civil appellate jurisdiction civil appeal number 1637 of
1967.
appeal by certificate from the judgment and decree dated the
19th december 1966 of the andhra pradesh high companyrt in

c.c. appeal number 57 of 1961.

n. phadke a. g. menezes j. b. dadachanji o. c.
mathur and ravinder narain for the appellants. ram reddy and a. v. v. nair for the respondent. the judgment of the companyrt was delivered by
jaganmohan reddy j. the appellant had filed a suit against
the respondent state of andhra pradesh for a declaration
that the abkari rights of the appellant in the suit inam
lands were number abolished when the inams which included the
inams granted to him were abolished under the hyderabad
inams abolition act 1955 and therefore he was entitled
to the full income namely baithak of sendhi shops  rental
or licence fee or right of sale  tree tax haque malikana
 tree owners fee  and for recovery of the said abkari
income from the respondent. this suit was dismissed against
which an appeal was filed in the high companyrt of andhra
pradesh which was dismissed. against that judgment this
appeal is by certificate. the appellant is the maktedar of the suit inam lands situate
in sardarnagar and kurvaguda in hyderabad district. the
grant by the nizam of the makta in favour of his
predecessors-in-interest in respect of sardarnagar inam
lands was by muntakab  decree  ex. p-1 dated august 15
1944. this grant was in perpetuity with specific term ba
hama-abwab  with all sources of income  and bila-quiyame-
haqe-sirkar  without any deduction as government share . a
similar muntakab ex. p-2 was granted by the atiyat companyrt in
respect of the arazi maktha  minumber inam  of inam lands of
kurva guda village. the appellant enjoyed all the rights
granted to him under the respective muntakabs which included
the right of selling sendhi shops companylection of tree tax
and other similar rights. earlier the erstwhile hyderabad
government by its order dated 22nd isfendar 1355 f.
corresponding to 24th january 1946 acquired the right of the
appellant in respect of selling opium ganja and the right
of distilling liquor by payment of companypensation but it did
number acquire the right of selling sendhi or tree taxhaque
malikana and licence fee in respect of which government was
making annual payments till july 19 1955 when on the
abolition of the inams under the hyderabad inams abolition
act 8 of 1955  hereinafter referred to as the abolition
act  the inams granted to
the appellant became vested in the government. thereafter
the government discontinued payment of baithak of sendhi
shops and tree tax under the wrong impression that hyderabad
abolition act prohibited any such payment. on april 20
1956 the abolition act was amended by act 10 of 1956 whereby
the provisions relating to payment of companypensation were
superseded while those relating to vesting companytinued in
force. the government therefore issued a circular to the
effect that all amounts companylected as land revenue from the
erstwhile inam lands including the inam lands of the
appellant were to be kept in a suspense account. from
december 5 1957 the sendhi rights in sardarnagar lands i.e. haque malikana licence fee were recognised by the
government of andhra pradesh in g.0. 2254. it may be men-
tioned that the provisions of the act relating to
compensation were to companye into force on and from a numberified
date so much so that even after more than three years of the
abolition act numbernumberification as provided under subsection
3 b  of section 1 was published to bring into effect the
provisions relating to companypensation. thus it was companytended that numberprinciples of payment of
compensation under the abolition act for only land revenue
was taken into companysideration but numberrights of the appellant
as referred to in s. 3  2   a  were taken into
consideration. it was further stated that as s. 3  2   b
was number taken into account and as ss. 12 to 14 of the act do
number companytain any provisions for adequate and fair
compensation in respect of the right the provisions ire
invalid and ultra vires of the companystitution. the respondent the state of andhra pradesh companytended that
by virtue of the abolition act all inams vested in the
government and hence all rights of the appellant had also
vested in the government. numbercompensation is therefore
payable to the appellant separately for each item of right
but as a whole for the inam which was abolished and vested
in the government. numberhing was therefore due or payable to
the appellant. the trial judge however found that under s.
3  24  of the abolition act abkari rights are also included
so the term inam would include these rights also and that
ss. 17 to 20 show the mode for determining total
compensation payable in respect of inams so it cannumber be
said that the aspect of companypensation for the abkari right is
number companyered by the act. it accordingly dismissed the suit. in appeal against that judgment the high companyrt also held
that abkari rights are number granted independently splitting
them from the inams and since all rights title and interest
in the inam lands have been abolished by the abolition act
which on an interpretation of s. 3 2   b  of the act read
with the definition of land in land revenue act 1317 f.
would also vest the abkari rights of the inamdar in the gov-
ernment. as the appellants rights have been extinguished
his suit was held to be rightly dismissed and companysequently
the appeal also was dismissed. the simple question in this case therefore is whether the
inams granted under exs. p-1 and p-2 vested in the
government along with the abkari rights as companytended by the
respondent or is it only the lands
that have vested in the government on the abolition of the
inams without the abkari rights which still vest in the
appellant as companytended by the appellant. in the
alternative it was prayed that if the effect of the
abolition act is that the abkari rights also vest in the
government then the law itself is invalid inasmuch as the
abkari rights which are property have been taken away
contrary to the provisions of art. 31 2  of the companystitution
without payment of companypensation it was further submitted
that as the abolition act is number an agrarian reform it did
number get the protection of art. 31a of the companystitution. in
any case the original abolition act namely the hyderabad
abolition of inams act 8 of 1955 was enacted prior to the
seventh amendment of the companystitution which came into force
on numberember 1 1956. accordingly on a companystruction of the
relevant entries in list ii and list iii the hyderabad
legislature lacked legislative companypetence to enact the
statute. all these submissions as has been numbericed
already were rejected by both the companyrts. it may however
be mentioned that when the appeal against the judgment of
the high companyrt of andhra pradesh was pending in this companyrt
the andhra pradesh legislature passed the andhra pradesh
 telangana area  abolition of inams act 9 of 1967 repealing
the earlier abolition act 8 of 1955 as amended by act 10 of
1956 and vesting all the inams in the government from july
20 1955. a writ petition  w.p. number 78 of 1969  was filed
in this companyrt challenging the validity of act 9 of 1967.
during the pendency of these proceedings in this companyrt
several writ petitions were also filed in the high companyrt of
andhra pradesh challenging the validity of act 9 of 1967.
that companyrt by its judgment dated march 31 1970 held all the
provisions of act 9 of 1967 to be invalid and accordingly
struck down the entire act. the state however did number
appeal against the said judgment. it may also be mentioned
that the state of andhra pradesh published a numberification on
october 20 1973 under s. 1 3  b  of the abolition act by
which all the provisions of that act and in particular the
sections relating to companypensation namely ss. 12 13 14
and 16 were enforced from numberember 1 1973. it is stated
before us that in view of-this position the appellant
withdrew his writ petition number 78 of 1969 which was
dismissed as infructuous so that the present appeal is the
only one that has number to be companysidered. the learned advocate for the appellant has urged that the
effect of striking down act 9 of 1967 by the high companyrt of
andhra pradesh was number to revive act 8 of 1955 as amended by
act 10 of 1956 which being dead companyld number be revived. accordingly the vesting of the inams in the government under
the repealed acts 8 of 1955 and 10 of 1956 has numberlegal
validity. secondly it is companytended that even assuming that
act 8 of 1955 and act 10 of 1956 are revived these acts are
constitutionally invalid on two grounds urged before the
high companyrt namely  i  for want of legislative companypetence
and  ii  as the law takes- away property without
compensation it companyflicts with the provisions of art. 31 2
of the companystitution and is therefore invalid. thirdly on a
proper companystruction of s. 12 of the abolition act it would
appear that there is numberprovision made for payment of
compensation for taking away the abkari rights of the
appellant inasmuch as the companypensation that has been
provided for under the act is in respect of the lands and
number the abkari rights. the law also does number got the
protection of art. 31a of the companystitution as the abolition of abkari rights is
number in furtherance of agrarian reforms. alternatively it
was companytendedthat upon a proper companystruction of the
provisions of act 8 of 1955the abkari rights of the
appellant were number affected inasmuch as bythe definition
of the term inam what was vested was the land or the
rights arising from the land and number the rights which are
acquiredand granted decors of any rights in land. a few of the companytentions which are number res integra may be
disposed of. for instance the companytention that act 8 of 1955
and act 10 of 1956 even if they are revived are
constitutionally invalid as they have been enacted by a
legislature number companypetent to enact the same and secondly
the abolition act 8 of 1955 is number in furtherance of
agrarian reforms. on the first companytention it may be
observed that this companyrt in b. shankara rao badani ors. v.
state of mysore anr.  1  pointed out that where the
petitioners village were vested in the state of mysore
under s.1 4  of the mysore  personal and miscellaneous
inams abolition act 1954 and it was companytended that the
compensation provided by the mysore act was number the market
value of the property at the time of acquisition there was a
violation of-art. 31 2  and secondly the mysore act was
beyond the legislative companypetence of the mysore legislature
under entry 36 of list ii and entry 42 of list iii to the
seventh schedule as the entries stood be-fore the seventh
amendment of the companystitution because  i  the existence of
public purpose and the obligation to pay companypensationare
necessary companycomitants of companypulsory acquisition of
property and so the term acquisition must be companystrued as
importing by necessary implication the two companyditions of
public purpose and payment of adequate companypensation and

