JUDGMENT <NAME>, Actg. C.J.

1. This judgment disposes of the above-mentioned 24 petitions as the question involved in all these petitions is identical.

2. The petitioners in all the petitions carry on the business of processing cotton fabrics and man-made fabrics by bleaching, dyeing, printing and finishing them. The question is, whether the petitioners, who carry on the business of bleaching, dyeing, printing and finishing cotton fabrics, are liable to the excise duty as the manufacturers for the purpose of the Central Excises and Salt Act , 1944 (hereinafter referred to as "the Excise Act "). Since it is common ground that the business carried on by all the petitioners is of the same nature, for the purpose of convenience we shall refer to the facts as alleged in Writ Petition No. 623 of 1979 <CITATION> to the petitioner-company, cotton fabrics and man-made fabrics are received in the company as full manufactured fabrics commercially known as grey fabrics, which are cleared after payment of excise duty under Tariff Items Nos. 19 and 22, as the case may be. The process to which the grey fabrics are then subjected is called bleaching process in which grey fabrics are boiled in soap and soda solution and thereby by use of a bleaching agent the grey fabrics are made white. After the bleaching process is completed, the material is then taken for the dyeing process, which according to the petitioner, consists of imparting of required shades of colours. After the material is dyed, it is subjected to the printing process, that is, printing of required designs on the fabrics by a printing machine. The final stage is called finishing process which consists of giving final touches for better appearance. The petitioners say that at no stage is the spinning and weaving involved in the processes carried on by the petitioners. The petitioners claim that it is an independent process used and has no activity of spinning of yarn or weaving of cotton or man-made fabrics which can be done only on looms. The petitioner has also alleged that it has no discretion in the choice of shades of colours or designs and has to comply with the directions of the customers. The final processed fabrics cannot be sold by the petitioner in the market and all that the petitioner collects from its customers consists of charges for the job work of processing done by the petitioner-company which has no proprietary or ownership interest in the fabrics either before or after it is processed.

3. It is not in dispute that on being called upon to submit classification list for approval of the excise authorities as prescribed by Rule 173-B of the Central Excise Rules, 1944 (hereinafter referred to as "the said Rules"). The petitioner submitted the necessary classification list and such list for cotton fabrics has been approved under Tariff Item No. 19 and in respect of manmade fabrics it has been approved under Tariff Item No. 22. Now, it is the common case of all the petitioners that the excise duty recovered from them has been recovered illegally inasmuch as the petitioner not being a manufacturer and the processes of bleaching, dyeing, printing and finishing not being manufacturing processes, they were not liable to pay any excise duty. Consequently, in all these petitions, as originally filed, the petitioners have made claims of refund of the duty, which, according to them, has been illegally recovered. The diverse amounts claimed by the petitioners in their respective petitions need not be referred to as nothing turns on the quantum of the amounts claimed by them.

4. It is obvious that these petitions came to be filed consequent upon the decision of <ORG> in <CITATION> (1979 Excise Law Times J 181). We shall refer to this decision in detail a little later, but it is sufficient for the present to mention that <ORG> in that case has taken the view that processing of cotton fabrics or man-made fabrics does not bring into existence any new woven stuff or substance and processing in the form of bleaching, dyeing or printing fabrics does not amount to manufacture of any cotton fabrics or man-made fabrics falling under Tariff Items No. 19 or 22. Consequently, <ORG> took the view that the wording of Items Nos. 19 and 22, as they stood at the material time, did not permit any other levy except that the goods which were received by the petitioners, remain the same, speaking in terms of excisable goods, namely, cotton fabrics or man-made fabrics, and processing did not involve any further manufacture of the woven stuff or woven substance and unlike embroidery and coated or laminated fabrics, there was no specific mention in the inclusive definition so far as processed cloth is concerned, either in Item No. 19 or Item No. 22. The amounts collected by way of excise duty from the processors were thus directed to be refunded on the ground that the recoveries were without the authority of law and were illegal levies.

5. The decision of <ORG> was rendered on 24th January, 1979. It is clearly with a view to overcome the decision of <ORG> that an Ordinance called the Central Excises and Salt and Additional Duties of Excise (Amendment) Ordinance, 1979, came to be promulgated by the President of India on 24th November, 1979. This Ordinance was later on replaced by the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980 (hereinafter called the " Amendment Act "). By sub-section (2) of section 1 of that Act, it is provided that the Amendment Act should deemed to have come into force on 24th November, 1979. After this Amendment Act was enacted, the petitioners amended their original petitions and raised a challenge to the constitutional validity of the Amendment Act . It is necessary at this stage to refer briefly to the amendments which were introduced by the Amendment Act .

