JUDGMENT <NAME>, J.

1. The short question which has been referred to us is :-

"Whether on the facts and in the circumstances of the case the sale of corrugated sheets by the opponent-firm was covered by entry 80 of Schedule B or entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957 ?"

2. The short facts which have given rise to this reference are :-

The opponent-firm is a registered dealer dealing in iron and steel, gold and silver, vegetable ghee, corrugated iron sheets etc. It was assessed according to best judgment for the period from 1st April, 1956, to 31st March, 1957, by an order passed by the Sales Tax Officer, Godhra, on 30th June, 1962. The assessee appealed to the Assistant Commissioner of Sales Tax which was dismissed and its revision was only partially allowed by the Deputy Commissioner of Sales Tax. The Deputy Commissioner held that entry 15 of Schedule B relating to iron and steel only included primary products of the rolling mills which are not subjected to any process after rolling and, therefore, corrugated sheets were covered by entry 80 of Schedule B to the Act. In revision the <ORG> has however held that the corrugated sheets sold by the opponent would be "iron and steel" within the meaning of entry 15 of Schedule B to the Act. The <ORG> has, therefore, required the <ORG> to make the aforesaid reference to this Court.

3. The relevant entry 15 at the relevant time was as under :- "Iron and steel". The said entry was subsequently amended to bring it in line with section 14 of the Central Sales Tax Act which declared "iron and steel" as goods of special importance in inter-State trade or commerce. Under section 14 of the Central Sales Tax Act, 1956, the said entry is iron and steel, i.e.,

(a) pig iron and iron scrap.

(c) steel scrap, steel-ingots, still billets, steel bars and rods.

(d) (i) steel plates.

(ii) steel sheets. Sold in the same form (iii) steel bars and till bars. in which they are directly (iv) rolled steel sections. produced by the rolling (v) tool alloy steel. mills. 4. The residuary entry 80 covers those items which did not fall under any specific item. Therefore, once a commodity in question would be covered under entry 15, there would be no question of residuary entry 80 being attracted. It is only if we hold that the commodity in question has ceased to be "iron and steel" or is not "iron and steel" that we can answer that it falls under the residuary entry 80 in this case.

5. The question before as relates to corrugated iron sheets. Corrugated only means wrinkled. It is still iron as it is only in wrinkled condition and the form which it has taken is the sheet form. Therefore, the corrugated iron sheets would be "iron", which has been given a treatment of corrugation and which is in the form of sheets. The question before us is whether it can be said to be iron and steel within the meaning of entry 15. Entry 15 uses two words in close association, i.e., iron and steel. Steel is made from iron by processing it. On a plain literal construction, this entry must cover iron and steel in all its forms. So long as the commodity continues to retain the character of iron and steel and it is only when it is manufactured into a different finished product or fabricated into a different article that it would cease to fall under this entry. The question of interpretation of similar entries is now well settled. <CITATION> , ( 11 S.T.C. 827.) <ORG> had to interpret the expression "groundnut oil" within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, in the context of hydrogenated groundnut oil. It was contended that the hydrogenated oil was not "groundnut oil". At page 834 their Lordships pointed out that the physical state did not determine the identity of the commodity and so merely because Hydrogenated groundnut oil assumed a semi solid form, it did not cease to be groundnut oil. At page 835 their Lordships further pointed out that it was true that the change was both additive and inter-molecular and still it could hardly be said that rancid groundnut oil was not groundnut oil. It would undoubtedly be very bad groundnut oil but still it would be groundnut oil and if so it did not seem to accord with logic that when the quality of the oil was improved in that its resistance to the natural processes of deterioration through oxidation was increased, it should be held not to be oil. Thus, though the hydrogenated oil was refined groundnut oil after this process of hydrogenation, it was held that hydrogenated oil still continued to be groundnut oil notwithstanding the processing which was merely for the purposes of rendering the oil more stable, thus improving its keeping qualities for those who desire to consume groundnut oil. On a parity of reasoning, even if iron had been corrugated or put in there form of sheets it will still continue to be iron and shall corrugation or conversion into sheets to make it more acceptable to the customers would riot turn it into a different manufactured product of iron so lone as iron continues its essential character and the only change was one of corrugation or in shape, i.e., of sheets. <CITATION> . ( 19 S.T.C. 24 at page 28.) this Court had to deal with entry 47 of Schedule A to the Bombay Sales Tax Act, 1959, which was "sugar in all its forms". The Court hall to deal with patasa, harda and alchidana and to determine whether these commodities fell within the definition of "sugar" in entry 47. At page 28 this Court followed the decision of <ORG> in <NAME> v. <NAME> and Others, ( 5 S.T.C. 365.) where the question had arisen regarding chira and muri as to whether they could be said to be covered by tile words "all cereals and pulses" including all forms of "rice". "Muri" was parched, beaten rice, which involved the process of boiling paddy, its dehydration, frying and flattening. "Muri" involved the process of soaking, boiling and dehydration of paddy and the removal of husks. As a result of these processes the article, rice, became edible and could the taken as food without any more cooking. Even the article, when so transformed, bore a different name and could not be commonly recognised as rice. <NAME>, C.J., observed that those commodities could be regarded more as forms of rice than products thereof and were, there fore, exempt from tax under the Assam Sales Tax Act, 1947. Relying upon this decision, this Court held that the word "form" would connote a visible aspect in which the thing existed or manifested itself. Sugar might manifest itself in the form of patasa as a result of certain simple processes being carried out. It might similarly manifest itself in the form of alchidana or small lumps of sugar or as harda. If sugar so manifests itself it could not be said that sugar had ceased to be sugar merely because it takes a particular shape or form which appeals to certain class of people on festive occasions. The ratio of this decision of this Court was approved by their Lordships of <ORG> at page 33 in the decision in <CITATION> ., ( 19 S.T.C. 24.) where their Lordships observed that the word "sugar" in item No. 47 was intended to include within its ambit all forms of sugar, that is to say, anger of any shape or texture, colour or density and by whatever name it is called. It was held that the view of <ORG> was correct. While referring to the decision in <ORG> ( 11 S.T.C. 827) at page 34 their Lordships pointed out that notwithstanding the processing which was merely for the purpose of rendering the oil more stable, to be groundnut oil two conditions had to be satisfied, that it must be from groundnut and it must be "oil". The hydrogenated oil was from groundnut and in its essential nature it remained an oil. It continued to be oil for use for the same purpose as groundnut oil which had not undergone the process, and the mere fact that hydrogenated oil was semi-solid did not alter its character as an oil. On a parity of reasoning when iron is corrugated to make it more acceptable to the customers or is put into the form of sheets, it still continues to retain the essential character of iron and we cannot hold that it would fall under the residuary entry 80 so long as it retained its essential character of "iron". We would also refer in this connection to the decision of <ORG> in <CITATION> ( 17 S.T.C. 313), where the question had arisen regarding scrap iron which was processed for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. The question arose whether these bars, hats and plates sold were iron and steel exempted under the relevant notification. There was another entry, entry 39, relating to "goods prepared from any metal other than gold and silver" and it, therefore, included goods prepared from iron. At page 315 their Lordships pointed on that a comparison of the said two notifications brought out the distinction between raw materials of iron and steel and the goods prepared from iron and steel; while the former is exempted from tax, the latter is taxed. Therefore, iron and steel used as raw materials for manufacturing other goods were held to be exempted from taxation. So long as iron and steel continue to be raw materials, they enjoy the exemption. Scrap iron purchased was merely re-rolled into bars, hats and plates and they were processed only for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. They did not in the process lose their character as iron and steel. The dealer sold "iron and steel" in the shape of bars, dots and plates and the customer purchased "iron and steel" in that shape and, therefore, it was held that the bars, hats and plates sold by the assessee were iron and steel exempted under the notification. This decision would completely clinch the issue as it in terms held that mere alteration of the shape is wholly immaterial or even the processing which makes the article attractive and acceptable to the customers would not matter. The real test laid down by their Lordships is that so long as in any such processing the commodity does not lose the character as iron and steel, it must be held to be exempted. The learned Advocate-General vehemently relied upon the fact that their Lordships had in the earlier line made a distinction between raw materials of iron and steel and the goods prepared from iron and steel, and iron and steel was exempted from tax while the latter were taxed. That distinction was drawn by their Lordships on the facts of that case as their Lordships were dealing with the relevant entries where such distinction had to be spelt out. The test which their Lordships have relied is whether such processing, which is done to make the iron and steel attractive and acceptable to the customers by giving the shape of bars, flats and plates would make it lose the character of iron and steel. In fact relying on these conditions this very <ORG> in S.T.R. No. 19 of 1965 decided on 19th June, 1958, (Since reported as <ORG> v. The state of Gujarat  22 S.T.C. 160.) held that "snuff" which was included in the definition of "tobacco" in all its forms, manufactured or not, did not lose its essential character when it was put in the form of a paste, viz., creamy dental snuff, when the other ingredients were added, like flavouring agents, water and preservatives, to make the paste more marketable when the snuff was intended to be used for applying to the gums. It was in terms held that the said dental creamy snuff completely retained its essential character as snuff as flavoring agents, preservatives and water were added only to change its physical condition to make it more acceptable to the customers when intended for use as paste for application to the gums and there was no reason to hold that snuff had lost its essential character and a totally different article was produced which could not claim exemption. On a parity of reasoning we must hold that "iron" does not lose its essential character when it is put merely in the form of corrugated iron sheets, as it is merely an alteration of form or shape to make it more acceptable to the customer. It may be capable of independent use but that does not change it into a totally different manufactured product or a new fabricated article in which it can be said that iron and steel has lost its essential character.

