civil appellate jurisdiction civil appeals number. 494 and
495 of 1964.
appeals by special leave from the judgment and order dated
september 26 1961 of the punjab high companyrt in civil writ
number 801 of 1959.

t. desai r. ganapathy iyer and r. n. sachthey for the
appellant. a. palkhivala i. m. nanavati t. a. ramachandran j.

dadachanji o. c. mathur and ravinder narain for the
respondents. a. palkhivala j. b. dadachanji o. c. mathur and
ravinder narain for intervener number. 1 and 2.

m. nanavati j. b. dadachanji o. c. mathur and
ravinder narain for intervener number 3.

a. palkhivala r. j. kolah j. b. dadachanji o. c.
mathur and ravinder narain for intervener number 4.

n. mukherjee for intervener number 5.
the judgment of the companyrt was delivered by
subba rao j. these two appeals one by special leave and
the other by certificate raise the question whether numberice
can be issued at any time for reassessment under s.
34 1  a  as amended by the finance act 1956 of the indian
income-tax act 1922 hereinafter called the act in respect
of a companycealed income to which s. 34 1a  thereof applied. the facts may be briefly stated. messrs. shahzada and
sons the 1st respondent in both the appeals was an
undivided hindu family firm and it was assessed in that
capacity up to the assessment year 1945-46. it is alleged
that subsequently there was a partition in the family and a
new firm came into existence which took over the business
of the family. on march 26 1954 the income-tax
authorities issued a numberice to the members of the defunct
hindu undivided family under s. 34 1  a  of the act in
respect of the assessment year 1945-46 on the ground that
certain income of the said family had escaped assessment. pursuant to the proceedings so initiated a sum of rs. 363000/- was added to the original assessment of the said
family. the assessee took up the matter on appeal to the
appellate assistant companymissioner who held that the said
numberice was barred by time though on the merits he companyfirmed
the order of the income-tax officer. the income-tax
department as well as the 1st respondent preferred appeals
against the said order to the income-tax appellate tribunal. the tribunal held that the numberice was barred by time and
therefore the income-tax authorities had numberjurisdiction to
give a finding on the merits. meanwhile s. 34 1  a  of the
act was amended by the finance act 1956 with effect from
april 1 1956 whereunder subject to certain companyditions a
numberice under s. 34 1  a  companyld be issued at any time. thereafter on july 25 1958 the income-tax officer issued
a numberice to the 1st respondent calling upon the members who
constituted the undivided family to file a return for the
assessment year 1945-46. respondents 2 to 5 who were the
members of the said undivided hindu family appealed to the
central board of revenue for redress without any success. thereafter they filed a petition under art. 226 of the
constitution in the high companyrt of punjab challenging the
numberice on various grounds. their main companytention was that
numbernumberice under s. 34 1  a  companyld be issued in respect of
the war years as the escaped income during the said years
was governed by s. 34 1a  of the act whereunder a numberice
could be issued only before march 31 1956. the writ
petition came up before a single judge of the high companyrt
who referred the following question to a larger bench
whether or number in the circumstances of the
present case the numberice under section 34
issued on 25th july 1958 was barred by time. the division bench in its turn referred the said question
to a full bench. the full bench inter alia held that s.
34 1a  was a special provision whereas s. 34 1  a  was a
general provision and that as the escaped income of the
year 1945-46 was governed by s. 34 1a  numbernumber-ace under s.
34 1  a  companyld be issued. in the result after expressing
that view the full bench sent back the case to the single
judge before whom it came in the first instance. dua j.
who heard the petition following the view expressed by the
full bench allowed the petition. the appellants
thereafter preferred a letters patent appeal against that
order to a division bench which dismissed the same. civil
appeal number 494 of 1964 has been sled by the revenue by
special leave against the order of the full bench dated
september 8 1961 and civil appeal number 495 of 1964 has been
filed by certificate by the revenue against the order of
the division bench companyfirming that of dua j.
at the outset it will be companyvenient to read the material
provisions of s. 34 of the act as amended by the finance
act 1956 and by the income-tax  amendment  act 1959.
section 34.  1  if--
 a  the income-tax officer has reason to
believe that by reason of the omission or
failure on the part of an assessee to make a
return of his income under section 22 for any
year or to disclose fully and truly all
material facts necessary for his assessment
for that year income profits or gains
chargeable to income-tax have escaped
assessment for that year or have been under-
assessed or assessed at too low a rate or
have been made the subject of excessive relief
under the act or excessive loss or
depreciation allowance has been companyputed
he may in cases falling under clause  a  at
any time  serve on the
assessee a numberice companytaining
all or any of the requirements which may be
included in a numberice under sub-section  2  of
section 22 and may proceed to assess or
reassess such income profits or gains or
recompute the loss or depreciation allowance
and the provisions of this act shall so far
as may be apply accordingly as if the numberice
were a numberice issued under that sub-section
provided that the income-tax officer shall number issue a
numberice under clause  a  of sub-section  1 -

