax arises. As the expression "goods" refers only to moveable property, then, safe deposit lockers are excluded from that expression, because the lockers are imbedded in the earth in the strong rooms of the banks. It is submitted that safe deposit lockers are permanently fixed in the strong rooms and they do not answer the description of moveable property. According to the General Clauses Act, immoveable property shall include land, benefits arising out of the land, and things attached to the earth. The Transfer of Property Act defines the phrase "attached to earth", but gives no definition of immoveable property beyond excluding standing timber, growing crops. The phrase "attached to the | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-14 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | definition of immoveable property beyond excluding standing timber, growing crops. The phrase "attached to the earth" is defined in the Transfer of Property Act as imbedded in the earth, as in the case of walls or buildings or attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. The definition of immoveable property in the General Clauses Act is held to apply even to the Transfer of Property Act. It is all the more applicable to the Sales Tax Act which levies tax on transactions relating to goods constituting moveable property. There is considerable force in the contention of the learned counsel for the petitioners that lockers imbedded in the earth cannot be regarded as moveable property and cannot, therefore, answer the description of "goods" for the purpose of the Sales Tax Act. Learned Government Pleader was on his feet quickly to contradict the petitioners that in some banks the lockers are not imbedded in the earth. That is a matter for verification. It is for the banks to establish the relevant fact. All that we can declare is that if the safe deposit lockers are imbedded in the earth in the strong rooms of the banks, they do not constitute "goods" for the purpose of levy of tax on the charges realised for transferring the right to use the lockers. If in any given cause the lockers are kept mobile in the bank then they answer the description of the goods and further considerations regarding the levy of tax may arise. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-15 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 12. It is next contended that the hire charged by the banks for hiring of lockers is not exclusively for the use of the lockers. It is a composite charge to cover a variety of services associated with the lockers. It is submitted that the safe deposit lockers are located in strong rooms constructed at considerable cost by the banks. Walls of high thicknesses rendering them fire-proof are constructed. Steel doors of larger thicknesses in gauge are provided and special locking devices are arranged in the strong rooms. It is stated that some of the leading banks make their strong rooms an impregnable fortress by providing emergency alarm, etc., in the event of prowlers gaining access into the strong room. It is further stated that heavy security by employing security staff round the clock was provided. All these precautions were taken to ensure that the properties deposited in the safe deposit lockers located in the strong rooms are safe and inaccessible. Learned counsel contended that in fixing the hire charges the banks would take into consideration all the above services which are associated with the operation of the lockers. Learned counsel, therefore, urged that unless classification is made of the hire charged it is not possible to identify the sum charged for the transfer of right to use the lockers alone. As it is impossible to make any such classification no tax can be levied, contended the learned counsel for the petitioners. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-16 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 13. We see considerable force in the submissions of the learned counsel for the petitioners. Let us ask the question as to why people go to banks for depositing their valuables in lockers. Is it because they do not have the facility of a locker at their residence ? It is common knowledge that every steel almirah is fitted with a safe deposit locker of high thickness and gauge. The class of customers who go to banks for depositing their valuables in lockers do certainly have steel almirahs in their houses or even otherwise can afford to purchase one such almirah with safe deposit locker. But then why do these persons prefer to go to a bank and deposit their valuables in the lockers located there without keeping the articles in their houses under constant watch by them ? The answer is obvious. It is because the safe deposit lockers hired by banks are located in impregnable strong rooms and prowlers cannot gain access into these strong rooms of the banks. The wide feeling is that valuables deposited in bank lockers are safer than at home because of the high security arrangements at the bank and the provision of strong rooms. It cannot, therefore, be gainsaid that persons pay the hire charges for the lockers not only for the right to use the lockers but also for a host of other services referred to above closely associated with the maintenance of lockers by the banks. In that sense the hire charges collected by the banks from the constituents represent a consolidated charge levied by the bank for a variety of services and facilities provided, of which the use of the locker forms a small part. The hire charge is inseparable into various services and because of the impossible nature of relating to any particular amount as hire charge solely for the use of the locker, the proposal to levy tax on such hire should fail. Any endeavour to levy tax on the aggregate hire charges levied by the bank would amount to levying tax not only on the right to use locker but | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-17 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | levied by the bank would amount to levying tax not only on the right to use locker but also on the charges collected by the bank for the provision of strong rooms, providing round the clock watch and ward and employing necessary staff to have a close supervision in the operation of strong rooms. The inseparable character of the hire charged by the banks frustrates any attempt to separate the small sum which is the charge for the right to use the locker, which only can be subject to tax under the Act. We have, therefore, no hesitation in holding that, in the facts and circumstances above stated, the banks cannot be called upon to pay sales tax on the hire received for the use by the constituents of the lockers which forms a fractional and inseparable part of the composite charge for a variety of services. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-18 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 14. Sri Ananta Babu raised a further plea that the levy of tax is contemplated only in respect of goods which are either delivered or capable of being delivered to the persons who seek exclusive use of the goods. Referring to the agreement between the bankers and the persons taking the lockers on hire, learned counsel submitted that it must be regarded as a contract in the nature of bailment falling under Chapter IX of the Indian Contract Act. Section 148 of the Contract Act defines a "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivered them. Learned counsel points out that the contract in these cases cannot be considered under any other head. It is submitted that delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf. Learned counsel submits that in the first place no delivery of lockers is involved when a bank hires a safe deposit locker to a constituent. The bank keeps the custody of the locker and the constituent is merely a licensee having access to go into the strong room and operate the locker. Learned counsel also pointed out that the hirer does not even have the facility to open the locker on his own, because the locker cannot be opened unless the master key available with the bank is also simultaneously operated. Learned counsel, therefore, submitted that the bank does nothing having the effect of putting the lockers in the possession of the bailee. On the other hand, the conditions in the contract unmistakably indicate that the exclusive possession and custody of the locker are kept with the bank itself always and not even liberty is given to the hirer to open the locker whenever he likes. The lockers can be operated only during the prescribed hours and a hirer cannot operate the | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-19 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | The lockers can be operated only during the prescribed hours and a hirer cannot operate the locker with his own key, unless the master key remaining with the banks is also simultaneously used. On these facts, the learned counsel contended that there is neither delivery of the lockers nor has anything been done by the bank having the effect of putting the lockers on the possession of the bailee. The facts indicate the contrary. Learned counsel invited our attention to Chitty on Contracts, 24th Edition, Volume II, to the observations at page 2236 concerning "Hire at common law". It is observed that in the bailment termed "hire" the bailee receives both possession of the chattel and the right to use it, in return for a price or remuneration to be paid to the bailor. The bailee is under an obligation to return the chattel to the owner at the expiration of the fixed period of the hiring and to pay the cost of returning it. While the bailment continues to subsist, the bailee is entitled to possessory remedies and can prevent anyone, including the owner, for interfering with the chattel against his will. Adverting to these observations, Sri Ananta Babu claims that the arrangement for providing lockers cannot but be regarded as a bailment under law and once that is accepted, none of the conditions associated with the contract of bailment is satisfied in the present case. In our opinion, the learned counsel is well fortified in his submissions. We are not told by the learned Government Pleader that the contract of hire between the bankers and the constituents can be regarded legally as anything other than the contract of bailment. Indeed the nature of the transaction undoubtedly puts the contract as one of bailment. That being so, delivery is essential which is lacking in the present case. Clause (29-A) of article 366 of the Constitution of India and the consequential amendments made to the Sales Tax Act refer in our opinion only | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-20 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | of the Constitution of India and the consequential amendments made to the Sales Tax Act refer in our opinion only to cases where there is a transfer of the right to use goods delivered to the person concerned. It does not take in its sweep transactions which merely licence a person to use goods without securing possession. Take for instance a case where a person takes on hire a cab from a rental agency. The agency delivers the car to the person for his use during a specified period and the person concerned returns the vehicle after user and pays to the agency the charge for such user. That clearly is a transaction caught by clause (29-A) in article 366 of the Constitution. Or, take for instance the case of a person who took on hire articles from a furniture makes for his use for a specified period. He carries the furniture home, used it for a particular period and returns it to the furniture maker after user and pays appropriate charges. That again is an instance falling under clause (29-A) of article 366 of the Constitution and the consequential amendments in the Act. It is not necessary to multiply instances of this type as there are plenty. In making the aforesaid amendments, in our opinion, the law envisaged the levy of tax in respect of sums paid for securing the right to use the goods, of which possession or delivery has been taken by him. It does not apply to cases where the person concerned is merely a licensee without possession of the goods. | https://indiankanoon.org/doc/1788622/ |
b0b5f7363af5-21 | State Bank Of India And Ors. vs State Of Andhra Pradesh on 9 March, 1988 | 15. Our attention has been invited to a decision of the Calcutta High Court in Bank of India v. Commercial Tax Officer, Calcutta [1987] 67 STC 199 wherein the same question was considered by a learned single Judge of the Calcutta High Court. The learned Judge held that tax is not leviable in respect of lockers hired by banks to customers. Although we tread the ground through a route slightly different from what the learned Judge did we reached the same destination; we are in respectful agreement with the view expressed by the learned single Judge.
16. For all the aforesaid reasons, we hold that no power is conferred on the sales tax authorities to levy sales tax in respect of hire charges collected by banks for providing safe deposit lockers under section 5-E of the Act. If, however, a contrary view is possible, we still hold that the petitioners cannot be called upon to pay tax till the date of publication of G.O. Ms. No. 794 dated 19th August, 1987, as the notification issued under section 9 of the Act withdrawing the exemption from the levy of tax had taken effect only from that date.
17. In the result, all the writ petitions are allowed, but in the circumstances, without costs. Advocate's fee Rs. 200 in each.
