PETITIONER: <ORG> & OTHERS Vs. RESPONDENT: UNION OF INDIA & OTHERS DATE OF JUDGMENT14/03/1984 BENCH: VENKATARAMIAH, <NAME> (J) BENCH: VENKATARAMIAH, <NAME> (J) MISRA, R.B. (J) CITATION: 1984 AIR 971 1984 SCR (3) 180 1984 SCC (3) 362 1984 SCALE (1)480 CITATOR INFO : R 1990 SC 313 (22) RF 1990 SC 772 (31) RF 1991 SC1676 (72) ACT: Constitution of India 1950, Article 226  Indian Contract Act 1872, Section 72 Limitation Act 1963, Section 17(1)(c) & Article 113. Central Excise & Salt Act 1944, First Schedule, Item 23A(1) and Item 68. Excise duty-Claim for refund of excess duty paid- Jurisdiction of <ORG> to order refund in a petition under Article 226. HEADNOTE: Appellant No. 1 was a company engaged in the business of manufacturing different types of glass, viz., figured glass, wired glass, coloured figured glass, rolled glass and coolex wired glass. <ORG> had levied and collected excise duty on the said goods on the basis that they belonged to the category of 'sheet glass' and were therefore subject to payment of excise duty under Item 23A(1) of the First Schedule to the Central Excise and Salt Act , 1944. On February 20, 1976, the appellants applied for the refund of excess duty paid by them from October 1, 1963 upto the date of the application on the ground that the items of glass in question could not be described as 'sheet glass' mentioned in Item 23A and that since they did not fall under any of the Items ] to 67 in the First Schedule of the Act they could only be subjected to levy of excise duty under the residuary provision, Item 68. The Assistant Collector of Central Excise rejected the claim for refund and the appellants there-upon filed a Writ petition in <ORG> on September 28, 1976, but the same was withdrawn as a <ORG>al Appeal filed by the appellants was pending with the Collector. The said <ORG>al Appeal was however later dismissed and this order was confirmed in the appellants' revision petition to the Government. The appellants thereupon filed a Writ Petition in <ORG> and assailed the order. <ORG> reversed the decision of the departmental authorities and held that the items of glass manufactured by the appellants did not fall within the scope of tariff Item 23A(I) of the First Schedule but that they came within tariff Item 68 thereof, liable to duty accordingly, and directed refund of excess duty paid after February 20, 1976, on which date the dispute was raised. The claim for refund of excess 'duty paid during the period prior to February 20, 1976 was, however, rejected. In the appeal to this Court on the question: (I) whether the appellants are resettled to claim refund of excess excise duty paid prior to February 20, 181 1976 and whether they are entitled to claim refund of such duty paid between A October 1, 1963 and February 20, 1976 or during any shorter period, and (2) whether the appellants are entitled to claim such refund in respect of all the goods. Allowing the appeal in part. ^ HELD: 1. (i) The excess amount paid by the appellants would have become refundable by virtue of section 72 of the Indian Contract Act if the appellants had filed a Suit within the period of limitation. Section 1  1(1)(c) of the Limitation Act, 1963 provides that where in the case of any suit or application for which a period of limitation is prescribed under that Act, the suit or application is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff or applicant had discovered it or could have with reasonable diligence discovered it. [186F-G] (ii) Under Article 113 of the Limitation Act . 1963 a suit for recovery of excess duty had to be filed within three years from the date of payment to the <ORG>. [187B] (iii) <ORG>s have power, for the purpose of enforcement of fundamental rights and statutory rights to make consequential orders for repayment of money realised by Government without the authority of law under Article 226 of the Constitution. This is an alternative remedy provided by the Constitution in addition to, but not in supersession of the ordinary remedy by way of suit in the absence of any provision which would bar such a suit expressly or by necessary implication. While there are different periods of limitation prescribed for the institution of different kinds of suits by the Limitation Act . 1963, there is no such period prescribed by law in respect of petitions filed under Article 226 of the Constitution. Whether relief should be granted to a petitioner under Article 226 where the cause of action had arisen in the remote past is a matter of sound judicial discretion governed by the doctrine of laches. Where a petitioner who could have availed of the alternative remedy by way of suit approaches <ORG> under Article 226 , it is appropriate ordinarily to construe that any unexplained delay in filing of the writ petition after the expiry of the period of limitation prescribed for filing a suit as unreasonable. This rule. however, cannot be a rigid formula. Each case has to be judged on its own facts and circumstances touching the conduct of the parties, the change in situation, the prejudice which is likely to be caused to the opposite party or to the general public. [187D-H] In the instant case, the appellant had made excess payment on being assessed by the <ORG> and such payment cannot be treated as voluntary payment precluding them from recovering the amounts. The appellants should in the facts and circumstances of this case be deemed to have discovered the mistake on the date of making each payment of excise duty in excess of the proper duty payable under law. All such excess payments made on or after September 28, 1973 which would fall within the period of three years prior to the date on which the first writ petition was filed should have been ordered to be refunded under Article 226 But <ORG> declined to do so. Though 182 the appellant should not be granted any relief in respect of payment made between October 1, 1963 and September 27, 1973 which would fall beyond the three years from the date of the first writ petition, it is not proper and just to negative the claim in respect of excess payments made after September 28, 1973. <ORG> officer, <CITATION> ,  S.C.R. 1350, referred to. 2. In respect of wired glass, a dispute has arisen between the <ORG> and the appellants earlier and in that case while the <ORG> claimed that wired glass was subject to payment of duty under tariff Item 23A(4) the appellants pleaded that wired glass was liable to duty under tariff Item 23A(1). <ORG> ultimately accepted the case of the appellants, . and duty was paid on that basis till February 20, 1976. While the earlier order may not be a legal bar to the contention raised by the appellants on February 20, 1976 that wired glass was not taxable under tariff Item 23A(l) but under tariff Item 68 after that date, it is certainly a circumstance which disentitles the appellants to claim refund of excess duty paid by them in a petition under Article 226. The claim for refund of excess duty paid on wired glass during the period prior to February 20, 1976 is therefore liable to rejected. [185G-186C] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3338 of From the Judgment and order dated 22 and 23-11-78 of - <ORG> in Spl. Civil Application No. 577 of 1978.

