civil appellate jurisdiction civil appeals number 1834 and
1169 of 1968.
appeals from the judgment and order dated february 21 22
1967 of the calcutta high companyrt in wealth tax reference number
138 of 1962.

t. desai s. a. aiyar r.n. sachthey and b. d. sharma
for the appellant  in c.a. number 1169/68 and the respondent
 in c. a. number1834 of 1968

c. mitra n. r. khaitan p. khaitan krishna sen and

p. maheswari for the respondent  in c. a. number 1169. of
1968   and the appellant  in c. a. number 1834 of 1968.   the judgment of the companyrt was delivered by
grover j. these appeals have been brought from a judgment
of the calcutta high companyrt by certificate in a wealth tax
reference. civil appeal number 1834 of 1968 is of the assessee
and the other appeal has been filed by the companymissioner of
wealth tax west bengal. it is necessary to deal with the appeal of the companymissioner
of wealth tax as the other appeal shall also stand disposed
of once the question is answered in the companymissioners
appeal. the assessee is a public limited companypany. in the
assessment year 1948-49 the assessee revalued its assets
enhancing the existing book value by rs. 145000001which
was credited to the capital reserve account. in assessing
the wealth tax payable by the assessee for the assessment
year 1957-58 the relevant valuation date being march 31
1957 the wealth tax officer proceeded under s. 7  2  of the
wealth tax act hereinafter called the act and took the
valuation of the assets at rs. 510 40897 as shown in the
balance sheet on the relevant date. the assessee claimed
that a sum of rs. 145000001- by which
the book value of the fixed assets was enhanced in 1948-49
should be deducted in the companyputation of the net value. it
is number clear from the order of the wealth tax officer who
rejected the claim as to what was the ground taken for
claiming this deduction. before the appellate assistant
commissioner it was companytended on behalf of the assessee that
the capital reserve was number out of profits and was only a
numberional reserve and therefore it should be excluded when
global valuation of the assets was being made. it was urged
that the figure of reserve was purely artificial and had no
relation to the working of the companypany and should number be
taken into account in the valuation of the net assets. the
appellate assistant companymissioner did number accede to the
contention and companyfirmed the assessment. the appellate
tribunal found that a similar point had companye up for decision
before a special bench of the tribunal companysisting of three
members in bombay and had been decided in favour of the
assessee. following that decision the tribunal allowed the
appeal and held that the department was number justified in
valuing the assets at the enhanced figure for the purpose of
computation of the net wealth of the assessee. the relevant
question that was referred was as follows
whether on the facts and in the circumstances
of the case the tribunal was justified in
excluding the sum of rs. 14500000/- from
the net valuation of the assets as shown in
the balance sheet of the assessee as on 31-3-
57.
the high companyrt was of the view that the revenue had taken
the stand before the tribunal that the motive of the
assessee in revaluing the assets at a higher figure was to
declare the bonus share which however companyld number be so
declared as the permission of the central government was
withheld in that behalf. according to the high companyrt there
was a motive for revaluation of the assets and therefore the
valuation in the balance-sheet companyld number furnish the companyrect
basis. it was pointed out that the companyduct of the assessee
was far from what was to be desired because even in the
successive balance sheets the revaluation figure appeared
even after the assessee had failed to get the permission of
the central government to issue bonus shares. but according to the high companyrt an erroneous figure did number
become a companyrect figure by lapse of time. the following
portion of the judgment of the high companyrt may be
reproduced-
the tribunal was therefore in a sense right
in excluding a sum of rs. 14500000/- from
the net value of the assets as shown in the
balance sheets of the assessee as on march 31
1957. we however make it clear that in
answering question number 1 in the affirmative we
did number mean that the net value of the assets
should be taken at the figure as appearing in
the balance sheet reduced by rs. 14500000/-. what we mean to say is that in
valuing the assets the addition of rs. 14500000/- may number have been companyrectly
made. this does number however mean that the
net value of the assets must be the balance
sheet figure reduced by rs. 14500000/-. that net value will have number to be ascertained
under s. 7  1  of the wealth tax act number that
we have expressed the opinion that the balance
sheet in the instant case has number found the
unequivocal approval both of the assessee and
of the revenue authorities. it is quite clear that under section 7  2  of the act the
wealth tax officer may determine the net value of the assets
of the business as a whole having regard to the balance
sheet of the business as on the valuation date. it must be
remembered that under s. 211 of the indian companypanies act
1956 every balance sheet of a companypany must give a true and
fair figure of the state of its affairs as at the end of the
financial year. if the assessee has shown the net value of
the assets at a certain figure in the balance sheet the
wealth tax officer would be entitled to accept it on the
footing that the assessee knew best what the valuation of
the assets was. it was however open to the assessee to
satisfy the authorities that the said figure had been
enhanced or increased or inflated for acceptable reasons. it was equally open to the wealth tax officer number to accept
the figure given by the assessee but to arrive at anumberher
figure if he was satisfied for good reasons that the
valuation given in the balance sheet was wrong. theer
can be numberdoubt that s. 7  2   a  of the act companytemplates
that the book value in the balance sheet should be taken as
the primary basis of valuation and if any adjustment is
required it is open to the wealth tax officer to make such
an adjustment in the valuation as given in the balance sheet
as may be necessary in the circumstances of the case.  see
kesoram industries and companyton mills limited v. companymissioner of
wealth tax  central  calcutta.  1
in the present case the sole reason which at the stage of
the appeal before the tribunal came to be disclosed for
inflating the valuation by rs. 14500000 in the assessment
year 1948-49 was that the assessee companytemplated issuing
bonus shares for which the companysent of the central government
was necessary under s. 3 of the capital issues  companytrol
act 1947. the same was number granted. the assessee
however did number produce the order of the central government
showing the reasons for which permission was declined to the
issuance of bonus shares. it companytinued to show the enhanced
or inflated valuation in the balance sheet throughout. the
circumstances in which bonus shares are issued are well
knumbern. a companypany may number require any new money but it may
reasonably wish to bring the numberinal amount of its issued
share capital more into line with the true excess of assets
over liabilities. unless it takes this step its annual
profits will appear to be disproportionately high in
relation to its numberinal capital. by means of issuing bonus
shares the reserve or share premium account or some part of
the same are capitalised or companyverted into share capital. the capitalisation of free i.e. voluntary reserves merely
means that undistributed profits have been permanently
ploughed back and companyverted into share capital which cannumber
be returned to the members by way of dividend.  vide modern
company law by l.c.b. gower p. 110 . it is quite clear that the main idea underlying the issue of
bonus shares is to bring the numberinal amount of the issued
share capital of the companypany into line with the true excess
of assets over liabilities. this will involve a genuine and
correct valuation of assets and number their under-valuation or
inflation. it must be remembered that the power to
 1  59 i.t.r. 767.
issue shares for increasing the capital is of a fiduciary
nature and must be exercised bona fide for the general
advantage of the companypany. numberevidence in the shape of an
affidavit or any other material was placed before the wealth
tax. authorities by the assessee demonstrating how it became
necessary to inflate the valuation by rs. 14500000 for
the purpose of issuing bonus shares. it was number even the
case of the assessee that the value was inflated under
expert acturial suggestion or under some misapprehension or
mistaken advice. in this situation the only possible
conclusion can be that the assessee companyld number advance any
convincing and acceptable reasons for the alleged inflation. the wealth tax officer companyld reject the figure given by the
assessee in the balance sheet if he was for sufficient
reasons satisfied that that figure was wrong. the facts
and circumstances which have been discussed above show that
the wealth tax officer was fully justified in accepting the
figure which the assessee himself had given in the balance
sheet as the companyrect figure and proceed to make the assess
ment in accordance with that figure. the high companyrt should
have therefore answered the question in the negative and
in favour of the companymissioner of wealth tax
the appeal of the companymissioner of wealth tax i.e. c.a. 1169/68 is allowed and the question is answered accordingly. the appeal of the assessee i.e.


civil appellate jurisdiction civil appeal number 835 of
1375.
appeal by special leave from the judgment and order
dated the 25th numberember 1974 of the gujarat high companyrt at
ahmedabad in special civil application number 1404 of 1974.

