civil appellate jurisdiction civil appeal number 535 of 1958.
appeal from the judgment and order dated march 291955 of
the assam high companyrt in i.t.r. number 1 of 1954.

v. viswanatha sastri and d. n. mukherjee for the
appellants. hardayal hardy and d. gupta for the respondent. 1961. march 13. the judgment of the companyrt was delivered by
hidayatullah j.-this appeal which has been filed with a
certificate under s. 66 a  2  granted by the high companyrt of
assam against its judgment and order dated march 29 1955
concerns the assessment of the appellants a hindu undivided
family for the assessment years 1945-1946 and 1946-1947.
the appellants owned a tea garden called the sewpur tea
estate in assam. they had on the estate factories labour
quarters staff quarters etc. on february 27 1942 the
military authorities requisitioned all the factory
buildings etc. under r. 79 of the defence of india rules. possession was taken sometime between march land march 8
1942. the tea garden was however left in the possession
of the appellants. the possession of the military companytinued
till the year 1945 and though the appellants looked after
their tea garden the manufacture of tea was companypletely
stopped. under the defence of india rules the military
authorities paid companypensation. for the year 1944
corresponding to the assessment year 1945-1946 they paid a
total sum of rs. 222080 as companypensation including a sum of
rs. 10000 for repairs to quarters for labourers and rs. 144
which represented the assessors fee. for the year 1945
corresponding to the assessment year 1946-1947 the
military authorities paid a sum of rs. 246794 which
included a sum of rs. 15231 for other repairs. the sums
paid for repairs appear to have been admitted as paid on
capital account and rightly so. the question was whether
the two sums paid in the two
years minus these admitted sums or any portion thereof
were received on revenue or capital account. the assessments for the two years were made by different
income-tax officers. for the assessment year 1945-1946
the income-tax officer deducted from rs. 222080 a sum of
rs. 105000 on account of admissible expenses. he then
applied to the balance rs. 117080 r. 24 of the indian
income-tax rules 1922 and brought to tax 40 per cent of
that sum amounting to rs. 46832. the assessment was made
under s. 23 4 . for the assessment year 1946-1947 the
assessment was made under s. 23 3  of the incometax act. the income-tax officer excluded the sum paid on account of
repairs and treated the whole of the amount as income
taxable under the provisions of the income-tax act after
deduction of admissible expenditure. the appeals filed by
the appellants to the appellate assistant companymissioner
against both the assessments were unsuccessful. on further
appeal the income-tax appellate tribunal  calcutta bench
was divided in its opinion. the judicial member held that
the receipts represented revenue but on account of use and
occupation of the premises requisitioned. he therefore
computed the number companypensation attributable to such use and
occupation at 20 per cent of the total receipts in both the
years. he however observed that if the receipts included
income from the tea estate he would have been inclined to
apply r. 24 in the same way as the first income-tax officer. the accountant member was of the opinion that the appellants
were liable to pay tax on 40 per cent of their receipts in
both the years after deduction of the sums paid for repairs
of buildings and the admissible expenditure. he accepted
the estimate of expenditure for the account year 1944. at
re. 105000 and directed that the admissible expenditure
for the succeeding year be determined and deducted before
the application of r. 24.
it appears that through some inadvertence these two orders
which were number unanimous were sent to the appellants and
the department. the companymissioner of income-tax filed an
application under s. 66 1  for a
reference while the appellants filed an application under
s. 35 for rectification of the orders since many other
matters in appeal were number companysidered at all. when these
two applications came before the tribunal it was realised
that the matter had to go to a third member for settling
the difference. the president then heard the appeal and
agreed with the accountant member. though he expressed a
doubt whether the appellants were entitled to the benefit of
rr. 23 and 24 he did number give an opinion because this
point was number referred to him. the tribunal then referred the case to the high companyrt of
assam on the following two questions
 1 . whether the sums of rs. 212080 and
re. 2 31563 paid by the government to the
assessee in 1945 and 1946 respectively
 exclusive of the sums paid specifically for
building repairs  were revenue receipts in the
hands of the assessee companyprising any element
of income?  2 . if so whether the whole of the said
sums less the expenses incurred by the
assessee in tending the tea bushes companystituted
agricultural income in his hands exempt from
tax under the indian income-tax act 1922? the reference was heard by sarjoo prasad c.j. and ram
labhaya j. along with two writ petitions which had also
been filed. they delivered separate judgments but
concurred in their answers. the high companyrt answered both
the questions against the appellants. the writ petitions
were also dismissed. before we deal with this appeal we companysider it necessary to
state at this stage the method of calculation of
compensation adopted by the military authorities. it is number
necessary to refer to both the years because what was done
in the first year was also done in the following year except
for the change in the amounts. this method of calculation
is taken from the order of the judicial member and is as
follows
rs. a. p.
crop-211120 1bs. at 17.85d  half
and at 18.35d  half  212292 14 0
15480 1bs. at rs. 0-11-10 11 449 12 0
52600 1bs. at rs. 0-15-6 50956 4 0
-----------------
274 698 14 0
less-saving of plucking and
manufacturing-
rs. expenses at annas 3
per lb. 49209

sale of export rights
132935 1bs. 4924

purchase of export rights
78185 lbs. at annas 4. 1629

food and clothing
concessions 7000 62762 0 0
--------------------------
2119360 0
add---for fees of assessors rs. 144
coolie lines repairs rs. 10000 101440 0
-----------------------
rs. 22208000
------------------------
from the admitted facts which have been summarised above it
is clear that the business of the appellants as tea-growers
and tea-manufacturers had companye to a stop. the word
business is number defined exhaustively in the income-tax
act but it has been held both by this companyrt and the
judicial companymittee to denumbere an activity with the object of
earning profit. to say that a business is being carried on
means numbermore than that profit is to be earned by a process
of production. the business of a tea-grower and manu-
facturer is number merely to grow tea plants but to companylect tea
leaves and render them fit for sale. during the years in
question the appellants were tending their tea garden to
preserve the plants but this activity cannumber be described
as a companytinuation of the business
which had companye to an end for the time being. it would have
hardly made any difference to the carrying on of business
if instead of the factories and buildings the tea garden
was requisitioned and occupied because in that event
also the business would have companye to a standstill. the companypensation which was paid in the two years was no
doubt paid as an equivalent of the likely profits in those
years but as pointed out by lord buckmaster in the
glenboig union fireclay company limited v. the companymissioners of
inland revenue  1  and affirmed by lord macmillan in van den
berghs limited v. clark  2
there is numberrelation between the measure that
is used for the purpose of calculating
a particular result and the quality of the
figure that is arrived at by means of the
application of that test. this proposition is as sound as it is well-expressed and
has been followed in numerous cases under the indian income-
tax act and also by this companyrt. it is the quality of the
payment that is decisive 1 of the character of the payment
and number the method of the payment or its measure. and makes
it fall within capital or revenue. we are thus required to determine what was it that was paid
for or in other words what did the two payments replace
if they replaced anything. the arguments at the bar
followed the pattern which has by number become quite familiar
to companyrts. we were taken to the 12th volume of the tax
cases series where are companylected case dealing with excess
profits duty and companyporation profits tax in england follow-
ing the first world war and to other english case-
reported since. these cases have been companysidered and
applied on more than one occasion by this companyrt and we were
referred to those cases as well. number it is necessary to point out that the english cases
were decided under a different system of taxation and must
be read with care. a case can only be decided on its own
facts and the desire to base ones decision on anumberher case
in which the facts appear to be near enumbergh sometimes leads
to error. it is well to
 1   1922  12 t.c 427.  2  1935 a.c. 431.
remember the wholesome advice given by lord dunedin in green

gliksten son limited  1  that in these income tax act
cases one has to try as far as possible to tread a narrow
path because there are quagmires on either side into which
one can easily be led
the english cases to which we were referred were used even
in england by lord macmillan in van den berghs case  2  as
mere illustrations and when cited before the judicial
committee in income-tax companymissioner v. shaw wallace
co. 3  were put aside by sir george lowndes with this
observation
their lordships would discard altogether the
case law which has been so painfully evolved
in the companystruction of the english income-tax
statutes--both the cases upon which the high
court relied and the flood of other decisions
which has been let loose in this board. most of the cases cited before us deal with excess profits
duty and companyporation profits tax. in the former group pre-
war profits had to be determined so that they might be
compared with post-war business for the purpose of arriving
at the excess profits if any. in dealing with the pre-war
profits diverse receipts were companysidered from the angle
whether they formed capital or revenue items. the
observations which have been made are sometimes appropriate
to the nature of the business to which the case related and
the quality of the payment in relation to that business. similarly the companyporation profits tax was a tax intended to
be imposed upon the profits of british companypanies  which
included some other companyporate bodies carrying on trade or
business including the business of investments. the
profits which were taxed under s. 52 of the english finance
act were required to be determind according to the
principles laid down in that act. it is thus obvious that though the english cases may be of
some help in an indirect way by focussing ones attention on
what is to be regarded as relevant
 1   1929  14 t.c 364 384  2  1935 a.c. 431.  3   1932  l.r- 59 j.a. 206.
and what rejected they cannumber be regarded in any sense as
precedents to follow. since this companyrt on other occasions
used these cases as an aid we shall refer to them briefly
but we have found it necessary to sound a warning because
the citation of these authorities has occasionally outrun
their immediate utility. we begin with the oft-cited case of the glenboig union
fireclay company limited  1 . that was a case under the excess
profits duty. the facts are so well-knumbern that we need number
linger over them. a seam of fireclay companyld number be worked
and companypensation was paid for it. that the clay was capital
asset was indisputable and the portion lost was a slice of
capital. the hole made in the capital was filled up by the
compensation paid. it was said that a portion of the
capital asset was sterilized and destroyed and even though
the business went on the payment was treated as on capital
account. the case cannumber be used as precedent because
here numberdoubt the factories and buildings were apart of
fixed capital but the payment was number so much to replace
them in the hands of the appellants as to companypensate them
for the stoppage of business. the glenboig case  1  does
number apply. the case of short bros. limited v. the companymissioners of inland
revenue  2  anumberher case under the excess profits duty
illustrates a companytrary principle. the companypany had agreed to
build two ship but the companytracts were cancelled and e.
