PETITIONER: C.I.T. MADRAS Vs. RESPONDENT: T. V. SUNDRAM IYENGAR (P) LTD. DATE OF JUDGMENT09/04/1975 BENCH: CHANDRACHUD, Y.V. BENCH: CHANDRACHUD, Y.V. SARKARIA, RANJIT SINGH GUPTA, A.C. CITATION: 1976 AIR 255 1975 SCR 93 1976 SCC (1) 17 CITATOR INFO : F 1983 SC 420 (12) ACT: Indian Income Tax Act . 1922, s. 23 A-Scope of. HEADNOTE: Under Section 23A of the Indian income Tax Act , 1922, if in respect of any previous year the profits and gains distributed as dividends within the 12 months immediately following the expiry of that previous year are less than the statutory percentage of the total income of that previous year as reduced by the amounts mentioned in cls. (a), (b) and (c) and sub-s. (1), the Income Tax Officer shall make an order that the company shall be liable to pay super-tax at the prescribed rate on the undistributed balance of the total income of the previous year. According to Explanation 2, statutory percentage means 45 per cent of the industrial profits and 60 per cent of nonindustrial profits.The explanation further says that the said percentages should be applied separately with reference to the amounts of profits and gains attributable to the two parts of the company's business as if the said amounts were respectively the total income of the company in relation to each of its parts, the amount of dividends and taxes also being similarly apportioned for purpose of sub-s. (1). In the present case 45 per cent of the industrial profits comes to Rs. 1.51 lakhs, while 60 per cent of non-industrial profits comes to Rs. 8.43 lakhs. The company, instead of distributing a sum of Rs. 9.94 lakhs by way of dividends distributed Rs. 4.20 lakhs, equally as profits of the industrial and non-industrial activities leaving aside the profit of Rs. 13.21 lakhs. The income Tax Officer allocated the dividends declared by the company to the industrial and non-industrial segments in the same proportion as the profits of the two segments bore to the total profits of the company and levied additional super-tax under s. 23A on the entire undistributed balance of the total profits available for distribution, namely Rs. 13.21 lakhs. The Order was confirmed by the Appellate Assistant Commissioner. On appeal, <ORG> held that in so far as the profits of the industrial activity were concerned, the company must be deemed to have distributed by way of dividends out of those profits just so much,as would be equal to 45 per cent of such profits and accordingly it allocated the dividend out of industrial and non-industrial profits. On this allocation it came to the conclusion that the company having declared the statutory dividend on its industrial profits, was not liable to pay additional super- tax in so far as these profits were concerned. It, however, upheld the levy of additional super-tax on non-industrial profits. <ORG> confirmed the <ORG>'s view. Allowing the appeal, HELD : (1) <ORG> was in error in holding that the profits of the two parts of the company's business should be treated as if they were the total income of the company for all purposes. In taking this view <ORG> overlooked the concluding words of Explanation 2 by reason of which the legal fiction has to be limited to its duly appointed purpose. [106 D-E]. (2) <ORG> and the <ORG> were wrong in holding in favour of the assessee. Where a company has a composite business, the first step is to ascertain the distributable profits of the two parts separately. For the purpose of finding out the minimum dividend that the company ought to have distributed, the proper statutory percentage as prescribed by Explanation 2 has to be applied separately to the distributable profits of the two parts, as if the respective profits are the total income of the company in relation to each part of its business. The composite dividend distributed by the company has then to be 94 apportioned between the two parts in the same ratio as the respective profits of the two parts bear to the toal profits of the company. [103H-104B]. (3)(a) Explanation 2 by its express terms requires that for the purpose of sub-s. (1) the amount of dividends must be "similarly apportioned". [101 E] (b) The word "similar" may generally be said to be a word of ambiguous import in the sense that the mere stipulation in a statute that something should be done similarly is insufficient by itself to signify the degree of similarity with which that thing must be done. The words "similarly apportioned" mean apportioned with reference to the amounts of profits and gain attributable to the two parts of the company's business. The Explanation first refers to an apportionment or splitting up and then provides that the dividends and taxes shalt be similarly apportioned, that is to say, similarly split up. Accordingly, the words "similarly apportioned" have a definite meaning and are not ambiguous. [101G-102 C]. (c) The word "apportion" is used in Explanation 2 in the sense of "split up" so that "similarly apportioned" means "similarly split up ". The dividends have, therefore, to be split up similarly, i.e. in the same ratio as the industrial and non-industrial profits bear to each other after the total profit is split up in two parts, industrial and non- industrial. [102D-E] ((1) An assignment as a proper portion of the dividends would mean an assignment in the same or similar ratio as the respective profits of the- two segments bear to the total profits of the company. It is not open to the company to split up and apportion the dividends to the Profits of the two segments in such a manner as it finds convenient or thinks fit. The company's freedom to apportion the dividends is conditioned by the ratio which the profits of the two segments bear to the total profits. [102 F-G] The sum of Rs. 4.20 lakhs has to be split up in the same proportion which the respective profits of the two segments bore to the total profits of the company. There is a short- fall in respect of both the segments and accordingly the company would be liable to pay additional super-tax at the rate of 37 per cent on the entire undistributed balance of the distributable profits. [102 H-103 B]. (4)(a) The language of s. 23A(1) as also of Explanation 2 is clear and distinct and does not yield to more than one reasonable interpretation. The fiction created by the Explanation is expressly limited to the purposes of sub-s. (1) and there is no justification for pursuing the fiction to its logical conclusion so as to permit it to operate beyond the limited purpose of sub-s. (1). Under the scheme contained in s. 23A where a company has a composite business it is necessary at the outset to find out the profits attributable to the two parts of its business. The statutory percentages as prescribed by Explanation 2 have then to be applied separately to the profits of the two parts. By reason of the fiction created by Explanation 2, the profits of each part have, for this purpose, and for this purpose alone, to be treated as if they were the total income of that part of the Company's business. By sub-%. (1) the company becomes liable to pay additional super-tax if the dividends distributed by it are "less than the statutory percentage of the total income". Explanation 2 creates the fiction that for the purpose of sub-s. (1) the income of the respective parts is to be regarded as the total income of each part so that the statutory percentages can be applied separately to the income of each part. The fiction operates in this limited field and is in terms created for this limited purpose. [105D-106 B]. (b) The levy of additional super-tax under s.23A(1) is a single levy. The super-tax has to be levied "on the undistributed balance of the total income of the previous year". Sub-section (1) itself clarifies that by these words is meant "total income as reduced by the amounts, if any, referred to in cls. (a), (b) or (c) and the dividends actually distributed, if any." Even if the Income Tax Officer finds that the apportioned dividend in any part of the company's business is less than the dividend that ought to have been 95 declared by application of the statutory percentage, that additional super-tax has to be levied on the whole of the undistributed profits of the company. [106 B-D]. ARGUMENTS For the appellant : 1.On a true interpretation of Section 23A(1) and Explanation 2 thereto where the company's profits liable to be distributed as dividend are composite consisting of industrial and non-industrial profits, the Income-tax Officer has first to find out profits attributable to industrial activity and profits attributable to non- industrial activity and ascertain the ratios between the industrial and non industrial profits to the total distributable profit. By the fiction created by explanation 2 he has to treat the profits in each section as if they were the total income of that section and apply the statutory percentage to find out the minimum dividend that must be declared by the company. He has then to dissect the composite dividend declared by the company and apportion the same between the dividend relating to industrial profits and dividend relating to non-industrial profits in the same ratios as the industrial profits bear to the total distributable profits and non-industrial profits bear to the total distributable profits. Thereafter, he has to find out whether the dividends so apportioned between the two parts is below the minimum distributable on the application of the statutory percentage. If he finds that the declared dividend apportioned to any part of the business is below the taxable minimum arrived at by applying the statutory percentage then the Income-tax Officer has to levy additional super tax on the entire undistributed profits, that is to say, on the distributable profits minus the total composite dividend declared by the company. 2.The levy of additional super-tax u/s. 23A(1) is a single levy and is on the undistributed profits on their entirety and, therefore, where on apportionment of the composite dividend declared by the company the industrial and non- industrial profits, the Income-tax Officer finds that the apportioned dividend in any part of the company's business is less than the dividend that ought to have been declared by application of the statutory percentage the Income-tax Officer has to levy additional super-tax on the entire undistributed profits even though in the other section of the business the declared dividend as apportioned may not be below the minimum that ought to have been distributed by the application of the statutory percentage. 3. The fiction created in clause of explanation 2 of Section 23A(1) prescribing that the amounts of profits or gains attributable to two parts of company's business should be- treated as if they were the total income of the company in relation to each of the parts is only for the purpose of applying the statutory percentage which hag to be applied to the total income to find out the dividend liable to be distributed. This fiction cannot be extended for the purpose of deeming the profits of each part as total income for the purpose and levy of additional super-tax as if there were as man total income as there were parts of business profits. 4. Even on the interpretation put 'by <ORG> and the opinion given by it on the question referred to u/s. 66(2) of the Income-tax Act , 1922, the Income-tax Officer would be justified in levying additional super-tax on the entire distributed profit of Rs. 13,21,174 or atleast on Rs. 12,36,196 which is the amount of non-industrial profits minus the balance of the declared dividend attributable to non industrial profits i.e. Rs. 14,05,310 minus Rs. 2,69,114. For the respondent Section 23A of the Income-tax Act was recast by the Finance Act II of 1957 with effect from 1-4-1957. It is this amended section that is applicable to the case under consideration as it relates to the assessment year 1957-58. 96 The scope of Explanation 2 would appear to require the following step& to be taken in order to find out whether s. 23A(1) is applicable in the case of a company whose profits consist partly of industrial activity and partly of non- industrial activity. (i) Ascertain the profits relating to each part separately when the company's business consists of partly in manufacture and partly of other activities. (ii) Treat the profit of each part as the total income of the company (in order to find out whether the dividend distributed is less than the statutory percentage). (iii) Apportion the taxes relating to each part and deduct such tax from the profits of that of the company's business. Arrive at the balance of income by deducting the amount covered by item (3) from the amount covered by item (2). (iv) Apply the statutory percentage of either 45 per cent or 60 per cent on the balance of income arrived at. (v) Find out whether the dividend distributed and apportioned to each part is less than the statutory percentage. (vi) If the dividend distributed is less than the statutory percentage, then on the undistributed balance of income of each part less the taxes specified in sub-section (1) and dividend apportioned to this part, additional super-tax to be levied at 37 per cent. The expression 'similar' is an ambiguous word. The word apportionment split up. So long as the apportionment is made with the desire to, act as fairly and justly as possible by all parties no uniform mode of apportionment is necessary. In the light of this the assessee company has apportioned the dividend in accordance with the law. There is no other method. of apportionment indicated in the explanation. Section 23A(1) is not applicable to that party of the company's profits relating to manufacture. If he follows the provisions of explanation 2 the Income-tax Officer cannot be said to be satisfied that the dividend distributed relating to this part of the company's business is less than the statutory percentage. The contention of the <ORG> on the other hand is that the dividend should be apportioned in the same proportion in which the industrial profits and non-industrial profits bear to the total income of the company less the taxes specified in cls. (a), (b) and (c) of s. 23A(1) . It is undeniable that the words used in the latter part of the explanation are ambiguous. They are capable of more meaning than one. The interpretation contended for by the revenue leads to anamolous results. In the circumstances, the construction which favors the assessee and saves it from the penal consequences deserved to be adopted. JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1392-93 of 1970.