6. The first material amendment made was in the definition of the word "manufacture" in section 2(f) of the Excise Act. The original definition of the word "manufacture" in section 2(f) contained a general definition of an inclusive nature to say that manufacture includes any process incidental or ancillary to the completion of a manufactured product, and a special reference to certain processes was made in four sub-clauses in that definition in respect of certain articles such as tobacco, salt, patent or proprietary medicines and lastly in clause (iv) in relation to goods comprised in Item No. 18A of the First Schedule to the Excise Act . By the Amendment Act , three more clauses were added to the definition of the word "manufacture". We are really concerned with clauses (v) and (vii) of section 2(f) of the Excise Act. The relevant part of the definition as amended now reads as follows :-

"'manufacture' includes any process incidental or ancillary to the completion of a manufactured product, and ** ** ** (v) in relation to goods comprised in Item No. 19-I of the First Schedule, includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any one or more of these processes; ** ** ** (vii) in relation to goods comprised in Item No. 22(1) of the First Schedule, includes bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process or any one or more of these processes;" The object of these amendments was clearly to expand the definition of the word "manufacture" in relation to Item No. 19-I, which was cotton fabrics and Item No. 22(1), which was man-made fabrics. 7. The second part of the amendment is to be found in Section 3 of the Amendment Act by which original Item No. 19-I in the First Schedule to the Excise Act , was substituted by new Item No. 19-I and for the original Item No. 22(1) new Item No. 22(1) was substituted. These Items, as substituted, now read as follows : "I. Cotton fabrics, other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials - (a) cotton fabrics, not subjected to any Twenty per cent process. ad valorem. (b) cotton fabrics, subjected to the Twenty per cent process of bleaching, mercerising, ad valorem. dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes. ** ** ** 22(1). Man-made fabrics other than (i) embroidery in the piece, in strips or in motifs, (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials - (a) man-made fabrics, not subjected to any Twenty per cent process. ad valorem plus rupees five per square metre. (b) man-made fabrics, subjected to the Twenty per cent process of bleaching, dyeing, ad valorem plus printing, shrink-proofing, tendering, rupees five per heat-setting, crease resistant square metre. processing or any other process or any two or more of these processes."

It may be pointed out that the original Item No. 19 referred to "cotton fabrics". It provided that "Cotton fabrics means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chadders, bed-sheets, bed-spreads, counter-panes, table-cloths, embroidery in the piece, in strips or in motifs and fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artifical plastic materials,....." The proviso is not material for our purpose. The original Item 19-I read as follows :

"I. Cotton fabrics other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artifical plastic materials."

Thus, Item No. 19-I is now substituted by the new Item referred to above and the effect of this substitution is that for the purposes of excise duty cotton fabrics have been categorised into two classes, namely, (a) cotton fabrics, not subjected to any process, and (b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes. The duty on each one of them is twenty per cent ad valorem. Substantially the same is the nature of the substitution of old Item No. 22(1) by new Item No. 22(1). This Item referred to made-made fabrics and by the amendment, man-made fabrics have again been divided into two categories, namely, (a) man-made fabrics, not subjected to any process, and (b) man-made fabrics, subjected to different processes referred to in clause (b).

8. Cotton fabrics and man-made fabrics were also subjected to the additional duty of excise as a result of the enactment of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as "the Additional Duties Act"). By section 4 of the Amending Act, Items Nos. 19-I and 22(1) of the First Schedule to the Excise Act were also similarly amended by making an identical substitution of Items Nos. 19-I and 22(1) in the First Schedule to the Additional Duties Act. The Amendment Act has been made retrospective in operation, and so far as cotton fabrics are concerned, it becomes operative from 1st March, 1955 and so far as man-made fabrics are concerned, it becomes operative from 18th June, 1977. Now, it has been provided by clause (iv) of sub-section (1) of section 5 of the Amendment Act that amendments to clause (f) of section 2 of the Excise Act should be treated as having been in force at all relevant times subject to the modifications that the reference in the Excise Act to the "goods comprised in Item No. 19-I of the First Schedule" shall be construed as reference to such "cloth", "cotton cloth" or, as the case may be, "cotton fabrics", and reference to the "goods comprised in Item No. 22(1) of the First Schedule" shall be construed as reference to such "rayon or artificial silk fabrics", or, as the case may be, "man-made fabrics". Section 5(2) of the Amendment Act also validates duties of excise already levied, assessed or collected on cloth, cotton cloth, cotton fabrics, woollen fabrics, rayon or artificial silk fabrics and man-made fabrics subjected to any process. It provides that all duties of excise levied, assessed or collected or purported to have been levied, assessed or collected, before the date of commencement of the Amendment Act , on (i) "cloth", "cotton cloth" and "cotton fabrics" subjected to any process, (ii) "woollen fabrics" subjected to any process, (iii) "rayon or artificial silk fabrics" and "man-made fabrics" subjected to any process, under any Central Act shall be deemed to be, and shall be deemed always to have been as validly levied, assessed or collected as if the provisions of section 5 had been in force on and from the appointed day. It is also expressly enacted in section 5 of the Amendment Act that every Central Act as in force at any time during the period commencing with the appointed day and ending with day immediately preceding the date of commencement of the Amendment Act and providing for or relating to the levy of duties of excise on "(a) 'cloth', 'cotton cloth' or, as the case may be, 'cotton fabrics', (b) 'woollen fabrics', (c) 'rayon or artificial silk fabrics', or, as the case may be, 'man-made fabrics', shall have and shall be deemed to have always had effect during the said period as if (i) such 'cloth' or as the case may be, 'cotton fabrics' comprised for the purpose of the duty leviable under the Excise Act - (A) a sub-item covering such 'cloth', 'cotton cloth' or 'cotton fabrics' not subjected to any process mentioned in sub-clause (v) of clause (f) of section 2 of the Central Excises Act, as amended by this Act; and (B) a sub-item covering such 'cloth', 'cotton cloth' or 'cotton fabrics' subjected to any such process or any two or more such processes, and the rate of duty specified in such Act with respect to such 'cloth' 'cotton cloth' of 'cotton fabrics' had been specified separately with respect to each of the aforementioned sub-items thereof". Similar provision was also made in clause (iii) of sub-section (1) of section 5 in respect of "rayon or artificial silk fabrics" or "man-made fabrics". It is common ground that the effect of various amendments inserted in the Excise Act by the Amendment Act was to include the processes of bleaching, dyeing and printing, in so far as the present petitions are concerned, within the definition of the word "manufacture". It is also common ground that by making amendment to Tariff Item No. 19-I and by creating two separate categories of cotton fabrics, that is, (1) not subjected to any process, and (2) subjected to the processes of bleaching, dyeing, printing and other processes and by making these amendments retrospectively, recoveries which have so far been made from the processors in question, were sought to be legalised. With this effect of the amendments there is no dispute between the parties. In other words, if these amendments can be sustained and if the amendments in section 2(f) were within the legislative competence of the <ORG>, and the processes of bleaching, dyeing and printing and other processes mentioned in the newly introduced clause (v) of section 2(f) were manufacturing processes, then it is not in dispute that the processors would become liable to pay excise duty refund of which is now sought. The only way by which the petitioners could have got rid of the liability to pay the excise duty on the processed cloth, that is, cloth subjected to the processes of bleaching, dyeing, and printing, was to attack the Amendment Act , and that is what has been done by the learned counsel appearing for the petitioners in the course of the arguments in these petitions. The matters have been exhaustively argued before us by Mr. <NAME>, Mr. <NAME> and Mr. <NAME> appearing for the several petitioners. Since the arguments are common, it is not necessary to refer to the arguments by each of the learned counsel separately.