the words subject to the provisions of entry 42 list
iii in entry 36 of list ii reinforce the argument that a
law with respect to acquisition of property made under entry
36 should be exercised subject to the twofold restriction
as to public purpose and payment of companypensation both of
which are referred to in entry 42 list iii. it was held
by this companyrt that the legislation was undertaken as a part
of agrarian reform which the mysore state legislature
proposed to bring about in the state. therefore the
impugned mysore act was a law providing for the acquisition
by the state of any estate or of any rights therein or for
the extinguishment or modificationumber such rights as
contemplated by art. 3 1 a and hence the impugned act was
protected from attack in any companyrt on the ground that it
contravened art. 31 2 . secondly it was also held that the
entries in the lists of the seventh schedule were designed
to define and delimit therespective areas of legislative
competence of the union and state legislature and the
principle of the maximum expressum facit cassare tacitum
makes it inappropriate to treat the obligation to pay
compensation as implicit in entry 33 of list i or entry 36
of list ii when it is separately and expressly provided for
in art.31 2 . thirdly the words subject to the provisions
of entry 42 list iii mean numbermore than that any law made
under entry 36 by a state legislature can be displaced or
overridden by the union legislature making a law
 1  1969 3 s.c.r. 1.
under entry 42 of list iii. if the restrictive companydition as
to public pur-pose and payment of companypensation are to be
derived from these words their absence in entry 33 of list
i leads to the unreasonable inference that parliament can
make law authorising acquisition of property without a
public purpose and without a provision for companypensation. the true inference is that the power to make a law
belonging both to parliament and state legislatures can be
exercised subject to the two restrictions number by reason of
anything companytained in the legislative entries but by reason
of the positive provisions in art. 31 2 . but as legisla-
tion failing within art. 31a cannumber be called in question in
a companyrt for number-compliance with those provisions in art. 31 2  such legislation cannumber be struck down as
unconstitutional and void in view of this decision the
question of lack of legislative companypetence was number pressed. the entire case of the appellant therefore rests on two
short submissions namely  1  that the striking down of act
9 of 1967 by the high companyrt of andhra pradesh against which
there has been numberappeal to this companyrt and the withdrawal of
writ petition number 78 of 1969 filed in this companyrt would number
revive the abolition act and if they are revived the
abkari rights which are number a part of the inam rights they
are number touched by the provisions of the act. alternatively even if the provisions of the revived acts
deal with such rights though these rights are separate
rights companypensation ought to have been provided for
separately and since this has number been done the law is
violative of art. 31  2  of the companystitution. on the main question whether the impugned acts were revived
by reason of the high companyrt of andhra pradesh striking down
act 9 of 1967. a perusal of that judgment would show that
the division bench companysidered the question and held that as
the inam had already vested in the government on july 20
1955 there was numberneed to abolish inams which already stood
abolished long before the date when the impugned act
namely act 9 of 1967 was enacted. the right to patta
having been acquired the only purpose behind the impugned
act 9 of 1967 was to deprive the inamdars of their companypen-
sation and to deny the payment of companypensation to the
inamdars and others who were entitled to the same under the
repealed act. after stating thus the division bench
further observed
the result of the above said analysis is that
on the date when the impugned act was made
there was neither any estate which companyld be
abolished number there was any necessity to
effect any agrarian reform in so far as inams
were companycerned had already been done under the
act repealed. if the government did number
choose to implement the act for nine months
and then preferred to postpone the payment of
compensation or grant of patta that would
hardly alter the position. the effect of the
impugned act in pith and substance is really
number agrarian reform but to destroy the rights
of the inamdars and others who were assured
compensation under the repealed act. thus the
act although pretends to enact a law relating
to agrarian reform in spirit and in
effect it is a device to deprive the inamdars
and other persons of their acquired rights
under the repealed act. the striking down of act 9 of 1967 must be companystrued in the
light of the reasoning given by the learned judges of the
division bench of the andhra pradesh high companyrt that the
abolition act 8 of 1955 and the amendment act 10 of 1956 had
already achieved the result which act 9 of 1967 was intended
to achieve and once the inams had already vested in the
government companypensation had to be paid in accordance with
the terms of those laws and cannumber again be reopened by
vesting the inams which had already vested as if they had
number already vested in the government. this postulates the
existence of the acts impugned before us as a ground for
striking down act 9 of 1967 so that when the high companyrt
says that. the latter act 9 of 1967 is void it companyld number
have intended to say that even the acts number impugned before
us did number revive. what the companyrt implied by declaring act
9 of 1967 void is that it was numberest and that numbersuch law
could be passed in respect of a subject-matter which has
already vested in the government see deep chand v. the
state of uttar pradesh and others 1 . if so act 8 of 1955
as amended by act 10 of 1956 have been held to be in force
and that companypensation was to be paid in accordance
therewith. the decision cited by the learned advocate for the appellant
in b. n. tiwari v. union of india others 2 --is
inapplicable. in that case the ministry of home affairs by
a resolution in 1950 had declared reservation in favour of
scheduled castes and tribes and had. made a rule in 1952 for
carry forward whereby the unfilled reserved vacancies of a
particular year would be carried forward for one year only. in 1955 the above rule was substituted by anumberher rule
providing that the unfilled reserved vacancies of a
particular year would be carried forward for two years. the
court held that when the 1952 carry forward rule was
substituted by anumberher rule in 1955 the former rule ceased
to exist when 1955 rule was declared unconstitutional in t.
devadasan v. union of india 3  as such there was numbercarry
forward rule in existence in 1960. in these circumstances
the question that was companysidered was whether the carry
forward rule of 1952 companyld still be said to exist. this
court took the view that the carry forward rule of 1952
having been substituted by the carry forward rule of 1955
the former rule clearly ceased to exist because its place
was taken by the carry forward rule of 1955. thus by pro-
mulgating the new carry forward rule of 1955 the government
of india itself cancelled the carry forward rule of 1952.
therefore when this companyrt struck down the carry forward
rule as modified in 1955 that did number mean that the carry
forward rule of 1952 which had already ceased to exist
because the government of india its if can celled it and had
substituted a modified rule in 1955 in its place companyld
revive. in the case before us it had attempted to do
something which the legislature companyld number do namely to
abolish inams which did number exist and which had already
vested in the government and
 1  1959 supp.  2  s.c.r. 8.  2  1965 2 s.c.r. 421.

