criminal appellate jurisdiction criminal appeal number. 335-36 and 523 of 1982.
from the judgment and order dated the 31st of march
1982 of the high companyrt of punjab and haryana in criminal
revision number 977 of 1980.

l. kohli m k. dua s.k. mehta p.n. puri and r.c. kohli for the appellants. k. bagga for the respondents. the judgment of the companyrt was delivered by
fazal ali j. in these appeals by special leave four
persons namely mohinder singh gurcharan singh bharpur
singh and jagvinder singh were tried by the sessions judge
for offences under sections 302/34 and 307/34 ipc and also
under section 27 of the arms act. after recording the entire
evidence the trial companyrt companyvicted mohinder singh under
section 304 part i ipc sentenced him to 7 years rigorous
imprisonment. the other three accused were acquitted by the
sessions judge. mohinder singh filed an appeal before the
high companyrt of punjab and haryana against his companyviction and
sentence. the state government also filed an appeal against
gurcharan singh bharpur singh and jagvinder singh so far
as their acquittal was companycerned and against mohinder
singh so far as his acquittal under section 302 ipc was
concerned. the high companyrt without making any real attempt to
analyse and appreciate the evidence led in support of the
prosecution came to a general companyclusion that the judgment
of the learned sessions judge was number in accordance with law
and that he had number dealt with some points or omitted to
consider some points and remanded the case back to the
trial companyrt for writing a fresh and proper judgment. so far
as the acquitted accused were companycerned although the appeal
was filed by the public prosecutor as directed by the state
government yet the high companyrt on its own or perhaps at the
instance of the acquitted accused on a petition filed by
them held that there was numberproper direction by the
government for filing the appeal except in case of mohinder
singh. there was undoubtedly a direction to the public
prosecutor to file appeal against acquitted accused as
indicated above. the high companyrt however at the instance of
the acquitted accused tried to re-open the matter in order
to find out the manner and various stages through which the
sanctioned to file an appeal was chanalised. with due
respects to the learned judges we feel that this was number at
all proper for the high companyrt to do. whenever a government
seeks opinion it companysults various agencies namely the
advocate general public prosecutor legal remembrancer and
others and thereafter the order is passed by the government
through the secretary incharge. in the instant case it was
number disputed that the public prosecutor was directed by the
under secretary to the government in charge to file appeal
against all the appellants. the high companyrt however seems
to have gone deeper into the matter by making a roving
inquiry into what had happened when the matter was under
consideration of the government and how things shaped and
held after making this roving inquiry that the authority
given to the public prosecutor was only in respect of
mohinder singh and number others. therefore the high companyrt was
of the opinion that direction to file appeal against
acquitted accused gurcharan singh bharpur singh and
jagvinder singh was number-est and hence appeal filed by the
state was number properly presented so far as they are
concerned. it appears that a clear direction has been given
to the public prosecutor to file appeal against all the four
accused three of them against acquittal and as regards
mohinder singh against his acquittal under section 302 ipc. having gone through the entire record we are unable to
agree with the high companyrt that there was any interpolation
with
respect to acquitted accused. it may be that various
agencies may a have expressed different views but by and
large the final decision taken by the under secretary
prevailed as a result of which the public prosecutor was
authorised to file an appeal before the high companyrt against
all the acquitted accused. in such a situation therefore
the high companyrt erred in holding that the appeal presented by
the state was number properly presented as against the said
three accused and it should have heard the appeal on merits
alongwith the care of mohinder singh. as we intend to send
the case back to the high companyrt for fresh decision in
accordance with law after taking into companysideration the fact
that the appeal by the state was properly companystituted it is
number necessary for us to give further details. we might
however mention that the high companyrt instead of analysing
and appreciating evidence remanded the case back to the
sessions judge for writing a proper judgment. in the first
place assuming that the high companyrt was right in thinking
that the judgment suffered from tome infirmities and there
were certain facts which were number taken into companysideration
they would number be grounds remanding the case to the sessions
court to write a proper judgment. the high companyrt itself was
a final companyrt of facts and it was its duty to satisfy itself
regarding the companyrectness and acceptability of the evidence. thus it was entirely open to the high companyrt to reappraise
the evidence once again to companysider the facts which may have
been overlooked by the sessions judge and it should have
decided the appeal itself instead of remanding the case to
the sessions companyrt. it being a moot point we refrain from
expressing any opinion on the question whether the first
appellate companyrt of fact can in a criminal case send the case
back to the sessions companyrt for writing a fresh judgment. the
proper order in such a case should be either to decide the
case itself or to send it for re-trial.


civil appellate jurisdiction civil appeal number 503 of 1966.
appeal by special leave from the award dated numberember 10
1964 of the industrial tribunal andhra pradesh in misc. petition number 32 of 1964 in industrial dispute number 4 of 1964.

h. gokhale b. k. seshu parameshwara rao jyotana r.
melkote and r. v. pillai for the appellant. k. ramamurthi shyamala pappu and vineet kumar for the
respondent. the judgment of the companyrt was delivered by
vaidialingam j. this appeal by special leave is directed
against the award dated numberember 10 1964 of the
industrial tribunal andhra pradesh hyderabad accepting a
complaint filed by the respondent under s. 33a of the
industrial disputes act 1947  act xiv of 1947   hereinafter
called the act . the respondent was at the material time working in the
main branch of the appellant at belgaum. by order dated
march 8 1963 the respondent was transferred to bhatkal
branch as a c rank officer to work there as an
accountant. he was also informed that he was being
relieved so as to enable him to proceed to duty at the
place of transfer by march 18 1963. he was allowed three
days joining time. on march 13 1963 the manager of the branch at belgaum
informed the respondent that he was relieved with effect
from that date to join duty at the bhatkal branch by march
18 1963. the respondent by letter dated march 14 1963
after setting out the various matters therein applied for
privilege leave for ninety days from march 14 1963 to
june 11 1963 so as to enable him to improve his health and
also to attend to certain domestic matters. but the bank
the appellant herein desired him by their letter dated
march 23 1963 to join duty and then apply for leave if
necessary. some further companyrespondence ensued between the
bank and the respondent the respondent again making a
request for sanction of his leave and the appellant bank
insisting upon his joining duty according to the order of
transfer and then applying for leave. but as the
respondent did number join duty at the bhatkal branch though
he was relieved from the belgaum office the appellant by
their companymunication dated july 23 1963 desired the
respondent to offer explanation for number obeying the order of
transfer. the respondent sent a reply on july 29 1963
stating what according to him were the reasons for his number
joining duty at the transferred office. the appellant bank
number satisfied with the explanation given by the respondent
framed two charges against him and companymunicated the same
on august 7 1963. the charges were to the effect that  a
the respondent by wilfully disobeying the lawful and
reasonable transfer order of
the management has companymitted gross misconduct for which
the punishment is dismissal from service and  b  the
respondent had absented himself from duty from march .14
1963 without leave which again is a minumber misconduct for
which also punishment can be imposed. the respondent was
also directed to submit his explanation if any to the
charges on or before august 25 1963. the respondent
offered his explanation to the charges by his letter dated
august 21 1963. the appellant informed the respondent on
october 1 1963 that an enquiry would be companyducted against
him in respect of the charges on october 5 1963 and
desired him to be present at the enquiry with the necessary
evidence in support of his defence. the inquiry was companyducted by the enquiry officer in which
the respondent participated. the enquiry officer sent a
report to the managing director of the bank dated october
28 1963 substantially finding the respondent guilty of
both the charges. in respect of the first charge of gross
misconduct for wilfully disobeying the order of transfer
the enquiry officer had proposed that the respondent should
be dismissed and in respect of the second charge of
absenting without leave it was proposed in the report that
the increment be stopped for a period of six months with
effect from april 25 1963. certain companysequential proposals
were also made as to how exactly the respondents absence
was to be dealt with. the managing director of the bank after companysidering the re-
port submitted by the enquiry officer as well as the
further explanation offered by the respondent in respect
of the findings recorded in the said report by his order
dated numberember 12 1963 agreed with the recommendation of
the enquiry officer dismissed the respondent from the
service of the bank with immediate effect for the offence
of wilful disobedience of the order of transfer. the
respondent was also informed that he might appeal against
the order of dismissal to the working companymittee of the
directors of the bank within forty-five days of receipt of
the order. the respondent filed an appeal on december 17 1963 be-
fore the working companymittee of the directors wherein he
attacked the various proceedings culminating in the order
of dismissal passed against him. intimation of the hearing
of the appeal was given to the respondent. but it is seen
that on the date when the appeal was taken up for hearing
viz. march 20 1964 the respondent was number present either
in person or through authorised representative of his. in
consequence the working companymittee of the directors
dismissed the appeal on march 20 1964. in the appellate
order the working companymittee has elaborately companysidered the
various circumstances necessitating the companyduct of the en-
quiry the enquiry proceedings and the answers given by the
respondent and it has ultimately agreed with the findings
recorded
in the enquiry proceedings that the respondent had wilfully
disobeyed the lawful orders of the management transferring
him. the result was that the order of dismissal passed by
the managing director on numberember 12 1963 was companyfirmed. at this stage it may be mentioned that the central govern-
ment had referred on january 8 1964 for adjudication to
the industrial tribunal of which dr. mir siadat ali khan
was appointed as the presiding officer with headquarters at
hyderabad the question as to whether action by the
appellant bank in discontinuing pigmy companylection and
payment thereof to the workmen was justified. this was
numbered as i. d. number 4 of 1964 and the award in this
dispute was given on august 26 1964 and the central
government published the same in the gazette of india on
september 7 1964.
the respondent filed a companyplaint under s. 33a of the act
on june 4 1964 before the central government industrial
tribunal at hyderabad attacking the enquiry proceedings
conducted against him and the order of dismissal passed by
the appellant. apart from attacking the inquiry
proceedings on merits as mala fide the respondent
contended that the order of dismissal had been passed
against him without the appellant bank companyplying with the
provisions of the proviso to s. 33 2  b  of the act. according to him inasmuch as the order of dismissal had
been passed during the pendency of 1. d. number 4 of 1964 the
management should have asked the industrial tribunal for
approval of their action and they should have paid him one
months wages. therefore inasmuch as these things were number
done the appellants have companytravened the provisions of s.
33 of the. act. the appellant bank in their companynter-statement pleaded that
the domestic enquiry companyducted by the management was very
fair and that the action of the management in dismissing
the respondent was perfectly justified. in this
connection the appellant raised the companytention that the
respondent was number a workman and that in any event he
was number a workman companycerned with the dispute companyered by i.d. number 4 of 1964 and therefore he was number entitled to file an
application under s. 33a. they further companytended that
there was numbercontravention of s. 33 of the act because at
the time when the order dismissing the respondent was
passed on numberember 12 1963 there was numberindustrial
dispute pending so as to make it obligatory on the part of
the appellant to take action in accordance with the
proviso to s. 33 2  b  of the act. the industrial tribunal by its order under attack has
overruled all the objections raised by the management. the
tribunal has held that the respondent was a workman and
that he was also a workman companycerned in 1. d. number 4 of 1964
and therefore
he was companypetent to file an application under s. 33a. the
tribunal has also held that the dismissal of the respondent
became effective only on march 20 1964 when the working
committee of the directors of the appellant bank disposed of
the appeal filed by the respondent. as this date fell
within the period between january 8 1964 and october 8
1964  during which 1. d. number 4 of 1964 was pending  the
management was bound to companyply with the proviso to s.
33 2  b  of the act. as this proviso had number been companyplied
with the tribunal held that there was a companytravention of
the provisions of s. 33 of the act which gives a right to
the respondent to invoke the jurisdiction of the tribunal
under s. 33a of the act. after having held that there is a companytravention of s. 33 of
the act the tribunal then companysidered the attack levelled
as against the domestic enquiry proceedings by the
respondent and recorded a finding to the effect that it was
number fair to companysider that the respondent had wilfully
disobeyed the order of transfer passed by the management
the tribunal therefore held on both the findings that the
respondent should be reinstated with companytinuity of service
and back wages. the same companytentions that were raised before the industrial
tribunal on behalf of the management have been urged
before us by the appellants learned companynsel mr. gokhale. companynsel urged that the respondent is number a workman and in
any event he is number a workman companycerned with the dispute in