<NAME>, <NAME> and Ms. <NAME> for the appellants.

<NAME>, <NAME> and <NAME> for the respondents.

The Judgment of the Court Was delivered by VENKATARAMIAH, J. This appeal by special leave is filed against the judgment and order dated November 22/23, 1978 of <ORG> in Special Civil Application No. - 577 of 1978 filed under Article 226 of the Constitution.

Appellant No. I is a company which is engaged in the business of manufacturing different types of glass viz. figured glass wired glass, coloured figured glass, rolled glass and coolex wired glass at Vallabh Vidyanagar in the State of Gujarat from the year 1963. Appellant No. 2 is the Managing Director of appellant No. t. <ORG> had levied and collected excise duty On the said goods on the basis that they belonged to the category of sheet glass and were therefore subject to payment of excise duty under Item 23A (1) of the First Schedule to the Central Excises and Salt Act , 1944 (hereinafter referred to as 'the Act'). On February 20, 1976, the appellants applied for the refund of excess duty paid by them from October 1, 1963 upto the date of the application on the ground that the item of glass in question were distinct commercial goods known in the market as figured glass, wired glass, coloured figured glass, rolled glass, coolex figured glass and coolex wired glass and could not be described in common parlance as 'sheet glass' mentioned in Item 23A and that since they did not fall under any of the Items 1 to 67 in the First Schedule to the Act they could only be subjected to levy of excise duty under the residuary provision Item 68 in that Schedule after it was inserted in it.

Item 23A of the First Schedule to the Act at all material times read as.-

(1) Sheet glass and plate Thirty per cent ad glass valorem (2) Laboratory glassware Ten per cent ad valorem (3) Glass shells, glass Fifteen per cent ad globes and chimneys valorem for lamps and lanterns (4) other glassware inclu- Thirty per cent ad ding tableware valorem."

The relevant part of tariff Item 68 which was introduced from March 1, 1975 read as: .

"68. All other goods not one per cent ad elsewhere specified, valorem manufactured in a factory but excluding (a) alcohol, all sorts, including alcoholic liquors for human consumption. (b) opium, Indian hemp and other narcotic drugs and narcotics; and (c) dutiable goods as defined in sections 2(c) of the Medici- nal and Toilet Preparations (Excise Duties) Act, 1955."

After holding an enquiry and hearing the appellants, the Assistant Collector of <ORG>, <NAME> rejected the claim for refund by his order dated September 20, 1976 because he was of the view that the items of goods in respect of which dispute had been raised fell within the purview of tariff Item 23A (1). Against the said order of the Assistant Collector the appellants filed a writ petition in Special Civil Application No. 1365 of 1976. On the file of <ORG> on September 28, 1976. The said petition was admitted but when it was taken up for Final hearing it was contended on behalf of the <ORG> that since the appellants had also filed an appeal against the very same order before the Collector of <ORG> they could not pursue the remedy under Article 226 of the Constitution as it stood then. In view of the above contention the writ petition was withdrawn without prejudice to the remedy by way of appeal. The appeal was thereafter disposed of by the Collector on July 27, 1977 affirming the order of. the Assistant Collector. A revision petition filed by the appellants against the order of the Collector was dismissed by <ORG> by its order dated February 2, 1978. The said order in revision was challenged before <ORG> by the appellants under Article 226 of the Constitution. <ORG> by its judgment under appeal reversed the decision of the departmental authorities which had, been affirmed by <ORG> and held that the items of glass manufactured by the appellants namely, figured glass, wired glass, coloured figured glass, rolled glass and coolex wired glass did not . fall within the scope of tariff Item 23A(1) of the First Schedule to the Act as it stood at the material time but they came within tariff Item 68 and were liable to bear duty accordingly. <ORG> was, however, of the view that the appellants were only entitled to refund of excess duty paid by them after February 20, 1976 on which date they raised the dispute. Accordingly <ORG> issued a writ quashing the decision of the <ORG> in so far as the classification of the goods was concerned and declaring that they were subject to payment of duty under tariff Item 68 of the First Schedule to the Act aud not under tariff Item 23A(1) thereof. The <ORG> was further directed to review the relevant assessments accordingly for the period subsequent to February 20, 1976 and to refund any excess duty that might after such review be found to be refundable to the appellants. The claim of the appellants for refund of excess duty paid during the period prior to February 20, 1976 was, however, rejected.

The appellants have filed this appeal by-special leave only as regards the rejection by <ORG> of their prayer for refund of excess- duty paid by them prior to February 20, 1976.

The <ORG> has not filed any appeal against the judgment of <ORG>. Hence the decision that the goods were taxable under tariff Item 68 and not under tariff Item 23A(1) of the First Schedule to the Act has become final. Item 23A(1) is also stated to have been since amended suitably so as to bring the items of glass in dispute within its scope.

The question which arise for consideration in this appeal are therefore (I) whether the appellants are entitled to claim refund of - excess excise duty which had-been paid by them prior of February 20, 1976 and if so, whether they are entitled to claim refund of such duty paid between October l, ;963 and February 20,1976 or during any shorter period and (2) whether the appellants are entitled to claim such refund in respect of all the goods in question. F Since it is convenient to dispose of the second question at this stage, we shall take it up first. A few more facts which are relevant to this issue have to be stated here. As mentioned earlier the goods in respect of which dispute had been raised by the appellants in their application dated February 20, 1976 were figured glass, wired glass, coloured figured glass, rolled glass and coolex wired glass. But it is seen that in respect of wired glass, a dispute had arisen between the <ORG> and the appellants earlier and in that case while the <ORG> claimed that wired glass was subject to payment of duty under tariff Item 23A(4) the appellants pleaded that wired glass was liable to duty under tariff Item 23A(1). The Government of India ultimately by its order dated August 24, 1971 (in order No. 261 of 1971 of <ORG> on Central Excise Revision Application accepted the case of the appellants that wired glass was subject to duty wader tariff Item 23A - (1) and the appellants paid duty on that basis till February 20, 1976. These facts distinguish the case in respect of wired glass from the case in respect of the other goods While the said earlier order may not be a legal bar to the contention raised by the appellants on February 20, 1976 that wired glass was not taxable under tariff Item 23A(1) but under tariff Item 68 after that date, it is certainly a circumstance which disentitles the appellants to claim refund of excess duty paid by them in a petition under Article 226 of the Constitution on a ground contrary to their earlier stand. The claim for refund of excess duty paid on wired glass during the period prior to February 20, 1976 is liable to be rejected. The appeal of the appellants to that extent should, therefore, fall.