9. The contention of the petitioners firstly is that the Amendment Act , in so far as it amends the definition of the word "manufacture" with regard to Tariff Items Nos. 19-I and 22, it ultra vires of entry 84 of List I of the Seventh Schedule to the Constitution of India. Now, entry 84 relied upon by the petitioners reads as follows :

"84. Duties of excise on tobacco and other goods manufactured or produced in India except -

(a) alcoholic liquors for human consumption;

(b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry."

It is argued before us that entry 84 authorises levy of excise duty on tobacco and other goods manufactured or produced in India. It is argued that it is not open to the <ORG> to enact a provision giving an artificial meaning to the word "manufacture". It must be given its etymological meaning. According to the learned counsel, the processes of bleaching, dyeing and printing are not processes which could be properly described as manufacturing processes. By making the said amendment to the word "manufacture" and by including such processes within that definition as also making consequential amendments in Tariff Items Nos. 19-I and 22(1), the <ORG> has traversed beyond the scope of entry 84, and the Amendment Act must, therefore, be struck down ultra vires. The learned counsel for the petitioners have argued that all that is done by the processors is that fully manufactured cotton fabric, which is incomplete, is further subjected to the processes of bleaching, dyeing and printing and, therefore, the article still continues to be a cotton fabric and no different article having distinctive features and character comes into existence. The learned counsel have, therefore, argued that grey cloth, before it was used, was cotton fabric and after it was processed, it continues to be cotton fabric and therefore cotton fabric was not subjected to any manufacturing processes. Reliance was placed before us on certain decisions which turn on the question as to whether a particular process was a manufacturing process or not. According to the learned counsel appearing for the department, the processes of bleaching, dyeing and printing are essentially manufacturing processes inasmuch as a result of these processes a new substance known to the market is brought into being. He also relied on certain decisions in support of his argument that dyeing and printing processes are manufacturing processes. We would first prefer to decide as to whether bleaching, dyeing or printing processes are manufacturing processes on first principle. What is the test which has to be applied before deciding whether a particular process is a manufacturing process or not and what is the essential requirement, which must be satisfied before a particular process is described as a manufacturing process or not to be a manufacturing process, has been subject-matter of some of the decisions of <ORG>. <CITATION> <ORG> was concerned with the question as to whether the manufacture of refined oil from the raw materials undertaken by the manufacturers of vegetable product known as vanaspati was liable to excise duty. The manufacturers purchased ground-nut and til oil from the open market and the oils thus purchased by them are subjected to different processes in order to turn them into vanaspati. Their contention was that at no stage they produced any new product which can come within the items described in the Schedule as "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". The contention of the department was that the manufacturers in the course of manufacture of vanaspati, which is a vegetable product, from the raw ground-nut and til oil, brought into existence that is known in the market as refined oil after carrying out some process with the aid of power, and it fell within the description of "non-essential oils" and is liable to excise duty, and in that context, it was pointed out by <ORG> that the excise duty is on the manufacture of goods and not on the sale. After referring to the argument of the counsel for the revenue that manufacture is complete as soon as by the application of one or more processes the raw material undergoes some change, it has been observed by <ORG> as follows (page 794) :

"To say this is to equate 'processing' to 'manufacture' and for this we can find no warrant in law. The word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change is a substance', however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American Judgment. The passage runs thus :-

"Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use."