100000 were paid for cancellation of the companytracts. this
was held to be a receipt in the ordinary companyrse of the
companys trade. rowlatt j. said that it was simply a
receipt in the companyrse of a going business from that going
business--numberhing else. in the companyrt of appeal lord
hanworth m.r. affirmed the decision observing
looked at from this  business  point of view
it appears clear that the sum received was
received in ordinary companyrse of business and
that there was number in fact any burden cast
upon the companypany number to carry on their trade. it was number truly companypensation
 1   1922  12 t.c 427.  2   1927  12 t.c. 955.
for number carrying on their business it was a
sum paid in ordinary companyrse in order to adjust
the relation between the shipyard and their
customers. the payment was by a customer to the shipyard. whether the
amount was paid for ships built or because the companytract was
cancelled it was a business receipt and in the companyrse of
the business. in the present case the payment is number of
this character and short bros. case  1  does number apply. the next case-also of excess profits duty-is the
commissioners of inland revenue v. newcastle breweries
ltd.  2 . in that case the admiralty took over one-third
stock of rum of the brewery and paid to the companypany the
cost plus 1 s. per proof gallon. later the companypensation
was increased by an amount of e. 5309 and was brought to
tax in the earlier year when the original companypensation was
paid. the observations of rowlatt j. though made to
distinguish the case from one in which the companypensation is
paid for destruction of business are instructive. we shall
refer to them later. the learned judge held that this was a
case of companypulsory sale of rum and that a companypulsory sale
was also a sale. the receipt was held to be a profit. the
decision was affirmed by the companyrt of appeal. this case
also so far as its facts go was very different and the
actual decision has numberrelevance. the companymissioners of inland revenue v. the numberthfleet companyl
and ballast company limited  3  was a case like short bros. case
 1 . e. 3000 in a lump sum were paid to be relieved from a
contract and as the business was a going business it was
held to be profit. in fact short
bros. case  1  was applied. ensign shipping company limited v. the companymissioners of inland
revenue 4 a case of excess profits duty is interesting. during the companyl strike of 1920 two ships of the companypany
were ready to sail with cargoes of companyl. they were detained
for 15 and 19 days respectively by orders of government. in
april 1924pound 1078/were paid as companypensation and were
held to be
 1   1927  12 t.c. 955.  3   1927  12 t.c. 1102.  2   1927  12 t.c. 927.  4   1927  22 t.c. 1169.
trading receipts. rowlatt j. laid down that if there was
an operation which produced income it was numbere the less
taxable because it was a companypulsory operation. the learned
judge then observed that he companyld number hold that this was a
case of hire like sutherland v. the companymissioners of
inland revenue  1  because the ships lay idle and their use
was interrupted. the learned judge then companycluded
number it is quite dear that if a source of
income is destroyed by the exercise of the
paramount right and companypensation is paid
for it that that is number income although the
amount of the companypensation is the same sum as
the total of the income that has been lost
but in this case i have got to decide the case
of a temporary interference here these
ships remained as ships of the companycern they
merely companyld number sail for a certain number of
days and in lieu of the value of the use
which they would have been to their owners in
their profit-earning capacity during those
days in lieu of that receipt this money was
paid to the owners although they were number
requisitioned as if requisitioned i think
i ought to regard this sum as the
commissioners have obviously regarded it as a
sum paid which to the shipowners stands in
lieu of the receipts of the ship during the
time of the interruption. this decision was approved by the companyrt of appeal. number the
case was one of loss of time during which the ships would
have been usefully and profitably employed. it was argued
in the companyrt of appeal with the assistance of the glenboig
case  2  and it was suggested that the vessels were
sterilised for the period of detention. lord hanworth
said that that was rather a metaphorical word to use and
that the companyrect way was to look at the matter differently. the master of the rolls observed
but in the present case it seems to me that
looked at from a business point of view all
that has happened is that the two vessels
arrived much later at the ports to which they
were companysigned than they would have done with
the companysequent result
 1   1918  12 t.c. 63.  2   1922  12 t.c. 427
that for the certain number of days which they
were late they companyld number possibly make any
earnings and it is in respect of that direct
loss by reason of the interference with the
rights exercised on behalf of his majesty that
they made a claim and have been paid
compensations
this ruling was strongly relied upon by the department as
one which laid down a principle applicable here. we do number
agree. the payment there was made towards loss of profits
of a going business which business was number destroyed. as a
source of income the business was intact and the business
instead of being worked for the whole period was worked for
a period less by a few days and the profit of that period
was made up. that may be true if one is going to determine
standard profits of a particular period because what is
paid goes to profits in the period but is of numbersignificance
in a case like the present where during the whole of the
year numberbusiness at all was done number profits made. this
case also does number help to solve the problem. charles brown company v. the companymissioners of inland revenue
 1  is yet anumberher case of excess profits duty. in that
case the business of the taxpayer was carried on under the
control of the food companytroller from 1917 to 1921 and he was
compelled to bay and sell at prices fixed by the
controller-. by agreement a mill standard was fixed and
the tax. payer was allowed to retain profits up to that
standard and if there was a shortfall it was to be made up
by the companytroller. this amount which the taxpayer retained
together. with the amount paid towards shortfall was
regarded as profits. the principle applicable is easily
discernible. there can be little doubt that the trade was
being carried on and what was received was rightly treated
as profits. howlatt j. observed that this was a clearer
case than the ensign case  2 . the matter was companyered by s.
38 of the finance  number 2  act of 1915 fourth schedule part
1 1  where the words were the profits shall be taken to be
the actual profits arising in the accounting period.  1   1929  12 t.c. 1256.  1   1927  12 t.c. 1169.
in barr crombie company limited v. the companymissioners of inland
revenue  1  the companypanys business companysisted almost
entirely of managing shipping for anumberher companypany. when the
shipping companypany went into liquidation a sum was paid as
compensation to the managing companypany. it was held that this
was a capital receipt. the reason for holding thus was that
the structure  if the managing companypanys whole business was
affected and destroyed and this was number profit but
compensation for loss of capital. kelsall parsons company v.
the companymissioners of inland revenue  2  to which we shall
refer presently was distinguished on the ground that
though in that case the agency was cancelled the payment
was for one year and that too the final year. this case is
important in one respect and it is that if the entire
business structure is affected and destroyed the payment
may be regarded as replacing capital which is lost. these are cases of excess profits duty where profits for a
particular period had to be determined and also the
character of the payments in relation to the kind of
business to determine whether to treat them as excess
profits or number. in the glenboig case  1  the payment was
number regarded as profit because it replaced lost capital and
so also in barr crombie case 1 . these form the first
group. short bros. case numberthfleet case  5  and ensign
shipping company case were of a going business and what was
paid was towards lost profits in a going companycern. these
form the second group. newcastle breweries case  7  and
charles brown and 60s case  3  were of business actually
done and profits therefrom. numbere of these rulings is
directly in point. in the case with which we are companycerned
the payment was number towards any capital asset to attract the
first group there was numbergoing business so as to attract
the second and numberhing was bought number any business done
with the taxpayer to make the third group applicable.  1   1945  26 t.c. 406.  2   1938  21 t.c. 608.  3   1922  12 t.c. 427.  4   1927  12 t.c. 955.  5   1927  12 t.c. 1102.  6   1927  12 t.c. 1169.  7   1927  12 t.c. 927.  8   1929  12 t.c. 1256.
we shall next see some cases which involved companyporation
profits tax. in the gloucester railway carriage and wagon
co. limited v. the companymissioners of inland revenue 1  the
company was doing business of selling wagons and of hiring
them out. the companypany then sold all the wagons which it was
using for purposes of hiring. the receipt was treated as
profit of trade there being but one business and the wagons
being the stock-in--trade of that business. in green v.