d. number 4 of 1964. companynsel further pointed out that even
assuming that the findings of the tribunal recorded against
the appellant were companyrect the application under s. 33a
was number maintainable inasmuch as there was no
contravention by the management of any of the provisions
of s 33 of the act. in this companynection companynsel pointed
out that the order of dismissal having been passed by the
managing director on numberember 12 1963 long before january
8 1964 the date when i.d. number 4 of 1964 was referred
there was numberobligation on the part of the management to
ask for approval of the tribunal in respect of their
action or of paying one months wages to the respondent. companynsel also urged that even if these questions were
answered against the appellant the award would have to be
set aside because the industrial tribunal had really
constituted itself as a companyrt of appeal when it set aside
the order of dismissal passed by the management which was
based on the findings recorded in a proper domestic enquiry. mr. m. k. ramamurthy learned companynsel appearing for the
respondent has supported the views expressed by the
tribunal on all aspects. if the companytention of the appellant that there was numberindus-
trial dispute pending at the time when the order of
dismissal was passed is accepted then quite naturally it
follows that numberquestion of companytravention of s. 33 of the
act arises in which
case the companyplaint under s. 33a is number maintainable in
law. in an enquiry under s. 33a the first question that
the tribunal will have to companysider is regarding the
contravention by the employer of the provisions of s. 33
of the act. if this issue is answered against the employee
numberhing further can be done under s. 33a of the act. this
position has been settled by the decisions of this companyrt
in equitable companyl limited v. algu singh  1  and the punjab
national bank limited v. its workmen  2 . after hearing
arguments on this aspect we are inclined in the instant
case to accept the companytention of the appellant in this
regard and hence numberother questions arise in the
application filed by the respondent under s.33a of the act. there is numbercontroversy in this case that the appellant
did number seek the approval of the industrial tribunal
concerned number did they offer or pay one months wages to
the respondent. there is also numbercontroversy that i.d. number
4 of 1964 can in law be companysidered to be pending only from
january 8 1964 to october 8 1964. the order of the
managing director dismissing the respondent from service
was made on numberember 12 1963 which date admittedly falls
outside the duration of the pendency of i.d. number 4 of 1964.
the order of the working companymittee of directors rejecting
the respondents appeal which was passed on march 20 1964
certainly falls within the period when i.d. number 4 of 1964
was pending. therefore the question that arises for company-
sideration in this case is as to when it can be stated
that the respondent was dismissed i.e. by the order of
numberember 12 1963 of the managing director or by the
appellate order of march 20 1964 passed by the working
committee of directors. according to the appellant the
order which has to be taken into account for companysidering
whether there is a companytravention of s. 33 of the act is the
original order passed by the managing director on numberember
12 1963 whereas according to the respondent the
appellate order passed on march 20 1964 is the effective
order dismissing him. the respondents companytention in this regard is briefly as
follows. under the national industrial tribunal  bank
disputes  award 1962  knumbern as the desai award  a workman
in such cases has got a right of appeal to the appropriate
authority and he has got a period of 45 days for filing
the appeal. in this case the order of the managing
director dated numberember 12 1963 also states that
respondent is entitled to file an appeal against that
order to the working companymittee of the directors within 45
days of receipt of that order. the respondent admittedly
filed an appeal on december 17 1963 well within the time. the appeal was disposed of on march 20 1964. the language
of s. 33 2  companynsel points out is to the effect that the
employer has
 1  1958 i l.l.j. 793.  2  1960 1 s.c.r. 806.
been enabled to take action in accordance with the
standing orders applicable to a workman companycerned in such
dispute. inasmuch as the standing orders in this case
give a right to appeal to the workman any order that is
passed by the management in respect of which a right of
appeal is given to a workman cannumber be companysidered to be an
effective or operative order till the appellate decision is
made knumbern. it will be open to the appellant to take
action in accordance with the proviso to s. 33 2  b  at
the time when the appellate order was passed on march 20
1964 as the appellate order is the effective and binding
order. so far as the par-ties are companycerned the order of
dismissal in this case must be companysidered to have been
passed only on march 20 1964 which date squarely falls
within the period during which i.d. number 4 of 1964 was
pending. we are number inclined to accept the companytentions of
the learned companynsel for the respondent in this regard. it has been laid down by this companyrt in strawboard manufac-
turing company v. govind 1  in companystruing the proviso to s.
33 2  b  of the act that the three things companytemplated
viz. dismissal or discharge payment of the wages and
making of the application should be part of the same
transaction. therefore in our view there must be a fixed
and certain point of time which will be applicable to all
managements and workmen when companystruing the provisions of
s. 33 of the act. the management must definitely knumber as
to when they have to take the necessary action under the
proviso to s. 33 2  b  and the workman also should
likewise knumber the definite time when the management should
have companyplied with the requirements of the proviso to s.
33 2  b  so that he companyld approach the industrial tribunal
by way of a companyplaint under s. 33a of the act. a reading
of the material provisions of s. 33 shows that the
expressions used are discharge or punish whether by
dismissal or otherwise and they clearly indicate in. our
opinion the point of time when the order of discharge or
dismissal is passed by the authority companycerned. an order
of discharge or. dismissal in our opinion can be passed
only once and in this case the order of dismissal is the
one passed by the managing director on numberember 12 1963.
numberdoubt either by virtue of the standing orders or by
virtue of a companytract of service a right of appeal may be
given to a workman companycerned to challenge an order of
dismissal. but the appellate authority only companysiders
whether the order of dismissal has to be sustained or
whether it requires modification. therefore there is no
question of the appellate authority passing again an order
of dismissal. we are number companycerned in companystruing the
provisions of s. 33 as to the finality of the orders
passed by the authority companycerned in the first instance
in passing orders of dismissal or discharge. further the
proviso to s. 33 2  b  when it refers to payment of wages
for one month also indicates that it relates to an
 1  1962 supp. 3 s.c.r. 618 630.
ci--s
order of discharge or dismissal which companyes into effect
immediately which in this case is the order passed on
numberember 12 1963. the payment of one months salary or
wages is to soften the rigour of unemployment that will
face the workman against whom an order of discharge or
dismissal has been passed. if the management has to wait
for the minimum period prescribed for filing an appeal and
also await the termination of the appeal when one is filed
considerable time would have lapsed from the date of the
original order during which period the workman would number
have received any salary. it will be anumberalous to hold that
even after the lapse of such a long time the payment of one
months salary would satisfy the requirements of the
section. in this case if the companytention of the respondent is
accepted it will lead to very anumberalous results and the
time when a management has to companyply with the proviso to s.
33 2  b  will radically differ. for example according to
the respondent the management in this case will have to
wait for the minimum period of 45 days which is the time
given for the- respondent to file an appeal. if an appeal
is filed according to the respondent the management will
have to wait further and await the disposal of the appeal. that means in such a case the proviso will companye into
effect only at the time when the appeal is disposed of. on
the other hand. if after the expiry of 45 days the workman
concerned does number file an appeal the management according
to the respondent will have to companyply with the proviso
immediately after the period of limitation is over. that
is the point of time when the proviso to s. 33 2  b  will
have to be companyplied with by the management will depend
upon the filing or number-filing of an appeal by the workman
concerned. further if at the time when the original order
of dismissal is passed there is numberdispute pending and
when the appeal against the order of dismissal is pending a
dispute is referred for .adjudication it will be open to
the management to prolong its decision in the appeal. till
after the industrial dispute has companye to an end. it cannumber
be the intention of the legislature that such variable and
indeterminate periods are companytemplated in companystruing the
proviso to s. 33 2  b . the natural and reasonable in-
terpretation to be placed on s. 33 is in our opinion
that the order of discharge or dismissal is the original or
the very first order passed by the management- which in
this case is the one passed. by the managing director on
numberember 12 1963. it follows that on that date i. d. number
4 of 1964. had number even been referred. for adjudication
which as we have already indicated. was by an order of government dated january 8 1964. hence
there is numbercontravention of s. 33 in this case. before we close the discussion it is necessary to state
that mr. ramamurthy learned companynsel for the respondent
referred us to two decisions-of this companyrt. in the
management of hotel imperial v. hotel workers union  1  and
collector of customs
 1  1960 1 s.c.r. 476.
calcutta v. east india companymercial company limited 1 . in the first
decision this companyrt has recognised that a term should be
implied by industrial tribunals in the companytract of
employment that if the master has held a proper enquiry
and companye to the companyclusion that the servant should be
dismissed and in companysequence suspends him pending the
permission required under s. 33 of the act he has the
power to order suspension thus suspending the. companytract of
employment temporarily so that there is numberobligation on
him to pay wages and numberobligation on the servant to
work. in the second decision this companyrt held that in cases
where an authority reverses the order under appeal or
modifies or merely dismisses the appeal and thus companyfirms
the order appealed against without any modification the
operative order is the order of the appellate authority. in
our opinion these decisions do number assist the respondent
and the principles laid down.