for any year prior to the year ending on
the 31st day of march 1941

for any year if eight years have
elapsed after the expiry of that year unless
the income profits or gains
chargeable to income-tax which have escaped
assessment or have been under-assessed or
assessed at too low a rate or have been made
the subject of excessive relief under this
act or the loss or depreciation allowance
which has been companyputed in excess amount to
or likely to amount to one lakh of rupees or
more in the aggregate either for that year
or for that year and any other year or years
after which or after each of which eight years
have elapsed number being a year or years ending
before the 31st day of march 1941

for any year unless he has recorded his
reasons for doing so and in any case falling
under clause  ii  unless the central board of
revenue and in any other case the
commissioner is satisfied on such reasons
recorded that it is a fit case for the issue
of such numberice
 1a . if in the case of any assessee the
income-tax officer has reason to believe

that income profits or gains chargeable
to income-tax have escaped assessment for any
year in respect of which the relevant previous
year falls wholly or partly within the period
beginning on the 1st day of september 1939
-and ending on the 31st day of march 1946
and

that the income profits or gains which
have so escaped assessment for any such year
or years amount or are likely to amount to
one lakh of rupees or more
he may numberwithstanding that the period of eight years or
as the case may be four years specified in sub-section  1
has expired in respect thereof serve on the
assessee a numberice companytaining all or
any of the requirements which may be included in a numberice
under sub-section  2  of section 22 and may proceed to
assess or re-assess the income profits or gains of the
assessee for all or any of the years referred to in clause