Thus, according to <ORG>, if a new substance is brought into existence or if a new or different article having a distinctive name, character or use result from particular processes, such processes would amount to manufacture. In a later decision in <CITATION> , the scope of the word "manufacture" was again considered. In paragraph 8 (page 427) <ORG> observed as follows :

"The word 'manufacture', according to its dictionary meaning, is the making of articles or material (now on a large scale) by physical labour or mechanical power."

Reference to the extract from the Permanent Edition of Words and Phrases reproduced above was made. <ORG> then further observed as follows (page 427) :

"The word 'manufacture' said <NAME>, C.J., in <CITATION> , (1819) 2B & Ald. 345 (349), cited in Stroud's Judicial Dictionary (3rd ed.) Vol. 3, p. 1734.

'has been generally understood to denote, either a thing made which is useful for its own sake and vendible as such, as a medicine, a stove, a telescope, and many others; or to mean an engine or instrument, or some part of an engine or instrument, to be employed either in the making of some previously known article, or in some other useful purpose, as a stocking frame, or a steam engine for raising water from mines; or, it may perhaps extend also to a new process to be carried on by known implements ...... No more philosophical or abstract principle can answer to the word 'manufactures'. Something of a corporeal and substantial nature - something that can be made by man from the matters subjected to his art and skill, or at the least some new mode of employing practically his art and skill, is required to satisfy the word."

<ORG> has referred to the earlier decision in <ORG> case and observed that there must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The test to be applied must, therefore, be whether the processes in question have resulted into bringing into being a distinctively new article which is known to the market. It is not in dispute that what is given to the processors is grey cloth which is unbleached. That grey cloth is undoubtedly the main product of the manufacturing processes. When this grey cloth is made available to the processors, it is first bleached and then dyed, printed and finished. Now, the argument of the learned counsel for the petitioners is that after bleaching, dyeing, printing and finishing, the product continues to be cotton fabric and, therefore, since grey cloth was handed over to the processors, it continues to be cotton fabric even after it is subjected to the other processes. There was no process of manufacture, nor is the printed material product resulting from manufacturing processes. It is undoubtedly true that both printed material and grey cloth could generally be described as cotton fabric, but surely, the unbleached grey cloth is not the same cotton fabric as printed cotton fabric. It is difficult to accept the argument that a dyed and printed cotton fabric must be treated on the same footing or indeed as the same article as commonly known as grey cloth. The use to which the bleached, dyed and printed and finished product could be put to is entirely different or in any case, in addition to the use to which grey cloth could be put. The printed material in its finished form is wholly different from the grey cloth and, in fact, the grey cloth could be treated as the basic material on which is subjected to different processes. Admittedly, the printed material is known in the market not by the same name i.e. "grey cloth". Cotton fabric is merely a general description but, there may be various types of cotton fabrics and it can never be said that all cotton fabrics are identical or are the same as the base material which was originally given to the processors. On first principles, therefore, we are not inclined to accept the contention of the learned counsel for the petitioners that bleaching, dyeing, printing and finishing processes are not manufacturing processes.

10. We may, at this stage, refer to the decision of <ORG> in <ORG> case. Even though <ORG> held that cotton fabrics subjected to bleaching, dyeing and printing could not be subject to the excise duty under Item No. 19-I, it is important to note that <ORG> proceeded on the footing that the processes of bleaching, dyeing and printing are manufacturing processes and held that excise duty would be leviable under residuary Item No. 68 of the First Schedule. In paragraph 22 of the judgment, <ORG> observed as follows (page J 193) :

"..... Item 68 refers to 'All other goods not specified elsewhere manufactured in a factory'. Therefore, processed cotton fabrics and processed man-made fabrics were manufactured in the factories of the petitioners and since they are not covered by Item 19 or 22 of the Schedule, they are liable to pay ad valorem duty only in respect of the value added by them at the time of processing because the only manufacturing activity which they have done is the manufacturing of processed fabrics from fabric which was already in existence."