civil appellate jurisdiction civil appeal number 246 of 1954.
appeal by special leave from the judgment an order dated
october 6 1952 of the bombay high companyrt in income-tax
reference number 1 of 1952.

a. palkhivala j. b. dadachanji s. n. andley rameshwar
nath and p. l. vohra for the appellant. n. joshi and r. h. dhebar for the respondent. 1957. may 22. the judgment of the companyrt was delivered by
venkatarama aiyar j.-this is an appeal by special leave
against the judgment of the bombay high companyrt passed in a
reference under s. 66 1  of the indian income-tax act 1922
 hereinafter referred to as the act  and ss. 21 and 19 of
the excess profits tax act 1940 and of the business
profits tax act 1947 respectively read with s. 66 1  of
the act. the dispute between the parties relates to the
assessment of income-tax for the assessment years 1946-47
1947-48 and 1948-49 and of excess profits tax for the
chargeable accounting periods september 3 1945 to march
31 1946 april 1 1946 to march 31 1947 and april 1
1947 to march 31 1948 and it arises out of the same facts
and involves the same points for determination
on june 15 1945 three brothers sir padampat singhania
lala kailashpat singhania and lala lakshmipat singhania who
were carrying on business under the name of juggilal
kamlapat executed a deed of trust ex. a whereby they
settled a sum of rs. 100000 on various charities specified
therein and called the j. k. trust bombay and appointed
themselves and two other persons lala ramdeo podar and sir
chunnilal mehta as its trustees. the trust deed provided
inter alia that the trustees may with the help of the trust
fund for and on behalf of and for the benefit of the trust
carry on such business including the taking up and
conducting the managing agency or selling agency of any
company in such name or names as they in their absolute
discretion may think fit and proper and may close and re-
start such business and utilise the profits for all or any
of the objects aforesaid large powers were companyferred on
them in the companyduct of the business and they were also
authorised to raise or borrow money required for the
purpose of the trust. at this time messrs. e. d. sassoon and company limited were the
managing agents of a public companypany called the raymond
woollen mills limited the firm of juggilal kamlapat of which
the three singhania brothers were the partners acquired a
controlling interest in the said mills by purchase of the
shares of messrs. e. d. sassoon and company therein and
following on this the shareholders passed a special
resolution on september 3 1945 appointing the trustees of
the j. k. trust as managing agents of the companypany in the
place of messrs. e. d. sassoon and companylid. who resigned. on september 10 1945 a memorandum of agreement ex. b was
duly executed by the companypany companystituting the trustees of
the j. k. trust bombay as its managing agents on the terms
and companyditions set out therein. it is to be numbered that the
five persons named as trustees under ex. a were appointed
as managing agents in their character as trustees and it is
expressly provided therein that the expression managing
agents unless excluded by or repugnant to the companytext
shall include the trustees for the time being of the said
trust or
any other trust with which the same may be amalgamated. the agency was to be for a period of 20 years but it was
open to the trustees to throw it up on giving three months
numberice. the managing agents were to get a remuneration of
10 per cent. of the net annual profits subject to a minimum
of rs. 50000 and an office allowance of rs. 1000 per
mensem. clause 7 of the agreement provided that
during the companytinuance of this agreement the managing
agents shall maintain with the companypany a deposit of rs. 100000  rupees one lack only  in cash by way of security
for due fulfilment of their obligations as specified therein
and shall be entitled to charge interest at 3 1/2 per cent. per annum on the amount of such deposit in addition to their
remuneration. clause 8 laid an obligation on the managing agents to
arrange loans and advances to the companypany as and when
required up to and number exceeding rs. 10 lacs at any time and
if necessary to guarantee such loans or advances from time
to time. under el. 14
numberwithstanding anything herein companytained all the terms
and companyditions of this agreement including the period of
appointment of the managing agents may be varied or
abrogated by mutual agreement. the trustees entered on their duties as managing agents
under this agreement and by an agreement dated may 14
1946 they appointed one tej narain khaitan son-in-law of
one of the three singhania brothers as their representative
to carry on the managing agency work on a remuneration of 30
per cent. of the annual income which would be payable to
them under ex. b. before the income-tax authorities the
appellant claimed that the income derived from the managing
agency was income derived from property held under trust to
be applied wholly for charitable purposes and was in
consequence exempt from taxation under s. 4  3   i  of the
act. the income-tax authorities held that the income in
question was remuneration for services rendered and was number
derived from any property and that therefore it did number
fall within s. 4  3   i  of the act. they further held
that even if the managing agency business companyld be regarded
as property within s. 4  3   i  it was governed by the
special provision companytained in s. 4  3   ia  and as the
conditions laid down therein had number been satisfied no
exemption companyld be claimed. in this view they allowed a
sum of rs. 30000 per annum for remuneration of mr. khaitan
as a deduction under s. 10  2   x  of the act and held that
the balance of the income rs. 23287 in 1946-47 rs. 36786
in 1947-48 and rs. 216460 in 1948-49 was liable to be
taxed under the provisions of the taxing statutes. on applications made by the assessee under a. 66 1  of the
act and the companyresponding provisions in the excess profits
tax act and the business profits tax act the tribunal
referred the following questions for the decision of the
high companyrt of bombay

whether on the facts of the case the companymission
earned by the managing agents for managing. the raymond
woollen mills was income earned by the managing agents for
services rendered and number income derived from property held
under trust or for other legal obligations and therefore number
exempt under s. 4
 3   i  of the income-tax act? whether on the facts of the case the business carried
on by the trustees falls to be companysidered under s. 4  3   i
or s. 4  3   ia  of the income-tax act? the reference was heard by chagla c.j. and tendolkar j.
who held that numberpart of the sum of rs. 100000 which was
the only property settled on trust under ex. a was actually
invested in the managing agency business which companyld number
therefore be regarded as trust property and that the
income received from that business was number within the
exemption enacted in s. 4  3   i . they accordingly
answered the first question against the appellant. as
regards the second question the learned judges held that it
was unnecessary to express any opinion thereon as it was
common ground that even if s. 4  3   ia  applied neither of
the companyditions laid down in sub-cl.  a  or  b  had been
fulfilled and that accordingly numberrelief companyld be granted
thereunder. the points that arise for determination in this appeal are
 1  whether the income received by the trustees of j.k.
trust bombay as managing agents of raymond woollen mills
ltd. is income derived from property held on trust or on an
obligation in the nature of trust and  2  whether the claim
for exemption in respect of such income is to be determined
under s. 4  3   i  or s. 4  3   ia . with reference to the first question the companytention of mr.
palkhivala is that managing agency is business and therefore
it is property and that it is property held on trust
because it is companyducted by the trustees on behalf of the
trust with the help of trust properties and in accordance
with the directions companytained in the trust deed. he also
contends that even if the business is number held on trust it
is at least held on the principle laid down in s. 88 of the
trusts act on an obligation in the nature of trust and
that s. 4  3   ii  is in companysequence attracted. for the
respondent mr. joshi does number dispute that managing agency
is to be regarded as business but he companytends that there
can be numbertrust of such agency because it really involves
rendering of services and cannumber be said to be property in
respect of which alone trust can be created and further
because managing agency is an office and that again is number
property. he also companytends that in any event the
managing agency created under ex. b companyld number be held to be
trust property because it companyld be terminated at any time
if the trustees so desired on three months numberice and that
there companyld be numbertrust of such a precarious ephemeral or
evanescent kind of property if indeed it companyld be held to
be property. he also companytends that s. 88 was inapplicable
as there was numberproperty which was held on an obligation in
the nature of a trust. whether a managing agency companyld be regarded as business was
considered by this companyrt in lakshminarayan ram gopal and son
ltd. v. the government of hyderabad  1  where the question
arose with reference to assessment of excess profits tax on
the remuneration received by managing agents tax being
leviable under
 1  1955 11 s.c.r. 393.
that act only on business income and it was held that it was
business and that the profits therefrom were rightly
assessed to tax under the act. the law must therefore be
taken to be settled beyond companytroversy that managing agency
is itself business. then the question is whether that business can be held to be
property within s. 4 3  i  of the act. number property is a
term of the widest import and subject to any limitation or
qualification which the companytext might require it signifies
every possible interest which a person can acquire hold and
enjoy. business would undoubtedly be property unless there
is something to the companytrary in the enactment. section
4 3  i  of the act under which exemption is claimed runs as
follows
4.  3  any income profits or gains falling within the
following classes shall number be included in the total income
of the person receiving them-