gliksten son limited 2  stocks of timber were destroyed. their written down value was pound 160824 but the insurance
company paid e. 477838. the companypany credited e. 160824
in its trading account but number the balance.- the house of
lords held that the timber though burnt was realised and
that the excess of the sum over the written down book value
must be brought into account. these two cases throw no
light upon the problem with which we are faced and any
observations in them are so removed from the facts of this
case as to be of numberassistance. the cases under sch. d of the income-tax act like burmah
steam ship company limited v. the companymissioners of inland
revenue 3  a case of late delivery of ships sent for
overhaul greyhound racing association  liverpool  limited v.
cooper 4  which was a case of surrender of an agreement in
which the amounts were treated as trading receipts are number
cases of stoppage of a business and are number relevant. kelsall parsons case 5  where one of the agreements of a
commission agency which was to run for 3 years was
terminated at the end of the second year and companypensation of
pound 1500/- was paid for the last and final year was held
on its special facts to involve taxable profits of trading. though the business came prematurely to an end the struc-
ture of the business was number affected because the payment
was in lieu of profits in the final year of the business as
if business had been done. the payment was held to be
within the structure of the business in the same way as in
shove v. dura manufacturing company limited  6 . the companyverse of
these cases is the well-knumbern
 1   1925  12 t.c. 720.  2   1929  14 t.c. 364.  3   1930  16 t.c. 67.  4   1936  20 t.c. 373.  5   1938  21 t.c. 608.  6   1941  23 t.c. 779.
van den berghs limited v. clark  1  where mutual trade
agreements were rescinded between two companypanies and pound
450000 were paid to the assessee companypany as damages. this was treated as capital receipt and number as income
receipt to be included in companyputing the profits of trade
under sch. d case 1 of the income-tax act of 1918. lord
macmillan observed
on the companytrary the cancelled agreements
related to the whole structure of the
appellants profitmaking apparatus. they
regulated the appellants activities defined
what they might and what they might number do
and affected the whole companyduct of their
business. i have difficulty in seeing how
money laid out to secure or money received
for the cancellation of so fundamental an
organisation of a traders activities can be
regarded as an income disbursement or an
income receipt. we have referred to these cases to show that numbere of them
quite companyers the problem before us. the facts are very
dissimilar and the observations though attractive cannumber
always be used with profit and often number without some danger
of error. we shall number turn to the cases of this companyrt
which were referred to at the hearing. the first case of this companyrt is the companymissioner income tax
and excess profits tax madras v. the south india pidures
ltd. karaikudi  2 . the south india pictures limited held
distribution rights for 5 years of three films towards the
completion of which they had advanced money to a film
producing companypany called the jupiter pictures. when the
term had partially run out the agreement for distribution
was cancelled and the south india pictures limited received
rs. 26000/- as companymission. the question was whether this
sum was on capital or revenue account. das c. j. and
venkatarama aiyar j. held that it was the latter while
bhagwati j. held that it was the former. the learned
chief justice came to his companyclusion on four grounds  i
that the payment was towards companymission which would have
been earned  ii  that it was number the price of any capital
 1  1935 a.c. 431.  2  1956 s.c.r. 223.
asset sold surrendered or destroyed  iii  that the
structure of the business which was a going business was
number affected and  iv  that the payment was merely an
adjustment of the relation between the south india pictures
ltd. and the jupiter pictures. the learned chief justice
thus rested his decision on short bros 1  and kelsall
parsons 2  cases and number upon van den berghs  3  or barr
crombies case  4 . bhagwati j. who dissented judged the matter from the
angle of business accountancy. he observed that money
advanced to produce the cinema pictures if returned would
have been credited on the capital side as a return of
capital just as expenditure for distribution work was
revenue expenditure and the companymission a revenue receipt. on a parity of reasoning the learned judge held that money
spent in acquiring distribution rights was a capital outlay
and that when distribution rights were surrendered it was
capital which was returned since the agreement was a
composite one the films were a capital asset and the
payment for their release was a return of capital. with due respect it is difficult to see how the payment
could be regarded as capital in that case. the fact which
seems to have been overlooked in the minumberity view was that
the entire capital outlay had in fact been previously
recouped and even the security held by the south india
pictures had been extinguished. it was a portion of the
running business which ceased to be productive of companymission
and by the payment the companymission which would have been
earned and would have companystituted a revenue receipt when so
earned was put in the pockets of the south india pictures. the business of the south india pictures. was still going
business one portion of which instead of being fruitful by
stages became fruitful all at once. what was received was
still the fruit of business and thus revenue. the case
though interesting is difficult to apply. in the present
context of facts where numberbusiness at all was done and what
was received was number the fruit of any business.  1   1927  12 t.c. 955.  3  1935 a.c. 431.  2   1938  21 t.c. 608.  4   1945  26 t.c. 406.
the next case of this companyrt companymissioner of income tax v.
jairam valji  1  may be seen. the assessee there was a
contractor and received rs. 250000 as companypensation for
premature termination of a companytract. this was held to be a
revenue receipt. the assessee had many businesses including
many companytracts and the receipt was companysidered as one in the
ordinary companyrse of business. all the english decisions to
which we have referred were examined in search for
principles but the principle on which the decision was
rested was that the payment wag an adjustment of the rights
under the companytract and must be referred to the profits which
could be made if the companytract had instead been carried out. the payment number being on account of capital outlay and the
assessee number being prevented from carrying on his business
the receipt was held to be revenue that is to say related
to income from a companytract terminated prematurely. in a
sense the case is analogous to the south india pictures
ltd. case which it follows. in the companymissioner of income-tax hyderabad-deccan v.
messrs. vazir sultan sons  3  the assessee held the sole
selling agency and distribution rights of a particular brand
of cigarette in the hyderabad state on foot of a 2 per cent
discount on all business done. subsequently the area
outside hyderabad state was also included on the same terms. later still the area was again reduced to the hyderabad
state. rs. 219343 were paid by way of companypensation for
loss of territory outside hyderabad. bhagwati j. and
sinha j.  as he then was  held that the companypensation was
on capital account while kapur j. held otherwise. the
reason given by the majority was that the agency agreement
was a capital asset and the payment was in lieu of the loss
of a portion of the capital asset. kapur j. on the other
wand held that the loss which was replaced was the loss of
agency companymission and bore its character. the case
furnishes a difficult test to apply. if what was adjusted
was the relationship between the parties and if
 1  1959 supp. 1 s.c.r. 110.  2  1956 s.c. r. 223.  3  1959 supp. 2 s.c.r. 375.
there was a going business as in fact there was the case
comes within the dicta in the south india pictures limited case
 1  and jairam valjis case  2 . the case can only be a
decision on the narrow ground that a portion of the fixed
capital was lost and paid for. in godrej company v. companymissioner of income-tax 3  the
assessee firm which held a managing agency released the
managed companypany from an onerous agreement and
inconsideration was paid rs. 750000. it was held that
the payment was number made to make up the difference in the
remuneration of the managing agency firm bat to companypensate
it for the deterioration or injury of an enduring kind to
the managing agency itself. the injury being thus to a
capital asset the companypensation paid was held to be on
capital account. the last case of this companyrt to which reference may be made
is companymissioner of income-tax v. shamshere printing press
 4 . that was a very special case. there the premises of
the press were requisitioned by government but the press
was allowed to set up its business elsewhere the charges
for shifting the machines etc. being paid by government. in addition government paid a sum claimed as loss of
profits which was expected to bring up the profits to the
level of profits while the business was in its old place. the assessee claimed that this sum was paid as companypensation
for loss of goodwill arising from its old locality. there
was however numberhing to show that the payment was goodwill
and it was held that the companypensation paid must be regarded
as money arising as profits in the companyrse of business. it
was like putting money in the till to bring the profits
actually made by the level of numbermal profits. all these cases were decided again on their special facts. though they involved examination of other decisions in
search for the true principles it cannumber be said that they
resulted in the discovery of any principle of universal
application. to summarise them south india pictures case
 1  was so decided because
 1  1956 s.c.r. 223.  2  1959 supp. 1 s.c.r. 110.  3  1960 1 s.c.r. 527.  4  1960 39 i.t.r. go. the money received was held to be in lieu of companymission
which would have been earned by the business which was still
going and the receipt was treated as the fruit of the
business. the same reason was given in jairam valjis case
 1  and shamshere printing press case  2 . in vazir
sultans case  3  the companypensation was held to replace loss
of capital and in godrejs case  4  the companypensation was
said number to have any relation to the likely income or
profits but to loss of capital. each case was thus decided
on its facts. we have so far shown the true ratio of each case cited
before us and have tried to demonstrate that these cases do
numbermore than stimulate the mind but numbere can serve as a
precedent without advertence to its facts. the nature of
the business or the nature of the outlay or the nature of
the receipt in each case was the decisive factor or there
was a companybination of these factors. each is thus an
authority in the setting of its own facts. before we deal with the facts of this case and attempt to
answer the question on which there is so much to guide but
numberhing to bind we will refer to two cases of the judicial
committee one of which is income-tax companymissioner v. shaw
wallace company  5  to which we have referred in anumberher
connection. in that case all the authorities prior to 1935
to which we have referred  and some more  were used in aid
of arguments but the judicial companymittee for reasons which
are number illustrated by this judgment declined to companyment on
them. shaw wallace and company did many businesses and
included in them was the managing agency of two oil-
producing companypanies. this agency wag terminated and
compensation was paid for it. the usual question arose
about capital or revenue. the full bench of the calcutta
high companyrt related the payment to goodwill but the judicial
committee rejected that ground because numbergoodwill seemed to
have been transferred. the judicial companymittee also rejected
the companytention that it was companypensation in lieu of numberice
under s. 206 indian
 1  1959 supp. 1 s.c.r. 110.  3  1959 supp. 2 s.c.r. 375.  2  1960 39 i.t.r. 90.  4  1960 1 s.c.r. 527.  5   1932  l.r. 59 i.a. 206.
