PETITIONER: <NAME> Vs. RESPONDENT: SMT. ATMA DEVI & ORS. DATE OF JUDGMENT02/09/1987 BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) OZA, G.L. (J) CITATION: 1987 AIR 2220 1987 SCR (3)1184 1987 SCC (4) 183 JT 1987 (3) 474 1987 SCALE (2)436 ACT: Delhi Rent Control Act , 1958: Section 14(1)(h) --Allot- ment of house to wife---A <ORG> employee--Whether disentitles the husband to retain the tenanted premises as tenant. HEADNOTE: The premises in question had been let out in April, 1968 to the appellant at a monthly rent of Rs.340 by the husband of respondent No. 1 and the father of respondents Nos. 2 to 8. In July, 1977 the landlord filed an eviction petition against the appellant on the ground of bona fide require- ment. In September, 1978 appellant's wife was allotted a <ORG> quarter due to her employment as a teacher In the <ORG> school. In March, 1986 the first respondent filed a petition before <ORG> that the wife of the appellant having been allotted a residential quarter came within the mischief of clause (h) of Section 14(1) of the Act and was, therefore, liable for eviction. The appellant contended that he had not acquired any house and that the quarter in question was allotted to his wife on joint allotment basis on compassionate grounds and that the same had been surrendered and, therefore, the appellant was not liable to be evicted. It was further contended that the allotted accommodation could not be treated as alternative accommodation for the appellant and his family. The Additional Rent Controller held that having regard to the provisions of law, as the tenant had acquired vacant possession for residence, he became disentitled to retain the premises in question and, therefore, passed an order of eviction. <ORG> dismissed the appeal of the appellant. <ORG> rejected the second appeal. In the appeal to this <ORG>, the question for considera- tion was: whether under clause (h) of Section 14(1) of the Act allotment of a house to the wife, who was a <ORG> employee, in all circumstances disentitled the tenant to retain the tenanted premises. 1185 Allowing the appeal, this <ORG>, HELD: 1. The premises in question which the wife occu- pied was indisputably not the matrimonial home. The husband would not, therefore, have any statutory or legal right against the <ORG> to use and enjoy the allotted prem- ises to the wife of the tenant because of her job. The tenant cannot be made to lose his tenancy because of the wife acquiring possession of a flat or allotment of a flat because of her official duties over which the husband has no right or domain or occupation. [1194C-D] 2.1 The purpose of the Delhi Rent Control Act is to control rents and evictions; in other words, to control unreasonable evictions and to ensure that in an atmosphere of acute shortage of accommodation, there is proper enjoy- ment of available spaces by those who want and deserve. [1189G-H] 2.2 Unless acquisition of a premises or allotment of a premises or a part of a premises by the tenant in which he has domain which he can reasonably and alternatively use as substitute for the place he is using in the tenancy, it cannot lead to forfeiture of his right to occupy his tenant- ed premises. The case would be otherwise, however, if a tenant comes into possession of a premises or is allotted a piece of residence or acquires vacant possession of the premises then such a tenant cannot prevent, if other condi- tions are fulfilled under Section 14(1)(h) of the Act being liable to forfeiture of his tenancy. [1190B-C] 2.3 Tenancy is a right vested in the tenant. The main purpose of the Act is the protection of tenants from evic- tion. The various provisos to sub-section (1) of section 14 laid down the exception to this rule. The intention of the <ORG> in divesting the tenant of his right was based upon the fact that the tenant had legally acquired another residence as of right. There is no law according to which husband and wife could be deemed to be one person. [1191E-F] 2.4 The acquisition of other residence must be by the tenant himself before proviso (h) of sub-s. (1) of section 14 of the Act would apply. [1191D] 2.5 If a wife or husband acquires a property and the other spouse if he/she is the tenant, has a legal right by virtue of such acquisition and stay there, then only can such acquisition or allotment of premises would disentitle or attract the provisions of cl. (h) of section 14(1) of the Act, otherwise the whole purpose would be defeated. That is the rationale behind the scheme. [1191F-G] 1186 2.6 From the fact that the wife of the tenant was allot- ted a temporary <ORG> accommodation, it cannot be said that there was admission by virtue of which the tenant could lose his tenancy that the wife has acquired a house which is available to the husband over which the husband has a domain which could be a substitute to the tenanted premises. This fact of acquisition or allotment of fiat in the name of wife (which incidentally she has lost having given up the job) can be in certain circumstances a factor in judging the bona fide needs of the landlord; but the same indisputably cannot be any ground to evict the tenant on the ground that he has acquired vacant possession or allotted residence in terms of cl. (h) of section 14(1) . [1192E-F, 1193A-B] 3. The rights, if any, of the parties in the eviction petition on the ground of bona fide need of the landlord will not in any manner be prejudicially affected. [1194F] [In England the rights of the spouses to the matrimonial home are now governed by the provisions of the Matrimonial Homes Act, 1967. Where one spouse is entitled to occupy a dwelling house by virtue of any estate or interest or con- tract or by virtue of any enactment giving him or her the right to remain in occupation, and the other spouse is not so entitled, then the spouse not so entitled has the certain rights (known as "rights of occupation"), that is to say, if in occupation, a right not to be evicted or excluded from the dwelling house or any part of it by the other spouse except with the leave of the court given by an order; if not in occupation, a right with the leave of the court so given to enter into and occupy the dwelling house. [1193D-G] Such rights are not granted in India. But with the change of situation and complex problems arising, it is high time to give the wife or the spouse a right of occupation in a truly matrimonial home, in case of marriage breaking up or in case of strained relationship between the husband and the wife.] [1193G] <CITATION> ,  Delhi Rent Judgment 287; Smt. Revti Devi v. <NAME>,  All India Rent Control Journal 418; <CITATION> and others,  3 SCR 267; <CITATION> ,  1 SCR 535 and <ORG>, Fourth Edition, Vol. 22 page 650, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1170 of 1987.