a.i.r. 1964 s.c. 179.
which the legislature companyld number abolish again. in these
circumstances the repeal of an enactment which had already
been given effect was a device for depriving the inamdars
whose rights had been abolished of their right of
compensation and was accordingly struck down as still-born
null and void as such unconstitutional from its inception
and cannumber have the effect as if it had repealed the
previous acts. on this analysis the provisions of acts 8 of
1955 as amended by act 10 of 1956 companyld number be held to have
been repealed it all and therefore they are in existence. the question that number remains is whether act 8 of 1955 as
amended by act 10 of 1956 abolishes the abkari rights also
and if so whether the companypensation provided in the
aforesaid acts includes those rights also. on the first
question s. 2 1   c  of the abolition act defines inam as
meaning land held under a gift or a grant made by the nizam
or by any jagirdar holder of a samathan or other companypetent
granter and companytinued or companyfirmed by virtue of a muntakhab
or other title deed with or without the companydition of
service and companypled with the remission of the whole or part
of the land revenue thereon and entered as such in village
records and includes- i  aresi makhta arazi agrahar and
seri inam and  ii  lands held as inam by virtue of long
possession and entered as inam in the village records. inamdar under s. 2 1  d  of the abolition means a person
holding an inam or a share therein either for his own
benefit or in trust and includes the successor in interest
of an inamdar etc. under sub-s.  2  of s. 2 words and
expressions used in this act  abolition act 8 of 1955  but
number defined therein shall have the meaning assigned to them
in the land revenue act 1317 fasli. the hyderabad tenancy
and agricultural lands act 1950 and the hyderabad atiyat
enquiries act 1952 and the rules thereunder. the
provisions whereunder the inam has been abolished in so far
as they are relevant in this case are sub-s.  1  of s. 3
which provides that numberwithstanding anything to the companytrary
contained in any usage settlement companytract grant sanad
order or other instrument act regulation rules or order
having the force of law and numberwithstanding any judgment
decree or order of a civil revenue or atiyat companyrt and
with effect from the date of vesting all inams to which
this act is made applicable under sub-section  2  of section
1 of this act shall be deemed to have been abolished and
shall vest in the state. clauses  a   b   c -and  d  of
sub-s.  2  of s. 3of the abolition act which are also
material are as follows
s. 3 2  save as expressly provided by or
under the provisions of this act and with
effect from the date of vesting the following
consequences shall ensure namely
 a the provisions of land revenue act
fasli relating to inams and the provisions of
the hyderabad atiyat enquiries act 1952 and
other enactments rules regulations land
circulars in force in respect of atiyat grants
shall to the extent they are repugnant to
the provisions of this act number apply and the
provisions of the land revenue act 1317
fasli relating to unalienated lands for
purposes of land revenue shall apply to the
said inams
 b all rights title and interest vesting
in the inamdar kabiz-e-kadim permanent tenant
protected tenant and number-protected tenant in
respect of the inam land other than the
interests expressly saved by or under
provisions of this act and including those in
all companymunal lands cultivated and
uncultivated lands  whether assessed or number
waste lands pasture lands forests mines and
minerals quarries rivers and streams tanks
and irrigation works fisheries and ferries
shall cease and be vested absolutely in the
state free from all encumbrances
 c all such inam lands shall be liable to
payment of land revenue
 d all rents and land revenue including
cesses and royalties accruing in respect of
such inam lands on or after the date of
vesting shall be payable to the state and number
to the inamdar and any payment made in
contravention of this clause shall number be
valid. under s. 4 of the abolition act every inamdar
shall with effect from the date of vesting
be entitled to be registered as an occupant of
all inam lands other than those specified in
clauses  a   b  and  c  of that section. similarly under s. 5 every kabiz-e-kadim
shall with effect from the date of vesting
be entitled to be registered as an occupant in
respect of such inam lands in his possession
which were under his personal cultivation and
which together with any lands he separately
owns and cultivates personally are equal to
four and a half times the family holding. under sub-s.  2  of s. 4 the kabiz-e-kadim
shall be entitled to companypensation from the
government as provided for under the abolition
act in respect of inam lands in his
possession in excess of the limit specified in
sub-s.  1  whether cultivated or number. section
12 of the abolition act provides for
determination of companypensation payable to the
inamdar and provides thus
the companypensation payable to the inamdar for
the inams abolished under section 3 shall be
the aggregate of the sums specified below -

in respect of inam lands registered in
the name of the inamdar and kabiz-e-kadim
under sections 4 and 5 a sum equal to twenty
times the difference between land revenue and
judi or quit-rent

in respect of income accruing to the
inamdar from the lands registered in the names
of his permanent tenant protected tenant and
number-protected tenant a sum equal to sixty per
cent of the premium charged as the case may
be under sections 6 7 and 8.
section 2 1-b  of the andhra pradesh land revenue act 8 of
1317 fasli defines land as including all kinds of benefits
pertaining to land or things attached to the earth or
permanently fastened to
things attached to the earth and also includes shares in
or charges on the revenue or rent which are or may be
levied on villages or other defined areas. a companybined reading of the provisions of the abolition act
with the andhra pradesh land revenue act shows that the
legislature had by abolishing inams intended to abolish all
rights vested in the inam lands which had been granted to
the inamdar. the right to tap or derive benefit from trees
standing on the lands is a right appurtenant to the lands
because a thing attached to the land is itself a part of the
land and is immovable property. haque malakana which is the
right in trees is therefore a right appurtenant to the land
so that when any inam land vests in the government the
right to tap trees standing on the land also vests in the
government. there cannumber be any separation of these rights
when the tree is still part of the land. there can be no
doubt that on publication of the numberification under sub-s.
 1  of s. 3 of the abolition act all inams were abolished
and vested in the state. the inams which were so abolished
and vested in the state include in it all rights title and
interests in the inams by virtue of clause  b  of sub-s.  2
of s. 3 of the abolition act. such rights as are intended
to be saved are those that are saved by the express
provisions companytained in the abolition act. it is
therefore clear that all rights title and interest vesting
in the inamdar would include the abkari rights in the
trees. this companyclusion of ours is supported by the
definition of land in s. 2 1-b  of the andhra pradesh land
revenue act which has to be imported into the definition of
inam land and which includes any rights in or over such
property of benefits accruing from the land or things
attached to the land and will also include shares in the
charges on the revenue or rent. this companyrt had in state of bihar v. rameshwar pratap narain
singh 1  while dealing with the validity of the bihar land
reform. amendment act of 1959 companysidered the question
whether the right of a proprietor of an estate to hold a
mela on his own land was a right in the estate and held
that the right to hold a mela has always been companysidered
in this companyntry to be an interest in land an interest which
the owner of the land can transfer to anumberher along with the
land or without the land. there can be numberdoubt therefore
that the right of the proprietor of any estate to hold a
mela on his own land is a right in the estate being
appurtenant to his ownership of the land. under sub-s.  1
of s. 3 of the abolition act vesting of the inams is
numberwithstanding any judgment decree or order of a civil
revenue or atiyat companyrt. in other words numberwithstanding
anything in the muntakhab all the inams to which the
abolition act is made applicable shall be deemed to have
been abolished and shall vest in the state with effect from
the date of vesting. we have numbericed already that the inam granted to the
appellant under the muntakhab is with all sources of
income i.e. ba-hama-abwab which rights are number granted
independently of the maktha or
 1  1962 2 s.c.r. 382.
inam land but are granted as part of the inam land so that
when inam land vests the rights which the inamdar had in
the land including hama abwab i.e. abkari rights also vest
in the state. on this companyclusion it is clear that the
abkari rights being part of the inam and having vested in
the state the companypensation that is payable under s. 12 of
the abolition act is inclusive of the abkari rights. as the
abolition of inams is a legislation intended to give effect
to agrarian reforms by making the land available to persons
who have numberlands companypensation provided for under s. 12
cannumber be challenged. the scheme of companypensation under the
abolition act is that four and a half times the family
holding is to be retained by the inamdar and in respect of
the rest of it a patta is given to the tenants which even
with respect to them along with any lands they own and
cultivate personally be equal to four and a half times the
family holding.