The main question which fell for decision before <ORG> was whether the articles fell within tariff entry 19 or 22 as contended by the <ORG> or under residuary entry 68. It is no doubt true that the learned counsel for the petitioner did not accept as correct the view of <ORG> that processing was a manufacturing activity. But, as we have already pointed out above, even etymologically, the processes of bleaching, dyeing and printing must be described as manufacturing processes. The decision of <ORG> in <CITATION> (1979 E.L.T. J 380), in which <ORG> held that the printed and lacquered aluminium tubes did not have, in relation to a plain extruded tubes, any distinctive name, character or use as both can be used for the same purpose, both enjoy the same character, and enjoy the same name, and therefore, they cannot be said to be a new substance distinguishable from plain extruded tubes, cannot be of any assistance to the petitioners. The petitioner in that case had been printing and lacquering only plain extruded tubes, and the question was whether by printing and lacquering the plain extruded tubes of aluminium the petitioners firstly applied any further process of extrusion to them and did they thereby manufacture tubes, and it was held that printing and lacquering are not even remotely connected with the manufacture of aluminium tubes and that it was a process independent of the manufacture of aluminium tubes. The question as to whether a particular process is a process of manufacture or not has to be determined having regard to the facts and circumstances of each case and having regard to the well-known tests laid down by <ORG>. In any case, there is no similarity of facts in the Extrusion Process's case and the present cases. The other decision relied upon by the petitioners was a case in which colouring of a paper which is already manufactured was not held to be a process in the manufacture of paper, nor was it a process which was incidental or ancillary to the manufacture of paper. This decision is in <CITATION> (1980 E.L.T. 164). The petitioner in that case purchased paper manufactured by manufacturers and coloured or printed one side. <ORG> held that colouring of a paper which was already manufactured was not a "process in the manufacture of paper" and that if colouring was in the process of the manufacture of the paper, then it will come within the expression "paper, all sorts". It was also held that no manufacturing process was involved by printing on white paper or by colouring manufactured product, namely, the paper. This product was held not to fall under Tariff Item No. 17(4). It is obvious that the activity of printing and colouring was considered in the light of the expression "all other kinds of paper".

11. We would also refer to decision of <ORG> in <CITATION> . The question before <ORG> was whether processing of pineapple fruit into slices for selling in sealed cans did not involve consumption of a commodity in the process of manufacture as contemplated by Section 5A of the Kerala General Sales Tax Act, 1963. Now, on the facts of that case, <ORG> held that there was no consumption of original pineapple fruit for the purpose of manufacture, when pineapple fruit was processed into pineapple slices for the purpose of being sold in sealed cans. The test which was applied by <ORG> was : "Does the processing of the original commodity bring into existence a commercially different and distinct article ?". <ORG> referred to a series of cases in some of which it was held that a different commercial article had come into existence, and in some others where although the original commodity had undergone a degree of processing it had not lost its original identity. A passage from an American decision was extracted which read as follows (page 1229) :

"At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured'."

It was this comment which <ORG> found was applicable to the case before it, and the view taken was that although a degree of processing was involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It was pointed out that higher price was occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it.

Having regard to what we have said earlier, unless it is possible for us to say that a dyed, printed and finished cotton fabric had substantially the same identity as the grey cloth, it would be difficult for us to accept the contention of the petitioners that these processes are not processes of manufacture. As already pointed out, the identity of the final material which emerged as a result of processing was wholly different and distinguishable from the original grey cloth or cotton cloth.

Dated 17th June 1983

12. Mr. <NAME> has also referred us to a decision of <ORG> in <CITATION> . [(1957) 8 S.T.C. 358] in support of the contention that cotton fabric even after it is processed remains the same cotton fabric. The main question involved in that decision was the interpretation of a notification issued by the U.P. Government exempting sale of manufactured cloth or yarn with a view to export such cloth or yarn. The notification provided that with effect from 1st December 1949 the provisions of the U.P. Sales Tax Act, 1948, did not apply to the sales of cotton cloth or yarn manufactured in Uttar Pradesh, made on or after 1st December, 1949, with a view to export such cloth or yarn outside the territories of India on the condition that the cloth or yarn was actually exported and proof of such actual export was furnished. Undoubtedly, <ORG> in that case held that although the colour of the cloth had changed by printing and processing, the cloth exported was the same as the cloth sold by the petitioners and they were therefore entitled to the exemption under the notification. The facts of that case will show that what fell for consideration before <ORG> was the identity of the cloth purchased and exported having regard to the use of the words "such cloth" in the notification. These words were construed by <ORG> to mean that the <ORG> did not intend that the identical thing should be exported in bulk and quantity or that any change in appearance would be crucial to alter it. It was also pointed out that the words "such cloth or yarn" would mean cloth or yarn manufactured in Uttar Pradesh and sold and those words have nothing to do with the transformation by printing and designs on the cloth. It is implicit in the decision of <ORG> that by printing or designing the cloth was in fact transformed. But, since the decision turned on the construction of the notification in which any change in appearance or transformation of an article into another did not become relevant, we do not think that this decision is of any assistance to Mr. <NAME>.