From the Judgment and Order dated 6.4. 1987 of <ORG> in S.A.O. No. 71 of 1987.

Mr. <NAME>, Dr. <NAME> and <NAME> for the Appellant.

<NAME> and Miss <NAME> for the Respondents. The Judgment of the Court was delivered by <NAME>, J. What is the true meaning of the expression 'tenant has before or after the commencement of the Act, built, acquired vacant possession of, or been allotted, a residence' in terms of clause (h) of Section 14(1) of the Delhi Rent Control Act, 1958 (hereinafter called 'the Act') is the question raised in this appeal in the backdrop of interesting set of facts. This is an appeal by the tenant against the judgment and order dated 6th April, 1987 of <ORG>. To the facts first, however, we must go to appreciate the point. The appellant was at all material times since 1968 a tenant of the ground floor of premises No. 2/14, Kalkaji Extention, New Delhi. The premises had been let out in April, 1968 to the appel- lant at a monthly rent of Rs.340 per month by one <NAME>, deceased husband of respondent No. 1 and father of respondents Nos. 2 to 8. The premises consist of two bed rooms, one drawing room, one dining room, one kitchen, two bath rooms and court yard at the back and porch in the front and one store and also one verandah. It is the case of the appellant that originally the appellant had occupied these alongwith his wife, his aged mother, his son, daughter, brother and sister-in-law. However, the brother and sister- in-law have since moved out and since 1979 the appellant's wife <NAME> was only staying with the family off and on for short periods usually when the appellant was on tour. In the meantime on or about 20th July, 1977 the land- lord filed eviction petition against the appellant on the ground of bona fide requirement. On or about 25th September, 1978 the appellant's wife <NAME> was allotted Flat No. 93, Sadiq Nagar, i.e., a government quarter was given to her due to her employment as a teacher in <ORG>, Kalkaji, New Delhi. She goes to live there leaving the rest of her family in the premises in dispute. It is the case Of the appellant aS made out in appeal before us that one Shri <NAME> and his family were asked to share with the appellant's wife on a joint-allotment basis because it was not safe for a lady to live alone. The case of the appellant was that the relation- ship between the appellant and his wife <NAME> was not very good. There were differences of opinion. The appellant wanted the wife to give up her job and concentrate on the upbringing of the children. The lady was reluctant. She wanted to pursue her own avocation and career. It is highlighted before us that in those circum- stances the wife of appellant had applied for government accommodation and had gone to live in the said premises. However, by force of circumstances as the children have grown up and daughters became of marriageable age she was induced to give up her job and allotment and she has come back to the husband's premises being the premises in dis- pute. On 17th of March, 1986 respondent No. 1 filed in <ORG>, Delhi a petition on the ground that the wife of the appellant <NAME> had been allotted on 25th of September, 1978 a residential quarter from <ORG>, Delhi by virtue of her employment in <ORG>, Kalkaji, New Delhi. The appellant therefore came within the mischief of clause (h) of section 14(1) of the Act. Written statement was duly filed in which it was stated that appellant had not acquired any house but that the landlord had tried to take advantage of the strained relationship between the tenant and his wife. It was stated that the tenant had strained relationship with his wife and on ac- count of the same only she had acquired a separate accommo- dation and started staying there and got her ration card prepared at the same address but since the appellant had grown up children and remained on touring job; therefore, in order to provide the required protection and care, the wife of the appellant came to the house in question temporarily. It was stated that this fact is well within the knowledge of the landlord and other members of the family. It was denied that <NAME>., the tenant had sublet the quarter No. 93. On the other hand it was apparent that the depart- ment had allotted the house to the wife of the appellant alongwith one other colleague jointly, who had now surren- dered the same. It was further stated that this joint allot- ment had been made to the appellant's wife on compassionate grounds. The appellant was, therefore, not liable to be evicted from the premises in question it was asserted. The case was proceeded under section 37 of the Act. It was the contention of the appellant that he wanted to substantiate by production of evidence both oral and documentary that the flat allotted to his wife was on compassionate grounds in recognition of her special need to live apart from him. It could not be an alternative accommodation for the appellant and his family. It was further stated that the wife was allotted Flat No. 93, Sadiq Nagar on 25th September, 1978. A few months later, the appellant's wife was all alone in the flat and felt the need for some company, and she arranged one of her colleagues Mrs. <NAME> alongwith her family should come to stay with her in this flat. Mrs. <NAME>'s husband Mr. <NAME> was entitled to such accommoda- tion in his own right as a teacher in <ORG>, Hari Nagar Ashram, New Delhi and accord- ingly the appellant's wife arranged to have the flat jointly allotted to herself and Mr. <NAME>. Mr. <NAME> with his family entered the flat on or about 28th April, 1979 and continued to share the flat with the appellant's wife for three years only. In 1982 they moved out of the flat and since then the appellant's wife has continued in the flat. In 1978 when she first occupied the flat, the appellant's wife had a separate ration card giving the flat as her address and had drawn ration on that basis and not with her family in the suit premises. It was further stated that the appellant should have been permitted to adduce evidence both oral and documentary on all the above facts. But the learned Additional Rent Controller directed that no evidence need be necessary as the matter could be decided on admitted facts. In view of the provisions of law as the tenant had acquired vacant possession for residence became disentitled to retain the premises in question, he, therefore, passed an order of eviction.