6. The learned Advocate-General next argued that we must interpret entry is, with the help of the amended entry in the light of section 14 of the Central Sales Tax Act, 1956. The ]earned Advocate-General relied upon the doctrine of parliamentary exposition. It is well settled that that doctrine could not apply where there is apparent reason to show why the <ORG> introduced the amendment and when the whole object would be apparent that the amendment was not one by way of parliamentary exposition of the earlier statute. As I have already mentioned, section 14 was enacted by the <ORG> and this amendment was done by the State <ORG> to bring the entry of "iron and steel" in line with that definition given in section 14 . Even assuming that the learned Advocate-General was right in inviting our attention to that definition it is obvious even on a plain reading of that definition that even steel plates, steel sheets, steel bars and tin bars, rolled steel sections, and tool alloy steel are included along with pig iron, scrap iron and iron plates etc. That indicates that the <ORG> has in terms included in the scope and ambit of this entry "iron and steel" even when it is in different forms and shapes, so long as the character of "iron and steel" is retained. Various kinds of iron and steel, i.e. pig iron, scrap iron and even steel in its various forms, including steel sheets are covered. If steel sheets could fall within the scope of this entry, it is difficult to follow the reasoning of the learned Advocate-General that iron sheets would not fall in it. The learned Advocate-General's argument is that it is only when "iron and steel" is used as raw materials for the manufacture of products that it falls within the ambit of entry 15. That test is slightly misleading for the simple reason that those very raw materials which can go into fabrication of view articles or which produce finished manufactured products may equally be of direct use as such. The real test should be not the use that is made of these raw materials, whether in the process of manufacture or fabrication of these articles, but whether the commodity is still in the form of iron and steel and retains its essential character of iron and steel. <ORG> of this High Court in <CITATION> , ([1964) 15 S.T.C. 586) had an occasion to consider this question, where pieces of rolled steel sections, joined together by rivetting, were held to retain the same form in which rolled steel sections were directly produced by rolling mills. It is, therefore, clear that on no principle of construction we can hold that this particular entry "iron and steel" would not be applicable to tile case of corrugated iron sheets, when it can never be doubted that they continued to retain their essential character of iron and the only processing of corrugation was done or shape was given by turning them into iron sheets for the propose of making the commodity in question more acceptable to the customers in the market. It would be wholly immaterial whether such corrugated iron sheets could be put to direct use or they were to be used for turning out other articles from them. The <ORG> was, therefore, right in its view that the corrugated iron sheets sold by the assessee firm were "iron and steel" and they did not fall within the residuary entry 80. With great respect to my learned brother, I beg to differ and I, therefore, record my opinion as under :

In the result this reference should be answered, in my opinion, by holding that the corrugated iron sheets sold by the opponent-firm were covered by entry 15 of Schedule B of the Act of 1953, prior to its amendment by Act No. 16 of 1957 and not by the residuary entry 80 of Schedule B. Reference is answered accordingly. The <ORG> shall pay the costs of this reference to the assessee.

Divan, J.

7. In this reference under section 54 of the Bombay Sales Tax Act, 1953 (hereinafter referred to as the Act), the following question has been referred to us by <ORG> :-

"Whether on the facts and in the circumstances of the case the sale of corrugated sheets by the opponent-firm was covered by entry 80 of Schedule B or entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957."

8. The short facts giving rise to this reference are as follows :-

The opponent-firm is a registered dealer dealing in iron and steel, gold and silver, vegetable ghee, corrugated iron sheets etc. The firm was assessed according to best judgment for the period from 1st April, 1956, to 31st March, 1957, by the <ORG>, Godhra, by his order dated 30th June, 1962. Against the order of the <ORG>, there was an appeal to the Assistant Commissioner of Sales Tax, Baroda. The appeal was dismissed. Thereafter, the assessee-firm went in revision to the Deputy Commissioner of Sales Tax. The Deputy Commissioner partially allowed the revision application and held that entry 15 of Schedule B to the Act related to iron and steel, which would include only primary products of the rolling mills which are not subjected to any process after rolling and that, therefore, corrugated sheets were covered by entry 80 of Schedule B to the Act. Against the order of the Deputy Commissioner, the assessee-firm went in revision to <ORG> and the <ORG> held that entry 15 of Schedule B as it stood at the material time referred only to iron and steel and that corrugated iron sheets sold by the assessee-firm were iron within the meaning of entry 80 of Schedule B to the Act. Thereafter, at the instance of the State of Gujarat, the above question has been referred to us by the <ORG>.

9. At the time when the application for reference was heard by the <ORG>, a question of limitation was argued before the <ORG> but the <ORG> held that it had the power to condone the delay under section 5 read with section 29 of the Indian Limitation Act, 1963, and exercising the said power, the <ORG> condoned the delay and thereafter granted the application for reference to <ORG>. At one stage of the hearing before us, Mr. <NAME>, on behalf of the assessee, wanted to argue before us that the reference was not competent inasmuch as the Sales Tax <ORG> had no power to condone the delay and hence the entire reference was incompetent. However, he subsequently gave up the point regarding limitation and the matter has been argued on merits before us.

10. Entry 15 in Schedule B to the Act read as follows :-

S.T. G.S.T. P.T. "15. Iron and steel Nil. Six pies. Three pies." 11. This entry remained on the Statute Book during the period from 1st April, 1954, to 7th April, 1957. Since the period of assessment with which we are concerned in the instant case is the period from 1st April, 1956, to 31st March, 1957, it is this entry which would be applicable. We may point out that by an amendment the above entry No. 15 was substituted by the following entry :- S.T. G.S.T. P.T. Nil. Two naye Two naye "15. Iron and steel, that is to say - paise. paise. (a) pig iron and iron scrap. (b) iron plates sold in the same form in which they are directly produced by the rolling mills. (c) steel scrap, steel ingots, steel billets, steel bars and rods. (d) (i) steel plates. Sold in the same form in which (ii) steel sheets. they are directly produced by (iii) steel bars and tin bars. the rolling mills. (iv) rolled steel sections. (v) tool alloy steel. 12. This entry remained in force during the period from 8th April, 1957, to 30th September, 1958; and thereafter with effect from 1st October, 1958, this amended entry was deleted by Bombay Act No. 71 of 1958. 13. I have had the benefit of hearing the judgment of my learned brother <NAME>, J., when the judgment was dictated in open Court and I regret that I cannot agree with his conclusion that corrugated iron sheets are a form of iron and steel and not, as I hold, an article of iron. I agree with my learned brother that the principle of legislative interpretation which was contended for by the learned Advocate-General cannot help <ORG> in the instant case.

14. The whole principle lying behind the doctrine of legislative interpretation as set out in a subsequent piece of legislation is that the <ORG> interprets that which was already there on the Statute Book and the subsequent legislation is merely enacted with a view to explain and interpret the legislative intent as embodied in the earlier piece of legislation. The observations of <ORG> in <CITATION> , ( 17 S.T.C. 170 at page 174.) set out that principle.

15. As a result of the Central Sales Tax Act , being Act No. 74 of 1956, iron and steel as therein mentioned, was provided for and the entry which we have set out above as being in force during the period 8th April, 1957, to 30th September, 1958, is precisely the same entry that is to be found in section 14 of the Central Sales Tax Act; and it was with a view to bring the law in line with the provisions of the Central Sales Tax Act that entry No. 15 in the Bombay Sales Tax Act was amended as above with effect from 8th April, 1957. Under these circumstances, I agree with my learned brother that the principle of legislative interpretation cannot have any application in the instant case and the only question here is whether the words, "iron and steel" as occurring in entry 15, as it originally stood, during the period 1st April, 1954, to 7th April, 1957, would cover "corrugated iron sheets". It is clear that if they did not fall within the entry of iron and steel, they would be falling within the residuary entry 80 covering all goods other than those specified from time to time in any of the preceding entries in Schedule B. Under entry 80 of Schedule B, the articles would attract sales tax of 2 nP., general sales tax of 3 nP., and purchase tax of 2 nP.; whereas under entry 15, as it originally stood, there was no sales tax but there was general sales tax of six pies in the rupee and purchase tax of three pies in the rupee.

16. Since the principle of subsequent legislation is not applicable to the facts of this case, we cannot say merely from the amended entry as was in force from 8th April, 1957, to 30th September, 1958, that iron and steel as it originally stood during the period 1st April, 1954, to 7th April, 1957, included merely basic raw material and not any iron and steel in its manufactured form or for production or consumption.

17. The rival contentions regarding the merits of the case can be stated in this form. It is contended on behalf of the assessee-firm that corrugated iron sheets are nothing else but iron or steel sheets which are wrinkled by hydraulic pressure or in a rolling mill and corrugation merely means wrinkling iron sheet. It was, therefore, contended on behalf of the assessee before us that a corrugated iron sheet is only a form of iron or steel sheet. On the other hand, it has been contended by the learned Advocate-General, on behalf of the <ORG>, that as shown by the standard books of reference like <ORG>, an elaborate process has to be gone into in order to convert an iron sheet into a corrugated iron sheet; and further that a corrugated iron sheet cannot be used for the same purpose for which an ordinary iron sheet can be used; nor an ordinary iron sheet can be used for the purpose for which a corrugated iron sheet can be used. Under these circumstances, the learned Advocate-General has contended that once the process of corrugation is gone through, the corrugated iron sheet becomes a distinct article of iron and steel and ceases to be a form of iron and steel.

18. I agree with my learned brother <NAME>, J., that the observations of <ORG> in <CITATION> ( 17 S.T.C. 313, at p. 315.) treating the words "iron and steel" as indicating raw materials were made by <ORG> in the context of the notification with which <ORG> was dealing in that case; and in my opinion they do not help me in deciding the question arising before us in the instant case.

19. <CITATION> , ( 11 S.T.C. 827.) the question before <ORG> was whether hydrogenated groundnut oil (commodity called vanaspati) is "groundnut oil" within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. Rule 18(2) of the said Rules provided as follows :-

"18. (2) Every such registered manufacturer of groundnut oil will be entitled to a deduction under clause (k) of sub-rule (1) of rule 5 equal to the value of the groundnut and/or kernel purchased by him and converted into oil and cake if he has paid the tax to the <ORG> on such purchases :

Provided that the amount for which the oil is sold is included in his net turnover :

Provided further that the amount of the turnover in respect of which deduction is allowed shall not exceed the amount of the turnover attributable to the groundnut and/or kernel used in the manufacture of oil and included in the net turnover."

