ORDER <NAME>, J.

1. This criminal appeal is directed against the judgment of <ORG>, rendered in Criminal Appeal No. 544 of 1987 partly allowing the appeal by setting aside the convictions of respondents 2 to 4 (accused Nos. 1 to 3) under Section 302 read with Section 34 of I.P.C. and Section 498-A I.P.C. and the sentence of imprisonment for life and the sentence of one year rigorous imprisonment respectively but retaining the conviction of the respondents 2 to 4 under Section 201 read with Section 34 of I.P.C. and the sentence of three years rigorous imprisonment as against respondents 2 and 3 (accused 1 and 2) but reducing the sentence of imprisonment inflicted on respondent No. 4 (A-3) to the period already undergone and in lieu of the unserved portion of the sentence, imposing a fine of Rs. 1000/- in default to suffer rigorous imprisonment for three months.

2. The relevant facts of the case giving rise to this appeal are necessary to be re-capitulated for the disposal of this appeal.

3. Before <ORG>, there were four accused namely respondents 2 to 4 and one <NAME> alias <NAME> (accused 4) who stood convicted under Section 201 I.P.C. and sentenced to undergo three years rigorous imprisonment and to pay a fine of Rs. 1,000/- in default to undergo rigorous imprisonment for a further period of three months and who is not a respondent in this appeal. For the sake of convenience, we shall refer respondents 2 to 4 in this judgment as accused Nos. 1 to 3 as arrayed before <ORG>.

4. The second and third accused are the father and mother of the first accused. The first accused married the deceased, <NAME>, daughter or PW-8 (the appellant herein) on 10.5.79 at Tirumala hills. PW-9 is the brother of the deceased. All the accused are residents of Komaripalem. The appellant is the resident of Rayavaram. At the time of the marriage, the appellant gave sufficient cash and gold to the deceased. As the deceased was aged about 12 years at the time of her marriage she stayed with her parents till she attained her puberty and thereafter was sent to her marital home. The case of the prosecution is that the deceased used to complain to her father and that her husband and in-laws were pressing hard to get some landed property towards her dowry. When the appellant made enquiries about her daughter's complaints, the accused abused and tried to beat him. In 1985 during the second crop season, the accused 1, 2 and 4 along with the deceased forcibly harvested the crop standing in the land of the appellant. It is stated that the deceased even went to the extent of filing a suit against her father, the appellant (PW-8) and brother (PW-9) claiming that the land in dispute was in her possession. Her brother PW-9 in turn filed a suit against the deceased and PW-8. The appellant filed a criminal complaint against the deceased and the accused persons. Thus, there were civil and criminal proceedings between the parties.

5. On the intervening night of 6/7th September, 1985 the accused 1 to 3 are said to have attended the marriage celebrated in the house of PW-1 and remained in the marriage house till morning of 7th September and when they came back to their house they, to their shock and surprise found number of people gathered in front of their house and the body of the deceased lying in an easy chair. The fourth accused who is not a respondent in this appeal went to the police station and gave the report Ex. 14 to the Head constable. Some nail marks and swelling over the neck, lips, chin and nose were noticed on the dead body. A tin covered with a cap and pasted with a label inscribed 'Democran' (i.e. pesticide) was found by the side of the dead body. The fourth accused stated in Ex. P. 14 that the deceased had committed suicide. PW-10 registered the report. Thereafter, PWs 10 and 11 reached the scene and took up investigation.

6. In the meanwhile, the appellant and PW-9 on receipt of the jarring information about the death of the deceased came to the scene village. During the investigation, the first accused handed over three letters Ex. P. 6 to P-8, said to have been written by the deceased to her father. These letters were seized under Ex. P. 5. PW-10 held the inquest and during the course of which he examined P.Ws 8 and 9 and others. As suspicion was entertained over the death of the deceased, the dead body was sent for post-mortem examination. PWs 5 and 6, the Medical Officers conducted autopsy and found some external injuries. The medical officers sent the viscera and some of the parts of the dead body namely liver, kidney for chemical examination. After the receipt of the Chemical Examiner's report both PWs 5 and 6 gave their opinion that the death was due to poisoning and smothering i.e. asphyxia. Further investigation was taken by PW-13 and thereafter by PW-14. All the accused were arrested. After completing the investigation, charge-sheet was laid. On the side of prosecution PWs 1 to 14 were examined.

7. All the accused denied their complexity with the offence in question and stated that the relationship between the deceased and the accused were on cordial terms, that on the ill-fated night they were all in the marriage house of PW-1 and that this case is foisted against them by the appellant on account of the long-standing enmity. <ORG> accepting the evidence let in by the prosecution convicted A-1 to A-3 under the respective charges and sentenced them as aforementioned. On being aggrieved, the accused 1 to 3 filed criminal appeal No. 544 of 1987 and the fourth accused who stood convicted only under Section 201  preferred criminal appeal No. 576 of 1987. Both the appeals were disposed of by <ORG> by the impugned common judgment.

8. The State has not preferred any appeal against the order of acquittal of A-1 A-3 of the charges punishable under Sections 302 read with 34 and 498-A of the Indian Penal Code ; but this present appeal is by PW 8, the father of the deceased.

9. Mr. <NAME>, the learned senior counsel appearing on behalf of the appellant took us very meticulously through the judgments of <ORG> as well of <ORG> and strenuously contended that the reasons given by the appellate Court for recording an order of acquittal of the offence of murder are perverse and difficult to comperhand and <ORG> has over-looked the important and vital facts which tend to show that the circumstances established are consistent only with the hypothesis of guilt of the accused. According to him, the chain of evidence is complete leaving no reasonable ground for drawing a conclusion consistent with the innocence of the accused. It is further submitted that the unrealistic and false plea put forth by the accused stating that none of them was present in the house on the ill-fated night is itself an additional circumstance lending support to the other impelling circumstances unfailingly pointing out the guilt of the accused. The first respondent, State of Andhra Pradesh sails with the appellant supporting the arguments advanced by Mr. <NAME>. Mr. <NAME>, learned Counsel appearing on behalf of the respondents 2 to 4 (Accused 1 to 3) countered the above argument, submitting that the judgment of <ORG> is based on sound reasoning and that the totality of the evidence adduced by the prosecution, if at all proves anything it may create only a suspicion against the appellants and that no conviction, as rightly pointed out by <ORG>, can be safely recorded on such suspicion or conjecture.

10. Before adverting to the arguments advanced by the learned Counsel we shall at the threshold point out that in the present case here is no direct evidence to connect the accused with the offence in question and the prosecution rests its case solely on circumstantial evidence. this <ORG> in a series of decisions has consistently held that when a case rests upon circumstantial evidence such evidence must satisfy the following tests :

(1) the circumstances from which an inference of guilt is sought to be drawn, must be cogently and firmly established;

(2) those circumstances should be of a definite tendency unerringly pointing towards guilt of the accused;

(3) the circumstances, taken cumulatively, should form a chain so complete that there is no escape from the conclusion that within all human probability the crime was committed by the accused and none else; and (4) the circumstantial evidence in order to sustain conviction must be complete and incapable of explanation of any other hypothesis than that of the guilt of the accused and such evidence should not only be consistent with the guilt of the accused but should be inconsistent with his innocence. ( <CITATION> ).

11. See also <CITATION> , <CITATION> , <NAME> v. State of Karnataka <NAME> v. State of Punjab 1986 Suppl. SCC 676, <CITATION> .

12. Bearing the above principle of law enunciated by this <ORG> we shall scrutinise scrupulously and examine carefully the circumstances appearing in this case with serious and onerous responsibility imposed on this <ORG>.

13. There are certain salient and material features in the present case which are not controverted; they being that A-1 to A-3 and the deceased lived under a common roof, that the deceased had instituted a civil suit against her father, PW-8 and brother PW-9 claiming exclusive possession of the disputed land, that the deceased was found dead on the morning of 7.9.85 and that there were certain visible injuries such as abrasions, nail marks and contusions on the part of the nose, upper lip, chin and neck etc. as noted by the Medical Officers (PWs 5 and 6) in the post-mortem report Ex. P. 9. The appellate Court on the strength of the opinion given by the Medical Officers (PWs 5 and 6) has agreed with the view of <ORG> that the death of the deceased was of homicidal one and not suicidal and held "therefore suicidal is ruled out." We also very carefully went through the evidence of the Medical Officers and found that the prosecution has convincingly established that the death of the deceased was due to forcible administration of poison and smothering. Hence we are in full agreement with the concurrent findings of the Courts below that it is a clear case of murder.