Aggrieved by the aforesaid order the appellant went up in appeal being R.C.A. No. 957 of 1986. The learned <ORG> negatived the appellant's plea that he should have been allowed to produce evidence in support of his averment of strained relations with his wife and that on account of these strained relations he could not in any way avail of the allotment of the flat to his wife. The <ORG> dismissed the appeal of the appellant. Being aggrieved thereby the appellant approached <ORG> in second appeal. <ORG> by its impugned judgment dated 6th of April, 1987 summarily rejected the appeal. Being further aggrieved the appellant has come up to this Court as mentioned hereinbefore.

The short question is whether under clause (h) of Sec- tion 14(1) of the Act allotment of a house to a wife who is a <ORG> employee in all circumstances disentitled the tenant to retain the tenanted premises. We are unable to accept the view of <ORG>. We have noted the provisions. The purpose of the Act is to control rents and eviction, in other words, to control unreasonable evictions and to ensure that in an atmosphere of acute shortage of accommodation, there is proper enjoyment of available spaces by those who want and deserve. In other words, to ensure that there is no unreasonable and unnecessary spaces in the hands of one tenant and other tenants and landlords' need of occupation of spaces remains unsatisfied; clause (h) of Section 14(1) is an attempt in a way to ration out accommodation between tenants and landlords. Looked at from that point of view unless acquisition of a premises or a flat or allotment of a prem- ises or part of a premises by the tenant in which he has domain which he can reasonably and alternatively use as a substitute for the place he is using in the tenancy it cannot lead to a forfeiture of his right to occupy his tenanted premises. The case would be otherwise, however, if a tenant comes into possession of a premises or is allotted a piece of residence or acquires vacant possession of the premises then such a tenant cannot prevent, if other condi- tions are fulfilled under section 14(1)(h) of the Act being liable to forfeiture of his tenancy. But counsel for the respondent heavily relied on a decision of this Court in <CITATION> ,  Delhi Rent Judgment 287. That was a case under the Delhi Rent Control Act , 1958 and section 14(1)(h) of the Act came up for con- sideration. The respondent-tenant was out of possession since October 9. 1976. He was dispossessed during the pend- ency of the appeal before <ORG>. The respondent's son was a business executive, who was, at one time, allotted a flat by his employers. On December 12, 1980, the respondent's wife purchased a flat at Saket from <ORG>, at a cost of about Rs. 1,20,000. The flat was available to the respondent though his explanation is that it had been let out by his wife to their son. The respondent thereafter has now no case to be put back in possession of the flat in dispute. <NAME>, C.J. delivering the judgment of the Court observed that the Court had allowed the appellants to amend their applications for possession by pleading that the respondent had acquired possesion of a vacant residence within the meaning of sec- tion 14(1)(h) of the Delhi Rent Control Act , 1958. Having considered the averments of the parties on the point at issue it was held in that case that the respondent had through his wife acquired vacant possession of a residence in Delhi and in that view of the matter was held not enti- tled to retain old tenanted premises. Mr. <NAME>, learned counsel strenuously contended before us that this proposition that acquisition of a flat by the wife was acquisition by the tenant and such acquisition in all circumstances would be within the mischief of section 14(1)(h) of the Act and would disentitle the tenant to retain his flat in question. We are unable to accept this reading of the said Act. The said decision rested on the facts of that case. There in that case, this Court found that the respondent's wife had purchased a flat in Saket and further found that the flat was available to the respondent. In those circumstances it was held that there was acquisi- tion of vacant possession of a residence and as such section 14(1)(h) of the Act would be attracted. It cannot however be laid down as a general proposition of law that acquisition of flat by the wife in all circumstances would amount to acquisition of fiat by the tenant. This position has been very properly highlighted in the decision of <ORG> in Smt. <NAME> v. <NAME>, [1970] All India Rent Control Journal 418 where <NAME>, J. as the learned Chief Justice then was; held that the mere occupation of a new residence by the tenant without any legal right to do so would not be covered by proviso (h) to section 14(1) of the Delhi Rent Control Act. If he goes to stay in the house of his wife, legally speak- ing, he has no right as such to stay and can be turned out from the house at any time by its legal owner, namely, the wife. There was no law according to which the husband and the wife could be deemed to be one person. Therefore, where proviso (h) required that the tenant himself should acquire vacant possession of another residence before he can become liable to eviction, the effect of its language cannot be whittled down by arguing that proviso (h) would apply even if it is not the tenant himself but his wife or his other relation were to acquire such other residence. Therefore, as a general proposition of law, the acquisition of other residence must be by the tenant himself before proviso (h) to sub-s. (1) of s. 14 of the Act would apply. The learned Judge dealt with this and observed that in construing the above provision, it has to be borne in mind that the scheme of the Act had to be appreciated. Tenancy is a right vested in the tenant. The main purpose of the Act is the protection of tenants from eviction. The various provisos to sub-s. (1) of s. 14 laid down the exception to this rule. The learned Judge observed that when proviso (h) made tenant liable to eviction, its effect was to divest the tenant of his right of tenancy. The intention of the legislature in divesting the tenant of his right was based upon the fact that the tenant had legally acquired another residence as of right. There is no law according to which husband and wife could be deemed to be one person. Therefore, the correct position must be that if a wife or a husband acquires a property and the other spouse if he/she is the tenant, has a legal right by virtue of such acquisition and stay there, then only can such acquisition or allotment of premises would disentitle or attract the provisions of cl. (h) of section 14(1) , otherwise the whole purpose would be defeated. In other words if for all practical and real sense the tenant ac- quired, built or was allotted another residence then his need for the old tenanted residence goes and the tenant loses his right to retain his tenanted premises. That is the rationale behind the scheme.