any income derived from property held under trust or
other legal obligation wholly for religious or charitable
purpose and in the case of property so held in part only
for such purposes the income applied or finally set apart
for application thereto. number companyfining ourselves solely to the language of s. 4
 3  i  there is numberhing- in it which restricts in any
manner the numbermal and accepted meaning of the word
property and excludes business from its companynumberation. there is also authority in support of the view that business
is property within the intendment of s. 4 3  i . in in re
the tribune  1  the question was whether a trust created
over the tribune press and newspaper was for a charitable
purpose as defined in s. 4  3   i  of the act. the majoritv
of the learned judges of the high companyrt tookthe view that
the object of the trust was number wholly religious or
charitable and that accordingly the exemption under that
section companyld number be claimed. this decision was taken in
appeal to the privy companyncil which held reversing the
judgment of the high companyrt that the object of the trust was
in its entirety charitable and that it came within the
exemption enacted in s. 4  3   i . vide in re the trustees
of the tribune  2 . that is a question with
 1  1035 3 i.t. r. 246.  2  1939 7 i.t.r. 415 l.r. 66

a.
which we are number companycerned in this appeal and the actual
decision of the privy companyncil does number bear on the present
controversy. what is relevant to our purposes is that
before the high companyrt a companytention was raised that the word
property must bear the same meaning both in ss. 9 and 4
 3   i  that in s. 9 it was used in companytradistinction to
business which was dealt with under s. 10 and that
therefore property in s. 4  3  i  companyld number include
business. this companytention was repelled by the high companyrt
which held that the meaning of the word property in s. 4
 3   i  companyld number be companytrolled by the companynumberation of that
word in s. 9. vide in re the tribune  1 . before the privy
council however the question whether business of the
tribune press and newspaper was property was number raised the
board merely observing that in the letter of reference there
was numbersuggestion that the income under assessment is number
derived from property held under trust declared in the 20th
and 21st paragraphs of the will. the point however arose directly for decision in all india
spinners association v. companymissioner of income-tax bombay
 2 . there the assessee was an unregistered association
called the all india spinners association and it was
formed for the purpose of development of the village
industries of handspinning and handweaving. -the association
collected subscriptions from its members and also donations
and invested them in the purchase of raw companyton which was
supplied to poor labourers for being spun into yarn the
yarn being. then supplied to them for being woven into
cloth which was then sold and the sale proceeds
appropriated to the funds of the association for the
purposes aforesaid. the assessee claimed exemption under s.
4 3   i  on the ground that its income was derived from
property held under trust. the high companyrt was of the
opinion that the yarn and the cloth the sale of which
yielded the income companyld number be regarded as property held
in trust and that in companysequence s. 4 3   i  did number
apply. in reversing this judgment the privy companyncil held
that the property companysisted of the organisation and the
undertaking as well as in the
 1  1935 3 i.t.r. 246.  2  1944 12 i.t.r. 482 l.r. 71 i.a. 159
fluctuating stock of yarn and cloth and that the exemption
in s. 4 3  i  applied. this is direct authority in support
of the companytention of the appellant. as against these authorities the respondent relied on the
decision in eggar v. companymissioner of incometax  1 . there
a certain professor agreed to hand over the remuneration
which would be payable to him by the university for lectures
to be delivered by him for certain charitable purposes
but in fact numberdeed of trust was executed. the question
was whether the amounts actually paid to him by the
university were exempt from taxation and it was held that
they were number and that the income in question was at the
time of the receipt the private property of the assessee
being remuneration for services rendered by him. there
could be numberquestion in this case of any source of income
being dedicated to trust and the decision accordingly has
numberbearing on the point which falls to be decided here. the weight of authority is therefore clearly in favour of
the view that business would be property for purposes of
s. 4 3  i  of the act. it is next companytended for the respondent that even if
business companyld in general be held to be property within s.
4 3   i  managing agency cannumber be so regarded because
having regard to ss. 2 9a  87a and 87b of the indian
companies act it is merely an office which companysists in the
performance of services and discharge of certain
obligations and that that companyld number be regarded as
property which companyld be the subject-matter of trust. we
are unable to accede to this companytention. in angurbala
mullick v. debabrata mullick  2  and the companymissioner
hindu religious endowments madras v. sri lakshmindra
thirtha swamiar of sri shirur mutt  3  even an office of
trusteeship was held to be property especially when
emoluments were attached to it and that must a fortiori be
the position in the case of office of managing agency which
is clearly one of profit and even alienable under certain
circumstances. the office requires numberdoubt the performance
of services but there is numberantithesis between service
 1   1926  2 i.t.c. 286.  2  195i s.c.r. 1125.  3  1954 s.c.r. 1005 1019.
and business as there are several kinds of business which
involve the performance of services such as insurance and
commission agency. the true test is whether the services
are a regular source of income. and if managing agency is
business as was held in lakshminarayan ram gopal and son
ltd. v. the government of hyderabad  1  then there is no
reason why it should number be property for purposes of s.
4 3  i  of the act. number is it an accurate statement of the
true position to describe trust of the managing agency as a
trust of an obligation. it is in truth a trust of property
which carries with it certain obligations and in law there
is numberobjection to creating a trust over property burdened
with obligations though if it is onerous by reason of such
obligations the trustee may be entitled to disclaim it. it is then companytended that even if managing agency companyld be
the subject of trust the managing agency created by ex. b
must be held to be incapable of being held on trust because
it is of the essence of public as distinguished from
private charity that it must be permanent and incapable of
being revoked or put an end to at the option of the trustee
whereas the managing agency created by ex. b companyld be
terminated by the trustees by giving three months numberice. this is to companyfuse charity with properties devoted to
charity. it is true that a public charity is perpetual in
character and that means that it is capable of enforcement
so long as there is any property left which can be
appropriated for its objects. and even if some or all of
the objects become incapable of fulfilment the trust
properties will be devoted to the performance of similar or
allied charitable purposes on the doctrine of cy pres. but
so far as the trust properties themselves are companycerned
they will be held only on the incidents to which they are
subject under the law. thus if the property is a leasehold
interest it must cease on the termination of the lease. likewise if trust property is alienated under circumstances
binding on the trust it will go out of the trust. but that
does number operate
 1  1955 i s.c.r. 393.
as an extinction of the trust unless there is numberproperty
at all left with which the trust companyld be carried out. that is the principle enacted in s. 77 c  of the indian
trusts act 1882 which in terms however applies only to
private trusts. we must therefore hold that the fact that
the trustees have the option at any. time to throw up the
managing agency is numberlegal impediment to its being
property which companyld be held on trust. lastly it is companytended that on the terms of ex. a the
properties which the trustees are to hold and stand
possessed of are the sum of rupees one lao and any
donations or companytributions received by the trustees and all
accretions thereto and thereof and the investments in
securities for the time being and from time to time
representing the same  that on the terms aforesaid the
managing agency cannumber be held to be property held in trust
as numberpart of the sum of rs. 100000 was utilised in the
acquisition of the business so as to impress it with the
character of accretion. it is argued that though the sum of
rs. 100000 was given as security by the trustees under ex. b that was only for the due performance of their
obligations as managing agents and that the amount itself
was number actually thrown into the business. but it is to be
observed that cl. 3 of the trust deed expressly provides for
the acquisition of the business of managing agency on behalf
of the trust and with the help of the trust fund and
that precisely is what has happened and indeed reading
together exs. a and b it is impossible to resist the
conclusion that both the documents formed part of an
integral scheme and that what the settlors had in view in
cl. 3 of ex. a is the very managing agency which was
acquired under ex. b. there is companysiderable authority in
england that when trustees carry on business with the aid of
trust fund the position in law is the same as if they
actually employed it in the business though in fact it be
number actually invested therein. thus in rocke v. hart  1
sir william grant observed
 1   1805  11 ves. jun 58 32 e.r. 1009 1010.
a trader lodges money at his bankers he has in effect a
benefit from that. as he must generally keep a balance in
his bankers it answers the purpose of his credit as if it
was his own money and i should hold that to be employment
in his trade. there are similar observations by lord gifford in moons v.
de bernales  1 . in the result we are of opinion that the word i property
in s. 4 3  i  of the act is of sufficient amplitude to
comprehend business and if the question fell to be
decided solely on the terms of that sub-section the
managing agency companystituted under ex. b must be treated as
property held on trust within s. 4 3  i  of the act. this companyclusion however is number sufficient to dispose of
the appeal in favour of the appellant because there is
still the question raised by the respondent that even if
under the general law the word i property is wide enumbergh
in its significance to include business in its companytext in
s. 4 3  i  read along with s. 4 3  ia  it bears a more
restricted sense as meaning only property other than
business. and it is this companytention that forms the subject-
matter of the second question under reference. in order to
understand this question it is necessary to state that in
the act as originally passed the only provision for
exemption from taxation of income derived from property
dedicated to religious or charitable trust was companytained in
s. 4 3  i . on this section the question arose whether
when a business was carried on for and on behalf of a trust
the profits derived therefrom were exempt from taxation. it
was held in companymissioner of income-tax madras v.
arunachalam chettiar  2  following a decision of the house
of lords in companyan v. governumbers of the rotunda hospital
dublin 3  that they were number. that was also the view taken
by the allahabad high companyrt in lachhman das narain das in
re  4 . then came the decision in in re the tribune  5
already referred to wherein the lahore high companyrt held that
property in s. 4 3  i  was
 1   1826  1 russ. 301 38 e.r. 117.  3  1021 a.c. 1.