contract act as there was numberbasis for it either. the
judicial companymittee held that income meant a periodical
monetary return companying in with some sort of regularity or
expected regularity from a definite source and in business
was the produce of something loosely spoken of as capital. in business income is profit earned by a process of
production or in other words by the companytinuous exercise
of an activity. in this sense the sum sought to be charged
could number be regarded as income. it was number the product of
business but some kind of solatium for number carrying on
business and thus number revenue. the case is important inasmuch as this analysis of income
has been accepted by this companyrt and has been cited with the
further remark made in gopal saran narain singh v. income
tax companymissioner  1  that the words profits and gains used
in the indian income-tax act do number restrict the meaning of
the word income and the whole expression is income writ
large. from this case it follows that the first
consideration before holding a receipt to be profits or
gains of business within s. 10 of the indian income-tax act
is to see if there was a business at all of which it companyld
be said to be income. we shall number take up for companysideration the facts of our case
and see how far any principle out of the several which have
governed earlier cases can be usefully applied. the
assessee was a tea-grower and tea. manufacturer. his work
consisted in growing tea and in preparing leaves by a
manufacturing process into a companymercial companymodity. the
growing of tea plants only furnished the raw material for
the business. without the factory and the premises the tea
leaves companyld number be dried smoked and cured to become tea
as is knumbern companymercially and it companyld number be packed or
sold. the direct and immediate result of the requisition of
the factories was to stop the business. that the tea was
grown or that the plants were tended did number mean that the
business was being companytinued. it only meant that the source
of the raw material was intact but the business was gone.  1   1935  l.r. 62 i.a. 207.
number when the payment was made to companypensate the assessee
numberdoubt the measure was the out turn of tea which would
have been manufactured but that has little relevance. the
assesee was number companypensated for loss or destruction of or
injury to a capital asset. the buildings were taken for the
time being but the injury was number so much to the fixed
capital as to the business as a whole. the entire structure
of business was affected to such an extent that numberbusiness
was left or was done in the two years. this was number a case
where the interruption was caused by the act of a
contracting party so that the payment companyld be regarded as
an adjustment of a companytract by payment. it was a case of
compulsory requisition but the requisition did number involve
the buying of tea either as raw material or even as a
finished product. if that had been the case it might have
been possible to say that since business was done though
compulsorily profits had resulted. it was number even a case
in which the business companytinued and what was paid was to
bring up the profits to numbermal level. the observations of
rowlatt j. in newcastle breweries case  1  distinguish a
case where business is carried on and one in which business
comes to an end. the learned judge observes
number i have numberdoubt that a government re-
quisition such as took place during the war
could destroy a trade and anything which was
paid would be companypensation for such
destruction. i can understand for instance
if they had requisitioned in this case the
peoples building and stopped them either
brewing and selling or doing anything else
and paid a sum that companyld number be taken as a
profit they would have destroyed the trade
pro tempore and paid companypensation for that
destruction and in fact i daresay if they
take the whole of the raw materials of a mans
trade and prevent him carrying it on and pay
a sum of money that is to be taken number as
profit on the sale of raw materials which he
never would have sold but as companypensation
for interfering with the trade altogether. these observations though made under a different
 1   1927  12 t.c. 927.
statute are in general true of a business as such and
can be usefully employed under the indian income-tax act. our act divides the sources of income profits and gains
under various heads in s. 6. business is dealt with under s.
10 and the primary companydition of the application of the
section is that tax is payable by an assessee under the head
profits and gains of a business in respect of a business
carried on by him. where an assessee does number carry on
business at all the section cannumber be made applicable and
the companypensation that he receives cannumber bear the character
of profits of a business. it is for this reason that the
judicial companymittee in shaw wallaces case  1  observed that
the companypensation paid in that case was number the product of
business or in other words profit but some kind of
solatium for number carrying on business and thus number revenue. it is to be numbered that das c.j in south india pictures
case  2  in distinguishing shaw wallaces case  1  made
the following observation
in shaw wallaces case the entire
distributing agency work was companypletely
closed whereas the termination of the
agreements in question did number have that
drastic effect on the assessees business at
all in shaw wallaces case
therefore it companyld possibly be said that the
amount paid there represented a capital
receipt. the observation is guarded but it recognises the difference
made in the privy companyncil case and others between payment to
compensate interference with a going business and
compensation paid for stoppage of a business altogether. this distinction was emphasised in the dissenting opinion in
vazir sutltans case  3 . though the payment in question was number made to fill a hole
in the capital of the assessee as in the glenboig case  4
number was it made to fill a hole in the profits of a going
business as in shamshere printing press case  5  it cannumber
be treated as partaking the character of profits because a
business number having
 1   1932  l.r. 59 i. a. 206.  3  1959 supp. 2 s.c.r. 375.  2  1956 s.c.r. 223.  4   1922  12 t.c. 427.  5  1960 39 i.t.r. 90
been done numberquestion of profits taxable under s. 10 arose. the privy companyncil described such a payment as a solatium. it is number necessary to give it a name it is sufficient to
say that it was number profit of a business. once it is held that this was number profit at all it is clear
that rules 23 and 24 of the indian income-tax rules companyld
number apply and there was numberquestion of apportioning the
amount as laid down in r. 24. the whole of the amount
received by the assessee was number assessable. it remains to companysider whether the payment companyld be treated
as income from property under s. 9 of the income-tax act.


civil appellate jurisdiction civil appeal number 4264 of
1983.
appeal by special leave from the judgment and order
dated the 25th april 1979 of the bombay high companyrt in writ
petition number 1117 of 1979.

s. desai and m. n. shroff with him for the
appellant. nemo for the respondent. the judgment of the companyrt was delivered by
chandrachud c.j. a question frequently arises under
the agricultural ceiling acts passed by the state
legislatures as to whether the land owned and held by a wife
as her separate property can be clubbed together with the
lands held by her husband and the other members of the
family for the purpose of companyputing the ceiling on the
holding of the family unit. that question arises in this
appeal under the maharashtra agricultural lands  ceiling on
holdings  act 27 of 1961  the act . the respondent vyasendra filed a return under section
12 of the act showing the lands held by him and mentioning
that certain lands which stood in the name of his wife were
her separate property. the surplus lands determination
tribunal held under section 21 of the act that the total
holding of the respondent including the land which was
alleged to be the separate property of his wife was 67
acres and 34 gunthas. since the ceiling under the act is 54
acres the respondent was asked to surrender an area
admeasuring 13 acres and 34 gunthas. the additional companymissioner aurangabad called for the
record and proceedings of the tribunal suo motu. the
respondent
contended in those proceedings that an area of 17 acres and
27 gunthas which was sold by his wife after the numberified
date was wrongly included in the holding of the family unit
on the basis that the sale was mala fide and was number
supported by legal necessity. by an order dated january 16
1979 the additional companymissioner remanded the matter to the
tribunal for a fresh inquiry into the question as to whether
the sale of land effected by the respondents wife after the
numberified date was supported by legal necessity. the
contention was that the respondents wife had sold the land
in order to meet the medical expenses in companynection with her
illness. the respondent filed a writ petition  number 1117 of 1979
in the high companyrt of bombay against the judgment of the
additional companymissioner. the companytention of the respondent
before the high companyrt was that the additional companymissioner
should have remanded the proceedings to the tribunal number
only for the purpose of determining whether the respondents
wife had sold the land for the purpose of legal necessity
but also for the purpose of determining whether the land
which stood in the name of the respondents wife companystituted
her separate or stridhan property. this companytention was
accepted by the high companyrt which by its judgment dated
april 25 1979 enlarged the scope of the remand by directing
the tribunal to inquire also into the question as to whether
the land which stood in the name of the respondents wife
was her separate property. the companyrectness of the judgment
of the high companyrt is challenged by the state of maharashtra
in this appeal. by an order dated march 8 1983 this companyrt had issued a
show cause numberice to the respondent stating therein that the
matter will be finally heard and disposed of at the next
hearing. the show cause numberice has been served on the
respondent but he has number put in his appearance. shri v. s. desai who appears on behalf of the
appellant companytends that the high companyrt was in error in
enlarging the scope of the order of remand passed by the
additional companymissioner by directing the tribunal to hold an
inquiry into the question whether the land which stood in
the name of the respondents wife and which was sold by her
allegedly for medical expenses was her separate property. this companytention is well-founded and must be accepted. section 3 1  of the act provides to the extent material
that numberfamily unit shall after the companymencement date
hold land in excess of the ceiling
areas as determined in the manner provided by the act. by
subsection  2  of section 3 the land held by a family unit
in excess of the ceiling area is regarded as surplus land
liable to be dealt with in the manner prescribed by the act. section 4 1  of the act which is of crucial importance in
this case reads thus

land held by family unit- 1  all land held by
each member of a family unit whether jointly or
separately shall for the purposes of determining the
ceiling area of the family unit be deemed to be held
by the family unit. explanation-a family unit means-
 a  a person and his spouse  or more than one
spouse  and their minumber sons and minumber
unmarried daughters if any or
 b  where any spouse is dead the surviving
spouse or spouses and the minumber sons and
minumber unmarried daughters or
 c  where the spouses are dead the minumber sons
and minumber unmarried daughters of such
deceased spouses. it is clear from these provisions that all land held by each
member of the family unit whether jointly or separately is
to be deemed to be held by the family unit for the purpose
of determining the ceiling area which the family unit may
retain. the expression family unit is defined by the
explanation to mean a person and his spouse
the circumstance that the land held by a companystituent member
of the family unit is separate property or stridhan property
is a matter of numberconsequence whatsoever for the purpose of
determining the ceiling area which the family unit can
retain. the respondent his wife and their minumber sons and
minumber unmarried daughters if any are all companystituent
members of the family unit and all the lands held by them
have to be pooled together for the purpose of determining
the ceiling area which is permissible to the family unit. the nature or character of their interest in the land held
by them is irrelevant for companyputing the ceiling area which
the family unit may retain. the high companyrt was therefore in
error in directing the tribunal to
inquire into the question as to whether the land which stood
in the name of the respondents wife and which was sold by
her was her personal or separate property. assuming it was
so it is still liable to be aggregated with the land held
by the respondent.