From the judgment and order dated the 23rd January, 1969 of <ORG> in Tax Cases No. 116 of 1965 and 190 of 1967, Reference No. 48 of 1965 and 72 of 1967. <NAME> and <NAME>, for the appellant. <NAME> and <NAME>, for respondent.

The Judgment of the Court was delivered by CHANDRACHUD, J.-These appeals by certificate granted by <ORG> under section 66A(2) of the Income-tax Act, 1922 arise out of a common judgment dated January 23, 1969 delivered by <ORG> in Tax Cases Nos. 116 of 1965 and 190 of 1967. Tax Case No. 116 of 1965 arose out of the reference made by <ORG> under section 66(1) of the Act while Tax Case No. 190 of 1967 arose out a reference made by the <ORG> in pursuance of an order made by <ORG> under section 66(2) of the, Act. The question which arises for consideration in these appeals is whether under section 23A of the Act, the assessee-company is liable to pay additional super-tax in respect of any portion of its profits.

Section 23A of the Act of 1922, in so far as material read thus at the relevant time :

"23A. (1) Where the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the company of that previous year as reduced by-

(a) the amount of income-tax and super-tax payable by the company in respect of its total income, but excluding the amount of any. super-tax payable under this section ;

(b) the amount of any other tax levied under any law for the time being in force on the company by the Government or by a local authority in excess of the amount, if any, which has been allowed in computing the total income ; and

(c) in the case of a banking company, the amount actually transferred to a reserve fund under section 17 of the Banking Companies Act, 1949 ;

the Income-tax Officer shall, unless be is satisfied that, having regard to the losses incurred by the company in earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable, make an order in writing that the company shall, apart from the sum determined as payable by it on the basis of the assessment under section 23 , be liable to pay super-tax at the rate of fifty per cent in the case of a company whose business consists wbolly or mainly in the dealing in or holding of investments, and at the rate of thirty seven per cent in the case of any other company on the undistributed balance of the total income, of the previous year, that is to say, on the total income as reduced by the amounts, if any, referred to in clause (a), clause (b) or clause (c) and the dividends actually distributed, if any.

x x x x x x x x x x x x x x x x x x x x x Explanation 2.-For the purposes of this section'. statutory percentage means,-

(i) In the case of a company whose business consists wholly or mainly in the deali ng in or holding of investments .. .. .. 100%

(ii) In the case of an Indian company whose business consists wholly in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other from of power 45%

(iii) In the case of an Indian company a part only of whose business consists in any of the activities specified in clause (ii)-

(a)in relation to the said part of the company's business 45%

(b) in relation to the remaining part of the company 's business--

(1) if it is a company which satisfies the conditions specified in sub-

clause (a) of clause (iv) 90% (2) in any other case 60% the said percentages being applied

separately with reference to the amounts of profits and gains attributable to the two parts of the company's business aforesaid as if the said amounts were respectively the total income of the company in relation to each of its parts, the amount of dividends and taxes also being similarly apportioned for the purposes of subsection x x x x For the assessment year 1957-59 relevant to the previous year ended December 31, 1956 the company was assessed to additional super-tax under the aforesaid provision. The business of the company consists partly in, the manufacture or processing of goods and partly of an activity of a non-industrial nature. Out of a total income A of Rs. 37,98,774 the profits of the company available for distribution came to Rs. 17,41,814 out of which Rs. 3,36,504'represented industrial profits and Rs.

14,05,310 represented non-industrial profits. The company distributed by way of dividends a sum of Rs. 4,20,640 only, claiming that the dividend was declared equally out of the profits of the industrial and non-industrial activities.

Thus, the profits which were available for distribution but which were not distributed came to Rs. 13,21,174. The Income-tax Officer, while making the assessment, allocated the dividends declared by the company to the industrial and nonindustrial segments in the same proportion as the profits of the two segments bore to the total profits of the company. By this method, out of the total dividend of Rs. 4,20 640 declared by the company, a sum of Rs. 81,264 was treated as dividends declared out of industrial profits while a sum of Rs., 3,39,376 was treated as dividends declared out of non-industrial profits. Holding that under section 23A , the company was liable to distribute by way of dividends a sum of Rs. 1,51,426 out of industrial profits and a sum of Rs. 8,43,186 out of non-industrial profits, the Income-tax Officer levied additional super-tax on the entirety of the undistributed balance of the total income, that is to say, on Rs. 13,21,174.

The Appellate Assistant Commissioner having rejected the appeal, the company carried the matter in a further appeal to <ORG>, Madras Bench, contending that it had declared dividends utilising the industrial and non-industrial profits equally and since the dividends thus declared out of industrial profits exceeded the statutory percentage of the minimum distributable dividend as provided in section 23A , the levy of additional super-tax on the industrial profits was unjustified. On the other hand, it was submitted on behalf of <ORG> of section 23A , to be apportioned in the same for the purposes of section 23A , to be apportioned in the same ratio in which the profits themselves were apportioned between industrial and non-industrial activities. The <ORG> rejected the method canvassed by the <ORG> as "a Rule of thumb" but then it also rejected the method adopted by the company of allocating the declared dividend half and half to the profits of the two segments. Having rejected both the methods, the. <ORG> held that in so far as profits of the industrial activity were concerned, the company must be deemed to have distributed by way of dividends out of those profits just so much, neither more nor less-, as would be equal to 45 per cent of such profits. Accordingly, the <ORG> allocated a sum of Rs. 1,51,426 as dividends out of industrial profits and the balance, namely, Rs. 2,69,214 as dividends out of non-industrial profits. On this allocation the <ORG> came to the conclusion that the company, having declared the statutory dividend on its industrial profits, was not liable to pay additional super-tax in so far as those profits were concerned. It, however , upheld the levy of additional super-tax on nonindustrial profits.

Under section 66(1) of the Act, the <ORG> referred the following question for the opinion of <ORG> (1) "Whether on the facts and in the circumstances of the case, <ORG> was right in holding that the assessee company was not liable to. the additional super-tax under sec. 23A in respect of the assessee's industrial profits for the assessment year 1957,58".