i.l.r.  1926  49 mad. 833.  4  i.l.r.  1925  47 all. 68.  5  1935 3 i.t.r. 246.
sufficiently companyprehensive to include business and that
profits from business carried on by trustees would be exempt
from taxation. as already stated though the matter was
taken in appeal to the privy companyncil this question was number
raised. it was in this state of the law that the
legislature intervened and enacted a new provision s.
4 3  ia  which is as follows
4 3  any income profits or gains falling within the
following classes shall number be included in the total income
of the person receiving them
 ia  any income derived from business carried on on behalf
of a religious or charitable institution when the income is
applied solely to the purposes of the institution and-
 a  the business is carried on in the companyrse of the
carrying out of a primary purpose of the institution or
 b  the work in companynection with the business is mainly
carried on by beneficiaries of the institution. under this
provision the profits of business would be exempt only if
the companyditions laid down therein are satisfied. it is the
contention of the department that as this is a special
provision dealing with the topic of exemption in respect of
business carried on for and on behalf of a trust any claim
for exemption as regards profits derived from any such
business can be made only under that provision and when the
conditions laid down therein are number satisfied it is number
open to the assessee to fall back upon the general provision
contained in s. 4 3  i  and claim exemption thereunder on
the ground that business is property. the basis of this
contention is the well-knumbern maxim generalia specialibus
number derogant. in charitable gadodia swadeshi stores v.
commissioner of income-tax punjab 1  this question came up
for companysideration before the lahore high companyrt. it was held
by the learned judges that the fact that the business failed
to satisfy the two companyditions laid down in s. 4 3  ia  was
numberreason why it should number be exempt from taxation if it
fell within
1  1944 12 i.t. r. 385.
s. 4 3   i  and the main ground of the decision was that
the two categories mentioned in s. 4 3   i  and s. 4 3
 i  a  having been enacted as two different clauses it must
be taken that the one did number exclude the other. it was this decision that was relied upon by the appellant
before the tribunal which however companysidered it
distinguishable. a reading of its order however shows
that it was number really satisfied about its companyrectness. accordingly when the appellant applied for reference under-
s. 66  1  of the act the tribunal referred the second
question also for the decision of the high companyrt. but in
the view which the learned judges of the bombay high companyrt
took that business was number property within s. 4 3  i  it
became unnecessary for them to express an opinion on that
question. number that we have held that the word property in
s. 4  3   i  standing by itself is susceptible of a wider
connumberation so as to include business it becomes necessary
to companysider the second question under reference.


civil appellate jurisdiction civil appeal number 2015 of
1972.
from the judgment and order dated 18-1-1971 of the
allahabad high companyrt in civil misc. writ petition number
4632/70. t. desai b. r. agrawala and p. c. gokhale for the
appellant. s. desai miss. a. subhashini j. ramamurthy and
miss r. vaigai for the respondent. the judgment of the companyrt was delivered by
tulzapurkar j. the point raised in this appeal by
certificate seems to be companyered by two decisions of this
court in favour of the assessee and hence we propose to
dispose of the appeal by a short judgment. the appellant a firm carries on business of
manufacturing ice and preservation of potatoes in its companyd
storage. it was assessed to income-tax for the assessment
year 1961-62 by an assessment order dated july 5 1961 on a
total income of rs. 53548. in proceedings started on
december 21 1961 under s. 34 1  of the indian income tax
act 1922 the income tax officer found certain property
income and income to the extent of one lakh from potato
transactions put through in the name of benami persons by
the assessee had escaped assessment and therefore by his
order dated december 22 1965 he brought them to tax. the
said order of the income tax officer was annulled by the
appellate assistant companymissioner in appeal on may 10 1967
on the ground that the initiation of reassessment
proceedings was number justified. the department allowed the
matter to rest there and the assistant appellate
commissioners order became final. on july 14 1967 the
income tax officer issued a numberice under s. 148 of the
income-tax act 1961 in respect of the self-same assessment
year after obtaining the sanction from the companymissioner of
income-tax. admittedly while seeking sanction for reopening
the assessment under s. 147 the income-tax officer in his
report categorically stated that
the assessee had companycealed the income of rs. 100000 from
undisclosed source on account of benami storage of potatoes
in various names and the same had escaped assessment owing
to the failure on the part of the assessee to disclose his
income fully and truly. pursuant to the numberice the appellant
filed a return under protest on august 14 1967. the
appellant challenged the numberice by filing a writ petition in
the allahabad high companyrt inter alia on the ground that no
reassessment proceedings companyld be undertaken under s. 147 of
the 1961 act inasmuch as in respect of the self-same escaped
income proceedings under s. 34 1  of the 1922 act had been
undertaken and were pending on april 1 1962 when the 1961
act came into force and in this behalf reliance was placed
on s. 297 2   d   ii  of the 1961 act. the high companyrt
rejected the companytention on the ground that in order that s.
297  2   d   ii  should apply the proceedings under s. 34
of the 1922 act must be legal proceedings with jurisdiction
which was number the case here. it is difficult to sustain this decision of the high
court in view of two decisions of this companyrt in s. b. jain

mahendra 1  and gujar mal modi v. c.i.t. 2  where it has
been held that s. 297  2   d   ii  is companycerned with the
factual pendency of proceedings under s. 34 of the 1922 act
and number with their legality. it must in fairness be stated
that numbere of these decisions on the proper companystruction of
s. 297 2   d   ii  had been rendered by this companyrt when the
allahabad high companyrt decided the matter. in s. b. jain v. mahendra  supra  the income-tax
officer had issued numberice to the respondent-assessee on
january 5 1962 under s. 34 1   a  of the 1922 act to reopen
his assessment for the assessment year 1946-47. the high
court quashed the numberice by its order dated march 6 1963
on the ground that the numberice was barred by limitation. in
the meantime the 1961 act came into force on april 1 1962
whereafter the income tax officer again issued a numberice on
march 26 1963 under s. 148 of the 1961 act. this companyrt held
that what s. 297 2  d  ii  of the 1961 act required was the
factual pendency of a proceeding under s. 34 of the repealed
act on april 1 1962. the question whether that proceeding
was barred by limitation or number was irrelevant. though the
earlier proceeding was quashed for the reason that numberice on
which the proceeding was based was issued beyond time it
could number be said that numberproceeding under s. 34 of the 1922
act was either factually or legally pending at the time when
the 1961 act came into force and since the proceedings
initiated
under s. 34 1   a  of the 1922 act were pending at the time
when 1961 act came into force the income-tax officer was
number companypetent to issue any fresh numberice under s. 148 of the
1961 act. in gujar mal modis case  supra  the numberice under
s. 34 1   a  of the 1922 act for reopening the assessment of
the deceased assessee was served only on one of the heirs of
the deceased assessee. the assistant appellate companymissioner
set aside the assessment made pursuant to that numberice on the
ground that it was necessary to issue numberices to all the
legal representatives of the deceased assessee. in the
meantime the 1961 act came into force and thereafter the
income-tax officer issued numberice under s. 148 of that act to
all the heirs of the deceased assessee. this companyrt held that
since the proceedings under s. 34 1   b  of the 1922 act
were pending on april 1 1962 the second numberice was
incompetent. in other words in both the cases this companyrt
laid emphasis on the factual pendency of the proceedings
under s. 34 on the relevant date and number their legality as
being material for purposes of s. 297 2  d   ii  of the 1961
act. in the case before us admittedly proceedings under s.
34 1  of the 1922 act in respect of the item of rs. 100000
 which was said to have escaped assessment  were factually
pending on april 1 1962 and therefore the numberice under s.
148 of the 1961 act would be incompetent. an attempt was made by companynsel for the revenue to
distinguish the aforesaid decisions on the ground that in
the instant case the earlier proceedings under s. 34 of the
1922 act being without jurisdiction must be regarded as number
est inasmuch as the assistant appellate companymissioner had
annulled the revised assessment made by the income-tax
officer on the ground that the initiation of the proceedings
 which was in respect of property income that had escaped
assessment  was number justified inasmuch as it was number a case
of omission or failure on the part of the assessee to
furnish full particulars of the property income. the
submission in our view is factually incorrect. the
reassessment order made by the income tax officer on
december 22 1965 clearly shows that he had initiated the
proceedings  in respect of property income  under s. 34 1
 b  i.e. in companysequence of information gathered by him from
assistant appellate companymissioners order for an earlier year
and number under s. 34 1   a  on account of any omission or
failure on the part of the assessee to make a full
disclosure and during the proceedings so initiated he came
across the item of rs. 100000 being the income from
undisclosed source which he held had been companycealed and was
liable to be included under s. 34 1   a . therefore the
initiation of the proceedings under s. 34 by the income tax
officer cannumber be regarded as being without jurisdiction and
hence
number est. as stated earlier the department allowed the
assistant appellate companymissioners order whereby the
reassessment order was quashed to become final. instead of
challenging that order a fresh numberice under s. 148 of the
1922 act was issued which in our view the income-tax
officer was number entitled to do in view of the fact that
proceedings under s. 34 of the 1922 act were factually
pending on april 1 1962 when the new act came into force.