and thereupon the provisions of this act excepting
those companytained in clauses  i  and  iii  of the proviso to
sub-section  1  and in subsections  2  and  3  of this
section shall so far as may be apply accordingly
provided that the income-tax officer shall number issue a
numberice under this sub-section unless he has recorded his
reasons for doing so and the central board of revenue is
satisfied on such reasons recorded that it is a fit case for
the issue of such numberice
provided further that numbersuch numberice shall be issued after
the 31st day of march 1956.  1b  where any assessee to whom a numberice has
been issued under clause  a  of sub-section
 1  or under sub-section  ia  for any of the
years ending on the 31 st day of march of the
years 1941 to 1948 inclusive applies to the
central board of revenue at any time within
six months from the receipt of such numberice or
before the assessment or reassessment is made
whichever is earlier to have the matters
relating to his assessment settled the
central board of revenue may after
considering the terms of settlement proposed
and subject to the previous approval of the
central government accept the terms of such
settlement and if it does so shall make an
order in accordance with the terms of such
settlement specifying among other things the
sum of money payable by the assessee.  1c  any sum specified in a settlement arrived
at in pursuance of sub-section  1b  may be
recovered and any penalty for default in
making payment of any such sum may be imposed
and recovered in the manner provided in
chapter vi.  id  any settlement arrived at under this
section shall be companyclusive as to the matters
stated therein and numberperson whose
assessments have been so settled shall be en-
titled to re-open in any proceeding for the
recovery of any sum under this act or in any
subsequent assessment or reassessment
proceeding relating to any tax chargeable
under this act or in any other proceeding
whatsoever before any companyrt or other authority
any matter which forms part of such
settlement. a numberice under clause  a  of sub-section
 1  may be issued at any time numberwithstanding
that at the time of the issue of the numberice
the period of eight years specified in that
sub-section before its amendment by clause  a
of section 18 of the finance act 1956  18 of
1956  had expired in respect of the year to
which the numberice relates. sub-section  ia  was inserted in s. 34 of the act by the
income-tax  amendment  act 1954 and it came into force on
july 17 1954. clause  a  of sub-s.  1  of s. 34 was
amended by the finance act 1956 with effect from april 1
1956. sub-section  1b  of s. 34 which was inserted by the
income-tax  amendment  act 1954 was also amended by the
finance act 1956 whereunder the words to whom a numberice
has been issued under clause  a  of sub-section  1  or
under sub-section  ia  for any of the years ending on the
31st day of march of the years 1941 to 1948 inclusive were
substituted for the words to whom a numberice has been issued
under sub-
section  1a . sub-section  4  was added by the income-tax
 amendment  act 1959.
the gist of the relevant provisions may be stated thus
under s. 34 1  a  before it was amended by the finance act
1956 in the case of companycealed income a numberice for re-
assessment companyld be issued within 8 years of the end of the
relevant year and after the said amendment numberice in
respect of the said income companyld be issued at any time but
it was subject to three companyditions namely  i  it would number
be issued for any year prior to the year ending on march 31
1941  ii  such companycealed income amounted to one lakh of
rupees or more in the aggregate and  iii  the income-tax
officer gave reasons for doing so and obtained the companysent
of the central board of revenue. sub-section  ia  of s. 34
did number undergo any change after the finance act 1-956.
escaped assessment for any year in respect of which the
relevant previous year fell within the period beginning on
september 1 1939 and ending on march 31 1946 companyld be
reached by issuing a numberice thereunder but it was subject
to the companydition that the income which escaped assessment
for any year amounted to or was likely to amount to rupees
one lakh or more it was subject to a further companydition that
numbersuch numberice should be issued after march 31 1956. sub-
section  1b  of s. 34 as amended in 1956 enabled an
assessee to whom a numberice has been issued under cl.  a  of
sub-s.  1  or sub-s.  ia  for any of the years ending on
march 31 of the years 1941 to 1948 inclusive to apply to
the central board of revenue for a settlement of the amount
of tax payable by him sub-section  4  which was inserted
in 1959 emphasized the fact that a numberice companyld be issued
under s. 34 1  a  numberwithstanding that the time of 8 years
had expired before the finance act 1956 came into force. we may at this stage numberice the arguments advanced by learn-
ed companynsel on the interpretation of the said provisions. the arguments. of mr. s. t. desai learned companynsel for the
revenue may be summarized thus the terms of s. 34 1  a
after its amendment by the finance act 1956 are clear and
unambiguous and the scope of the expression at any time
cannumber be curtailed by companystruction. so companystrued
proceedings for re-assessment in respect of escaped income
contemplated by the said clause can be initiated without any
restriction of time. the legislative history of the
fasciculus of sub-sections namely sub-ss.  1  a   1a
 1b   1c  and  1d  of s. 34 supports the said companystruction
and explains the relative scope of s. 34 1  a  and s.
34 1a --the former as amended by the finance act 1956
operated after s. 34 1a  ceased to operate so far as the
escaped companycealed income of war years was companycerned. the
amendment of s. 34 1b  by the said act and the introduction
of s. 34 4  by the income-tax  amendment  act 1959
reinforces the said companystruction namely
that the amended s. 34 1  a  lifted the ban of limitation
also in respect of the escaped income of the war years. the
retention of s. 34 1a  on the statute became necessary as
proceedings taken thereunder were pending at the time the
finance act 1956 came into force and the companysequential
provisions such as s. 34 1b  etc. with which s. 34 1a
was integrally companynected companyld number be applied if the latter
was omitted. further the said sub-sections still applied
to incomes falling under s. 34 1  b  in respect of war
years. in any view it must have been retained in
superabundant caution and that fact companyld number restrict the
scope of an otherwise clearly expressed provision viz. s.
34 1  a . the companystruction accepted by the high companyrt led
to the anumberalous position of the legislature prescribing a
shorter period of limitation in the case of tax-evaders
during the war years and numberperiod of limitation for evaders
of such income during the prewar and post-war years. this
could number have been the intention of the legislature as the
evasion of tax during the war. years was companyparatively of
larger amounts than during the other periods and for that
very reason it has passed the taxation of income
 investigation companymission  act 1947 which was declared to
be void by this companyrt. this companytention was accepted by the
bombay and calcutta high companyrts in laxminarayan r. rathi v.
income-tax officer poona  1  and mandanlal jajodia v.
income-tax officer dist. ii 1  calcutta  2  respectively. mr. palkhivala learned companynsel for the respondents
answered this criticism thus. in a taxing act one has to
look merely what is clearly stated and if the
interpretation is open to doubt the companystruction most
beneficial to the subject must be adopted. section
34 1  a  before it was amended in 1956 provided for the
genus out of which by the income-tax  amendment  act 1959
the species of r 34 1a  was carved out. while s.
34 1  a  was a general provision s. 34 1a  was a special
provision. on the principle of generalia specialibus number
derogant the field companyered by s. 34 1a  should be excluded
from that companyered by s. 34 1  a . if that was the legal
position before the 1956 amendment the argument proceeded
the same position would companytinue thereafter as parliament
retained s. 34 1a  along with its provisos as it stood
before the amendment and amended only s. 34 1  a . the
lifting of the ban of limitation therefore should on the
basis of the said doctrine be companyfined to the field companyered
by s. 34 1  a  before the amendment. if parliament intended
to do away with the period of limitation in respect of the
escaped incomes during the war period it would number have
retained s. 34 1a  on the statute book for in that event
it would serve numberpurpose. it would be wrong to say that it
ceased to be operative after april 1 1956 for the period
of limitation would still apply to proceedings in respect of
escaped incomes of the war years. sub-s.  4  added in s. 34
in the year 1959 and s. 34 1b  as amended
 1   1964  52 i.t.r. 254.  2   1965  58 i.t.r. 693.
in 1956 would number throw any light on the question but in a
way would support the view that they were companycerned only
with the escaped incomes companyered by s. 34 1  a  excluding
thereform those companyered by s. 34 1a . the argument based on
the alleged anumberaly led numberhere and indeed the retention of
s. 34 1a  on the statute book was intentionally done as the
parliament having already placed a particular class of
assessees under a special and heavy burden did number think
fit to make any provision which was likely to harass them
further. the ambiguity in the section if any should go
for the benefit of the tax-payer and number the tax-gatherer. this argument was accepted by the madhya pradesh and gujarat
high companyrts in rustomji v. income-tax officer special
investigation circle indore 1  and mathurdas govinddas v.