In regard to the relief of refund of excess duty paid in respect of the other goods, the case stands on an entirely different footing. This is a case where the <ORG> had assessed the duty payable by the appellants under a wrong provision. The appellants were obliged to pay the duty so assessed. They did not, no doubt, question the assessments by taking a specific stand as they had done earlier in the case of wired glass. The appellants, however, questioned the validity of the levy only on February 20, 1976 on the ground that tariff Item 23A (1) of the First Schedule to the Act under which the duty has been levied was not applicable to tile goods. While the <ORG> refused to accept the said plea, <ORG> has upheld it. In view of the decision of <ORG>, the fact that the appellant had paid duty in excess of what they were bound in P law to pay should be now taken as having been established. It is. not disputed that if the appellants had filed a suit within the period of limitation the excess amount would have become refundable by virtue of section 72 of the Indian Contract Act. Section 17(1)(c) of - the Limitation Act , 1963 provides that where in the case of any suit or application for which a period of limitation is prescribed under that Act, the suit or application is for relief from the consequence of a mistake, the period of limitation shall not begin to run until the plaintiff or applicant had discovered it or could have with reasonable diligence discovered it. In the instant case the date on which the mistake was discovered by the appellants or the date on which the appellants could with reasonable diligence have discovered it is not clear from the record before us. No efforts also was made in the course of the arguments urged on behalf of the appellants to establish it. We have, therefore, to assume that on the date each payment of excise duty made by the appellants in excess of the proper duty payable by them, the appellants could have discovered with due diligence that the duty claimed from them was excessive. Under Article 113 of the Limitation Act , 1963 which is applicable to this case, a suit for recovery of such excess duty had to be filed within three years from the date of payment to the <ORG>. But the appellants instead of filing a suit, first filed a writ petition in Special Civil Application No. 1365 of 1976 on September 28, 1976 and that petition had to be withdrawn in view of clause (3) of Article 226 of the Constitution as it stood then because the alternative remedy by way of an appeal was available. The appellants could, therefore, file the writ petition out of which the appeal arises only after the disposal of the revision petition by <ORG> as mentioned earlier. lt is not disputed that <ORG>s have power, for the purpose of enforcement of fundamental rights and statutory rights, to make consequential orders for repayment of money realised by the <ORG> without the authority of law under Article 226 of the Constitution. This is an alternative remedy provided by the Constitution in additional to but not in supersession of the ordinary remedy by way of suit in the absence of any provision which would bar such a suit either expressly or by necessary implication. While there are different periods of limitation prescribed for the institution of different kinds of suits by the limitation Act, 1963, there is no such period prescribed by law in respect of petitions filed under Article 226 of the Constitution. Whether relief should be granted to a . petitioner under Article 226 of the Constitution where the cause of action had arisen in the remote past is a matter of sound judicial discretion governed by the doctrine of laches. Where a petitioner who could have availed of the alternative remedy by way of suit approaches <ORG> under Article 226 of the Constitution, i. is appropriate ordinarily to construe that any unexplained delay in the filing of the writ petition after the expiry of the period of limitation prescribed for filing a suit as unreasonable. This rule, however, cannot be a rigid formula. There may be cases where even a delay of a shorter period may be considered to be sufficient to refuse relief in a petition under Article 226 of the Constitution. There may also be cases where there may be circumstances which may persuade the court to grant relief even though the petition may have been filed beyond the period of limitation prescribed for a suit. Each case has to judged on its own facts and circumstance touching the conduct of the parties, the change in situation, the prejudice which is likely to be caused to the opposite party or to the general public etc. In the instant case, the appellants had in fact approached <ORG> on September 28, 1976 itself by filing Special Civil Application No. 1365 of 1976 for directing repayment of the excess duty paid by them. But no relief could be granted in that petition in view of the provisions of Article 226 of the Constitution as it stood then and the petition had to be withdrawn. Hence even granting that on the date of making each payment of excise duty in excess of the proper duty payable under law, the appellants should be deemed to have discovered the mistake, all such excess payments made on and after September 28, 1973 which would fall within the period of three years prior to the date on which Special Civil Application No. 1365 of 1976 was filed should have been ordered to be refunded under Article 226 of the Constitution. But <ORG> declined to do so on grounds of estoppel and acquiescence. While we do agree that the appellants should not be granted any relief in respect of payment made between October 1, 1963 and September 27, 1973 which would fall beyond three years from the date of the first writ petition filed in this case we do not find it proper and just to negative the claim of the appellants in respect of excess payments made after September 28, 1973. In the instant case the appellants had made excess payments on being assessed by the <ORG> and such payments cannot be treated as voluntary payments precluding them from recovering them. (See <ORG> officer, <CITATION> . We do not also find that the conduct of the appellants is of such a nature as would disentitle them to claim refund of excess payments made in respect of goods other than wired glass.

We, therefore, modify the judgment and order passed by <ORG> by quashing the assessments of excise duty made in respect of the goods in question other than wired glass viz. figured glass, coloured figured glass, rolled glass and coolex wired glass for the period between September 28, 1973 and February 20, 1976 also and directing the assessing authority to make a fresh assessment in accordance with law in the light of the decision of <ORG>. a The respondents are further directed to refund after such fresh determination any excess duty that may be found to have been paid by the appellants. The fresh assessments shall be completed within four months from today. The appeal is, however, dismissed in A so far it relates to the claim for refund of excess duty paid in respect of wired glass during that period.

The appeal is accordingly allowed in part. No costs.

N.V.K. Appeal partly allowed.