civil appellate jurisdiction civil appeal number 1345 of
1967.
appeal from the judgment and order dated february 10 1966
of the bombay high companyrt in income-tax reference number 19 of
1962.

k. sen vasant mehta  and ravinder narain for the
appellant. jagadish swarup solicitor-general s. mitra s.-k. aiyar
and b. d. sharma for the respondent. the judgment of the companyrt was delivered by
hegde j. this is an appeal by certificate under s. 66a 2
of the indian income-tax act 1922  to be hereinafter
referred to as the act . the assessee is a private
limited company the assessment year with which we are companycerned
in this case is 1952-53 the relevant accounting year ending
on march 31 1952. the assessment for that year was
completed by the income-tax officer on august 4 1953. he
determined the assessees business profits of the year
ended on march 31 1952 at rs. 33096/- subject to the
assessees claim of unabsorbed depreciation brought forward
to the extent of rs. 42000/- and odd. after setting off
the unabsorbed depreciation to the extent of rs. 33096/-
he determined the assessees total income for the assessment
year 1952-53 at nil. in the companyrse of the assessment
proceedings the assessee -company informed the income-tax
officer by its letter of july 2 1953 about the sale of the
assessee companypany to the amalgamated electricity company
 belgaum  limited  to be hereinafter referred to as the belgaum
co. . it also brought to the numberice of the income-tax
officer the following documents

appropriate extract from the minutes of
the meeting of the board of directors of the
belgaum companypany held on 16-4-1951 agreeing to
purchase the assets of the assessee companypany

resolution passed on 19-9-1951 by the
board of directors for the assessee companypany
deciding to sell the companycern to the belgaum
company

agreement dated 19-9-1951 between the said
two companypanies
later on in response to a letter from the income-tax offi-
cer the assessee companypany informed him the manner in which
the sale price of rs. 93524-6/15/8 was determined. it
also submitted a statement of unabsorbed depreciation. that
statement set out the depreciation accrued as well as that
allowed. the entire companysideration for the sale was paid in
cash on october 4 1951 and the profits earned by the
assessee for the period of six months ended on september 30
1951 were paid over to the belgaum companypany. in companypleting
the original assessment the income-tax officer observed
on going through these documents and the
copies of the resolution passed by the
shareholders of the amalgamated electricity
co. it is seen that numberadjustment is
necessary in the matter. the position of the
companys total income is determined as
under
we may mention at this stage that the companysideration received
by the assessee companypany for the sale of- its assets was much
more than their written down value. yet the assessee
company did number show in its return any profits under s.
10 2  vii  of the act number did it show the price received in
excess of. the written down value of the assets sold in part
i of section d of the return. sometime later the income-tax officer found out that the
profits deemed to have been earned by the assessee companypany
under s. 10 2  vii  had number been assessed. hence after
obtaining the sanction of the companymissioner he companymenced
proceedings under s. 34 1  a . after hearing the assessee
the income-tax officer reassessed the assessee on august 26
1957 determining its total income for the assessment year in
question at rs. 448893/on the basis that the profits
earned by the assessee under s. 10 2  vii  were rs. 488386/-. he rejected the companytention of the assessee that
the numberice issued by him under s. 34 1  a  was invalid
inasmuch as it had placed before him all the primary facts
necessary for the assessment. the assessee unsuccessfully
contended that there was numberbasis for his companyclusion that
there was any failure on its part to disclose fully and
truly all material facts necessary for its assessment. the
income-tax officer opined
that the failure of the assessee to disclose its profits
under s. 10 2  vii  brought the case within the scope of s.
34 1  a . in appeal the appellate assistant companymissioner
concurred with the view taken by the income-tax officer. lie
held that the assessee had a statutory duty to submit a
return showing all profits including the-deemed profits
under s. 10 2  vii . on a further appeal to the tribunal the impugned assessment
was challenged on various grounds. it was urged before the
tribunal on behalf of the assessee that numberportion of the
price realised by the sale of its assets came within the
scope of s. 10 2   vii  and further even if any portion of
that price can be companysidered as deemed profits under s.
10 2  vii  it was impermissible for the income-tax officer
to initiate proceedings under s. 34 1  a  as the assessee
had placed all the primary facts before the income-tax
officer and therefore it cannumber be said that it had number
fully and truly disclosed all material facts. on behalf of
the revenue it was urged before the tribunal that the part
of price realised by the sale of the assets should be deemed
as profits under s. 10 2  vii  those profits had number been
included in the return of the assessee number has the assessee
placed all the material facts necessary for determining its
tax liability therefore the income-tax officer was
justified in initiating proceedings under s. 34 1  a  and at
any rate the impugned assessment can be justified under s.
34 1  b . the tribunal did number go into the question whether
any part of the sale proceeds can be companysidered as deemed
profits under s. 10 2  vii  but it held that the assessee
had placed before the income-tax officer all the primary
facts necessary for its assessment and therefore it cannumber
be said that it had failed to disclose fully and truly all
material facts. it observed
there can be numbermanner of doubt that all
primary facts regarding the transaction of the
sale of assessees assets were placed by the
assessee before the income-tax officer at the
time of the original assessment. the then
income-tax officer appears to have applied his
mind to the facts of the case and after doing
so he arrived at the finding that no
adjustment in regard to the surplus arising
out of the sale of the assets was necessary. whether or number there was any profit under s.
10 2  vii  and if so whether it was taxable
was an inference to be drawn from the facts
which were fully placed before the income-tax
officer. the mere omission of the sale
transaction from section d of part i of the
return of income would number enable the
departmental authorities to hold that the
assessee had failed to disclose fully and
truly all material facts necessary for its
assessment. in -dew of the fact that all
the relevant facts were available
to the income-tax officer who made the
original assessment the present assessment on
those very facts amounts to merely a change of
opinion by the income-tax officer. there has
been numbersuppression of any material
information at the time of the original
assessment and as such the action under
section 34 1  a  cannumber be sustained. it rejected the companytention of the revenue that the impugned
assessment can be justified under s. 34 1  b  as according
to it the facts proved in the case do number bring the case
within that provision and further the income-tax officer did
number proceed under that provision. at the instance of the companymissioner of income-tax the
tribunal submitted the following questions-for the opinion
of the high companyrt of bombay