14. The next important question is whether the circumstances attend the case do satisfactorily and unerringly establish the guilt of the accused 1 to 3 or any of them so as to incriminate them with the heinous crime of murder and the offence of cruelty within the mischief of Section 498(A) I.P.C. The learned Counsel appearing on behalf of the appellant seeks to draw an inference of guilt of the accused on the following circumstances:

1. The demand of the deceased requesting her father to settle the landed property in her name and her subsequent filing of the civil suit in the year 1985 i.e. within a period of 6 years since her marriage indicate that the accused should have pressurised the deceased to take a hostile attitude towards her father so that they could grab the property.

2. The very fact that the deceased who was in her prime of youth did not accompany her husband and in-laws to attend the marriage celebrated in the house of PW-1, situated just opposite to the accused's house shows that there was no cordial relationship between the deceased and the accused and the deceased was not leading a happy marital life.

3. The facts that the victim was alive when all the accused are said to have left their house to attend the marriage and she was done away with only during the intervening night of 6th/7th September, 1985 are not in dispute.

4. The fact that the deceased was found dead lying on an easy chair indicates that the dead body should have been brought and. laid on the easy chair by someone else.

5. The presence of a tin container covered with a cap and pasted with a label inscribed 'Democran' (i.e. pesticide) near the easy chair which on chemical examination was not found to contain any poisonous substances shows that someone had kept the tin near the dead body so as to create a false impression in the minds of others that the victim had consumed the poison and committed suicide

6. The presence of the injuries namely semi-circular abrasions resembling that of human nail marks over the upper parts of her lip, nose and chin, the contusions over the front of the neck, the congestion of the protruding eye balls and the presence of blush, black discolouration from the right angle of the mouth extending to right side of the neck unequivocally lead to a decisive conclusion that the deceased had been over-powered by the assailants and the poison was administered to her by forcibly opening her mouth and closing the nose and pressing the neck so as to make the victim to gulp the poison and in that process more than one person should have participated. This view is fortified by the final opinion given by the doctors stating that the death might have been caused due to the combined effect of asphyxia irritable due to smothering and poisoning democran.

7. The conduct of the first accused in handing over the three letters Ex. P. 6 to P. 8, alleged to have been written by the deceased herself, to the Investigating Officer on 7.9.85 at the scene house itself is yet another circumstance showing that the accused has by a concerted pre-plan manipulated a defence theory of suicide so as to escape from the culpability of the crime. The defence of the accused that they were at the marriage house from 8.00 p.m. on 6.9.85 till the morning of 7.9.85 is patently false and unrealistic since the house of PW-1 where the marriage was conducted is almost opposite to the house of the accused. This plea of the accused is too big a pill to be swallowed.

8. The introduction of the patently false averments in Ex. P. 14 by accused 4 that the deceased had committed suicide should have been made only at the instance of A-1 to A-3 and this conduct of the accused clearly indicates that the accused had pre-planned and calculated a false theory of defence presumably due to an earlier deliberation and consultation with the local M.L.A.

15. According to the learned defence counsel, the totality of the above circumstances unerringly, unfailingly and unshakably prove that the accused 1 to 3 alone were the perpetrators of this heinous crime of murder and none else.

16. While considering the above circumstances, the appellate Court has expressed its view that the explanation given by the accused that they were at the marriage house of PW-1 throughout the night is nothing but a false explanation and that the culprits who ever they might have been should have administered the poison to the victim and thereby caused her death and that there is very strong suspicion against the accused persons but the prosecution cannot be said to have established the guilt of the accused decisively since the suspicion cannot take the place of legal proof. The relevant portion of the final conclusion of the appellate Court reads thus :

There is no evidence whatsoever either from the neighbours or from others to show that the accused at any time ill-treated the deceased or treated her cruelly. In these circumstanes, it is not possible to hold that the prosecution has established the guilt on the part of A. 1 to A. 3. Thus, there is no conclusive evidence that the accused committed the offence of murder. It is an unfortunate case where cold-blooded murder has been committed and it is difficult to believe that no inmate of the house had any hand in the offence of murder. But that will be only a suspecion which cannot take the place of proof.

17. We, in evaluating the circumstantial evidence available on record on different aspects of the case, shall at the foremost watchfully examine whether the accused 1 to 3 had developed bad-blood against the deceased to the extent of silencing her for ever, that too in a very inhuman and horrendous manner. The appellant wants us to infer that the deceased should have been subjected to all kinds of pressures and harassments and compelled to institute the suit against her father and brother claiming exclusive right over the landed property in order to grab the said property, that this conduct of the accused should have been resented by the deceased and that on that score the accused should have decided to put an end to her life. In our view, this submission has no merit because there is no acceptable evidence showing that there was any quarrel in the family and that the deceased was ill-treated either by her husband or in-laws. <ORG> while dealing with this aspect of the case has observed that there is no evidence that the accused ill-treated the deceased, which observation we have extracted above. Hence, we hold that there is no sufficient material to warrant a conclusion that the accused had any motive to snatch away the life threat of the deceased. There is no denying the fact that the deceased did not accompany her husband and in-laws to attend the marriage celebrated in the house of PW-1 and remained in the scene house and that she has been done away with on the intervening night of 6th/7th September, 1985. From this circumstance, the <ORG> will not be justified in drawing any conclusion that the deceased was not leading a happy marital life. As observed by the appellate <ORG>, the explanation offered by accused 1 to 3 that they remained in the house of PW 1 throughout the night is too big a pill to be swallowed. But at the same time, in our view, this unacceptable explanation would not lead to any irrestible inference that the accused alone should have committed this murder and have come forward with this false explanation. We have no hesitation in coming to the conclusion that it is a case of murder but not a suicide as we have pointed out supra. The placing of the tin container with the inscription 'Democran, by the side of the dead body is nothing but a planted one so as to give a misleading impression that the deceased had consumed poison and committed suicide. But there is no evidence as to who had placed the tin container by the side of the dead body. Even if we hold that the perpetrators of the crime whoever might have been had placed the tin, that in the absence of any satisfactory evidence against the accused would not lead to any inference that these accused or any of them should have done it. It is the admitted case that the first accused handed over three letters Ex. P. 6 to P. 8 alleged to have been written by the deceased to the Investigating Officer. The sum and substance of these letters are to the effect that the decased had some grouse against her parents and that the accused were not responsible for her death. The explanation given by accused No. 1 in this written statement is that by about the time of the arrival of the police, one <NAME> handed over these letters to him saying that he (<NAME>) found them near the place where the dead body was laid and that he (A-1) in turn handed over them to the police. PWs 8 and 9 have deposed that these letters are not under the hand writing of the deceased. But the prosecution has not taken any effort to send the letters to any hand-writing export for comparison with the admitted writings of the deceased with the writings found in Ex. P. 6 to P. 8. Under these circumstances, no adverse inference can be drawn against accused No. 1 on his conduct in handing over these letters.

18. No doubt, this murder is diabolical in conception and cruel in execution but the real and pivotal issue is whether the totality of the circumstances unerringly establish that all the accused or any of them are the real culprits. The circumstances indicated by the learned Counsel undoubtedly create a suspicion against the accused. But would these circumstances be sufficient to hold that the respondents 2 to 4 (accused 1 to 3) had committed this heinous crime. In our view, they are not.

19. There are series of decisions holding that no one can be convicted on the basis of mere suspicion, however, strong it may be. Though we feel it is not necessary to re-capitulate a 11 those decisions we will refer to a few on this point.

20. this Court in <CITATION> 1953 SCR 94 has pointed out that in cases dening on circumstantial evidence courts should safeguard themselves against the danger of basing their conclusions on suspicions how so ever strong.

21. <CITATION> , it has been observed :

It is well settled that no one can be convicted on the basis of mere suspicion, though strong it may be. It also cannot be disputed that when we take into account the conduct of an accused, his conduct must be looked at in its entirety

22. <CITATION> , this Court has reiterated the above dictum and pointed out that the suspicion, however, great it may be, cannot take the place of legal proof and that "fouler the crime higher the proof".

23. We are of the firm view that the circumstances appearing in this case when examined in the light of the above principle enunciated by this Court do not lead to any decisive conclusion that either all these accused or any of them committed the murder of the deceased, Vijaya punishable under Section 302 read with Section 34 of I.P.C. or the offence of cruelty within the mischief of Section 498-A I.P.C. Hence, viewed from any angle, the judgment of the appellate Court does not call for interference.

24. The appeal is dismissed accordingly.


CASE NO.: Appeal (civil) 4262 of 1999 PETITIONER: State of Maharashtra and <NAME> RESPONDENT: <NAME> and <NAME> DATE OF JUDGMENT: 17/08/2005 BENCH: ARIJIT PASAYAT & H.K. SEMA JUDGMENT:

J U D G M E N T ARIJIT PASAYAT, J.