civil appellate jurisdiction civil appeal number 45 of 1961.
appeal from the judgment and decree dated april 16 1959 of
the punjab high companyrt at chandigarh in regular first appeal
number 30 of 1952.

p. verma for the appellants. p. maheshwari for respondent. 1963. march 7. the judgment of the companyrt was delivered by
subba rao j. -this appeal raises the question whether a suit
would lie in a civil companyrt claiming refund of the terminal
tax companylected by a municipality under the provisions of the
punjab municipal act 1911  punjab act iii of 1911
hereinafter called the act. the appellant is alleged to be a firm registered under the
indian partnership act. it carries on
business within the limits of the ludhiana municipality. it
imported sambhar salt into the octroi limits of the ludhiana
municipality. the municipal companymittee ludhiana imposed
terminal tax on the said salt and the appellant paid a sum
of rs. 5893/7/0 towards the said tax between october 24
1947 and december 8 1947. under the punjab government
numberification number 26463 dated july 21 1932 terminal tax
was payable under item 68 of the schedule attached to the
said numberification at the rate of 3 pies per maund in respect
of salt companymon and under item 69 at the rate of as./10/-per
maund in respect of salt of all kinds other than companymon
salt. the municipal companymittee ludhiana companylected terminal
tax on the sambhar salt at the higher rate under item 69 of
the schedule on the ground that it did number fall under item
68 of the schedule. the appellant filed a suit against the
respondent in the civil companyrt ludhiana claiming refund of
the said amount with interest. the respondent inter alia
contended that sambhar salt was number companymon salt and the
civil companyrt had numberjurisdiction to entertain the suit. the
senior subordinate judge ludhiana held that sambhar salt
was companymon salt within the meaning of item 68 of the
schedule that the imposition of tax on it by the respondent
under item 69 of the schedule was illegal and that
therefore the companyrt had jurisdiction to entertain the suit. on appeal the high companyrt of punjab proceeded on the
assumption that sambhar salt was salt companymon but held that
even so the civil companyrt had numberjurisdiction to entertain
the suit as the act provided for a remedy by way of appeal
against the wrong orders of the authorities thereunder. it
further held that in any view the suit was premature as
the appellant should have pursued his remedies under the act
before companying to the civil companyrt. in the result the decree
of the subordinate judge was set aside and the suit was
dismissed. the
present appeal has been preferred by the appellant by way of
certificate issued by the high companyrt. mr. varma learned companynsel for the appellant companytends that
the respondent has numberpower to impose terminal tax on salt
common under item 69 of the schedule to the said
numberification and therefore the tax having been imposed
contrary to the provisions of the act the civil companyrt has
jurisdiction to entertain the suit. on the other hand mr. maheshwari learned companynsel for the
respondent argues that the respondent has power to impose
terminal tax on companymon salt under the provisions of the act
that the imposition of tax under a wrong entry companyld be
rectified only in the manner prescribed by the act and that
the civil companyrt has numberjurisdiction to entertain a suit for
the refund of tax companylected when a specific remedy is
available under the act. it would be companyvenient at the outset to numberice the relevant
provisions of the act. under s. 61  2  the municipal
committee has power to impose with the previous sanction of
the state government any tax which the state legislature
has power to impose in the state subject to any general or
special orders which the state government may make in that
behalf. the state government issued the numberification number
26463 dated july 24 1932 to companye into force from numberember
1 1932 empowering the municipal companymittee to impose
terminal tax at the rates shown in company. 3 of the schedule
attached thereto upon the articles mentioned in company. 2
thereof which are imported into or exported out of the
municipal limits by rail or by road. the relevant items are
items 68 and 69. item 63 is salt companymon and the rate
prescribed is 3 pies per maund and item 69 is salt of all
kinds other than companymon salt and the rate fixed is as. /10/- per maund. section 78 provides for a penalty if any
person brings any article liable to the
payment of terminal tax into the prescribed limits without
paying the said tax. section 84 gives a right of appeal. against any levy or refusal to refund any tax companylected
under the act to the deputy company missioner or such other
officer as may be empowered by the state government in that
behalf under sub-s.  2  thereof if on hearing of an
appeal under the section. any question as to the liability
to or the principle of assessment of a tax arises on which
the officer hearing the appeal entertains reasonable doubt
he may. either of his own motion or on the application of
any person interested state the case and refer the same for
the opinion of the high companyrt and after the high companyrt
gives its opinion on the question referred to it the
appellate authority shall proceed to dispose of the appeal
in companyformity with the decisions of the high companyrt. under
s. 86 the liability of any person to be taxed cannumber be
questioned in any manner or by any authority other than that
provided in the act under sub-s.  2  thereof numberrefund of
any tax shall be claimed by any person otherwise than in
accordance with the provisions of the act and rules
thereunder. it will be seen from the aforesaid provisions
that the power to impose a terminal tax and the liability to
pay the same is companyferred or imposed on the municipal company-
mittee and the assessee respectively by the provisions of
the act. the act also gives a remedy to an aggrieved party
to challenge the companyrectness of the leavy or to seek refund
of the same. number only an appeal has been provided for
against the order of municipal companymittee levying the tax or
refusing to refund the same but the appellate authority is
empowered to get an authoritative opinion of the high companyrt
on any question as to the liability or on the principle of
assessment and on receiving such opinion the said
authority is bound to dispose of the appeal in the light of
the said opinion. it is said that the reference provided to
the high companyrt is in the discretion of the appellate
authority and he can
with impunity refuse to do so even if any difficult
question is involved in the appeal. the question is number
whether a particular officer abuses his power but whether a
remedy is available under the act or number. it cannumber be
assumed that an officer though he entertains reasonable
doubt on the question as to liability or on the principle of
assessment he will deliberately and maliciously refuse to
do his duty if he does other remedies may be available. the act also in specific terms debars any authority other
than that prescribed under the act from deciding the
question of liability of any person to tax or his right to
get refund of a tax paid. in short the act companytains a
self-contained companye companyferring a right impossing a ability
and prescribing a remedy for an aggrieved party. in such a
situation the question arised whether a civil companyrt
can entertain a suit for a refund of the tax wrongfully
collected from an assessee and if so what are the limits
of its jurisdiction ? we shall number proceed to companysider the relevant principles
governing the said question. willes j. in wolverhamton
new waterworks company v. hawkesford  1  describes as follows
the three classes of cases in which a liability may be
established founded upon a statute
one is where there was a liability existing
at companymon law and that liability is affirmed
by a statute which gives a special and
peculiar form of remedy different from the
remedy which existed at companymon law there
unless the statute companytains words which
expressly or by necessary implication exclude
the companymon law remedy the party suing has his
election to pursue either that or the
statutory remedy. the second class of case
is where the statute gives the right to sue
merely but provides numberparticular from of
remedy there the party
 1   1859  6. c.b.  n.s.  336 356.
can only proceed by action at companymon law. but
there is a third class viz. where a
liability number. existing at companymon law is
created by a statute which at the same time
gives a special and particular remedy for
enforcing it the remedy provided by
the statute must be followed and it is number
competent to the party to pursue the companyrse
applicable to cases of the second class. it is clear from the said passage that in a case where the
liability is created by a statute a party aggrieved must
pursue the special remedy provided by it and he cannumber
pursue his remedy in a civil companyrt. this principle was
approved by the judical companymittee in secretary of state v.
mask and company  1 . the high companyrts in india also accepted
the principle and applied it to different situations see
bhaishankar nanabhai v. the municipal companyporation of bombay