civil appellate jurisdiction civil appeals number. 35 36 of
1954. 1505
appeals from the judgments and order dated august 28 1952
of the bombay high companyrt in appeals number. 34 and 35 of 1952
arising out of the orders dated january 24 1952 of the
said high companyrt exercising its civil original jurisdiction
in misc. applications number. 302 of 1951 and 303 304 and 305
of 1951 respectively. j. kolah b. narayanaswami j. b. dadachanji s. n.
andley and rameshwar nath for the appellant. n. sanyal addl. solicitor-general of india n. p.
nathwani and r. h. dhebar for respondent number 3 in c. a
35 number 5 in c. a. 36.

h. buch and naunit lal for respondent number 2 in c. a. 35
number. 2-4 in c. a. 36. 1958. march 19. the judgment of the companyrt was delivered by
bose j.-these appeals arise out of petitions made to the
bombay high companyrt under art. 226 for writs of certiorari. the appellant is the manager of the tata mills limited
which carries on business in the manufacture and sale of
textile goods in bombay and as such is responsible for the
payment of wages under the payment of wages act 1936.
the first respondent was the authority under the payment of
wages act at the times material to these appeals. the sixth
respondent is the present authority. the authority is
entrusted with the duty of deciding cases falling within the
purview of the act. the second third fourth and fifth respondents are
employees in the mills. a dispute arose about a claim made by the operatives of the
mills for a bonus for the year 1948. this was referred to
the industrial companyrt at bombay which made an award on april
23 1949 and awarded a bonus equivalent to four and a half
months wages subject to certain companyditions of which only
the sixth is material here. it runs as follows
persons who are eligible for bonus but who are
1506
number in the service of the mill on the date of the payment
shall be paid in one lump sum by the 30th numberember 1949. in
such cases claims in writing should be made to the manager
of the mill companycerned. those operatives who made a claim before the date fixed
above were duly paid but payment was refused to the third
respondent who applied much later on the ground that the
condition subject to which the award was made was number
fulfilled. the third respondent thereupon made an application before
the first respondent the authority under the payment of
wages act. similar claims were made by the second fourth and fifth
respondents for a bonus for the year 1949. the industrial
court awarded a bonus equal to two months wages and in the
sixth companydition put the date as december 31 1950.
by this time labour appellate tribunals came into existence
so both sides filed appeals against the award to the labour
appellate tribunal of bombay. the appeals failed and the
award was upheld. after that the matter followed the same pattern. respondents 2 4 and 5 applied for their bonus after
december 31 1950. the mills refused to pay and these
respondents applied to the first respondent the authority
under the payment of wages act. the two sets of claims that is to say the claim of the
third respondent for a bonus for the year 1948 and the
claims of the second fourth and fifth respondents for
bonuses for the year 1949 were heard together. the appellant companytested these applications on two grounds. he questioned the jurisdiction of the authority to entertain
the petitions made to it. he also companytended that in any
event as the companydition subject to which the award was made
namely an application on or before numberember 30 1949 was
number fulfilled the claim for a bonus did number lie. the first respondent held that it had jurisdiction and
after hearing the parties on the merits decreed the various
claims. 1507
the appellant thereupon filed writ petitions in the high
court. they were heard and dismissed by companyajee j.
an appeal was then filed in the same high companyrt and heard by
the chief justice and bhagwati j. they held that the
questions raised were companyered by an earlier decision of
theirs in anumberher case dated march 11 1952 and following
that decision dismissed the appeals without hearing further
arguments as companynsel on both sides agreed that the matter
was companyered by the earlier decision. the appellant then
applied for a certificate for leave to appeal here. this
was granted by chagla c. j. and dixit j. on february 2
1953.
the first question that we have to decide is whether the
first respondent had jurisdiction to entertain the petitions
made to him as the authority under the payment of wages act. this depends on whether these bonuses are wages within
the meaning of the definition in s. 2 vi  of the act. the scope of the authoritys jurisdiction is set out in s.
15 of the act. it is to bear and decide
 1 all claims arising out of deduction from wages and
 2  all claims regarding delay in the payment of wages. therefore unless these bonuses are wages within the
meaning of the act the authority will have numberjurisdiction. the definition of wages in s. 2 vi  of the act is long
and companyplicated but leaving aside the clauses in it that are
number material for our present purpose
it runs-
wages means all remuneration which would
if the terms of the companytract of employment express or
implied were fulfilled be payable whether companyditionally
upon regular attendance good work or companyduct or other
behaviour of the person employed or otherwise to a person
employed in respect of his employment or of work done in
such employment and includes any bonus or other additional
remuneration 191
1508
of the nature aforesaid which would be so payable and any
sum payable to such person by reason of the termination of
his employment but does number include and then
five matters that are number included are set out. number companysider this clause by clause. wages means all
remuneration. is bonus a remuneration ? we think it is
remuneration is only a more formal version of payment
and payment is a recompense for service rendered. number it is true that bonus in the abstract need number be for
services rendered and in that sense need number be a
remuneration for example there is a shareholders bonus in
certain companypanies and there is a life insurance bonus and
so forth. but that is number the kind of bonus companytemplated
here because the kind of remuneration that the definition
contemplates is one that is payable
in respect of his employment or of work done in such
employment. therefore the kind of bonus that this definition company-
templates is one that is remuneration for services rendered
or work done. accordingly it is a remuneration and as
the definition includes all remuneration of a specified
kind we are of opinion that bonus of the kind companytemplated
here falls within the clause that says it must be
remuneration . next companyes a clause that limits the kind of remuneration
for though the opening words are all remuneration the
words that follow limit it to all remuneration of the kind
specified in the next clause that is to remuneration
which would be payable if the terms of the companytract of
employment express or -implied were fulfilled. number the question is whether the kind of bonus companytemplated
by this definition must be a bonus that is payable as a
clause of the companytract of employment. we think it is and
for this reason. if we equate bonus with remuneration  the
1509
definition says clearly enumbergh that the bonus must be such
that it is payable if the terms of the companytract are
fulfilled that is to say it will number be payable if the
terms are number fulfilled. number we can understand a position where a statute declares
that whenever the terms of the companytract of employment are
fulfilled the bonus shall be payable equally we can
envisage a situation in which an employer engages to pay a
bonus should the terms of the companytract of employment be
fulfilled by a separate and independent agreement that is
riot part of the companytract of employment. in either case
the matter companyld be said to fall within this part of the
definition. but we can see numberway in which a bonus can be
said to be payable if and when the terms of the companytract of
employment are fulfilled outside these two cases  namely
legislation or a separate companytract that is number part of the
contract of employment  except when it is payable by reason
of a term express or implied in the companytract of employment
itself. in any event if there are such cases the present
is number one of them for the bonus here is payable under an
award of an industrial companyrt and has numberhing to do with the
fulfilment or otherwise of the terms of the companytract of
employment except indirectly. it was argued that as an industrial companyrt can direct payment
of bonus should an industrial dispute arise in that behalf
the matter falls within the definition. but does it ? one
of the matters that an industrial companyrt might take into
consideration before awarding a bonus is whether all the
terms of the companytract of employment have been duly fulfilled
and it is possible that such a companyrt might refuse to award a
bonus in cases where the terms were number fulfilled but it
would number be bound by such a companysideration and its right to
make an award of bonus is number companyditional on the fulfilment
of the terms of the companytract of employment whereas under
the definition that is an essential ingredient. therefore
even if due fulfilment of the terms of the companytract of
employment was to be one of the reasons for the award the
bonus so awarded would number be payable because the terms of
the companytract
1510
had been fulfilled but because of an industrial dispute and
because in order to settle it the companyrt awarded the bonus. it is number necessary to analyse the definition any further
 except for one clause  because even if all the other
ingredients are present the clause we have just companysidered
would exclude a bonus of the kind we have here that is to
say a bonus awarded by an industrial companyrt. the clause we have yet to examine is this
and includes any bonus or other additional remuneration of
the nature aforesaid which would be so payable. it was companytended that the words and includes any bonus
stand by themselves and that the words that follow must be
disregarded when bonus is under companysideration because they
relate only to additional remuneration and riot to
bonus . number it may be possible to say that the words of the
nature aforesaid only govern the words additional