20. It was in the context of this sub-rule (2) of rule 18, that the question was considered by <ORG>; and <ORG> came to the conclusion, after considering the hydrogenating process, that hydrogenated groundnut oil was a form of groundnut oil and they held that the assessee-company was entitled to the benefit of the deduction of the purchase price of kernel or groundnut, which went into the manufacture of hydrogenated groundnut oil, from the sale turnover of such oil. At page 835 of the report, <NAME>, J., delivering the judgment of <ORG>, observed :

"Both the <ORG> as well as <ORG> have pointed out that except for its keeping quality without rancidity and ease of packing and transport without leakage, hydrogenated oil serves the same purpose as a cooking medium and has identical food value as refined groundnut oil. There is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly we consider that hydrogenated oil still continues to be 'groundnut oil' notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil."

21. It is by the application of this test of what may be called possibility of substituting hydrogenated groundnut oil for groundnut oil and substituting groundnut oil for hydrogenated groundnut oil, that <ORG> decided whether hydrogenated groundnut oil was groundnut oil within the meaning of rule 18(2).

22. <CITATION> , ( 19 S.T.C. 24.) the decision of <ORG> in the matter and also the decision of <ORG> on appeal therefrom have been reported; and both <ORG> as well as <ORG> came to the conclusion that patasa, harda and alchidana fall within the definition of "sugar" in entry 47 of Schedule A to the Bombay Sales Tax Act, 1959; and therefore the sales are exempt from the payment of sales tax. Entry 47 in Schedule A is as follows :

"Sugar as defined in item No. 8 of the First Schedule to the Central Excises and Salt Act , 1944."

Item No. 8 of the First Schedule to the Central Excises and Salt Act , 1944, defines sugar as under :-

"Sugar means any form of sugar containing more than 90 per cent of sucrose."

23. Therefore the question that <ORG> and thereafter <ORG> had to consider in that particular case was whether patasa, harda and alchidana could be regarded as forms of sugar containing more than 90 per cent of sucrose. In order to arrive at their conclusions, both <ORG> and <ORG> relied upon the decision of <ORG> in <ORG> case ([1960] 11 S.T.C. 827.) and in both the <ORG>, the test of substituting one article for the other was applied to find out whether patasa, harda and alchidana were forms of sugar or not.

24. The decision given by us in the snuff-paste case referred to by my learned brother in his judgment again dealt with the definition of tobacco occurring in the Sales Tax Act and incorporating in that deduction tobacco from the relevant entry in the Central Excises and Salt Act , 1944. Like the entry pertaining to sugar, the entry pertaining to tobacco in the Central Excises and Salt Act , 1944, defined tobacco to mean any form of tobacco manufactured or not and snuff was included in the definition of the word "tobacco". Therefore, any form of tobacco, i.e., any form of snuff would be covered by the definition of tobacco; and that was the conclusion which we arrived at in that particular case depending upon the particular entry. Ultimately the instant case will turn upon our decision whether corrugated iron sheets can be said to be a form of iron and steel or can be said to be an article of iron and steel.

25. In support of his argument, the learned Advocate-General relied upon the decision of <ORG> in <CITATION> ( 12 S.T.C. 590.). There <ORG> was dealing with the entry relating to iron and steel and the provisions of the Central Sales Tax Act , 1956, had to be considered by <ORG>. The petitioners before <ORG> contended that they had purchased iron scrap or steel scrap and then rolled the same into rolled steel sections; and <ORG> held that when the raw material, iron or steel, that was purchased by the petitioners was rolled into rolled steel sections, the outcome is a different and a new commodity and when it is sold, there is a sale of a different commodity and not a sale of steel over again. This decision of <ORG> does not directly help us because in each case of this kind, the question is whether the process, through which the commodity passes, turns that commodity into a new article and changes its original form.

26. In <ORG>, 1958 Edition, Volume 8, at page 21, "corrugated iron" has been shown to be sheet iron formed with parallel ridges and furrows, so that the cross-section is a continuous waved line. Flat sheet metal tends to buckle and get out of shape with every change in temperature. The corrugations, made in one direction, give it greatly increased stiffness and adapt it to numerous purposes for which it would otherwise be less suitable. The sheet metal is corrugated by passing between ridged rollers, whose ridges are opposed like the teeth of gear-wheels. It comes out in the commercial form and is frequently subjected to a process of coating with zinc, to protect it from oxidation, and is then known as galvanized corrugated iron. It is used widely for roofing and walling barns, sheds, warehouses, and other buildings. This passage from <ORG> makes it clear that greatly increased stiffness and adaptation to numerous purposes is brought about by the process of corrugation. In the absence of corrugation, flat iron sheet tends to buckle and get out of shape with every change in temperature, and more so in a tropical country like ours, and it is for the purpose of giving it greatly increased stiffness and also to adapt it to numerous purposes that the process of corrugation has to be gone through.

27. In Encyclopaedia Britannica, 14th Edition, Volume 6, at page 471, the process of corrugating iron sheets has been pointed out and it has also been pointed out that corrugation can be made by passing hat sheets either through powerful presses when several sheets are corrugated at a time or in rotary corrugating rollers usually doing one sheet at a time. It is also pointed out that the corrugating process enables much lighter gauges of sheets to be used because it makes them very rigid and portable. Thus it is clear that the whole idea of submitting the iron or steel sheet to corrugating process is to make the corrugated sheet very rigid and portable and to use the corrugated sheet for purposes for which the flat sheet could not have been need.

28. Thus, from these two works of reference it is clear that corrugated iron sheet can be used for the purposes for which hat sheets cannot be used because the hat sheet has not got the advantage of stiffness and rigidity and strength which corrugated iron sheet has got. Thus a hat sheet cannot be need for the purposes for which a corrugated iron sheet can be used. Contrariwise, it is common sense that a corrugated iron sheet cannot be used when for example boxes of flat iron sheets etc. are required to be made, because what is required is a flat surface inside and outside and not a corrugated surface in cases of that kind.

29. Thus the test which was applied by <ORG> in <ORG> case. ([1960] 11 S.T.C. 827.) viz., the possibility of substituting one commodity for the other, viz. hydrogenated groundnut oil for groundnut oil and groundnut oil for hydrogenated groundnut oil so far as the consumers are concerned, is not applicable when we go to hat iron sheets and corrugated iron sheets. That test, from the standard works of reference, cannot apply, since a hat iron sheet cannot be substituted for use where a corrugated iron sheet is required to be used, particularly looking to the fact that corrugated iron sheet will not buckle or get out of shape with every change in the temperature. It is because of these reasons that in the light of the judgment of <ORG> in <ORG> case ([1960] 11 S.T.C. 827.) and the test applied by <ORG>, that I am unable to agree with my learned brother regarding the final conclusion in this case.

30. In my opinion, in the light of the test indicated by <ORG> about the possibility of substituting one for the other, it is clear that in the instant case, a corrugated iron sheet is not a form of iron and steel but is an article of iron and steel and is a distinct commodity. In my opinion, the elaboration of processes through which a commodity has to pass before it can be classified as a different article is not the test. For example, every article made of iron and steel will possess all the characteristics of iron and steel, whatever the process it has gone through; but merely because the basic characteristic of and steel or the basic composition of iron and steel still remains, it cannot be said that the article of iron or steel still remains iron and steel. For example, the body of a motor car, it is well-known, is pressed out of steel sheets, but it cannot be said to be steel because by the very process through which it has undergone, it is turned out into a different article. The same test would apply to electric fans made out of steel or to almirahs and numerous other articles made out of steel. The real test applicable to such cases is the test of possibility of substituting one for the other and if there is a possibility, where articles can be used for one or the other and can be substituted one for the other, then in spite of the process being undergone the article would still remain the same; and if there is no possibility of any substitution to the consumer it would be a new commodity and would no longer be a form of the original article.

31. It is, therefore, with regret that I am unable to agree with my learned brother that corrugated iron and steel is merely a form of iron and steel. In my opinion, the only conclusion possible, in the light of the technical information available from the standard works of reference, and applying the tests laid down by <ORG> in <ORG> case, ([1960] 11 S.T.C. 827.) is that corrugated iron and steel is an article of iron and Steel, and would, therefore, not fall within entry 15 of Schedule B but would fall within the residuary entry 80 of Schedule B to the Act. I would, therefore, answer the question referred to us by stating that the sale of corrugated iron sheets in question was covered by entry 80 of Schedule B to the Act and I would direct the assessee-firm to pay the costs of this reference to the State of Gujarat.

32. P.C. In view of the difference of opinion on the points which clearly emerge from our respective judgments, the case should now be placed under clause 36 of the Letters Patent of this High Court before one or more of the other Judges and the points should be got decided as laid down In that clause.

33. In pursuance of the <ORG> order, the reference came on for hearing before <NAME>, C.J., and the learned Chief Justice delivered the following judgment on November 11/12 1968 :

Bhagwati, C.J.

34. The short question which arises for determination in this reference is whether corrugated iron sheets fall within entry 15 or entry 80 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957. Entry 15 reads "iron and steel" while entry 80 is a residuary entry providing for all goods other than those specified in Schedule A, section 7A and the preceding entries of Schedule B. It was common ground between the parties that if corrugated iron sheets do not fall within entry 15, there is no other specific entry which covers them and they would fall to be governed by entry 80. The Sales Tax Officer assessing the assessee for the period 1st April, 1956, to 31st March, 1957, took the view that corrugated iron sheets were not covered by entry 15 and were therefore taxable under entry 80 which provides a higher rate of tax and this view was affirmed by the Assistant Commissioner of Sales Tax in appeal and the Deputy Commissioner of Sales Tax in revision. The <ORG> in further revision disagreed with the view of the revenue authorities and held that corrugated iron sheets were iron and steel within the meaning of entry 15 and were therefore taxable at the lower rate of tax provided in that entry. The <ORG> thereupon applied for a reference and on the application of the <ORG> the following question of law was referred for the opinion of this Court :

"Whether on the facts and in the circumstances of the case, the sale of corrugated sheets by the opponent-firm was covered by entry 80 of Schedule B or entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957 ?"

35. On the answer to this question there was a difference of opinion between Divan, J., and <NAME>, J., and hence the reference was ordered to be placed before a third Judge. That is how the reference comes before me.