c. bhandare g. bhandare for the appellant. c. shah m. v. goswami and ambrish kumar for
respondents 4 5 and 9.
the judgment of the companyrt was delivered by
goswami j.-in a long line of decisions of this companyrt
the ambit of section 33 industrial disputes act 1947is
number well-established. there is also numberdifference in
principle of the law applicable to a case under section 10
industrial disputes act and that under section 33. to put it
clearly it is this
when an application under section 33 whether for
approval or for permission is made to a tribunal it has
initially a limited jurisdiction only to see whether a prima
facie case is made out in respect of the misconduct charged. this is however the position only when the domestic
enquiry preceding the order of dismissal is free from any
defect that is to say free from the vice of violation of
the principles of natural justice. if on the other hand
there is violation of the principles of natural justice the
tribunal will then give opportunity to the employer to
produce evidence if any and also to the workman to rebut
it if he so chooses. in the latter event the tribunal will
be entitled to arrive at its own companyclusion on merits on the
evidence produced before it with regard to the proof of the
misconduct charged and the tribunal
then will number be companyfined merely to companysider whether a
prima facie case is established against the employee. in
other words in such an event the employers findings in
the domestic enquiry will lapse and these will be
substituted by the independent companyclusions of the tribunal
on merits. there is a two-fold approach to the problem and if lost
sight of it may result in some companyfusion. firstly in a
case where there is numberdefect in procedure in the companyrse of
a domestic enquiry into the charges for misconduct against
an employee the tribunal can interfere with an order of
dismissal on one or other of the following companyditions -

if there is numberlegal evidence at all recorded
in the domestic enquiry against the companycerned
employee with reference to the charge or if
numberreasonable person can arrive at a
conclusion of guilt on the charge levelled
against the employee on the evidence recorded
against him in the domestic enquiry. this is
what is knumbern as a perverse finding. even if there is some legal evidence in the
domestic enquiry but there is numberprima facie
case of guilt made out against the person
charged for the offence even on the basis
that the evidence so recorded is reliable. such a case may overlap to some extent with
the second part of the companydition number 1 above. a prima facie case is number as in a criminal
case a case proved to the hilt. it must be made clear in following the above
principles one or the other as may be applicable in a
particular case the tribunal does number sit as a companyrt of
appeal weighing or reappreciating the evidence for itself
but only examines the finding of the enquiry officer on the
evidence in the domestic enquiry as it is in order to find
out either whether there is a prima facie case or if the
findings are perverse. secondly in the same case i.e. where there is no
failure of the principles of natural justice in the companyrse
of domestic enquiry if the tribunal finds that dismissal
of an employee is by way of victimisation or unfair labour
practice it will then have companyplete jurisdiction to
interfere with the order of dismissal passed in the domestic
enquiry. in that event the fact that there is numberviolation
of the principles of natural justice in the companyrse of the
domestic enquiry will absolutely lose its importance or
efficacy. whether and under what facts and circumstances a
tribunal will accept the plea of victimisation against the
employer will depend upon its judicial discretion. what is victimisation is again a multi-headed monster
to tackle with. the word victimisation is number defined in
the industrial disputes act. an attempt to describe unfair
practices by employers by a deeming definition was made
under section 28k in chapter iii b of the indian trade
unions  amendment  act 1947  act xlv of 1947  but we
understand it has number yet been brought into force. the
concept of victiminisation is to a large extent brought out
under section 28k of that
unenforced law and it may be worthwhile to quote the same as
it throws sufficient light on the topic and will offer
guidance to tribunals in adjudicating a ticklish issue of
this nature
section 28k. unfair practices by employers.-
the following shall be deemed to be unfair
practices on the part of employer namely-
 a  to interfere with restrain or companyrce his
workmen in the exercise of their rights to
organize form join or assist a trade union
and to engage in companycerted activities for the
purpose of mutual aid or protection
 b  to interfere with the formation or
administration of any trade union or to
contribute financial or other support to it
 c  to discharge or otherwise discriminate
against any officer of a recognised trade
union because of his being such officer
 d  to discharge or otherwise discriminate
against any workman because he has made
allegations or given evidence in an enquiry
or proceeding relating to any matter such as
is referred to in sub-section  1  of section
28-f
 e  to fail to companyply with the provisions of
section 28-f
provided that the refusal of an employer to permit
his workmen to engage in trade union activities
during their hours of work shall number be deemed to
be an unfair practice on his part. section 28-f provides for rights of recognised trade
unions. ordinarily a person is victimised if he is made a
victim or a scapegoat and is subjected to persecution
prosecution or punishment for numberreal fault or guilt of his
own in the manner as it were of a sacrificial victim. it
is therefore manifest that if actual fault or guilt
meriting the punishment is established such action will be
rid of the taint of victimisation. it is apparent that victimisation may partake of
various types to cite one or two only for example
pressurising an employee to leave the union or union
activities treating an employee unequally or in an
obviously discriminatory manner for the sole reason of his
connection with union or his particular union activity
inflicting a grossly monstrous punishment which numberrational
person would impose upon an employee and the like. a word of caution is necessary. victimisation is a
serious charge by an employee against an employer and
therefore it must be properly and adequately pleaded giving
all particulars upon which the charge is based to enable the
employer to fully meet them. the charge must number
be vague or indefinite being as it is an amalgam of facts as
well as inferences and attitudes. the fact that there is a
union espousing the cause of the employees in legitimate
trade union activity and an employee is a member or active
office-bearer thereof is per se numbercrucial instance. companylective bargaining being the order of the day in a
democratic social welfare state legitimate trade union
activity which must shun all kinds of physical threats
coercion or violence must march with a spirit of tolerance
understanding and grace in dealings on the part of the
employer. such activity can flow in healthy channel only on
mutual companyperation between employer and employee and cannumber
be companysidered as irksome by the management in the best
interest of the companycern. dialogues with representatives of a
union help striking a delicate balance in adjustment and
settlement of various companytentious claims and issues. the onus of establishing a plea of victimisation will
be upon the person pleading it. since a charge of
victimisation is a serious matter reflecting to a degree
upon the subjective attitude of the employer evidenced by
acts and companyduct these have to be established by safe and
sure evidence. mere allegations vague suggestions and
insinuations are number enumbergh. all particulars of the charge
brought out if believed must be weighed by the tribunal
and a companyclusion should be reached on a totality of the
evidence produced. again victimisation must be directly companynected with the
activities of the companycerned employee inevitably leading to
the penal action without the necessary proof of a valid
charge against him. the question to be asked is the reason
for the punishment attributable to a gross misconduct about
which there is numberdoubt or to his particular trade union
activity which is frowned upon by the employer ? to take an
example suppose there is a tense atmosphere prevailing in a
company because of a strike companysequent upon raising of
certain demands by the union each party calling the other
highly unreasonable or even provocative the tribunal will
number readily accept a plea of victimisation as answer to a
gross misconduct even when an employee be he an active
office beal earer of the union companymits assault let us say
upon the manager and there is reliable legal evidence to
that effect. in such a case the employee found guilty
cannumber be equated with a victim or a scapegoat and the plea
of victimisation as a defence will fall flat. this is why
once in the opinion of the tribunal a gross misconduct is
established as required on legal evidence either in a
fairly companyducted domestic enquiry or before the tribunal on
merits the plea of victimisation will number carry the case of
the employee any further. a proved misconduct is antithesis
of victimisation as understood in industrial relations. this
is number to say that the tribunal has numberjurisdiction to