Under section 66(2) of the Act the <ORG> referred to <ORG> the following question (2) "Whether on the facts and in the circumstances of the case, the <ORG> is right in holding that additional supertax is not leviable under sec- 23 A of the Act , in respect of any portion of the profits of the assessee company for the assessment year 1957-

The second question on which <ORG> called for a reference may seem to suggest that under the judgment of the <ORG> the Company as heldi not liable to pay additional super-tax in respect of an portion of its profits. That is not so. The <ORG> held that the Company was not liable to pay additional super-tax on its in-dustrial profits but was liable to pay it on non-industrial profits. <ORG> confirmed the <ORG>'s view. It held that there was no justification in Explanation 2 for the apportionment of dividends in the ratio which the industrial profits bear to nonindustrial profits, that it was open to the asssee to apportion the dividends in such a way as to conform to the requirements of section 23A in respect of one of the two segments of its business and that the profits of the other segment only would attract the incidence of additional super-tax. <ORG> demonstrated the absurdity of the contrary view with the help of a hypothetical illustration.

We are concerned in this appeal with the true construction of section 23A as recast by Finance Act 2 of 1957. The section, in so far, as relevant, is extracted above. It has no application to companies in which the public are substantially interested. The section provides for levy of additional super-tax at 50 per cent in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments and at 37 per cent in the case of any other company. The additional super-tax is leviable if in respect of any previous year the profits and gains distributed as dividends within the 12 months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the previous year as reduced by the amounts mentioned in clauses (a), (b) and (c) of sub-section (1). The additional super-tax, which in the instant case would be 37 per cent, is payable on the undistributed balance of the total income of the previous year.By 'undistributed balance of the total income' is meant the total income as reduced by the amounts, if any, referred to in clauses (a), (b) and (c) of sub-section (1) and the dividends actually distributed if any.

By Explanation 2, 'statutory percentage' means for the present purpose, 45 per cent of industrial profits and 60 per cent of nonindustrial profits. These percentages have to be applied separately to the profits of the two segments as if those profits were respectively the total income of the company in relation to each segment of its business. The dividends and taxes have also to be 'similarly apportioned', for the purposes of sub-section (1). Two questions arise for decision : (1) Whether the dividends distributed by the Company have to be apportioned as between the profits of the industrial and non-industrial segments of its business in the same proportion as the respective profits bear to the total profits of the Company ; and (2) Whether, if on apportionment, the dividend apportionment to one of the two segments is found to be less than the statutory percentage in respect of that segment, the additional super-tax is leviable on the entire balance of the Company's undistributed profits or whether it is leviable on the balance of undistributed profits of that segment only in respect of which the short-fall has occurred. The second question may not strictly arise if on the first question it is found that the dividend apportionable to the two segments is less than the statutory percentage in respect of both the segments. All the same, it would be necessary to examine that question also as <ORG> has held that the liability to pay the additional

-super-tax must be restricted to the undistributed profits of that segment only, in respect of which the default has occurred.

On the first question, the language of Explanation 2 is clear and admits of no doubt or difficulty. It requires by its express terms that for the purposes of sub-section (1), the amount of dividends must be "similarly apportioned". But, counsel for the respondent urged that since the Explanation does not refer to any apportionment at all, the words "similarly apportioned" cannot be ascribed any rational meaning and it would therefore be open to the company to apportion the dividends 50 : 50 to the profits of the two segments. Relying on "Words and Phrases Legally Defined" by <NAME>, Vol, V, p. 79 where it is stated that the word 'similar' is an ambiguous word, it was submitted that the benefit of an ambiguity in a taxing statute must go to the assessee and accordingly, the company would be free to make a convenient apportionment of dividends so as to attract the least incidence of the additional super-tax. Counsel also relied on <NAME>'s "Words and Phrases", Vol. 1, p. 217, where it is said that so long as the apportionment is made with the desire to act as fairly and justly as possible by all parties, no uniform mode of apportionment is necessary.

The word 'similar' may be said to be a word of ambiguous import in the sense that the mere stipulation in a statute that something should be done similarly is insufficient by itself to signify the degree of similarity with which that thing must be done. A thing can be done similarly without its being a slavish copy of the model. But Explanation 2 indicates with meticulous particularity, how similarly dividends and taxes must be apportioned, When it says that they must be "similarly apportioned", the reference obviously is to the apportionment which is spoken of earlier in the Explanation. After specifying what particular percentages shall constitute the statutory percentage for the purposes of section 23A , Explanation 2 provides that the said percentages, shall be applied separately "with reference to the amounts of profits and gains attributable to the two parts of the company's business." The words "similarly apportioned" which thereafter occur in the Explanation mean apportioned "with reference to the amounts of profits and gains attributable to the two parts of the company's business". Thus, the Explanation first refers to an apportionment or splitting up and then provides that the dividends and taxes shall be similarly apportioned, that is to say, similarly split up. Accordingly, the words "similarly apportioned" convey a definite meaning and are not ambiguous.

It is urged that the division of total profits of a company into industrial and non-industrial profits cannot be the result of any apportionment properly so-called but must conform to the company's books of account and therefore, Explanation 2 cannot be said to refer to any apportionment before speaking of the dividends and taxes being "similarly apportioned". This argument reads too much in the word 'apportioned'. That word is used in Explanation 2 in the sense of 'split up', so that 'similarly apportioned' means simply " similarly split-up. The dividends have therefore to be split up similarly, that is, in the same ratio as to industrial and non-industrial profits bear to each other after the total profit is split up in two parts, industrial and nonindustrial. According to Burrow's Words and Phrases, Vol. 1. p. 217, to 'apportion' means 'to split up'. It is therefore impossible to accept the respondent's contention that though Explanation 2 requires that dividends should be similarly apportioned, it would be open to the company to make any convenient division of the dividends distributed by it. According to the Shorter Oxford English Dictionary, 3rd Ed., Vol. 1, p. 87, to 'apportion' is 'to assign as a proper portion'.

An assignment as a proper portion of the dividends would mean an assignment in the same or similar ratio as the respective profits of the two segments bear to the total profits of the company. It is thus not open to the company to split up and apportion the dividends to the profits of the two segments in such manner as it finds convenient or thinks fit. The company's freedom to apportion the dividends is conditioned by the ratio which the profits of the two segments bear to the total profits. The total distributable profits of the company came to Rs. 17,41,814 out of which the industrial profits are Rs. 3,36,504 and the non-industrial profits are Rs. 14,05,310. Forty-five per cent of the industrial profits comes to Rs. 1,51,426 while 60 per cent of the non-industrial profits comes to Rs. 8,43,186. The company therefore ought to have distributed a sum of Rs. 9,94,612 by way of dividends whereas it distributed a sum of Rs. 4,20,640 only. This sum of Rs. 4,20,640 has to be split up in the same proportion which the respective profits of the two segments bear to the total profits of the company. That is to say, a sum of Rs. 81,264 from out of the total dividends distributed is apportionable to the industrial profits while a sum of Rs. 3,39,376 is apportionable to the non-industrial profits. There is thus a short-fall in respect of both the segments and accordingly the company would be liable to pay the additional supertax at the rate of 37 per cent on the entire undistributed balance of distributable profits.

The hypothetical illustration which was cited before the Income-tax Officer and which is relied upon by <ORG> may at the highest, if its fundamental premise is true, show that the interpretation canvassed by the <ORG> may conceivably work out injustice.But if the language of the statute is clear and unambiguous, and if two interpretations are not reasonably possible, it would be wrong to discard the plain meaning of the words used in order to meet a possible injustice. Besides, the illustration only assumes an injustice and therefore its fundamental premise is wrong. The distributable profits of the hypothetical company are said to be Rs. 1,00,000 out of which Rs. 30,000 are industrial and Rs. 70,000 non- industrial profits. Applying the statutory percentage of 45 and 60 per cent respectively, the company must distribute by way of dividends Rs. 13,500 plus Rs. 42,000, that is, Rs. 55,500. <ORG> says that even if the company distributes Rs. 55,500 by way of dividends, apportioning Rs. 13,500 to industrial profits and Rs. 42,000 to nonindustrial profits, it would violate section 23A because, if the sum of Rs. 55,500 is to be apportioned in the same ratio which the profits of the two segments bear, a sum of Rs. 16,650 will be apportionable to industrial profits and Rs. 38,850 to non-industrial profits. The fallacy of this illustration consists in its overlooking that if the company is liable to distribute Rs. 55,500 by way of dividends and it does distribute that, sum, there is no violation of section 23A . That section applies only if "profits and gains distributed as dividends .... are less than the statutory percentage of the total income .... as reduced. . . . "

If the dividends have to be apportioned in the ratio of profits of the two segments, the taxes have also to be similarly apportioned for Explanation 2 speaks of "the amount of dividends and taxes also being similarly apportioned". A "similar" apportionment of taxes, it is urged by the respondent, may in practice lead to impossible and unreal situations since the taxes on the profits of the two segments may be unequal as in the case of a newly established industrial undertaking which, in respect of its industrial income, may enjoy a tax concession. There is no merit in this contention. The method specified in section 23A has to be worked out according to its scheme and it is no answer to the obligation to apportion the dividends and taxes, that taxes levied on the profits of the two segments are unequal or are leviable on a different basis. Thus, <ORG> and the <ORG> were wrong in holding in favour of the assessee on the first of the two questions which we have framed for consideration. Where a company has a composite business, as for example industrial and non-industrial business, the first step is to ascertain the distributable profits of the two parts separately. For the purpose of finding out the minimum divided that the company ought to- have distributed, the proper statutory percentage as prescribed by Explanation 2 has to be applied separately to the distributable profits of the two parts, as if the respective profits are the total income of the company in relation to each part of its business. The composite dividend distributed by the company has then to be apportioned between the two parts in the same ratio as the respective profits of the two parts bear to the total profits of the company.