Dr. <NAME> drew our attention to the various as- pects of the case where no proper opportunity was given to the tenant to show that in fact the husband would not and did not have any right at all to come to the premises allotted to the wife which was taken because of the strained relation of the husband and wife regarding the career of the wife. In such a house the hus- band will not come, he will certainly have no legal right or access for either staying or coming in the premises acquired by the wife. If it defeats the husband's tenancy then it would be mockery of justice. Mr. <NAME> tried to submit that there was no evidence before the trial court as well <ORG> of the alleged strained relationship between the parties. What is necessary is that unless there is a positive evidence, and here there is none, of acquisition of property prima facie in the name of the tenant or allotment of flat to the tenant, it cannot be said to have been ac- quired by or allotted to some members of the tenant's family other than the wife. That cannot defeat the tenant's right under clause (h) of section 14(1) . If there is such an acquisition by or on behalf of the tenant then the tenant and members of the tenant's family would have dominion over the acquired residence. Such acquisition would bring to the tenant the mischief of section 14(1)(h) of the Act. In the case of this nature the appellate court had ample power in our opinion to have taken additional evidence. Our attention was drawn to a decision of the learned Single Judge in the case of <NAME> v. <NAME>, [ 1982] Jabalpur Law Jour- nal 45 1. Our attention was drawn at the bar that a judgment can be given on admission, that is to say, in this case that an allotment had been made in favour of the wife or the tenant. Our attention was drawn to Mulla's Code of Civil Procedure, Vol. II, 14th Edition page 1148 which highlights that such oral admission must be definite and unambiguous and must be satisfactorily established. In our opinion, from the fact that the wife of the tenant was allotted a tempo- rary <ORG> accommodation, it cannot be said that there was admission by virtue of which the 'tenant could lose his tenancy that the wife has acquired a house which is avail- able to the husband over which the husband has a domain which could be a substitute to the tenanted premises. In that view of the matter we are of the opinion that there was no admission at all.