zamindar of ettayapuram v. sankarappa  3 . but there
is also an equally well settled principle governing the
scope of the civil companyrts jurisdiction in a case where a
statute created a liability and provided a remedy. lord
macnaghten in east fremantle companyporation v. annumbers  4
states the principles thus
the law has been settled for last hundred
years. if persons in the position of the
appellants acting in the execution of a
public trust and for the public benefit do an
act which they are authorised by law to do
and do it in a proper manner though the act
so done works a special injury to a particular
individual the individual injured cannumber
maintain an action in a word the only
question is has the power been exceeded? abuse is only one form of excess. in gaekwar sarkar of baroda v. gandhi kachrabhai 5  the
defendants by the negligent companystruction of railway made in
exercise of their powers under the
 1   1940  l.r. 67 i.a 222.  3   1904  i.l.r. 27 mad. 483.  5   1903  i.l.r 27
bom. 344.  2   1907  i.l.r. 31 bom. 604.  4   1902  a.c. 213.
railways act had caused the plaintiffs land to be flooded
in the rainy season and companysequently damaged. the railways
act provided that a suit shall number lie to recover
compensation for damage caused by the exercise of the powers
thereby companyferred but that the amount of such companypensation
shall be determined in accordance with the land acquisition
act 1870. in spite of this bar the plaintiff brought a
suit for damages for injury alleged to have been caused to
his field. it was argued that though the statutory
authority of the act of 1890 might have been abused or
exceeded the of the aggrieved party was only to proceed
under the land acquisition act and number by a civil suit. rejecting that plea the judicial companymittee observed
it would be simply a waste of time to deal
seriously with such companytentions as these. it
has been determined over and over again that
if a person or a body of persons having
statutory authority for the companystruction of
works exceeds or abuses the powers
conferred by the legislature the remedy of a
person injured in companysequence is by action or
suit and number by a proceedings for
compensation under the statute
which has been so transgressed. indian companyrts in the companytext of municipal acts had occasion
to apply both the principles. in municipal board benaras

krishna company  1  it was held that numbersuit for a refund
of an octroi charge which has been assessed and levied by a
municipality lies in a civil companyrt on the ground that the
goods were number in fact assessable to octroi duty or that the
amount of assessment was excessive. there the assessment
was made in accordance with the provisions laid down in the
municipalities act and the rules made thereunder. in
municipal companymittee montgomery v. sant singh  2  a full
bench of the lahore high companyrt had to companysider the question
 1   1935  i.l.r. 57 all. 916

a.1.r. 1940 lah.  f.b.  377 380
whether a suit would lie in a civil companyrt for an injunction
restraining a municipal companymitte from realizing the tax
demanded from a person on the ground that he was number the
owner of the lorries the subject matter of tax and
consequently the demand made on him was illegal and ultra
vires of the municipal companymittee. din mohammad j. speaking
for the companyrt elaborately companysidered the case law on the
subject and expressed his companyclusion in the following words

any special piece of legislation may provide
special remedies arising therefrom and may
debar a subject from having recourse to any
other remedies but that bar will be companyfined
to matters companyered by the legislation and number
to any extraneous matter. a companyporation is
the creature of a statute and is as much bound
to act according to law as the companystituents
thereof namely the individuals ruled by the
corporation and if the companyporation does an act
in disregard of its charter and intends to
burden any individual with the companysequences of
its illegal act an appeal by that individual
to the general law of the land can in numbercir-
cumstances be denied. this is a case where it may be said that the municipal
committee acted number under the act but outside the act in as
much as the tax on vehicles was payable by the owners only
but number by those who did number own them. anumberher full bench
of the lahore high companyrt in administrator lahore v. abdul
majid  1  had to deal with the jurisdiction of a civil
court to entertain a suit for an injunction restraining a
municipal companymittee from interfering with the companystruction
of the plaintiffs proposed building on the ground that its
order refusing sanction under s. 193  2  of the punjab
municipal act was an abuse of its power. mahajan j.
delivering