We have shown that in the instant case the dividend apportionable between the two parts of the company's business is less than the statutory percentage in respect of both the parts. <ORG>, like the <ORG>, gave to the company the choice to allocate the dividend suitably to the two parts and held on such allocation that since the default had occurred in respect of the profits of the non- industrial part only, the company would be liable to pay the additional super-tax on the undistributed balance of the non-industrial profits only. The second question which we propose to consider, though it does not arise on our findings, is whether the company is liable to pay additional super-tax on the undistributed balance of non-industrial profits only or whether it is liable to pay the additional super-tax on the entire undistributed balance of its distributable profits. We have heard a full argument on this question and if we did not decide it the view of <ORG> is likely to cause misunderstanding. As observed by <NAME> in <CITATION> ,(1) section 23A was enacted in terrorem against private companies. The object of the section is to prevent evasion of super-tax by the shareholders of a company in which the public are not substantially interested. The shareholders of a private company could avoid the high incidence of super-tax by allowing the profits of the company to accumulate in its hands so that the accumulated profits could be distributed eventually in the form of bonus shares which are not assessable as income in their hands.

In considering whether the company is liable to pay additional super-tax on the entire balance of distributable profits, it has to be borne in mind that section 23A is clearly penal in nature ; for, in circumstances mentioned therein, if a private company fails to distribute by way of dividends the statutory percentage of its distributable profits, it becomes liable to pay, apart from the sum deter- mined as payable by it on the basis of the assessment under section 23 , super-tax at 50 per cent or 37 per cent as the case may be, on the undistributed balance of its distributable profits. In the first place, this provision being penal, the burden would lie on the revenue to prove that the conditions laid down by the section are satisfied.(2) (1) 17 I. T. R. 493, of 495 and 496.

(2) <CITATION> .(p) Ltd., 57 I.T.R. 176, 184.

Secondly, penal statutes have to be construed strictly in the sense that if there is a reasonable interpretation which will avoid the penalty, that interpretation ought to be adopted : "When the legislature imposes a penalty, the words imposing it must be clear and distinct".(1) It is contended on behalf of the respondent that the language of section 23A (1) read with Explanation 2 is ambiguous and therefore the court ought to adopt the interpretation which favorites the assessee, more particularly because the relevant provisions provide for the imposition of a penalty. In this behalf, learned counsel for the respondent relied strongly on the provision contained in Explanation 2 by which the statutory percentages are required to be applied separately with reference to the amounts of profits and gains attributable to the two parts of the company's business, "as if the said amounts were respectively the total income of the company in relation to each of its parts". It is urged that the fiction created by Explanation 2 must be given its full effect and that it must be carried to its logical con- clusion. As the distributable profits of the two parts are to be deemed to be the total income of the company in relation to each ,of those parts, the penalty, according to the respondent, can be imposed on that part of the income only in respect of which the default has occurred. It is impossible to accept this contention. If two interpretations of the relevant provisions were reasonably possible, we would have readily accepted that interpretation which favours the assessee. But the language of sub-section (1) of section 23A as also of Explanation 2 is clear and distinct and does not yield to more than one reasonable interpretation. Sub-section (1) provides that if the dividends distributed by a company are less than the statutory percentage of the "total income" of the company as reduced by the amounts mentioned in clauses (a), (b) and

(c), the Income-tax Officer shall make an order that the company shall be liable to pay additional super-tax at the prescribed rates "on the undistributed balance of the total income of the previous year", that is to say on the total income as reduced by the amounts referred to in clauses (a),

(b) and (e) and the dividends actually distributed. Explanation 2 clarifies what is meant by "statutory percentage" and provides that the prescribed percentages should be applied separately with reference to the amounts of profits and gains attributable to the two parts of the company's business, "as if the said amounts were respectively the total income of the company in relation to each of its parts....... for the purposes of sub-section (1)". The fiction created by the Explanation is thus expressly limited to the purposes of sub-section (1) and there is no justification for pursuing the fiction to its logical conclusion so As to permit it to operate beyond the limited purpose of sub-section (1). Under the scheme contained in section 23A , where a company has a composite business it is necessary at the outset to find out the profits attributable to the two parts of its busi- (1) Willis v. Thorp (1875) L.R. 10 Q.B. 383, 386, gee also Craies in Statute Law, Sixth Ed., p, 529-530.

ness. The statutory percentages a prescribed by Explanation 2 have then to be applied separately to the profits of the two parts. By reason of the fiction created by Explanation 2 the profits of each part have for this purpose, and this purpose alone, to be treated as if they were the total income of that part of the company's business. By sub- section 1 , the company becomes liable to pay additional super-tax if the dividends distributed by it are "less than the statutory percentage of the total income". Explanation 2 creates the fiction that for the purposes of sub- section 1 , the income of the respective parts is to be regarded as the total income of each part so that the statutory percentages can be applied separately to the income of each part. The fiction operates in this limited field and is in terms created for this limited purpose.

The levy of additional super-tax under section 23A (1) is a single levy. The super-tax has to be levied "on the undistributed balance of the total income of the previous year". Sub-section (1) itself clarifies that by these words is meant "total income as reduced by the amounts, if any, referred to in clause (a), clause (b) or clause (c) and the dividends actually distributed, if any". The additional super-tax has therefore to be levied on the entire undistributed balance of the net income of the company. In other words, even if the Income-tax Officer finds that the apportioned dividend in any part of the company's business is less than the dividend that ought to have been declared by application of the statutory percentage, the additional supertax has to be levied on the whole of the undistributed profits of the company. <ORG> was therefore in error in holding that the profits of the two parts of the company's business should be treated as if they were the total income of the company for all purposes. In taking this view, <ORG> overlooked the concluding words of Explanation 2 by reason of which the legal fiction has to be limited to its duly appointed purpose.

In the result we set aside the order of <ORG> and allow the appeal with costs.

Appeal allowed.