36. The question which I have to consider is whether corrugated iron sheets fall within entry 15 which reads "iron and steel". In order to determine this question it is necessary to understand the nature of the commodity known as corrugated iron sheets. Corrugated iron sheets are iron sheets with parallel ridges and furrows so that the cross-section is a continuous waved line. "Flat sheet metal", points out <ORG> 1958 Edition, Volume 8, at page 21, "tends to buckle and get out of shape with every change in temperature. The corrugations, made in one direction, give it greatly increased stiffness and adapt it to numerous purposes for which it would otherwise be less suitable. The sheet metal is corrugated by passing between ridged rollers ............. It comes out in the commercial form, and is frequently subjected to a process of coating with zinc to protect from oxidation, and is then known as galvanized corrugated iron. It is used widely for roofing and walling barns, sheds, warehouses and other buildings". Encyclopaedia Britannica, Fourteenth Edition, Volume 6, at page 471, also points out that corrugating process enables much lighter gauges of sheets to be used because it makes them very rigid and portable. Corrugated firm sheets are thus nothing but iron sheets-sheets of iron-corrugated, that is, wrinkled for the purpose of making them more rigid and giving them increased stiffness so that they become more suitable for roofing and walling than they would otherwise be as hat iron sheets. They are iron sheets with their shape altered to make them more adaptable and useful for being used as iron sheets for roofing and walling. Now flat iron sheets would certainly be covered by the entry "iron and steel". That indeed was not disputed by the learned Advocate-General on behalf of the revenue and indeed it could not be disputed in view of the decision of <ORG> in <CITATION> ( 17 S.T.C. 313.) where iron and steel bars, hats and plates were held to be covered by the expression "iron and steel" in the notification issued by <ORG> under section 5 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act , 1952. If flat iron sheets are within the entry "iron and steel", it is difficult to appreciate how they cease to be so by mere alteration of shape by corrugation, It is no doubt true that iron sheets when corrugated cease to be raw materials for manufacture or fabrication of goods and they can be used only as corrugated iron sheets for roofing and walling but on that account they do not cease to be iron sheets having the essential character of iron. It may be that by reason of alteration of shape, iron sheets may cease to be usable for any purpose other than roofing or walling but they still remain iron sheets and do not lose the essential character of iron which they possessed as flat iron sheets before corrugation. The process of corrugation is one of alteration of shape and it does not make iron sheets a different article or product of iron. The question in cases of this kind is always one of degree and where precisely to draw the dividing line when a commodity loses its essential character of iron and steel-ceases to be a form of iron and steel - and becomes an article or product of iron and steel, is by no means easy to decide. But on the whole, having regard to the various considerations above-mentioned, I think corrugated iron sheets fall on the right side of the dividing line and must, like flat iron sheets, be regarded as a form of iron rather than an article or product of iron. Even if I had any doubt about this conclusion, I would resolve it in favour of the assessee, taking resort to the doctrine which Lord <NAME> has characteristically described as the last refuge of judicial hesitation, the doctrine that if two views are possible in a taxing statute, that which favours the assessee must be preferred.

37. This view which I am taking also finds support from the decision of <ORG> in <CITATION> . ( 11 S.T.C. 827.). <ORG> in that case was concerned with the question whether hydrogenated groundnut oil was groundnut oil within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1999. <ORG> held that hydrogenated groundnut oil was groundnut oil since it was from groundnut and in its essential nature it remained "oil". <ORG> pointed out that the physical state did not determine the identity of the commodity and merely because hydrogenated groundnut oil assumed semi-solid form it did not cease to be groundnut oil. Hydrogenated groundnut oil, said <ORG>, still contained to be groundnut oil notwithstanding the processing which was merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desired to consume groundnut oil. On the analogy of this decision, it may be said that even if iron is put in the form of sheet and subjected to corrugation for the purpose of making it more useful in the form of iron sheet by improving its rigidity and stiffness, it would not become a different article or product of iron but would continue to retain its essential character of iron notwithstanding the corrugation.

38. There is also a decision of <ORG> in Kapildeoram Baijnath Prosad v. <NAME>, ([1954] 5 S.T.C. 365.) where the same approach has been adopted. There the question was whether chira and muri could be said to be covered by the words "all cereals and pulses including all forms of rice". Chira was parched beaten rice which involved the process of boiling paddy, its dehydration, frying and then flattening. Muri involved the process of soaking, boiling, dehydrating paddy and removal of husks. These commodities which were the result of processing of rice became edible and could be taken as food without any more cooking and they could not be commonly recognised as rice. And yet <ORG> held that these commodities were forms of rice rather than products thereof and were therefore exempt from tax under the Assam Sales Tax Act, 1947. This decision was referred to by a Division Bench of this Court with approval in <CITATION> ( 19 S.T.C. 24.) The question in that case was whether patasa, harda and alchidana fell within the definition of "sugar" in entry 47 to Schedule A to the Bombay Sales Tax Act, 1959. This Court pointed out that the word "form" connotes a visible aspect in which the thing exists or manifests itself. Sugar may manifest in the form of patasa as a result of certain simple processes being carried out. It may similarly manifest itself in the form of alchidana or small lumps of sugar or harda. If sugar so manifests itself, it cannot be said that sugar has ceased to be sugar merely because it takes a particular shape or form which appeals to certain class of people on festive occasions. This decision was affirmed in appeal by <ORG> and the decision of <ORG> is reported at page 30 of the same volume, <ORG> pointed out that the word "sugar" in entry 47 was intended to include within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colons or density and by whatever name it was called. So also it can be said on a parity of reasoning that merely because iron is given the shape of a sheet and is subjected to corrugation for the purpose of giving it rigidity and increased stiffness so as to make it acceptable to a particular class of persons who might rant to use it in the form of an iron sheet for roofing and walling, it does not cease to be iron; it merely assumes another form, namely, that of a wrinkled sheet but it still continues to retain the essential character of iron.

39. The revenue however relied strongly on the decision of <ORG> in <CITATION> ( 17 S.T.C. 313.) to which I have already made a reference earlier, but I do not think this decision in any way supports the contention of the revenue. The assessee in this case purchased scrap iron locally and imported iron plates from outside and after converting there into bars, flats and plates in his rolling mills, sold them in the market. The question arose whether the iron bars, flats and plates, re-rolled and sold by the assessee, were exempt from sales tax by virtue of a notification which inter alia exempted "iron and steel" from liability to sales tax, or they were taxable under another notification which imposed tax at a particular rate on "goods prepared from any metal other than gold and silver". <ORG> held that iron bars, flats and plates sold by the assessee were covered by the expression "iron and steel" and were exempted under the first notification. <NAME>, J., speaking on behalf of <ORG> said :

"Scrap iron purchased by the respondent was merely re-rolled into bars, hats and plates. They were processed for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. They did not in the process lose their character as iron and steel. The dealer sold 'iron and steel' in the shape of bars, flats and plates and the customer purchased 'iron and steel' in that shape. We, therefore, hold that the bars, flats and plates sold by the assessee are iron and steel exempted under the notification."

40. These observations clearly show that mere alteration of shape is wholly immaterial and it does not matter whether iron is in the shape of bars, flats or plates and equally, one may say, it makes no difference whether it is in the form of flat sheets or corrugated sheets. When the assessee in the present case sold corrugated iron sheets, he sold "iron" in the shape of corrugated sheets and the purchasers purchased "iron" in that shape.

41. I am, therefore, of the view that corrugated iron sheets are merely "iron" in another shape and form and they cannot be regarded as articles or products manufactured or fabricated out of iron. They must, therefore, be held to fall within entry 15 which reads "iron and steel" and they cannot be taxed under the residuary entry 80. The question referred to this Court must therefore be answered by saying that the sale of corrugated iron sheets by the assessee was covered by entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957 and not by the residuary entry 80 of that Schedule. The State will pay costs of the reference to the assessee.

42. Reference answered accordingly.


PETITIONER: STATE OF HARYANA AND ORS. Vs. RESPONDENT: CH. BHAJAN LAL AND ORS. DATE OF JUDGMENT21/11/1990 BENCH: <NAME>, <NAME>: <NAME>, <NAME>, K. JAYACHANDRA (J) CITATION: 1992 AIR 604 1990 SCR Supl. (3) 259 1992 SCC Supl. (1) 335 JT 1990 (4) 650 1990 SCALE (2)1066 ACT: Constitution of India, 1950: Article 226-- Quashing of criminal proceedings--Circumstances under which power could be exercised-Guidelines given. Code of Criminal Procedure, 1973: Sections 154, 155, 156, 157, 159--Cognizable offence--Field of investigation--Exclusive domain of investigating agencies--Court's interference--When justified. Section 482--Inherent powers of courts--Exercise Of--Circumstances necessitating quashing of criminal pro- ceedings--Guidelines indicated. Prevention of Corruption Act , 1947: Section 5- -Investi- gation by designated officers--Express prohibition of offi- cers below certain rank---Whether directory or mandatory--Exceptions only on adequate reasons--To be dis- closed--Authorising such non_designated officers without reasons--Whether legal and valid--Investigation carried on by such officer--Quashing of. Words & Phrases: "Reason to suspect"--Meaning of. HEADNOTE: The First Respondent was a Minister and subsequently Chief Minister of Haryana State. Later he became Union Minister. On 12.11.1987 a complaint was presented before the Haryana Chief Minister, wherein serious allegations were levelled against the First Respondent. The main allegations were that he accumulated huge properties worth crores of rupees in the names of his family members, relations and persons close to him by misusing his power and position and by undervaluing the market price, and all those transactions were benami in character. According to the complainant, since the accumulation of the properties by the First Re- spondent, in the shape of buildings, land, shares, ornaments etc. was far beyond his legal means, an investigation should be directed against him. 260 <ORG> marked the complaint to the Director General of Police, who in turn endorsed the same to the Superintendent of Police concerned. On the direction from the Superintendent of Police, the SHO regis- tered a case under Sections 161 and 165 of Indian Penal Code, 1860 and under section 5(2) of the Prevention of Corruption Act, 1947 and took up the investigation. Meanwhile, the First Respondent filed a Writ Petition before <ORG> for a direction to quash the First Information Report and for restraining the appellants from proceeding further with the investigation. <ORG> quashed the entire criminal proceedings holding that the allegations did not constitute a cognizable offence for commencing lawful investigation. Aggrieved by the judgment of <ORG>, the appel- lants preferred the present appeal by special leave, con- tending that the allegations contained in the complaint, either individually or collectively, constituted a cogniza- ble offence warranting the registration of a case as contem- plated under Section 154(1) Cr. P.C., and a thorough inves- tigation in compliance with various statutory provisions ï7 3 On behalf of the Respondents, it was contended that on account of the deep rooted political animosity and rivalry entertained by the then Chief Minister, he used the com- plainant, who was stooge in his hands, to file the complaint containing false and scurrilous allegations against the First Respondent and hence the criminal proceedings rightly deserved to be quashed. Disposing of the appeal, this Court, HELD: 1. The judgment of <ORG> quashing the First Information Report is set aside as not being legally and factually sustainable in law. However, the commencement as well as the entire investigation, if any, so far done is quashed on the ground that the third appellant (SHO) is not clothed with valid legal authority to take up the investiga- tion and proceed with the same within the meaning of Section 5A(1) of the Prevention of Corruption Act. [319A-C] 2. The observations made by <ORG> are unwar- ranted and the historical anecdote is out of context and inappropriate. If such a view is to be judicially accepted and approved, then it will be tantamount to laying down an alarming proposition that an incoming 261 Government under all circumstances, should put its seal of approval to all the commissions and omissions of the outgo- ing Government ignoring even glaring lapses and serious misdeeds and the deleterious and destructive consequences that may follow therefrom. [318E- <CITATION> :