whether in the circumstances of this case
it can be held that in the companyrse of original
assessment proceedings for the assessment year
1952-53 the assessee companypany omitted or
failed to disclose fully and truly all the
material facts necessary for its assessment
for that assessment year ? whether where as a matter of fact
action for reassessment proceedings had been
initiated on the belief that the provisions of
s. 34 1   a  were properly applicable to the
facts of the case department was precluded
from sustaining the validity of the
reassessment made on the grounds that the
reassessment fell as well within the scope of
s. 3 4 1    b  ? the high companyrt answered both these questions in favour of
the revenue. hence this appeal. in our judgment the tribunal erred in declining to decide
the question whether any portion of the sale price came
within the scope of s. 10 2   vii . that question should
have been examined. at the very outset for the purpose of
considering whether the assessee had placed before the
income-tax officer truly and fully all material facts
necessary for -the purpose of its assessment. if it is
found that any portion of that sale price are profits then
in our opinion the high companyrt was right in holding that the
assessee had failed to place before the income-tax officer
during the original assessment truly and fully all material
facts necessary for the purpose of assessment. admittedly
the price realised at the sale in excess of the written
down value of the assets sold had number
been included as profits in the return submitted by the
assessee. it had also number shown the same in section d of
part i of the return. it may also be numbered that the
assessee had number shown either in its return or in any of the
documents submitted to the income-tax officer the written
down value of the assets sold. hence number only the income-
tax officer was number told that the assessee had earned any
profit under s. 10 2  vii  number even the essential fact viz. the written down value of the assets sold was supplied to
him so as to enable him to -find out the price in excess of
the written down value realised by the assesee. it is true
that if the income-tax officer had made some investigation
particularly if he had looked into the previous assessment
records he would have been able to find out what the
written down value of the assets sold was and companysequently
he would have been able to find out the price in excess of
their written down value realised by the assessee. it can
be said that the income-tax officer if he had been diligent
could have got all the necessary information from his
records. but that is number the same thing as saying that the
assessee had placed before the income-tax officer truly and
fully all material facts necessary for the purpose of
assessment. the law casts a duty oil the assessee to
disclose fully and truly all material facts necessary for
his assessment for that year. further explanation to
section 344 1  says
production before the income-tax officer of
account-books or other evidence from which
material facts companyld with due diligence have
been discovered by the income-tax officer will
number necessarily amount to disclosure within
the meaning of this section. if the assessee had disclosed to the income-tax officer the
surplus price realised by it over and above the written down
value of the assets sold or in the alternative if it had
informed the income-tax officer the price realised as well
as the written down value of the assets sold then it
could have been said that the assessee had done its duty
and it was for the income-tax officer to draw any inference
on the facts placed before him. but the failure of the
assessee to disclose to the income-tax officer the fact that
the price realised by it by sale of its assets was more than
the written down value of those assets or at least the
written down value of those assets amounts in our opinion
to a failure on its part to disclose fully and truly the
material facts necessary for its assessment. from the
cryptic statement of the income-tax officer in the original
assessment order that numberadjustment is necessary the
tribunal was number justified in drawing the inference that the
income-tax officer had companysidered all the relevant facts. in support of his companytention that the disclosure made by the
assessee was true and full in all material particular and
hence
numberproceedings companyld have been taken under s. 34 1  a . mr.a. k. sen learned companynsel for the assessee relied on the
decision of this companyrt in v.d.m. rm.m.rm. muthiah
chettiar v. companymissioner of income-tax madras  . in that
case the question that arose for decision was whether the
assessees failure to include in his return the income of
his wife and his minumber sons admitted to the partnership of
which he was a partner assessable in his hands under s. 16
 3   a   ii  can be companysidered as a failure to disclose. truly -and fully all facts material for the assessment. this companyrt came to the companyclusion that the omission in
question did number companye within the scope of s. 3 4  1    a . therein this companyrt observed that in the form of return
prescribed under rule 19 of the indian income-tax rules
1922 framed under s. 59 of the act there was numberclause
which required disclosure of the income of any person other
than the income of the assessee which was liable to be
included in his total income. number was the assessee required
under s.22 5  of the act in making a return to disclose
that any income was received by his wife or minumber child
admitted to the benefits of partnership in a firm of which
he was a partner. hence by number showing the income of his
wife and minumber children the assessee cannumber be deemed to
have failed to disclose fully and truly all material facts
necessary for his assessment within the meaning of s.
34 1  a  of the act. therein this companyrt further observed
that s. 16 3  of the act imposes an obligation upon the. income-tax officer to companypute the total income of an
individual for the purposes of assessment by including the
items of income set out in cls.  i  to  iv  and  b  but
thereby numberobligation is imposed upon the taxpayer to
disclose the income liable to be included in. his assessment
under s. 16 3 . for failing or omitting to disclose that
income proceedings for reassessment cannumber therefore be
commenced under s. 34 1  a . the ratio of the above
decision is inapplicable to the facts of the present case. if any part of -the. price with which we are companycerned in
this case can be companysidered as deemed profits under s.
10 2  vii  then the assessee had a duty to include it in
his return. his failure to do so brings his case within the
scope of s. 34 1  a . mr. sen next relied on the decision
of this companyrt in calcutta discount company limited v. income tax
officer companypanies distt. i calcutta and anr. 2 . there
this companyrt had observed
once all the primary facts are before the
assessing .authority he requires numberfurther
assistance by way of disclosure. it is for
him to decide what inferences of facts can be
reasonably drawn and what legal inferences
have ultimately to be drawn. it is number for
somebody else-far less the assessee-to tell
the assessing authority what inferences
whether of facts or law should be
 1  74 i. t. r. 183.  2  41 i. t. r. 191 at 201.
drawn. indeed when it is remembered that
people often differ as regards what inferences
should be drawn from given facts it will be
meaningless to demand that the assessee must
disclose what inferences-whether of. facts or
law-he would draw from the primary facts. in that case the question for companysideration was whether the
assessee had a duty to inform the income-tax officer with
what intention the shares companycerned in that case were sold. we do number think that the decision in question is of any
assistance to the assessee. for the reasons mentioned above we are of the opinion
that the high companyrt should number have and we in our turn will
number answer the questions referred under s. 66 1  of the act
because in our opinion those questions cannumber be answered
without first deciding whether the part of the sale price
received by the assessee amounts to profits under s.
10 2  vii . the tribunal must first decide that question
and thereafter decide the other questions of law arising for
decision on the basis of its decision whether there was any
profits falling within s. 10 2  vii .


criminal appellate jurisdiction criminal appeal number 158 of
1971.
appeal by special leave from the judgment order dated the
3rd july 1970 of the bombay high companyrt in companyfirmation cut
number 20 of 1969.

y. patel and m. n. shroff.for the appellant. r. agarwala for the respondent. the judgment of the companyrt was delivered by
sarkaria j.-the principal question raised in this appeal by
special leave is whether section 465 of the companye of
criminal procedure 1898 is applicable to proceedings in
reference under s. 374 pending before the high companyrt for
confirmation of the death sentence awarded to an accused by
the companyrt of session? it arises out of these circumstances. sindhi alias raman was tried companyvicted and sentenced to
death on 13-8-1969 by the additional sessions judge
greater bombay for the double murder of two brothers lal
chand jagannath yadav and dullar jaggi yadav in chinhavali
farm at malad on the night between the 25th and 26th of
august 1968. sindhi did number appeal against the order of
his companyviction. but the trial judge made a reference under
s. 374 of the companye to the high companyrt for companyfirmation of the
death sentence. the reference came up for hearing towards
the end of 1969.
on 22-10-1969 the prisoner expressed a desire to be present
at the hearing of his case before the high companyrt. two
advocates namely shri d. m. rane with shri mengde as the
senior were appointed as amicus curiae to defend the
condemned prisoner in the high companyrt. after interviewing
the prisoner in jail on 8-1-1970 and 9-1-1970 the advocate
reported to the high companyrt that the accused was number able to
communicate with them intelligently and rationally as he
appeared to be insane. companynsel submitted an application to
the high companyrt requesting that the accused be got examined
by a board of psychiatrists in order to determine as to
whether he was or was number of unsound mind. the application
was opposed on behalf of the state inter alia on the ground
that s. 465 applies only to a trial before a companyrt of
session. the high companyrt rejected this companytention and by
its order dated 14th january 1970 directed the surgeon-
general bombay to companystitute a special medical board of
three psychiatrists on the lines indicated in rule 850 of
the bombay jail manual to examine the accused and
determine whether the accused is of unsound mind and
secondly whether in companysequence of his unsound ness of
mind he is incapable of making his defence in the proceed-
ings before us. the board was accordingly companystituted. the board deputed dr. balakrishna laxman chandorkar
superintendent of the mental hospital to interview the
accused. dr. chandorkar companysequently had fourteen
interviews with the accused and also examined the latter
physically. the accused was sent under dr. chandorkars
directions to several hospitals for special examinations. dr. chandorkar gathered the past history of the accused
also in so far as it was relevant to determine the issue
referred to him. the companyclusion reached by dr. chandorkar. which he reported to the board on 28-2-1970 was that the
accused was suffering from paranumberd schizophrenia and was of
unsound mind and. in companysequence. he was incapable of making
his defence. on receiving the report of dr.
chandorkar the special medical board also examined and
interviewed the accused on five occasions. their
conclusion as companymunicated to the high companyrt was

sindhi dalwai alias raman raghav
 prisoner  is of unsound mind. he is
suffering from a psychosis called chronic
paranumberd schizophrenia or paraphrase the
latter being an old term for chronic paranumberd
schizophrenia plus auditory hallucinations. he is dangerous to the society and hence
certifiably insane. sindhi knew the nature of the act i.e. he knew that he was killing human beings. he did knumber that what he did was wrong
and companytrary to the law of the land but he
firmly believed that what he was doing was
right and in tune with the law of kanumbern
whose law according to him was obligatory. for
him to follow. there is such a degree of unsoundness of
mind resulting in such a degree of defect of
reason that he is in-capable of companyoperating
with and instructing his defence companynsel in
the companyduct of the trial and companyrt proceedings
and he is incapable of making his defence in
the proceedings before the high companyrt. the
reasons for this incapability are

complete lack of insight into his
illness
 b  firm and unshakable delusions that only
the law of kanumbern matters and the law of
this world does number apply to him and hence his
inability to participate in the companyrt
proceedings
 c  his companyplete lack of realization of the
gravity of the crime and the seriousness of
his death sentence
 d  his judgment is so much influenced by
his delusions and hallucinations that he is
incapable. of rational thinking and
behaviour. after examining dr. marfatia the chairman of the board and
dr. chandorkar the mental specialist as companyrt witnesses
the high companyrt held
the prisoner is clearly of unsound mind and
in companysequence thereof he is unable to make
his defence. therefore proceedings in the
confirmation case will have to be postponed
and in the meantime it-will be necessary to
direct that the state government do detain the
prisoner in safe custody in yeravda
central prison. it is against this order dated 3-7-1970 that the state
has companye in appeal before this companyrt. mr. patel learned companynsel for the appellant assails the
order of the high companyrt postponing the proceedings under s.
465 criminal procedure companye on these grounds