<NAME>


PETITIONER: BUDHSEN Vs. RESPONDENT: STATE OF U.P. DATE OF JUDGMENT: 06/05/1970 BENCH: DUA, I.D. BENCH: DUA, I.D. RAY, A.N. CITATION: 1970 AIR 1321 1971 SCR (1) 564 1970 SCC (3) 128 CITATOR INFO : D 1972 SC2478 (5) RF 1978 SC1770 (25,26) ACT: Evidence Act ,s.9-Identification parades-Manner of holding-Weight to be attached-Constitution of India, 1950, Art. 136- Evidentiary value attached to identification parades-Erroneous Interference by <ORG>. HEADNOTE: The two appellants B and N, along with two others who were acquitted by <ORG>, were charged with the offence of murder by shooting the deceased, committed on September 12, 1967. The evidence against them mainly consisted of six witnesses who had identified them at test parades. <ORG> rejected the evidence of three of them and relied upon the evidence of the remaining three. Two of them claimed to be present at the time of the occurrence and the third came on the scene after hearing pistol shots and the alarm raised by others. The appellants were strangers to all the witnesses. One of the eye witnesses (P.W. 1) gave the first information to the police, but there was no description of the assailants in it. The P.S.J. recording the report also did not question the informant for the purpose of securing more information about the description of the assailants in order to be able to take measures to discover and arrest them. P.W. 1 identified the appellants at two identification parades conducted by a Magistrate. The identification parade in respect of N was held on October 21, 1967 and in respect of B on October 28, 1967. In the form relating to the identification parade, there is a footnote stating that it is very useful to note whether the witness knew the name of the person he had come to identify or only described him and that the witness should not be asked in a general way to identify whomsoever he knew. The Magistrate gave evidence that he had asked witnesses who had come to identify the accused (named) as to what he had seen the accused doing and recorded whatever the witness told him. Whatever the first witness <NAME> told him was recorded word for word and since the other witness <NAME> repeated the same thing he noted down against their names the words as above. The identification memorandum as regards the other accused, prepared by the Magistrate at the time of his identification parade, was similar. There was also unexplained error as to the date on which appellant B was admitted into the jail. In both identification memos there were no- remarks by the Magistrate in respect of the steps taken by the jail authorities to ensure proper conduct of proceedings. The eye witnesses also did not specify in court the accused who had actually fired the pistol. The second eye witness admitted in cross-examination that he had gone to the jail for identification on three occasions and that on two occasions be had identified the accused but on the third occasion be did not identify any. He was unable to state as to which accused he identified in the first and which in the second parade. The third witness deposed that he <NAME> identified the accused who had a jhola in his hand (he was alleged by) by the three witnesses to have 565 taken a pistol from the Jhola) at one identification parade and the other accused at the second identification parade. Appellant 'N' had stated during the identification parade that he had been shown to the witnesses and had also been photographed. On the question whether the conviction could be sustained on this evidence :- HELD : Facts which establish the identity of an accused person are relevant under s. 9 of the Evidence Act. The substantive evidence of identification is the statement of the witness in court. But the evidence of identification at the trial for the first time is from its very nature weak. A prior test identification, therefore serves to corroborate the evidence in court. The purpose of identification parades which belong to the investigation stage is to enable the witnesses to identify persons concerned in the offence, who are not previously known to them, and thereby to satisfy the investigating officers of their bona fides by pointing out the persons they recognise as having taken part in the crime. These parades, thus furnish evidence which corroborates the testimony of the identifying witnesses in court. These parades do not constitute substantive evidence. Keeping in view the purpose of identification parades, the precautions to eliminate suspicion of unfairness and to reduce chances of testimonial error. They must take intelligent interest in the proceedings bearing in mind two considerations : (i) that the life and liberty of an accused may depend on their vigilance and caution, and (ii) that justice should be done in the identification. Generally, the Magistrates must make a note of every objection raised by an accused at the time of identification and the steps taken by them to ensure fairness to the accused, so that the court which is to judge the value of the identification evidence may take them into consideration in the appreciation of that evidence. The persons required to identify an accused should have had no opportunity of seeing him after the commission of crime and before identification and secondly that they should make no mistakes or the mistakes made are negligible. The identification to be of value should also be held without much delay. The number of persons mixed up with the accused should be reasonably large and their bearing and general appearance not glaringly disincline. [570 H; 571 A-H; 572 A- C] In the present case the evidence shows that the Magistrate paid scant attention to the direction in the identification memos. The memos do not show that the parades were held by the Magistrate with the degree of vigilance, care and anxiety their importance demanded, and they were filled up in a very casual manner. They could only have a somewhat fleeting glimpse of the assailants. The prosecution has also not explained why the second eve witness had to go to the jail for identification a third time. The two eve witnesses did not state in evidence what particular part the two appellants played in the occurrence. The third witness who come on the scene on hearing the alarm could only have had a still more fleeting glimpse. [572 F-G; 573 D-E; 577 C- D] The statements of the three witnesses were also otherwise unimpressive and coupled with the fact that there was a possibility of their having seen at least one of the accused (appellant B) outside jail gates a week before the identification parades were held, the test identification parades could not be considered to provide safe and trustworthy evidence on which the appellants' conviction could be sustained. [577 E] (2) The entire case depended on identification of the appellants and the identification was founded solely on test identification parades. <ORG> did not correctly appreciate the evidentiary value of the parades and proceeded on the erroneous assumption that it is substantive, evidence and that on the basis of that evidence alone the conviction could be sustained. <ORG> also ignored. important evidence on the record in regard to the manner in which test identification parades were held and the connected circumstances suggesting that they were held more or less in a mechanical way without the necessary precautions being taken to eliminate unfairness. This is an erroneous way of dealing with test identification parades and since it has caused failure of justice, this <ORG> is justified in interfering under Art. 136 [577 H; 580 C-G] JUDGMENT:

CRIMINAL APPELLATE JURISDICTION : Criminal Appeals Nos. 199 and 200 of 1969.

Appeals by special leave from the judgment and order dated April 28, 1969 of <ORG> in Criminal Appeal No. 2623 of 1968 and Referred No. 160 of 1968. <NAME>, for the appellant (in Cr.A. No. 199 of 1969).

<NAME>, <NAME>, <NAME><NAME> and <NAME>, for the appellant (in Cr. A.No. 200 of 1969).

<NAME>, for the respondent (in both the appeals). The Judgment of the Court was delivered by <NAME>, J.-These two appeals by special leave arise out of a joint trial of the present appellants and <NAME> and <NAME>. All the four accused were convicted by the trial court; the present appellants were sentenced to death under S. 302 read with s. 34 I.P.C. and <NAME> and <NAME> to life imprisonment under S. 302 read with s. 109 , I.P.C . They challenged their conviction by separate appeals to <ORG>. By means of a common judgment <ORG> dismissed the appeal of the present appellants (Crl. A. No. 2623 of 1968) and allowed that of their co- accused <NAME> and <NAME> (Crl. A. No. 2648 of 1968). The sentence of death imposed on the present appellants under s. 302 , I.P.C . for the murder of <NAME> was confirmed. According to the prosecution story <NAME> and <NAME> related to each other as cousins belonged to village Bidrika. They used to harass the poor inhabitants of that village whereas deceased <NAME> used to espouse their cause. As a result, there was not much love lost between <NAME> and <NAME> on the one side and <NAME> on the other. Some years ago <NAME>, along with some others, was prosecuted for forging accounts of <ORG> and was found guilty the Assistant Sessions Judge, though released on probation under the U.P. First Offenders' Pro-

bation Act. <NAME>, at whose instance, that prosecution was initiated, presented a revision petition in <ORG> 'against the order of the Assistant Sessions Judge challenging the benefit given to <NAME> under the U.P. First Offenders' Probation Act . <ORG> allowed the revision on July 26, 1967 and imposed on <NAME> a substantive sentence of rigorous imprisonment for two years. <NAME> had the support of <NAME> in the trial court and the revision to <ORG> was also preferred by him at the instance of <NAME>. This further enraged <NAME> and <NAME> and <NAME> is stated to have threatened <NAME> with death about ten days before his 'murder. This happened before <NAME> was taken into custody pursuant to the order of <ORG> imposing on him the sentence of, imprisonment. This was alleged to be the immediate motive for <NAME>'s murder. In 1962 also <NAME> and <NAME> had also been prosecuted by <NAME> under s. 452 / 326 and s. 147 , I.P.C . but they were acquitted. Ever since then, according to the prosecution, <NAME> and <NAME> had been harboring ill feelings towards <NAME> and planning to have him murdered through hired assassins. On September 11, 1967 <NAME> (P.W. 2) is stated to have gone to the house of <NAME> and saw <NAME> and <NAME> in the company of four unknown persons and over-heard <NAME> saying that the said four persons had left the job unfinished though they had visited the village often and telling them that the balance would be paid to them only after the job was accomplished. The following day at about 10 a.m. when it was drizzling <NAME> was sitting in his <NAME> also described as <NAME> on a cot and his brother <NAME> (P.W. 1) and <NAME> (P.W. 3) were squatting on a heap of fodder nearby. They were all sitting in the Duari because that was the only place ;which provided protection against rain. Suddenly four unknown persons entered the Nohra through the Duari. Two of them caught hold of <NAME> and <NAME>, one of them sat on the cot of <NAME> and pressed his legs and the fourth who was carrying a red jhola in his hand, took out a pistol from the jhola and fired at <NAME> from point blank range. <NAME> fell down. The fourth man re- loaded his pistol and fired another shot which hit <NAME> on the chest killing him instantaneously. <NAME> and <NAME> raised alarm. On hearing their alarm and the sound of pistol fire, <NAME>, <NAME> and <NAME>

4) came to the scene of occurrence and saw the four assailants running away from the <NAME>. According to the prosecution, the four unknown assailants murdered <NAME> at the instigation of <NAME> and <NAME>. First information report was lodged by <NAME> at police station Iodged, about ten miles away from the place of occurrence at 2.35 p.m. the same day (September 12. 1967). On his return from the police station <NAME> met <NAME> (P.W. 2) from whom he learnt, what he (<NAME>) had seen and heard a day previous, at the house of <NAME>. <NAME>, Sub-Inspector with whom the F.I.R. was lodged reached the scene of the occurrence at 6.15 p.m. the same day. He found one discharged cartridge and two wads at the place of the occurrence. He recorded the statements of some witnesses, including <NAME> on the following day. Further investigation was conducted by Sub-Inspector <NAME> (P. W. 21). <NAME> and <NAME> on whom suspicion had fallen were not traceable with the result that warrants for their arrest were made over to Sub-Inspector <NAME>. Proceedings under ss. 87 and 88 , Cr. P.C. were started against them but soon thereafter they surrendered themselves in court on September 29, 1967. During investigation the Investigating Officer learnt about the complicity of the present appellants and <NAME> was arrested on October 9, 1967. <NAME>, however, was arrested in connection with some other case on October 14, 1967 by Sasni police. Magistrate <NAME> (P.W. 20) held identification parade of <NAME> on October 21, 1967 and of <NAME> on October 28, 1967.