18. Writ petitions allowed. | https://indiankanoon.org/doc/1788622/ |
64ed99d40797-0 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | JUDGMENT Syed Shah Mohammed Quadri J. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-1 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 1. In these four writ petitions, the constitutional validity of section 115J of the Income-tax Act, 1961, is questioned. As the question raised in these writ petitions is common, they were heard together and are being disposed of by a common judgment. For appreciating the contentions raised in these writ petitions, we would refer to the facts in Writ Petition No. 8060 of 1992. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-2 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 2. The first petitioner in this writ petition is a public limited company which is registered under the Companies Act, 1956. The second petitioner is one of the equity shareholders of the first petitioner-company. It is stated that under the provisions of the Companies Act, the petitioner is required to prepare the balance-sheet and the profit and loss account in accordance with Schedule VI to the said Act. For the financial year 1989-90, i.e., April 1, 1989, to March 31, 1990, the petitioner disclosed Rs. 65,52,925 as the net profit. The petitioner filed income-tax returns for the said year claiming that under section 32(2) of the Act, the company has unabsorbed depreciation allowance of Rs. 11,99,745 which the petitioner was entitled to carry forward; the petitioner had also investment allowance computed in accordance with the provisions of section 32A of the Act at Rs. 49,59,734 which remained unabsorbed. After necessary adjustment of the other allowances and expenses, the income for that year was determined at Rs. 61,59,479. But after setting off the brought forward depreciation and investment allowance for the assessment year, the income of the petitioner for the assessment year 1990-91 became nil. The petitioner says that section 115J was inserted by the Finance Act, 1987; and a new concept of book profit was introduced; and the provisions of section 80VVA were deleted. By virtue of the operation of the newly inserted provision 115J, the books profits liable to tax were determined at Rs. 29,25,878 and tax of Rs. 14,62,939 computed at 50 per cent. and surcharge of Rs. 1,17,035 at eight per cent. of the income-tax, totalling to Rs. 15,79,974 were paid along with returns of | https://indiankanoon.org/doc/737044/ |
64ed99d40797-3 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | income-tax, totalling to Rs. 15,79,974 were paid along with returns of income for the year 1990-91. It is added that for the assessment year 1991-92, the petitioner had the profit of Rs. 1,10,64,691. After making necessary adjustments as per the Act and the rules framed thereunder, the taxable income was arrived at Rs. 18,63,394 on which tax together with surcharge was paid at Rs. 8,57,160. The petitioner-company deducted the income determined for the assessment year 1991-92 under the provisions of section 115J and claimed to set off the notional income on which it has suffered tax for the year 1990-91. That was not allowed by the Income-tax Officer. The petitioner, therefore, challenges the constitutional validity of section 115J saying, it is unconstitutional and violative of articles 14 and 19(1)(g) of the Constitution of India. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-4 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 3. In the counter-affidavit filed by the Revenue, it is stated that the minimum tax on companies was dealt with by section 80VVA which was inserted in 1983 but from the year 1988-89 that provision was deleted and section 115J was inserted. Sample studies carried out by the Central Board of Direct Taxes revealed that while the provisions of section 80VVA have had the effect of subjecting the companies to minimum tax which they would not have otherwise paid, there were still companies which had no income-tax liability despite substantial profits. This was due to the fact that the companies were availing of depreciation in full under the Income-tax Act, and thus the phenomena of prosperous zero-tax companies continued. There were about 650 such companies during the relevant assessment year 1984-85. About 28 per cent. of the companies (139 companies) accounting for a net profit of Rs. 274 crores showed no tax liability. So after conducting a careful study, by the Finance Act, 1987, section 80VVA was deleted and section 115J was introduced by way of an independent Chapter XII-B in the Income-tax Act and it came into force from the assessment year 1988-89. It is only when the total income of a company under the provisions of the Income-tax Act, in respect of any accounting year, of any company, is less than 30 per cent. of its book profits for purposes of charging income-tax, that 30 per cent. of the book profit is treated as income. Subject to some adjustments, the book profits became the basis of taxation or assessability of income-tax. The figures given by the petitioner company in its return for the assessment year 1991-92 are not disputed. But it is stated that there is no rationality in claiming deduction of the income assessed under section 115J for the assessment year 1990-91 and there is no substance in the | https://indiankanoon.org/doc/737044/ |
64ed99d40797-5 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | section 115J for the assessment year 1990-91 and there is no substance in the contention that there would be double taxation. It is not correct that section 115J creates any hostile discrimination as alleged. Parliament in its wisdom chose the corporate sector for taxing under section 115J of the Act and the same is not open to challenge on the ground of discrimination. The Government policy of taxation strikes a balance between promotion of investment in development and levy and recovery of taxes for the purposes of developmental activities and keeping in view these factors amongst others, the Government formulated the taxation policy. For these reasons, it prayed that the writ petitions be dismissed. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-6 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 4. Sri Ravi, learned counsel for the petitioners, who led the batch, concentrated on the question of carry forward of unabsorbed losses and unadjusted allowances under sub-section (2) of section 115J when notional income becomes the subject-matter of assessment under sub-section (1) of section 115J of the Act. In other words, his submission is that where the notional income of a company is taxed, having regard to the provisions of section 115J(1), the unabsorbed loss and unadjusted allowances. etc., of an amount equal to the extend income should be allowed to be carried forward, otherwise it would result in double taxation. He has elaborated his argument with reference to the example given in the Board's Circular No. 495, dated September 22, 1987 (see [1987] 168 ITR (St.) 87); if unabsorbed losses or unadjusted allowances, equal in quantum to the income which is subject to tax under section 115J(1). are not allowed to be carried forward to the next year, then submits the learned counsel, the provisions of section 115J(1) would be liable to be struck down on the ground of violation of article 14 as well as on the ground of double taxation so to save them from the vice of unconstitutionality it is necessary to interpret sub-section (2) of section 115J in such a manner as to make the carry forward of the unabsorbed losses and unadjusted allowances, equal in amount to the income calculated under section 115J(1), permissible. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-7 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 5. Sri Muralikrishna, learned counsel appearing for the petitioner in Writ Petition No. 2221 of 1993, while adopting the arguments of Sri Ravi, adds that once the taxable income of the company is determined under sub-section (1) of section 115J that should form the basis for the purpose of determining the unabsorbed depreciation, business losses and other allowances to be carried forward and set-off against the income for the subsequent year, in other words, he submits that on determining the taxable income under section 115J(1) the corresponding amount of the scientific research expenditure that could be absorbed against that income, should be allowed to be carried forward to the next assessment year under sub-section (2) of section 115J; if any other interpretation is given to section 115J(2), then section 115J(1) would be rendered unconstitutional. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-8 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 6. Sri S.R. Ashok, learned standing counsel appearing for the Revenue, has contended that under the garb of interpreting sub-section (2) of section 115J, the assessee cannot nullify the purpose of the legislation and the scheme introduced under section 115J(1) of the Act. His contention is if sub-section (2) of section 115J is interpreted in the manner suggested by learned counsel for the petitioners, it would lead to anomalous consequences as the amounts that could be carried forward under sub-section (2) of section 115J would fall either under unabsorbed investment allowance or unabsorbed depreciation or unabsorbed loss or benefit under section 80J and each of them had its own restriction both with regard to time-limit as also with regard to computation. Had Parliament intended to provide such a relief under sub-section (2) of section 115J, it should have said so in that provision and it is not open for the petitioners to read in sub-section (2) something which has not been provided by Parliament. He submits that the example given in Board's Circular No. 495, dated September 22, 1987 (see [1987] 168 ITR (St.) 87), is the correct interpretation of sub-section (2) of section 115J. He has also contended that section 115J(1) is not open to challenge on any of the grounds urged by the petitioners.
7. We shall first deal with the contention of learned counsel for the petitioners in regard to carry forward of unabsorbed losses or unadjusted allowances, etc., under sub-section (2) of section 115J.
8. It will be useful to read here section 115J which runs as under : | https://indiankanoon.org/doc/737044/ |
64ed99d40797-9 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 8. It will be useful to read here section 115J which runs as under :
"115J. Special provisions relating to certain companies. - (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of generation of distribution of electricity), the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day April, 1988, but before the 1st day of April, 1991 (hereafter in this section referred to as the relevant previous year), is less than thirty per cent. of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent. of such book profit.
(1A) Every assessee, being a company, shall, for the purpose of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956).
Explanation. - For the purposes of this section, 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A), as increased by -
(a) the amount of income-tax paid or payable, and the provision therefor; or | https://indiankanoon.org/doc/737044/ |
64ed99d40797-10 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | (b) the amounts carried to any reserves (other than the reserves specified in section 80HHD or sub-section (1) of section 33AC), by whatever name called; or
(c) the amount or amounts set aside to provisions made for meeting liabilities other than ascertained liabilities; or
(d) the amount by way of provision for losses of subsidiary companies; or
(e) the amount or amounts of dividends paid proposed; or
(f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III applies; or
(g) the amount withdrawn from the reserve account under section 80HHD, where it has been utilised for any purpose other than those referred to in sub-section (4) of that section; or | https://indiankanoon.org/doc/737044/ |
64ed99d40797-11 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | (h) the amount credited to the reserve account under section 80HHD, to the extent that amount has not been utilised within the period specified in sub-section (4) of that section; or (ha) the amount deemed to be the profits under sub-section (3) of section 33AC;
if any amount referred to in clauses (a) to (f) is debited or, as the case may be, the amount referred to in clauses (g) and (h) is not credited to the profit and loss account, and as reduced by, -
(i) the amount withdrawn from reserves (other than the reserves specified in section 80HHD) or provisions, if any such amount is credited to the profit and loss account :
Provided that, where this section is application to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1988, shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount withdrawn) under this Explanation; or
(ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or | https://indiankanoon.org/doc/737044/ |
64ed99d40797-12 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | (iii) the amounts (as arrived at after increasing the net profit by the amounts referred to in clauses (a) to (f) and reducing the net profit by the amounts referred to in clauses (i) and (ii) attributable to the business, the profits from which are eligible for deduction under section 80HHC or section 80HHD; so, however, that such amounts are computed in the manner specified in sub-section (3) or sub-section (3A) of section 80HHC or sub-section (3) of section 80HHD, as the case may be; or | https://indiankanoon.org/doc/737044/ |
64ed99d40797-13 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | (iv) the amount of the loss or the amount of depreciation which would be required to be set-off against the profit of the relevant previous year as if the provisions of clause (b) of the first provision (1) of section 205 of the Companies Act, 1956 (1 of 1956), are applicable.
(2) Nothing contained in sub-section (1) shall affect determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year to years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J." | https://indiankanoon.org/doc/737044/ |
64ed99d40797-14 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 9. By the Finance Act, 1987, Chapter XIIB containing a lone section, viz., section 115J, extracted above, was inserted with effect from April 1, 1988. It replaced section 80VVA and remained in force for three years, viz., 1988-89, 1989-90 and 1990-91. Section 80VVA had placed certain restrictions on allowances of various incentives allowable under the Act. But the unabsorbed part of the allowances was allowed to be carried forward to the subsequent year; however, that does not cover depreciation allowances or settings off business losses. The object of insertion of section 115J is to ensure levy of minimum tax on what are known as "prosperous zero-tax companies". Such companies were showing huge profits in the profit and loss account and were also declaring dividends to the shareholders but on account of various incentives and increase in depreciation rates, among others, were showing very less or "Nil" taxable total income. Under the scheme of the above section which is a self-contained provision, certain companies whose total income as computed under the provisions of the Income-tax Act, in respect of the previous year relevant to the assessment year after April 1, 1988, is less than 30 per cent. of their book profits the total income of such companies chargeable to income-tax for the relevant previous year, is treated as an amount equal to 30 per cent. of such book profits and is taxed accordingly. It also provides for certain adjustments by way of adding amounts and granting deductions for computing the chargeable income under section 115J(1). | https://indiankanoon.org/doc/737044/ |
64ed99d40797-15 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 10. Sub-section (2), with which we are concerned, says that the provisions of sub-section (1) shall not affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under : (a) sub-section (2) of section 32; or (b) sub-section (3) of section 32A; or (c) clause (ii) of sub-section (1) of section 72; or (d) section 73; or (e) section 74; or (f) sub-section (3) of section 74A; or (g) sub-section (3) of section 80J.
11. Sub-section (2) is only a saving provision. It provides that determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions, enumerated above, will have to be made unaffected by the provisions in sub-section (1) of section 115J.