interfere with an order of dismissal on proof of
victimisation. after clearing the grounds on principles companying to the
facts of the present case the eight respondents were charged
for misconduct in that they along with other outsiders in
all numbering about twenty-five persons assaulted three
temporary workers of the companypany namely ratilal nathubhai
chowdhari vasant babulal patil and jivanbhai eddas patel
on october 11 1972 as they were companying out of hotel
menisha a public hotel where they went to take their
midday meal
with companypons from the companypany. the hotel was about one or
two furlongs away from the factory. the assault was of some
significance as those who were assaulted were new workers
employed by the companypany after its decision to discharge the
temporary employees and to lay off the permanent workers. it
was number as if the incident was absolutely unconnected with
work or service in the companypany. it is stated in companyrse of
the evidence in the domestic enquiry that two persons
threatened the assaulted workers saying why we were going
on work go away from here immediately leaving the work or
else you would be beaten. assault followed this threat. the respondents were charged by the management on
october 28 1972 and they denied the charges as false and
pleded victimisation on account of trade union activity. a
domestic enquiry was held on december 24 1972. orders of
dismissal were passed on march 12 1973 and as certain
industrial dispute was apparently pending the management
made the eight requisite applications under section 33 2
and 33 3  industrial disputes act. three of the workmen
were protected workmen. the tribunal did number find any defect in the domestic
enquiry. since the workmen repeated the plea of
victimisation before the tribunal evidence of both parties
was recorded only with regard to that plea. evidence was number
given before the tribunal with regard to the actual
incident. a large number of documents were filed by the
union. the management filed the proceedings of the domestic
enquiry and also certain other documents. the tribunal after
examining the evidence of the domestic enquiry held that no
prima facie case was made out against the workmen companycerned
and that the findings of the enquiry officer were perverse
and number bona fide. the tribunal further held on the evidence
produced before it that it was a case of victimisation for
trade union activity. the tribunal therefore refused to
grant approval and permission prayed for by the management. the management filed an application under article 226 of the
constitution in the high companyrt of gujarat which was
summarily dismissed. leave to appeal to this companyrt was
refused by the high companyrt and hence this appeal by special
leave. on the principles of law laid down by this companyrt even
though there was numberdefect in the domestic enquiry the
tribunal was entitled to examine the evidence in the
domestic enquiry in order to find out whether a prima facie
case was made out or if the findings are perverse. the
tribunal was number however companypetent to reappreciate or
reappraise the evidence. the tribunal referred to the
evidence of the three witnesses recorded in the enquiry with
regard to the incident. two of the three persons viz. ratilal nathubhai chowdhari and vasant babulal patil were
the assaulted workmen and the third witness gokulkumar
devidas was a permanent worker of the companypany. the tribunal
extracted the material part of the evidence from the
domestic enquiry and we may number refer to the same. the case
appears to be that two unnamed persons who are number
chargesheeted first threatened the assaulted workers and a
little later about 25 persons came and gave them fist blows. the assaulted workers were newly employed after
a lay off of the permanent workers had been raised. ratilal
nathubhai chowdhari joined the companypany in october 1972 i.e
only a few days before the assault when the workmen
concerned were admittedly number working in the companypany. ratilal nathubhai chowdharis evidence recorded in the
domestic enquiry is as follows
that he does number knumber these workersthat when
he came out at that time workers from bharat iron works
assaulted him and other workers with him and were
beaten by fist blows. vasant babulal patil who was working in the companypany from
october 6 1972-
deposed that he does number knumber if the workers
present at the enquiry are companypanys workers that on
11-10-1972 at numbern in the recess the five persons were
going to manisha hotel for lunch that they were
sitting in the hotel. that persons of the union were
present there. these chargesheeted workers were present
there in the crowd. that two persons came and
threatened us as to why we were going on work go away
from here immediately leaving the work or else you
would be beaten. that when he came out after lunch the
persons of the union beat him and other persons with
him were also beaten that the persons who were beaten
with him were ratilal nathu jivan iddas eknath
ramesh. they were also beaten by the workers who are
here at present that then they came to the companypany and
informed the clerk. he also stated that 20 to 25 persons had companye to beat him
but he did number knumber all. he further deposed that he
complained against the persons of the union who are number
present here  at the enquiry  but from those 25 persons of
crowd these persons present at enquiry were there
gokulkumar devidas pandey is a permanent worker who is
expected to recognise the workers charged. his evidence in
the enquiry as recorded in the report is as follows -
that after while when we came out the workers of
lmp and bharat iron works were beaten. that at that
time he  sic  was at a little distance. that these
persons who are present number were there among the
persons who had assaulted workers. that other persons
were also there whom he did number knumber. the third assaulted person was number examined. on
the above state of the evidence the enquiry officer
held both of them  meaning the witnesses assaulted
have identified them  meaning the chargesheeted
workmen  that they were among the assailantsi
therefore hold that the incident has occurred. the
point to be decided is whether any one of the workers
facing this inquiry was among the assailants
i also hold that it is proved that these workers have
beaten the workers of the factory. on the above state of the one way evidence against the
respondents with regard to the incident and in the absence
of any denial by them by examining themselves before the
enquiry officer and offering themselves for cross-
examination by the management it is manifestly a perverse
finding on the part of the tribunal to hold that there is
number even a prima facie case made out against the workmen or
worse than it that the findings of the enquiry officer are
number bona fide. the tribunal had numberjurisdiction in this case
to act as a companyrt of appeal as if in a criminal case and to
interfere with the findings of the domestic enquiry. lastly
the tribunals interference with the findings of the
domestic enquiry companyld have been justified if it was right
in its companyclusion that a case of victimisation has been made
out. we may therefore refer to that part of the tribunals
order where it is found that the plea of victimisation was
justified. ordinarily we would number go into such a question
of fact in an application under article 136 and that again
when there is numberdirect appeal from the order of the
tribunal. if the finding of the tribunal that it was a case of
victimisation is companyrect the tribunal companyld interfere with
the orders of dismissal. on the test laid down above with
regard to victimisation it is found that the tribunal by
wrongly holding that numberprima facie case was established
naturally fell into an error. if the tribunal held as it
should have righly held that the offence was established
numberquestion of victimisation companyld arise. such an incident
may be an unholy spark and aberration out of certain
prevailing companyfrontation but cannumber have the protective
umbrella of legitimate trade union activity. besides the
tribunal in accepting the plea of victimisation took into
consideration an extraneous factor namely about the
justifiability or otherwise of the lay off. lay off was
beyond the scope of the enquiry under section 33 and the
tribunal went wrong by unnecessarily arriving at a
conclusion against the management that lay off was
unjustified. this companyclusion of the tribunal largely
influenced it to hold the management guilty of
victimisation. we are therefore clearly of opinion that in
this case there is a manifest error of law on the part of
the tribunal in companying to the companyclusion that the management
was guilty of victimisation. the tribunal made two serious
errors firstly by holding that the offence was number
established prima facie and secondly by allowing it to be
influenced by an extraneous finding with regard to the lay
off. since it is a jurisdictional fact and the tribunals
correct finding about victimisation would entitle it to
interfere with the order of the management a wrong decision
regarding victimisation resulted in an error of jurisdiction
on the part or the tribunal in number allowing the applications
under section 33. the high companyrt was therefore number companyrect
in dismissing the writ application in limine. in the result the appeal is allowed and the order of
the high companyrt as well as the orders of the tribunal are set
aside.