The trial court came to the conclusion that <NAME> and <NAME> had abetted the murder of <NAME> and appellants <NAME> and <NAME>, had committed the murder. <NAME> and <NAME> were, therefore, Sentenced to death and <NAME> and <NAME> to life imprisonment.

On appeal <ORG> re-summoned <NAME>, Head Constable of Thana Sasni, District Aligarh, who had already appeared at the trial as P.W. 14 and recorded his additional statement. <NAME> had taken <NAME> in custody at police station Sasni. His statement as P.W. 14 left some doubts in the minds of the Judges of <ORG> to clear which it was considered necessary to examine him again in <ORG>. After considering the entire evidence <ORG> acquitted <NAME> and <NAME> but maintained the conviction and sentence of <NAME> and <NAME>, appellants. The statement made by <NAME>, (P.W. 2) was not believed by <ORG> and his version was described as unnatural and improbable. That court also ignored the evidence of <NAME> (P.W. 5), <NAME> (P.W. 7) and <NAME> (P.W. 8) on the ground of their being either irrelevant or unreliable. The existence of inimical relations between <NAME> and <NAME> on one side and <NAME> on the other was not considered to be a sufficiently strong circumstance against <NAME> and <NAME> so as to hold them guilty of instigating <NAME>'s murder. As against <NAME> and <NAME>, appellants in the opinion of <ORG> primary evidence consists of their iden- tification by some of the witnesses. The court took into consideration the identification parade for <NAME> held by Magistrate <NAME> on October 21, 1967 and that for <NAME> on October 28, 1967. It was principally the evidence of identification on which reliance was placed for holding the present appel-

<NAME>

lants to be responsible for the murder of <NAME>. The three witnesses on whose evidence in regard to the identification <ORG> relied are <NAME>, <NAME> and <NAME>. The additional evidence recorded by <ORG> consisted of the statement of <NAME>. That court also inspected the original entries in the general diary of the police as well as their carbon copies. <NAME> stated in the additional evidence that he had made entry at sl. no. 9 of the general diary of the original re- port under s. 307 , I.P.C . and s. 25 Arms Act made by <NAME> against <NAME> (Ex. Ka. 10). He denied that blank space had been left in the general diary for entering the particulars of the pistol (tamancha) and cartridges etc. In regard to this denial in <NAME>'s statement <ORG> observed that the weapon of offence with which the offence under s. 307 , I.P.C . was said to have been committed by <NAME> was probably a later addition though the court did not consider it proper to record a firm finding to that effect. A major part of the judgment of <ORG> is confined to the evidence in regard to the identification parade and to the question whether the identifying witnesses had an opportunity of seeing the appellants before their identification. Holding that there was no opportunity for those witnesses to see the appellants before their identifications the court confirmed their conviction and sentence as already observed. In this Court <NAME> and <NAME> addressed us in support of the appeals of their respective clients <NAME> and <NAME>. According to their submission the evidence in regard to the identification parades is of an extremely weak character and is wholly uninspiring. According to them it does not bring home to the appellants the offence of murder beyond reasonable doubt. It was also urged that according to the prosecution evidence four unidentified, persons having participated in the unfortunate murder of <NAME> there is no reliable evidence showing that any one of the present appellants actually fired the fatal shot. Evidence regarding any specific part played by the appellants, they contended, is also not forthcoming on the record. On this ground it was emphasised that in any event the extreme penalty of death is uncalled for. Since according to <ORG> the primary evidence against the appellants is that of their identification by the witnesses the crucial point seems to us to be the admissibility and' value of the evidence regarding the identification of the appellants. We accordingly consider it necessary, on the facts and circumstances of this case, to examine that evidence. <ORG>, as already observed by us, has ignored the evidence of <NAME> (<NAME>

5) Girendrapal (P.W. 7) and Lekhraj (P.W. 8) as either irrelevant or unreliable. The identification of the appellants is.

57 0 thus confined to the testimony of <NAME> (P.W. 1), <NAME> (P.W. 3) and <NAME> (P.W. 4). Turning first to the evidence of <NAME> it is important to bear in mind that he claims to be present at the time of the alleged occurrence along with <NAME>. He also lodged the first information report at 2.35 p.m. on the day of the occurrence. In the report, this is what <NAME> stated in regard to the identification of the alleged assailants and the respective parts played by them in the commission of the offence:

"Today at about 10 O'clock in the day I and my brother <NAME> and his partner <NAME> son of Chidda Jatav of my village were present at the Gher, and it was raining a little, that four persons dame to the Gher and out of them, one man sat on the cot near my brother and two persons caught hold of me and <NAME> and the fourth man having taken out the Katta (pistol) from inside the Jhola which he was carrying in his hand, fired shot at my brother <NAME>. My brother jumped and fell down the cot, and he fired another shot at my brother, who had fallen down which hit <NAME> at his chest as a result whereof he died. We both raised alarm. On hearing our alarm <NAME> son of <NAME>, <NAME> and <NAME> tailor of my village also came up and then the accused persons having come out and ran away. These persons have also seen the four accused persons, while coming out of the gher and running away. <NAME> and <NAME> having called, these four <NAME> have got committed the murder of my brother. We all can recognise these <NAME> on being confronted."

This description of the assailants could hardly provide the investigating authorities with any firm starting point from which they could proceed to take the necessary measures for the discovery and arrest of the alleged offenders as required by S. 157 , Cr. P.C. It is unfortunate that the Sub-lnspector <NAME>, (P.W. 19) did not care to get more information about the description of the alleged assailants by questioning the informant. Of course, <NAME> and <NAME> were mentioned in the F.I.R. as the persons who had employed the four assailants for murdering the deceased but having been acquitted they do not concern us. Now, facts which establish the identity of an accused person are relevant under S. 9 of the Indian Evidence Act. As a general rule, the substantive evidence of a witness is a statement made in court. The evidence of mere identification of the accused person at the trial for the first time is from its very nature inherently of a weak character. The evidence in order to carry conviction should ordinarily clarify as to how and under what circumstances he came to pick out the particular accused person and the details of the part which the accused played in the crime in question with reasonable particularity. The purpose of a prior test identification, therefore, seems to be to test and strengthen the trustworthiness of that evidence. It is accordingly. considered a safe rule of prudence to generally look for corroboration of the sworn testimony of witnesses in court as to the identity of the accused who are strangers to them, in the form of earlier identification proceeding. There may, however, be exceptions to this general rule, when, for example, the court is impressed by a particular witness, on whose testimony it can safely rely, without such or other cor- roboration. The identification parades belong to the investigation stage. They are generally held during the course of investigation with the primary object of enabling the witnesses to identify per'sons concerned in the offence, who were not previously known to them. This serves to satisfy the investigating officers of the bona fides of the prosecution witnesses and also to furnish evidence to corroborate their testimony in court. Identification proceedings in their legal effect amount simply to this: that certain persons are brought to jail or some other place and make statements either express or implied that certain individuals whom they point out are persons whom they recognise as having been concerned in the crime. They do not constitute substantive evidence. These parades are essentially governed by s. 162 , Cr. P.C. It is for this reason that the identification parades in this case seem to have been held under the supervision of a Magistrate. Keeping in view the purpose of identification parades the Magistrates holding them are expected to take all possible precautions to eliminate any suspicion of unfairness and to reduce the chance of testimonial error. They must, therefore, take intelligent interest in the proceedings, bearing in mind two considerations : (i) that the life and liberty of an accused may depend on their vigilance and caution and (ii) that justice should be done an the identification Those proceedings should not make it impossible for the identifiers who, after all, have, as a rule, only fleeting glimpses of the person they are supposed to identify. Generally speaking, the Magistrate must make a note of every objection raised by an accused at the time of identification and the steps taken by them to ensure fairness to the accused, so that the court which is to judge the value of the identification evidence may take them into consideration in the appreciation of that evidence. The power to identify, it may be kept in view, varies according to the power of observation and memory of the person identifying and each case depends on its own facts, but there are two factors which seems to be of basic importance in the evaluation of identification. The persons required to identify an accused should have bad no, opportunity of seeing him after the commission of the crime and before identification and secondly that no mistakes are made by them or the mistakes made are negligible. The identification to be of value should also be held without much delay. The number of persons mixed up with the accused should be reasonably large and their bearing and general appearance not glaringly dissimilar. The evidence as to identification deserves, therefore, to be subjected to a close and careful scrutiny by the <ORG>. <NAME>, Magistrate, who conducted the identification, has appeared at the trial as P.W. 20. The identification memo in respect of <NAME>, appellant, is Ex. Ka 20 dated October 21, 1967 and in respect of <NAME> is Ex. Ka 21, dated October 28, 1967.