13. On first principles we have already held that the processes of bleaching, dyeing and printing did bring into existence a new marketable commodity different from the grey cloth which is handed over to the processors. We find that we are supported in this view by some decisions which were brought to our notice by Mr. <NAME>. <CITATION> [(1957) 8 S.T.C. 325], no doubt a Division Bench of <ORG> while considering the meaning of the word "manufacture" for the purposes of the Madhya Bharat Sales Tax Act, 1950, held that it was not necessary that there must be a transformation in the materials and that the transformation must have progressed so far that the manufactured article becomes commercially known as another and different article from the raw materials, and all that is necessary is that the material should have been changed or modified by man's art or industry so as to make it capable of being sold in an acceptable form to satisfy some want, or desire, or fancy or taste of man. It does appear that the concept of manufacture has been given a very wide meaning, but it is not necessary for us to go into the question as to whether that view is correct or not, because we have already referred to the later decision of <ORG> in <ORG>' case and <ORG> case . All that we wish to point out is that <ORG> took the view that a person who is engaged in the work of printing and dyeing textiles purchased by him and in the business or selling or supplying the printed and dyed material is a manufacturer within the definition given in section 2(k) of the Madhya Bharat Sales Tax Act. We may also in passing refer to the argument raised by Mr. <NAME> that this view has, in fact, been approved by <ORG> in <CITATION> [(1968) 21 S.T.C. 17]. In that decision, <ORG> pointed out that the word "manufacture" has various shades of meaning, and in the context of sales legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture. Referring to the decision in <NAME> case [(1968) 8 S.T.C. 325] <ORG> observed as follows (page 20) :

"......... The decision of <ORG> might perhaps be justified on the ground that a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed."

Though this observation cannot be read as an express approval of the broad proposition propounded by <ORG> in <NAME> case, the fact remains that even according to <ORG> a printed or dyed cloth is commercially a different article from the cloth which is purchased and printed or dyed - a conclusion we have already reached on construing the meaning of the word "manufacture". A similar view has been taken by <ORG> in <CITATION> , [(1972) 30 S.T.C. 489]. The Division Bench in that case positively took the view that sizing, bleaching or dyeing of raw cloth turns it into a different marketable commodity and, as such, amounts to "manufacture" of a commercially new product. We may also in passing refer to a decision of this Court in <CITATION> (1983 E.L.T. 253) where the question which fell for decision of <ORG> was whether the process of cutting large rolls of paper into specific sizes and dimensions and to roll them into teleprinter rolls with the aid of power driven machines amounts to manufacture under section 2(f) of the Excise Act. The Division Bench held that teleprinter paper or roll was a different commodity or article from the one used as the base material which was large size or jumbo rolls writing or printing paper.

14. We must, therefore, reject the argument, having regard to what we have stated earlier and the decisions referred to above, advanced on behalf of the petitioners that when grey cloth is subjected to the processes of bleaching, dyeing, printing and finishing, there is no manufacture of a new marketable commodity. Consequently, we must also reject the argument that when these processes are included in the definition of the word "manufacture" by the Amendment Act , no artificial concept of manufacture has been introduced and challenge to the validity of the Amendment Act on that ground must, therefore, fail.

15. The other ground on which the validity of the Amendment Act is challenged is that, by giving the amendments retrospective effect by section 5 thereof, there is an unreasonable restriction on the petitioners' fundamental rights to carry on business and the Amendment Act is, therefore, invalid as being violative of article 19(1)(g) of the Constitution of India. Now, at the outset it is to be remembered that the petitioners have already paid the excise duty demanded of them from time to time and the present petitions are only for seeking orders of refund. The inevitable result of any taxing legislation is that subjects become liable to pay tax. In a given case a tax may also be imposed retrospectively. That by itself would not amount to unreasonable restriction on the right to carry on business. What is canvassed before us is that the unreasonable restriction consists of levy of tax retrospectively. As already pointed out, if there is power in the <ORG> to enact retrospective legislation, it would also include a fiscal legislation and imposition of tax liability. Merely on the ground that such a legislation has been enacted, the legislation cannot become open to challenge on the basis of unreasonableness. We have not been shown any further pleadings as to how and on what ground such a legislation would be called as unreasonable restriction. Mr. <NAME> has referred us to a decision of <ORG> in <CITATION> . That was a case in which originally as a result of the amendment made by Madras Act 7 of 1964 in entry 47 of the First Schedule to the Madras General Sales Tax Act, 1959, sales tax was intended to be levied on all kinds of mineral oils, including non-lubricants, at the rate mentioned in that entry. <ORG>, however, while construing entry 47 held that furnace oil, which was a non-lubricant mineral oil, was not covered by entry 47 and entry 47 could not be used to levy tax on sale of non-lubricant mineral oils. <ORG> then passed an Amendment Act 7 of 1964 to rectify and remove the defect in the language found by <ORG> and to validate the past levy and collection of tax in respect of all kinds of non-lubricant mineral oils including furnace oil at the rate specified in entry 47 from April 1, 1964 when Act 7 of 1964 came into force. When this challenged, the challenge was negatived on the ground that such an amending and validating Act to make "small repairs" is a permissible mode of legislation and is frequently resorted to in fiscal enactments. It was further pointed out that the fact that a dealer is not in a position to pass on the sales tax to others does not affect the competence of the legislature to enact a law imposing sales tax retrospectively, it being a matter of legislative policy. The following paragraph from 73 Harward Law Review 692 at page 705 was reproduced with approval (page 2459) :

"It is necessary that the legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called 'small repairs. Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature's or administrator's action had the effect it was intended to and could have had, no such right would have arisen. Thus, the interest in the retroactive curing of such a defect in the administration of government outweighs the individual's interest in benefiting from the defect..... The <ORG> has been extremely reluctant to override the legislative judgment as to the necessity for retrospective taxation, not only because of the paramount governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the costs of government among those who benefit from it."