ORDER

1. Special leave grarited.

2. We heard Mr. <NAME>, learned Counsel for the appellant and Mrs. <NAME>, learned Counsel for the respondents.

3. <ORG> constituted under the U.P. Imposition of Ceiling on Land Holdings Act determined the compensation payable to respondents 3 to 6 for acquisition of the surplus land and trees in the amount of Rs. 90,637. 20 p. The State of U.P. having been dissatisfied with this quantum of compensation assessed by <ORG> preferred an appeal in <ORG> on September 19, 1972, but as the appeal was by that time barred by limitation, the appellant simultaneously filed an application under Section 5 of the Limitation Act for condoning the delay in preferring the appeal. In support of the application under Section 5 , affidavits of <NAME>, <NAME>, <NAME>, <NAME>, <NAME> of <ORG> and <NAME>, Assistant <NAME> <ORG> Lucknow, were filed. Respondents 3 to 6 contested the application seeking condonation of the delay. The learned District Judge held that the order under appeal was dated January 25, 1972 and the appeal was filed on September 19, 1972 and that prima facie it was barred by limitation. The learned District Judge noted the fact that the allegation that <NAME> and <NAME> were in collusion with the answering respondents does not carry conviction. The learned District Judge further held that the explanation for not filing the appeal in time is not very convincing and that even though the concerned department had the knowledge about the order which was to be questioned in appeal, right from January 25, 1972, the appellants failed to explain each day's delay and therefore could not avail of the benefit of Section 5 of Limitation Act;. Approaching the matter from this angle, the learned District Judge rejected the application praying for condonation of delay and dismissed the appeal as barred by limitation.

4. The present appellant approached <ORG> in Writ Petition No. 610 of 1974 under Article 227 of the Constitution. <ORG> declined to interfere with the order of the learned District Judge even though it was satisfied that the appellant had established that it was prevented by a sufficient cause from preferring the appeal in time. This is frankly un-understandable and exhibits a rigid and inflexible view of jurisdiction under Article 227 ultimately leading to injustice. This is what <ORG> says :

May be, if I had considered the matter as the court of first instance I might have taken a different view, but unless it can be held that the view taken by the learned District Judge was not a plausible view that cannot be reversed in exercise of the powers under Article 226 of the Constitution.

Article 227 or Article 226 were devised to advance justice and not to thwart it. Therefore, accepting the finding of <ORG> that sitting as trial court, it was satisfied that the appellant had made out sufficient cause for condoning the delay, we must interfere in this appeal so as to advance justice.

5. Accordingly this appeal is allowed and the order and Judgment of the learned District Judge as well as of <ORG> are set aside. The application made under Section 5 of the Limitation Act by the present appellant seeking condonation of delay in preferring the appeal before the learned District Magistrate is granted and delay is condoned and the appeal is admitted to file. The matter is remitted to learned District Judge with a direction to dispose of the appeal on marits.

6. Respondents 3 to 6 are dragged to this Court through no fault of theirs. Though in the facts of the case they ought not to have very seriously contested the application made by the appellant for seeking condonation of delay in preferring the appeal, However, as discretion is exercised in favour of the appellant, it is just and proper that the appellant shall pay costs incurred by the respondents 3 to 6 both in <ORG> and this Court quantified at Rs. 1500/- within one month from today.

7. Appellant shall also pay interest at 9% on the amount of compensation that may be determined finally in the appeal from the date of the order of the prescribed <ORG>.


PETITIONER: M/S. <ORG>. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, KERALA STATE DATE OF JUDGMENT: 10/02/2000 BENCH: Syed Shah Mohammed Quadri JUDGMENT:

<NAME>, J.

The unsuccessful assessee is the appellant in this appeal, by special leave, which arises from the Judgment and Order of the Division Bench of <ORG> in I.T.R.No.15 of 1990 passed on October 22, 1991. By the impugned order <ORG> answered the following two questions, referred to it at the instance of the appellant, in the affirmative that is against the appellant and in favour of the Revenue:- (1) Whether, on the facts and in the circumstances of the case, that <ORG> was justified in holding that there was evidence before the Commissioner of Income-tax that the assessment order was erroneous and prejudicial to revenue?

(2) Whether, on the facts and in the circumstances of the case, the <ORG> was justified in holding that Rs.3,66,649 was a taxable receipt for the assessment year 1983-84?

The facts giving rise to these questions may be noticed here. The case relates to the assessment year 1983-84 for which the accounting period of the appellant ended on February 28, 1983. The appellant is a public limited company. It entered into an agreement for sale of the estate of rubber plantation measuring acres 699 of land for consideration of Rs.210 lakhs with M/s. Supriya Enterprises (for short the purchaser) on July 18, 1982. The Agreement provided, inter alia, for payment of the consideration in instalments as scheduled therein. However, the purchaser could not adhere to the schedule and on his request the parties agreed to extension of time for payment of the instalments on condition of his paying compensation/damages for loss of agricultural income and other liabilities in a sum of Rs.3,66,649. Accordingly, the appellant passed a resolution also to that effect on September 25, 1983 and the purchaser paid the said amount. In the annexure to the return filed by it for the assessment in question the amount was noted as compensation and damages for loss of agricultural income. By Order dated October 31, 1985, the Income-tax Officer accepted the same and endorsed nil assessment for that year. The Commissioner of Income-tax having examined the records of the assessment found that the nil assessment order passed by the Income-tax Officer was erroneous and it was prejudicial to the interests of the revenue. He issued notice to the appellant, under Section 263 of the Income Tax Act (for short the Act), to show cause why the order of assessment should not be set aside and Rs.3,66,649 should not be assessed under the head income from other sources. After the appellant filed its reply the Commissioner, by order dated February 8/9, 1988, concluded that the said amount was unconnected with any agricultural operation activity and was liable to be taxed under the head income from other sources. Dissatisfied with the Order of the Commissioner, the appellant filed an appeal before <ORG>, which was dismissed on August 5, 1988. On the application of the appellant under Section 256(1) of the Act, the aforementioned questions were referred to <ORG> at Ernakulam. Mr. <NAME>, learned counsel for the appellant, urged the very same two contentions which were argued before <ORG>, namely,