In Ex. Ka 20 we find a note that <NAME> had stated that he had been shown to the witnesses and had also been photographed. Column 7 of the memo requires to be inserted therein the name or description of the person the witness came to identify and this is to be recorded in the words of the witness. In Ex. Ka 20, <NAME> said "I saw the accused while committing the murder. I did not know him before."

As against the other five witnesses namely <NAME>, <NAME>, <NAME>, <NAME> and <NAME> we only find the word "Do" In this connection the note at the foot of the printed form containing the following direction seems to us to be, of some importance:

"N.B.-It is very useful to note whether the witness knew the name of the person he had come to identify or he only described him in some such way as the man who was standing at the door at the time of the dacoity. The witness is not to be asked in a general way, identify whomsoever you know."

It is obvious that scant attention was paid to the letter and spirit of this note. <NAME> (P.W 20) when cross-examined on behalf of <NAME> said:"

"I asked the witnesses who had come to identify accused <NAME> as to what they had seen <NAME> doing. Whatever they told me was recorded by 'me in col. 7 of the memo. Whatever the first witness <NAME> told was recorded word for word by me and since the other witnesses repeated the same thing I noted down the word 'as above' (uparyukt)". The remarks of the Magistrate were also required against the enquiry on point no. 2 at the bottom of the first sheet of Ex. Ka 20 which relates to the step taken by the jail authorities to ensure the 5 7 3 proper conduct of the proceedings. We do not find any remarks by the Magistrate on this point in Ex. Ka 20. His remarks 'would certainly have provided helpful information on an important point without which the court is left only to guess.

In the identification memo in respect of <NAME> (Ex. Ka 21) in column 7, against the name of <NAME>, witness, we find the following entry:

"I came to identify the person who committed the murder of my brother".

Against the name of <NAME> we find the following entry:

"Came to identify the person who committed the murder".

Against the names of the remaining four witnesses, who were the same as mentioned in Ex. Ka 20, we find the word "Do". This means that their answer is the same as that of <NAME>. In this form also there are no remarks by the Magistrate in respect of the steps taken by the jail authorities to ensure proper conduct of proceedings. The memos of the identification parades do not show that the parades were held by the Magistrate with the degree of vigilance, care and anxiety their importance demanded. The casual manner of filling the identification memos is further apparent from the fact that <NAME>, appellant's admission into the jail is shown therein as October 15, 1967 instead of October 14, 1967. This mistake was admitted by P.W. 20 in cross-examination without offering any explanation for the mistake.

We may here appropriately point out that <NAME> (P.W. 20) was called upon as a Magistrate only to conduct the identification proceedings and it was beyond his duty to interrogate the witnesses for eliciting other facts or to require them to make any statement beyond mere identification.

This takes us to the evidence of the identifying witnesses. <NAME> was not produced at the trial. The other witnesses except three, were not relied upon by <ORG>. We need, therefore, confine ourselves only to those three witnesses.

<NAME> it (P.W. 1) brother of <NAME>, deceased, deposed at the trial that on September 12, 1967 at 10 a.m. he, <NAME> and <NAME> were sitting in the Gher, about 50 paces towards the east of the village abadi. <NAME> was sitting on a cot and <NAME> and the witness were sitting on a heap of- fodder nearby in the Duari because that was the only place affording shelter against rain. The cot on which <NAME> was sitting was in the middle of the Duari. What the witness next stated now be reproduced in his own words:

"Four unknown persons entered the Duari from outside. One of them sat down by the headside of my brother and another proceeded to wards the charpoy of my brother. Of the remaining two, one caught hold of me, while the other caught hold of <NAME> <NAME> and I immediately raised an alarm The person, who proceeded towards the charpoy of my brother, took out a country made pistol from the bag and shot at my brother. It was he who was holding the bag in his hand. The shot hit my brother and he jumped from the charpoy and fell down. The person who was sitting by the headside of my brother pressed my brother's legs with his legs. The person, armed with the pistol, again loaded the pistol and shot at my brother's chest. My brother died immediately."

On hearing my shouts and the sound of pistol firing <NAME>, <NAME> and <NAME> arrived. The <NAME> escaped through the Duari and ran away towards the east."

It is noteworthy that this witness has not specifically stated that <NAME>, appellant, had fired the pistol shot. It is only by reference to the person holding a bag from which the pistol was taker out that it is sought to be implied that <NAME> had fired the shot In court <NAME> was not specifically identified as the person firing the shot or even as a person holding the bag the witness has also not stated as to what part the other appellant played in the occur rence. A little lower down the witness proceeds :

"I never saw before the four persons who had come to my brother's gher on the. day of occurrence. I bad come to <ORG>, Aligarh to identify them. (The witness, having touched the accused <NAME> and <NAME>, stated) I identified them in jail. I saw them for the first time on the day of occurrence and thereafter I saw them in jail at the time of identification. I did not see them anywhere in. the intervening period.

The question naturally arises if on this state of his testimony the identification made by <NAME> can be held to be a reliable piece of evidence on which the conviction of the appellants can be sustained. In evaluating his testimony we may appropriately consider bow far his description of the actual occurrence inspires confidence We are asked to believe that one of the four assailants sat down near the head of <NAME> and pressed the legs of the latter with 5 7 5 his own legs and he and the deceased were in this position when one of the assailants fired at. <NAME>, who thereupon jumped down from the cot. When we picture to ourselves the occurrence as narrated we find it to be unrealistic and, therefore, untrust worthy, if not fantastic. There is undoubtedly considerable embellishment in the court version as compared to what was stated by the witness in the F.I.R. This embellishment does not add to the credibility of the story but it certainly suggests that the witness has a highly imaginative mind and is capable of playing on his imagi nation. We, therefore, do not consider it to be safe to hold on his evidence that the two appellants were among the assailants and that <NAME> had fired the fatal shots. <NAME> (P.W. 3) deposed that on the day of the occurrence he was sitting in the Nohra of <NAME> who was sitting on a cot. He and <NAME> were sitting on the fodder because it was drizzling. The statement in regard to the occurrence may now be described in his own words "Four unknown persons came, one of whom had ared jhola. One of them sat down on headside of <NAME> and another proceeded ahead. The remaining two caught hold of me and <NAME>. <NAME> and I raised an alarm. The person having the red Jhola took out a pistol from the Jhola and fired at <NAME>. On being hit with the shot, <NAME> fell down. The badmash, who was sitting on the headside of <NAME>, pressed his legs with his legs. Having loaded the pistol, the person armed with pistol, fired a shot at <NAME>.

<NAME> died. <NAME> and <NAME> arrived at the spot. The badmashes went away through the eastern side.

I did not know all the four badmashes from before. (Having touched <NAME> and <NAME>, the witness stated) Identified them in jail. I saw these two accused at the spot for the first time and thereafter in jail. I did not see them anywhere in the intervening period." In cross-examination the witness admitted that the assailants has been seen by him only for about three or four minutes. He had gone to the jail for identification on three occasions. On two occasions he identified the accused persons in separate parades but did not identify anyone on his third visit. The third visit deposed by him seems to us to be a somewhat suspicious circumstance and the prosecution has not cared even to attempt to explain this statement. The witness was also unable to state as to which accused had been identified by him in the first parade and which in the second-. He was further unable to tell the dates on which he had gone to the jail for identification. According to him he had gone to the jail at about II or 12 O'clock during the day time.

-576 These two witnesses claimed to have seen the actual occurrence which took three or four minutes. Two assailants held these two witnesses and one sat on the cot of the deceased and pressed the legs of the deceased with his own legs and the fourth one fired two shots having re-loaded the pistol after the first shot. Their glimpses ,of the assailants would of course be somewhat fleeting but the different parts played by the four assailants would certainly have left on their minds a fairly firm impression as to what part the two appellants had played in. that sordid drama. The power to identify undoubtedly varies according to the power of observation and memory of the identifier and an observation may be based upon small minutiae which a witness, especially a rustic, uneducated villager may not be able to describe or explain. In this case we find that P.W. 4 <NAME> does not know the difference between a minute and a second. An illiterate villager may also at times be found to be more observant than an educated man and his identification in a given case may impress the court without the witness' being able to formulate his reasons for the identification. But on the peculiar facts and circumstances of this case one would expect these two witnesses to state what particular part these two appellants played in the course of the occurrence. Without some clear indication to that effect it would be difficult for a judicial mind to rely for conviction on the general assertion of these witnesses that the appellants were among the assailants who murdered the deceased. <NAME> (P.W. 4) gave his version as follows:

"It happened 131 months ago. It was 10 a.m. I had gone to the shot) of <ORG> to make purchases. <NAME>, Darzi, was present at that shop along with me. I heard an alarm from the eastern side in which direction lay the <NAME> of <NAME>. I heard the sound of a fire. <NAME> and I rushed towards the <NAME>. When both of us were at a distance of 15 Dacron from the <NAME>, I heard the sound of another fire. I saw four unknown badmashes coming out of the <NAME> of <NAME>. They ran away towards the east. There badmashes were empty handed and one of the badmashes had a Katta in his right hand and a red jhola in his left hand. I went to the <NAME> and saw that <NAME> was lying dead and <NAME> and <NAME> were present there. <NAME> also reached the <NAME> of <NAME> after me. I had gone to the District Jail in order to identify the badmashes (Having touched the accused Naubat and <NAME>, the witness stated) I identified them in the District Jail. At first 1 saw them running away from the <NAME>. Thereafter, identified them in the District Jail.