Our attention was drawn to certain observations of Bhagwati, J., as the learned Chief Justice then was, in <CITATION> ,  3 S.C.R. 267, where dealing with certain facts wheth- er premises given on a licence could be considered in con- sidering the bona fide requirement of the landlord to the allotment or acquisition. In our opinion, this principle is wholly irrelevant for the point in controversy before this Court. We are not concerned here whether there was ground for bona fide requirement of the landlord for which a suit had been filed and which is pending appeal. This fact of acquisition or allotment of flat in the name of wife (which incidentally she has lost having given up her job) can be in certain circumstances a factor in judging the bona fide needs of the landlord; but the same indisputably cannot be any ground to evict the tenant on the ground that he has acquired vacant possession or been allot- ted residence in terms of clause (h) of section 14(1) . Mr. <NAME> drew our attention to certain observations of this Court in <CITATION> ,  1 S.C.R. 535, where this Court held that the tenant's liability to eviction arises when the fact of unlawful subletting is proved. The fact that subsequently the other tenant had left the premises does not cure the mischief done. Mr. <NAME> placing this decision tried to urge before us that the allotment itself of a residence or acquisition of a residence by the tenant or the wife of the tenant was sufficient to attract clause (h) of section 14(1) of the Act. The fact that subsequently the tenant had left the premises was irrelevant and did not affect the position. It.was further submitted that the tenant had acquired a premises or allotted a residence which could be considered to be so in terms of clause (h) of section 14(1) but the flat in question allotted to the wife of the tenant could not by any stretch of imagination be considered to be a matrimonial home. In England the rights of the spouses be husband or wife to the matrimonial home are now governed by the provisions of Matrimonial Homes Act, 1967. Halsbury's Laws of England, Fourth Edition, Vol. 22 page 650 deals with the rights of occupation in matrimonial home and paragraph 1047 deals with and provides that where one spouse is enti- tled to occupy a dwelling house by virtue of any estate or interest or contract or by virtue of any enactment giving him or her the right to remain in occupation, and the other spouse is not so entitled, then the spouse not so entitled has the certain rights (known as "rights of occupation") that is to say if in occupation, a right not to be evicted or excluded from the dwelling house or any part of it by the .other spouse except with the leave of the court given by an order if not in occupation, a right with the leave of the court so given to enter into and occupy the dwelling house. But such rights are not granted in India though it may be that with change of situation and complex problems arising it is high time to give the wife or the spouse a right of occupation in a truly matrimonial home, in case of marriage breaking up or in case of strained relationship between the husband and the wife. We, however, cannot for the purpose of this case get much assistance from the prin- ciple adumbrated in paragraph 1047 of Halsbury's Laws of England. In England cases before 1968 established that occupation of the matrimonial home by a tenant's wife after the tenant had left counts as occupation by the tenant so as to preserve the statutory tenancy for as long as the marriage itself sub- sists. In those circumstances in England the landlord could not properly be granted an order for possession against the husband unless there were available grounds for possession against both husband and wife. The tenant cannot abandon his rights while his wife remains; nor can the landlord evict the wife even if the tenant consents or purports to surren- der his statutory tenancy. This is the result of the case law in England and much social awareness and the case laws have been given statutory expression in the Matrimonial Homes Act 1967. We have no such law. The premises in ques- tion which the wife occupied was indisputably not the matri- monial home. It is nobody's case. The husband would not, therefore, have any statutory or legal right against the Government to use and enjoy the allotted premises to the wife of the tenant because of her job. Looked at from any point of view, the tenant cannot be made to lose his tenancy because of wife acquiring possession of a flat or allotment of a flat because of her official duties over which the husband has no right or domain or occupation. In the premises we are unable to sustain the judgment under appeal. To complete the story the wife of the tenant has resigned and has joined the husband at <ORG>, New Delhi. We hope there will be no more strained relationship in the family. Hereafter they will live happily provided the landlord permits so. We shall try to ensure that they so permit.

The appeal is allowed and the judgment and order of <ORG> and the Courts below are set aside. The eviction petition under section 14(1)(h) of the Delhi Rent Control Act, 1958 is dismissed. In the facts and circumstances of the case the parties will bear and pay their own costs. This, however, will not in any manner prejudice the fights, if any, of the parties in the other eviction petition on the ground of bona fide need of the landlord which we are told is still pending.

N.P.V. Appeal allowed.


JUDGMENT <NAME>, J.

(1) <ORG> Delhi Bench) (hereinafter referred to as <ORG> has referred the following two questions to this Court, under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act):- "1. Whether on the facts and in the circumstances of the case, the sum of Rs. 5,349.00 paid by the assessed to M/s. <ORG>, Kanpur was a business expenditure of revenue nature ? 2. Whether on the facts and in the circumstances of the case, the assessed's business of printing and publishing books was a newly established industrial undertaking entitled to the exemption from tax under section 15C of the Income-tax Act, 1922 ?"

(2) The facts relevant to the first question may briefly be stated : <ORG>, Delhi, (hereinafter referred to as the assessed) is a registered firm carrying on business of publishing books. The assessed wanted to obtain recognition of <ORG> for some of the textbooks published by it in order to enable the assessed to sell the text books in the territory of Himachal Pradesh. For this purpose, the assessed entered into an agreement with another firm, <ORG>, Kanpur, which, according to the assessed, was in a position to use its influence for obtaining recognition of the assessed's text books from <ORG>.^ This agreement was entered into sometime in September, 1959. Under this agreement, the assessed agreed to pay 6"% royalty on the net sales of such approved books in consideration for the services of <ORG> for obtaining such recognition to the assessed's text books. The assessed did obtain recognition for its text books through the good offices of M/s, <ORG> and it paid to <ORG> a sum of 5,349.00 during the accounting period relevant to the assessment year 1961-62. The assessed claimed deduction of the said amount in computing its income for the said year. The assessed's claim was rejected by <ORG> on the ground that the amount represented capital expenditure and on the same ground, the disallowance was confirmed by the Appellate Assistant Commissioner. The <ORG>, however, allowed the assessed's claim holding that it was a revenue expenditure and directed <ORG> to delete the said amount from the income of the assessed. At the instance of the <ORG>, the <ORG> has, however, referred the first question to this Court under sections 66(1) of the Act.