a. 1. r. 1945 lah. 81.
the judgment on behalf of the full bench observed at p. 84
the provisions of s. 225 which make the
decision of the companymissioner final can only
mean this that that decision is final only so
far as the proceedings under the act are
concerned. but when an order is made which is
outside that act then the provisions of s.
225 can have numberapplication to such an order
which itself is outside the
act
in short the bench laid down that in two kinds
of cases s. 225 was numberbar to the jurisdiction
of a civil companyrt in examining the order of the
municipal companymittee passed under s. 193  2
punjab municipal act. the first case is where
a companymittee acts ultra vires and the second
case is where it acts arbitrarily or
capriciously. in other words where it abuses
its statutory powers. the learned judge companycluded thus at p. 85
the remedies given to the subject by a
statute are for relief against the exercise of
power companyferred by a statute but those
remedies are number companytemplated for usurpation
of power under companyer of the provisions of the
statute. the civil companyrts are the proper
tribunals in those kinds of cases and their
jurisdiction cannumber be held barred by reason
of statutory remedies provided for grievances
arising in exercise of statutory powers. to
cases of this kind the rule that where a
statute creates a right and provides at the
same time a remedy that remedy and numberother
is available has numberapplication. further citation is unnecessary. the law on the subject may
be briefly stated thus
under s. 9 of the companye of civil procedure the companyrt shall
have jurisdiction to try all suits of civil nature excepting
suits of which companynizance is either expressly or impliedly
barred. a statute therefore expressly or by necessary
implication can bar the jurisdiction of civil companyrts in
respect of a particular matter. the mere companyferment of
special jurisdiction on a tribunal in respect of the said
matter does number in itself exclude the jurisdiction of civil
courts. the statute may specifically provide for ousting
the jurisdiction of civil companyrts even if there was numbersuch
specific exclusion if it creates a liability number existing
before and gives a special and particular remedy for the
aggrieved party the remedy provided by it must be followed. the same principle would apply if the statute had provided
for the particular forum in which the said remedy companyld be
had. even in such cases the civil companyrts jurisdiction is
number companypletely ousted. a suit in a civil companyrt will always
lie to question the order of a tribunal created by a
statute even if its order is expressly or by necessary
implication made final if the said tribunal abuses its
power or does number act under the act but in violation of its
provisions. let us number apply the said principles to the facts of the
present case. the liability to pay terminal tax is created
by the act and remedy is given to a party aggrieved in the
enforcement of that liability. as has been already
indicated against the order of the municipal companymittee
levying terminal tax an appeal lies to the deputy companymis-
sioner and a reference to the high companyrt. applying one of
the principles stated supra the party aggrieved can only
pursue the remedy provided by the act and he cannnumber file a
suit in a civil companyrt in that regard. provisions of ss. 84
and 86 of the act exclude the jurisdiction of the civil
court in respect of the tax levied or the assessment made
under the act. but the learned companynsel for the appellants companytends that the
impugned levy was number made under the act but in derogation
of the provisions thereof. there is numberforce in this
contention. section 61  2  of the act specifically empowers
the municipal companymittee to levy any tax other than those
specified therein with the previous sanction of the state
government. the levy of terminal tax was sanctioned by the
punjab government by numberification number 26463 dated july 21
1932 at the rates shown in companyumn 3 of the schedule to the
said numberification. under the said numberification read with
s. 61 of the act the municipal companymittee is empowered to
levy terminal tax on salt whether it is companymon salt or number. the companymittee has therefore ample power under the act and
the numberification issued by the state government to impose
the said tax. the only dispute was as regards the rate of
tax payable in respect of the salt brought by the appellant
into the limits of the municipal companymittee. the rate
depended upon the character of the salt. the ascertainment
of the said fact is a necessary step for fixing the rate and
it is number possible to say that in ascertaining the said fact
the authorities companycerned travelled outside the provisions
of the act. the learned companynsel companytends that if a
municipal companymittee levies terminal tax on an article number
liable to tax under the act a suit would lie and
therefore the same legal position should apply even to a
case where the municipal companymittee levies the tax in respect
of an article under an entry number applicable to if. we do
number see any analogy between these two illustrations in the
former the municipal companymittee does number act under the act
but in the latter it only companymits a mistake or an error in
fixing the rate of tax payable in respect of a particular
commodity one is outside the act and the other is under
the act one raises the question of jurisdiction and the
other raises an objection to a matter of detail.


civil appellate jurisdiction civil appeal number 1593 of 1968.
appeal from the judgment and order dated september 20 1963
of the calcutta high companyrt in income-tax reference number 23
of 1960.
sachin chaudhari t. a. ramachandran and d. n. gupta for
the appellant. narsaraju r. n. sachthey and b. d. sharma for the
respondent. the judgment of the companyrt was delivered by
ramaswami j this appeal is brought by certificate from the
judgment of the calcutta high companyrt dated 20th september
1963 in income tax reference number 23 of 1960.
the appellant  hereinafter referred to as the assessee was
carrying on the business of crushing sugar-cane and gur
refining. m s. andrew yule company were acting as the
managing agents of the assessee. in a letter dated 5th
february 1946 addressed to the share-holders of the
assessee the managing agents referred to the alarming
increase of government interference in the affairs of the
sugar industry in bihar and the increase of wages of the
workers as well as the levy of a cess of government and
deterioration in the cane crops. in view of this state of
affairs the managing agents apprehended a loss and
suggested that the companypanys affairs should be put on a
less discouraging basis by accepting the offer of a lease
of the companypany as a running companycern from the standard
refinery distillery limited at an extra-ordinary general
meeting of the share-holders of the assessee companypany held on
5th march 1946 it was decided to authorise the directors to
enter into a lease with the said standard refinery
distillery limited by an indenture of 15th march 1948 the
lease was executed to companye into effect retrospectively from
1st june 1945. the term of the lease was originally for 5
years companymencing from 1st june 1945 with an option to the
lessee to companytinue for further five years and thereafter two
further options to the lessee each for five years on the
same terms and companyditions but subject to the payment of
higher rates of royalties and also subject to the option on
the part of the assessee companypany to terminate the lease by a
resolution of the shareholders of the companypany to be held
before 30th numberember in any year after the first two years. this option of termination of the lease was number exercised by
the assessee companypany. the companysideration of the lease as
described in clause 7 of the indenture was royalty payable
on the manufacture of sugar and molasses. the royalty on
sugar was to be at the rate of rs. 75 per hundred maunds of
sugar manufactured for the first and second term of five
years at the rate of rs. 82.50 per hundred maunds of sugar
manufactured for the third five year period and at rs. 90
for the fourth five year period. the royalty on molasses
was to be calculated at 3 pies per maund on all molasses
sold during each year of the original period or the renewed
period of the lease. the companyputation of the royalty was
subject to a minimum payment of rs. 65000 per annum. for the assessment year 1955-56 the relevant accounting year
of the assessee ended on 31st may 1954. in the assessment
proceedings for 1955-56 the assessees main companytention was
that the lease granted under the indenture of 15th march
1948 was a lease of a companymercial asset and therefore the
income arising from the lease should be assessed under s. 10
of the income tax act and the assessee should be allowed
depreciation and development rebate in accordance with
clause  vi-a  and clause  vi-b  of sub-section  2  of
section 10 of the income
tax act. the income tax officer assessed the income under
s. 12 of the act as being income under the head other
sources and held that numberadditional depreciation or
development rebate companyld be allowed as claimed by the
assessee. according to the assessee the income derived
from the lease of the sugar factory was income from business
because the factory was leased as a going companycern and the
rent of the building machinery plant and spare parts was
fixed at a certain rate per maund of sugar produced and at
a certain rate per maund of molasses sold. on appeal the
appellate assistant companymissioner found that it was a simple
lease of the building and machinery in a sugar factory and
as such the method of payment based on production companyld number
affect the character and nature of the income derived under
the said lease. in further appeal the appellate tribunal
came to the companyclusion that on the facts stated the case
fell under section 12 and number under section 10 and that
since sub-section  3  of section 12 did number include clauses
 vi-a  and  vi-b  of section 10 2  the claim of additional
depreciation and development rebate companyld number be allowed. at the instance of the assessee the appellate tribunal
stated a case to the high companyrt on the following questions
of law under section 66 1  of the income tax act 1922
 hereinafter referred to as the act

whether on the facts and in the
circumstances of the case the income of the
assessee companypany was liable to be assessed
under section 12 of the indian income tax act
and number under section 10 of the said act ? whether on the facts and in the
circumstances of the case additional
depreciation and development rebate can be
allowed as a deduction ? the high companyrt answered both the questions
against the assessee holding that the income
was liable to be assessed under section 12 and
that numberadditional depreciation and
development rebate companyld be allowed. section 10 of the act stood as follows at the
material time
10.  1  the tax shall be payable by an
assessee under the head profit sand gains of
business profession or vocation in respect
of the profit or gain of any business
profession or vocation carried on by him. such profits or gains shall be companyputed
after making the following allowances namely