State of Maharashtra and the Punjabrao Krishi Vidyapeeth (hereinafter referred to as the 'University') question legality of the judgment rendered by a Division Bench of <ORG>, Nagpur Bench. By the impugned judgment <ORG> directed that there was no necessity for obtaining approval of <ORG> for the purpose of treating the respondents (hereinafter referred to as the 'employees') as the permanent employees w.e.f. 7.11.1983 and that they are entitled to all benefits from that date as permanent employees.

Background facts in a nutshell are as follows:

The respondents and several others, who according to the appellants were engaged on seasonal basis, approached <ORG>, Maharashtra, Nagpur Bench, Nagpur by filing complaint purportedly under Section 28 read with Item 6 of Schedule IV of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter referred to as the 'Act'). The case of the complainants was that they were continuously working with the present appellant no.2-<ORG> in <ORG>, Nagpur without any break in service as daily- wagers. The nature of duties performed by them is of permanent nature. Even though they were being continued as temporary employees, they attended work of permanent nature. According to them this practice was being followed to deprive them from getting benefits which a permanent workman is entitled and this amounted to unfair labour practice under Item 6 of Schedule IV of the Act. Prayer was made to restrain the <ORG> and the <ORG> from continuing with the unfair labour practice complained of and to make the complainants permanent in the post they were working. Stand of the <ORG> and the <ORG> was that by itself it cannot create permanent posts as <ORG> has to be approached for this purpose. It was pointed out that <ORG> was approached for making 140 labourers permanent. <ORG> held that there was unfair labour practice and directed the respondents i.e. the <ORG> and the <ORG> to make the complainants permanent subject to the approval of <ORG>. Stand taken by the <ORG> was with reference to Section 50(B) of the Punjabrao Krishi <ORG> (Krishi Vidyapeeth) Act, 1968 (in short the ' <ORG> Act '). Six writ petitions were filed by the <ORG> questioning correctness of the judgment rendered by <ORG>. A learned Single Judge of <ORG> of the Bombay High Court, Nagpur Bench in Writ Petition no. 143/1983 along with writ petition nos. 170/1983, 1171/1982, 1172/1982, 1173/1982 and 1174/1982 held that the order passed in the complaint cases was to be modified to the extent that for the words "subject to the approval of <ORG>" in each of the case the words "subject to the prior approval of <ORG>" were to be substituted.

Thereafter, ten persons who are respondents herein filed a writ petition before <ORG> to implement the order of <ORG>. By the impugned judgment <ORG> held that <ORG>'s order was to be modified by excluding the words "subject to the approval of <ORG>". Accordingly, directed that all the respondents were to be treated as permanent employees with all benefits w.e.f. 7.11.1983 i.e. the day on which Section 50(B) of the University Act was repealed by Maharashtra Agricultural Universities (Krishi Vidyapeeth) Act, 1983 in (short the '1983 Act'). According to <ORG> there was no provision similar to Section 50(B) of the Act in 1983 Act and, therefore, the question of any approval much less prior approval of <ORG> did not arise.

Learned counsel for the appellants submitted that the order dated 25th July, 1983 by which writ petition no. 143/83 and other cases were disposed had attained finality. Merely because the provision which was in operation when the order of <ORG> was passed had subsequently been repealed, same was really of no consequence.

Per contra, learned counsel for the respondent submitted that the direction of <ORG> is in order keeping in view the fact that the <ORG> at all points of time had taken the stand that it had a scheme for regularization.

It is to be noted that the <ORG> as revealed from the affidavits filed before <ORG>, had stated that more than 3,000 workers were engaged from time to time on daily-wages basis, besides 970 workers working on regular basis. Whenever a post fell vacant or newly created with the approval of the competent authority and following due procedure the vacancies are filled up from amongst those who are on daily-wages according to their zone-wise seniority list separately maintained for Nagpur and Amaravati zones. This position is not disputed by the respondents. That being so, the order of <ORG> is clearly untenable on more than one counts. Firstly, the order in writ petition no. 143/83 and other connected cases dated 25th July, 1983 had become final and there was no challenge to it. Prayer in the subsequent writ petition to enforce <ORG> Order is clearly not maintainable. Merely because Section 50(B) of the Act was repealed that did not take away the effect of the order passed by <ORG> in the earlier cases. The prayer for enforcement of the <ORG> order in its original form could not have been made, when the same had been modified by <ORG>'s order which had attained finality.

Additionally, as observed by this Court in <CITATION> . (2001 (7) SCC 346) the status of permanency cannot be granted when there is no post. Again in <ORG> v. <NAME> (2001 (7) SCC 356), it was held that mere continuance every year of seasonal work obviously during the period when the work was available does not constitute a permanent status unless there exists posts and regularization is done.

Above being the position the impugned judgment of <ORG> cannot be maintained and is set aside. It is, however, not in dispute that except respondent no.8 who has died in the meantime the others have been at points of time regularized. The regularization shall take effect from the respective dates of order in that regard as passed by the authority and not from 7.11.1983 as directed by <ORG>.

The appeal is allowed to the aforesaid extent without any order as to costs.


<NAME>, J.

1. The devaluation of the Indian Rupee on 6th June, 1966 brought several problems in its wake. One such problem arose out of the consequential enhancement in the liability of an Indian businessman who had imported plant and machinery from abroad the consideration for which had been fixed in terms of a foreign currency and which has not been fully discharged by the date of devaluation. How this increase in liability has to be (a) accounted for in the books of account of the businessman and (b) taken into account for purposes of certain allowances available under the Income-tax Act , 1961, are the two issues that have to be considered in this appeal.

2. A simple hypothetical illustration (steering clear of complications that may arise where the purchase is made by borrowing funds therefor from others, where the price is paid in several instalments, where more than one fluctuation in exchange rate intervene and so on) will serve to bring the problem into focus. Let us consider the case of an income-tax assessee, whose previous year ended on 31.3.66 who had placed an order for plant and machinery costing $ 10,000 on 1.1.1966, at a time when the rupee exchange rate of a dollar was, say, ten rupees to the dollar. The cost of the plant or machinery would have been debited by him, in his books for the year ended 31.3.66, at Rupees One Lakh. If the price wholly or in part remained undischarged on 6.6.1966, the assessee would have become liable to pay more money in terms of the Indian Rupee to pay in full the price of $ 10,000. Let us suppose that he had eventually to pay Rs. 1,20,000 in the accounting year 1966-67 to discharge his liability towards the purchase price. The two questions that would arise are :

(1) Should he enter the additional liability of Rs. 20,000 in his books for the year ended 31.3.67 during which the additional liability arose consequent on the devaluation or should he reopen his accounts of the earlier year and correct the figure of cost debited therein from Rs. 1,00,000 to Rs. 1,20,000?

(ii) On what basis should he claim allowances like depreciation and development rebate under the Income-tax Act which are admissible on the "actual cost to the assessee" of such plant and machinery?

3. Before dealing with these questions it may be useful to refer to certain accountancy principles and statutory provisions that have a bearing on the issues raised.

4. Soon after the currency devaluation of 1966, <ORG> issued a statement indicating the manner in which the effects of devaluation should be shown in the accounts. It said:

2.1 Where the accounts of an enterprise are closed on a date prior to 6th June 1966, but the auditor reports thereon subsequent to that date, the question arises whether it is necessary to include in the accounts or in the auditor's report any reference to the fact of devaluation and its effects upon the accounts of the company. It is accepted in connection with certain matters that events occurring after the balance sheet date may be of such a nature that they would have to be taken into account in order to show a true and fair view. The <ORG> is, therefore, of the opinion that it is the duty of the Directors of a company to disclose by way of a note on the accounts the effect (if material) of devaluation upon the accounts of the company and in particular about the extent to which the outstanding liabilities may be increased as a result of devolution and its effect upon the profit or loss of a company.

xxxx xxxx xxxxx 2.2 While this is the recommended procedure, it is permissible for a company to include the effects of devaluation in its accounts ending on a date prior to 6th June 1966. It would be desirable to make appropriate disclosure of the effect of such inclusion on the true and fair view of the results for the year and the position as at the Balance Sheet date in the accounts or in any notes thereon.

xxxx xxxx xxxxx 6.1 The <ORG> is of the opinion that to the extent to which repayment obligations in respect of fixed assets purchased prior to devaluation remain outstanding as on 6th June 1966 (except those covered by forward exchange contracts), the additional cost of repayment in terms of rupees, should be considered as enhancing the cost of the corresponding asset purchased. In cases where identification of the assets which have been purchased out of foreign funds is not possible, some reasonable method of allocation would have to be adopted.

6.2 Depreciation must be provided on the additional cost according to the method of depreciation normally employed by the company.