It is now settled law that retrospective legislation cannot be struck down though such legislation might operate harshly in some cases (see paragraph 11 of the judgment in <NAME>'s case).

16. At one stage, it was argued by Mr. <NAME> that the petitioners are apprehensive that the <ORG> would now take advantage of retrospective effect of the legislation and there is a clear possibility of demand which would otherwise be barred by limitation, and the course of reading down of such a provision which was adopted by <ORG> in <CITATION> (1983 E.L.T. 239) was suggested. It is strictly not necessary for us to go into the hypothetical submission that the <ORG> might raise demands which were barred by limitation taking advantage of retrospective legislation. If and when such demands are raised, the question as to whether such demands could legally be raised or whether retrospective provisions are themselves subject to the other relevant provisions of the Excise Act would have to be considered. This disposes of the contention raised with regard to the constitutional validity of the Amendment Act .

17. The next contention which has been raised, and mainly on the basis of the decision of <ORG> in <ORG> case, is that notwithstanding the amendment in Items Nos. 19-I and 22(1) of the First Schedule to the Excise Act , the petitioners cannot become liable to excise duty, because the definition on the expression "cotton fabrics" in Item No. 19 has not been amended. As we have already pointed out, in <ORG> case <ORG> had proceeded on the footing that bleaching, dyeing and printing were processes of manufacture, and since the processed cotton fabrics did not find a place in the definition of the expression "cotton fabrics" in Item No. 19, liability of excise duty was attracted not under Item No. 19 but under Item No. 68. It is needless to say that the whole object of the Amendment Act was to overcome <ORG> decision. Notwithstanding such clear intention the fact still remains that the <ORG> did not think it necessary to amend the definition of the expression "cotton fabrics" in Item No. 19, but instead substituted a new Item No. 19-I and Item No. 22(1) in place of the original entries. In our view, no such amendment of the definition was necessary in view of the clear amendment in Item No. 19-I. When we consider the amended entry in Item No. 19-I, it is clear that "cotton fabrics" referred to in Item No. 19-I are obviously cotton fabrics as defined in Item No. 19. The said Item defines the expression "cotton fabrics" as "all varieties of fabrics manufactured either wholly or partly from cotton and includes..........." When the new Item No. 19-I was substituted for the old Item, as already pointed out, cotton fabrics were divided into two categories : (a) cotton fabrics, not subjected to any process, and (b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, water-proofing etc. The cotton fabrics referred to in clauses (a) and (b) had to be cotton fabrics specified in Item No. 19. When we read the charging provision in section 3 of the Excise Act, it will appear clear that the object of the entries in the First Schedule is two-fold : Firstly, they are intended to specify excisable goods and secondly, they are intended to specify the rates at which excise duties would be levied. By the Amendment Act what the <ORG> has done is that, though the meaning of the expression "cotton fabrics" is not changed in Item No. 19, two different kinds of cotton fabrics have been specified as excisable articles. As already pointed out, when clauses (a) and (b) of sub-item I refer to "cotton fabrics", they are undoubtedly cotton fabrics which are covered by Item No. 19, and when it comes to specifying the duty, the entries independently refer to cotton fabrics not subjected to any process and cotton fabrics subjected to different processes. Duty payable on these cotton fabrics have been separately specified in the new entries by amendment. If cotton fabrics in clauses (a) and (b) of sub-Item I are the cotton fabrics which are defined in Item No. 19, we fail to see how it could be argued that even though grey fabrics are subjected to manufacturing processes of bleaching, dyeing and printing, excise duty as provided by the Amendment Act is not attracted. The contention of all the learned counsel for the petitioners appears to be based on a misapprehension of the nature of the decision of <ORG> in <ORG> case. The main ground on which the processed cotton fabrics are held fabrics were not specified as a separate item subjected to levy in Item No. 19-I and that was why it was taken to fall under residuary Item No. 68. Once that omission is now removed by the <ORG> by specifically mentioning "processed cotton fabrics", it is obvious that the view taken by <ORG> must stand superseded. The same reasoning must equally apply while rejecting the argument of Mr. <NAME> that amendments to the Additional Duties Act "seem to have misfired" as the learned counsel put it. Even there, as already pointed out, Item No. 19-I has been amended and for the reasons which we have already given, it was not necessary to make any separate amendment in the substantive Item No. 19. The same principle will apply in the case of substitution of new Item No. 22(1) regarding man-made fabrics.