(i) that the exercise of jurisdiction by the Commissioner under Section 263(1) of the Act was not only unwarranted but also illegal; he contended that mere loss of tax could not be treated as prejudicial to the interests of the revenue and that only when the order of the Assessing Officer would affect the administration of the revenue that it could be treated as prejudicial to the revenue; (ii) that the amount of Rs.3,66,649 was in reality agricultural income and, therefore, ought not to have been brought to tax. Mr. <NAME>, learned senior counsel for the respondent, asserted that the Income-tax Officer passed the order without application of mind and inasmuch as it resulted in loss of tax it was also prejudicial to the interests of the revenue, therefore, the exercise of jurisdiction under Section 263(1) of the Act by the Commissioner was justified and legal. He further submitted that the second contention was not open to the appellant as the basic facts found by <ORG> were not questioned before <ORG>. To consider the first contention, it will be apt to quote Section 263(1) which is relevant for our purpose:- 263. Revision of orders prejudicial to revenue - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

Explanation - x x x A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and

(ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue

-- recourse cannot be had to Section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. <ORG> in <NAME> Vs. <NAME> and Another [31 ITR 872], <ORG> in Commissioner of Income- tax, Mysore Vs. <NAME> [98 ITR 422], <ORG> in Commissioner of Income-tax Vs. <ORG> [203 ITR 108] and <ORG> in Commissioner of Income-tax Vs. Smt. <NAME> [215 ITR 81] treated loss of tax as prejudicial to the interests of the revenue. Mr. <NAME> relied on the judgment of the Division Bench of <ORG> in <ORG> Vs. Commissioner of Income-tax [163 ITR 129] interpreting prejudicial to the interests of the revenue. <ORG> held, In this context, it must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the Order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of <ORG>. In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the <ORG>. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue. <NAME> Vs. Commissioner of Income-tax [67 ITR 84] and in Smt. <NAME> Vs. Commissioner of Income-tax, West Bengal [88 ITR 323]. In the instant case, the Commissioner noted that the Income-tax Officer passed the order of nil assessment without application of mind. Indeed, <ORG> recorded the finding that the Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant- company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the Income-tax Officer was erroneous is irresistible. We are, therefore, of the opinion that <ORG> has rightly held that the exercise of the jurisdiction by the Commissioner under Section 263(1) was justified. The second contention has to be rejected in view of the finding of fact recorded by <ORG>. It was not shown at any stage of the proceedings, the amount in question was fixed or quantified as loss of agricultural income and admittedly it is not so found by the <ORG>. The further question whether it will be agricultural income within the meaning of Section 2(1A) of the Act as elucidated by this Court in Commissioner of Income-tax, West Bengal, Calcutta Vs. <NAME> [32 ITR 466] does not arise for consideration. It is evident from the Order of <ORG> that findings recorded by the <ORG> that the appellant stopped agricultural operation in November 1982 and the receipt under consideration did not relate to any agricultural operation carried on by the appellant, were not questioned before it. Though, we do not agree with <ORG> that the said amount was paid for breach of contract as indeed it was paid in modification/relaxation of the terms of the contract, we hold that <ORG> is justified in concluding that the said amount was a taxable receipt under the head income from other sources. We find no merit in the appeal and dismiss the same with costs.


PETITIONER: <ORG> & <ORG>. Vs. RESPONDENT: <ORG> & ORS. DATE OF JUDGMENT: 25/04/1969 BENCH: <NAME>, M. (CJ) BENCH: <NAME>, M. (CJ) SHELAT, J.M. BHARGAVA, VISHISHTHA HEGDE, K.S. GROVER, A.N. CITATION: 1970 AIR 192 1970 SCR (1) 358 1969 SCC (2) 283 CITATOR INFO : R 1970 SC1292 (7) RF 1971 SC 231 (6) R 1972 SC1061 (89,100,139,174) RF 1972 SC1148 (5) RF 1972 SC2205 (21) RF 1973 SC1461 (596) R 1974 SC1069 (63) RF 1975 SC1116 (3) RF 1975 SC2299 (190,607) R 1977 SC1686 (6) R 1978 SC 803 (26) R 1979 SC1550 (14,19) E 1984 SC1291 (12) RF 1984 SC1780 (11) F 1985 SC1683 (6,7) RF 1988 SC 587 (15) R 1989 SC 516 (30) F 1990 SC 781 (47) ACT: Bombay Municipal Boroughs Act, 1925, s. 73-Levy of 'rate' on tax and buildings-'Rate' held not to include tax on capital value or percentage of capital value-Defect sought to be removed by Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963-Enactment of s. 99 of Gujarat Municipalities Act to give power to municipalities to levy tax on capital value or percentage of capital value of lands and buildings-Power of State Legislature under item 49 List II of Seventh Schedule to Constitution levy tax on capital value of buildings-Efficacy of Validating Act-Principles on which retrospective validation can be upheld.. HEADNOTE: Section 73 of the Bombay Municipal Boroughs Act, 1925 allows the municipality to levy 'a rate on building or lands or both situate within the municipality'. The Rules under the Act applied the rates on the basis of the percentage on the capital value of lands and buildings. <CITATION> ,  2 S.C.R. 608 this <ORG> held that the term 'rate' must be given the special meaning it had acquired in English law and must be confined to an impost on the basis of the annual letting value; it could not be validly levied on the basis of capital value though capital value could be used for the purpose of working out the annual letting value. Faced with this decision <ORG> passed the Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963. By s. 3 of this Act past assessment and collection of 'rate' on lands and buildings on the basis of capital value or a percentage of capital value was declared valid despite any judgment of a court or <ORG> to the contrary, and future assessment and collection on the basis of capital value for the period before and after the Validation Act was authorised. At the same time s. 99 was enacted in the Gujarat Municipalities Act to provide for the levy of a tax on lands and buildings "to be based on the annual letting value or the capital value or a percentage of capital value of the buildings or lands or both." Appellant No.1 was a company carrying on the manufacturers of cotton goods at <ORG>. It was assessed for the assessment years 1961-62, 1962-63 and 1963-64 to a rate on lands and buildings under s. 73 of the Bombay Municipal Boroughs Act on the basis of a percentage of the capital value. It filed writ petitions in <ORG> challenging the said assessments. After the Validation Act of 1963 was passed it amended the petitions to challenge the validity and efficaciousness of s. 3 of the said Act. <ORG> dismissed the writ petitions. Appeals with certificate were filed before this <ORG>. HELD : (i) When a legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition is that the legislature must possess the power to impose the tax, for if it does not, the action must ever remain ineffective and illegal. Granted legislative competence it is not sufficient to declare merely that the decision of the 389 court shall not bind, for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A <ORG>'s decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. [392 H-393 8] Ordinarily, a court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the 'rules or both are invalid or do not sufficiently create jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction has not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. Sometimes the legislature gives it own meaning and interpretation of the law under which the tax was collected and by legislative flat makes the new meaning binding on courts. The legislature may follow any one method or all of them and while it does so it may neutralise the effect of the earlier decision of the court which becomes ineffective after the change of the law. [393B-D] Whichever method is adopted it must be within the competence of the legislature and legal and adequate to attain the object of validation. If the legislature has the power over the subject-matter and competence to make a valid law, it can at. any time make such a valid law and make it retrospectively so -as to bind even past transaction. The validity of a Validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in Validating law for a valid imposition of the tax. [393D-F] (ii) After this <ORG>'s decision in <NAME> case it could no longer be questioned that <ORG> had power under entry 49 of List II of the Seventh Schedule to the Constitution to levy a tax on the capital value of lands and buildings. It was open to the State legislature to authorise the municipality to levy the same tax indicating the mode of levy. This the legislature had done by enacting s. 99 of the Gujarat Municipalities Act and by indicating the different modes which may be adopted in making the levy, one such mode being a percentage of the capital value. [394C- <CITATION> , A.I.R. 1969 S.C. 59, applied. (iii) The legislature by the Validation Act provided for the following matters. First, it stated that no tax or 'rate by whichever name called and laid on the capital value of lands and buildings must be deemed to be invalidly assessed, imposed, collected or recovered simply on the ground that a rate is based on the annual letting value. Next it provided that the tax must be deemed to be validly assessed, imposed, collected or recovered and the imposition must be deemed to be always so authorised. The legislature by this enactment retrospectively imposed the tax on lands and buildings based on their capital value and as the tax was already imposed, levied and collected on that basis, made the imposition, levy collection and recovery of the tax valid, notwithstanding the declaration by the court that as 'rate', the levy was incompetent. The legislature not only equated the tax collected to a tax on lands and buildings which it had the power to levy, but also to a rate giving a new meaning to the word 'rate' Sup.C.I/69-11. 390 and while doing so it put out of action the effect of the decisions of the courts to the contrary. The exercise of power by the legislature was valid because the legislature does possesses the power to levy a tax on lands and buildings based on capital value thereof and in validating the levy on that basis, the implication of the word 'rate' could be effectively removed and the tax on lands and buildings imposed instead. The tax therefore could no longer be questioned on the ground that s. 73 spoke of a rate and the imposition was not a rate as properly understood but a tax on capital value. [394F-395E] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeals. Nos. 2197 and 2198 of 1966.