6.3 The <ORG> has recommended to the Government that appropriate amendments be made in the Companies Act to embody the accounting treatment outline above. It has also been represented to the Government that the consequential amendments should be made in the Income-Tax Act to enable businesses to claim such additional depreciation and appropriate development rebate as an allowable deduction for tax purposes.

6.4 Fixed assets which are purchased prior to devaluation but paid for subsequently, should be recorded at the enhanced cost by conversion at the new rates of exchange.

6.5 Advances made to foreign suppliers for machinery to be supplied should be retained in the books at the actual rupee cost of the advance (i.e. at the old rate of exchange). Any subsequent payment towards the purchase of the machinery by way of final instalment or otherwise would, if paid after devaluation, be converted at the new rate of exchange and the total cost of the asset would be the sum of these two figures.

(Emphasis added)

5. A few years later, the currencies of a large number of countries came to be "floated" in foreign exchange markets leaving the exchange rates to be determined from day to day market forces. Also, the Indian rupee was delinked from the Pound Sterling and its rates of exchange in relation to other currencies came to be determined by the <ORG> on the basis of the exchange rates of a selected "basket" of foreign currencies. In the context of these developments, the institute issued a further detailed statement on accounting for foreign exchange transactions. Pointing out that the need for a "foreign currency translation" arises (a) when translating the financial statements of foreign entities in the books of the parent entity and (b) when determining or restating book values of revenue items and assets and liabilities in respect of transactions in foreign currencies, the statement addressed itself, inter alia, to three problems: (a) whether all differences should be adjusted in the profit and loss account; (b) whether the adjustment should be in the year of change or deferred; and (c) whether any part of the difference can be treated as a capital expenditure. On the second issue with which we are concerned here, the statement said:

23. At the same time, deferment of the charge to the profit and loss account in all cases till the actual gain or loss is realised on conversion of the foreign currency would result in accounting on a "cash basis' and would be contrary to the "accrual" concept of accounting. It therefore becomes necessary to distinguish between translation differences which arise on translation of current assets and short-term liabilities and translation on differences which arise on translation of non-current assets and long-term liabilities.

xxxx xxxx xxxxx

25. The translation difference arising on the translation of long-term, liabilities should be dealt with as under:

(i) If the funds represented by the long-term liabilities have been used for the purchase of assets which continue to appear in the balance sheet at the date of translation, the amount of the difference can be dealt with as suggested in sub-paragraphs (ii) and (iii) below or can be added to or deducted from the cost of the assets to the extent considered appropriate.

(ii) If the translation results in a profit, the difference (to the extent not adjusted wholly or partly against the cost of assets) should be transferred to a reserve account and a loss arising on a subsequent translation can be debited to this reserve.

(iii) If the translation results in a loss, the difference (to the extent not adjusted wholly or partly against the cost of assets) should be written off in the profit and loss account. If the amount of the difference is substantial, it can be written off in annual instalments over a period of years in proportion to the repayment of the liability in each of the subsequent years.

6. The <ORG> reacted to the situation created by the devaluation of 1966 by effecting two amendments : The first legislative provision enacted to meet the situation was the insertion of Section 43A in the Income-tax Act , 1961. The relevant portions of this provision, inserted by the Finance (No. 2) Act, 1967, w.e.f. 1.4.1967, need to be set out in full as the controversy before us turns entirely on a proper interpretation of this privision. It reads:

43A. (1) Notwithstanding anything contained in any other provision of this Act, where an assessee has acquired any asset from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange at any time after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towers the whole or a part of the cost of the asset or for repayment of the whole or a part of the moneys borrowed by him from any person, directly or indirectly, in any foreign currency specifically for the purpose of acquiring the asset (being in either case the liability existing immediately before the date on which the change in the rate of exchange takes effect), the amount by which the liability aforesaid is so increased or reduced during the previous year shall be added to, or, as the case may be, deducted from, the actual cost of the asset as defined in Clause (1) of Section 43 or the amount of expenditure of a capital nature referred to in Clause (iv) of Sub-section (1) of Section 35 or in Section 35A or in Clause (ix) of Sub-section (1) of Section 36 , or, in the case of a capital asset (not being a capital asset referred to in Section 50 ), the cost of acquisition thereof for the purposes of Section 48 , and the amount arrived at after such addition or deduction shall be taken to be the actual cost of the asset or the amount of expenditure of a capital nature or, as the case may be, the cost of acquisition of the capital asset as aforesaid.

xxxx xxxx xxxxx (2) The provisions of Sub-section (1) shall not be taken into account in computing the actual cost of an asset for the purpose of the deduction on account of development rebate under Section 33 .

7. The second statutory provision was an amendment to Schedule VI of the Companies Act, 1956 in the form of Balance Sheet prescribed for companies. In the third column setting out "the instructions" in accordance with which assets should be made out", the following instructions had appeared against "Fixed Assets" at the very top of the form:

Under each head the original asset and the additions thereto and deductions therefrom during the year and the total depreciation written off or provided up to the end of the year to be stated.

8. To this, a new paragraph, in language identical with that employed in Section 43A above, was added by a notification dated 3.1.1968. It read:

Where the original cost aforesaid and additions and deductions thereto, relate to any fixed asset which has been acquired from a country outside India, and in consequence of a change in the rate of exchange at any time after the acquisition of such asset, there has been an increase or reduction in the liability of the company, as expressed in Indian currency, for making payment towards the whole or a part of the cost of the asset or for repayment of the whole or a part of moneys borrowed by the company from any person, directly or indirectly in any foreign currency specifically for the purpose of acquiring the asset (being in either case the liability existing immediately before the date on which the change in the rate of exchange takes effect), the amount by which the liability is so increased during the year, shall be added to, or, as the case may be deducted from the cost, and the amount arrived at after such addition or deduction shall be taken to be the cost of the fixed asset.

Explanation 1: This paragraph shall apply in relation to all balance sheets that may be made out as at the 6th day of June, 1966, or any day thereafter and where, at the date of issue of the notification of <ORG>, in the Ministry of Industrial Development and Company Affairs (<ORG>), G.S.R. No. 129, dated the 3rd day of January, 1968, any balance-sheet, in relation to which this paragraph applies, has already been made out and laid before the company in Annual General Meeting, the adjustment referred to in this paragraph may be made in the first balance-sheet made out after the issue of the said notification.

xxxx xxxx xxxxx

9. Reverting now to the first of the two questions posed earlier in the background of the above principles and amendments, the position appears to be that on strict accountancy principles the increase or decrease in liability towards the actual cost of an asset arising from exchange fluctuation can be adjusted in the accounts of the earlier year in which the asset was acquired (if necessary, by reopening the said accounts). In that event, the accounts of that earlier year as well as subsequent years will have to be modified to give effect to variations in depreciation allowances consequent on the re-determination of the actual cost In other words, in the illustration given earlier, the actual cost of Rs. 1,00,000 and the allowances based thereon shown in the accounts for the financial year 1965-66 would have to be revised to show an actual cost of Rs. 1,20,000 and allowances based on that figure. The figures of written down value and depreciation allowances for subsequent years would also need consequential revision. However, though this is a course which is theoretically advisable or precise, its adoption may create a lot of practical difficulties. That is why <ORG> gave an option to business people to make a mention of the effect of devaluation by way of a note on the accounts for the earlier year in case the balance sheet in respect thereof has not yet been finalised but actually to give effect to the necessary adjustments in the subsequent years instead of re-opening the closed accounts of the earlier year. This also appears to be in accord with the principle laid down by this Court in <CITATION> , Naidu (1964)53 ITR and CIT v. <ORG>.. .

10. This is also the principle subsequently recognised by the amendment to the Companies Act , 1956. Thus, in the illustration given earlier, the actual cost of the asset for the assessment year 1966-67 will be Rs. 1,00,000. The actual cost to be entered in the books, for the assessment year 1967-68 will, however, be Rs. 1,20,000.