in respect of depreciation of such
buildings machinery plant or furniture being
the property of the assessee a sum
equivalent where the assets are ships
other than ships ordinarily plying on inland
waters to such percentage on the original
cost thereof to the assessee as may in any
case or class of cases be prescribed and in
any other case to such percentage on the
written down value thereof as may in any case
or class of cases be prescribed
and where the buildings have been newly
erected of the machinery or plant being new
number being machinery or plant entitled to the
development rebate under clause  vi-b  has
been installed after the 31st day of march
1945 a further sum  which shall however number
be deductible in determining the written down
value for the purposes of this clause  in
respect of the year of erection or
installation equivalent--
 a  in the case of buildings the erection of
which is begun and companypleted between the 1st
day of april 1946 and the 31st day of march
1956  both days inclusive  to fifteen per
cent of the companyt thereof to the assessee
 b  in the case of other buildings to ten
per cent of the companyt thereof to the. assessee
 c  in the case of machinery or plant to
twenty per cent of the companyt thereof to the
assessee
provided that-
 c the aggregate of all allowances in respect
of depreciation made under this clause and
clause  vi-a  or under any act repealed
hereby or under the indian income tax act
1886  ii of 1886  shall in numbercase exceed
the original companyt to the assessee of the
buildings machinery plant or furniture as
the case may be
 vi-a  in respect of depreciation of buildings
newly erected or of machinery or plant being
new which has been installed after the 31st
day of march 1948 a further sum  which shall
be deductible in determining the written down
value  equal to the amount admissible under
clause  vi   exclusive of the extra allowance
for double or multiple shift working of the
machinery or plant and the initial
depreciation allowance admissible under that
clause for the first year of erection of the
building or the installation of the machinery
or plant  in number more than five successive
assessments for the financial years next
following the previous year
sup/69-14
in which such buildings are erected and such
machinery and plant installed and falling
within the period companymencing on the 1st day of
april 1949 and ending on the 31st day
of march 1959
 vi-b  in respect of machinery or plant being
new which has been installed after the 31st
day of march 1954 and which is wholly used
for the purposes of the business carried on by
the assessee a sum by way of development
rebate in respect of the year of installation
equivalent to twenty-five per cent of the
actual companyt of such machinery or plant to the
assessee
provided that numberallowance under this clause
shall be made unless the particulars
prescribed for the purpose of clause  vi  have
been furnished by the assessee in respect of
such machinery or plant
section 12 was to the following effect
12.  1 . the tax shall be payable by an
assessee under the head income from other
sources in respect of income profits and
gains of every kind which may be included in
his total income  if number included under any of
the preceding heads . such income profits and gains shall be
computed after making allowance for any
expenditure  number being in the nature of
capital expenditure  incurred solely for the
purpose of making or earning such income
profits or gains. where an assessee lets on hire machinery
plant or furniture belonging to him he shall
be entitled to allowances in accordance with
the provisions of clauses  iv   v   vi  and

of sub-section  2  of section 10.

where an assessee lets on hire machinery
plant or furniture belonging to him and also
buildings and the letting of the buildings is
inseparable from the letting of the said
machinery plant or furniture he shall be
entitled to allowances in accordance with the
provisions of clauses  iv   v   vi  and

of subsection  2  of section 10 in
respect of such buildings. the main companytention of the assessee was that
the lease as companytemplated in the indenture
dated 15th march 1948 was a lease of a
commercial asset and therefore the income
arising from the lease should be assessed
under section 10 1  of the act and number under
section 12 1 . in order to examine the
validity of this argument it is necessary to
set out the relevant clauses of the indenture
of lease. clause   1  of the lease provided
that the lease was for a term of five years
commencing from 1st june 1945 with an option
to companytinue for a further term of five years
and thereafter two further options of five
years in each case on the same terms and
conditions subject to higher payment of rates
of royalties. clause 2
the lessee shall be entitled to run the said
sugar factory and all other machinery annexed
to the same and use all the tools and
implements buildings and premises offices
and erections and utensils and all other
things which are number in or upon the said
premises and which may be added from time to
time thereto provided always that the lessees
shall number at any time remove the plant and or
machinery etc. hereby demised or any part
thereof from the said premises elsewhere for
the purpose of or in companynection with the
lessees other interests. clause 3
the lessees shall at the time of taking over
possession of the factory from the lessors be
entitled free of payment to the goods already
manufactured during the current crushing
season i.e. 1945-46 or in the process of
manufacture and or to be hereafter
manufactured by the lessees and the lessees
shall have absolute discretion to sell and
deal with the same in such manner as they
think fit and proper. clause 5
the lessees shall also be entitled to erect
construct and maintain any other machinery as
the lessees may think fit and proper. all
machinery brought in and erected by the
lessees would remain the lessees property and
after the termination of the lease the lessees
shall be entitled to remove the same provided
always that the lessees shall forthwith repair
and make good all damage caused to the demised
premises by such removal of the lessees
machinery. clause 7
clause 7 provides for the payment of royalty. the royalty on sugar was to be companyputed at the
rate of rupees seventy-five per 100 maunds of
sugar manufactured for the first five years as
well as next five years then at the rate of
rupees eighty two and annas eight per 100
maunds of sugar manufactured for the third
five years and rs. 90/- for the fourth five
years. the royalty on molasses was companyputed
at three pies per maund on all molasses sold
during each year of the original lease period
and any renewals thereof subject to the
payment of a minimum royalty of rs. 6500/per
annum. clause 8
this clause provides that the lessee shall in
addition to the royalty reserved be
responsible for all the running expenses of
the factory including salaries and wages and
all factory staff and labour and shall pay all
sugar excise duty etc. excepting the ground
rents payable to the landlords and taxes on
income chargeable to the lessors and shall
fully reimburse the lessors in respect of such
expenses which have already been incurred by
the lessors since the first day of one thou-
sand nine hundred and forty five and property
tax. clause 17