12. It is argued that having regard to sub-section (1), determination of the amounts to be carried forward of losses, etc., referred to above, three propositions are possible, viz. :
(i) Once the income is determined under sub-section (1) in an assessment year, from that year unabsorbed losses and unadjusted allowances, etc., mentioned above, cannot be carried forward any more because by operation of sub-section (1) of section 115J, a new scheme has come into effect which puts an end to the carrying forward of losses, etc.; | https://indiankanoon.org/doc/737044/ |
64ed99d40797-16 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | (ii) On the determination of the taxable income, under the relevant provisions of the Act, whatever amounts remain to be carried forward as per regular computation, either by way of unabsorbed losses or unadjusted allowances, etc. the same be carried forward to the next year ignoring the fact that a notional income is made taxable under sub-section (1);
(iii) The taxable income arrived at under sub-section (1) of section 115J should be deemed as available for purposes of setting of unabsorbed losses or unadjusted allowances, etc., in that assessment year but postponed to the next year without allowing the actual adjustment. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-17 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 13. In our considered view sub-section (2) gives statutory recognition to the proposition (ii) and gives no scope to entertain propositions (i) and (iii). We would examine these propositions and the merits of the Board's Circular No. 495, dated September 22, 1987 (see [1987] 168 ITR (St.) 87), interpreting sub-section (2) of section 115J. The circular recites that it is an accepted canon of taxation to levy tax on the basis of ability to pay; however, as a result of various tax concessions and incentives, some companies which are marking huge profits and also declaring substantial dividends, have been managing their affairs in such a way as to avoid payment of income-tax and accordingly as a measure of equity section 115J has been introduced by the Finance Act, 1987. Under the new provision, in the case of a company whose total income, as computed under the provisions of the Income-tax Act is less than 30 per cent. of the book profit, computed under the section, the total income chargeable to tax will be 30 per cent. of the book profit as computed. The book profit will be the net profit as shown in the profit and loss account prepared in accordance with the provisions of the Sixth Schedule to the Companies Act, 1956, after certain adjustments. This provision involves two processes. First, the assessing authority has to determine the income of the company under the provisions of the Income-tax Act and, secondly, the book profit has to be worked out in accordance with the Explanation below section 115J(1A), then it will have to be seen whether the total income determined under the first process is less than 30 per cent. of the book profit; if so, sub-section (1) would be invoked and the total income of such company chargeable to income-tax for the relevant previous year shall be equal to 30 per cent. of | https://indiankanoon.org/doc/737044/ |
64ed99d40797-18 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | chargeable to income-tax for the relevant previous year shall be equal to 30 per cent. of such book profit. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-19 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 14. Sub-section (2) of section 115J provides that the application of this process shall not affect the carry forward of unabsorbed depreciation, unabsorbed investment allowance, business losses, deficiency under sub-section (3) of section 80J to the extent not set-off, as computed under the Income-tax Act. It is illustrated in the said Board's circular as under (see [1987] 168 ITR (St.) 111) :
----------------------------------------------------------------------Book profits for the purposes of Profit under the Income-tax
Companies Act, 1956 Act
----------------------------------------------------------------------
(1) (2)
----------------------------------------------------------------------
Year 1984
(Rs.) (Rs.)
Loss excluding Loss excluding
depreciation 3,00,000 depreciation 80,000
Depreciation 1,00,000 Depreciation 4,00,000
Year 1985
Profit before Profit before
depreciation 5,00,000 depreciation 5,00,000
Less : Depreciation Less : Depreciation 4,00,000
as per books 2,00,000
-------- --------
3,00,000 1,00,000
Less : Deduction under Less : Business loss
section 205(2)for for 1984 80,000
the year 1984 1,00,000
-------- --------
2,00,000 20,000
C.F. Business loss Less : Unabsorbed
1984 3,00,000 depreciation 20,000
-------- --------
Nil
C.F. unabsorbed
depreciation 1985 3,80,000 | https://indiankanoon.org/doc/737044/ |
64ed99d40797-20 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | depreciation 1985 3,80,000
Year 1986
Net loss as per books Business loss (-) 10,00,000
before depreciation (-) 10,00,000
Depreciation 2,00,000 Add : Depreciation
as per I.T.
Rules (-) 4,00,000
Business loss to be
carried forward (-) 10,00,000
Unabsorbed
depreciation
to be carried
forward (-) 2,00,000
Year 1987
Net Profit 10,00,000 Profit before
depreciation 10,00,000
Book depreciation 2,00,000 Less : Depreciation
as per I.T.Rules 8,00,000
2,00,000
Less : Carried
forward business loss
for 1986 to the
extent adjusted 2,00,000
---------
Assessed income Nil
---------
(Rs.)
Application of section 115J
Profit before depreciation 10,00,000 | https://indiankanoon.org/doc/737044/ |
64ed99d40797-21 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | Less : Book depreciation 2,00,000
---------
8,00,000
Less : Deduction under section 205(2) 2,00,000
---------
6,00,000
Out of the amount whichever is less :
1984 : Business loss 3,00,000
1986 : Business loss 10,00,000
---------
Total loss 13,00,000
1986 : Depreciation 2,00,000
Assessable income 30 per cent. of Rs. 6 lakhs, i.e.,
Rs. 1.8. lakhs
Amount to be carried forward as per sub-section (2)
of section 115J
1984 : Unabsorbed depreciation 3,80,000
1986 : Business loss 8,00,000
Unabsorbed depreciation 4,00,000 | https://indiankanoon.org/doc/737044/ |
64ed99d40797-22 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 15. The contents of the above circular read with the example given thereunder, extracted above, would make it evident that there is no scope for the Revenue to contend that in view of the provision of sub-section (1), the unabsorbed depreciation allowance, unadjusted loss or deficiency, etc., as the case may be, can no longer be carried forward to the subsequent year to years. The second proposition represents the stand of the Revenue, while the assessee presses into service the third proposition. In the light of the example given in the circular of the Board, we shall consider these aspects. At the end of the year 1985, it is noted, the company was having carried forward unabsorbed depreciation of Rs. 3,80,000. In the year 1986, the company was having net loss of Rs. 10,00,000, depreciation of Rs. 2,00,000 and unabsorbed depreciation of Rs. 2,00,000 to be carried forward; further business loss to be carried forward in a sum of Rs. 10,00,000, thus it was having business loss of Rs. 10,00,000 and total depreciation of Rs. 4,00,000. But in the year 1987, the company had net profit of Rs. 10,00,000 and book depreciation of Rs. 2,00,000; the depreciation as per the Income-tax Rules was Rs. 8,00,000. After deducting depreciation under the Income-tax Rules, the income was reduced to Rs. 2,00,000. Against this income of Rs. 2,00,000, out of the unadjusted loss of 1986 amounting to Rs. 10,00,000, a sum of Rs. 2,00,000 would get adjusted leaving the assessable income as nil. Now under the Companies Act, from out | https://indiankanoon.org/doc/737044/ |
64ed99d40797-23 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | would get adjusted leaving the assessable income as nil. Now under the Companies Act, from out of the profits of Rs. 10,00,000, the book depreciation of Rs. 2,00,000 was deducted reducing the income to Rs. 8,00,000; under section 205(2) of the Companies Act, a sum of Rs. 2,00,000 was deducted leaving the income of Rs. 6,00,000, after adjusting under the Explanation, 30 per cent. of Rs. 6,00,000, i.e., 1.8 lakhs would be taxable under sub-section (1) of section 115J. | https://indiankanoon.org/doc/737044/ |
64ed99d40797-24 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 16. Proposition (ii) which in accordance with sub-section (2) of section 115J would entitle the company to carry forward unabsorbed depreciation of Rs. 3,80,000 unadjusted depreciation of Rs. 4,00,000 and business loss of Rs. 8,00,000. So far as the first two items are concerned, there is no controversy. Regarding the unabsorbed business loss of Rs. 8,00,000, what to contained is that out of carried forward business losses of Rs. 10,00,000, only Rs. 2,00,000 of business loss was adjusted as the amount of income was reduced to nil; however, as the Revenue is assessing the company to income-tax on Rs. 1.8 lakhs, the income arrived at under section 115J(1), whereas, in fact, income as per income-tax calculations is nil; the unadjusted depreciation and/or business loss which is available for adjustment but could not be adjusted against the said taxable income, that is, so much of the loss as can be adjusted against Rs. 1.80 lakhs should be allowed to be carried forward to the next year. We find it difficult to accede to the contention of learned counsel for the petitioners for reasons more than one. Firstly, for the purpose of arriving at the total taxable income under the provisions of the Income-tax Act, out of the carried forward loss, a sum of Rs. 2 lakhs was already adjusted and that resulted in the nil income and business loss, unabsorbed of Rs. 8,00,000 which is allowed to be carried forward, as such the claim to carry forward Rs. 1,80,000, equal to taxable income under sub-section (1) is misconceived. Secondly, because sub-section (2) of section 115J of the Act is saving provision and does not confer any | https://indiankanoon.org/doc/737044/ |
64ed99d40797-25 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | (2) of section 115J of the Act is saving provision and does not confer any further right, the amount of income arrived at for the purpose of exigibility of income-tax under sub-section (1) of section 115J, cannot be taken note of, while considering the question of carrying forward of unadjusted loss. Thirdly, the very object of the provision of section 115J is to tax such companies which are making huge profits and also declaring substantial dividends, but are managing their affairs in such a way as to avoid payment of income-tax, as a result of various tax concessions and incentives and for that purpose the taxable income is determine under sub-section (1) of section 115J, if any loss equal to the income thus determined is allowed to be adjusted, then that would frustrate and nullify the very object of enacting the provision. In our view, from a plain reading of sub-section (2) of section 115J, it is very clear that the quantum of unabsorbed losses, unadjusted depreciation, etc., for the purpose of carrying forward as to be under the provisions of the Act, irrespective of the quantum of income determined under the provisions of sub-section (1) of section 115J. We, therefore, find no illegality in the example of calculations given in the Board Circular No. 495, dated September 22, 1987 (see [1987] 168 ITR (St.) 87). | https://indiankanoon.org/doc/737044/ |
64ed99d40797-26 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 17. This takes us to the second contention which was somewhat faintly contended and that is, if operation of sub-section (2) of section 115J, as given in the Board's circular is accepted, the provision of sub-section (1) of section 115J would be rendered unconstitutional, as it will be discriminatory and violative of articles 14 and 19(1)(g) of the Constitution of India. The discrimination alleged is that the provision is applicable only to companies but not to other units of taxation. This contention in our view is without any substance. In Jain Brothers v. Union of India , the Supreme Court observed that it was well-settled that in fiscal enactments the Legislature had a larger discretion in the matter of classification so long as there is no departure from the rule that persons included in a class were not singled out for special treatment. In that case the classification of firms as the registered firm and the unregistered firm and taxing them differently, was questioned as arbitrary and violative of article 14. It was held that it was open to the Legislature to say that once a registered firm committee a default attracting penalty, it should be deemed or considered to be an unregistered firm for the purpose of imposition of penalty and no question of discrimination under article 14 could arise in such a situation. It was also observed that there was nothing to prevent the Legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but withholding the same when it committed a default and became liable to imposition of penalty.