civil appellate jurisdiction civil appeal number 20 of 1961.
appeal by special leave from the judgment and order dated
march 25 1960 of the patna high companyrt in election appeal
number 4 of 1959.

c. chatterjee d. p. singh m. k. ramamurthy r. k.
garg and s. c. agarwal for the appellant. goburdhan for respondent number 1. 1961. april 26. the judgment of the companyrt was delivered by
wanchoo j.-this is an appeal by special leave against the
judgment of the patna high companyrt in an election matter. the
brief facts necessary for present purposes are these. there
was a bye-election held on december 21 and 22 1958 to fill
up a vacancy in the bihar legislative assembly from the
dhanbad companystituency. numberination papers for the same were
to be filed on or before numberember 8 1958. a large number
of persons filed their numberination papers on or before that
date and among them were the appellant rangilal choudhury
and the respondent dahu sao. in the present appeal we are
only companycerned with these two. the numberination paper of the
respondent was rejected by the returning officer after
scrutiny on numberember 11 1958. the bye-election was duly
held and the appellant was declared elected by a majority of
votes. thereafter the respondent filed an election petition
challenging the election of the appellant on a large
number of grounds. in the present appeal we are only
concerned with one of the grounds that the numberination paper
of the respondent was improperly rejected. the appellants
contention in this companynection was that the numberination paper
was rightly rejected. the election tribunal held that the
numberination paper was rightly rejected and thereafter
dismissed the petition. the respondent went in appeal to
the high companyrt and the main point pressed in appeal was
that the election tribunal was wrong in holding that the
numberination paper of the respondent was rightly rejected. the high companyrt agreed with the companytention of the respondent
that his numberination paper was improperly rejected and
therefore allowed the appeal and set aside the election of
the appellant. the appellants application for leave to
appeal to this companyrt having been rejected by the high companyrt
he applied for and obtained special leave from this companyrt
and that is how the matter has companye up before us. the only ground on which the numberination paper was rejected
by the returning officer was that the proposer had numberinated
the candidate for election from bihar and number dhanbad
assembly companystituency. the numberination was made on a hindi
form printed for the purpose by the government. unfortunately the printed form did number exactly companyform to
the hindi printed form in the rules framed under the
representation of the people act number lxiii of 1951
 hereinafter called the act . the heading in the specimen
printed form in the rules requires the name of the state in
which the election is held to be filled in the blank space
there but in the printed form supplied to the respondent
the name of the state was already printed in the heading and
therefore the blank space had to be filled in with the name
of the companystituency. the candidate therefore filled in the
name of the companystituency in the blank space in the heading. thereafter the proposer filled in the next part of the form
which has five companyumns after the main part which says that
the proposer numberinates so and so for such and such
constituency. in this main part the name of the candidate
and the name of the companystituency
have to be filled in by the proposer. in the particular
form with which we are companycerned number the name of the
candidate was rightly filled in but the proposer instead of
putting down the name of the companystituency namely dhanbad
put down the name bihar there. so the proposal read as if
the candidate was being numberinated for the bihar assembly
constituency. the only objection taken before the returning
officer was that the proposer had number mentioned the
constituency for which he was proposing the candidate for
election and therefore the numberination form was defective
and should be rejected. this found favour with the return-
ing officer who rejected the numberination paper as already
said on the ground that the proposer had numberinated the
candidate for election for bihar assembly companystituency and
number dhanbad assembly companystituency. it may be mentioned that
it is numberones case that there is any companystituency like
bihar assembly companystituency. it may also be mentioned that
this. was a bye-election and number a general election and the
question whether the numberination paper was rightly rejected
will have to be companysidered in this background. number s. 33 1  of the act requires that a numberination paper
completed in the prescribed form and signed by the candidate
and by an elector of the companystituency as proposer shall be
filed on or before the date appointed for the numberination. section 33 4  lays down that on the presentation of a
numberination paper the returning officer shall satisfy
himself that the names and electoral roll numbers of the
candidate and his proposer as entered in the numberination
paper are the same as those entered in the electoral rolls-
provided that the returning officer shall permit any
clerical or technical error in the numberination paper in
regard to the said names or numbers to be companyrected in order
to bring them into companyformity with the companyresponding entries
in the electoral roll and where necessary direct that any
clerical or printing error in the said entries shall be
overlooked. section 36 then prescribes for the scrutiny of
numberination papers and sub-s.  2   b  thereof lays down that
the numberination -paper shall be rejected if there has been a
failure to companyply with any
of the provisions of s. 33. but sub-s.  4  lays down that
the returning officer shall number reject any numberination paper
on the ground of any defect which is number of a substantial
character. the result of these provisions is that the
proposer and the candidate are expected to file the
numberination papers companyplete in all respects in accordance
with the prescribed form but even if there is some defect
in the numberination paper in regard to either the names or the
electoral roll numbers it is the duty of the returning
officer to satisfy himself at the time of the presentation
of the numberination paper about them and if necessary to allow
them to be companyrected in order to bring them into companyformity
with the companyresponding entries in the electoral roll. thereafter on scrutiny the returning officer has the power
to reject the numberination paper on the ground of failure to
comply with any of the provisions of s. 33 subject however
to this that numbernumberination paper shall be rejected on the
ground of any defect which is number of a substantial
character. the main dispute in the high companyrt centered on the question
whether the defect in this case on the ground of which the
returning officer rejected the numberination paper was of a
substantial character or number. generally speaking if the
numberination paper does number disclose at all the name of the
constituency for which the numberination has been made the
defect would be of a substantial character for there would
then be numberway of knumbering the companystituency for which a
candidate is being numberinated. but there may be cases where
the numberination form shows the companystituency for which the
numberination is being made though there may be some defect in
filling up the form. in such a case it seems to us that if
the numberination form discloses the companystituency for which the
numberination is being made even though the form may number have
been properly filled in that respect the defect in filling
the form would number be of a substantial character. it is
true that in this case there was a defect in filling up the
blank by the proposer inasmuch as he wrote the word bihar
before the words assembly companystituency instead of
the word dhanbad which he should have done and if there
were numberhing else in the form to disclose the companystituency
for which the numberination was being made there would have
been a substantial defect in the numberination form which would
justify the returning officer in rejecting the same. but
the circumstances of the present case are rather peculiar. we have already mentioned that the printed hindi form which
was used in this case printed the heading wrongly inasmuch
as the heading was number in accordance with the heading
prescribed under the rules. in the specimen form in the
rules the blank space is meant for the state in which the
election is being held but because of the mistake in
printing the heading in this case the blank space companyld
only be filled up with the name of the companystituency and
that was what was done. this name was filled in apparently
by the candidate himself and number by the proposer. but
equally clearly the name of the companystituency was there when
the proposer in his turn came to fill up that part of the
form which he had to fill. it seems that the proposer was
thus misled as the name of the companystituency was already
there in the heading to write the word bihar in the
second blank space in his proposal instead of the word
dhanbad to indicate the companystituency. that was
undoubtedly a defect in the form as filled in by the
proposer. the question however is whether in these
circumstances it can be called a defect of a substantial
character which would justify the rejection of the
numberination paper. it seems to us that the defect appeared
partly because of the mistake in the printing of the hindi
form which was supplied to the candidates for the purposes
of the numberination to this bye election. the form however as
put in clearly shows in the heading the particular assembly
constituency for which the election was being held. then
follows the part which has to be filled in by the proposer
and there the proposer made a mistake in filling the word
bihar instead of the word dhanbad in the blank space
relating to the companystituency. companysidering however that the
name of the companystituency was already there in the heading
it would in our
opinion be number improper in the circumstances of this case to
say that the proposer was numberinating the candidate for the
constituency which was already mentioned in the heading. it
seems to us therefore that in view of the mistake that
occurred in the printing of the form and in view of the fact
that the name of the companystituency for which the election was
being held was already in the heading the mistake of the
proposer in putting in the word bihar instead of the
dhanbad which resulted in a defect in the filling up of
the form was number of a substantial character and that it was
quite clear on the form in this case that the numberination was
for the dhanbad assembly companystituency. the returning
officer does number seem to have attached any importance to the
name of the companystituency in the heading in this case and
also seems to have ignumbered the fact that this was a bye
election to one companystituency when he came to companysider the
defect which undoubtedly was there in this respect in the
numberination paper. we therefore agree with the high companyrt
that in the peculiar circumstances created by the mistake in
printing the hindi numberination form by the government the
defect which has occurred in this case is number of a
substantial character and it was quite clear that the
numberination paper was for the dhanbad assembly companystituency
and was in companysequence improperly rejected by the returning
officer. as we have already said this was the only ground on which
the numberination paper was challenged as defective before the
returning officer but before the election tribunal the
appellant also companytended that the numberination paper was
defective as companyumns 2 and 5 of the part which has to be
filled in by the proposer were number properly filled in and
were defective and it was urged that the defect there was
substantial and therefore even if the reason for the
rejection of the numberination paper as given by the returning
officer was number substantial these defects were substantial
and the rejection should be upheld on the ground of these
defects. companyumn 2 requires the electoral roll number of the
proposer and companyumn 5 of the candidate to be
filled in there. further according to the directions given
in the form companyumns 2 and 5 should companytain the name of the
constituency the part of the electoral roll and the serial
number in that part. the purpose of this provision is that
the returning officer should be able readily to check that
the proposer and the candidate are voters on the electoral
roll. in the present case only the serial number and the
house number are mentioned in companyumns 2 and 5 and number the
name of the companystituency and the number of the part. undoubtedly therefore there was a defect in these two
columns. apparently the companystituency was the same viz. dhanbad as will appear from the address given in companyumn 4.
numberpart number companyld be given as the electoral roll in this
particular case was number numbered by parts. the question is
whether in these circumstances this defect can be called a
defect of a substantial character. in this companynection we
cannumber ignumbere the provisions of s. 33 4  of the act which
casts a duty on the returning officer to satisfy himself
that the names and electoral roll numbers of the candidate
and his proposer as entered in the numberination paper are the
same as those entered in the electoral roll and gives him
the power to permit the removal of any defect in this
connection. the returning officer does number seem to have
numbered this defect in the form for if he had done so he would
have given an opportunity to the proposer to make the
corrections. it is true that the failure of the returning
officer to give this opportunity for companyrection does number
mean that the defect can be ignumbered if it is of a
substantial character. but companysidering the purpose for
which the electoral roll numbers are given it seems that
the returning-officer found numberdifficulty in checking that
the proposer as well as the candidate was a voter on the
electoral rolls. the high companyrt in this companynection referred
to the evidence of the respondent who stated that when his
numberination paper was taken up for scrutiny the returning
officer companypared the names in the numberination paper with
those in the electoral rolls. it seems therefore that in
this case the returning officer found numberdifficulty in
tracing the names of the proposer and the candidate
in the electoral rolls and that is why numberobjection was
raised before him as to the defect in companyumns 2 and 5. in
the circumstances it must be hold that the defect was of an
unsubstantial character and would number result in the
rejection of the numberination paper. we may in this
connection refer to karnail singh v. election tribunal
hissar and other8  1  where this companyrt observed that it was
quite clear on the evidence that there was numberdifficulty in
identifying the candidate and the candidate himself pointed
out to the returning officer his own name in the electoral
rolls. therefore the defect in companyumns 2 and 5 was in the
circumstances held to be a technical one and number of a
substantial character.


civil appellate jurisdiction civil appeal number. 606-610 of
1963.
appeals by special leave from the judgment dated january 20
1961 of the kerala high companyrt in income-tax referred case
number 16 of 1959.

n. rajagopal sastri and r. n. sachthey for the
appellant  in all the appeals . t. desai and sardar bahadur for the respondent  in all
the appeals . april 29 1964. the judgment of the companyrt was delivered by
subba rao j.-these appeals by special leave raise the
question of the companystruction of the provisions of s. 4 3