Appeals from the judgment and decree dated September 10, 1966 of <ORG> in Special Civil Applications Nos. 846 of 1963 and 765 of 1964.

<NAME>, <NAME>, <NAME> and <NAME>, for the appellants (in both the appeals).

<NAME> and <NAME>, for the respondents Nos. 1 and 2 (in both the appeals).

<NAME> and <NAME>, for respondent No. 3 (in both the appeals).

The Judgment of the Court was delivered by <NAME>, <NAME> These matters arise under Art. 226 of the Constitution and are appeals by certificate granted by <ORG> against its judgment and order, September 10, 1966. The appellant No. 1 is a Company which has spinning and weaving mills at Broach and manufactures and sells cotton yarn and cloth. Respondent No. 1 is the Broach Borough <ORG> constituted under S. 8 of the Bombay Municipal Boroughs Act, 1925. In the assessments years 1961-62, 1962-63 and 1963-64 the <ORG> purporting to act under s. 73 of the Bombay Municipal Boroughs Act, 1925 and the Rules made thereunder imposed a purported rate on lands and buildings belonging to the respondent at a certain percentage of the capital value. Section 73 of the Act allows the <ORG> to levy "a rate on buildings or lands or both situate within the municipal borough". The Rules under the Act applied the rates on the basis of the percentage on the capital value of lands and buildings., The assessments lists were published and tax was imposed according to the rates calculated on the basis of the capital value of the property of the appellant and bills in respect of the tax were served. The writ petitions were filed to question the assessment and to get the assessment cancelled.

During the pendency of the writ petitions the legislature of Gujarat passed the Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963. As a result the writ petitions were amen-

ded and the Validation Act was also questioned. The appellants also filed a second writ petition questioning the validity of the Validation Act under Arts. 19(1)(f), (g) and 265 of the Constitution. By the order under appeal here both the writ petitions were dismissed although a certificate of fitness was granted.

The Validation Act was presumably passed because of the, decision of this Court reported in <CITATION> (1). In that case the validity of the Rules framed by <ORG> under s, 73 were called in question, particularly Rule 350A for rating open lands which provides that the rate on the area of open lands shall be levied at 1 per centum on the valuation based upon capital value. Dealing with the word 'rate' as used in these statutes, it was held by this Court that the word 'rate' had acquired a special meaning in English legislative history and practice and also in Indian legislation and it meant a tax for local purposes imposed by local authorities. The basis of such tax was the annual value of the lands or buildings. It was discussed in the case that there were three methods by which the rates could be imposed : the first was to take into account the actual rent fetched by the land or building where it was actually let the second was,. where it was not let, to take rent based on hypothetical tenancy, particularly in the case of buildings; and the third was where neither of these two modes was available, by valuation based on, capital value from which annual value had to be found by applying suitable percentage which might not be the same for lands and buildings. It was held that in S. 73 the word 'rate' as used must have been used in the special sense in which the word was understood in the legislative practice of India before that date. Rule350A Which laid the rate on land at a percentage of the valuation based upon capital was therefore declared ultra vires the Act itself. In short, the word 'rate' was given a specialised meaning and was held to mean a kind of imposition the annual letting value of property, if actually let out, and on a notional letting value if' the property was not let out. The legislature of Gujarat then passed the Validation Act seeking to validate the imposition or the tax as well as to avoid any future interpretation of the Act on the lines on which Rule 350A was construed. The Act came into force on January 29, 1964. After defining the expressions used in the Act and providing for its application, the Act enacted S. 3 which concerned validation of impositions and collections of taxes or rates by Municipalities in certain cases. That section reads as. follows "3. Validation of imposition and collection of taxes or rates by municipalities in certain cases.