n. gadgil income-tax officer special investigation
office ahmedabad  2 . before we advert to the said arguments it will be
convenient to numberice the relevant rules of companystruction. the classic statement of rowlatt j. in cape brandy
syndicate v. i.r.c.  3 . still holds the field. it reads
in a taxing act one has to look merely at
what is clearly said. there is numberroom for
any intendment. there is numberequity about a
tax. there is numberpresumption as to a tax. numberhing is to be read in numberhing is to be
implied. one can only look fairly at the
language used. to this may be added a rider in a case of reasonable
doubt the companystruction most beneficial to the subject is to
be adopted. but even so the fundamental rule of
construction is the same for all statutes whether fiscal or
otherwise. the underlying principle is that the meaning
and intention of a statute must be companylected from the plain
and unambiguous expression used therein rather than from any
numberions which may be entertained by the companyrt as to what is
just or expedient. the expressed intention must guide the
court. anumberher rule of companystruction which is relevant to
the present enquiry is expressed in the maxim generalia
specialibus number derogant which means that when there is a
conflict between a general and a special provision the
latter shall prevail. the said principle has been stated in
craies on statute law 5th edn. at p. 205 thus
the rule is that whenever there is a
particular enactment and a general enactment
in the same statute and the latter taken in
its most companyprehensive sense would overrule
the former the particular enactment must be
operative and the general enactment must be
taken to affect only the other parts of the
statute to which it may properly apply.  1  1964 54 i.t.r. 461  2  1965 56

t.r. 621.  3  1921 1 k.b. 64 71.
but this rule of companystruction is number of universal
application. it is subject to the companydition that there is
numberhing in the general provision expressed or implied
indicating an intention to the companytrary see maxwell on
interpretation of statutes 11th edn. at pp. 168-169. when
the words of a section are clear but its scope is sought to
be curtailed by companystruction the approach suggested by lord
coke in heydons case  1  yield better results
to arrive at the real meaning it is always
necessary to get an exact companyception of the
aim scope and object of the whole act to
consider according to lord companye  1  what
was the law before the act was passed  2
what was the mischief or defect for which the
law had number provided  3  what remedy
parliament has appointed and  4  the reason
of the remedy. with these rules of companystruction in mind let us number tackle
the-problem raised in this case. under s. 34 1  a  after
it was amended by the finance act 1956 a numberice in respect
of an escaped companycealed income companyld be issued at any time. the terms of cl.  a  and the expression at any time are
clear and unambiguous and if there is numberhing in the act
detracting from the width of the said terms it is clear
that a numberice can be issued at any time in respect of the
concealed income of any year number being a year ending before
march 31 1941. but s. 34 1a  provides for the issue of
numberice in respect of escaped income of the previous years
within the period beginning on september 1 1939 and ending
on march 31 1946. does this sub-section detract from the
generality of s. 34 1  a  ? the history of the said
provision may usefully be numbericed. as we have stated
earlier the parliament passed the taxation of income
 investigation companymission  act 1947 mainly to catch the
escaped incomes of the war profiteers. this companyrt in suraj
mall mohta and company v. a. v. viswanatha sastri  2  and
muthiah v. c.l.t.  3  held that s. 5 4  and 5 1  of the said
act became void on the companymencement of the companystitution as
offending art. 14 thereof. the first decision led to the
insertion of sub-ss.  ia  to  id  in s. 34 by the income-tax
 amendment  act 1954 with effect from july 17 1954. the
object of the amending act was to provide for the assessment
or re-assessment of persons who had to a substantial
extent evaded payment of taxes during the war years and for
matters companynected therewith. but at the time sub-s.  ia
was inserted in s.34 the period of limitation provided with
regard to issue of numberices under s. 34 1  a  was 8 years and
for cases falling under s. 34 1  b  it was 4 years but as
the income-tax  amendment  act 1954 came into force only
on july 17 1954 the said periods of limitation prescribed
in respect of escaped companycealed incomes during the said
period had run out except in respect
 1  1584 3 rep. 7b.  2  1955 1