5 77 I never saw them in the intervening period. (Having touched <NAME>, accused, the witness stated). He had a <NAME> in his right had and a jhola in his left hand."

In cross-examination he stated that he had gone to the District Jail, Aligarh twice for identification. In the, first identification he identified the person who had 'a jhola in his hand and at the second identification he recognised the other, <NAME>. He also stated that before identification Proceedings, the Deputy <NAME> had enquired from him as to whom he had come to identify to which he had replied that he had come to identify the persons who had committed the murder of <NAME>. This witness only saw the assailants when they were running away after the alleged murder. Normally speaking, therefore, his would be a still more fleeting glimpse of the assailants as compared to that of the two earlier witnesses. To sustain the conviction on his evidence as to identification one would certainly expect a more firm an( positive reference to the appellant, who was holding a jhola and A pristol (katta). during the identification parade. Vithout such corroborative evidence the statement in court identifying <NAME>, appellant, would be of little value.

This is not all. The statements of these three witnesses are otherwise also unimpressive and coupled with the fact that the possibility of these persons having seen at least <NAME> on October 21, 1967 outside the, jail gates whom they are supposed to have identified a week later the test identification parades cannot be considered to provide safe and trustworthy evidence on which the appellants' conviction has been sustained by the high <ORG>.

<NAME> on behalf of the <ORG> very strongly argued that under Art. 136 of the Constitution this Court does not interfere with the conclusions of facts arrived at on appreciation of evidence and in this case on consideration of the evidence relating to the test identification parades two courts below have come to a positive conclusion that the appellants were two out of the four unknown assailants of <NAME>, deceased. This Court, so argued the counsel, should affirm that conclusion in the absence of any proved legal infirmity. In regard to the sentence the counsel con- tended that this is a matter which rests in the discretion of the trial court and when the sentence of death is confirmed by <ORG> this Court should not interfere on appeal under Art. 136.

It is undoubtedly true that under Art. 136 this <ORG> does not ordinarily interfere with conclusions of fact properly arrived at by <ORG> on appreciation of evidence on the record. except where there is legal error or some disregard of the forms of legal' process or a violation of the principles of natural justice resulting 13 Sup. Cl/70-8 in grave or substantial injustice. <CITATION> . (1) this <ORG>, after examining its previous decisions in which this <ORG> had not accepted concurrent findings or had re-examined the evidence for itself, said "The above cases show that this <ORG> has not accepted concurrent findings of fact if there is no evidence for the finding or if there has been an omission to notice material points while appreciating evidence or to bear in mind relevant considerations which swing the balance in favour of the accused. It has also on occasions reexamined the evidence in view of the fact that the case against the accused was based on circumstantial evidence and it was of an extraordinary nature. In the case before us, as we will show presently the, High <ORG> appears to have completely overlooked the variation in certain important aspects by P.W. 3, while deposing at the trial from what he had stated earlier' and consequently <ORG> could not apply its mind to their significance. In view of this infirmity in the judgment and other considerations which will be pointed out later we are satisfied that this is one of the exceptional cases in which we should undertake the examination of the entire evidence and appraise it."

In that case the following observations of <NAME>, (as the present Chief Justice then was) from the judgment in <CITATION> (2) were reproduced with approval:

"Ordinarily, it is not the practice of this <ORG> to reexamine the findings of fact reached by <ORG> particularly in a case where there is concurrence of opinion between the two <ORG>s below. But the case against the appellant is entirely based on circumstantial evidence, and there is no direct evidence that he administered a poison, and no poison has, in fact, been detected by the doctor, who performed the postmortem examination, or by the Chemical Analyser. The inference of guilt having been drawn on an examination of a mass of evidence during which subsidiary findings were given by the two <ORG>s below, we have felt it necessary, in view of the extraordinary nature of this case, to satisfy ourselves whether each conclusion on the separate aspects of the case, is supported by evidence and is just and proper. Ordinarily, this <ORG> is not required to (1) Crl. As. Nos. 81, 112 and 132 of 1964 decided on 23-10-1964.

(2) [1960] 2 S.C.R. 460.

<NAME>

enter into an elaborate examination of the evidence, but we have departed from this rule in this particular case, in view of the variety of arguments that were addressed to us and the evidence of conduct which the appellant has sought to explain away on hypotheses suggesting innocence. These arguments, as we have stated in brief, covered both the factual as well as the medical aspects of the case, and have necessitated a close examination of the evidence once again, so that we may be in a position to say what are the facts found, on which our decision is rested "

In <NAME> v. The State of Maharashtra(1) this Court observed :

"We have been taken through the entire evidence of all the important witnesses by counsel for the appellants and we do not think that the conclusion recorded by the Sessions Judge and confirmed by <ORG> was one which could not reasonably be arrive d at by those <ORG>s. There are undoubtedly certain discrepancies in the statements of the four witnesses, <NAME>, <NAME>, <NAME> and <NAME>. But what weight should be attached to the evidence of the witnesses was essentially a matter with which the <ORG> of first instance, before whom the witnesses were examined was concerned, and if the view taken by that <ORG> is confirmed by <ORG>, even assuming that this <ORG> may, if the case were tried before it, have taken a different view, (though we do not say that in this case we would have so done) we would not be justified in making a departure from the settled practice of this <ORG> and proceed to review the evidence."

In Brahmin <NAME> v. <ORG> (2) Court stated the position thus :

"We have dealt with the arguments of Mr. <NAME> at some length but we wish to restate that this Court will not examine for itself evidence led in a criminal case unless it is made to appear that justice has failed by reason of some misapprehension or mistake in the reading of the evidence by <ORG>. <ORG> must be regarded as the final court in criminal jurisdiction and special leave given in a criminal case does not entitle the person to whom the leave is given to canvass the correctness of the findings by having the evidence read and ra- (1) Crl. A. No. 120 of 1964 decided on 19th March, 1965.

(2) Ctl. A.No. 129 of 1963 decided on August 10, 1965.

appraised. There must ordinarily be a substantial error of law or procedure or a gross failure of justice by reason of misapprhension or mistake in reading the evidence or the appeal must involve a question of principle of general importance before this <ORG> will allow the oral evidence to be discussed."

<CITATION> . of Andhra Pradesh (1) this Court appraised the evidence on the plea of self-defence and allowed the appeal because the approach of <ORG> on this plea was found to be incorrect. Again, in <NAME> v. State of Haryana (2 ) because of special features like rejection by the court below of a considerable mass of evidence on serious charges, this Court looked into the evidence to see how far the case as framed against the appellant could be held proved.

Before us the entire case depends on the identification of the appellants and this identification is founded solely on test identification parades. <ORG>; does not seem to have correctly appreciated the evidentiary value of these parades though they were considered to be the primary evidence in support of the prosecution case. It seems to have proceeded on the erroneous legal assumption that it is a substantive piece of evidence and that on the basis of that evidence alone the conviction can be sustained. And then that court also ignored important evidence on the record in regard to the manner in which the test identification parades were held, and other connected circumstances suggesting that they were held more or less in a mechanical way without the necessary precautions being taken to eliminate unfairness. This is clearly an erroneous way of' dealing with the test identification parades and has caused failure of justice. <NAME> laid great emphasis on the fact that there is no enmity shown between the witnesses and the appellants. In our opinion, though this factor is relevant it cannot serve as a substitute for reliable admissible evidence required to establish the guilt of the accused beyond reasonable doubt. The evidence in regard to identification having been discarded by us as legally infirm and which does not connect the appellants with the alleged offence it cannot by itself sustain the conviction of the appellants. Non-disclosure on the record as to how and when the <NAME> to the lacuna in the prosecution case. These appeals are allowed and the accused acquitted.

Y.P. Appeals allowed.. (1) [1970] 1 S.C.C. 225.

(2) crl. A. No. 62 of 1968 on March 26, 1970 5 81