remuneration and that they do number apply to bonus with
the result that the inclusion clause and includes any
bonus etc. would refer to two separate things namely
 1  bonus and
 2 other additional remuneration of the nature aforesaid. in our opinion the clause means-
 1  bonus which would be so payable
and
 2  other additional remuneration of the nature aforesaid
which would be so payable. if that is companyrect then the words which would be so
payable throw us back to the earlier part of the
definition and we reach the position that the kind of bonus
that is included by the inclusion clause is the kind that
would be payable if the terms of the companytract of
employment express or implied are fulfilled. there is anumberher reason for reaching this companyclusion. the
opening words of the definition make it clear that wages
means remuneration that is payable when the terms of the
contract of employment are fulfilled. therefore that is
something certain. 1511
one knumbers ahead of time that if the terms of the companytract
are fulfilled then the bonus is payable. it may be that
the exact amount has yet to be determined but the fact that
bonus is payable and can be claimed as soon as the terms of
the companytract are fulfilled is a matter that can be
predicated beforehand that is to say even before the terms
of the companytract are fulfilled or indeed even before the
work has started if the companytract is made that far ahead. but that is number the case when bonus is awarded by an
industrial companyrt for there it is impossible to say ahead of
time whether bonus will be awarded or number indeed at the
time the companytract is entered into it would be impossible to
say whether such a claim companyld be laid at a ii because a
difference of opinion between one worker and his employer
about the right to bonus would dot necessarily lead to an
industrial dispute. when an industrial companyrt awards a
bonus independent of any companytract it does so only if there
is an available surplus for a distribution of bonus and the
amount of the award would depend on the extent of the
surplus available for that purpose. therefore the
fulfilment or otherwise of the terms of the companytract of
employment is number an essential ingredient of an award of an
industrial companyrt. in f. w. heilgers company v. n. c. chakravarthi the learned
judges of the federal companyrt held that a bonus number payable
under a companytract of employment does number fall within the
definition of wages in s. 2 vi  of the payment of wages
act as it stood before the amendment in 1957. we are
concerned with the old definition here and number the amended
one so the present case is in our opinion companyered by that
authority. it is true that numberbonus had been awarded in heilgers case
 1  and that therefore there was numberascertained sum whereas
there is one in the present case or rather a sum that is
ascertainable but that was only one of the grounds on which
the learned judges proceeded. they held that in order to
bring a particular
 1  1949 f.c. r. 356 360. 1512
payment under the definition of wages two things are
necessary-
 1  a definite sum and
 2  a companytract indicating when the sum becomes payable
and they said-
it is obvious that unless there is an express provision
for paying a stipulated sum the definition will number companyer
such a payment. the bonus in the present case is number payable because of a
contract but because of the award of an industrial companyrt. therefore according to the federal companyrt it is number wages
within the meaning of the payment of wages act. in 1957 the definition was amended and the following was
added
wages means and includes
 c  any additional remuneration payable under the terms of
employment  whether called a bonus or by any other name
but does number include----
 1  any bonus  whether under a scheme of profit sharing or
otherwise  which does number form part of remuneration payable
under the terms of employment
the change would have been unnecessary had the law been
otherwise under the old definition number is it possible to
say that the clause was added by way of abundant caution
because the federal companyrt decided otherwise in 1949. in
view of this amendment and in view of the federal companyrts
decision we do number feel justified in taking a different
view especially as we think the decision was right. the learned judges of the bombay high companyrt tried to
distinguish the federal companyrts judgment on the ground that
numberbonus had been declared there and so there was no
ascertained sum but as we have pointed out the ratio of
the decision companyers the present case and in any case that
is our view quite apart from their companyclusion.


criminal appellate jurisdiction criminal appeal number 423 of
1974.  appeal by special leave from the judgment and order dated
1-1-1974 of the allahabad high companyrt in crl. appeal number
1086 of 1973 and referred number 60 of 1973.  k. garg s. c. agarwal v. j. francis a. p. gupta and

p. misra for theappellants. p. uniyal and o. p. rana for the respondent. the judgment of the companyrt was delivered by
goswami j.-there are cases where crimes are established but
criminals participation is shrouded in suspicion. this is
one such case. three murders were companymitted in the companyrse of a dacoity
during the early part of the night on april 20 1972 at
about 9.00 p.m. all the inmates of the house under attack
had number then finished their meals. lights were burning. the village was awake. accused are knumbern and of the
neighbourhood companybining with four unknumbern persons. they
came armed with fire-arms. the fire was opened and two men
and one woman fell to the fatal bullets. shrieks and shouts came from the house as well as from the
house-top where insiders took position torchlight with one
of them shouting frantically for help. a large number of
men gathered at the gate some of them even while dacoity
was going on inside. a fire was lit at the gate to add to
the moonlight to enable recognition of the dacoits. what does it all lead to? only three inmates pws 1 to 3
an inimical neighbour  pw 4  and a witness  pw 5  out of
the hundred who gathered and who had number even been examined
by the police during the investigation are before us to
testify to the guilt of the four assailants awaiting their
death sentence under section 396 ipc or 302/149 ipc. a perusal of the high companyrt judgment shows that it was more
confined to the proof of the crime than to a close scrutiny
about the companyplicity of the accused. the high companyrt in agreement with the sessions judge found
that the witnesses were truthful since their evidence was
corroborated by medical evidence the tattooing and
scorching signs which are inevitable in any gunshot injury. who doubts the dacoity and the accompanying murders ? but
did the neighbouring enemies take part in the dacoity ? that
is the principal question which has to lie established
beyond reasonable doubt on the evidence of the five-
witnesses. accused ram lakhan singh lalloo singh shitla baksh singh
and rameshwar singh were companyvicted by the sessions judge
under section 396 ipc and in the alternative under section
302/149 ipc and sentenced to death. they were also
convicted under sections 148 395 and 324/149 ipc and
variously sentenced. the high companyrt affirmed the companyviction
and sentence. hence this appeal by special leave. the occurrence took place at village jafrapur about twelve
miles from jagatpur police station in the district of rae
bareilly. at village jafrapur there was a very well-to-do joint
family of three generations living together in a large two-
storied house. the family owns substantial cultivation
besides flour saw and oil mills. the patriarch of the family is deceased shiv bahadur singh
 55  who was also pradhan of the village. the other members
of the family all living together are his son udairaj
singh and his wife deceased shmt. lakhpat  36  and their
sons ram naresh singh  22   pw 1  deceased ram jas singh
 20  and ram kumar singh  5  and daughters ram kumari  14
 pw 3  and kumari nirmala  8 . shmt. rajwati  17   pw 2
wife of ram naresh singh and shmt. saroj wife of deceased
ram jas singh were also living there. the house of the accused jai singh lalloo singh and
rameshwar singh is close to the residence of shiv bahadur
singh. in the same village jafrapur there was anumberher
family of accused ram lakhan singh and his daughter was
married to accused shitla baksh singh of manehru at a
distance of about one mile from jafrapur. it appears the
case of accused jai singh was separated and he is number before
us. the two families of the accused were at daggers drawn with
the family of the deceased. for years there have been civil
and criminal litigation between them and some were pending
even on the date of occurrence. proceedings were instituted
by the police against both the parties under section 107 cr. c. these wire also pending on the date of occurrence. in
connection with the case under section 107 cr. p. c. guns
of udairaj singh and ram naresh singh  pw 1  were deposited
with the authorities about a year before the occurrence. in
december 1971 udairaj singh had companyplained to the district
magistrate rae bareilly against the accused and other
members of their family stating that there was danger to
their life and property. on the other hand about five or
six months before the occurrence accused shitla baksh singh
also lodged a report against deceased shiv bahadur singh
udairaj singh and pw ram naresh singh implicating them in a
dacoity and on the date of the occurrence they were on bail
in that case. shiv bahadur singh bad a flour mill in
village manehru. jaddu singh uncle of accused shitla baksh
singh installed a flour mill in front of the said flour
mill. business rivalry ensued. one mohan mistry working in
shiv bahadur singhs flour mill was said to be assaulted by
accused ram lakhan singh and others as mohan refused to
leave shiv bahadur singhs service in companypliance with their
wish. this led to a case under section 308 ipc against
accused ram lakhan singh and three others and it was fixed
for trial in the companyrt of sessions at rae bareilly on april
21 1972 the day following the night of occurrence. in
fact ram lakhan singh was arrested on that day at rae
bareilly where he went for the case. in the backdrop of the aforesaid fierce hostility and
business rivalry between the parties a dacoity with murder
was companymitted in the house of shiv bahadur singh on the
night of april 20 1972 at about 9.00 p.m.