11. We may now turn to the second question posed earlier and consider the position on general principles. So far as depreciation allowance is concerned, the position is perhaps a little simpler because it is a recurrent claim. Under the definitions contained in Section 32 read with Section 43(1) and (6) of the Income-tax Act , the depreciation is to be allowed on the actual cost of the asset less all depreciation actually allowed in respect thereof in earlier years. Thus where the cost of the asset subsequently goes up because of devaluation, whatever might have been the position in the earlier year, it is always open to the assessee to insist, and for the Income-tax Officer to agree, that the written down value in the year in which the increased liability has arisen should be taken on the basis of the increased cost minus depreciation earlier allowed on the basis of the old cost. Thus in the illustration given earlier, if the asset is one that earns depreciation at 10%, the assessee would have got a depreciation allowance of Rs. 10,000 for assessment year 1966-67 and that will stand. But, for the assessment year 1967-68 the depreciation allowance will be calculated on an actual cost of Rs. 1,20,000 minus the depreciation, earlier allowed, of Rs. 10,000 i.e. on Rs. 1,10,000. The written down value and allowances for subsequent years will be calculated on this footings. In other words, though the depreciation granted earlier will not be disturbed, the assessee will be able to get a higher amount of depreciation in subsequent years on the basis of the revised cost and there will be no problem. So far as development rebate is concerned, however, a difficulty will arise because it is a one time allowance which has to be allowed in the year in which the machinery or plant has been acquired, installed or brought to use. If the actual cost has already been determined at the original price and development rebate has been granted on that footing to the assessee and an increase in liability arises later, it is possible for the <ORG> to contend that since the actual cost has already been determined and development rebate fixed on that footing there is no possibility or necessity for re-considering the issue though it may perhaps contend to the contrary if the fluctuation in exchange rate had resulted in a decrease in liability. On the other hand, the assessee may contend that, since the figure of actual cost has undergone a modification as a result of the currency revaluation, the assessment for the year in which development rebate was allowed should be re-opened and the actual cost as well as the development rebate should be re-computed; or, if this is not possible, that the actual cost should be re-worked at least in the subsequent year and any deficiency of the development rebate earlier allowed should be made up in the subsequent year though a corresponding alternative argument would not have been available if the fluctuation in currency had been favourable to our country. To obviate all these doubts and difficulties, Section 43A was enacted. While Sub-section (1) of Section 43A provides generally for modification of the actual cost of the asset consequent on the variation in exchange rate in the year in which the increase or reduction in liability arises, Sub-section (2) contains a clear mandate that the provisions of Sub-section (1) are not to be taken into account in computing the actual cost of an asset for the purpose of deduction on account of the development rebate under Section 33 . This means, according to the <ORG>, the statute is categorical that any increase or decrease in the liability towards the actual cost of machinery or plant consequent on fluctuations in exchange rates is totally irrelevant and has to be disregarded for purposes of computation of the development rebate allowable thereon.

12. The grievance of the <ORG>, appellant in this appeal, is that, in spite of the clear and categorical language of Section 43A(2) , not only the Gujarat High Court in the judgment under appeal [( but also several other <ORG> vide: <CITATION> . (1977)109 I.T.R. 645 (Mad); <CITATION> . ; <CITATION> . v. <ORG> ; <CITATION> . and <CITATION> . have held that assessees are entitled to development rebate on the enhanced cost, the lone voice speaking differently being <CITATION> . . <NAME>, for the appellant, contends that the statutory mandate is clear and cannot be toned down. He lays emphasis on the well-established canon of construction of taxing statutes enunciated by <NAME> and approved in catena of decisions [e.g. <CITATION> . . He also refers to the principle that a special provision [here, the one regarding development rebate contained in Section 43A(2) ] should override a general provision [regarding allowance of depreciation and development rebate on the actual cost of the assets in question]. He submits that we should overrule or reverse the decisions referred to earlier and uphold the department's action in restricting the allowance of development rebate to the original cost.

13. Before considering the respondent's answer to this contention, reference may usefully be made to the "notes on clauses" of the Finance (No. 2) Bill, 1967 pertaining to the insertion of Section 43A . The note on the relevant clause reads thus (vide : 1967-64 I.T.R. St. 169-70):

Clause 17 seeks to insert a new Section 43A in the Income-tax Act . The proposed Section 43A , in substance, secures that where an assessee had acquired any capital asset from a country outside India for the purposes of his business or profession on deferred payment terms or against a foreign loan, before the date of devaluation of the rupee, the additional rupee liability incurred by him in meeting the instalments of the cost of the asset or of the foreign loan, as the case may be, falling due for payment after the date of devaluation, will be allowed to be added to the original actual cost of the asset for the purpose of calculating he allowance on account of depreciation in computing the profits for the assessment year 1967-68 and subsequent assessment years. Similarly increase in the original actual cost will be allowed to be made in respect of capital assets acquired by the assessee to be used in scientific research related to the class of business carried on by him or patent rights or copyrights acquired from abroad or any capital asset acquired by a company for the purpose of promoting family planning amongst its employees. Further, in computing the capital gains arising to the assessee on the sale or transfer of a capital asset acquired by him from abroad on deferred payment terms or against a foreign loan, the additional rupee liability incurred by him in repaying the instalments of the cost or the foreign loan, as the case may be, after the date of devaluation of the rupee, will be added to the original actual cost of the asset. The proposed section also secures that where there is a decrease in the rupee liability of the assessee in respect of assets acquired by him from abroad due to a change in the exchange value of the rupee, the original actual cost of the asset will be correspondingly reduced.

The additional rupee liability incurred on imported capital assets or, as the case may be, any decrease in such liability, in the circumstances stated in the earlier paragraph will not, however, be taken into account in computing the actual cost of the asset for the purpose of deduction on account of development rebate.

14. Reference must also be made to a circular issued by <ORG> on which reliance was placed by both counsel:

6.1. The par value of the rupee was lowered by 36.5 per cent with effect from 6 June, 1966. In consequence of this change, the value, in rupees, of a unit of any foreign currency has increased by 57.5 per cent. Thus, the par rate of exchange between the rupee and the US Dollar became Rs. 7.50 per $ 1, as against Rs. 4.76 per $ 1 before the devaluation of the rupee. The value of other foreign currencies in terms of Indian currency has also similarly gone up by 57.5 per cent with effect from the date of devaluation of the rupee. The effect of this is that assessees who had imported capital assets from abroad before the date of the devaluation of the rupee on deferred payment terms or against loans in foreign currency, have incurred an additional liability in rupees for payment of the instalments of the cost of the assets or of the loan in foreign currency remaining outstanding as on the date of devaluation, i.e. 6 June, 1966. Such assessees would have suffered a hardship if the additional rupee liability referred to above were not to be taken into account for the purpose of granting depreciation allowance in respect of the imported assets, or for other purposes, e.g. amortisation, against the profits, of the capital cost of imported assets consisting of patent rights and copyrights or of imported assets used by the assessee for scientific research related to his business, or for computing the amount of capital gain or loss arising from the subsequent sale or transfer of the imported capital assets. In order to avoid such hardship, and also to provide for the converse situation where, due to any devaluation of the currency of a foreign country or revaluation of the Indian currency in the future, there is a reduction in the liability of an assessee for payment of instalments of the cost of assets imported by him from abroad or repayment of foreign loans against which assets are required, the Finance (No. 2) Act, 1967 has made special provisions in he new Section 43A . The substance of these provisions, which take effect from 1 April, 1967, i.e. for and from the assessment year 1967-68, is explained in the following paragraphs.

62: The provisions of the new Section 43A apply in a case where an assessee has acquired any capital asset from abroad for the purpose of his business or profession, on credit or on deferred payment terms, or against a loan in foreign currency, and the whole or a part of the cost of such asset or of the loan in foreign currency, is outstanding as on the date on which there is a change in the rate of exchange of currency. In such a case where, in consequence of the change in the rate of exchange of currency, there is an increase or reduction in the assessee's liability as expressed in Indian currency for payment of the whole or a part of the cost of the assets or of the loan in foreign currency, the original actual cost, to the assessee, of the machinery or plant or other capital asset, is required to be increased or, as the case may be, reduced correspondingly for the following purposes:

xxxx xxxx xxxxx The above mentioned adjustment to the original actual cost of the assessee to the imported capital asset is to be made in respect of the previous year in which there is an increase or reduction in the assessee's liability in terms of Indian currency for payment of the whole or part of the cost of this asset or for repayment of the foreign loan against which the asset has been acquired. With reference to the recent devaluation of the rupee, this will be the previous year in which the date of devaluation, viz. 6 June, 1966, falls.

xxxx xxxx xxxxx xxxx xxxx xxxxx

65. It has been expressly provided in Sub-section (2) of Section 43A that the abovementioned provisions for adjustment to the original actual cost of imported capital assets due to an increase or reduction in the assessee's liability for payment of the instalments of the cost of the asset or for repayment of the foreign loan against which the asset has been acquired, will not be applicable in computing the actual cost of the asset for the purpose of the deduction on account of development rebate under Section 33 .

xxxx xxxx xxxx xxxx xxxx xxxxx

15. It may also be mentioned that <ORG>, by its letter of 4th January, 1967, sometime earlier to the enactment of Section 43A had clarified its stand on certain points raised by <ORG>. The first two paragraphs of this letter have a bearing on the issue before us and may be extracted here :

1. As regards the point that the additional rupee liability in regard to assets imported before but installed after the date of devaluation would, in any case, be treated as forming part of the actual cost of the asset for the purpose of allowance of development rebate under the existing law the interpretation of the <ORG> on legal position is different. It is that the actual cost of the asset in such a case will be reckoned at the cost on the date on which the legal ownership in the assets passed to the assessee, i.e., the cost as calculated in accordance with the pre-devaluation rate of foreign exchange.

