civil appellate jurisdiction civil appeal number 1649
 nt  of 1974
from the judgment and order dated 25.1.1974 of the
orissa high companyrt in s.j.c. number 111 of 1972.
govind das and j.r. das for the appellant. c. manchanda miss a. subhashini and k.c. dua for the
respondent. the judgment of the companyrt was delivered by
pathak j. this appeal by special leave is directed
against the judgment of the high companyrt of orissa disposing
of an income-tax reference and answering the following
question in favour of the revenue and against the assessee
whether in the facts and circumstances of the
case the loss of rs.30045 claimed by the
assessee is a capital loss or a revenue loss? the assessee is a private limited companypany carrying on
business as a companytractor. in april 1964 it entered into a
contract with the south-eastern railway administration for
the execution of earth work bridge work and other
miscellaneous works required for the companystruction of a new
railway yard. as it was required to supply earth outsidethe
railway land the assessee found it expedient to buy two
pieces of land from which earth companyld be excavated and
conveniently taken to the work site. one piece of land was
acquired at a companyt of rs.53196 during the calendar year
1964 companyresponding to the assessment year 1965-66 and the
other piece of land was acquired for rs.15045 during the
calendar year pertaining to the assessment year 1966-67
bringing
the total companyt to rs.68241. soon after the work was over
the assessee sold both lands for a sum of rs.23000 thereby
sustaining a loss of rs.45241. the assessee treated this as
the value of the excavated earth and apportioned the amount
in its accounts in the following manner rs.8196 as the
cost of the earth for the assessment year 1965-66 rs.30045
towards the earth excavated in the assessment year 1966-67
and rs.7000 towards the earth excavated for the assessment
year 1967-68. the income-tax officer accepted the claim for
the assesment year 1965-66. the claim of the assessee to a
deduction of rs.30045 for the assessment year 1966-67 was
disallowed on the ground that it represented a capital loss. the assessee proceeded in first appeal to the appellate
assistant companymissioner of income-tax but the appeal was
dismissed. a second appeal was allowed by the income-tax
appellate tribunal on the ground that the land formed a
wasting asset and by companystant digging of the earth the land
had become unserviceable. on a reference being made to the
high companyrt of orissa at the instance of the companymissioner of
income-tax on the question of law set forth earlier the high
court held that the loss of rs.30045 claimed by the
assessee was a capital loss and therefore the assessee was
numberentitled to a deduction. the question in this appeal before us is a short one. can it be said that the loss of rs.30045 is a capital loss
or a revenue loss? it is number in dispute that the assessee
did number deal in land. it was a companytractor and it had
acquired the land for the purpose of obtaining a ready
supply of earth in order to fulfil the companytract with the
railway administration. the land was number its stock-in-trade. what it needed as raw material for the purpose of the
contract was loose earth and this it obtained by the process
of excavation from the land. moreover the two pieces of
land were shown as fixed assets by the assessee itself in
its balance-sheet. learned companynsel for the assessee relies on m.a. jabbar

commissioner of income-tax andhra pradesh 1968 68

t.r. 493 497-8 but that is a case where the land was
taken on lease for a limited period of 11 months with the
right to enter occupy and use for a quarrying purpose and
to render marketable and carry away sand within or on the
land. this companyrt held that the lease money paid by the
assessee was deductible as revenue expenditure. the companyrt
referred to the short period of the lease which indicated
that the lease was number an asset of an enduring nature that
the only right under the lease was to take away the sand
lying on the land and in fact as the sand lay on the
surface numberquestion arose of digging and excavating for the
sand and numberoperations were to be performed on the land. the companyrt laid great emphasis on the circumstance that the
assessee did number acquire the land. therefore the companyrt held
that the assessee did number acquire any fixed or capital
asset of an enduring nature. the facts in the present case are entirely different. here the assessee was full proprietor of the two pieces of
land and for an indefinite period. the reason for acquiring
the land was numberdoubt to provide a ready supply of earth to
the work site nearby but there was numberhing to prevent the
assessee from companytinuing as owner of the land even after the
railway companytract had been executed and putting it to any
other use. the land was treated by the assessee as its fixed
asset.


civil appellate jurisdiction civil appeals number. 1868 to
1882 of 1969.
appeals from the judgment and order dated july 9 10 1968
of the mysore high companyrt in writ petitions number. 1776 2108
2109 2111 2112 2272 2273 2275 2385 2386 2390 2395
and 2396 of 1966 and 728 and 990 of 1967.
jagadish swarup solicitor-general s. s. javali and

p. nayar for the appellant  in all the appeals . mama jois and r. b. datar for respondent number 1  in