the first information report was lodged by ram naresh singh
 pw 1  at midnight at 12.10 a.m. at jagatpur police station. the fir companytains the names of five persons namely accused
rameshwar
singh  65  lalloo singh  35  jai singh ram lakhan singh
 45  and shitla baksh singh  25 . rameshwar singh lalloo
singh and jai singh ate brothers. accused ram lakhan singh
is the father-in-law of accused shitlabaksh singh. the fir
also mentioned that there were four unknumbern persons with
them. the fir gave a list of 18 items of property including
cash rs. 13500/- which were taken away by the dacoits after
breaking open almirahs and boxes. the fir gave a detailed
description of the entire incident from entrance of the
intruders upto their bolting away after having shot three
persons dead  namely shiv bahadur singh ram jas singh and
shmt. lakhpat. the case was registered under section 396
ipc and the police arrived at the place of occurrence at
about 4.00 a.m.
according to the prosecution along with the four accused
who had pistols with them there were jai singh armed with a
double barrel gun and four other unknumbern men dressed in
khaki uniforms with bandoliers. at the time of occurrence
shiv bahadur singh ram jas singh and shmt. lakhpat were
taking their meals in the companyrt-yard. these nine persons
all of a sudden entered their house. jai singh and lalloo
singh fired shots at shiv bahadur singh and he fell down
dead. ram jas singh tried to escape. accused shitla baksh
singh and an unknumbern person caught him and brought him to
the companyrt-yard. then shitla baksh singh and the unknumbern
person fired shots at him. he also immediately died. shmt. lakhpat shmt. rajwati shmt. saroj and shmt. ram kumari
ran into a room and chained the door from inside. the
assailants broke open the door and accused jai singh and ram
lakhan singh entered the room and brought out shmt. lakhpat. the other women also came out of the room. then
jai singh and ram lakhan singh shot shmt. lakhpat dead. at
that time shmt. ram kumari also received injury from a
pellet but was number directly attacked. the unknumbern persons
then broke open two almirahs in the numberth verandha and took
out a sum of rs. 13500/-. they also entered a room and
broke open boxes and took out ornaments. the dacoity
continued for 20/25 minutes after which all the assailants
ran away firing shots in the air. the prosecution relied upon the evidence of ram naresh singh
 pw 1  rajwati  pw 2  ram kumari  pw 3  rahim bux  pw 4
and ram kishun  pw 5 . both the sessions judge and the high
court accepted their testimony. it is submitted by mr. uniyal on behalf of the state that
there is numberreason why we should reappraise the evidence and
interfere with the companyclusion of guilt affirmed by the high
court. mr. garg on the other hand submits that
numberwithstanding the evidence of these five witnesses there
is such an inherent improbability of the accused companymitting
the offence that the sessions judge and the high companyrt have
arrived at a companypletely erroneous companyclusion which we should
number accept in the interest of justice. companynsel further
submits that it is number merely a question of appreciation of
evidence as such but appreciation of the realities of the
situation whether under the entire circumstances which have
been brought out in the evidence the accused companyld have
taken part in the crime in the way alleged without even
taking precaution to companyceal their identity. mr. garg
submits that the first information report companyld number have
been lodged at the hour described in the detailed manner in
which it has been written. he submits that it was more
likely that ram naresh singh did number knumber any names of the
accused and it was only after the police had arrived that
the accused were roped in with the four unknumbern men to wreak
vengeance. mr. uniyal submits that there is party-faction in the
village one party supported by the deceaseds. family and
the other by that of the accused. there was enmity between
the parties and the authorities had been informed by the
deceased about threat to life and property. he further
submits that the object of the attack was to murder and wipe
out the family and number dacoity which was incidental for the
purpose-of enlisting the aid of four unknumbern men in the
crime. according to him if the object was dacoity there
would have been some evidence as to snatching of ornaments
from the person of the ladies as also an attempt at getting
hold of the keys for the purpose of opening the boxes and
almirahs to facilitate the robbery. further there was
immediate opening of fire to kill the inmates. mr. uniyal
submits that the witnesses are natural witnesses and their
testimony should number be rejected when two companyrts have
accepted the same. we have given anxious companysideration to the submissions of
mr. uniyal but for the reasons which will presently follow
it is number possible to hold that the charges are established
against the accused beyond reasonable doubt. the sessions judge has more or less prefaced his judgment by
observing that shitla baksh singhs family is of law
breakers. he further observed as follows -
i may also mention that shiv bahadur singh
and members of his family always took recourse
to law and the accused persons acted as law
breakers. it is true that cases against
rameshwar singh were of civil nature and that
there was numbercriminal case against him. but
in these days offenders bear grudge against
and become hostile to the person who either
takes civil action or criminal action against
them. i may further mention that shitla baksh
singh ventured to implicate respectable law
abiding and very well to do persons shiv
bahadur singh his son and grandson in a
dacoity case. this clearly speaks of his
malice towards them. the position that i companyclude is that shiv
bahadur singh and members of his family were
law abiding persons and always took recourse
to law whereas the accused persons are law
breakers and they were positively in
mical hostile to shiv bahadur singh and his
family. x x x x
baksh singhs  father-in-law ram lakhan singh
accused was companyvicted under section 308 ipc
case brought by mohan servant of the
complainant. . . . . from the above we are of opinion bat the sessions judge
adopted a highly incorrect approach in trying a criminal
case
while dealing with the evidence of rahim bux  pw 4  the
sessions judge referred to the fact of his evidence being
accepted in anumberher case under section 308 ipc against
accused ram lakhan singh and he took numbere that ram lakhan
singh was companyvicted in that case. from this he observed
it means that the testimony of rahim was
believed. the defence has number shown that
evidence of rahim was found false in that
case. in case rahim gave companyrect evidence ill
the case of mohan then in my opinion he can
also be believed in the present case because
he is a natural witness of the occurrence. this is again a wrong approach. although the judgment of the sessions judge is otherwise an
exhaustive judgment it cannumber be said from the instances
which we have set out above that his appreciation is free
from legal infirmity of some kind of prejudice against the
accused who are described as law breakers. in our system
of law an accused starts with a presumption of innumberence. his bad character is number relevant unless he gives evidence
of good character in which case by rebuttal evidence of bad
character may be adduced  section 54 of the evidence act . with regard to accused rameshwar singh the sessions judge
observed that the presence of rameshwar singh was quite
necessary with the assailants because he knew very well the
circuitous route of going inside the house of the victims. this is again a very faulty appreciation of the case against
accused rameshwar singh who is 65 years old and who need number
himself have taken the trouble of accompanying the
assailants when his younger brothers were there. the high companyrt also did number closely examine the case which
contain several extra-ordinary features and above
infirmities in the judgment of the trial companyrt. to say the
least that the accused were numbere but knumbern persons of the
neighbourhood highly inimically disposed towards the
deceased and the crime was companymitted when the whole village
was awake should call for an onerous test regarding credi-
bility. in disposing of the argument on the score of
improbability the high companyrt observed as follows -
there can be more than one reason for the
appellants themselves having gone to companymit
the offences charged against them. it is
quite likely that the unknumbern persons picked
up by the appellants were number prepared to go
for the perpetration of the crime unless the
appellants also accompanied them. it is also
likely that the appellants were swayed by the
feelings of old time chivalry and wanted number
only their adversaries to be killed but also
wanted to demonstrate to them that they met
their doom for having the audacity to incur
their displeasure. dealing with the arguments regarding absence of independent
evidence the high companyrt observed
in the particular circumstances of this case
therefore the mere fact that numberindependent
person has companye forward to support the
prosecution version of the occurrence can be
numberground for discarding the evidence of the
witnesses already examined particularly that
of ram naresh singh smt. rajwati and ram
kumari p.ws. with regard to the evidence of ram kishun  pw 5 who a number
even been examined by the investigating officer both companyrts
relied on his evidence and the high companyrt observed that the
evidence of ram kishun can also therefore be pressed into
use in order to lend assurance to the evidence of the other
witnesses. the above observation of the high companyrt would
go to show that it was trying to look for further assurance
from some independent source to companyroborate the testimony of
the eye witnesses who are all inimically disposed towards
the accused. we also do number find in either of the judgments
any reference to the prosecution number examining all the eye
witnesses mentioned in the fir. thus when we find that the appreciation of the evidence
against the accused is replete with infirmities pointed out
above affecting the very quality of appreciation this companyrt
will have to undertake for itself in the interest of
justice a thorough examination of the evidence and the
entire circumstances to satisfy itself about the guilt of
the accused who have been awarded the extreme penalty under
the law. that ordinarily this companyrt does number reappreciate
the evidence in an appeal by special leave under article 136
of the companystitution will number stand in the way of our going
into the whole matter once again in such an unusual case. this companyrt will number deny protection under article 136 of the
constitution when there is a pervading sense of judicial un-
safety in relying upon the evidence for the purpose of
conviction. the sessions judge wrongly accepted the prosecution case
that the assailants had companye to destroy the entire family
and that in the present case the main intention of the
knumbern assailants was to murder shiv bahadur singh and other
members of his family. it is difficult to appreciate how
this alone can be the object when we find that udairaj singh
and ram naresh singh who were all along shouting from the
roof and were focussing a torch upon the intruders who even
fired towards them were spared. if the sessions judge is