2. The Government agrees that for the purpose of the calculation of depreciation allowance, the cost of capital assets imported before the date of devaluation should be written off to the extent of the full amount of the additional rupee liability incurred on account of devaluation and not what is actually paid from year to year. The proposed legal provision in the matter is intended to be framed on this basis.

(Emphasis Added)

16. The contention of <NAME>, on behalf of the assessee-respondent, proceeds on the following lines:

(1) There can be no doubt that, on general principles, where the liability in respect of the cost of a capital asset increases due to devaluation, the increased liability, and not the original one, will really be the actual cost of such asset. There is no difficulty about this and there is no provision in the Act which stands in the way of the application of this principle where the previous year in which the increase in liability arises is the same as that in which the asset is acquired, installed or put to use. In fact this is what has happened in this case. The asset was acquired/installed in calendar year 1966 and, by the end of this year, the increase in the liability had resulted. Therefore, on ordinary and normal principles of accountancy, the cost of the asset should be and has been debited in the books at the increased figure in the year 1966. That is the actual cost on which the assessee is entitled to development rebate and depreciation. The non-obstante clause, at the commencement of Section 43A(1) , suggests that the sub-section operates only where there is some provision in the. Act which runs contrary to the above principle. There being none, Section 43A(1) has no application to this type of a case. Section 43A(1) not being applicable, the language of Section 43A(2) adds nothing.

(ii) Actually, Section 43A is intended to meet a different situation viz. one where the increase in liability occurs in a subsequent accounting year. In such a situation, a question might conceivably arise as to whether the assessee is entitled to reopen its accounts for the earlier year where the asset had been debited at its original cost and development rebate and depreciation allowed on that basis. On normal accountancy principles the assessee can perhaps claim that he has a right to rewrite the books of the earlier year, open or closed, to show the increased cost as the actual cost. As to development rebate and depreciation also, he can perhaps claim that these allowances originally made for the earlier year should be reworked on the basis of the enhanced liability subject, however, to the possibility of his obtaining relief under some provision of the Act such as Section 154 or Section 263 . The department may, perhaps, claim likewise where the change in rate is favourable to our country.

(iii) Section 43A , however, has been enacted to forestall such a claim. It seeks to ensure:(a) that the enhanced liability is added to the actual cost or earlier expenditure on the asset only in the subsequent previous year in which such liability accrues and this is also in conformity with the provision introduced in the Companies Act in respect of Company assessees; and (b) that such increased liability is taken as the basis for amortisation allowances thereafter by taking the revised figure to be the actual cost, capital expenditure or cost of acquisition for the purposes of the five provisions set out in Sub-section (1) viz., Section 43(1) , 35(1)(iv) or 35A or 36(1)(ix) or Section 48 . Thus the allowances in that previous year and thereafter by way of depreciation under Section 32 , or, by way of deductions under Section 35(1)(iv) or 35A or 36(1)(ix) or Section 48 will be on the basis of the increased liability.

(iv) Thus understood it will be appreciated that the question of making such adjustment can arise only in respect of recurrent allowances for the future based on the actual cost or expenditure, referred to above. The provision can have no relevance in respect of an allowance like development rebate which has already been granted in an earlier year once and for all. There can be no question of reopening the claim of the earlier allowance at all as the adjustment is permitted by Sub-section (1) only in the subsequent year. If development rebate has already been claimed and allowed in an earlier year on the basis of the original cost, the Act prohibits the assessee from seeking either to review the figure of original cost on the basis of devaluation and claiming the deficiency in the earlier year on general principles or to claim it, on the strength of Sub-section (1), as an additional allowance in the subsequent year. This is what is made clear by Sub-section (2).

(v) Counsel claims that the interpretation of the provision suggested by him-viz. that it has application only to cases where actual cost has already been determined in a previous year and the increase in liability arises in a later previous year-is fully borne out by the reference therein to types of capital allowances other than depreciation, the language used in the notes on clauses ("Where an assessee had acquired....") and the language used in the circular earlier set out ("for the assessment year 1967-68 and subsequent assessment years" and "adjustment to the original actual cost").

(vi) The department's theory that Section 43A occupies the entire field cannot be accepted unless it is shown either that the section confers for the first time a benefit which would not be otherwise available or that the section was intended not to confer a benefit but to curtail the existing benefits and allowances under the Act. Neither of these premises is correct The first is incorrect because general principles of accountancy permit the incremental liability to be added to, or deducted from, the actual cost; the only controversy can be in relation to the year of adjustment of such increase or decrease, where it occurs in a later year. The second premise is incorrect as it runs counter to the tenor of the "notes on clauses" and the circular.

(vii) If the department's contention were the correct one, the non obstante clause would have been inserted in Sub-section (2) and not in Sub-section (1): and Sub-section (2) would have read: "such increase or decrease in liability as is referred to in Sub-section (1) shall not be taken into account" and not "the provisions of Sub-section (1) will not be taken into account" as at present

17. Plausible and ingenious as this argument sounds, we are of opinion that it cannot be accepted. It puts too strained and artificial a construction on the clear language of Section 43-A . This section was specially introduced to provide for the treatment of the situation created by the devaluation of the rupee. It specifically enacts that the amount of increase or decrease in the liability due to exchange rate fluctuation should be adjusted against the actual cost or the capital expenditure or the cost of acquisition referred to in the five provisions of the statute mentioned earlier. Where the terms of Sub-section (1) are fulfilled in any case, it is mandatory to take the actual cost, capital expenditure or cost of acquisition at the higher or lower figure for the purposes of the provisions mentioned irrespective of whatever might have been the position independent of the section. The non obstante clause with which the section begins, indeed, makes it clear that, if the position had been different otherwise, it cannot prevail after the introduction of this section. Equally, even if the position would have been the same otherwise, that would be no justification to ignore or disregard the enacted provision on the ground that a specific statutory provision was not at all necessary. Once the provision is there and its terms apply, it should be applied; it is idle to speculate on what the position would have been otherwise.

18. The facts of the case undoubtedly fall within the terms of Section 43-A(1) . The assessee has acquired, for the purposes of its business, a capital asset from a country outside India by making payment in foreign currency. For this purpose it has borrowed monies in foreign currency from outside agencies and the liability in respect of such assets is outstanding. At a point of time after the acquisition of the asset, this liability has increased on account of the devaluation of our currency. These conditions being satisfied, the language of the sub-section is attracted.

19. The principal argument of Sri <NAME> for saying that Sub-section (1) is not attracted are two in number. He contends, firstly, that it applies only where the fluctuation in rate occurs in a previous year subsequent to that in which the asset is acquired. He submits that where, as in the present case, the increase in liability occurs in the same year, it has automatically to be given effect to in the accounts of the previous year irrespective of the language of Sub-section (1). That may be so but that is no reason to say that the terms of Sub-section (1) are not attracted to the case. We find no merit in the contention of Sri <NAME> that Sub-section (1) will come into operation only in respect of a year subsequent to the year in which the asset is acquired. The language of the sub-section does not contain any such qualification. The interpretation suggested by the learned Counsel would require the substitution of the words 'at any time during any subsequent previous year' in place of the present expression 'at any time'. There is nothing in the present language of the sub-section which makes it inapplicable to a case where the change in the magnitude of the liability consequent on a change in the rate of exchange occurs during the very previous year in which the asset has been acquired.

20. We also find it difficult to find substance in the second argument of Sri <NAME> that Sub-section (1) was inserted only to define the year in which the increase or decrease in liability has to be adjusted. It is no doubt true that, but for the new section, various kinds of arguments could have been raised regarding the year in which such liability should be adjusted. But, we think, arguments could also have been raised as to whether the actual cost calls for any adjustment at all in such a situation. It could have been contended that the actual cost can only be the original purchase price in the year of acquisition of the asset and that, even if there is any subsequent increase in the liability, it cannot be added to the actual cost at any stage and that, for the purposes of all the statutory allowances, the amount of actual cost once determined would be final and conclusive. Also Section 43-A provides for a case in which, as in the present case, the assessee has completely paid for the plant or machinery in foreign currency prior to the date of devaluation but the variation of exchange rate affects the liability of the assessee (as expressed in Indian currency) for repayment of the whole or part of the monies borrowed by him from any person directly or indirectly in any foreign currency specifically for the purposes of acquiring the asset. It is a moot question as to whether in such a case, on general principles, the actual cost of the assessee's plant or machinery will be the revised liability or the original liability. This is also a situation which is specifically provided for in the section. It may not, therefore, be correct to base arguments on an assumption that the figure or actual cost has necessarily to be modified for purposes of development rebate or depreciation or other allowances and that the only controversy that can arise will be as to the year in which such adjustment has to be made. In our opinion, we need not discuss or express any concluded opinion on either of these issues. As we said earlier, there is no need to speculate on all the problems that might have arisen if Section 43-A had not been there because the statute had resolved these problems. It lays down, firstly, that the increase or decrease in liability should be taken into account to modify the figure of actual cost and secondly that such adjustment should be made in the year in which the increase or decrease in liability arises on account of the fluctuation in the rate of exchange.