18. On the question of applicability of article 14 to fiscal legislation, in ITO v. N. Takin Roy Rymbai , the Supreme Court has laid down as under : | https://indiankanoon.org/doc/737044/ |
64ed99d40797-27 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | "In taxation laws the State has, in view of the intrinsic complexity of fiscal adjustments of diverse elements, a considerably wide discretion in the matter of classification for taxation purposes. Legislature has ample freedom to select and classify persons, districts, goods, properties, incomes and objects which it would be tax and which it would not tax. So long as the classification made within this wide and flexible range by a taxing statue does not transgress the doctrine of equality it is not vulnerable to attack on the ground of discrimination merely because it taxes of exempts from taxation, some incomes or objects and not others. Nor is the mere fact that a tax falls more heavily on some in the same category, by itself a ground to render the law invalid."
19. The same principle is reiterated in R.K. Garg v. Union of India [1982] 133 ITR (SC) and Kerala Hotel and Restaurant Association v. State of Kerala .
20. Before concluding the discussion on this aspect, we may usefully refer to the judgment of the Division Bench of the Delhi High Court in National Thermal Power Corpn. Ltd. v. Union of India , wherein the Division Bench has held that the provision of section 115J is not violative of article 14 or 19(1) of the Constitution.
21. We are in respectful agreement with the view expressed by the learned judges.
22. The next contention is that sub-section (1) of section 115J results in double taxation. We are unable to appreciate this contention. Firstly, because what is being taxed is income determined on the basis prescribed under the said impugned provision and there is no provision to re-tax the same income as such, as of fact there is no double taxation. And, secondly, because double taxation per se would not render an otherwise valid provision, invalid. (See Jain Brothers v. Union of India . | https://indiankanoon.org/doc/737044/ |
64ed99d40797-28 | Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996 | 23. However, learned counsel submits that if the losses, etc., which are not set-off or adjusted against the income determined as taxable under section 115J(1) and are not allowed to be carried forward, it would result in double taxation. We do not think so. The right to carry forward, it would result in double taxation. We do not think so. The right to carry forward losses, unadjusted allowances, etc., is kept intact by sub-section (2) of section 115J; merely because the amount equal to the income determined as taxable under sub-section (1) is not treated as unabsorbed loss, etc., which under no provision of the Act can be so treated, it cannot be said that there is double taxation.
24. For the aforementioned reasons, the writ petitions are without any substance and accordingly we dismiss them; having regard to the circumstances of the cases, we make no order as to costs. | https://indiankanoon.org/doc/737044/ |
058e532644cb-0 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | JUDGMENT Chinnappa Reddy, J.
1. Nawab Salar Jung III, a nobleman of erstwhile Hyderabad State died on 2-3-1949 leaving behind him a vast estate but no issue. Not unnaturally several persons came forward claiming to be heirs of the late Nawab Sajjid Yar Jang and Turab Yar Jung first cousins of the late Nawab were two such claims. But a notification published in the Jarida dated 9-5-1949 the Nizam made the Salar Jung Estate Administration Regulation, 1358 F, and appointed a Committee known as the Salar Jung Estate Committee to administer the estate of late Nawab Salar Jung. The regulation provided that no person including heirs, if any, of the late Salar Jung shall be entitled to the possession of the estate of the deceased so long as it was under the administration of the Committee. It was further provided that the Committee should function until the Government dissolved it by notification. This Committee was continued by the Nawab Salar Jung Bahadur (Administration of Assets) Ordinance 1949 made by the Governor General of India on 12-11-1949. The Ordinance was replaced by the Nawab Salar Jung Bahadur (Administration of Assets) Act, 1950 ( a Central Act). The Nawab Salar Jung Committee was continued by this Act and it was provided that no suit or other legal proceeding for the enforcement of any right or remedy in respect of any asset shall be instituted in any Court by any person other than the Committee save with the previous consent of the Central Government. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-1 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 2. On 31-5-1949 the Nizam of Hyderabad appointed a Commission to enquire into the question of succession to the estate of the late Nawab and one of the questions referred to the Commission was whether the Jagir of the law Nawab escheated to Government. Another question was who were the heirs of late Salar Jung. The Commission was unable to proceed with the enquiry as some of the claimants filed a Writ Petition in the High Court challenging the jurisdiction of the Commission to enquiry into the question of succession. The writ petition was ultimately allowed by the High Court of Hyderabad by the judgment dated 23-9-1952. The High Court held that the Commission was not the proper forum for determining the question of succession to the estate of the Nawab. The High Court, however, directed that the management of the estate might remain with the Committee until the question of succession was settled by the Civil Court in an appropriate action. The question of succession was ultimately settled as a result of the compromise between the various claimants, including the Government. The compromise was embodied in the decree passed in O.S. 13/58 a suit filed by some of the claimants. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-2 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 3. We stated that Sajjid Yar Jung and Turab Yar Jung were two of the persons claiming to succeed to the estate of Nawab Salar Jung. According to the plaintiff (a business of Bombay), Sajjid Yar Jung, did not have the wherewithal to establish his claim to a share i the estate of Salar Jung. He, therefore, approached the plaintiff for financial help to enable him to pursue his establish his claim. The plaintiff agreed to do so. Sajjid Yar Jung agreed to return all amounts advanced by the plaintiff from time to time. In addition he also agreed to give the plaintiff a one anna share in the amount received from the estate of Salar Hung Sajjid Yar Jung executed an agreement to that effect on 27-6-1952. Pursuant to the agreement Sajjid Yar Jung and his agents were drawing large amounts from the plaintiff from time to time. The total of the amounts so drawn came to about Rs.75,000. Sajjid Yar Jung was enabled to pursue and establish his claim. He, however, passed away before the plaintiff could be paid his share of the amount received from the estate of Salar Jung. The plaintiff estimated the amount due to Sajjid Yar Jung from the estate of Salar Jung at about Rs. 60 lakhs. He claimed that he would be entitled to about Rs. 3 lakhs in addition to the return of the sums advanced by him. The plaintiff, therefore, filed a suit against the heirs of Nawab Sajjid Yar Jung for accounts and for administration of the estate of the late Nawab. He impleaded as parties to the suit the sons, daughters and widow of Nawab Sajjid Yar Jung as defendants 1 to 8. The receiver of the estate of Nawab Salar Jung Bahadur was impleaded as the 19th defendant. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-3 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | of Nawab Salar Jung Bahadur was impleaded as the 19th defendant. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-4 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 4. The heirs of the late Nawab who contested the suit denied that the plaintiff had advanced any amounts to the Late Nawab and generally denied all that was said in the plaint. They also pleaded that the suit was barred by limitation. They further pleaded that the agreement dated 27-6-1952 was unenforceable in law as it was "in the nature of a chaperty deal" which was 'opposed to public policy and forbidden by law." | https://indiankanoon.org/doc/1685776/ |
058e532644cb-5 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 5. The learned Chief Justice of the City Civil Court found that the agreement was true, that it was admissible in evidence, that amounts were advanced by the plaintiff to late Sajjid Yar Jung as claimed by the plaintiff ad that the suit was not barred by limitation. However, he found that the agreement was opposed to public policy as the object of the agreement was that the plaintiff should wield his influence with the Central and State Ministers to have Sajjid Yar Jung recognised as the heir of Salar Jung in return for his being given a one anna share in the amount to be received by the Sajjid Yar Jung from the estate of Salar Jung. On that ground learned Chief Judge held that the agreement could not be enforced. He also held that it was unconscionable. He further held that even the amounts actually received by the Sajjid Yar Jung could not be recovered by the plaintiff. The suit was dismissed with costs. The plaintiff has preferred this appeal. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-6 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 6. The appeal was filed against all the legal representatives of the Sajjid Yar Jung. During the pendency of the appeal, Askar Nawaz Jung, 1st defendant in the appeal, died. C.M.P. No. 1990/1972 was filed to bring on record the legal representatives of Askar Nawaz Jung as parties in the appeal. Twelve persons were mentioned in C.M.P. No. 1990/72 as the legal representative of Askar Nawab Jung. Respondent No. 8 was 'Dorothy Baker alias Zaibunnissa alias Nazim and Hamidunnisa alias Baby, both being minors were proposed to be represented by their mother Dorothy Baker alias Zaibunnissa Begum alias Munavari Jahan Begum, respondent No. 8. It was mentioned in the petition that respondents 8 to 12 were residing opposite Dr. Kirloskar's Nursing Home in Bashir Bagh, Hyderabad. C.M.P. 1992/1972 was filed to appoint the 8th respondent as guardian of respondents 11 and 12. On the ground that the notices sent to respondents 8, 11 and 12 were returned unserved for the reason that they had vacated the house and the advocate for the appellant had not filed fresh batta with correct address though informed abut it, matter was posted first before the Deputy Registrar and later before the Court for orders. On 30-1-1974 Gopal Rao Ekbote, C.J. and Chennakesav Reddy, J., passed the following order : | https://indiankanoon.org/doc/1685776/ |
058e532644cb-7 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | "Even in regard to the 1st respondent C.M.P. 1990 and 1992 of 1972 were filed to bring on record the legal representatives and to appoint R-8 as guardian for minor respondents 11 and 12, all the respondents except respondents 11 12 were served with notices. The notices which were sent to R-8 for self and as guardian for minor respondents 11 and 12 were returned unserved with the endorsement 'house vacated'. Intimation of the fact was given to the counsel in the first week of December 1973 and he was asked to file a fresh batta with correct address and other costs. The order, however, was not complied with till today. The matter was placed before Deputy Registrar thrice. No one was present and nothing was done in that behalf. Even today no one appeared. We are therefore constrained to dismiss the appeal even as against the 1st respondent on the same ground. Although some of L.Rs. are served, but others are not served, particularly minors. Therefore, the appeal will abate against R. 1 as a whole. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-8 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | Post the appeal for final hearing next week."
On 10-6-1974 when the appeal came up for hearing before one of us and Krishna Rao, J., the learned counsel for the respondents raised a preliminary objection that the abatement of the appeal against the first respondent had, in law, resulted in an abatement of the entire appeal. At that stage, while going through the records, the learned counsel for the appellant claimed to have discovered that respondents 8, 11 and 12 in C.M.P. 1990/72 had in fact been served with notices and that the matter had been wrongly posed before the Court on 30-1-1974. At his request we adjourned the case to enable him to file applications to set aside the order dated 30-1-1974. Thereafter the appellant filed C.M.P. Nos. 4740 and 4824 of 1974 to condone the delay in seeking to set aside the orders dated 30-1-1974 passed in C.M.P. Nos. 1990/72 and 1992/72. Notice was ordered to the respondents. The appeal and the C.M.P. are now before us. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-9 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 7. We have looked into the original notices issued to respondents 8 to 12 in C.M.P. Nos. 1990 and 19921 of 1972. We find that some persons received the notices on 26-12-1972 on behalf of respondents 8, 11 and 12. Whoever was the person that received the notices it was certainly not the 8th respondent. The signature of the person who has signed on the notices bears no resemblance whatever to the signature of the 8th respondent. On the other hand, we find that notices appear to have been taken out once again to respondents 8, 11 and 12 and on 1-11-1973 the Process server made an endorsement on the notices to the effect that the respondents had vacated the house and gone to live elsewhere. It is clear that respondents 8, 11 and 12 were never served with notices. The order dated 30-1-74 cannot therefore be set aside on the ground of mistake of fact. The learned counsel for the appellant also argued that the Court was wrong in holding that the appeal had abated against respondent No. 1 as a whole. He argued that when notices had been served on nine out of the twelve legal representatives, the court acted without jurisdiction in declaring that the appeal had abated against the 1st respondent 'as a whole'. We will consider this question with preliminary objection raised by the learned counsel for the respondents that the appeal having abated against the first respondent it must be considered to have abated as a whole against all the respondents. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-10 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 8. In support of his preliminary objection Sri Jaleel Ahmed relied on a catena of decisions to which we shall make a brief reference in State of Punjab v. Nathu Ram, , land belonging to two brothers was acquired. The Arbitrator to whom the question of compensation was referred made an award against which the Government preferred an appeal. During the pendency of the appeal one of the brothers died. His legal representatives were not brought on record. So the appeal abated against him. The Supreme Court held that the appeal could not proceed against the other brother either. Reghubir Dayal J., observed that the Court would not proceed with an appeal (a) when the success of the appeal might lead to the court's coming to a decision which would be in conflict with the decision between the appellant and the deceased respondent and which would, therefore, lead to the court's passing contradictory decrees with respect to the same subject-matter; (b) when the appellant could not have brought the action for the necessary relief against those respondents alone who were still before the court; and (c) when the decree against the surviving respondents would be ineffective.