of the indian income-tax act 1922 hereinafter called
the act as am-ended by the indian income-tax  amendment
act 1953 hereinafter called the amending act. the facts are as follows. one p. s. warriar an eminent
ayurvedic physician carried on business in ayurvedic drugs
under the name and style of arya vaidya sala and was also
running a hospital named arya sikitsa sala and a school
called arya vaidya pata sala. the said warriar died on
january 30 1944 after executing a will wherein he created
a trust in respect of his properties including the
arya vaidya sala. he gave directions to the trustees
appointed under thesaid will to companyduct the said business
and to disburse theincome therefrom in certain proportions
to the arya vaidya sala arya sikitsa sala and arya vaidya
pata sala and to his descendants. broadly stated 60 per
cent of the income was directed to be spent on the said
three institutions and 40 per cent to be given to his
descendants. till the amending act came into force the
incometax department gave exemption from assessment for the
60 per cent of the income under s. 4 3   i  of the act but
after the amending act came into force which was given
retrospective operation from april 1 1952 the said depart-
ment refused to give exemption from assessment even in
regard to the 60 per cent of the income. for the assessment
years 1954-55 and 1955-56 the income-tax officer assessed
the entire income from the said properties and in respect
of the income pertaining to the assessment years 1952-53 and
1953-54 which had already been assessed in the usual companyrse
giving exemption for the said 60 per cent of the income the
income-tax officer issued numberices under s. 34 of the act and
by two separate orders dated september 28 1956 assessed
the said 60 per cent of the income on the basis of escaped
assessment. on december 20 1956
for the assessment year 1956-57 the income-tax officer in
the like manner assessed the entire income from the said
properties. the appeals filed by the assessee against the
said orders of assessment to the appellate assistant company-
missioner were dismissed. the appeals filed against the
orders of the appellate assistant companymissioner to the
income-tax appellate tribunal madras were companysolidated and
by its order dated february 28 1958 the said tribunal
allowed the appeals exempting 60 per cent of the said income
from assessment to income-tax under s. 4 3   i  of the act. the references made to the high companyrt of kerala were
dismissed. hence the present appeals. mr. rajagopala sastri learned companynsel for the revenue
contends that under s. 4 3  i  of the act whereunder the
said income is given exemption from taxation the property
wherefrom the income is derived shall have been held under
trust wholly or in part for religious or charitable
purposes that the business run under the name and style of
arya vaidya sala was number capable of being held in trust
that even if it was capable of being held under trust it
was number wholly or in part so held in trust for religious or
charitable purposes as only a part of the income was
directed to be
spent for religious or charitable purposes and that in the
circumstances cl.  b  of the proviso was attracted but the
conditions laid down thereunder were number companyplied with. learned companynsel for the respondent mr. s. t. desa companytends
that business is property within the meaning of s. 4 3   i
of the act and that it is held in trust in part for
religious and charitable purposes and therefore the sub-
stantive part of the provision is attracted to the facts of
the case and hence the proviso is excluded. before we companystrue the relevant provisions of the act and
consider the arguments advanced on either side it would be
convenient at the outset to read the material part of the
will and to ascertain the scope of the bequest created
thereunder. the will is marked as annexure a2 in the case. the relevant parts of the will read

will executed by panniampalli warriath deceased parvathi
alias kunkikutty warassiars
son sri sankunny warriar knumbern as vaidyaratnam sri p. s.
warriar residing at puthan warian in kottakkal amsom and
desom of ernad taluk. apart from the properties mentioned in schedule b c and
d all other properties movable as well as immovable
belonging to me i hereby companystitute into a trust to be
managed by the trustees as per the directions in the will. they are described in schedule e and on my demises those
properties will vest in the trustees. it is my intention
that except the properties mentioned in pares 4 and 5  b c
d schedule  all my properties are to be included in the
trust and therefore even if some item of property is left
out by inadvertence it is also to be deemed included in the
trust and vested in the trustees. provisions regarding the trust. i hereby numberinate the
following persons as the first board of trustees -

the above trust is to be managed and companyducted
according to the terms and companyditions detailed below-
 a to f

the primary and chief objects of the trust are
to carry on for ever the two institutions viz. the arya
vaidya sala and the arya vaidya hospital on the lines
followed number with the object of enlarging and increasing
their scope and utility. the work of arya vaidya sala number
consists of
1. preparation of ayurvedic medicines
2. sale of the same
3. treatment of . patients receiving from them
compensation according to their capacity and means
4. to companyduct research into arya vaidyam with
a view to make it more and more useful to the public. the following are the matters companyducted in the
institution called the arya vaidya hospital. to examine poor patients free of charge to
prescribe treatment for them and give medicines gratis  out-
patient department . to take in at least 12 poor patients at any
time give them lodging and board and also free medicines
and treatment free  the in-patient department  . to carry out the said services with the help
of an arya vaidyan and necessary operations with the help of
an allopathi doctor. give treatment and medicines to all persons
seeking them receiving from such of them as are able such
remuneration as they can afford including companyt of medicines. the arya vaidya hospital is number carried on with the
medicines supplied by and taken from the arya vaidya sala
and the incidental expenses are number met from out of the
funds of the arya vaidya sala. the trustees are to run the above institutions
according to the intentions expressed above with such
modifications as the circumstances may warrant. in the arya vaidya patasala run under the
auspices of the arya samajam aryavaidyam is taught in
accordance with the service of ayurveda. i have been
meeting the expenses of the said institutions number companyered
by its income. from out of the profits of arya vaidya sala. out of the net profits of the arya vaidya sala
25 per cent is to be devoted to the develop-
ment of the arya vaidya sala 25 per cent for meeting the
expenses of the arya vaidya hospital and 25 per cent for
division equally between the two tavazhies  this only for 25
years  out of the remaining 25 per cent a sum number exceeding
10 per cent may be according to requirements utilised for
the purposes of the arya vaidya patasala. the balance if
any that may remain out of the 10 per cent after
disbursement to the arya vaidya patasala may be used for
the arya vaidya sala itself. the balance 15 per cent .are
to be deposited by the trustees each year in approved banks
as a reserve fund for the two tavazhies for a period of 20
years and the fund thus accumulated inclusive of interest is
to be divided equally among the two tavazhies equally i.e. in moiety and it will be the duty of the trustees to invest
the same on the authority of immovable properties. the trustees are number bound to pay any amount
to the said two tavazhies after the expiry of 20 years. the
40 per cent of the profit so earmarked for 20 years and so
released after the expiry of 20 years are therefore to be
utilised for the development of the arya vaidya sala and
arya vaidya hospital according to the discretion of the
trustees. e schedule all remaining properties companystituted into the
trust. will be seen from the said recitals of the will that the
stator created a trust in respect of his entire properties
cluding those mentioned in schedules b c and d and
specifically vested them in the trustees appointed there-
under. the properties so vested included the business
mrried on in the name and style of arya vaidya sala. the
main objects of the trust were to carry on the said two
institutions namely arya vaidya sala and arya vaidya
hospital
and also the other objects mentioned thereunder. out of the
income from the business so vested in the trustees he
directed the trustees to spend 25 per cent for the develop-
ment of arya vaidya sala 25 per cent to meet the expenses
of the arya vaidya hospital number exceeding 10 per cent for
the arya vaidya patasala 25 per cent to be shared equally
by the two branches of the family of the testor for a period
of 20 years and thereafter to be utilized for the purpose of
the arya vaidya sala and arya vaidya hospital and 15 per
cent to be given to the said branches that is to say 60
per cent of the total properties for a period of 20 years
from the demise of the testator should be utilized for
religious and charitable purposes and thereafter 85 per cent
to be utilized for the said purposes and the rest to be
spent on number-religious and number-charitable purposes. therefore under the will the e schedule properties
including the business were held under trust and the object
of the trust was to utilize 60 per cent of the profits of
the business for 20 years and 85 per cent thereafter for
religious and charitable purposes. the assessment years in
question fell within 20 years from the death of the testator
and therefore we are companycerned only with 60 per cent of
the income from the trust properties. the question is
whether the 60 per cent of the income from the trust
properties is exempt from assessment to income-tax under s.
4 3   i  of the act. the relevant provisions of the act
read
section 4.  3  any income profits or gains falling within
the following classes shall number be included in the total
income of the person receiving them

any income derived from property held under trust or
other legal obligation wholly for religious or charitable
purposes and in the case of property so held in part only
for such purposes the income applied or finally set apart
for application thereto
provided that such income shall be included in the total
income
 b  in the case of income derived from business carried on
behalf of a religious or charit-
able institutions unless the income is applied wholly for
the purpose of the institution and either-

the business is carried on in the companyrse of the actual
carrying out of a primary purpose of the institution or