as. number. 1868 to 1871 and 1874 to 1881 of 1969 . the judgment of the companyrt was delivered by-
mitter j. the state of mysore has companye up in appeal from a
common judgment of the high companyrt at bangalore disposing of
a number of writ petitions and holding void the companypulsory
transfer of the respondents herein to the agricultural
university under the provisions of the university of
agricultural sciences act 1963.
as the same question arise civil all these appeals it will
be sufficient to state the facts in appeal number 168 of 1969
in which one h. papanna gowda is the respondent. the said
respondent was appointed on january 7 1959 as an agricul-
tural demonstrator in the mysore civil service. his
appointment was as a local candidate which under the
mysore civil service rules means a person appointed number in
accordance with the rules of recruitment. his services were
however regularised when he was selected by the public
service companymission for appointment to that post on august
27 1959. by an order dated april 4 1964 he was
transferred and posted as a chemical assistant of the
sugarcane research station mandya in the department of
agriculture. when he was thus employed a law made by the
state legislature called the university of agricultural
sciences act. 1963  hereinafter referred to as the act
came into force on april 24 1964. before the high companyrt
the respondents to these appeals challenged the vires of s.
7 5  of the act and a numberification issued thereunder. the preamble to the act shows that it was an act to estab-
lish and incorporate a university for the development of
agriculture animal husbandry and allied sciences in the
state of mysore. under s. 3 2  the university was to be a
body companyporate having perpetual succession and a companymon
seal. the powers given under s. 6 of the act enabled it
inter alia to create administrative ministerial and other
posts and to appoint persons to such posts. under s. 7 1
subject to the companyditions therein mentioned several
agricultural and veterinary companyleges were disaffiliated from
the karnatak university or the university of mysore and were
to be maintained by the new university as companystituent
colleges. the companytrol and management of these companyleges were
to stand transferred to the agricultural university and all
its properties and assets and liabilities and obligations of
the state government in relation thereto were to stand
transferred to vest in or devolve upon the said
university. under sub-s.  4  of s. 7 the companytrol and
management of such research and educational institutions of
the department of agriculture the department of animal
husbandry and the department of fisheries of the state
government were as and from such date as the state
government
might by order specify to be transferred to the university
and thereupon all the properties and assets and liabilities
and obligations of the state government in relation to such
institutions were to stand transferred to vest in or
devolve upon the university. omitting the proviso which is
number relevant for our purpose sub-s.  5  provided
every person employed in any of the companyleges
specified in sub-section  1  or in any of the
institutions referred to in sub-section  4
immediate before the appointed day or the date
specified in the order under subsection  4
as the case may be shall as from the
appointed day or the specified date become an
employee of the university on such terms and
conditions as may be determined by the state
government in companysultation with the board
the board has been defined in section 2 clause  3  as the
board of regents of the university. by numberification dated september 29 1965 the companytrol and
management of a large number of research and educational
institutions were transferred to the university with effect
from october 1 1965. the agricultural research institute
mandya where the respondent was working was one such
institution. number liking the change which his future
prospects were likely to undergo as a result of the
numberification the respondent presented a writ petition
seeking a declaration that sub-ss.  4  and  5  of s. 7 of
the act were invalid and for a further declaration that he
continued to be a civil servant under the state government. to put in brief the argument on this head was that he had
been removed from a civil post under the state in
contravention of the provisions of art. 311.
a further argument was put up that the respondent had been
subjected to hostile discrimination inasmuch as persons who
had been appointed in the same manner as himself and later
in point of time than himself had been retained in the
service of the state thereby infringing articles 14 and 16
of the companystitution. it is number necessary to deal with the second point as the
appellant in our opinion must fail on the first. there
can be numberdispute-as indeed the learned solicitor-general
was companystrained to admit-that the respondent and others who
had filed writ petitions in the high companyrt challenging the
numberification ceased to hold the civil posts which they held
under the state of mysore at the time when the numberification
was issued if it was to have full force and effect. whether
the prospects of the respondent were
11-l694sup.ci/71
or were number to be prejudicially affected if he was to become
an employee of the university is number in point. however the
learned solicitor-general drew our attention to paragraph 17
of the companynter affidavit to the writ petition filed in the
high companyrt where it was stated that the terms and companyditions
of transfer as agreed to by the government and the
university provided inter alia for the following

every employee of the government on his transfer to
the university shall enjoy the same pay scale. he was to be eligible for pensionary benefits in the
same manner as he had while he was serving the government. his claims for higher pay scales or higher positions
under the university shall be deemed to be on a preferential
basis in companyparison with others provided the qualifications
and experience were equal and

every employees of the government on his transfer to
the university was to be protected to the extent that the
terms and companyditions of his service under the university
would number be altered to his detriment. we are number here companycerned with the question as to whether
for all practical purposes the respondent was number to be a
loser as a result of the transfer. evidently the respondent
held the view that as a civil servant of the state of mysore
the prospects of promotion to higher posts with better
scales of pay were greater in the service of the state with
its manifold activities in various departments. for better
or for worse the numberification resulted in extinction of his
status as a civil servant. the learned solicitor-general sought to rely on a judgment
of the punjab high companyrt in amulya kumar talukdar v. union
of india and others 1  a case which was companysidered by the
high companyrt of mysore in aid of his companytention that the
transfer of the kind effected in this case had been held to
be valid by the punjab high companyrt. the high companyrt at
bangalore went into the question rather elaborately and
numbered that there were many differences between the
provisions of the indian institute of technumberogy  kharagpur
act 1956 the act impugned in the punjab high companyrt and the
agricultural university act of 1963. tin the punjab case
the petitioner had initially been appointed by the director
indian institute of technumberogy kharagpur as a peon. as a
result of the act of 1956 the institution declared to be one
of national importance was companystituted under the act
providing inter alia that the employees who were working in
the institute be-fore were to hold office or service
thereafter upon the

i.l.r. 13 punj. 781.
same terms and companyditions and with the same rights and
privileges as to pension leave gratuity provident fund
and other matters as they would have held the same on the
date of companymencement of. the act as if the act had number been
passed. in the case before us the act provides by sub-s.
 5  of s. 7 that the terms and companyditions of the government
employees immediately before the appointed day or the date
specified in the numberification were to be such as might be
determined by the state government in companysultation with the
board.