(1) [1954] 2 S.C.R. 608.

Notwithstanding anything contained in any judgment, decree or order of a Court or <ORG> or any other authority, no tax or rate assessed or purporting to have been assessed by a municipality under the relevant municipal law or any rules made thereunder on the basis of the capital value of a building or land, as the case may be or on the basis of a percentage of such capital value, or recovered by the municipality commencement of this Act shall be deemed to invalidly assessed, imposed, collected or recovered by reason of the assessment being based on the capital value or the percentage of the capital value, and not being based on the annual letting value, of the building or land, as the case may be, and the imposition, collection and recovery of the tax or rate so assessed and the provisions of the rules made under the relevant municipal law under which the tax or rate was so assessed shall be valid and shall be deemed always to have been valid and shall not be called in question merely on the ground that the assessment of the tax or rate on the basis of the capital value of the building or land, as the case may be, or on the basis of a percentage of such capital value was not authorised by law; and accord- ingly any tax or rate, so assessed before the commencement of this Act and leviable for a period prior to such commencement but not collected or recovered before such commencement, may be collected and recovered in accordance with the relevant municipal law, and the rules made thereunder."

If this section is valid then the imposition cannot be questioned and the short question which arises in this case is as to the validity of this section. It is not denied that a legislature does possess the power to validate statutes and to pass retrospective laws. It is, however,, contended that the Validation Act is ineffective in carrying out its avowed object. This is the only point which falls for consideration in these appeals.

Before we examine s. 3 to find out whether it is effective in its purpose or not we may say a few words about validating statutes in general. When a legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legis-

lative competence, it is not sufficient to declare merely that the decision of the <ORG> shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. Ordinarily, a court holds a tax to be invalidly imposed because the power to' tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. Sometimes the legislature gives its own meaning and interpretation of the law under which the tax was collected and by legislative fiat, makes the new meaning binding upon courts. The legislature may follow any one method or all of them and while it does so it may neutralise the effect of the earlier decision of the court which becomes ineffective after the change of the law. Whichever method is adopted it must be within the competence of the legislature and legal and adequate to attain the object of validation. If the legislature has the power over the subject-matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a Validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the Validating law for a valid imposition of the tax.

The inquiry in this case may begin by asking whether the legislature possesses competence to pass a law imposing a tax on lands and buildings on the basis of a percentage of their capital value. If the legislature possesses that power then it can authorise the Municipality to levy that tax. To test the proposition we may consider s. 99 which has now been enacted in the Gujarat Municipalities Act. It reads :

"99. Taxes which may be imposed. (1) Subject to any general or special orders which the State Government may make in this behalf and to the provisions of sections 101 and 102 , a municipality may impose for the purposes of this Act any of the following taxes, namely:-

(i) a tax on buildings or lands situate with in the municipal borough to be based on the annual letting value or the capital value or a percentage of capital value of the buildings or lands or both;

Learned counsel for the appellants did not contend that this section was outside the powers of the legislature. In fact, he could not, in view of entry 49 of List II of the Seventh Schedule to the Constitution. That entry reads : "Taxes on lands and buildings" and a tax on lands and buildings based upon capital value falls squarely within the entry. The doubt which is created by entry 86 of List I "Taxes on the capital value of assets", no longer exists after the decision of this Court in <CITATION> (1). In that case the respective ambits of the two entries are explained. It is pointed out that unlike the tax contemplated by _entry 49 (List II) the tax under entry 8 6 (List 1) is not a direct tax on lands and buildings but on net assets, the components of which may be lands and buildings and other items of assets excluding such liabilities as may exist. The incidence of the tax is not on lands and- buildings as units of taxation but on the net assets of which lands and buildings are only some of the components. This is not the case under entry 49 (List 11) where the tax can be laid directly on lands and buildings as units of taxation. Therefore, a tax on lands and buildings is fully within the competence of the legislature and it is open to it to authorise the municipality to levy the same tax indicating the mode of levy. This the legislature has done by indicating the different modes which may be adopted in making the levy, one such mode being a percentage of the capital value.

The legislature in S. 73 had not authorised the levy of a tax in this manner but had authorised the levy of a rate. That led to the discussion whether a rule putting the tax on capital value of buildings answered the description of the impost in the Act, namely, 'a rate on buildings or lands or both situate within the Municipal borough'. It was held by this Court it did not, because the word 'rate' had acquired a special meaning in legislative practice. Faced with this situation the legislature exercised its undoubted powers of redefining 'rate' so as to equate it to a tax on capital value and convert the tax purported to be collected as a 'rate' into a tax on lands and buildings. The legislature in the Validation Act , therefore, provided for the following matters. First, it stated that no tax or rate by whichever name called and laid on the capital value of lands and buildings must be deemed (1) A.I.R. 1969 S.C. 59.

to be invalidly assessed, imposed, collected or recovreed simply on the ground that a rate is based on the annual letting value. Next it provided that the tax must be deemed to be validly assessed, imposed, collected or recovered and imposition must be deemed to be always so authorised. The legislature by this enactment retrospectively imposed the tax on lands and buildings based on their capital value and as the tax was already imposed, levied and collected on that basis, made the imposition, levy collection and recovery of the tax valid, notwithstanding the declaration by the <ORG> that as 'rate', the levy was incompetent. The legislature not only equated the tax collected to a tax on lands and buildings, which it had the power to levy, but also to a rate giving a new meaning to the expression 'rate', and while doing so it put out of action the effect of the decisions of the courts to the contrary. The exercise of power by the legislature was valid because the legislature does possess the power to levy a tax on lands and buildings based on capital value thereof and in validating the levy on that basis, the implication of the use of the word 'rate' could be effectively removed and the tax on lands and buildings imposed instead. The tax., therefore, can no longer be questioned on the ground that S. 73 spoke of a rate and the imposition was not a rate as properly understood but a tax on capital value. In this view of the matter it is hardly necessary to invoke the 14th clause of s. 73 which contains a residuary power to impose any other tax not expressly mentioned.