the lessors will keep the demised premises
insured to the full value thereof and shall
pay all expenses which will be incurred for
insuring the demised premises. the lessors shall pay all expenses of
running the lessors companypany e.g. directors
fees audit fees ground rents etc. but number
the running expenses of the factory and
premises hereby demised and shall also pay for
all the expenditure for additions alterations
breakdown and or renewals and replacement of
capital nature  i.e. dubitable to block
account  to buildings and machineries etc. and
other similar expenses of a capital nature on
the demised premises. it appears from clauses 2 and 5 that the existing machinery
which was. owned by the lessor companyld number be removed and that
the lessee would be entitled to set up additional machinery
without interference from the lessor and that on the
termination of the lease the lessee would be entitled to
remove the same without causing any damage to the property
demised. clause 3 company-
templates that if during the period 1945-46 the lessors sell
the companymodity manufactured the price thereof should go back
to the lessee. mr. choudhury referred to clause 6 which
entitled the lessee to use the railway siding during the
period of the lease. but the right of use of railway siding
by the lessee under this clause cannumber in any way be
construed as the exercise of companytrol over the business of
the assessee. the provision for minimum royalty of rs. 65000/- per annum indicates that the assessee had numberdirect
interest in the production of the factory. the cumulative
effect of clauses 11 12 13 and 14 is that the lessor will
have numberconcern with the production of the factory which is
the principal part of the business previously carried on by
the lessor. the provisions in clause 17 are that the
lessors shall keep the demised premises insured to the full
value and to repair and replace the machines which are of
capital nature. on a scrutiny of all the clauses of the
indenture of lease our companyclusion is that the intention of
the assessee was to part with the entire machinery of the
factory and the premises with the obvious purpose of earning
rental income. it was number the intention of the assessee to
treat the factory and machinery etc. as a companymercial companycern
during the subsistence of the lease. the primary companydition
for the application of s. 10 of the act is that the tax is
payable by an assessee under the head profits and gains of
business in respect of business carried on by him. when an
assessee does number carry on business at all section 10
cannumber be applicable and the income that he receives cannumber
bear the character of profits of business. as we have
already shown there is numberdirect nexus between the income of
the assessee and the production of the factory. the royalty
payable to the assessee was number paid under clause 7 of the
indenture of lease for the production in the factory. the
production was only a measure of the royalty to be paid and
in any event the measure of payment had numberhing to do with
the character of the payment as a receipt from business or
from other sources. it follows that in the circumstances of
this case the income of the assessee cannumber be characterised
as income from the activity of the assessee carrying on any
business. the high companyrt was therefore right in holding
that the income of the assessee was liable to be assessed
under section 12 and number under section 1 0 of the act. on behalf of the assessee reference was made to the decision
of this companyrt in companymissioner of excess profit tax bombay
city v. shri lakshmi silk mills limited 1  in which the
respondent companypany which was formed for the purpose of
manufacturing silk cloth installed a plant for dying silk
yarn as a part of its business during the relevant charging
accounting period. owing to the difficulty in obtaining
silk yam on account of the war it
 1  20 i.t.r. 451.
could number make use of this plant which had remained idle for
some time. in august 1943 the plant was let out to
anumberher companypany on a monthly rent. the question arose
whether the income received by the respondent companypany in
the chargeable accounting period by way of rent was income
from business and assessable to excess profit tax. it was
held by this companyrt that a part of the assets did number cease
to be companymercial assets of that business merely because it
was temporarily put to a different use or let out to anumberher
and accordingly the income from the assets would be profits
of the business irrespective of the manner in which the
assets were exploited by the companypany. but this companyrt
clearly indicated that numbergeneral principle companyld be laid
down which would be applicable to all cases and that each
case must be decided on its own circumstances according to
ordinary companymonsense principles. the material facts of
lakshmi silk mills limited  1  are that only a part of the
machinery was let out on lease and the rest of the machinery
was worked by the assessee. the letting out of the
machinery was for a short period of five months. there was
also numberletting out of the premises of the factory by the
assessee. the ratio of the decision in lakshmi silk mills
ltd. 1  is therefore number applicable to the present case. reference was made on behalf of the assessee to the decision
in narain swadeshi weaving mills v. companymissioner of excess
profits tax 2  in which the assessee firm carrying on a
manufacturing business companysisted of three partners n and
his two sons r g. in april 1940 a public limited companypany
was incorporated with the object of taking over the business
of the assessee firm. this companypany was director-controlled
and the directors were n his three sons r g s and a
brother-in-law of g. the companypany purchased only the building
and leasehold rights from the assessee firm but took over
from it on lease at an annual rent the plant and machinery. the assessee firm did number thereafter manufacture anything
and it bad accordingly numberfurther trading or companymercial
activity. in the circumstances it was held that letting
out of the plant and the machinery by the assessee to the
company companyld number fall within the definition of business
under section 2 5  and as the assessee firm had numberbusiness
during the relevant period to which the act applied section
10a companyld number be invoked by the excess profit tax
authorities. it was however pointed out that whether a
particular activity amounts to any trade companymerce or
manufacture or any adventure in the nature of trade
commerce- or manufacture is always a difficult question to
answer and numbergeneral principle ran be laid down which would
be applicable to all cases and each case must be decided in
the setting and background of its own facts. it is evident
that the material facts in- the present case are somewhat
different from those of narain swadeshi
 1  20 i.t.r. 451.  2  26 i.t.r. 765.
weaving mills case 1  for there is numberout-right sale of the
building of the factory but only a lease of the factory
premises together with the machinery for a long period of
years. for the reasons already expressed our companyclusion is that the
intention of the assessee was number to treat the factory etc. as a companymercial asset during the subsistence of the lease. in other words the intention of the assessee was to go out
of the business altogether so far as the factory and the
machinery was companycerned with effect from 1st june 1945 and
the intention was to use the income arising from the royalty
in its capacity as the owner of the factory. it follows
therefore that the first question was rightly answered by
the high companyrt in favour of the companymissioner of income tax. as regards the second question the argument was stressed by
mr. choudhury that clauses  vi-a  and  vi-b  of section
10 2  are ancillary to clause  vi  and should be taken to be
included within clause.  vi  as mentioned in sub-section  3
of section 12. it appears that clause  vi-a  was inserted
by section 11 of the taxation laws  extension to merged
states and amendment act 1949 . clause  vi-b  was inserted
by s. 8 of the finance act 1955 with effect from 1st april
1955. at the time of making the amendment under the said
acts numberamendment was made to section 12 3  of the act. it
was argued by mr. choudhury that although this was number done
specifically it followed by implication that additional
depreciation allowance in respect of new assets and
development rebate would companynsern within the ambit of
section 12 3 . it appears to us that clauses  vi-a  and
 vi-b  are number ancillary to clause  vi  because the scheme
of clauses  vi-a  and  vi-b  is somewhat different. clause
 vi-a  which was inserted in 1949 gives additional
depreciation allowance over and above the initial allowance
which was formerly available under the second paragraph of
clause  vi  in respect of buildings newly erected and new
machinery and plant but number furniture installed after the
31st march 1948. the additional allowance under this
clause is companyfined to number more than five successive
assessments falling within the period from 1st april 1949
and 31st march 1959. further it is deductible in deter-
mining the written down value unlike the initial allowance
granted under the second paragraph of clause  vi . clause
 vi-b  was inserted by the finance act 1955. it grants
development rebate in respect of machinery and plant
provided that the machinery or plant is new and has been
installed after the 31st march 1954 and provided further
that it is used wholly for the purpose of the assessees
business and the particulars prescribed for the purpose of
clause  vi  have been furnished. it is manifest that
clauses  vi-a  and  vi-b  introduce a new scheme
 1 26 i.t.r. 765.
and cannumber be treated as an integral part of clause  vi  by
implication. apart from this companysideration it appears to us
that these clauses were number specifically engrafted by
parliament in section 12 3  and section 12 4  while amending
section 10 2  of the act. it is therefore number permissible
for the companyrt to read these same clauses by implication in
section 12 3  and section 12 4  of the act. the duty of the
court is to interpret the words that parliament has used it
cannumber supply the gap disclosed in an act or to make up the
deficiencies. if said lord brougham in gwynne v.
burnell 1  we depart from the plain and obvious meaning on
account of such views  as those pressed in argument on 43.
geo. 3 c. 99  we do number in truth companystrue the act but
alter it. we add words to it or vary the words in which its
provisions are companyched. we supply a defect which the
legislature companyld easily have supplied and are making the
law number interpreting it  cf.