9. In Ramswarup v. Munshi, a pre-emption decree had been granted. The vendees preferred an appeal to the Supreme Court. Of the five appellants first and second appellants constituted one group and appellants 3, 4 and 5 constituted another group. While the appeal was pending the first appellant died, but his legal representatives were not brought on record. The sale in the case was not a sale of any individual item of property but one of the entire set of properties. The Supreme Court held that the decree was a joint one and as part of the decree had become final by reason of abatement, the entire appeal must be held to be abated. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-11 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 10. In Rameswar Prasad v. Shambehari Lal, , it was held that if in respect of one appellant the appeal had abated and the decree in favour of the respondents had become final to that extent, it would be against the scheme of the Code of Civil Procedure to hear the appeal if the decree of the lower court proceeded on a ground common to all the plaintiffs or defendants. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-12 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 11. In Raghunath v. Ganesh, , Shamdass and Jaigopal had purchased the property prescribed as Lot No. 8 under a single sale deed. Jaigopal died and his legal representatives were not brought on record. The appeal in the Supreme Court was concerned with several items of property, besides Lot No. 8 which were in the possession of other defendants. An argument was advanced that the failure to bring the legal representatives of Jaigopal on record resulted in the abatement of the entire appeal. The Supreme Court repelled the contention and said that the interests of the other defendants who were in possession of various other properties were independent and, therefore, the whole of the appeal could not abate because the heirs of certain deceased defendant which was in possession of one property had not been brought on record. But so far as lot No. 8 was concerned, it was held that since there was only a single sale deed the appeal abated and could not proceed against Shamdas also. This case is an instructive case since it shows how the death of a respondent may not allow further proceedings in an appeal against some respondents while it may allow further proceedings in an appeal against other respondents depending upon whether the interests of the other respondents were the same as the interest of the deceased respondent.
12. In Gupta v. Murali Prasad, , the three tests laid down by the Supreme Court in State of Punjab v. Nathu Ram, were reiterated and it was further pointed out that the tests were not cumulative and that even if one of them was satisfied the court would have to dismiss the appeal. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-13 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 13. In Md. Suleman v. Md. Ismail, the plaintiff instituted a suit against persons who were not the only heirs of a deceased person against whose estate of the plaintiff had a claim. The plaintiff had made diligent and bona fine enquiry and had instituted the suit in the genuine belief that the defendants were the only persons interested in the estate. It turned out that there were others also who were interested in the estate. The Supreme Court was of the view that the question whether a decree obtained by a creditor against the heirs of a deceased person was binding upon the entire estate or only upon those who were impleaded eo nomine as parties was part of the law of procedure which regulated all matters gong to the remedy. The Supreme Court held that in the absence of fraud or collusion and in the absence of other circumstances which would indicate that there had not been a fair or real trial or that the absent heir had a special defence was not and could not be tried in the earlier proceeding, the decree would bind the absent heirs also. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-14 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 14. The principles deducible from these decisions of the Supreme Court are that on the abatement of an appeal against one respondent the Court cannot proceed with the appeal against the other respondents (1) If the success of the appeal would lead to contradictory decisions with respect to the same subject-matter (2) if the appellant could not have brought the action against the remaining respondents only and (3) if the decree granted against the surviving respondents would be ineffective. The tests are not cumulative and the entire appeal will have to be dismissed even if one of them is satisfied. These principles are founded on the assumption that the appellant has allowed the appeal to abate against one of the respondents by his own default. But where the appellant after diligent and bona fide enquiry genuinely believes that some persons alone are the heirs of the deceased respondent and brings them on record, a decree passed against such persons would bind the entire estate of the deceased person, subject of course to the absence of fraud or collusion or other circumstances which would indicate that there had not been a fair or real trial, or that the absent heir had no special defences which were open to them. If these principles are applied it must be held that the failure of the appellant to bring on record respondents 8, 11 and 12 in C.M.P. No. 1990/72 resulted in the abatement of the appeal against Askar Nawab Jung the 1st respondent in the appeal, as was held in the order passed by the Gopal Rao Ekbote, C.J., and Chennakesav Reddy, J., on 30-1-1974. Applying the same principles it must be further held that abate of the appeal against Askar Nawab Jung, the 1st respondent, must also lead to the position that the appeal cannot be heard against the other respondents either. The interests of the other respondents in the appeal are the same as the interests of Askar Nawab Jung | https://indiankanoon.org/doc/1685776/ |
058e532644cb-15 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | interests of the other respondents in the appeal are the same as the interests of Askar Nawab Jung and any success in the appeal against the other respondents would lead to contradictory decisions. On the one hand, the agreement would be void against Askar Nawab Jung heirs while it would be valid against the other respondents. This is a situation which the appellant had brought upon himself. There was no diligence at all on his part. It is not a case where he was not aware who the heirs of Askar Nawab Jung were. He filed a petition to implead all the heirs of Askar Nawab Jung but defaulted in taking appropriate steps to bring all of them on record. Even after the order of Gopal Rao Ekbote, C.J., and Chennakesav Reddy, J., was passed on 30-1-1974 he did not take any steps to have the order reviewed on any of the grounds now mentioned. In the petitions filed by him he does not even state why he delayed in filing the petitions. We have, therefore, no option but to hold that in view of the abatement of the appeal against the 1st respondent, it is not permissible for us to proceed with the appeal against the other respondents. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-16 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 15. The learned counsel for the appellant argued that in an action for administration it was not necessary that all the heirs of the deceased should be impleaded as parties. He relied on the decision of the Privy Council Mohammedali v. Safia Bai, AIR 1940 PC 215. That was a case where a Mohammadan heir brought a suit against his co-heirs for administration. On the death of one of the defendants the legal representatives were not brought on record. It was held that the suit for administration did not come to an end. The Privy Council pointed out that the contention that the plaintiffs suit had abated as a whole involved an assumption that the plaintiff was claiming relief against the deceased and that the deceased's heirs were entitled to resist the grant of such relief. No step of that reasoning could be justified, according to their Lordships. The situation here is completely different. The action is not by an heir against his co-heirs. The action is by a creditor against the heirs representing the estate of the deceased. Relief was claimed by the plaintiff against all the defendants and each of the defendants had a right to resist the grant of relief to he plaintiff whether or not the others resisted the action. We do not think that the reasoning in Mohammedali v. Safia Bai, AIR 1940 PC 215 (Supra) can possibly apply to the facts of the present case. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-17 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 16. Assuming that our conclusion that the appeal has been determined by its abatement against the 1st respondent is not correct, we will proceed to consider the appeal on its merits. It was argued by the learned counsel that the learned Chief Judge of the City Civil Court had invented a new ground of public policy in deciding that the suit agreement was opposed to public policy. This he urged, was impermissible and he relied on the observations of the Supreme Court in Cherulal Prakh v. Mahadeo Das, . Subba Rao, J.,, (as he then was) after referring to a few earlier cases on the subject of public policy stated that the position thus :-- | https://indiankanoon.org/doc/1685776/ |
058e532644cb-18 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | "The doctrine of public policy may be summarized thus : Public policy or the policy of the law is an illusive concept. It has been described as "untrustworthy guide", "variable equality", 'uncertain one'. 'Unruly horse' etc., the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society but in certain cases, the court may relieve them of their duty on a rule founded on what is called the public policy, for want of better words. Lord Atkin describes that something done contrary to public policy is harmful thing but the doctrine is extended not only to harmful cases but also to harmful tendencies, this doctrine of public policy is only a breach of common law, and, just like any other breach of common law, it is governed by precedents the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interests of stability of society not to make any attempt to discover new heads in these days." | https://indiankanoon.org/doc/1685776/ |
058e532644cb-19 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | It will be noticed that the Supreme Court did not altogether ban the evolution of a new head of public policy. In fact, in a modern progressive society with fast changing social values and concepts it becomes more and more imperative to evolve new heads of public policy, whenever necessary, to meet the demands of new situations. Law cannot afford to remain static. It has, of necessity, to keep pace with the progress of society and judges are under an obligation to evolve new techniques or adapt old techniques to meet the new conditions and concepts. As was said by Dankwerta L.J., in Nagle v. Fielden, 1966 (2)QB 633 at p. 650:
"The law relating to public policy cannot remain immutable. It must change with the passage of time. The wind of change blows upto it."
Professor Winfield described public policy as "a principle of judicial legislation or interpretation founded on the current needs of the community." Therefore, he thought that public policy was necessarily variable and that its very variability was its surest foundation. In an essay on 'Public Policy in English Common Law' (42 Harvard Law Review P. 76) he said :
"Public policy is necessarily variable. It may be variable not only from one century to another, not only from one generation to another, but even in the same generation. Further it may vary not merely with respect to the particular topics which may be included in it, but also with respect to the rules relating to any one particular topic................ This variability of the doctrine and not a missile to be flung at it. Public Policy would be almost useless without it."
17. The whole concept of limiting the heads of public policy is based on the concept of 'freedom of contract' which was considered so very fundamental in the days when laissez faire ruled the roost. This concept was succinctly stated by Jessel MR. In 1875 as follows: | https://indiankanoon.org/doc/1685776/ |
058e532644cb-20 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | "You have this paramount public policy to consider, that you are not rightly to interfere with the freedom of contract."
But, Laissez faire had its day and its corner stone. 'Freedom of contract' has not ceased to have the idealistic attraction it had in the 19th Century. We are now more and more concerned with the social and economic interest of the community rather than individual interest. A.C. Guest in his introduction in Anson's Law of Contract (23rd Edition) says :
"Today the position is seen in a very different light. Freedom of contract is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large. In the more complicated social and industrial conditions of a collectivist society it has ceased to have much idealistic attraction. It is once realised that economic equality often does not exist in any real sense, and that individual interests have to be made to subserve those of the community. Hence there has been a fundamental change both in our social outlook and in the policy of the legislature towards contract, ad the law today interferes at numerous points with the freedom of the parties to make what contract they like."