In our judgment these appeals possess no merits after the passing of the Validation Act and must be dismissed but in the circumstances without any order about costs.

G.C. Appeals dismissed.


JUDGMENT <NAME>, J.

1. The suit which has given rise to this appeal was brought by the plaintiff, a Mahomedan lady, against the defendant, her father-in-law, to recover arrears of certain allowance, called Kharch-i-pandan, under the terms of an agreement executed by him on the 25th October, 1877, prior to and in consideration of her marriage with his son <NAME>, both she and her future husband being minors at the time.

2. The agreement in question recites that the marriage was fixed for the 2nd November, 1877, and that "therefore" the defendant declared of his own free will and accord that he " shall continue to pay Rs. 500 per month in perpetuity " to the plaintiff for " her betel-leaf expenses, etc., from the date of the marriage, i.e., from the date of her reception, " out of the income of certain properties therein specifically described, which he then proceeded to charge for the payment of the allowance.

3. Owing to the minority of the plaintiff, her " reception " into the conjugal domicile to which reference is made in the agreement does not appear to have taken place until 1883. The husband and wife lived together until 1896, when, owing to differences, she left her husband's home, and has since resided more or less continuously at Moradabad.

4. The defendant admitted the execution of the document on which the suit is brought, but disclaimed liability principally on two grounds, viz., (I) that the plaintiff was no party to the agreement, and was consequently not entitled to maintain the action, and (2) that she had forfeited her right to the allowance thereunder by her misconduct and refusal to live with her husband.

5. Evidence of a sort was produced to establish the allegations of misconduct, but the Subordinate Judge considered that it was not "legally proved." In another place he expresses himself thus: "Although unchastity is not duly proved, yet 1 have no hesitation in holding that plaintiff's character is not free from suspicion." Their Lordships cannot help considering an opinion of this kind regarding a serious charge as unsatisfactory. Either the allegation of unchastity was established or it was" not; if the evidence was not sufficient or not reliable, there was an end of the charge so far as the particular matter in issue was concerned, and it was hardly proper to give expression to what the Judge calls "suspicion."

6. The Subordinate Judge, however, came to the conclusion that the plaintiff's refusal to live with her husband was satisfactorily proved, and, holding that on that ground she was not entitled to the allowance, he dismissed the suit.

7. The plaintiff thereupon appealed to <ORG>, where the argument seems to have been confined solely to the question of the plaintiff's right to maintain the action, as the learned Judges observe that neither side called their attention to the evidence on the record. They hold that she had a clear right to sue under the agreement, and they accordingly reversed the order of the first <ORG> and decreed the plaintiff's claim.

8. The defendant has appealed to His Majesty in Council, and two main objections have been urged on his behalf to the judgment and decree of <ORG>.

9. First, it is contended, on the authority of Tweddle v. <NAME> (1861) 1 B. & S. 393, that as the plaintiff was no party to the agreement, she cannot take advantage of its provisions. With reference to this it is enough to say that the case relied upon was an action of assumpsit, and that the rule of common law on the basis of which it was dismissed is not, in their Lordships' opinion, applicable to the facts and circumstances of the present case. Here the agreement executed by the defendant specifically charges immoveable property for the allowance which he binds himself to pay to the plaintiff j she is the only person beneficially entitled under it. In their Lordships' judgment, although no party to the document, she is clearly entitled to proceed in equity to enforce her claim.

10. Their Lordships desire to observe that in India and among communities circumstanced as the Mahomedans, among whom marriages are contracted for minors by parents and guardians, it might occasion serious injustice if the common-law doctrine was applied to agreements or arrangements entered into in connection with such contracts.

11. It has, however, been urged with some force that the allowance for which the defendant made himself liable signifies money paid to a wife when she lives with her husband, that it is analogous in its nature to the English pin-money, over the " application of which the husband has a control, and that, as the plaintiff has left her husband's home and refused to live with him, she has forfeited her right to it.

12. Kharch-i-pandan, which literally means " betel-box expenses," is a personal allowance, as their Lordships understand, to the wife customary among Mahomedan families of rank, especially in upper India, fixed either before or after the marriage, and varying according to the means and position of the parties. When they are minors, as is frequently the case, the arrangement is made between the respective parents and guardians. Although there is some analogy between this allowance and the pin-money in the English system, it appears to stand on a different legal footing, arising from difference in social institutions. Pin-money, though meant for the personal expenses of the wife, has been described as " a fund which she may be made to spend during the converture by the intercession and advice and at the instance of the husband." Their Lordships are not aware that any obligation of that nature is attached to the allowance called Kharch-i-pandan. Ordinarily, of course, the money would be received and spent in the conjugal domicile, but the husband has hardly any control over the wife's application of the allowance, either in her adornment or in the consumption of the article from which it derives its name.

13. By the agreement on which the present suit is based the defendant binds himself unreservedly to pay to the plaintiff the fixed allowance; there is no condition that it should be paid only whilst the wife is living in the husband's home, or that his liability should cease whatever the circumstances under which she happens to leave it.

14. The only condition relates to the time when, and the circumstances under which, his liability would begin. That is fixed with her first entry into her husband's home when, under the Mahomedan Law, the respective matrimonial rights and obligations come into existence. The reason that no other reservation was made at the time is obvious. The plaintiff was closely related to the ruler of the native state of Rampur; and the defendant executed the agreement in order to make a suitable provision for a lady of her position. The contingency that has since arisen could not have been contemplated by the defendant.

15. The plaintiff herself was examined as a witness for the ' defence. She states in her evidence that she has frequently been visited by her husband since she left his home. Neither he nor the defendant has come forward to contradict her statements. Nor does any step appear to have been taken on the husband's part to sue for restitution of conjugal rights,, which the Civil Law of India permits. On the whole their Lordships are of opinion that the judgment and decree of <ORG> are correct and ought to be affirmed.

16. Their Lordships will therefore humbly advise His Majesty that the appeal be dismissed.

17. The appellant will pay the costs.