Anr., [1988] 2 SCC 602; <CITATION> ,  1 SCR 1071; relied on.

<CITATION> .,  3 SCR 789; <CITATION> .,  1 SCC 438 and <CITATION> .,  1 SCC 288; referred to. 3.1. If any information disclosing a cognizable offence is laid before an officer-in-charge of a police station satisfying the requirements of Section 154(1) of the Crimi- nal Procedure Code , the said police officer has no other option except to enter the substance thereof in the pre- scribed form, that is to say, to register a case on the basis of such information. [279G] 3.2. Though a police officer cannot investigate a non- ï7 offence, he can investigate a non-cognizable offence under the order of a Magistrate having power to try such non- cognizable case or commit the same for trial within the terms under Section 155(2) of the Code but subject to Sec- tion 155(3) of the Code . Further, under the newly introduced Sub-section (4) to Section 155 , where a case relates to two offences to which atleast one is cognizable, the case shall be deemed to be a cognizable case notwithstanding that the other offences are non-cognizable and, therefore, under such circumstances the police officers can investigate such offences with the same powers as he has while investigating a cognizable offence. [279H; 280A-B]

4. The core of the Sections 156 , 157 and 159 of the Code of Criminal Procedure is that if a police officer has reason to suspect the commission of a cognizable offence, he must either proceed with the investigation or cause an investiga- tion to be proceeded with by his subordinate; that in a case where the police officer sees no sufficient ground for investigation, he can dispense with the investigation alto- gether; that the field of investigation of any cognizable offence is exclusively within the domain of the investiga- tion agencies over which the Courts cannot have control and have no power to stiffle or impinge upon the proceedings in the investigation so long as the investiga- tion proceeds in compliance with the provisions relating to investigation and that it is only in a case wherein a police officer decides not to investigate an offence, the concerned Magistrate can intervene and either direct an investigation or in the alternative, if he thinks fit, he himself can, at once proceed or depute any Magistrate sub-ordinate to him to proceed to hold a preliminary inquiry into or otherwise to dispose of the case in the manner provided in the Code . [283G-H; 284A- <CITATION> .,  1 SCC 554; <CITATION> and Ors.,  3 SCR 946; <CITATION> , AIR 1954 P.C. 18 and <CITATION> ,  3 SCR 668; referred to.

5.1. The expression "reason to suspect the commission of an offence" used in Section 154(1) Cr. P.C. would mean the sagacity of rationally inferring the commission of a cogniz- able offence based on the specific articulate facts men- tioned in the First Information Report as well in the Annex- ures, if any, enclosed and any attending circumstances which may not amount to proof. In other words, the meaning of the expression "reason to suspect" has to be governed and dic- tated by the facts and circumstances of each case and at ï7 in the First Information Report does not arise. [286E-F] 5.2. The commencement of investigation by a police officer is subject to two conditions, firstly, the police officer should have reason to suspect the commission of a cognizable offence as required by Section 157(1) and second- ly, the police officer should subjectively satisfy himself as to whether there is sufficient ground for entering on an investigation even before he starts an investigation into the facts and circumstances of the case as contemplated under clause (b) of the proviso to Section 157(1) of the Code. [288B- <CITATION> , AIR 1939 P.C. 47; <CITATION> , AIR 1946 P.C 123; United States v. <NAME>, 66 L.Ed. (<ORG>) page 623; <NAME> v. <NAME>,  2 All E.R. 610; <CITATION> ,  2 SCC 364; <CITATION> ,  Supp. 3 SCR 866; <CITATION> .,  3 SCR 121; referred to.

Webster's Third International Dictionary; Corpus Juris Secondum, Vol. 83 pp. 923, 927; Words and Phrases, (Perma- nent Edition 40A) pp. 590, 591; referred to.

6. The investigation of an offence is the field exclu- sively reserved for the police officers whose powers in that field are unfettered so long as the power to investigate into the cognizable offences is legitimately exercised in strict compliance with the provisions falling under Chapter XII of the Code and the <ORG> are not justified in obliter- ating the track of investigation when the investigating agencies are well within their legal bounds. A noticeable feature of the scheme under Chapter XIV of the Code is that a Magistrate is kept in the picture at all stages of the police investigation but he is not authorised to interfere with the actual investigation or to direct the police how that investigation is to be conducted. But if a police officer transgresses the circumscribed limits and improperly and illegally exercises his investigatory powers in breach of any statutory provision causing serious prejudice to the personal liberty and also property of a citizen, then the <ORG>, on being approached by the person aggrieved for the redress of any grievance has to consider the nature and extent of the breach and pass appropriate orders as may be called for without leaving the citizens to the mercy of police echelons since human dignity is a dear value of our Constitution. No one can demand absolute immunity even if he is wrong and claim unquestionable right and unlimited powers exercisable upto unfathomable cosmos. Any recognition of ï7 Power' which no authority on earth can enjoy. [290D- <CITATION> , AIR 1945 P.C. 18; <CITATION> ,  3 SCR 388; <CITATION> .,  2 SCC 424; <CITATION> .,  3 SCR 946; <NAME> etc. etc. v. The District Magistrate, Kamrup & Ors.,  2 SCR 12; <CITATION> .,  3 SCR 121; referred to. 7.1 The view of the High <ORG> that the non-filing of a written statement by a competent authority of the State Government by way of reply to the averments in the Writ Petition was serious flaw on the part of the appellants and as such the averments of Respondent No. 1 should be held as having disproved the entire crimination alleged in the F.I.R., is neither conceivable nor comprehensible. [293D] 7.2. It is true that some of the allegations do suffer from misty vagueness and lack of particulars. Further, there are no specific averments that either Respondent No. 1 or his relations and friends had no source of income to accumulate the properties now standing in their names and that Respond- ent No. 1 showed any favour to them by misusing his official position. [294B-C] These are all matters which would be examined only during the course of investigation and thereafter by the court on the material collected and placed before it by the investigating agencies. The question whether the relations and friends of Respondent No. 1 have independently purchased the properties out of their own funds or not, also cannot be decided by the <ORG> at this stage on the denial statement of Respondent No. 1 alone. [294C- <CITATION> .,  3 SCR 121; distinguished.

<CITATION> .,  1 SCC 554; relied on.

8.1. In the exercise of the extra-ordinary power under Article 226 or the inherent powers under Section 482 of the Code of Criminal Procedure, the following categories of cases are given by way of illustration wherein such power could be exercised either to prevent abuse of the process of any Court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guide- ï7 myriad kinds of cases wherein such power should be exer- cised:

(a) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the ac- cused;

(b) where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investi- gation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code;

(c) where the uncontroverted allegations made in the FIR or 'complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused;

(d) where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code;

(e) where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused;

(f) where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institu- tion and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party;

(g) where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge. [305D-H; 306A-E] 8.2. In the instant case, the allegations made in the complaint, do clearly constitute a cognizable offence justi- ï7 on and this case does not call for the exercise of extraor- dinary or inherent powers of <ORG> to quash the F.I.R. itself. [307B] <CITATION> ,  2 SCR 52; distinguished.

<CITATION> ,  3 SCR 388; <CITATION> .,  3 SCR 946; <CITATION> . etc.,  1 SCC 452; <CITATION> ,  3 SCR 794; <CITATION> ,  4 SCC 137; <CITATION> ,  4 SCC 551; <CITATION> .,  4 SCC 451; <CITATION> .,  1 SCC 554; <CITATION> .,  1 SCC 9; <CITATION> and Ors.,  3 SCR 121; <CITATION> - lingappa Konjalgi & Ors., [1976] Supp. SCR 123; <CITATION> .,  2 SCC 370; <CITATION> .,  1 SCC 692; <CITATION> .,  4 SCC 655; <CITATION> and Anr.,  SCR 1226; <CITATION> - heb Pawar,  4 SCC 231; <CITATION> .,  3 SCC 67; <CITATION> and Anr.,  4 SCC 59; <CITATION> , AIR 1945 P.C. 18; referred to.