18. With this fundamental change of outlook on the concept of Freedom of contract Jussel M.R's concept of limiting 'public policy' in the name of 'Freedom of Contract' must be considered to be on its way to becoming archaic. Further, in our view, in a developing democracy like ours dedicated to the establishment of a new social order, we cannot afford to shut the door firmly against new heads of public policy. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-21 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 19. It is true that public policy should not depend upon 'the idiosyncratic inferences of a few judicial minds'. (Lord Atkin in Fender v. St. John Mild May (1938) AC 1) and moral indignation must not be mistaken for public policy (Starke J., in Jenkins v. Smith, 1969 VR 267). These are trite sayings which need not deter morality indignant judicial minds from searching for new heads of public policy which satisfy the test of advancement of the highest public good and the prevention of clear and incontestable public hard. As far back as 1853 in Egerton v. Earl Brownlow, (1853) 4 HLC 1 at p. 151, Lord Chief Baron Pollock said :
"My Lords, it may be that Judges are no better able to discern what is for public good than other experienced and enlightened members of the community but that is no reason for their refusing to entertain question, and declining to decide upon it. Is it, or is not, a part of our common law that in a new and unprecedented case where the mere caprice of a testator is to be weighed against the public good, the public good should prevail? In my judgment it is." | https://indiankanoon.org/doc/1685776/ |
058e532644cb-22 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | Lord Chief Baron Pollock's speech was echoed by Viscount Haldane in Rodrigueaz v. Speyer Brothers, 1919 AC 59, Viscount Haldane expressed the view that in deciding upon questions of public policy Judges should be guided by the opinions of men of the world as distinguished from opinion based on legal learning. He also pointed out that what the law recognised as contrary to public policy turned out to vary greatly from time to time and that the dictum of Lord Halsbury in Janson v. Drieftein Consolidated Mines Ltd., 1902 AC 484, that courts cannot invent new heads of public policy should not be taken too laterally. Of course, as observed by professor Winfield in his essay. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-23 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | "It is not to be expected that men of the world are to be supposed as expert witnesses in the trial of every action raising a question of public policy. It is the Judges themselves, assisted by the bar who here represented the highest common factor of public sentiment and intelligence."
Thus the twin touchstones of 'public policy' are advancement of the public good and prevention of public mischief and these questions have to be decided by Judges and not as men of legal learning but as 'experienced and enlightened members of the community' 'representing the highest common factor of public sentiment and intelligence.' Enunciation of public policy is the crystallizing of the opinions of Judges as men of the world."
20. Public policy has often enough been described as 'an unruly horse' and this description appears to have scared away judicial minds from lading the steed into new pastures. To quote professor Winfield again. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-24 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | "That animal has proved to be a rather obtrusive not to say blundering steed in the law reports. It would have been more effective if we had not been so much of it. It has gone reverberating down the history of our law..................... some Judges appear to have thought it more like a tiger and have refused to mount it at all ............"
In a short note in 59 Law Quarterly Review P. 298 Dr. F.A. Mann observed :
"public policy may be an unruly horse. But this does not mean that on the proper occasion a Judge must not take his courage in his hand and mount the steed."
21. Similarly, Lord Denning in Enderby Town Football Club v. F.A. Limited, (1970) 3 WLR 1021 said, "I know that over three hundred years ago Hobart C.J. said, 'the public policy is an unruly horse.' It has often been repeated since. So unruly is the horse, it is said (per Burrough J., in Richardson v. Mellis, (1824) 2 Bing 229 at p. 252), that no Judge should try to mount it lest it run away with him. I disagree. When a good man in the saddle the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice, as we done in Nagle v. Fielden, (1966) 2 WLR 1027." | https://indiankanoon.org/doc/1685776/ |
058e532644cb-25 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 22. We have said so much amount 'public policy' at the risk of being thought presumptuous because it is our firm belief that it is as fascinating a weapon in the judicial armoury as 'ultra vires', 'natural justice', etc., and certainly capable of being put to far greater and effective use much in the hope that at some not too distant date the Supreme Court will 'unblinker the unruly horse.' | https://indiankanoon.org/doc/1685776/ |
058e532644cb-26 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 23. The learned Chief Justice said tat it was against the public policy to order into an agreement the object of which was to influence the Central and State Minister as. If this is a new head of public policy we are ready to sponsor it. But is by no means a new head of public policy. It comes under the head 'Agreement Tending to Injure the Public Service' mentioned at page 325 of Anson's Law of Contract, 23rd Edition. In Egerton v. Earl Brownlow, (1853) 4 HL Cas 1 (supra), Lord Chief Baron Pollock stated :
"the conclusions to which I have arrived, from the decided cases and the principles they involve, are, that all matter relating to the public welfare all acts of the legislature or the executive must be decided and determined upon their own merits only; and that is against the public interest (and therefore not lawful) for any one officiously, wantonly and capriciously........... to create any pecuniary interest or other bias of any sort in the decision of a matter of public nature and which involves the public welfare ............."
24. In Montefoire v. Menday Motor Components Co. Ltd., (1913) 2 KB 241, the defendants entered into an agreement with the plaintiff in the following terms:
"In consideration of your finding me the necessary capital, I am prepared to pay you 10 percent on the amount intorudced either direct or indirect and also to allot you forty shares in the Menday Motor Components Company Ltd." | https://indiankanoon.org/doc/1685776/ |
058e532644cb-27 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | According to the plaintiff a member of the Imperial Air Fleet Committee be arranged with the Treasury to provide the defendant, a manufacturer of Components of aircraft with the sum of ( 2000. He claimed that he was, therefore, entitled to be paid ( 200 and to have allotted to him forty shares in the defendant Company. In the course of the trial the Judge thought it right to call attention to the question whether there was not a defence open to the defendants that the contract sued upon was void at being contrary to public policy. The Judge fund that plaintiff had talked to the defendant "fairly of his acquaintance with high official of the Air Board" and he defendant thought that the plaintiff had 'put in a good word for him'. Shearman J., expressed the view that it was well settled that if on the face of a contract it was apparent that it was unlawful, it was the duty of the Judge himself to take the objection, and that, too, whether the parties take or waive the objection. He then proceeded to say :
"A contract may be against public policy either from the nature of the acts to be performed or from the nature of the consideration. In y judgment it is contrary to public policy that a person should be hired for money or valuable consideration when he has access to persons of influence to use his position and interest to procure a benefit from the Government."
After referring to Normal v. Cole, (1800) 3 Esp. 253 and Statute 5 and 6 Edward 6, C. 16, Shearman J., further stated : | https://indiankanoon.org/doc/1685776/ |
058e532644cb-28 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | "While I do not go to the length of holding that the defendants were bargaining with the plaintiff that they should receive an office under the Crown, I agree with the remarks of Coltman J., in the case of Hopkins v. Prescott, (1847) 4 CB 578 at p. 596 that where a person undertakes for money to use his influence with the Commissioners of Taxes to procure for another party the right to sell stamps & c., if the contract were not void by statute, it would be void at common law as contrary to public policy. It is well settled that in judging this question one has to look at the tendency of the acts contemplated by the contract to see whether they tend to be injurious to the public interest. In my judgment a contract of the kind has a most pernicious tendency. At a time when public money is being advanced to private firms for objects of national safety it would tend to corrupt the public service and to bring into existence a class of persons somewhat like those who in ancient times of corrupt politics were described as 'carriers', men who undertook for money to get titles and honours for those who agreed to pay them for their influence; see the remarks of Lord St. Leonards in Egerton v. Earl Brownlow, (1853) 4 HLC 1 at p. 234. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-29 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | It has been urged upon me in the course of the argument that a Judge must act with great caution in declaring a contract void as against public policy Burrough J., in Richardson v. Mellish, (1824) 2 Bing 229 at p. 252 said that public policy 'is a very unruly horse, and when once you get astride it you never know where it will carry you' and Lord Bramwell in Mogul Steamship Co., v. Mcgregor Gow & Co., (1892) AC 25 at p. 45, Lord Halsbury in Janson v Drieftein Consolidated Mines Ltd. (1902) AC 484 at p. 491 repeat the warning. But, applying the words of Pollock C.B. in Egerton v. Earlbrownlow (1853) 4 HLC 1 at p. 49, I think I am bound to look for the principles of former decisions, and not to shrink from applying them with firmness and caution to any new and extraordinary case that may arise."
In my judgment it is both in accordance with precedent and with public interest that I should declare this contract void as against public policy, with the result that both the action and the counter-claim are dismissed with costs." | https://indiankanoon.org/doc/1685776/ |
058e532644cb-30 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 25. In our view, an agreement, the object of which is to use the influence of a person with Ministers of the Government to obtain favourable decisions, is destructive of all sound and good administration. It discloses a tendency to corrupt or to influence public servants to decide and determine matters otherwise than upon their own merits, a tendency most injurious to the public interest. We do not have the slightest doubt that such an agreement is contrary to public policy. We also wish to emphasize that it is irrelevant that the persons proposed to be influenced are incorruptible and are persons 'whose ability honesty and patriotism are beyond all question' as in the case of Montefoire v. Menday Motor Components Co. Ltd., (1918) 2 KB 241 (supra). It is the very tendency of the agreement that makes it contrary to public policy.
26. The learned counsel for the appellant urged that this ground was not expressly raised in the written statement. As pointed out by Shearman, j., in Monterfoire v. Menday Motor Components Co. Ltd., (1918) 2 KB 241 it is the duty of the Judge to take the objection whether parties take or waive the objection if it comes to his notice that the agreement is contrary to public policy. The learned counsel then argued that the evidence in this case did not justify the finding of the learned Judge that the object of the agreement was to influence Ministers of the Government.
27. Ex. A-27 is the agreement executed by the late Nawab Sajjid Yar Jung. It is as follows:
"I Nawab Sahid Yar Jung Bahadur of Hyderabad Deccan wish that you should help me and my family in promoting our cause, i.e., in our being recognised as heirs to the late Nawab Salar Jung Bahadur's property. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-31 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | For the regard and love and affection that I held for you and for the time help that you have rendered me and will render me in future, I, by my free will and consent, promise to pay out of my proportionate share, a share of one anna in a rupee, within three months only after getting the possession of the property.
The letter dated........... is not in addition to this officer and on getting your full share that letter shall stand cancelled. Executed this document in favour of Seth RatanChand Hira Chand of 26, Napean Sea Road, Bombay and sign in confirmation whereof this 27th day of June, 1952 at 1, B. Passa Road, New Delhi.
Sd. Sajid Yar Jung.