c.r. 448.  3  1955 2 s.c.r. 1247.
of one or two years. so with the twin object of tending
the time and expediting the assessment the second proviso
was introduced therein to the effect that numbersuch numberice
should be issued after march 31 1956. but numberwithstanding
the said act presumably numberices companyld number have been issued
against all the evaders of tax with incomes of rupees one
lakh or more during the said period. parliament also wanted
to bring to tax escaped companycealed incomes during the period
number companyered by the said years. with that object in 1956 s.
34 was amended by the finance act 1956 by which it was
provided that numberice under s. 34 1  a  can be issued at any
time. but sub-s.  ia  was retained including the second
proviso. this amendment along with the other amendments
made by the said act came into force on april 1 1956. in
1959 the said section was again amended by the indian
income-tax  amendment  act 1959. under sub-s.  4  as
amended by the 1959 amendment act numberice under sub-s.
 1  a  might be issued at any time numberwithstanding that at
the time of the issue of numberice the period of 8 years
specified in that sub-section before its amendment by the
finance act 1956 had expired in respect of the year to
which the numberice related. this amendment was necessitated
by the judgments of the bombay and calcutta high companyrts in
debi dutt v. t. belan 1  and s. c. prashar v. vasantsen 2
respectively holding that if the right of the income-tax
officer to reopen an assessment was barred under the law for
the time being in force numbersubsequent enlargement of the
time companyld revive such right in the absence of press words
or necessary intendment. sub-section  4  was added to s. 34
to make it abundantly clear that numberice under s. 34 1  a
could be issued at any time numberwithstanding that the said
right was barred before the amendment act of 1956. this
history of the legislation loaves numberroom for doubt that the
intention of the legislature was to bring the escaped
concealed income of rupees one lakh and more to tax without
any time limit. before the 1956 act was passed the period
of limitation prescribed for proceeding against companycealed
incomes of rupees one lakh and more during the war years and
the earlier years had expired. the legislature stepped in
to prevent evasion of taxes on such incomes and lifted the
ban of limitation in respect thereof subject to certain
conditions. but the crucial question is whether the legislature by
making the relevant amendments has succeeded to effectuate
its intention. to state it differently do the amended
provisions carry out its intention ? section 34 1  a  as it number stands on the statute book
expressly states that in cases falling under cl.  a  of sub-
s.  1  numberice can be served thereunder on an assessee at any
time. the terms of s. 34 a  read with the 2nd proviso take
in the companycealed incomes of all the
 1  1959 35 i.t.r. 781.  2  1956 29 i.t.r. 857
years companymencing from the year ending on march 31 1941. it
does number exclude the incomes of the war years but the said
incomes are sought to be excludes on the principle of
generalia specialibus number derogant. as we have pointed out
earlier the said doctrine embodies a rule of companystruction
but it has numberuniversal application. to invoke it the
general and special provisions shall occupy the same field. in this case both during the period between the amendments
of 1954 and 1956 and thereafter they occupied different
fields. by july 17 1954 when sub-s.  ia  was introduced
in s. 34 numberproceedings under s. 34 1  a  companyld be
initiated except for the assessment year 1946-47 in respect
of the previous years that fell within the period beginning
on september 1 1939 and ending on march 31 1946 for they
were barred under the unmended section. sub-section  ia
therefore practically governed a situation that was number
governed by the provisions of s. 34 1  a . it was intended
to catch escaped incomes of the war years which were out of
the reach of s. 34 1  a . it is number therefore appropriate
to describe sub-s.  ia  as one carved out of sub-s.  1  a
or to call it a species of which sub-s.  a  1  is the genus. sub-section  ia  operated where sub-s.  1  a  practically
ceased to function. number companying to the period after the finance act 1956 was
passed i.e. after april 1 1956 a different situation
arose. the extended period given under the second proviso
to sub-s.  ia  expired on march 31 1956. thereafter sub-
s.  ia  ceased to be operative in the sense that numbernumberice
could thereafter be given thereunder. it worked itself out. the legislature companyld have extended the period under the
second proviso to sub-s.  ia  but it did number do so. it did
number give a further lease of life to it instead it removed
the period of limitation under sub-s.  1  a  as sub-s.  ia
had become practically defunct. the wide phraseology of
sub-s.  1  a  takes in all the escaped companycealed incomes
during all the years companymencing from 1941 and companyfers a
power on the income-tax officer to give numberice thereunder
in respect of the said incomes without any bar of
limitation. there is therefore numberconflict after april 1
1956 between sub-s.    a  and sub-s.  a  as the latter
ceased to be operative. there is anumberher way of looking at the problem. sub-section
 ia  does number really prescribe any period of limitation. it
enables the income-tax officer to take proceedings within a
particular time though the period of limitation had
expired. in this view numberquestion of carving out a species
out of a genus arises. it companyferred a special power on the
income-tax officer and the said power expired on april 1. 1956.
there is yet anumberher way of looking at the problem. the
number-obstante clause in sub-s.  ia  indicates that it was
enacted to operate numberwithstanding that the period of 8
years had expired. the said
sub-section served its purpose only when the period of 8
years governed a numberice under sub-s.  1  a . but when that
bar of limitation was removed sub-s.  ia  had become
otiose. sub-section  1b  as amended by the finance act of 1956
also throws some light on the interpretation of s. 34.
before it was amended an assessee to whom a numberice had been
issued under sub-s.  1  a  companyld apply to the central board
of revenue for settlement of the amount of tax payable by
him. after the amendment an assessee to whom a numberice was
given under sub-s.  1  a  and under sub-s.  ia  for any of
the years ending on march 31 1941 to 1948 companyld apply for
such a relief to the central board of revenue. the years
1941 to 1948 are the war years. this sub-section
therefore assumes that numberice companyld be issued in respect of
the war years under sub-s.  1  a . the numberice companytemplated
by sub-s.  1b  companyld only be a numberice after the amendment of
1956 for such numberice companyld number have been issued earlier
under sub-s.  1  a  in respect of the said years. the
numberice under sub-s.  ia  obviously refers to the numberice
issued before the amendment of 1956 and pending disposal. sub-section  4  added by the indian income-tax  amendment
act 1959 also reinforces the said companystruction. as
indicated earlier that sub-section was added to get over
the legal objection that proceedings barred before 1956 were
number revived under the 1956 act. it is true that sub-s.  4
refers only to sub-s.  1  a  but the subsection indicates
that the legislature assumed that proceedings after 1956
could only be taken under sub-s.  1  a . it was asked with some plausibility if the legislature
assumed that sub-s.  ia  ceased to be operative why it was
retained along with its proviso prescribing a period of
limitation in the amended section. though numbernew numberices
could be issued under that subsection after april 1 1956.
numberices already issued before that date were pending. they
would be disposed of in the manner prescribed by sub-ss.  ia   1b   1c  and  1d  of s. 34. all the said sub-
sections formed an integral companye. the legislature pre-
sumably intended to keep the said-sub-sections whereunder
proceedings had already been initiated and make available to
the said proceedings the procedure prescribed under the said
provisions. it may also be that sub-s.  1a  was kept in
super-abundant caution. whatever that may be it cannumber in
the circumstances mentioned by us detract from the clear
provisions of sub-s.  1  a . we have carefully gone through the judgments of the various
high companyrts namely bombay madhya pradesh gujarat and
calcutta cited at the bar. we received companysiderable help
from the seasonings companytained in the said judgments. as we
have in the companyrse of the judgment dealt with the
conflicting reasons given by
10 sup. c. i./66-12. the high companyrts we do number think it necessary to companysider
each of the four judgments in detail.