9.1. The entire matter is only at a premature stage and the investigation has not proceeded with except some prelim- inary effort taken on the date of the registration of the case. The evidence has to be gathered after a thorough investigation and placed before the <ORG> on the basis of which alone the <ORG> can come to a conclusion one way or the other on the plea of mala fides. If the allegations are bereft of truth and made maliciously, the investigation will say so. At this stage, when there are only allegations and recriminations but no evidence, this <ORG> cannot anticipate the result of the investigation and render a finding on the question of mala fides on the materials at present avail-. able. Therefore, it cannot be said that the complaint should be thrown overboard on the mere unsubstantiated plea of mala fides. Even assuming that the complainant has laid the complaint only on account of his personal animosity that, by itself, will not be a ground to discard the complaint con- taining serious allegations which have to be tested and weighed after the evidence is collected. [307G-H; 308A-D] ï73 9.2. The dominant purpose of registration of the case and the intended follow up action are only to investigate the allegations and present a case before the <ORG>, if sufficient evidence in support of those allegations are collected but not to make a character assassination of the person complained against. [308H; 309A] <CITATION> ,  4 SCR 733; <CITATION> ,  2 SCR 452; <CITATION> .,  Supp. 3 SCR 382; <CITATION> .,  3 SCR 789; The King v. Minis- ter of Health,  1 K.B. 619; Rex v. <ORG>, 96 L.T. 762; Earl Fitzwilliam's <ORG> v. Minister of <ORG>,  2 K.B. 284; referred to.

10.1. A police officer with whom an investigation of an offence under Section 5(1)(e) of the Prevention of Corruption Act is entrusted should not proceed with a pre-conceived idea of guilt of that person indicated with such offence and subject him to any harassment and victimisation, because in case the allegations of illegal accumulation of wealth are found, during the course of investigation as baseless, the harm done not only to that person but also to the office he held will be incalculable and inestimable. [297C-E] 10.2. In the instant case, the SP seems to have exhibit- ed some over-enthusiasm, presumably to please 'some one' and had directed the SHO to register the case and investigate the same even on the very first day of the receipt of the complaint from the DGP, in whose office the complaint was lying for merely 9 days. This unprecedented overenthusiasm shown by the S.P., without disclosing the reasons for making an order entrusting the investigation to the SHO who is not a designated officer under Section 5A(1) , really shocks ones' sense of justice and fair play even though the untest- ed allegations made in the complaint require a thorough investigation. Still, it is an inexplicable riddle as to why the S.P. had departed from the normal rule and hastly or- dered the SHO to investigate the serious allegations, le- velled against a former Chief Minister and a Minister in the Cabinet of the Central Government on the face of the regis- tration of the case. However, this conduct of the SP can never serve as a ground for quashing the FIR. [298C- <CITATION> ,  3 SCR 931; <CITATION> ,  3 SCR 71; relied on. ï73 11.1. A police officer not below the rank of an Inspec- tor of Police authorised by the State Government in terms of the First proviso can take up the investigation of an of- fence referred to in clause (e) of Section 5(1) of the Prevention of Corruption Act, only on a separate and inde- pendent order of a police officer not below the rank of a Superintendent of Police. A strict compliance of the second proviso is an additional legal requirement to that of the first proviso for conferring a valid authority on a police officer not below the rank of an Inspector of Police to investigate an offence falling under clause (e) of Section 5(1) of the Act. This is clearly spelt out from the expres- sion "further provided" occurring in the second proviso. Thus, investigation by the designated Police Officers is the rule and investigation by an officer of a lower rank is an exception. [311H; 312A-B] 11.2. The granting of permission under Section 5A of the Preven-

tion of Corruption Act authorising an officer of lower rank to conduct the investigation is not to be treated by a Magistrate as a mere matter of routine, but it is an exer- cise of his judicial discretion having regard to the policy underlying and the order giving the permission should, on the face of it, disclose the reasons for granting such permission. The Superintendent of Police or any police officer of higher rank while granting permission to a non- designated police officer in exercise of his power under the second provision to Section 5A(1) , should satisfy himself that there are good and sufficient reasons to entrust the investigation with such police officer of a lower rank and record his reasons for doing so; because the very object of the legislature in enacting Section 5A is to see that the investigation of offences punishable under Sections 16  1 , 165 or 165A of Indian Penal Code as well as those under Section 5 of the Act should be done ordinarily by the offi- cers designated in clauses (a) to (d) of Section 5A(1) . The exception should be for adequate reasons which should be disclosed on the face of the order. Strict compliance with Section 5A(1) becomes absolutely necessary because it ex- pressly prohibits police officers below certain ranks, from investigating into offences under Sections 161 , 165 and 165A  and under Section 5 of the Act without orders of Magis- trates specified therein or without the authorisation of the State Government in this behalf and from effecting arrests for those offences without a warrant. [314H; 3 15A-D] 11.3. The main object of Section 5A is to protect the public servant against harassment and victimisation. Section 5A of the Act is mandatory and not directory and the inves- ï7 illegality but that illegality committed in the course of an investigation does not affect the competence and the juris- diction of the Court for trial and where the cognizance of the case has in fact been taken and the case is proceeded to termination the validity of the proceedings with the preced- ing investigation does not vitiate the result unless miscar- riage of justice has been caused thereby. [311C; 312D-E] 11.4. In the instant case, there is absolutely no rea- son, given by the S.P. in directing the SHe to investigate and as such the order of the S.P. is directly in violation of the dictum laid down by this Court in several decisions. The third appellant, SHO is not clothed with the requisite legal authority within the meaning of the second provision of Section 5A(1) of the Act to investigate the offence under clause (e) of Section 5(1) of the Act. [315E- <CITATION> ,  1 SCR 1150; <CITATION> ,  Supp. 2 SCR 201; <CITATION> ,  3 SCR 477; <CITATION> ,  2 SCR 914; <CITATION> ,  2 SCR 195; <CITATION> ,  3 SCR 88; <CITATION> ,  3 SCR 563; <CITATION> ,  2 SCC 48; <CITATION> ,  3 SCR 510; relied on.

12. The Government order authorised the Inspector Gener- al of Police to investigate only the offences failing under Section 5 of the Act. Therefore, the SHO who has taken up the investigation of the offences inclusive of those under Section 161 and 165  is not at all clothed with any authority to investigate these two offences, registered under the IPC , apart from the offence under Section 5(2) of the Act. However, as the question relating to the legal authority of the SHO is raised even at the initial stage, it would be proper and also desirable that the investigation, if at all to be proceeded with in the opinion of <ORG>, should proceed only on the basis of a valid order in strict compliance with the mandatory provision of Section 5A(1) . [315G-H; 3 16A-B] &


JUDGMENT

1. This Rule was granted on the application of the second defendant in a suit for partition to set aside the decree made therein by the Court below on the basis of an arbitration award. The petitioner impugns the decree on two grounds, first, that the Subordinate Judge acted with material irregularity in the exercise of his jurisdiction when he declined to examine the arbitrator at the request of the second defendant, who alleged that the arbitrator had been guilty of judicial misconduct; and secondly, that the decree made by the Subordinate Judge in conformity with the award is, in part, made without jurisdiction, because it affects immoveable property which is not the subject-matter of the litigation.

2. As regards the first ground, it appears that when the award had been submitted, objection thereto was taken by the petitioner on the allegation that the arbitrator had delegated his authority to a stranger and that the award was in essence not the act of the arbitrator, but of that person. This was a serious charge of judicial misconduct, and, if established, would invalidate the award for it cannot be disputed that an arbitrator has no authority to delegate his functions, except possibly the performance of what are called ministerial acts"': <NAME> v. <NAME> (1742) 2 Atk. 501 at p. 504 : 26 E.R. 702, Emery v. <NAME> (1801) 5 Ves. 846 at p. 848 : 31 E.R. 889 : 5 R.R. 181 : on appeal 8 Ves. 505 : 7 R.R. 109 : 32 E.R. 451; Little v. <NAME> (1841) 9 D.P.C. 437 : 2 Scott. (N.R.) 159 : 2 Man. & G. 351 : 10 L.J.C.P. 88 : 5 Jur. 246 : 133 E.R. 627 : 58 R.R. 436; Tandy, In re (1841) 9 D.P.C. 1044 : 5 Jur. 726, <NAME> v. <NAME> (1861) 7 H. &. N. 509 : 31 L.J. Ex. 107 : 8 Jur. (N.S.) 514 : 5 L.T. 618 : 10 W.R. 253 : 126 R.R. 551, Eads v. <NAME> (1854) 4 De G.M. & G. 674 : 24 L.J. Ch. 531 : 1 Jur. (N.S.) 193 : 43 E.R. 671 : W.R. 98 : 102 R.R. 326. The Subordinate Judge states in his judgment that the arbitrator was authorised to take assistance in technical matters; that, indeed, was permissible to him, in so far as such assistance was necessary for the discharge of his duties: Caledonian By. Co. v. <NAME> (1860) 3 Macqueen H.L. 808 : 6 Jur. (N.S.) 1311 : 3 L.T. 65 : 8 W.R. 373 : 119 R.R. 1101, Hmery v. <NAME> (1801) 5 Ves. 846 at p. 848 : 31 E.R. 889 : 5 R.R. 181 : on appeal 8 Ves. 505 : 7 R.R. 109 : 32 E.R. 451, Hopcraft v. <NAME> (1824) 2 S. & S. & S. 130 : 3 L.J. Ch. 43 : 57 E.R. 295; Anderson v. <NAME> (1835) 3 Cl. & F. 26 : 6 E.R. 1347. But this would not entitle him to delegate his powers practically to another person. The decision must ultimately be his own judgment in the matter, although in the process of formation of that conclusion he may take the assistance of experts: <CITATION> 16 Ind. Cas. 478 : 23 M.L.J. 290 : 12 M.L.T. 133 : (1912) M.W.N. 1091. When a charge of judicial misconduct of this description was made against the arbitrator, it was incumbent upon the Court to examine him to ascertain whether the allegation was well founded or not. This is obviously good sense; but if authority is needed for this elementary proposition, reference may be made to the decision of <ORG> in <NAME> v. <NAME> 23 Ind. Cas. 625 : 18 C.W.N. 755 : 19 C.L.J. 494 : 36 A. 225 : I.O. L.J. 249 : 12 A.L.J. 537 : 17 O.C. 120 : 16 Bom. L.R. 413 : (1914) M.W.N. 172 : 16 M.L.T. 35 : 27 M.L.J. 181 : 1 L.W. 1015. There is consequently no escape from the position that the Subordinate Judge has acted with material irregularity in the exercise of his jurisdiction, inasmuch as he as overruled the objection of judicial misconduct on the part of the arbitrator, without enquiry and without reception of evidence material for the determination of the issue.