(3) The question, as framed by the <ORG>, would suggest that the <ORG> did not accept that the amount of Rs. 5,349.00 was even a business expenditure in the sense that it was laid out wholly and. exclusively for the purpose of the business of the assessed. But <NAME>, learned counsel for the <ORG>, conceded that the amount in question was a business expendtiure in the sense that it was laid out wholly and exclusively for the purpose of the assessed's business. He, however, contended that, although the amount represented a business expenditure of the assessed, yet it was of the nature of capital expenditure which was not allowable under section 10(2) (xv) of the Act.

(4) The question whether a particular expenditure is of a capital or of a revenue nature is a vexed question. The principles on which such a question has to be determined are very well known, having been laid down by the courts in England as well as in this country. These principles have been summarised by <ORG> in the leading case on the subject, namely, <CITATION> , (1955) 27 I.T.R. 34, (1) in the following terms:- "INcases where the expenditure is made for the initial outlay or for extension of a business or a substantial replacement of the equipment, there is no doubt that it is capital expenditure. A capital asset of the business is either acquired or extended or substantially replaced and that outlay whatever be its sources whether it is drawn from the capital or the income of the concern is certainly in the nature of capital expenditure. The question however arises for consideration where expenditure is incurred while the business is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment. Such expenditure can be looked at either from the point of view of what is acquired or from the point of view of what is the source from which the expenditure is incurred. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. It, it was part of the fixed capital of the business it would be of the nature of capital expenditure and if it was part of its circulating capital it would be of the nature of revenue expenditure. These tests are thus mutually exclusive and have to be applied to the facts of each particular case in the manner above indicated. It has been rightly observed that in the great diversity of human affairs and the complicated nature of business operations it is difficult to lay down a test which would apply to all situations. One has therefore got to apply these criteria one after the other from the business point of view and come to the conclusion whether on a fair appreciation of the whole situation the expenditure incurred in a particular case is of the nature of capital expenditure or revenue expenditure in which latter event only it would be a deductable allowance under section 10(2)(xv) of the Income-tax Act. The question has all along been considered to be a question of fact to be determined by the Income- tax authorities on an application of the broad principles laid down above and the Courts of law would not ordinarily interfere with such findings of fact if they have been arrived at on a proper application of those principles."