Witnesses :
1. Sarfraz Hussain,
2. G.N. Hardas." | https://indiankanoon.org/doc/1685776/ |
058e532644cb-32 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | It is interesting to notice that the plaintiff was required to help the Nawab and his family "in promoting our cause, i.e. in our being recognised as heirs of the late Nawab Salar Jung Bahadur's property." The use of expression 'promoting' is significant and it appears to us to contemplate much more than mere financing. We do not, however, wish to stress too much upon the use of this expression. The evidence of the plaintiff himself, as P.W. 10, gives more than a clue as to the true object of the agreement and what was expected of the plaintiff. He stated that he was an industrialist, a justice of the peace and the Chairman and Director of more than a dozen companies. He was approached by Sajjid Yar Jung and his brother for help them "to represent their case before the Union Ministers." He stated 'the representation to be made was regarding the estate of late Salar Jung and Sajjid Yar Jung and his brother wanted recognition for themselves and his sisters as the heirs of Salar Jung." He further stated that it was requested that he should accompany them to the Union Ministers concerned for representing their case to the Union Government. It appears to be fairly clear from these statements that the help which Sajjid Yar Jung wanted from the plaintiff was to represent their case before the Union Ministers i.e. to bring to bear his influence with the Union Ministers. It is nobody's case that the plaintiff is an adept at advocacy. The plaintiff added "they are made a request that I should advance monies to meet their expenses.............." This statement indicates that the request for financial help was secondary to the request to represent their cause i.e. to use his influence. The plaintiff stated that he took Sajjid Yar Jung to the concerned Ministers on two or three occasions at New Delhi and that after they learnt that the case was being considered favorably by the Union Government they came down to Hyderabad. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-33 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | they learnt that the case was being considered favorably by the Union Government they came down to Hyderabad. Sajjid Yar Jung requested him to meet the then Chief Minister Sri B. Ramakrishna Rao. Accordingly he met him. He further stated that he arranged for Sajjid Yar Jung's meeting with the Union Ministers who were seized with the subject-matter of Salar Jung's estate. He himself met three Ministers in connection with the representation of Sajjid Yar Jung. They were late N.Gopalaswamy Iyyengar, Late Sardar Vallabhhai Patel and Late Lal Bahadur Sastry. He has met Lal Bahadur Sastry earlier at Hyderabad along with Sajjid Yar Jung at the time of Congress Sessions. His meeting with the Ministers according to him, created a very favourable impression. At the time when he took up the assignment on behalf of Sajjid Yar Jung he expected an early disposal of the matter by the Government of India. It would have been so disposed of but for the stay orders of the High Court. He pursued the matter with the authorities at Delhi and the Union Government entered into correspondence with the local Government on the representation of Sajjid Yar Jung. With a show of modesty he added "I am not supposed to know which influence weighed with the Union Government or the local Government. I am only concerned with the result". The evidence of the plaintiff can lead but to one conclusion namely, that Sajjid Yar Jung promised to give imprisonment a one-anna share in the amount to realised from the estate of Salar Jung in return for the influence which the plaintiff was to bear upon the Union and State Ministers. One of the attestors of the agreement, a friend and consultant of Sajjid Yar Jung, was examined as P.W. 11. He also stated, "Sajjid Yar Jung wanted a representation of his case to be made to the | https://indiankanoon.org/doc/1685776/ |
058e532644cb-34 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | stated, "Sajjid Yar Jung wanted a representation of his case to be made to the Government of India and to the then Hyderabad Government. Sajjid Yar Jung wanted me to find a financier who can help him financially and also represent his case to the concerned Government". Later, he stated, "the plaintiff met two or three Union Ministers along with Sajjid Yar Jung and represented the case of the Nawab. I was present at the meeting with Mr. Lal Bahadur Sastry, who was then a Minister." Again, he stated, "the help rendered by the plaintiff was the financial help as also the representations he made to the persons concerned in the Union and the State Governments." The evidence of the plaintiff and P.W. 11 leave no doubt in our minds that the object of the agreement was to influence the Union and State Ministers and to advance and expend all amounts necessary in that connection. We agree with the finding of the learned Civil Judge on this question. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-35 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 28. The learned counsel argued that late Gopalaswamy Iyengar, late Sardar Vallabbhai Patel, late Lal Bahadur Sastry and late B.Ramakrishna Rao were incorruptible public servants and that there could be no question of influencing them. As already pointed out by us earlier, the question is not about the integrity of the persons proposed to be influenced but about the tendency of the agreement.
29. Even so, the learned counsel for the appellant argued that the plaintiff was entitled to a return of all the amounts advanced by him with interest. He relied upon the decisions in Hussain Baksh v. Rahmat Hussain, ILR (1889) 11 All 128 and Venkataswamy v. Nagi Reddy, AIR 1962 Andh Pra 457. Both were cases of champerty. Both were cases where the agreements wee held to the extortionate and unconscionable. In both cases the amounts actually advanced were directed to be refunded. The law is well settled in India that Champertous agreements are not as such opposed to public policy. They will not be enforced if they are extortionate and unconscionable in which the persons advancing the monies will be entitled to get a return of the same. In the present case, we are not concerned with a plain and simple champertous agreement. The object of the agreement was to influence Ministers and to incur necessary expenditure in connection therewith. There were no two independent agreements one for influencing the Ministers and the other for advancing monies. The agreement was one whole agreement and if it could not be enforced in part it could not be enforced as a whole. The whole of the agreement was tainted by the vice of being opposed to public policy. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-36 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 30. In passing the learned Chief Judge appeared to hold that the agreement was also unconscionable. The learned counsel for the appellant invited our attention to several cases where agreements to give 1/4th share. 3/32nd share, 3/16th share had been upheld by Courts. In the present case, what Sajjid Yar Jung agreed to give was only a 1/16th share. It could not, therefore, be said to be unconscionable. That, however, makes no difference in our final conclusion. | https://indiankanoon.org/doc/1685776/ |
058e532644cb-37 | Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975 | 31. In the result, we uphold the judgment and decree of the lower court and dismiss the appeal with costs. C.M.P. Nos. 4740, 4924/1974 are dismissed.
32. Appeal dismissed. | https://indiankanoon.org/doc/1685776/ |
95f83f67a79f-0 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | JUDGMENT Y.V. Anjaneyulu, J.
1. Two questions are referred to this court by the Income-tax Appellate Tribunal under s. 256(1) of the I.T. Act, 1961 :
"(1) Whether, on the facts and in the circumstances of the case, the entire land or any part of it could be treated appurtenant to the building for the purpose of applying the provisions of section 54 of the Income-tax Act, 1961 ?
(2) Whether the department was justified in reading 'reasonableness' before the words 'land appurtenant thereto' in section 54 of the Income-tax Act and whether the Tribunal was right in repelling such an interpretation ?
2. The matter relates to the assessment year 1964-65. The assessee and her three sisters were the joint owners of house property consisting of a fairly large building and extensive land, each one owning 1/4th share. The building has a built-up area of 17,136 sq. ft. and the total extent of land including the land on which the building stands is 13,029 sq. yards. The building as well as the entire extent of land was acquired by the Government under the Land Acquisition Act for construction of the office of the Accountant-General. Compensation was initially awarded by the Land Acquisition Officer and it was enhanced by the Second Additional Chief Judge, City Civil Court, Hyderabad, pursuant to reference made under s. 18 of the Land Acquisition Act. The compensation finally awarded was :
Rs.
(a) Compensation for land 5,21,160
(b) Compensation for the building 1,71,360
(c) Solatium 1,03,878
-------------
7,96,398
------------- | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-1 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 3. In the income-tax return field for the assessment year 1964-65, the assessee declared her share of capital gain arising on the transfer of the land and building by way of compulsory acquisition. The assessee claimed that she constructed a building for her residential purposes at a cost of Rs. 80,000 within a period of two years from the date of transfer of the abovesaid building together with land. Accordingly, the sum of Rs. 80,000 was claimed as deduction under s. 54 of the I.T. Act, 1961 (hereinafter referred to as "the Act"), from out of her share of capital gain. Omitting matters which are not the subject-matter of dispute in the present reference, it is enough to state that the ITO determined the assessee's 1/4th share of capital gain on the transfer of the land and building jointly owned by the assessee and her three sisters at Rs. 1,42,283 and set off against the same a sum of Rs. 75,000 which he estimated as the cost of building constructed by the assessee for her residential purposes under s. 54 of the Act. Doing so, he arrived at the capital gain for the purpose of assessment at Rs. 67,283 and included the same in the total income. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-2 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 4. Against the order of the ITO, the assessee filed an appeal before the AAC and questioned the correctness of the computation of the capital gain at Rs. 1,42,283. The dispute, inter alia, related to the original cost (market value) of the land and building as on January 1, 1954, and also the determination by the ITO of the cost of the building newly constructed for the assessee's residential purposes at only Rs. 75,000 against Rs. 80,000 claimed. The question regarding determination of the original cost (market value) as on January 1, 1954, is not relevant for the purpose of the present reference and it is not, therefore, necessary to refer to that matter. On the question of the estimated cost construction of the new residential house at Rs. 75,000, the AAC did not interfere with the estimate made by the ITO at Rs. 75,000. The AAC went further into the question whether the deduction of Rs. 75,000 representing the cost of construction of the new residential house could be set off against the entirety of capital gain arising on the sale of building as well as the land or should be limited to the extent of capital gain arising on the sale of the building and land "reasonably appurtenant" to the building. The provisions of s. 54(1) of the Act were construed by the AAC as permitting the set-off of the amount spents on the construction of a new building for residential purposes only against the capital gain arising on the transfer of the building and land, which is "reasonably appurtenant" to the building. The AAC was of the view that, if the land contiguous to a building is vast in extent, the entire extent of land could not be considered to be appurtenant to the building and only a reasonable portion of such land could be so considered under law. He, accordingly, | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-3 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | building and only a reasonable portion of such land could be so considered under law. He, accordingly, directed the ITO to redetermined the capital gain on the transfer of the building and the land reasonably appurtenant to the same and, if such capital gain should be less than Rs. 75,000, restrict the deduction under s. 54(1) of the Act only to the extent of the restricted sum. The AAC obviously held the view that the capital gain derived on the sale of land, which is not reasonably appurtenant to the building should be taxed in entirety and no part of the sum of Rs. 75,000 spent on the construction of the new residential house should be set off against such capital gain. As the ITO did not examine the question from the above points of view, he directed the ITO to re-work out the capital gain on the aforesaid basis. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-4 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 5. The assessee filed an appeal to the Income-tax Appellate Tribunal questioning the correctness of the above view of the AAC. It was urged before the Income-tax Appellate Tribunal that the AAC wrongly construed the provisions of s. 54(1) of the Act, inasmuch as the language of s. 54(1) did not provide for the classification of the land appurtenant to a building as "reasonably appurtenant" and otherwise. According to the assessee, the entire extent of land contiguous to the building should be considered as land appurtenant to the building for purposes of s. 54(1) of the Act and the sum of Rs. 75,000 spent on the construction of the new residential house should be set off against the entirety of the capital gain arising on the sale of the building as well as the land. The Income-tax Appellate Tribunal accepted the assessee's contention. The Tribunal was of the view that the AAC was in error in qualifying the word "appurtenant" occurring in s. 54(1) as "reasonably appurtenant". In that view of the matter, the Tribunal reversed the order of the AAC concerning this point. Thereupon, the Commissioner of Income-tax asked for and obtained the present reference from the Tribunal under s. 256(1) of the Act. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-5 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 6. Sri M. Suryanarayana Murthy, learned counsel for the Revenue, submitted that on a plain construction of the provisions contained in s. 54(1), it must be held that the expression "being buildings or lands appurtenant thereto" should necessarily refer only to that extent of land which is reasonably required for purposes of proper enjoyment of the house. According to the learned counsel, if a house stands on a vast extent of land, it would be improper to consider the entire extent of land as appurtenant to the building for purposes of s. 54. The learned counsel contends that the deduction under s. 54(1) is not permitted against capital gain arising on the sale of (entire) land as such, but only against the sale of the building and land appurtenant thereto. Thus, where a building together with land is sold, the learned counsel urges, it is necessary to enquire and determine the extent of land which is required for the purpose of proper enjoyment of the building as such and the appurtenant land can be restricted only to that reasonable extent and cannot be extended to the entire extent of land. Learned counsel draws attention to the Explanation to s. 5(1)(ivc) of the W.T. Act, 1957, which was inserted by the Finance Act of 1976 with effect from April 1, 1977. It would be appropriate to extract the Explanation referred to by the learned counsel :
"Explanation. - For the purposes of this clause, - ....