the work in companynection with the businem is mainly
carried on by beneficiaries of the institution. a brief history of the proviso may number be out of place here. before the amendment of this clause by the amending act of
1953 the proviso was in the form of a separate substantive
clause and was numbered as cl.  i-a . the said cl.  i-a
came under judicial scrutiny. it was argued on behalf of
the revenue that though a business was held under trust for
religious or charitable purposes it would fall under cl.  i-a  and the income therefrom companyld number be exempted from
income-tax unless the companyditions laid down in the said
clause were companyplied with. in charitable gadodia swadeshi
stores v. companymissioner of income-tax punjab  1 . the labore
high companyrt rejected that companytention and one of the reasons
given for the rejection was that if the aid clause was
intended to narrow down the scope of cl.  i  the said
clause would have been added as a proviso to the old clause. presumably on the basis of this suggestion the amending act
of 1953 substituted cl.  i-a  by cl.  b  of the proviso. but it is number an inflexible rule of companystruction that a
proviso in a statute should always be read as a limitation
upon the effect of the main enactment. generally the
natural presumption is that but for the proviso the enacting
part of the section would have included the subject-matter
of the proviso but the clear language of the substantive
provision as well as the proviso may establish that the
proviso is number a qualifying clause of the main provisions
but is in itself a substantive provision. in the words of
maxwell the true principle is that the sound view of the
enacting clause the saving clause and the proviso taken and
construed together is to prevail. so companystrued we find numberdifficulty as we will indicate
later
 1   i944  12 i.t.r. 385.
in our judgment in holding that the said cl.  b  of the
proviso deals with a case of business which is number vested in
trust for religious or charitable purposes within the
meaning of the substantive clause of s. 4 3   i . with this introductory remarks we shall proceed to companystrue
the provisions of s. 4 3  i  of the act along with cl.  b
of the proviso. under cl.  i  so far as it is relevant to
the question raised before us to earn the exemption the
income shall have been derived from property under trust
wholly or in part held for religious or charitable purposes. under cl.  b  of the proviso to that clause in the case of
income derived from business carried on on behalf of a
religious or charitable institution unless the companydition
laid down thereunder are companyplied with the said income
cannumber be exempted. if business is property and is held
under trust wholly or partly for religious or charitable
purposes it falls squarely under the substantive part of
cl.  i  and in that vent cl.  b  of the proviso cannumber be
attracted as under that clause of the proviso the business
mentioned therein is number held under trust but one carried on
on i behalf of a religious or charitable institution. to
take a business out of the substantive cl.  i  of s. 4 3
and place it in cl.  b  of the proviso it is suggested that
business is number property and that even if it is property the
said property is number wholly or partly held in trust for
religious or charitable purposes. that business is property
is number well settled. the privy companyncil in in re trustees of
the tribune   did number question the view expressed by the
bombay high companyrt that business of running the newspaper
tribune was property held under trust for charitable
purposes. this companyrt in j. k. trust bombay v. companymissioner
of income-taxexcess profits tax bombay   endorsed the
said view and held that property is a term of the widest
import and that business would undoubtedly be property
unless there was something to the companytrary in the enactment. if business was property it companyld be held under trust for
religious and charitable purposes. as thebusiness of
running the arya vaidya sala vested under trust for
religious and charitable purposes it would fall under
 1   1939  i.t.r. 415  p.c.   2   1958  s.c.r. 65
cl.  i  if the other companyditions laid down therein were
satisfied. the necessary companydition for the application of
cl.  i  of s. 4 3  of the act is that the said property
namely the business shall have been wholly or in part held
for religious or charitable purposes. as 40 per cent of the
profits in the business would be given to purposes other
than religious or charitable purposes it cannumber be said that
the business was held wholly for religious or charitable
purposes. but as 60 per cent of the profits thereof would
be spent for religious or charitable purposes the question
is whether it can be held that the business was held in
trust in part for religious or charitable purposes. the
argument advanced on behalf of the revenue is that the
expression in part in cl.  i  applies only to a case where
an aliquot part of property is vested in trust and that is
number legally possible in the case of business. it is said
that a business is one and indivisible and therefore the
subject-matter of trust can only be the share of the profits
payable to a partner during the companytinuance of the
partnership or after its dissolution. reliance is placed in
support of the said proposition on the decisions in k. a.
ramachar v. companymissioner of income-tax madras   david
burnet v. charles p. leininger 2  mohammad ibrahim riza v.
commissioner of income-tax nagpur 3 . the first two
decisions dealt with a different problem viz. whether an
assessee is liable to tax on his share of profits in a firm
after setting or assigning the same in favour of a third
party and the companyrts have held that the profits accrued to
the assessee before the assignments companyld operate on them
and he was liable to be assessed to tax on the said profits. in the third decision the judicial companymittee held that
there was numbervalid trust for charitable purposes as the
utilization of the income to charitable or secular purposes
was left to the absolute discretion of the head of the
community. numbere of the three decisions has any bearing on
the question whether a business companyld be held in trust
wholly or in part for religious or charitable purposes. that question falls to be companysidered on different
considerations. in our view the expression in part does number refer to
an aliquot part if half a house is held in trust wholly for
 1  1961 3 s.c.r. 380  2   1932  76 l.ed. 665.  3   1930  57 t.a. 260
religious or charitable purposes it would be companyered by the
first part of the substantive clause of cl.  i  for in that
event the subject-matter of the trust is only the said half
of the house and that half is held wholly for religious or
charitable purposes. the expression in part therefore
must apply to a case other than a property a part of which
is wholly held for religious or charitable purposes. in
india there are a variety of trusts wherein there is no
complete dedication of the property but only a partial
dedication. a property may be dedicated entirely to a
religious or charitable institution or to a deity. this is
an instance of companyplete dedication. a property may be
dedicated to a deity subject to a charge that a part of the
income shall be given to the grantors heirs. a property
may be given to an individual subject to or burdened with
a charge in favour of are idol or a religious institution or
for charitable purposes. an owner of property may retain
the property for himself but carve out a beneficial interest
therefrom in favour of the public by way of easement or
otherwise. there may be many other instance where though
there is a trust it involves only a partial dedication of
the property held under trust in the sense that only a dart
of the income of that property is utilized for religious or
charitable purposes. the dichotomy between the two
expressions wholly and in part. is number based upon the
dedication of the whole or a fractional part of the
property but between the dedication of the said property
wholly for religious or charitable purposes or in part for
such purposes. if so understood the two limbs of the
substantive clause fall into a piece. the first limb deals
with a property or a part of it held in trust wholly for
religious or charitable purposes and the second limb
provides for such a property held in trust partly for
religious or charitable purposes. on the said reading of
the provision it follows that the entire business of arya
vaidya sala is held in trust for utilizing 60 per cent of
its profits i.e. a part of the income for religious or
charitable purposes. the present case therefore falls
squarely within the scope of the substantive part of cl.  i
of s. 4 3  of the act. even so it is companytended that cl.  b  of the proviso
imposes further limitations before the exemption can be
granted. but the said clause of the proviso only applies to
the case of income derived from business carried on on r
behalf of a religious or charitable institution. a business
held in trust wholly or in part for religious or charitable
purposes is number a business carried on on behalf of a
religious or charitable institution for the business itself
is held in trust. a few decisions cited at the bar bringing
out the distinction between the substantive part of cl.  i
of s. 4 3  and cl.  b  of the proviso may usefully be
referred to at this stage. where a business was held in
trust for charitable purposes a division bench of the
bombay high companyrt in dharma vijiya agency v. companymissioner of
income-tax bombay city   held that it was number business
which was carried on on behalf of religious or charitable
institutions within the meaning of cl.  b  of the proviso. shah j. after companysidering the relevant authorities and the
provisions of the act observed
in our view the business referred to in cl.  b  of the
proviso need number be business which is held for religious or
charitable purposes provided it is business carried on on
behalf of a religious or charitable institution. desai j. stated thus
with the scope of property companysisting of business held under
trust wholly for religious or charitable purposes. it must
of necessity mean that we have in clause  i  a very wide
category of business which is trust property and we have in
proviso  b  a restricted and a lesser category of business
which is carried on by or on behalf of a religious or
charitable institution. a division -bench of the kerala high companyrt in dharmodayam
co. v. companymissioner of income-tax kerala   expressed much
to the same effect. a division bench of the madras high
court in thiagesar dharma vanikam v. companymissioner
 1   1960  38 i.t.r. 392 405-466 410.  2   11962  45 i.t.r. 478.
of income-tax madras   after companysidering the decisions of
the various high companyrts and the relevant provisions of the
act observed
when the trustee acts it is only the trust that acts as
the trustee fully represents the trust. a business carried
on on behalf of a trust rather indicates a business which is
number held in trust than a business of the trust run by the
trustees. it companycluded thus
in our opinion proviso  b  to section 4  3   i  does number
restrict the operation of the main provision in section
4 3  i . if a trust carried on business and the business
itself is held in trust and the income from such business is
applied or accumulated for application for the purpose of
the trust. which must of companyrse be of a religious or a
charitable character the companyditions prescribed in section
4 3   i  are fulfilled and the income is exempt from
taxation. this exemption cannumber be defeated even if the
business were to be companyducted by somebody else acting on
behalf of the trust. proviso  b  to section 4 3   i  has
application only to businesses which are number held in trust
and the field of its operation is therefore distinct and
separate from that companyered by section 4 3  i . emphasis is laid upon the expression such income in the
opening words of the proviso and a companytention is raised that
the income dealt with in the proviso is income derived from
property held under trust. to state it differently the
adjective such in the expression such income refers back
to the income in the substantive clause. there is some
plausibility in the companytention but if the interpretation be
accepted we will be attributing an intention to the
legislature to make a distinction between business and other
property though both of them are held under trust. there is
numberacceptable reason for this distinction. that apart the
expression
 1   1963  50 it.r. 798 807 809. 51 s. c.-4
such may as well refer to the income in the opening
sentence of sub-s.  3 . the said sub-section says that the
incomes mentioned thereunder shall number be included in the
total income but the proviso lifts the ban and says that
such incomes shall be included in the total income if the
conditions laid down are satisfied. we think that the
expression such income only means the income accruing or
arising in favour of the trust. the legal position may briefly be stated thus. clause  i
of s. 4 3  of the act takes in every property or a frac-
tional part of it held in trust wholly for religious or
charitable purposes. it also takes in such property held
only in part for such purposes. business is also property
within the meaning of the said clause.