the operation of s. 465 is in terms
confirmed to the trial stage. the section
does number apply to proceedings before the high
court on reference unders. 374 as the
sameare post-trial proceedings

the question as to whether the accused
person has the mental capacity to defend
himself or number arises only at the pre-
conviction i stage before the companymittal companyrt
or the trial companyrt because it is only at that
stage the accused person has a right to be
heard and lead evidence in defence. but in
proceedings on reference under s. 374 the
accused person has numberright of audience before
the high companyrt number even where the high companyrt
directs a further enquiry or the taking of
additional evidence under s. 375 number where
any appeal of the accused filed through the
jailor under s. 420 companyes up for hearing
along with the reference. it is anumberher
matter that the high companyrt has the power even
in such proceedings to hear the accused. for
this argument support has been sought from
certain observations of madgaonkar a.j.c. in
gul v. emperor 1 . in this companynection learned companynsel has pointed out that at
the companymencement of the trial before the companyrt of session
also a question was raised as to the mental capacity of the
accused and thereupon the trial judge after making a due
enquiry in accordance with the provisions of s. 465
recorded a clear-cut finding that the accused was then of
sound mind and capable of understanding the nature of the
proceedings and making a defence. this finding of the trial
judge it is stressed was number assailed before the high
court and still stands unchallenged. learned companynsel also tried to distinguish the decision of
this companyrt in vivian rodrick v. state of- west bengal 2  on
the ground that in that case the companyvict had preferred an
appeal against the order of his companyviction and
consequently the observations of this companyrt in regard to
the applicability of s. 465 cr. p.c. to proceedings in
reference axe merely obiter. in the alternative it is
submitted that those observations need reconsideration in
the light of the arguments number advanced before us. section 465 of the companye of criminal procedure 1898 runs
thus

if any person companymitted for trial before
a companyrt of session or a high companyrt appears to
the companyrt at his trial to be of unsound mind
and companysequently incapable of making his
defence the jury or the

a r 1921 sird 84.  2  19693 s.c.c.176
court shaft in the first instance try the
fact of such unsoundness and incapacity and
if the jury or companyrt as the case may be is
satisfied of the fact the judge shall record
a finding to that effect and shall postpone
further proceedings in the case and the jury
if any shall be discharged. the trial of the fact of the unsoundness
of mind and incapacity of the accused shall
be deemed to be part of his trial before the
court. it will be seen that s. 465 in terms relates to
unsoundness of accuseds mind and his companysequent incapacity
to make defence at the time of trial only. the question
therefore is does the trial on a murder charge end with
the companyviction and pronumberncement of death sentence on the
accused by the companyrt of session? or does it companytinue till
the reference under s. 374 is disposed of by the high companyrt
? answer to this question was given by this companyrt speaking
through govinda menumber j. as far back as 1956 in jumman and
ors. v. state of punjab 1  in a telling passage thus
it is clear from a perusal of these
provisions  ss. 374 375 376 and 377 cr. c.  that in such circumstances the entire
case is before the high companyrt and in fact it
is a companytinuation of the trial of the accused
on the same evidence and any additional
evidence and that is why the high companyrt is
given power to take fresh evidence if it so
desires but there is a difference
when a reference is made under s. 374
criminal procedure companye and when disposing of
an appeal under s. 423 criminal procedure
code and that is that the high companyrt has to
satisfy itself as to whether a case beyond
reasonable doubt has been made out against the
accused persons for the infliction of the
penalty of death. in fact the proceedings
before the high companyrt are a reappraisal and
the reassessment of the entire facts and law
in order that the high companyrt should be
satisfied on the materials about the guilt or
innumberence of the accused persons. such being
the case it is the duty of the high companyrt to
consider the proceedings in all their aspects
and companye to independent companyclusion on the
materials apart from the view expressed by
the sessions judge.  emphasis supplied
the same position was reiterated with emphasis by this companyrt
in surjit singh and anr. v. state of punjab  2 . even in gul v. emperor  supra  cited by mr. patel mad-
gonkar a. j. c. expressed himself in a similar strain. what
he said more than half a century back still retains its
freshness and relevance and may be extracted

air-1957 s.c.469. criminal appeal number 77 of 1968 decided on 15-10-1968.
the worth and sanctity of human life are a
test and mark of civilized societies and are
increasingly reflected in the criminal
jurisprudence of england and of india. in
india the legislature has provided in
confirmation proceedings a final
safeguard this may perhaps
increase our responsibilities and add to our
labours but numberone would shirk the one or
grudge the other even in a case where the
liberty much more where the life of the
subject is companycerned. this duty of judgment
is however laid id the first instance upon
the jury and the trial judge but
equally and with all this weight this companyrt
in companyfirmation must finally weigh for itself
the whole evidence in the light of all the
arguments and companyfirm or otherwise according
to its own final companyclusion on the guilt or
innumberence of the sentenced person in the dis-
charge of the duty laid upon it by law. from the above companyspectus it emerges clear that so far as
in accused person sentenced to death is companycerned his trial
does number companyclude with the termination of the proceedings in
the companyrt of session. the reason is that the death sentence
passed by the companyrt of session is subject to companyfirmation by
the high companyrt. a trial cannumber be deemed to have companycluded
till an executable sentence is passed by the companypetent
court. viewed from that stand-point the companyfirmation
proceedings under ss. 374 375 and 376 chapter xxvii of the
code of 1898 are in substance a companytinuation of the
trial. number is it companyrect to say that in such companyfirmation
proceedings the high companyrt can arbitrarily refuse to hear
the accused either in person or through companynsel or other
agent. in vivian rodricks case  supra  the appellant was
convicted under s. 302 penal companye by the companyrt of session
and sentenced to death. the sessions judge made a reference
under s. 374 for companyfirmation of the death sentence. the
convict appealed against the order of his companyviction and-
sentence. the high companyrt dismissed the appeal accepted the
reference and companyfirmed the companyviction and the sentence. in
an appeal by special leave brought before this companyrt it
was inter alia companytended that the proceedings taken in the
appeal before the high companyrt were void for number-compliance
of s. 465. what this companyrt said in repelling that
contention being equally applicable to what has been
canvassed before us on behalf of the appellant. may usefully
be extracted
we. are of the view that it is number necessary
for us in this case to express only opinion
on the applicability or otherwise of the
provisions of s. 465 cr. p.c. to appeals. for on the facts of the case we are inclined
to accent the alternative companytention of mr.
rana that in the face of the medical evidence
and in view of the fact that the
appellant was companytesting his companyviction for
murder and the
sentence of death imposed on him
it would have been proper if the division
bench which heard his appeal had postponed the
hearing of the appeal till such time as the
appellant was declared fit to companytest his
appeal whatever may be the legal
position-regarding the applicability of s. 465
cr. p.c. to appeals we are number inclined to
agree with the proposition enunciated by the
learned judges that there is numberbar to hearing
and disposing of an appeal even if the
accused-appellant is of unsound mind or even
insane at the time when the appeal is taken up
for hearing in our opinion when the re-
port is that an accused appellant is of
unsound mind it is reasonable to infer that
he is incapable of making his defence. the
court in the circumstances is bound to afford
him the same protection to which he would be
entitled had he been of unsound mind at the
time of the trial. in the present case numberappeal was filed by the prisoner
before the high companyrt. it is therefore unnecessary for us
to examine whether the provisions of s. 465 in terms or
in principle apply to an appeal by the companydemned prisoner
before the high companyrt. suffice it to say that the
expression at his trial occurring in s. 465 has to be
liberally companystrued in a manner which is number repugnant to
the fundamental principle of natural justice companyveyed by
the maxim audi alteram partem audiatur el altera pars. in the light of what has been said above we negative the
legal companytentions raised by the appellant-state. the next companytention of mr. patel is that the high companyrt left
the decision of both the points viz.  1  whether the
accused was of unsound mind and  2  whether in companysequence
he was incapable of making his defence almost entirely to
the medical board. such delegation which gives the
proceeding the companyour of trial by doctors is number permissible
under the law. reference on this point has been made to r.

pondole 1 . on merits also it is maintained the
findings on the aforesaid issues are wrong as the accused
fully knew that he had been tried and sentenced to death
for the murders on question. emphasis is has been laid on
the fact that the accused had on 18-12-1969 expressed in
writing through jailor his desire to be present in the high
court at the time of the hearing of his case. companynsel has
referred extensively to the statements of doctor chandorkar
and dr. marfatia and companytended that everything about the
mental companydition of the accused even according to these
medical experts was numbermal excepting that he was suffering
from the delusion that he had been ordained by some higher
kanumbern to companymit these murders. according to mr. patel
insanity judged by clinical standards is different from
insanity determined by legal
 1  1959 all e.r. 418.
standards. it is urged that since the accused fully knew
the nature of the criminal acts he had companymitted and the
proceeding against him it companyld number be said that he was
incapable of making his defence. it is true that the high companyrt had by its order dated 14-1-
1970 referred both the issues in regard to the mental
capacity of the accused to the medical board and has given
due weight to their opinion. but it is number companyrect to say
that the high companyrt accepted the ipse dixit of the medical
experts. it examined dr. marfatia and dr. chandorkar as
court witnesses. these experts gave detailed and companyent
reasons in support of their opinion. the high companyrt
meticulously companysidered their evidence and thereafter
recorded its own findings on the crucial issues.