3. As regards the second ground, it is not disputed that the arbitrator did, by his award, impose restrictions upon the use of immoveable property which did not form the subject-matter of the litigation and of the reference. The decree of the Subordinate Judge, in so far as it confirms that award in this respect, is consequently made without jurisdiction. It is an elementary rule that the submission furnishes the source and prescribes the limits of the arbitrator's authority and the award both in substance and in form must conform to the submission. Consequently, as the arbitrators are inflexibly limited to a decision of the particular matters referred, if the award extends to matters not within the scope of the submission, it is void as regards' the portion in excess of the submission: Hill v. <NAME> (1680) 2 Modern 309 : 86 E.R. 1090; <NAME> v. <NAME> (1670) 1 Ch. Cas. 185 : 2 Freeman 133 : 22 E.R. 754; Price v. <NAME> (1839) 10 A. & E. 139 : 2 P. & D. 304 : 8 L.J. Q.B. 198 : 3 Jur. 433 : 113 E.R. 53 : 50 R.R. 362; <NAME> v. <NAME> (1839) 10 A. & E. 139 : 2 P. & D. 304 : 8 L.J.Q.B. 198 : 3 Jur. 433 : 133 E.R. 53 : 50 R.R. 362; Baillie v. <ORG> (1835) 3 Cl. & F. 639 : 6 E.R. 1577; Buccleuch v. <ORG> (1870) 5 Ex. 221 : 41 L.J. Ex. 137 : 27 L.T. 1 : 5 H.L. 418; Moshahel v. Konomutty 15 W.R. 172; <CITATION> 13 Imd. Cas. 118 : 15 C.L.J. 110 : 16 C.W.N. 256; Mohammad Mumtaz Ali Khan v. <NAME> 28 I.A. 190 : 23 A. 394 : 5 C.W.N. 881 At the same time upon the materials placed before us, it seems that the award might have been amended so as to meet the objection taken on this ground; for as laid down by <ORG> in <NAME> v. <NAME> 23 Ind. Cas. 625 : 18 C.W.N. 755 : 19 C.L.J. 494 : 36 A. 225 : I.O. L.J. 249 : 12 A.L.J. 537 : 17 O.C. 120 : 16 Bom. L.R. 413 : (1914) M.W.N. 172 : 16 M.L.T. 35 : 27 M.L.J. 181 : 1 L.W. 1015. where the different parts of an award are severable and not dependent on each other, the illegal portion may be cancelled and effect given to the remainder. See also <CITATION> 29 I.A. 168 : 29 C. 854 : 7 C.W.N. 82 : 4 Bom. L.R. 673; Buccleuch v. <ORG> (1870) 5 Ex. 221 : 41 L.J. Ex. 137 : 27 L.T. 1 : 5 H.L. 418. The Subordinate Judge will deal with this matter, when the case goes back to him.

4. The result is that this Rule is made absolute, the decree of the Subordinate Judge set aside and the case remanded to him in order that it may be re-heard upon these two points. If the first objection succeeds, the award will be set aside and the <ORG> will itself proceed to try the suit. If the first ground fails, the <ORG> will proceed to consider how the award can be amended so that no restriction may be imposed upon the user of property which is not the subject-matter of the litigation. The costs of this Rule will abide the result. We assess the hearing fee at two gold mohurs.


PETITIONER: <ORG> LTD, Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX, CALCUTTA DATE OF JUDGMENT: 26/03/1959 BENCH: <NAME>, M. BENCH: <NAME>, M. <NAME>, BHUVNESHWAR P. KAPUR, J.L. CITATION: 1959 AIR 775 1959 SCR Supl. (2) 448 CITATOR INFO : R 1961 SC1019 (8) F 1963 SC 493 (4) R 1964 SC1761 (9) RF 1966 SC 719 (5) RF 1966 SC1583 (3,7,8) RF 1973 SC 651 (7,8) RF 1974 SC1728 (17) R 1985 SC 520 (21) ACT: Income-tax-Assessee acquiring shares by blank transfers- Receipt of dividend on such shares-If assessee entitled to grossing up of dividend income and to credit for tax deducted at source- Indian Income-tax Act , 1922 (XI of 1922), ss. 16(2) and 18(5). HEADNOTE: The assessee acquired shares in certain companies under "blank transfers " without getting the transfers registered with the companies and it received dividends in respect of these shares. It claimed that the dividend income should be grossed up under s. 16(2) Income-tax Act and that it should be allowed credit under s. 18(5) for the tax deducted at source on the dividend in the hands of the companies. Held, that, the assessee was not entitled to the benefits of ss. 16(2) and 18(5) as its name was not in the register of members of the companies. The benefit of s. 18(5) could only go to a shareholder; and a shareholder in that section meant the same thing as in the Indian Companies Act , 1913, i. e., a " member having his name on the register. The scheme of the Indian Companies Act , 1913, shows that the words " member ", " shareholder " and " holder of a share " have been used interchangeably. The words "holder of a share" are really equal to the word "shareholder" and the expression " holder of a share " denotes only a person who, as a shareholder, has his name entered on the register of members. In re <ORG>, (1882) 21 Ch. D. 849, <CITATION> - tax,  16 I.T.R. 187, jaluram <CITATION> ,  22 I. T.R. 491, <NAME> v. Incometax Officer,  32 I.T . R. 350, <CITATION> ,  24 I.T.R. 419, referred to. - A company when it pays income-tax does not do so on behalf of the shareholders, but the shareholders get the benefit of such payment. The rates of income-tax applicable to the company are, in most instances, higher than the rates applicable to individual shareholders and by the process of grossing up the recipient of the dividend gets some benefit. <NAME> v. <ORG>, (1940) A.C. 51 and <ORG> v. <NAME>, (1921) 2 A.C. 171, referred to. 440 In blank transfers the transfer deed signed by the transferor is handed over with the share scrip to the transferee who may complete the transfer by entering his name and applying to the company for registration of his name. The company only recognises those persons whose names are on the register of members and they alone are legally entitled to the dividend declared. In the case of a blank transfer equities exist between the transferor and the transferee and the transferee has a right to claim the dividend from the transferor who holds it in trust for him, but the company is only liable to the transferor and not to the transferee. Though the transferee is clothed with an equitable ownership he is not a full owner, since the legal interest vis-a-vis the company still outstands in the transferor. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 65 of 1956.

Appeal from the judgment and order dated August 31, 1954, of <ORG> in Income-tax Ref. No. 57 of 1953. <NAME> and <NAME>, for the appellant. <NAME>, <NAME> and <NAME>, for the respondent.

1959. March 26. The Judgment of the Court was delivered by <NAME>, J.-Messrs. <ORG>, Calcutta (hereinafter called the assessee) obtained on April 28, 1955, a certificate under s. 66A(2) of the Indian Income-tax Act from <ORG>, to appeal to this Court against the judgment dated August 31, 1954, in Income-tax Reference No. 57 of 1953. The Divisional Bench (<NAME>, C. J., and <NAME>, J.) in the judgment under appeal merely followed their earlier judgment delivered the same day in Income-tax Reference No. 22 of 1953, since reported as <CITATION> (1). It is the latter judgment which gives the reasons for the decision.

The facts of the case have been stated with sufficient fulness, yet briefly, in the statement of the case submitted by <ORG> (<ORG>) and may be conveniently set out in its own words: (1) [1955] 27 I.T.R. 202.

" The applicant had received sums of Rs. 3,831, Rs. 6,606, Rs. 7,954 and Rs. 8,304 in the four assessment years, 1944- 45, 1945-46, 1946-47 and 1947-48 as income from dividends. The shares in respect of which this dividend income was received were the property of the Applicant but in the books of the various companies these stood in the names of other persons. It appears that these shares were purchased by the Applicant from other persons under a blank transfer but the transfers had not been registered with the various companies. The Applicant's claim in these income-tax proceedings was that these shares although not registered in the name of the applicant were the property of the applicant. It was further claimed that this dividend income should be grossed up under s. 16(2) and credit for the tax deducted should be allowed to the Applicant under s. 18(5) ." The Income-tax Officer did not accept this claim, and the appeals of the assessee were rejected by the Appellate Assistant Commissioner of Income-tax, Calcutta, " A " Range and by <ORG>. The <ORG>, however, on being moved, referred the following question to <ORG>:

" Whether in the facts and circumstances of this case, the Applicant (the assessee) was entitled to have this dividend income grossed up under section 16(2) and claim credit for tax deducted at source under section 18(5) of the Income-tax Act? "

<ORG> answered the question in the negative, thus affirming the decisions of the <ORG> and <ORG>.

The assessee contends that the decision of <ORG> is erroneous, and that it is entitled to have the dividend income I grossed up' under s. 16(2) and also to claim credit for tax deducted at source, under s.18(5) of the Income-tax Act .

The relevant sections are as follows:

" 16(2) : For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distributed to him, and shall be increased to such amount as would, if income-tax (but not super-tax) at the rate applicable to the total income of the company without taking into account any rebate allowed or additional income-tax charged for the financial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distributed, were deducted therefrom, be equal to the amount of the dividend: (proviso omitted). 18 (5): Any deduction made and paid to the account of <ORG> in accordance with the provisions of this section and any sum by which a dividend has been increased under sub-section (2) of section 16 shall be treated as a payment of incometax or super-tax on behalf........ of the shareholder and credit shall be given to him therefor on the production of the certificate furnished under..... section 20 ...... in the assessment, if any, made for the following year under this Act: (proviso omitted).

49B(1): Where any dividend has been paid, credited or distributed or is deemed to have been paid, credited or distributed to any of the persons specified in section 3 who is a shareholder of a company which is assessed to income- tax in the taxable territories or elsewhere, such person shall, if the dividend is included in his total income, be deemed in respect of such dividend himself to have paid income-tax (exclusive of super-tax) of an amount equal to the sum by which the dividend has been increased under sub- section (2) of section 16 ."