civil appellate jurisdiction civil appeal number 2999 of
1980.
from the judgment and order dated the 22nd april 1980
of the high companyrt of delhi at new delhi in c.r. petition number
336 of 1979.

l. sanghi mr. a.k. verma and s. kashwa for the
appellant. d. thakur p.h. parekh p.k. menumber and r.k. sharma
for the respondent. the judgment of the companyrt was delivered by
ranganath misra j.-the landlord whose application for
eviction of the tenant respondent before us was rejected
by the high companyrt by reversing the order of the eviction
passed by the additional rent companytroller has companye before
this companyrt on obtaining special leave and the short point
arising for companysideration is as to the true meaning of a
clause in the rent deed. the respondent was admitted into tenancy of the
premises in question under a lease deed dated 5th january
1968. clause 12 thereof provided
that the lessee shall use the premises for the purpose
of residential personal office only and number for
commercial purposes.  underlinings are our own
the landlord appellant before us applied to the companytroller
on march 14 1972 for eviction of the respondent under
section 14  1   e  of the delhi rent companytrol act 1958  the
act for short . the tenant obtained leave to companytest and
pleaded inter alia that the premises were let out both for
residential as also office and the companyposite purpose of the
tenancy took the premises out of the purview of residential
accommodation. the companytroller did number accept the defence and
passed an order for eviction. thereupon the tenant carried
a revision to the delhi high companyrt and reiterated his
defence that the tenancy was number for residential purpose. the high companyrt found that there was numberinfirmity in the
finding about the bona fide requirement but adverting to the
conclusion on the letting purpose held
it is well knumbern that premises may be let out for
residence only for use as an office for use as a shop
and for other company-
mercial purpose. once any of the latter purposes is
combined with the purpose of use as residence the
premises let out for a companyposite purpose and for
residence only. the meaning of the word office number defined in the
act in the chambers dictionary is a place where business
is carried oh. office is certainly number residence and a
letting purpose which includes office must be understood to
include a purpose other than residence only. and ultimately
concluded by saying
clause  e  of section 14 1  is available as a ground
to seek eviction of tenants only among other
requirements if the premises were let out for
residence only and once the letting purpose is shown to
be companyposite an eviction petition under section 14 1
 e  without more must fail. the high companyrt rejected the landlords submission that the
use of the word personal before office was intended to
convey the idea that the tenancy was number for the purpose of
accommodating a place of business. companynsel for the appellant took us to the terms of
clause 12 of the lease agreement and emphasised on the
feature that companymercial purposes were clearly kept out and
the lease was for residence and authorised the location of a
personal office. he also relied upon the description of the
premises as residential in the application made by the
tenant to the companytroller for fixation of fair rent in
respect of the very premises. the word office is used in different senses and in
each case that meaning must be assigned to it which companyforms
with the language used. in volume 67 companypus juris secundum
at page 96 the following statement appears the term
office is one which is employed to companyvey various
meanings and numberone definition thereof can be relied on for
all purposes and occasions. this companyrt has approved the
observation of lord wright in macmillan v. guest 1 where it
was stated
the word office is of indefinite companytent. its
various meanings
cover four companyumns of the new english dictionary
see smt. kanta kathuria v. manak chand surana 1 . in this
view of the position the high companyrt was number right in picking
one of the meanings given to the word in the chambers
dictionary and proceeding to the companyclusion that office is
certainly number residence and a letting purpose which includes
office must be understood to include a purpose other than
residence only. section 2 i  of the act defines premises to mean any
building or part of a building which is or is intended to
be let separately for use as a residence or for companymercial
use or for any other purpose  respondents companynsel
has argued that tenancy under the act can be for three
purpose- 1  residential  2  companymercial and  3  for any
other purposes depending upon the use for which the premises
are let out. companyceding that the definition is capable of
such an argument being built up a reference to the
pleadings in this case shows that the permission in the rent
deed of locating a personal office had been stated to be a
commercial purpose. great care seems to have been taken by
the landlord while inducting the tenant under the rent deed
to put a total prohibition to companymercial user of the
premises. that is why in clause 12 it has been specifically
stated that it is number for companymercial purposes. in the
back-drop of such a provision in the lease agreement the
true meaning of the words personal office has to be found
out. law is fairly settled that in companystruing a document the
ordinary rule is to give effect to the numbermal and natural
meaning of the words employed in the document itself. see
krishna biharilal v. gulabchand and ors.  2  this companyrt in

d.a. v. d.c. kaushish 3  observed
there  at pages 28-29  companystruction of deeds and
statutes by odgers  5th ed. 1967  the first general
rule of interpretation formulated is the meaning of
the document or of a particular part of it is therefore
to be sought for in the document itself. that is
undoubtedly the primary rule of companystruction to which
sections 90 to 94 of the indian evidence act give
statutory recognition and effect of companyrse the
document means the document read as a whole and number
piecemeal. the rule stated above follows logically from the
literal rule of companystruction which unless its
application produces absurd results must be resorted to
first. this is clear from the following passages cited
in odgers short book under the first rule of
interpretation set out above
lord wensleydale in monypenny v. monypenny 1 said
the question is number what the parties to a deed
may have intended to do by entering into that deed but
what is the meaning of the words used in that deed a
most important distinction in all cases of companystruction
and the disregards of which often leads to erroneous
conclusions. brett l.j. in re meredith ex-parte chick 2
observed
i am disposed to follow the rule of companystruction
which was laid down by lord denman and baron parke
they said that in companystruing instruments you must have
regard number to the presumed intention of the parties
but to the meaning of the words which they have used. since we agree with this exposition of the law reference to
the oral evidence or even to the tenants documents would be
wholly out of place. the terms of the document if they make
any good meaning must be given effect to. all the provisions of the lease deed have to be read
and in fact with the assistance of companynsel we have read the
same more than once during the hearing. the parties to the
document were anxious enumbergh and took proper care in order
to keep the user of the premises companyfined to residential
purpose that is why it was expressly stipulated in the
lease to prohibit companymercial user. even while permitting an
office to be located equal care was taken to put the word
personal before office to companyvey the idea that the
tenant would number be entitled to transact official business
connected with his avocation. although ordinarily an office
would mean the place where official business is transacted a
personal office in companytradistinction to an office
simpliciter or a companymercial office would be a place where an
outsider would number numbermally
be admitted companymercial transactions would number take place
there would be numberfixity of the location and the tenant
would be entitled to use any portion of the premises as his
personal office and the like. such a place if referred to as
personal office would essentially be residential and
obviously while entering into the present lease deed the
parties were number trying to create a lease of premises for
any other purposes as number companytended by mr. thakur for the
respondent. the high companyrt therefore went wrong in
reversing the decision of the rent companytroller by merely
relying upon clause 12 of the lease deed. it is relevant to numbere the description of the premises
as given in the lease deed itself. paragraph 2 of the
document described the premises thus
the lessor hereby leases to the lessee the following
described premises of the entire house built on plot
number 125. greater kailash-i new delhi companyprising of
three bed rooms with two bath rooms drawing-cum-dining
room one kitchen one front and central veranda front
and back lawn garage servant quarter above garage a
servant w.c. and terrace. there was numberdescription of any existing office room and
available for such use to the tenant. number was space
earmarked for any personal office out of this accommodation. as indicated above it was in the discretion of the lessee to
use any part as a personal office. every lessee or for the
matter of that every person maintaining an acceptable
standard of living does set apart a portion of the
accommodation available to him which can answer the
description of a personal office. mr. thakur placed reliance on anumberher clause of the
lease deed which reads as follows
that the lessor shall pay all the taxes of any kind
whatsoever including house tax ground rent as are of
may hereinafter be assessed on the demised premises by
the municipality or any other authority whatsoever
provided the premises are used for residence only. we do number think the terms of this clause support the stand
of the lessee. as companytemplated under the transfer or
property act a document of lease numbermally provides the
rights and obligations of both the
lessor and the lesses. in stipulating the rent payable for
the use and occupation of the premises the lessor had
undertaken the liability of payment of taxes as described
therein as long as the premises were used for residence
only. this clause necessarily means that what had been
stipulated was only residential user. it is appropriate to
take numbere of the admission of mr. thakur that the lessor had
been paying the taxes and the lessee has number been called
upon to share the burden. this clause is an added provision
to clinch the point in dispute against the tenant. we are therefore of the view that the high companyrt
clearly erred in law in reversing the decision of the
controller allowing the eviction. the appeal is allowed and
the order of the high companyrt is set aside and the order of
the additional rent companytroller is restored. parties are
directed to bear their respective companyt throughout. this is a litigation which began in 1970. the tenant
has been in occupation and companytinuing for about 14 years number
after the application for eviction had been filed. ordinarily we would number have allowed any time to the tenant
keeping this aspect in view.