(b) 'land appurtenant, in relation to any dwelling unit or units comprising a building, means, - | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-6 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | (i) in an area where there is any law in force providing for the minimum extent of land contiguous to the land occupied by any building to be kept as open space for the enjoyment of such building, the minimum extent of land contiguous to the land occupied by the building comprising such dwelling unit or units required to be kept as open space under such law;
(ii) in any other area, an extent of land not exceeding one-third of the plinth area of the building comprising the dwelling unit or units at the ground level contiguous to the land occupied by such building."
7. Learned counsel states that the same considerations should prevail for determining the land appurtenant for purposes of s. 54 of the I.T. Act also. Learned counsel relied on certain decisions to which we shall presently refer, supporting his contention that the extent of the land appurtenant to a building has to be determined with reference to the facts of each case bearing essentially in mind the extent of land required for proper enjoyment of the building. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-7 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 8. Sri Parvatha Rao, learned counsel appearing for the assessee, reiterates the pleas taken by the assessee before the lower authorities. According to the learned counsel, there is absolutely no provocation for restricting the land appurtenant to building to any reasonable extent for purposes of s. 54 of the Act. According to the learned counsel, the language of s. 54 does not lend support to the Revenue's plea that any enquiry could be conducted for purposes of determining the extent of the land reasonably required for the purpose of proper enjoyment of the house and to treat such reasonable extent only as land appurtenant to the building. Learned counsel states that the Explanation to s. 5(1)(ivc) of the W.T. Act relied on by the Revenue cannot be applied for purposes of s. 54 of the I.T. Act. Learned counsel further contended that the extent of land in the present case is in any event, not so extensive as to call for any determination of the land reasonably appurtenant to the building, especially in view of the fact that the building was owned by four co-owners and the total extent of land of 13,029 sq. yards was necessary for the proper enjoyment of the building by all the four co-owners. It was pointed out that there was no material for the authorities below to show that the land contiguous to the building was used for any purpose other than the enjoyment of the house and consequently, no enquiry was called for. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-8 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 9. We may now notice the relevant provisions of the Act. Under s. 45 of the Act, any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head "Capital gains". The expression "capital asset" in defined in s. 2(14) of the Act as meaning property of any kind held by an assessee, whether or not connected with his business or profession. The definition excludes certain categories of capital assets which are not relevant for out purpose. Section 48 of the Act provides that the income chargeable under the head "Capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the capital asset and the cost of any improvement thereto. Section 54 of the Act, which is relevant for out present purpose, deals with capital gain arising on the sale of property used for residence and it may be usefully extracted below : | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-9 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | "54. Profit on sale of property used for residence. - Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence, and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, -
(i) if the amount of the capital gain is greater than the cost of the new asset, the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-10 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain." | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-11 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 10. It is clear from the above provisions that if capital gain arises on the transfer of buildings or lands appurtenant thereto, the income of which is chargeable under the head "Income from house property", and within the specified period an assessee acquires a house property for the purpose of his own residence, then the capital gain shall be reduced by the cost of the new house property. This is the plain effect of the provisions of s. 54. The basic requirement is that the capital gain should arise from the transfer of buildings or lands, the income of which is chargeable under the head "Income from house property". If land alone is sold, the provisions of s. 54 will have no application, inasmuch as the income from the land is not chargeable under the head "Income from house property". In order to secure the benefit of s. 54, it is necessary that the building together with land is transferred and the income from such building and land is chargeable under the head "Income from house property" under s. 22 of the Act. Inasmuch as the cost of the new house property acquired by the assessee for the purposes of his own residence is liable to be set off against the capital gain arising on the transfer of the buildings or lands appurtenant thereto, the question arises whether the expression "lands appurtenant thereto" covers the entire extent of land transferred along with the building or only a portion of such land as may be considered appurtenant to the building. The Revenue contends that the expression "land appurtenant thereto" does not cover the entire extent of land that may be transferred along with the building, but is limited only to the extent of land which is required for the proper enjoyment of the house and may, therefore, be considered as appurtenant to the building. In other words, what the Revenue contends is that if, in a given case, a vast extent of land is | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-12 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | what the Revenue contends is that if, in a given case, a vast extent of land is also transferred along with the building, it is not permissible to consider the entire extent of land as appurtenant to the building. An enquiry should be conducted for the purpose of ascertaining the extent of land required for effectively and properly enjoying the building and the land appurtenant should be restricted only to that extent and the capital gain ascertained accordingly. The set-off of the cost of the new house property acquired by the assessee for the purpose of his own residence can be made against the capital gain so computed. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-13 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 11. The expression "land appurtenant thereto" occurring in s. 54 of the Act has not been defined. It must, therefore, be understood in its popular and non-technical sense. It is not possible to accept the Revenue's contention that clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act, 1957, defining "land appurtenant" for the purpose of that clause should be considered equally applicable for the purpose of understanding that expression occurring in s. 54 of the I.T. Act. If the Legislature thought that the same technical meaning given in clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act should be applied to that expression occurring in s. 54 of the I.T. Act, nothing would have prevented the Legislature from doing so. The above Explanation was introduced in the W.T. Act with effect from April 1, 1977, and I.T. Act has been amended any number of times between 1977 and 1984, and yet the Legislature did not think it fit to define the expression "land appurtenant thereto" occurring in s. 54 of the I.T. Act in terms identical to clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act. It is interesting to find that the above Explanation in the W.T. Act is only for the purpose of s. 5(1)(ivc) because it is specifically stated so. That Explanation can have no application for any other purpose in the W. T. Act itself. It is, therefore, difficult to accept the Revenue's contention that the above technical meaning in clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act should be extended to s 54 of the | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-14 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | of the W.T. Act should be extended to s 54 of the I.T. Act. It must also be remembered that we are dealing with the income-tax assessment year 1964-65 and the amendment in the W.T. Act came into force only on April 1, 1977. It is equally difficult to accept the assessee's contention that whatever be the extent of land transferred along with the house, should be considered appurtenant to the building. The fallacy in this contention will be apparent if we take into account the fact that the land contiguous to a building can be used for purposes other than the enjoyment of the building. Take for instance a case where a part of the land contiguous to the building is independently leased for a fire-wood depot. The land contiguous to the building may be so vast in its extent that a person can conveniently lay out the surplus extent of land into plots and sell those plots without causing detriment to the proper enjoyment of the building. Could it be said that, in these cases, the land leased for a firewood depot or sold by laying out into plots constituted land appurtenant to the building ? We do not think so. There is force in the contention of the learned standing counsel for the Revenue that the expression "land appurtenant thereto" occurring in s. 54 of the Act is a matter of enquiry depending upon the facts and circumstances of each case and the authorities must determine the extent of land that is considered to be appurtenant to the building based on some acceptable criteria to which we shall advert a little later. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-15 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 12. Our attention has not been drawn to any decided cases on this point under the I.T. Act or, for that matter, under the W.T. Act. We have already stated that the expression "land appurtenant thereto" occurring in s. 54 of the Act is used in a broad, popular and non-technical sense and it must be so understood.
13. We may now examine some decisions bearing on this point arising under different enactments. In Palaniappa Chettiar v. Vairavan Chettiar [1960] 1 MLJ (Sh.N.) 29, a case arising under the Madras Buildings (Lease and Rent Control) Act, the Madras High Court held that the word "appurtenant" includes all structures of property abutting or adjacent to the main tenement or property, which are proper and necessary for its due enjoyment. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-16 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 14. In Trim v. Sturminster Rural District Council [1938] 2 KB 508; 2 All ER 168 (CA), which arose under the Housing Act, 1936, the meaning of the expression "house" turned out to be significant. Under s. 188 of the said Act, that expression was defined as including "any yard, garden, outhouses, and appurtenances belonging thereto or usually enjoyed therewith". The question arose whether a cottage and ten acres of adjoining grass land came within the expression of "house" for the above purpose. It was held that it was not the cottage together with the whole of the ten acres of land, but only the cottage with its outhouses, yards, curtilage and gardens, that constituted the "house" within the definition, inasmuch as the term "appurtenances" was there used in its well-established legal sense as including only such matters as outhouses, yards and gardens, and not land as meaning a corporeal hereditament. It was further held that the question as to exactly how much of the ten acres ought to be included in the appurtenances of the cottage and, therefore, in the "house" was one for the decision of the county court judge, his decision to be confined, however, to matters which, on the face of it, would be something considerably less than the whole of the ten acres. | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-17 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 15. We may notice the judgment of the Madras High Court in Irani v. Chidambaran Chettiar, . The matter arose under the Madras Buildings (Lease and Rent Control) Act, 1946. The question in that case was whether the 1st defendant was a "tenant in possession of building" within the meaning of the Act. He would be a tenant of a building if what was leased to him was within the definition contained in the Act. The word "building" is defined in the Madras Act as meaning "any building or hut or part of a building or hut let or to be let separately for residential or non-residential purposes and includes : (a) the garden, grounds and outhouses, if any, appurtenant to such building, hut or part of such building, or hut and let or to be let along with such building or hut, (b) any furniture supplied by the landlord for use in such building or hut or part of a building or hut". After considering the legal and popular meaning of the expression "appurtenant", Satyanarayana Rao J. observed at page 655 of the report as under :
"The meaning of the word 'appurtenant' given in the Oxford Dictionary is :
'Belonging as a property or legal right; constituting a property or right subsidiary to one which is more important; appertaining as if by right to; proper, suited or appropriate to; relating to, pertinent." | https://indiankanoon.org/doc/1637616/ |
95f83f67a79f-18 | Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984 | 16. That is the primary meaning of the word 'appurtenant'. In Budhi Mal v. Bhati, AIR 1915 All 459, "an appurtenance" is defined as an appendage, an adjunct, or something belonging to another thing as principal and passing as an incident to it. In Trim v. Sturminster Rural District Council [1938] 2 KB 508; 2 All ER 168 (CA), the learned judge considered the meaning of the word 'appurtenance' at pages 515 and 516 (of [1938] 2 KB) and observed that the word 'appurtenance' had never been extended to include land, as meaning a corporeal hereditament, which does not fall within the curtilage of the yard of the house itself - that is, not within the parcel of the demise of the house. That may be so. In the definition contained in the Act, the grounds and outhouses, if any, appurtenant to such building are included in the definition. As pointed out in Thomas v. Owen [1888] 20 QBD 225 (CA) at pp. 231, 232, the word 'appurtenance' has also a secondary meaning as equivalent to 'usually occupied' and this was cited with approval in Woodfall on Landlord and Tenant. If from 1914 this entire ground was occupied for the purpose of continuing the superstructure along with the building belonging to the lessor and the whole of it is treated as one unit, the site may be treated as an appurtenance in the secondary sense of the word."
17. In a separate but concurring judgment, Raghava Rao J. observed at pages 658 and 659 of the report as under : | https://indiankanoon.org/doc/1637616/ |