21. The result of the above discussion is that once the language of Sub-section (1) is attracted to a particular case, Sub-section (1) applies. Once Sub-section (1) is attracted, its application is excluded, qua development rebate, by the operation of Sub-section (2).

22. The contention of the learned Counsel that the interpretation we have accepted will mean the denial of some concession extended to the assessee is without force. The clarifications given by <ORG> in January 1967, the notes on clauses and the circular make it clear that the relief proposed to be granted was restricted only to depreciation and amortisation allowances. The anxiety of the <ORG>, which has been given effect to by the legislature, was only that, in the absence of a proper statutory provision, the assessee should not suffer by even normal allowances like depreciation and amortisation being denied to him for one reason or another. In that sense, the provision was intended to meet a hardship. There is no basis for an assumption that increased development rebate was also intended to be provided and that an interpretation which would result in its non-availability would be unfair as it would result in the curtailment of an intended benefit.

23. Counsel for the assessee points out that the departmental counsel has not been able to invite our attention to any specific reason spelt out anywhere as to why the legislature should deny development rebate on the basis of the revised cost though the other allowances and expenditure determined with reference to actual cost, capital expenditure or cost of acquisition will be calculated on the modified figure atleast subsequent to the change in exchange rate. This is no doubt true. But even the interpretation suggested on behalf of the assessee would create an anomaly for, according to the learned Counsel, if the fluctuation in the rate of exchange occurs in the same previous year as that of the acquisition of the asset, development rebate would be admissible on the increased cost but where the fluctuation occurs in a subsequent year it will not be so available. There is no rationale for making any such distinction. Such discrimination would indeed be more meaningless than an interpretation which, at least consistently, denies development rebate in all cases of increase in liability due to fluctuation in exchange rates. It cannot, therefore, be said that the interpretation contended for by the assessee is more reasonable or logical than the interpretation which follows from the clear language of the section.

24. Nor is there any in-appropriateness of statutory language as urged. As we have discussed above, the provisions of Sub-section (1) apply to the present case and the increased liability should be taken as 'actual cost' within the meaning of Section 43A(1) . All allowances including development rebate or depreciation allowance or the other types of deductions referred to in the sub-section will therefore have to be based on such adjusted actual cost. But then Sub-section (2) intercedes to put in a caveat. It says that the provisions of Sub-section (1) should not be applied for purposes of development rebate. The effect is that the adjusted actual cost is to be taken as the actual cost for all purposes other than for grant of development rebate. Read thus, there is no difficulty in the application of the language of the section to the present case. There is no inappropriateness of language either in Sub-section (1) or in Sub-section (2). The language used is quite appropriate and meets the situation fully.

25. For the reasons discussed above, we are of the opinion that the language of the provision is perfectly clear. It cannot be interpreted in a restrictive manner as contended for by the learned Counsel for the assessee. In our opinion, it is a clear requirement of the statute that, for purposes of development rebate, any increase or decrease in the actual cost consequent on fluctuations in exchange rate should not be taken into account. It may be that the legislature intended to give a different treatment to development rebate from depreciation and other allowances because the allowance of development rebate can result in an assessee claiming allowances exceeding the original cost. It may be that the legislature thought that, though development rebate was intended to promote development of industries, this could not be allowed at the cost of the foreign exchange resources of the country which are also depleted when there is an increase in liability due to devaluation of the currency. It is unnecessary to attribute any particular reason for the provision when the language of the section is otherwise plain and unambiguous. We do not think that, in face of the language of Sub-section (2), it would be right to permit the assessees to claim development rebate on the increased cost. We, therefore, allow the appeal and uphold the action of the assessing officer granting development rebate to the assessee only in respect of a sum of Rs. 52.48 lakhs and not on Rs. 61 lakhs on the basis of which it was claimed. Having regard, however, to the fact that the assessees had succeeded before all the <ORG> we make no order regarding costs.


CASE NO.: Appeal (civil) 1913 of 2002 PETITIONER: FIRST LAND ACQUISITION COLLECTOR & ORS. Vs. RESPONDENT: NIRODHI PRAKASH GANGOLI & ANR. DATE OF JUDGMENT: 07/03/2002 BENCH: G.B. Pattanaik & <NAME> JUDGMENT:

PATTANAIK,J.

Leave granted.

The acquisition proceeding in respect of Premises No. 27/1 and 27/B on Dehi Serampore Road, Calcutta having been set aside by <ORG>, the Land Acquisition Collector is in appeal against the same. The premises in question had been requisitioned under the provisions of West Bengal Requisition and Control (Temporary Provision) Act, 1947, for accommodating students of <ORG>, Calcutta by order dated 10th April, 1948. An acquisition proceeding in respect of the same premises was initiated by issuance of a notice under Section 4 of the Land Acquisition Act (hereinafter referred to as " The Act "), by Notification dated 17.12.1982. Declaration under Section 6 of the Act was issued on 13.12.1989. The acquisition proceedings related to both the premises, as aforesaid as well as a common passage. One K.K. Dugar and one <NAME> claiming right of way on the common passage assailed the aforesaid acquisition proceeding by filing a Writ Petition in <ORG>. The learned Single Judge of <ORG> quashed the Notification by order dated 3rd April, 1992. The said order was assailed by filing an appeal to <ORG>, but the appeal itself being barred by time and the application for condonation not having been allowed the appeal stood dismissed.

Subsequently a fresh Notification was issued under Section 4 only in respect of the premises No. 27/1a and 27/1b excluding the common passage and notices were issued under Sections 9 , 10 and 11 of the Act requiring interested persons to file application for compensation. Be it be stated, that the premises in question stood de-requisitioned by an order dated 2.7.1993. Writ Petition having been filed Challenging the notices issued under sections 9 , 10 and 11 was registered as Writ Petition No. 805 of 1994. <ORG> quashed the notices issued under Sections 9 , 10 & 11 of the Act by Order dated 25.8.1994 and it was further directed that the vacant possession of the disputed premises should be handed over within a period of six months. The aforesaid Writ Petition had been filed by the owner of the premises in question. Though time was extended by the <ORG> for delivery of possession but it is alleged that no possession had been delivered to the owner. On 29.11.1994 a fresh Notification was issued under Sections 4(1) and 17(4) of the Act for the purpose of use of <ORG>. Declaration under Section 6 of the Act was issued on 30.8.1995. Public Notices of substance of the declaration was also given at the convenient places in the locality in two daily newspapers published on 10.9.95. Notices under Sections 9 and 10 of the Act were served upon the interested persons on 18.10.95 inviting claims by 2.11.95. The State Government sanctioned Rs.50,41,515/- for paying the compensation amount. The Land Acquisition Collector issued notices under Section 11 on 27.10.95 and the same was served upon the persons interested on 2.11.95. The aforesaid notice was assailed by filing a Writ Petition which was registered as Writ Petition No. 1900 of 1995 challenging the entire acquisition. The learned Single Judge of <ORG> disposed of the Writ Petition by judgment dated 14.10.199 by holding that the Notification issued under Sections 4 and 6 as well as invocation of Section 17(1) and 17(4) dispensing with hearing under Section 5A of the Act is not assailable. It , however, directed that the appropriate authority should proceed afresh from the stage of issuance of Notification under Section 9 and the acquisition proceeding should be completed with utmost expedition. Pursuant to the aforesaid judgment of the learned Single Judge, Notification under Section 9 of the Act was issued again on 15.10.1999. But the owners assailed the legality of the order of the learned Single Judge by filing an appeal to <ORG>. <ORG> of <ORG> by judgment dated 17.5.2000 having allowed the appeal and having quashed the acquisition proceeding, the Special Land Acquisition Officer has approached this <ORG>. <ORG> while disposing of the Writ Appeal by the impugned judgment have been persuaded to interfere, substantially on the ground that since the earlier judgment and direction of the learned Single Judge of <ORG> dated 25.8.1994 directing delivery of the possession to the owner has not been complied with, the acquisition is malafide and is not in accordance with law. <ORG> in the impugned judgment came to hold that grave urgency and emergency being the pre-condition for invoking powers under sub-sections (1) and (4) of Section 17 , and in the case in hand, no such urgency having been present, invocation of power under Section 17(4) gets vitiated and, therefore, the commencement of the acquisition proceeding must be held to be not in accordance with law. Having quashed the acquisition proceeding the <ORG> further observed that it would be open to start a proceeding afresh in accordance with law.