(5) Although these principles are well-settled, the difficulty arises in the application of such principles to the facts and circumstances of each case. This difficulty has been recognised by <ORG> in <CITATION> , (1962) 44 I.T.R, 689, (2) and the following caution has been administered with regard to the application of the general principles to the facts of each particular case :- "NONEof the tests laid down in various authorities is either exhaustive or universal. Each case must depend on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases. . . . . .by matching the colour of one case against the colour of another." (6) This caution has been reiterated by <ORG> in a later case, namely, <CITATION> , (1966) 59 I.T.R. 718.(3) (7) So far as the facts of the present case are concerned, although the <ORG> had been carrying on business of publishing books in the earlier years also, it had not obtained recognition of its text books in Himachal Pradesh and it was for the first time during the assessment year under reference that the <ORG> obtained such recognition. As a result of obtaining such recognition, the <ORG> was able to sell its text books in the territory of Himachal Pradesh. Without obtaining such recognition, the <ORG> could not have sold its text books in the said territory. "This recognition resulted in the expansion of the <ORG>'s .business in a new territory. This recognition, therefore, brought to the asse-ssee an advantage of 'an enduring nature. What is an advantage of an enduring nature has been explained by <NAME> in <ORG> & <ORG> v. Federal Commissioner of Taxation, 61 C.L.R. 337, (4) "WHENthe words 'permanent' or 'enduring' are used in this connection it is not meant that the advantage which will be obtained will last for ever. The distinction which is drawn is that between more or less recurrent expenses involved in running a business and an expenditure for the benefit of the business as a whole" .... e.g. ..... "enlargement of the goodwill of a company" -"permanent improvement in the material or immaterial assets of the concern." (8) The fact that the consideration paid to <ORG> for obtaining this advantage for the <ORG> was not in the shape of a lump sum payment but was in the shape of royalty at 6"% on the net sales of the approved text books, will not alter the nature of the expenditure. As observed in (1955) 27 I.T.R. 34 by <ORG>, the source and the manner of the payment would then be of no consequence. The expenditure was not incurred for the purpose of running the business of the <ORG> but for the purpose of acquiring a valuable right. We, therefore, hold that the amount in question was a capital expenditure and was not allowable under section 10(2) (xv) of the Act. The first question, referred to us is, therefore, answered in the negative, i.e., in favor of the <ORG> and against the <ORG>. (9) The facts relevant to the second question may now be stated. In the years prior to the assessment year 1961-62, the <ORG> was getting its books printed in some other printing press. For the first time during the assessment year, the <ORG> started printing its books in its own printing press. It would appear from the assessment order, Annexure 'A' to the statement of the case, that in the earlier year, the <ORG> had claimed type replacement expenses and also that the <ORG>'s press had worked for 8 months in that year as against 12 months in the present year. This would indicate that the <ORG> was already having a press of its own even in the earlier year, although it was getting its books printed else where. But in the appellate order of the <ORG> as well as in the statement of the case, it has been stated that the <ORG> had established a printing press in this year and that the printing of books was a new venture for the first time. We would have wished that the relevant facts necessary for the application of section 15C of the Act had been investigated in greater detail and a definite finding had been given whether the <ORG> was already having a printing press in the earlier year as stated by the income-tax officer in his assessment order or whether the <ORG> had installed a printing press for the first time in this year and also whether the printing press installed by it was a new one or whether it was a secondhand one. But we shall proceed on the basis of what is stated in the appellate order of the <ORG> and in the statement of the case and assume that the <ORG> had installed a new printing press for the first time in this year only and that the <ORG> printed its books in its own printing press. On the basis of these facts, it cannot be seriously disputed that the business of the <ORG> is ill the nature of an industrial undertaking which manufacturs or produces articles, namely, books. It is also not disputed that the <ORG> satisfies clause (iii) of sub-section (2) of section 15C of the Act inasmuch as it employs 10 or more workers in a manufacturing process carried on with the aid of power. The learned counsel for the <ORG>, <NAME>, however, conteads that the <ORG> does not satisfy clause (i) of sub-section (2) of this section which reads as follows :- "(2)This section applies to any industrial undertaking which - (i) is not formed by the splitting up, or the reconstruction of business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business." (10) According to the learned counsel, the industrial undertaking of the <ORG> was formed by the reconstruction of business already in existence. We find considerable force in this contention. In <ORG>, 3rd Edition, the word 'reconstruction' has been explained thus at page 2491 :- 'WHATdoes 'reconstruction' mean ? To my mind it means this-an Undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking but that it is desirable to preserve it in some form, and to do so-not by selling it to an outsider who shall carry it on (that would be a mere sale) but, in some altered form, to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves that substantially the same business shall be carried on, and substantially the same persons shall carry it on. But it does not involve that all the assets shall pass to the new or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company, or resuscitated company. Substantially the business and the the persons intrested must be the same. Does it make any difference that the new company or resuscitated company does, or does not, take over the liabilities ? I think not. I think it is none the less a reconstruction because from the assets taken over some part is excepted,^ provided that substantially the business is taken; and it is immaterial whether the liabilities are taken over by the new or resuscitated company or are provided for by excepting from the scheme of reconstruction a sufficient amount to answer them. It is not, therefore, vital that either the whole assets should be taken over, or that the liabilities should be taken over. You have to see whether substantially the same persons carry on the same business; and, if they do, that is a reconstruction." (11) The meaning of this word 'reconstruction' has also been explained by <ORG> in <CITATION> ., (1959) 35 I.T.R. 662(¯) in the following terms:- "THEreconstruction of a business or an industrial undertaking must necessarily involve the concept that the original business or undertaking is not to cease functioning, and its identity is not to be lost or abandoned. The concept essentially rests on changes but the changes must be constructive and not destructive. The underlying idea of a recons truction is of a "business already in existence" : there must be a continuation of the activities and business of the same industrial undertaking. The undertaking must continue to carry on the same business though in some altered or varied form. If the alterations and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. For instance, if the ownership of a business or an undertaking changes hands not ostensibly but in reality and effectively, that would not be reconstruction. Or, if the very nature of the business is changed, that again would not be reconstruction. On the other hand, reorganisation of the business on. sounder lines or alterations in the mode or method or scope of the activities of the business or in its personnel or infusion of new blood in the management or control of the business which may even be by some changes in the constitution of persons interested in the undertaking would be no more than reconstruction of the business if it is substantially the same business carried on by substantially the same persons. In these matters, we have to look at the substance of the transaction and not the form. If, looking at the substance of the transaction, it is a sale, then the concept of reconstruction must be ruled out for in such a case there is no scope for speaking about any reconstruction of an existing business."