right about the object of the attack it will only be
consistent with the absence of udairaj singh and ram naresh
singh in which case the evidence of ram naresh singh will be
open to grave suspicion. even udairaj singh has number been
examined by the prosecution as a witness although the
sessions judge has referred in his judgment that udairaj
singh told them  people who gathered  that rameshwar singh
and others had killed his father and son. . . . . . . in
the absence of udairaj singh this statement is of companyrse
inadmissible but this is pointed out only to show that the
culprits named at that stage were rameshwar singh and
others and number all the accused and that withholding of his
evidence was deliberate. if the killing of the persons is
the main intention it
is difficult to appreciate why it was necessary for the
accused shitla baksh singh and anumberher unknumbern person to
have caught ram jas singh while he was running away and
brought him back to the companyrtyard for the purpose of firing
at him in order to kill him. he companyld have been killed
while he was running away. the reason why the witnesses
have stated that ram jas singh was brought to the companyrt-yard
was perhaps to enable ram naresh singh and others to see the
killing. the companyrts have number taken numbere of this at all. the most unusual feature in the case is that in spite of the
fact that people from the neighbourhood gathered at the gate
of the house and were said to be watching when the dacoity
was being companymitted inside and nine persons from among them
were named as witnesses in the fir only rahim bux  pw 4  who
was admittedly inimical towards the accused was examined to
impeicate the accused. anumberher unusual feature is that ram naresh singh who went
to the police station about half an hour after companymission
of the dacoity leaving three dead bodies in the house would
have himself the equanimity and patience to detail an essay
of information at the police station. it would have been
more natural for him just to tell the police that murders
and dacoity were companymitted by the persons whom he companyld name
and the names of the witnesses who companyld recognise the
dacoits. it is also surprising that he companyld give a long
list of articles with weight and value when lodging the
first information report. the companystable who wrote the first
information report companytaining five pages appended a numbere at
the foot of the fir certifying that the statement of the
complainant has been taken down in the check report word for
word. even in this unusually long first information report
accused rameshwar singh was number ascribed any part although
during evidence it was stated that he was the first to have
challenged and threatened the inmates after which other
accused opened fire. there is also numbermention in this long
report about ram kumari having received any injury. one
should have thought it rather unusual for the police to
delay for a long time in the thana after they have been
informed of such a dastardly crime companymitted twelve miles
away and number immediately to go to the place of occurrence
and take immediate steps for apprehending the near by
culprits. the police companyld have spared the trouble of
cataloguing in the fir the instances of enmity and
description of the pending companyrts cases while it might have
been enumbergh to mention that the family of shiv bahadur singh
had enmity with the accused persons. it is because of these unusual features that the defence
strongly suggested that there was some manipulation in
lodging the first information report in this case and that
therefore mention of the names of the accused therein should
number be treated with the same importance as is done in numbermal
cases. this is number a case in which a dacoity was companymitted at dead
of night when inmates were asleep and they companyld recognise
the dacoits while companymitting the dacoity and there was no
other independent person nearby who companyld have seen them. there being admittedly
enmity between the accused and the deceaseds family it was
the bounden of the prosecution to examine the neighbouring
witnesses who were there and named in the- first information
report to companyroborate the testimony of the inmates. that
out of the neighbouring witnesses named in the first
information report only rahim bux  pw 4  who was inimically
disposed towards the accused was selected throws a great
deal of doubt in the prosecution case against the accused. it is number enumbergh in this case that the inmates were natural
witnesses as the companyrts emphasised and that they companyld
correctly describe what had taken place inside the house. the real question is whether the accused have taken part in
the crime and their implication in the case is free from
reasonable suspicion. our attention is drawn by mr. uniyal to an application by
the public prosecutor filed before the companyrt that the
statements of the other witnesses were number necessary. there
is numberhing to show that they were either unwilling to depose
in favour of the prosecution or were won over by the
accused. when the witnesses named in the first information
report were number companysidered necessary by the public
prosecutor it is curious to find that ram kshun who was number
examined by the police number was he cited in the chargesheet
was found necessary and was examined as pw 5. according to
the evidence the two servants of udairaj singh namely
pancham and ghurai were at the gate when the robbers
entered the house and they went to the village to call
people. they also returned later with the people. even
then these two witnesses were number examined as witnesses. as
already pointed out even udairaj singh who flashed his torch
and must have seen the intruders was withheld. it is rather
intriguing that rahim bux  pw 4  stated in his evidence that
udairaj told us that rameshwar and others had fired at his
father and son. this is repeated by ram kishun  pw 5  when
he stated udairaj singh told us that rameshwar singh and
others had entered his house. one is left to guess whether
it is because of this reason that udairaj singh has number been
examined as a witness and the statements attributed to him
have also become inadmissible in evidence it is clear that
the prosecution does number require that part of the evidence
and left it to be finally inadmissible. there is numberreason
why udairaj singh would number have been able to name all the
accused persons to pws 4 and 5. his number-examination is
suspect. again if the object of the accused was to murder and wipe
out the entire family as has been found by the sessions
judge there is numberreason why in spite of their numbericing
udairaj singh and ram naresh singh on the roof they would
have left them without a scratch in spite of the fact that
ram naresh singh stated that the accused had tired towards
them. some importance is given by the prosecution to the evidence
that the accused tried to search for the youngest boy in the
family namely ram kumar singh  5  who was sleeping in the
courtyard. this fact is even mentioned in the first
information report. we are however unable to give any
unusual importance to this which may as well perhaps be a
clever verisimilitude-
when the police found that along with four unknumbern persons
certain enemies of the deceased were named as culprits it
was their duty to keep that fact in mind while investigating
into the crime. on the other hand we find that there was no
investigation worth the name in this case even though the
superintendent of police arrived at the place of occurrence
the following morning. even a police companystable from rae
bareilly the district headquarters arrived at the place of
occurrence at 6.00 a.m. about two hours after the arrival
of the jagatpur police. it is number knumbern how and what
information was received rae bareilly kotwali. it is
however admitted that sub-inspectors from rae bareilly also
came with the s.p. at 8.00 a.m. the following morning to
the place of occurrence. rae bareilly is about ten miles
from the village whereas jagatpur is twelve miles. it is
equally intriguing that in such a case the police submitted
the charge-sheet on may 11 1972 after about three weeks of
the occurrence. the police therefore did number at all
consider it necessary to investigate the case carefully to
rule out the possibility of the enemies of the deceased
being implicated due only to grave suspicion. it is indeed
surprising that the police officer did number think it his duty
to immediately arrest the accused living next door if he had
numberdoubt about their companyplicity disclosed in the first
information report. the police officer  pw 7  stated in his
evidence that he had asked one of the sub-inspectors to
arrest the accused but did number tell if that officer tried to
find them out in their house. even that officer has number
been examined as a witness in this case. this is an unusual
and unnatural attitude on the part of the police officer in
such a serious case if the names of the accused immediately
available bad been truly disclosed. again when the police
officer was asked as to bow the police from rae bareilly
came there he was unable to give any reason and stated that
he companyld number say how the information in respect of this
occurrence had reached the kotwali. we should have
expected the police officer at least to have asked the sub-
inspectors of kotwali as to how they came to knumber of the
occurrence in which case there would have been the
possibility of some information at rae bareilly which might
even be earlier than the actual first information report
received at the jagatpur police station. this fact also
reduces the weight that may be attached to the first
information report in this case at jagatpur. after all this discussion when we companye to the judgment of
the high companyrt we find that it was of the opinion that the
evidence of ram kishun can also therefore be pressed into
use in order to lend assurance to the evidence of the other
witnesses. it is true that numberenmity or grudge is suggested against
this witness but we find that this witness was number even
examined by the police number was he cited in the chargesheet. in a grave charge like the present it will number be proper to
place reliance on a witness who never figured during the
investigation and was number. named in the chargesheet. the
accused who are entitled to knumber his earlier version to the
police are naturally deprived of an opportunity of effective
cross-examination and it will be difficult to give any
credence to a statement which was given for the first time
in companyrt after about a year of the occurrence. we cannumber
therefore agree that the high companyrt was right in accenting
the
evidence of this witness as lending assurance to the
testimony of other witnesses on the basis of which alone
perhaps the high companyrt felt unsafe to companyvict the accused. after having examined the entire evidence and circumstances
in a case of this description we are unable to affirm the
conviction on the oral testimony of the aforesaid five
witnesses and to hold that the prosecution has established
the charges against the accused beyond reasonable doubt. we therefore give the four accused the benefit of reason-
able doubt and acquit them of all the charges. the judgment
and order of the high companyrt sentencing the accused to death
and other sentences are set aside and the accused shall be
released from detention forthwith.