civil appellate jurisdiction civil appeal number 2371 of
1968.
from the judgment and decree dated 20th april 1967 of
the madhya pradesh high companyrt in first appeal number l of 1960.

n. kacker sol. genl. k. l. hathi rajiv datta and

c. kapur for the appellant. n. sinha h. k. puri vivek seth p. p. singh and m.

dhingra for respondents number. 1-4.
the judgment of the companyrt was delivered by
fazal ali j. this appeal by certificate is directed
against the judgment of the high companyrt of madhya pradesh
dated 20th april 1 1967 affirming the decree passed by the
additional district judge indore decreeing the plaintiffs
suit. the facts of the case are detailed in the judgment of
the high companyrt and that of the district judge and it is number
necessary for us to repeat the same all over again. briefly the present action was brought by the
plaintiff for recovery of a sum of rs. 200000 invested by
the plaintiff in the adarsh bima companypany being defendant number
1 and the predecessor of the appellant who is defendant number
3  life insurance companyporation of india . the action was
brought on the basis that the managing director of the
adarsh bima companypany by practising fraud and
misrepresentation on the plaintiff induced him to part with
a sum of rs. 200000 by purchasing 200 shares of rs. 100/-
each. the companyrts
below have recorded clear findings of fact that the fraud
alleged by the plaintiff has been clearly proved and that
the plaintiff had parted with a sum of rs. 200000 by
investing the same in purchase of 2000 shares as a result of
which the shares scrips were handed over to the plaintiff
and he was assured of a dividend of 4. it has also been
found as a fact that such a resolution was companytrary to the
statute of the companypany. the suit was companytested by the appellant who is
defendant number 3 in the companyrts below mainly on the ground
that after the appellant took over the adarsh bima companypany
he was number liable for any act of the companypany which was ultra
vires the statutes of the companypany. in support of the appeal the solicitor general
submitted two points before us. in the first place it was
contended that on the finding that a fraud was companymitted on
the plaintiff and the act of the managing director being
ultra vires of the statutes of the companypany the companypany
would number be liable although the managing director may be
personally liable. secondly it was argued that assuming
that the companypany was liable but in view of the provisions of
section 7 2  of the life insurance companyporation act 1956
 hereinafter called the act  the liability of the appellant
would extend only to matters appertaining to the companytrolled
business as defined in the act. as regards the first companytention we find absolutely no
substance in the same. there was absolutely numberpleading by
the defendants that the monies were received by the managing
director personally and that the same did number go to the
coffers of the companypany. on the other hand the plaintiff
clearly pleaded in paragraphs 3  b  8  a  and 8 b  of the
plaint that the money was paid to defendant number 1 companypany
which after receiving the amount issued share scrips to the
plaintiff. the relevant portions of the aforesaid statements
may be extracted thus-
3  b  relying upon the said guarantee and promise
given by the defendant number 2 on the companypanys
behalf plaintiff number 1 on 11th june 1947 gave at
jhabua to defendant number 1 companypany through
defendant number 2 government of india 3 percent
loan bonds of 1953-55 of the value of rs. 100000
duly endorsed in favour of defendant number 1
company the companypany addressed a letter
acknumberledging receipt of the application for 1000
shares and the full companysideration of the said
shares at the rate of rs. 100 per share and agreed
to allot the said 1000 shares to plaintiff number 4. 8 a    the
plaintiffs submit that the transaction of selling
the said 2000 shares of defendant number 1 companypany
and registering the same as aforesaid in the names
of plaintiffs number 2 to 4 with a guarantee of
minimum return is ultra vires the defendant number 1
company and is found to be void and inumbererative in
law. 8 b  the said 2000 shares of defendant number 1
company are as aforesaid applied for and registered in
the names of plaintiffs number 2 to 4. at all material
times when the said shares were registered in the name
of plaintiffs number 2 to 4 the plaintiffs number 2 to 4
were minumbers. the plaintiffs submit that the transaction
of issuing the said 2000 shares to plaintiffs number 2 to
4 who were then minumbers and registering them as share-
holders in the register of defendant number 1 companypany is
void in law. thus the plaintiff has clearly alleged that the monies were
paid to the defendant companypany and number to the managing
director personally. if the share scrips were issued to the
plaintiff then it must be presumed that the money was
received by the companypany. this fact has number been denied by
the defendant-appellant. in these circumstances therefore
it is absolutely clear that there is numberhing to show that
the money was paid to the managing director personally and
number to the companypany. moreover this is essentially a question
of fact and it does number appear to have been raised before
any of the companyrts below. for these reasons therefore the
first companytention put forward by the solicitor general is
hereby over-ruled. companying to the next companytention the same undoubtedly
merits serious companysideration. before however examining this
contention the following admitted facts may be stated thus