It was contended in <ORG> that inasmuch as s. 16(2) referred to an I assessee, the assessee company was entitled to have the dividend 'grossed up' by the addition of income- tax paid by the various companies at source and consequently to have the benefit of the credit allowed under the two remaining sections. In the opinion of <ORG>, an assessee whose name was not in the register of members of the companies was not entitled to the benefit of these provisions. The learned Judges of <ORG> were of the opinion that the word " shareholder " in s.18(5) had the same signification as the word " member " used in the Indian Companies Act ; and that the assessee was not qualified to be considered as a shareholder, even though by a blank transfer it had ,purchased the relevant shares. In our opinion, <ORG> was right in its conclusion. A company when it pays income-tax, does not do so on behalf of the shareholders. It is itself chargeable under the Act, In <NAME> v. <ORG> (1), Lord <NAME> stated the law (which in substance is also the law in our country) thus:

My Lords, it is now clearly established that in the case of a limited company the company itself is chargeable to tax on its profits, and that it pays tax in discharge of its own liability and not as agent for its shareholders......... At one time it was thought that the company, in paying tax, paid on behalf of the shareholder; but this theory is now exploded by decisions in this <ORG>, and the position of the shareholders as to tax is as I have stated it." When the company pays its own income-tax and declares a dividend from the balance of its profits, it deducts from such dividend a proportionate part of the amount of the tax paid by it. This principle is explained in another English case, and it is substantially also the law in this country. In <ORG> v. <NAME> (2), Viscount <NAME> stated the law in these words:

" Plainly, a company paying income-tax on its profits does not pay it as agent for its shareholders. It pays as a tax- payer, and if no dividend is declared, the shareholders have no direct concern in the payment. If a dividend is declared, -the company is entitled to deduct from such dividend a proportionate part of the amount of the tax previously paid by the company; and, in that case, the payment by the company operates in relief of the shareholder. But no agency, properly so called, is involved."

The share-holders, however, get the benefit of the payment of the tax by the company. Though under (1) [1940] A.C. 51, 56 ; (1939) 22 Tax Cas. 603, 636. (2) [1921] 2 A.C. 171, 201.

s.16(2) of the Act their dividend is increased by a proportionate amount of tax paid by the company, the payment of the tax by the company is deemed tinder ss. 18(5) and 49B(1) to be payment by the shareholders. The rates of income-tax applicable to the company are, in most instances, higher than the rates applicable to the individual shareholders, and by this process of 'grossing up', as it is commonly called, the recipient of the dividend gets some benefit.

The position of a shareholder who gets dividend when his name stands in the register of members of the company causes no difficulty whatever. But transfers of shares are common, and they take place either by a fully executed document such as was contemplated by Regulation 18 of Table A of the Indian Companies Act 1913, or by what are known as blank transfers'. In such blank transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with the share scrip to the trans- feree, who, if he so chooses, completes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recognises no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of 'a blank transfer', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the tranferor retains the money in his own hands and fails to pay it to him.

A glance at the scheme of the Indian Companies Act , 1913, shows that the words " member ", " shareholder " and " holder of a share " have been used interchangeably in that Act. Indeed, the opinion of most of the writers on the subject is also the same.

<NAME> on the Companies Act , 12th Edition, page 803 has pointed out that the right of a transferee is only to call upon the company to register his name and no more.- No rights arise till such registration ,takes place. Section 2(16) of the Indian Companies Act, 1913, defines " share " as " share in the share capital of the company Section 5 deals with the mode of forming incorporated companies, and in the case of companies limited by shares, the liability of the members is limited to the amounts, if any, unpaid on the shares respectively held by them. By s. 18 , Table A is made applicable to companies, unless by the Articles of any company the terms of Table A have been excluded or modified. Regulation 18 of Table A reads as follows:

" The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain holder of the share until the name of the transferee is entered in the register of members in respect thereof. "

The words " holder of a share " are really equal to the word shareholder and the expression " holder of a share denotes, in so far as the company is concerned, only a person who, as a shareholder, has his name entered on the register of members. A similar view of the Companies Clauses Consolidation Act, 1845, was taken in <NAME> v. Morgan(1). The learned Lord Justices held that under s. 15 of that Act, the transferee bad not the benefit of a legal title till certain things were done, which were indicated by Lopes, L.J., in the following passage:

" Therefore the transferor, until the delivery of the deed of transfer to the secretary, is subject to all the liabilities and entitled to all the rights which belong to a shareholder or stockholder, and, in my opinion until the requisite formalities are complied with, he continues the legal -proprietor of the stock or shares subject to that proprietorship being divested, which it may be at any moment, by a compliance with the requisite formalities. (1) (1888) 37 Ch. D. 346, 356.

The same position obtains in India, though the completion of the transaction by having the name entered in the register of members relates it back to the time when the transfer was first made. See <NAME> v. <NAME> (1). During the period that the transfer exists between the transferor and the transferee without emerging as a binding document upon the company, equities exist between them, but not between the transferee and the company. The transferee can call upon the transferor to attend the meeting, vote according to his directions, sign documents in relation to the issuance of fresh capital, call for emergent meetings and inter alia, also compel the transferor to pay such dividend as he may have received. <CITATION> -(2) approved in <CITATION> . (3 ). But these rights though they, no doubt, clothe the transferee with an equitable ownership-, are not sufficient to make the transferee a full owner, since the legal interest vis-a-vis the company still outstands in the transferor; so much so, that the company credits the dividends only to the transferor and also calls upon him to make payment of any unpaid capital, which may be needed. The cases in <NAME> v. <NAME> (4) or <NAME>, In re <NAME> v. <NAME> (5) hardly advance the matter further than this. The position, therefore, under the Indian Com- panies Act, 1913, is quite clear that the expression " shareholder " or " holder of a share " in so far as that Act is concerned, denotes no other person except a " member ". The question that arises in the present case is whether by reason of ss. 16(2) and 18(5) the assessee, who was a transferee on a blank transfer' is entitled to the benefits of the grossing up of the dividend income. Learned counsel for the assessee strenuously contends that the assessee being an owner in equity of the shares and thus also of the dividend is entitled to this benefit. He refers to the use of the word I assessee in s. 16(2) . The <ORG>, on the (1) (1922) I.L.R. 45 Mad. 537.

(3) [1954] S.C.R. 117.

(2) (1922) 45 Bom. L.R. 46.

(4) (1878-79) L. R. 4 Ex. D. 24.

(5) [1940] 1 Ch. D. 92.

other hand, says that the dividend can be increased under s. 16(2) and credit allowed under s. 18(5) if the assessee is a 'shareholder', because the benefit of s. 18(5) can go only to the shareholder, i. e., a person with his name on the register of members, and not to a person holding an equity against such shareholder. The assessee contends that the word " shareholder " includes even a person who holds a share as a result of a blank transfer, and does not necessarily mean a member of the company, whose name is on the register of members.

Authorities on this point are not wanting, and indeed, in the judgment of <ORG> they have all been referred to. They are all against the assessee. <CITATION> (1), <CITATION> (2), <NAME> v. Incometax Officer (3) and <CITATION> (4).

The question that falls for consideration is whether the meaning given to the expression "shareholder" used in s. 18(5) of the Act by these cases is correct. No valid reason exists why " shareholder " as used in s. 18(5) should mean a person other than the one denoted by the same expression in the Indian Companies Act , 1913. In In re <ORG> (5), <NAME>, J., observed: " I use now myself the term which is common in the <ORG>, I a shareholder', that means the holder of the shares. It is the common term used, and only means the person who holds the shares by having his name on the register. " Learned counsel for the assessee cited a number of authorities in which the ownership of the dividend was in question, and it was held that the transferee whose name was not registered, was entitled to the dividend after transfer had been made. These cases are <ORG> v. Sir <NAME> (6), <NAME> v. <ORG> (7) (1)  16 I.T.R. 187.

(3) [1957] 32 I.T.R. 350.

(5) (1882) 21 Ch. D. 849, 854.

(2) [1952] 22 I.T.R. 490.

(4) [1953] 24 I.T.R. 419.

(6) (1925) 9 Tax Cas. 582, (7) (1941) 24 Tax Cas. 311.

and others cited at page 367 in <ORG> v. <NAME> (1).

No one can doubt the correctness of the proposition in these cases, but from an equitable right to compel the transferor to give up the dividend to the transferee, to a claim to the dividend by him as a " shareholder " against the company is a wide jump. In so far as the company is concerned, it does not even issue the certificate under s. 20 of the Income-tax Act in the name of an unregistered transferee but only in the name of the transferor whom it recognises, because his name is borne on its books. Section 20 lays down: " The principal officer of every company shall, at the time of distribution of dividends, furnish to every person receiving a dividend a certificate to the effect that the company has paid or will pay income-tax on the profits which are being distributed, and specifying such other particulars as may be prescribed. "

The meaning of s. 20 as also of s. 18(5) is clear if they are read with s. 19A , under which information regarding dividends has to be supplied by the company when demanded by the Income-tax Officer. It lays down:

" The principal officer of every company ... shall, on or before the 15th day of June in each year, furnish to the prescribed officer a return in the prescribed form and verified in the prescribed manner of the names and of the addresses, as entered in the register of shareholders maintained by the company, of the shareholders to whom a dividend or aggregate dividends exceeding Such amount as may be prescribed in this behalf has or have been, distributed during the, preceding year and of the amount so distributed to each such shareholder. " (Italics supplied). Section 19A makes it clear, if any doubt existed, that by the term " shareholder " is meant the person whose name and address are entered in the register of " shareholders " maintained by the company. There is but one register maintained by the Company. There (1) (1945) 26 Tax Cas. 359.

is no separate register of " shareholders " such as the assessee claims to be but only a register of " members ". This takes us immediately to the register of members, and demonstrates that even for the purpose of the Indian Income- tax Act, the words ',member and " shareholder " can be read as synonymous.

The words of s. 18(5) must accordingly be read in the light in which the word " shareholder " has been used in the subsequent sections, and read in that manner, the present assessee, notwithstanding the equitable right to the dividend, was not entitled to be regarded as a "shareholder" for the purpose of s. 18(5) of the Act. That benefit can only go to the person who, both in law and in equity, is to be regarded as the owner of the shares and between whom and the company exists the bond of membership and ownership of a share in the share capital of the company. In view of this, we are satisfied that the answer given by <ORG> on the question posed by the <ORG> was correct.

The appeal fails, and is dismissed with costs. Appeal dismissed.