(12) The assessed was already carrying on the business of publishing books in the earlier years. The only change that took place in the present year is that instead of getting its books printed in some other press, it printed its books in its own press. It was not an altogether new business which the assessed had established in the present year. The business which the assessed was carrying on in the earlier years was the same business which the assessed carried on in the present year, namely, the publishing of books. The business of the assessed in the earlier years may not amount to an industrial undertaking inasmuch as on the facts in the appellate order of the <ORG> and in the statement of the case, the assessed was not having a printing press of its own. But non-the-less it was a business which the assessed was carrying on in the earlier years. The benefit under section 15C was only available to an assessed who forms any industrial undertaking by the reconstruction of business already in existence. It is significant that the word used in clause (i) of sub-section (2) of section 15C of the Act is 'business' and not 'industrial undertaking'. Therefore, if an industrial undertaking is formed by the reconstruction of a business already in existence, the tax exemption under section 15C of the Act will not be available to the assessed. We are. therefore, of the view that the facts of the assessed's case come within the mischief of clause (i) of sub-section (2) of section 15C of the Act and the assessed is not entitled to the tax exemption under section 15C of . . the Act. We, therefore, answer the second question also in the negative, i.e. against the assessed and in favor of the <ORG>. The assessed will pay the costs to the <ORG> Counsel's fee is fixed at Rs. 250.00


<NAME>, J.

1. The respondent is a company which, for assessment to agricultural income-tax under the Coorg Agricultural Income-tax Act, 1951 (hereinafter referred to as "the Act"), for the assessment year 1952-53, filed a return showing a loss of Rs. 43,071. The relevant accounting year was the calendar year ending 31st December, 1951. The assessing authority thereupon issued a notice under section 18(2) of the Act in response to which the account books of the respondent were produced, and the assessing authority held that the respondent had not accounted for the receipts from the crop so the agricultural year 1950-51. The explanation of the respondent for not including those receipts was that the standing crops of that year were purchased separately from the previous owners for a sum of Rs. 2,16,000 and, consequently, the respondent did not treat that crop as its agricultural receipts. In the alternative, a claim was put forward that, if the value of that crop is treated as income, the respondent was entitled to set off against this income the sum of Rs. 2,16,000 paid for the purchase of the crops. The assessing authority held that the value of the entire crop of the year 1950-51 represented agricultural income of the respondent, and, consequently, added the amount of Rs. 2,16,000, representing its value, to the agricultural income of the respondent and assessed the tax thereon. The respondents appeal to the Deputy Commissioner for Agricultural Income-tax failed. The respondent applied to the Commissioner of Agricultural Income tax asking for a reference of the following question to <ORG> :

"Whether, on the facts and in the circumstances of the case, the Deputy Commissioner of Agricultural Income-tax was right in holding that the applicants were liable to be assessed to agricultural income- tax on the entire income from <ORG> for the agricultural season 1950-5 ?"

2. The Commissioner rejected the application. <ORG>, however, on an application presented by the respondent under section 54 of the Act, directed the Commissioner to submit a statement of the case in respect of the following question :

"Whether the crop of the season 1950-51 of the value of Rs. 2,16,000 would be agricultural income of the assessee under the Coorg Agricultural Income-tax Act, 1951, and is the assessee liable to pay agricultural income-tax in respect thereof ?"

3. After receipt of the statement of the case and hearing counsel for the parties, <ORG> returned the following answer :

"All monies realised by the assessee in respect of crops of all description which had already been harvested before the date of sale, viz., 22nd of March, 1951, do not constitute the agricultural income of the assessee within the meaning of the Coorg Agricultural Income- tax Act.

The net realisations by the assessee of crops of all description standing on the land on the date of purchase of the estate by him, viz., 22nd of March, 1951, computed in the manner provided in the Coorg Agricultural Income-tax Act constitute the agricultural income of the assessee within the meaning of the Act and is liable to tax under the Act."

4. <ORG> also added that, in the light of these answers, the actual agricultural income of the assessee liable to payment of tax under the Act will have to be computed fresh. The Commissioner of Agricultural Income-tax has now come up to this court, by special leave, in this appeal against the first part of the answer.

5. It appears to us that the first part of the answer returned by <ORG> is so obvious that hardly anything at all can be said to challenge it. The crops of the land, which was purchased by the respondent during the account year in question, it appears, were at two stages. Some of those crops had been harvested, while others were standing. These crops were also purchased. <ORG> has already held that the net realisations by the respondent from crops standing at the time of purchase will be included in the agricultural income of the respondent under the Act. With the correctness of this answer we are not concerned. With regard to the crops, which has already been harvested, <ORG> has held that they do not constituted the agricultural income of the assessee. In returning this answer, <ORG> was perfectly correct. From those crops, the income accrued to the respondent because he had purchased the ready harvested crops. Income in respect of those crops was not, therefore, derived by the respondent by any agricultural operations carried on by the respondent, or by performance by the respondent of any process ordinarily employed by a cultivator to render the produce raised or received by him if to be taken to the market, or by the sale by the respondent of produce raised or received by it. The crops, which had already been harvested, were raised and removed from the land by the vendor from whom the respondent purchased these crops. The sale price received by the vendor might have been treated as agricultural income of the vendor who had raised the crops and so these harvested crops to the respondent. In no case, could this income received by the respondent by sale of harvested crops purchased by it in that condition be treated as agricultural income received by the respondent. The appeal fails and is dismissed with costs.

6. Appeal dismissed.