that the bima companypany was doing merely the
business of life insurance and numberother

that on the companying into force of the act the
entire interest of the companypany vested in the
government
section 7 2  of the act runs thus-
7  2  the assets appertaining to the companytrolled
business of an insurer shall be deemed to include
all rights and powers and all property whether
movable and immovable appertaining to his
controlled business including in particular
cash balances reserve funds investments
deposits
and all other interest and rights in or arising
out of such property as may be in the possession
of the insurer and all books of account or
documents relating to the companytrolled business of
the insurer and liabilities shall be deemed to
include all debts liabilities and obligations of
whatever kind then existing and appertaining to
the companytrolled business of the insurer. explanation the expression assets appertaining
to the companytrolled business of an insurer
 a  in relation to a companyposite insurer includes
that part of the paid-up capital of the insurer or
assets representing such part which has or have been
allocated to the companytrolled business of the insurer in
accordance with the rules made in this behalf
 b  in relation to a government means the amount
lying to the credit of that business on the appointed
day. d
it is companytended by the solicitor general that the
appellant was liable to discharge only those liabilities
which pertained to the companytrolled business of the insurer. sub-clause  3  of section 2 of the act defines companytrolled
business thus-
controlled business means-

in the case of any insurer specified in sub-clause
 a   ii  or sub-clause  b  of clause  9  of section 2
of the insurance act and carrying on life insurance
business
as we have already pointed out that defendant number 1 adarsh
bima companypany was carrying on the business of life insurance
only. thus the moment the act was passed the business of
the adarsh bima companypany vested in the companyporation. pari
passu this companytention it was submitted that under section
7 2  of the act the liability of the appellant would number
extend number to any acts which are fraudulent or ultra vires
of the statutes of the companypany. we are however unable to
agree with this companytention. the words of section 7 2  of the
act appear to be of the widest amplitude and the section
includes all debts liabilities obligations of whatever
kind then existing and appertaining to the companytrolled
business of the insurer. there can be numberdoubt that at the
time when the appellant took over the adarsh bima companypany
the obligation to restitute the benefit received by the
company from the plaintiff had been fastened and the
appellant was legally bound to return the same to the
plaintiff under section 65 of the companytract
act in view of the finding of fact recorded by the companyrts
below that the companytract was void. the question as to whether
or number the transaction was ultra vires of the statutes of
the companypany was wholly irrelevant because that was the
reason why the companytract was void and number a ground for
exempting the appellant from its liability to pay. the words
of whatever kind are wide enumbergh to take within their
sweep all kinds of transactions entered into by the
predecessor companypany. the present transaction was undoubtedly
entered into by the predecessor companypany which had received
the sum of rs. 200000 from the plaintiff and had issued
share scrips. in these circumstances therefore we do number
see how the defendant number 3 can escape his liability even
under section 7 2  of the act. as however the plaintiff will
be entitled to restitution of the benefits under section 65
of the act he can only get the amount which he had paid to
the appellant companypany and number any interest thereon up to the
date of the suit. for these reasons we are of the opinion
that the judgment of the high companyrt is companyrect and does number
require any interference except a slight modification in the
form of the decree. we therefore direct that the plaintiff will be
entitled to the decree of rs. 200000 passed by the companyrts
below but number to the interest of rs.


civil appellate jurisdiction civil appeals number 1873 to
1876 of 1967.
appeals by special leave from the judgment and order dated
august 8 1966 of the assam and nagaland high companyrt in ref. number. 2 to 4 of 1965.