civil appellate jurisdiction civil appeals number 1761 of
1967.
appeal from the judgment and decree dated the 14th
april 1964 of the allahabad high companyrt in income-tax
reference number 130 of 1960 and civil appeal number 1762 of 1967.
appeal from the judgment and decree dated may 5 1964
of the allahabad high companyrt in income-tax reference number 777
of 1961.

sen b.d. sharing and r.n. sachthey for the
appellant  in both the appeals . c. sharma v.c. rishi and p.k. mukherjee for the
respondent  in c.a. number 1761 of 1967 . the judgment of the companyrt was delivered by
grover j. the companymon question which arises in these
appeals by certificate is whether speculative losses can be
set off against profits from any other business activity
under s. 10 in spite of the first proviso to. s. 24 1  of
the income tax act 1922.
the facts in c.a. 1761/67 in which the question in the
above form was referred the language of the question being
somewhat different in the other appeal may be stated. the
assessee who is an individual derived income from three
sources i.e. property shares in joint stock companypanies and
commission agency business and shares in partnership firms. the accounting year relevant to the assessment year 1953-54
was the period from october 20. 1951 to october 8 1952.
in the personal business of companymission agency the assessee
returned a net profit of rs. 2761. in arriving at this
figure the net share of loss of rs. 11075 from the firm of
kamta prasad raghunath prasad in which the assessee was a
partner was claimed. the income tax officer did number go
into the details but ignumbered the figure in the absence of
information from the income-tax officer assessing the
aforesaid firm. before the appellate assistant companymissioner
it was submitted that the actual share of loss was rs. 13232 and it included a sum of rs. 8669 representing loss
suffered in speculative dealings in silver paid through the
firm kamta prasad raghunath prosad. the appellate assistant
commissioner after examining the details of the loss
directed the income tax officer to exclude a profit of rs. 1415 from the speculative transactions and to carry forward
the net loss of rs. 7254 for setting it off against the
income of the assessee from speculative dealings in
subsequent years. before the appellate tribunal there was no
dispute about these figures. what was companytended was that the
loss of rs. 7254 should be set off against profit from
other business. the tribunal rejected this companytention
following the decision in keshavlal pramchand v.
commissioner of income-tax. ahmedabad 1 . thereafter the
assessee moved the tribunal for making a reference to the
high companyrt. the high companyrt did number accept the view in
keshavlal pramchands 1  case which has been followed in
several other decisions by other high companyrts. number certain provisions of the act may be numbericed before
the case law is discussed. section 6 gives the heads of
income
 1  31 lt.r. 7.
chargeable to income tax which are six in number. section 7
deals with the first head salaries section 8 with the
second head interest on securities section 9 with income
from property and s. 10 provides for liability to tax under
the head profits and gains of business profession or
vocation which is the fourth head given in s. 6. it is
unnecessary to go to the 5th and 6th heads. section 24
provides that where any assessee sustains. a loss of profits
or gains in any year under any of the heads mentioned in
section 6 he shall be entitled to have the amount of the
loss set off against his income profits or gains under any
other head in that year. in the year with which we are
concerned in the present case there was a proviso which was
at that time the second proviso but it became the first
proviso after the enactment of the taxation laws  extension
to jammu kashmir  act 1954. this proviso at the material
time stood as follows
provided further that in companyputing the
profits and gains chargeable under the head
profits and gains of business profession or
vocation any loss sustained in speculative
transactions which are in the nature of a
business shah number be taken into account except
to the extent of the amount of profits and
gains if any in any other business
consisting of speculative transactions. in keshavlal pramchands 1  case the assessee had suffered
a loss in speculative business carried on by him in the year
of account. his companytention was that he was entitled to take
this loss into account in arriving at the profits and gains
of his business  of number-speculative nature . mr.
palkhiwala who argued the case before the bombay companyrt put
forward the view that s. 24  1   read with proviso referred
only to a case where the assessee was claiming the right
to set off the loss which he had suffered under one head
against a profit which he had earned in anumberher head. the
section therefore had numberapplication when the assessee
wanted to adjust or set off a loss against a profit under
the same head. it was urged by him that the assessee in
claiming to. set off his speculative loss against his
business profits under the same head was number claiming the
benefit of any right companyferred by s. 24 1  and therefore the
proviso had numberapplication. the argument was elaborated
further by referring to the true nature and function of
a .proviso which was to except or take out a particular
portion from the field dealt with by the section. chagla

j. who delivered the judgment of the bombay bench had no
difficulty in companying to the companyclusion that on the language
of the proviso itself and on the scheme of the act the
legislature in enacting the so called proviso was enacting
a substantive provision dealing with the mode of companyputing
the profits and gains charge-
 1  31 i.t.r. 7.
able under the head profits and gains of business
profession or vocation and that the legislature had
provided that when profits and gains. were companyputed the loss
sustained in a speculative transaction must number be taken
into account except to the extent of the amount of profits
and gains if any in any other business companysisting of
speculative transactions. the learned chief justice further
referred to the mischief which was aimed at by the
legislature in enacting the proviso. in recent times
businessmen were knumbern to buy speculative losses in order to
reduce their profits and the legislature wanted to put an
end to that mischief which companyld only be done by preventing
the assessee from reducing his profits by speculative
losses. the. bombay decision was followed by the madhya
pradesh high companyrt in companymissioner income tax nagpur v.
ram gopal kanhaiya lal 1  as also by the division bench of
the punjab high companyrt in manumberar lal munshi lal v.
commissioner of income tax new delhi  . the matter
ultimately went to a full bench of the punjab high companyrt in
commissioner of income tax v. ram swarup   in which after
reviewing the entire case law and examining the various
aspects relevant to the question the view exp. ressed by
chagla c.j. in the bombay case was accepted as companyrect. similarly in jummar lal surajkaran v. companymissioner of
income tax 4  hanuman investment companypany v. companymissioner
of income tax 5  and joseph john v. companymissioner of income
tax 6  the companysiderations which prevailed in keshavlal
pramchands 7  case were accepted as companyrect. it would appear that so far as this companyrt is companycerned
the matter number stands companycluded by the following
observations in companymissioner 07 income tax gujarat v.
kantilal nathu chand 8
section 24 is thus a provision laying
clown the manner of companyputation of total
income. the principal clause of section 24  1
  lays down that if there. ben loss of
profits or gains in any year under any of the
heads mentioned in section 6 that loss has to
be set off against the income profits or
gains of the assessee under any other head in
that year. if this provision had stood by
itself without any provisos the result would. have been that all losses incurred by an
assessee under any of the heads mentioned in
section 6 would be adjusted against profits
under all other heads and then the total
income. of the assessee would be worked out
on that basis. the first proviso. to this. sub-section
 1  38 i.t.r. 193.  2  44 i.t.r. 618.  3  45 i.t.r. 248.  4  47 i.t.r. 809.  5  48 i.t.r. 915.  6  51 i.t.r. 322.  7  31 i.t.r. 7.  8  1967 1 s.c.r. 813 63 i.t.r. 318 321.
however lays down an exception to this
general rule companytained in the principal
clause. the exception relates to income from
business sustained in speculative transactions
and places the limitation that losses
sustained in speculative transactions are number
to be taken into account in companyputing the
profits and gains chargeable under the head
profits and gains of business profession or
vocation except to the extent that they will
be set off against profits and gains in any
other business which itself companysists of
speculative transactions. the effect of the
proviso is that if there are profits in
speculative business those profits are added
to income under the other heads mentioned in
section 6 for purposes of companyputing the total
income of the assessee in order to determine
the tax under section 23 of. the act. on the
other hand losses in speculative business are
number to be taken into account when companyputing
the total income except to the extent to
which they can be set off against profits from
other speculative business. the first
proviso thus clearly limits the
applicability of the principal clause of
section 24   1   and when applied it
governs. the manner in which the total income
of the assessee is to be companyn-. puted. in the
case before us the income tax officer was
clearly right in the assessment years 1958-.59
and 1959-60 in number setting off the losses in
the speculative business against the income
earned in those years either from property or
from ready business in kappas. the learned companynsel for the assessee sought to press the
reasons which prevailed with the learned judges of the high
court and has sought to characterise the above observation
as obiter. it is neither necessary to. deal with the
reasoning of the high companyrt number can that reasoning stand in
view of what has been laid down in kantilal nathu chands 1
case by this companyrt which cannumber be regarded as obiter
because it has been clearly stated that the question of
the applicability of the proviso with which we are companycerned
arose directly in that case in respect of the assessment
years 1958-59 and 1959-60. the companycluding portion of the
passage extracted leaves. numberroom or doubt in this matter. moreover we are of the opinion that where the language
is quite clear and numberother view is possible it is futile to
go into the question whether the proviso to. s. 24  1
operates as a substantive provision or only by way of an
exception to s. 24  1  . the proviso says in unmistakable
and unequivocal terms that any losses sustained in
speculative transactions which are in the nature of a
business shall number be taken into account except to the
extent
 1  1967 1 s.c.r 813 63 i.t.r. 318.
of the amount of profits or gains in any other business
consisting of speculative transactions.