Mr. <NAME>, learned Additional Solicitor General appearing for the appellant contended, that the purpose of acquisition being undoubtedly a public purpose, namely, for the use of <ORG> and <ORG> being of the opinion that the facts situation require invocation of urgency clause under Section 17 of the Act, the <ORG> in exercise of its extraordinary jurisdiction could not have interfered with the aforesaid subjective satisfaction of the authority in the matter of urgency and, therefore, the order is vitiated. The learned Additional Solicitor General further contended, that non-delivery of possession, pursuant to the earlier direction of the High <ORG>, could not be a ground for quashing a valid Notification issued under Sections 4(1) & 17(4) of the Act. The High <ORG>, therefore, committed serious error in interfering with the acquisition in question. According to the learned Additional Solicitor General the conclusion of the High <ORG> that the acquisition is malafide is based upon non-existence of any materials, and therefore, the same must be interfered with. In reply to the submission of the counsel appearing for the respondents to the effect that the object of invoking the urgency clause under Section 17 being to take immediate possession of the acquired land and in the case in hand that possession being with <ORG> ever since the premises stood requisitioned under the provisions of requisition under West Bengal Act of 1947, the very pre-condition of attracting Section 17 was non existent, it is stated that the earlier possession was not the possession of a lawful owner and the Notification for acquisition having been quashed by the <ORG> on two earlier occasions, the acquiring authority felt the necessity of urgent acquisition, and therefore the contention of the respondents' counsel is unsustainable.

Mr. <NAME>, learned senior counsel appearing for one of the respondent and Mr. <NAME>, learned senior counsel, appearing for other respondents vehemently urged that in respect of a land which is under possession of <ORG> or any other authority, the emergency power under Section 17 of the Act cannot be invoked inasmuch as the legislature have conferred power to take possession of the acquired land even without complying with the provision of Section 5A of the Act only in case of grave emergency where the acquisition cannot brook the delay of 30 days period which is contemplated for filing of Petition under Section 5A . This being the position and <ORG> being in possession of the premises right from 1948 the appropriate authorities could not have invoked the emergency provision under Section 17 of the Act. The counsel also further urged that the right conferred under Section 5A is a valuable right to the owner and the owner should not be deprived of the same unless there exists real emergency. It was further urged that <ORG> was justified in taking into account the defiant attitude of the <ORG> in not delivering possession notwithstanding the earlier orders of the <ORG> directing possession to be delivered within a period of six months.

The question of urgency of an acquisition under Section 17(1) and (4) of the Act is a matter of subjective satisfaction of the <ORG> and ordinarily it is not open to the <ORG> to make a scrutiny of the propriety of that satisfaction on an objective appraisal of facts. In this view of the matter when the <ORG> takes a decision, taking all relevant considerations into account and is satisfied that there exists emergency for invoking powers under Section 17 (1) and (4) of the Act, and issues Notification accordingly, the same should not be interfered with by the <ORG> unless the <ORG> comes to the conclusion that the appropriate authority had not applied its mind to the relevant factors or that the decision has been taken by the appropriate authority mala fide. Whether in a given situation there existed urgency or not is left to the discretion and decision of the concerned authorities. If an order invoking power under Section 17(4) is assailed, the <ORG>s may enquire whether the appropriate authority had all the relevant materials before it or whether the order has been passed by non-application of mind. Any post Notification delay subsequent to the decision of the State <ORG> dispensing with an enquiry under Section 5(A) by invoking powers under Section 17(1) of the Act would not invalidate the decision itself specially when no mala fides on the part of the government or its officers are alleged. Opinion of the State <ORG> can be challenged in a <ORG> of law if it could be shown that the State <ORG> never applied its mind to the matter or that action of the State <ORG> is mala fide. Though the satisfaction under Section 17(4) is a subjective one and is not open to challenge before a <ORG> of law, except for the grounds already indicated, but the said satisfaction must be of the Appropriate <ORG> and that the satisfaction must be, as to the existence of an urgency. The conclusion of the <ORG> that there was urgency even though cannot be conclusive but is entitled to great weight, as has been held by this <ORG> in <CITATION> AIR 1971 Supreme <ORG> 1033. Even a mere allegation that power was exercised mala fide would not be enough and in support of such allegation specific materials should be placed before the <ORG>. The burden of establishing mala fides is very heavy on the person who alleges it. Bearing in mind the aforesaid principles, if the circumstances of the case in hand are examined it would appear that the premises in question was required for the students of <ORG>, Calcutta and the Notification issued in December 1982 had been quashed by the <ORG> and the subsequent Notification issued on 25.2.1994 also had been quashed by the <ORG>. It is only thereafter the Notification was issued under Section 4(1) and 17(4) of the Act on 29.11.1994 which came up for consideration before the High <ORG>. Apart from the fact that there had already been considerable delay in acquiring the premises in question on account of the intervention by <ORG>s, the premises was badly needed for the occupation of the students of <ORG>, Calcutta. Thus, existence of urgency was writ large on the facts of the case and therefore, said exercise of power in the case in hand, cannot be interfered with by a <ORG> of law on a conclusion that there did not exist any emergency. The conclusion of <ORG> of Calcutta High <ORG>, therefore, is unsustainable.

It is indeed difficult for us to uphold the conclusion of <ORG> that acquisition is mala fide on the mere fact that physical possession had not been delivered pursuant to the earlier directions of a learned Single Judge of <ORG> dated 25.8.94. When the Court is called upon to examine the question as to whether the acquisition is mala fide or not, what is necessary to be inquired into and found out is, whether the purpose for which the acquisition is going to be made, is a real purpose or a camouflage. By no stretch of imagination, exercise of power for acquisition can be held to be mala fide, so long as, the purpose of acquisition continues and as has already been stated, there existed emergency to acquire the premises in question. The premises which was under occupation of the students of <ORG>, Calcutta, was obviously badly needed for the college and the appropriate authority having failed in their attempt earlier twice, the orders having been quashed by <ORG>, had taken the third attempt of issuing notification under Sections 4(1) and 17(4) of the Act, such acquisition cannot be held to be mala fide and, therefore, the conclusion of <ORG> in the impugned Judgment that the acquisition is mala fide, must be set aside and we accordingly set aside the same.

The arguments advanced on behalf of the respondents that as the premises in question continued to be under possession of <ORG>, invocation of special powers under Section 17 was vitiated and a valuable right of the land owners to file objections under Section 5A could not have been taken away. According to the counsel for the respondents, Section 5A of the Act, merely gives an opportunity to the land owner to object to the acquisition within 30 days from the date of publication of the notification under Section 4 , the power under Section 17 dispensing with inquiry under Section 5A can, therefore, be invoked where there exists urgency to take immediate possession of the land, but where possession is with the acquiring authority, there cannot exist any urgency, and, therefore the exercise of that power is patently erroneous. In support of this contention, reliance was placed on the decision of this <ORG> in <CITATION> ., 1976(1) S.C.C. 700 . We are unable to accept this contention since the same proceeds on a basic misconception about the possession of the premises. The premises in question had been requisitioned under the provisions of the Requisition Act and stood released from requisition by operation of Section 10B of the said Act, since 1993. Even though the premises stood occupied by the students of the medical college, but such occupation was neither as owner nor was lawful in the eye of law. To effectuate lawful possession and the purpose being undoubtedly a public purpose, <ORG> had been attempting ever-since December, 1982 and each of its attempt had failed on account of <ORG>'s intervention. It is in this context, the legality of exercise of power under Section 17 of the notification dated 29.11.94 is required to be adjudicated upon. In our considered opinion, having regard to the facts and circumstances narrated above, the exercise of power under Section 17 by <ORG>, cannot be held to be illegal or mala fide and consequently, the impugned Judgment of the Division Bench of Calcutta High <ORG> cannot be sustained. The learned Judges of the High <ORG> have been totally swayed away by the fact of non-implementation of the directions of <NAME>, in his order dated 25.8.1994, but that by itself would not be a ground for annulling lawful exercise of power under the provisions of the Land Acquisition Act . We, therefore, set aside the impugned Judgment of the Division Bench of Calcutta High <ORG> and hold that the acquisition in question is not vitiated on any ground. The acquisition proceeding, therefore, is held to be in accordance with law. The appeal is allowed. There will be no order as to costs.

............J.

(G.B. PATTANAIK) .J.

(<NAME>) March 07, 2002.