t. desai naunit lal and swaranjit sodhi for the
appellant  in all the appeals . c. chagla s. c. majumdar and r. k. jain for the
respondents  in all the appeals . the judgment of the companyrt was delivered by
hegde j-these appeals by special leave arise from the
decision of the high companyrt of assam and nagaland in tax
references number. 2 to 4 of 1965 on its file wherein the high
court of assam and nagaland answered the two questions of
law referred to it by the assam board of revenue under s.
28 2  of the assam agricultural income-tax act 1939  assam
act ix of 1939   to be hereinafter referred to as the act
in the negative. the two questions referred for the
advisory opinion of the high companyrt are

whether on the facts and in the cir-
cumstances of the case the board was companypetent
in companyrse of appeals preferred by the assessee
to question the finding of assistant
commissioner of taxes to the effect that the
amount donated to jalan charity trust were
amounts actually spent for charitable
purposes within the meaning of assam
agricultural income-tax act. whether on the facts and in the circum-
stances of the case the board was justified in
holding that only 60 per cent of the amounts
actually spent by the assessee for charitable
purposes from the agricultural income was
admissible as deduction under rule 2 2  of the
rules framed under the assam agricultural
income-tax act. aggrieved by the decision of the high companyrt companymissioner of
taxes assam has brought this appeal. we shall number briefly set out the facts necessary for
deciding the points in companytroversy in these appeals. each
of the three assessees with whom we are companycerned in these
appeals had given certain donations to the jalan charity
trust in the relevant assessment years which in the case of
two the assessees is 1955-56 and in the case of the third is
1955-56 and 1957-58. the question for companysideration is
whether those donations can be companysidered as amounts
actually spent for charitable purposes under rule 2 1  of
the rules framed under the act. the agricultural income of the assessee was companyputed at 60
per cent of the total net income ascertained by the income-
tax officer under the indian income-tax act 1922. before
the income-tax officer the assessees claimed exemption under
s. 15-b of the indian income-tax act in respect of the
donations made by them to the jalan trust but that officer
did number grant the exemption asked for but reserved that
question for decision to a latter date as he wanted to
examine the nature of those donations. he determined the
income of the assessees for the years in question without
taking into companysideration those donations. thereafter the
agricultural income-tax officer proceeded to assess the
agricultural income of the assessees. before that officer
the assessees again claimed exemption under rule 2 1  of the
rules of the donations given. by them to the jalan charity
trust. that officer refused to grant the exemption asked
for. thereafter the assessees took up the matter in appeal
to the assistant companymissioner. the assistant companymissioner
granted to each of the assessees exemption to the extent of
60 per cent of the amounts donated. then the assessees took
up the matter in appeal to the board of re venue.the
department had numberright to appeal against the order of the
assistant companymissioner. the board of revenue came to the
conclusion that the assessees were number entitled to any
exemption under the act but all the same as the order of the
assistant companymissioner had become final in respect of
exemption given the assessees were entitled to retain the
exemption granted by the assistant companymissioner. alternatively it also came to the companyclusion that even if
the assessees were entitled to any exemption under
the act and the rules the exemption granted to them by the
assistant companymissioner was more than what they were entitled
to. thereafter the assessees moved the board to refer to
the high companyrt for its. opinion the two questions mentioned
eerlier. there is numbersubstance in the first question referred to
above. it is true that the exemption granted by the assis-
tant companymissioner companyld number be interfered with by the board
of revenue. but all the same while companysidering whether the
assessees were entitled to the further exemption claimed by
them the board of revenue had to examine the true legal
position under the act and the rules for the purpose of
deciding the matter in issue before it. in our opinion the
high companyrt was wholly in error in opining that the board of
revenue was number companypetent to determine the true position
under law in view of the decision of the assistant
commissioner. the high companyrt overlooked the fact that
pronumberncing on the claim made by the assessees before the
board of revenue the board had to examine the legality of
the claim. it is one thing to say that the board companyld number
reverse the decision of the assistant companymissioner which
had become final but it is entirely a different thing to say
that the board was number companypetent to companysider whether the
assistant companymissioner took a companyrect view of the law or number
when the true position in law is necessary to be determined
for deciding the issue before it. number companying to the second question unlike s. 15-b of
the.indian income-tax act 1922 which exempts any sums
paid to an institution or a fund companying within the scope of
that section upto the prescribed limit under rule 2 1  read
with s. g g  of the act the assessee is entitled to deduct
from his income only those sums actually spent by him for
charitable purposes. charitable purpose. under that rule is
defined as including relief to the poor education medical
relief and the advancement of any other  object of public
utility. under rule 2 1  read with s. 8 g  before an assessee can
claim any exemption he has to establish that in the
relevant year he had actually spent for one or the other of
the charitable purposes mentioned in that rule the amount in
respect of which he claims examination. mere companytribution
to a fund would number entitle him to the exemption claimed
it is true that the assessees in these cases are proved to
have companytributed certain amounts to the jalan trust fund. it may also be true-about which we express numberopinion-that
the objects of jalan trust are similar to those mentioned
in rule 2 i . but there is numberproof in these cases that the
jalan trust had expended the amounts donated by the asses-
sees to that fund for any charitable purpose during the
relevant years. from the materials placed before the
court it appears that jalan trust had spent in the years
in question. some amounts for charitable purposes. but the
amount spent is much less than the donations received. further the assessees have number established any company-
relationship between the amounts spent by the jalan trust
and the amounts donated by them to the trust. under these
circumstances it is number necessary for us to decide whether
the actual spending referred to in rule 2.  i  must be by the
assessees themselves or it may also be through some other
agency. in our opinion before the assessees can claim
exemption under rule 2 1  in regard to any amount they
have to establish to the satisfaction of the assessing
authority that they had actually spent that amount for
charitable purposes. numbersuch proof is forthcoming in.