18. That brings us to the last argument, vehemently advanced by Mr. <NAME> and Mr. <NAME> with regard to excisable value of goods. It is argued before us, relying on the decision of <ORG> in <CITATION> (1977 E.L.T. J 177) that, since excise is a tax on the production and manufacture of goods, excisable value must be determined on the manufacturing cost and manufacturing profit. Since as processors the job of the petitioners was only to bleach, dye and print, the excisable value must be the value of the job done, that is to say, the value will have to be determined on the basis of manufacturing cost and manufacturing profit. Reliance has been placed before us on a decision of this Court in <CITATION> (1981 E.L.T. 859), it was held by a Division Bench of this Court that while computing the value of clearance of a job worker, it was only the cost which was incurred by him in relation to the manufacture of excisable goods that could be taken into account and, therefore, the value of raw material supplied by the customers to the job worker would not be taken into account, while computing the real value of the goods manufactured on job work basis because manufacturing cost as referred to by <ORG> in <NAME>' case (1977 E.L.T. J 177) meant the cost incurred by the manufacturer. Now, the only provision which is relevant for determination of the excisable value is the provision in section 4 of the Excise Act. Under that provision it is expressly provided that where the duty of excise is chargeable on any excisable goods with reference to value, such value shall be deemed to be the normal price thereof, and by normal price it means the price at which the goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale. We have already pointed out that these are all cases where there has never been any dispute with regard to the price with reference to which excise duty is determined. We have tried to ascertain from the learned counsel as to whether there is any allegation in any of these petitions to show that they have disputed the normal price on the basis of which recoveries have been made. The main grievance appears to be that while the processors get the grey cloth on which duty is already paid, they are required to pay duty on the basis of the value of the manufactured article which also includes the value of grey cloth on which excise duty has already been paid and the basic contention is that there is double levy of excise duty, Mr. <NAME> has referred us to Rule 56A of the Rules which provides for special procedure for movement of duty-paid materials or component parts for use in the manufacture of finished excisable goods. Under sub-rule (2) of Rule 56A it is expressly provided that a manufacturer will be given credit for they duty which is already paid on the articles already used in the manufacture subject to certain conditions and it is not now in dispute before us, irrespective of the question whether such claim for grant of credit was made or not, that in view of the provisions of this Rule, when excise duty will be charged on a processed printed material the processors will be given credit for the duty already paid on the grey cloth by the manufacturer of the grey cloth. A contention was raised before us that such credit would not be sufficient and would be extremely meagre in a given case. Now, when a statutory provision provides for credit being given, whether that credit is substantial or meagre is a matter which is beyond the pale of our jurisdiction. It is essentially a matter of policy for the <ORG> to decide. If it is bound that an excisable article has been manufactured and the excise duty has been determined or is determinable in prescribed manner, then such a liability cannot be challenged before us on the ground that the liability is excessive. Having heard the learned counsel for the petitioners and the <ORG> at considerable length, we are not satisfied that there is any substance in the challenges raised to the Amendment Act . Since, as already pointed out, these petitions for directions for refund were wholly based on the alleged constitutional invalidity of the Amendment Act , we have no other alternative but to reject these petitions.

19. Rules issued in all these petitions are discharged. There will be no order as to costs in all these petitioners.

20. Mr. <NAME> has made a request that the operation of this judgment be stayed for a period of four weeks. As we have found no substance in these petitions, we are not inclined to stay the operation of the judgment as requested.

21. Mr. <NAME> and Mr. <NAME> have made application for leave to appeal to <ORG> in Miscellaneous Petitions Nos. 481 and 2079 of 1979 and Writ Petitions Nos. 622 and 623 of 1979, and the same is rejected. Similarly, application for leave made by Mr. <NAME> and Mr. <NAME> in their matters is also rejected.


JUDGMENT <NAME> and <NAME>, <NAME>.

1. In this case the landlord petitioners made an application under Section 27 of the Chota Nagpur Tenancy Act (Bengal Act VI of 1908) for the enhancement of the rent paid by the tenants opposite-parties in respect of their holding.

2. The application was heard by a Deputy Collector empowered to discharge the functions of a Deputy Commissioner under Section 27 and the following sections of the Act. After a prolonged enquiry the Deputy Collector on the 12th February, 1912, made an order enhancing the rent of the tenants from Rs. 2-8 to Rs. 32-10-5 per annum. Against this order the tenants preferred an appeal under the provisions of Section 215 (1) (iv) to the Deputy Commissioner who, after commenting on the proceedings of the Deputy Collector in terms which should not find a place in the judgment, of any Court, dismissed the landlords application on the ground that in his opinion the questions at issue should be decided only "after a fall and fair trial" or "by <ORG> in the village."

3. It is not suggested that, in the area with which we are here concerned any order for the preparation of a record-of-rights had been issued, and obviously if in the opinion of the Deputy Commissioner the case had not been fully and fairly tried his proper course was to make or direct such further inquiry as might be necessary.

4. It therefore cannot, be and has not been disputed before us that in omitting to deal with the appeal before him on the merits the Deputy Commissioner has failed to exercise a jurisdiction vested in him by law. But on behalf of the tenants opposite-parties it has been contended that the <ORG>s of Deputy Commissioner when dealing with applications for the enhancement of rent under the provisions of Sections 27 to 30 of the Chota Nagpur Tenancy Act are not <ORG>s subject to the appellate jurisdiction of this <ORG> within the meaning of Section 15 of the Indian High <ORG>s Act 1861, that superintendence over Deputy Commissioners in the performance of their duties under the Act is by its express provisions vested in the Commissioner and <ORG> and that, therefore, this <ORG>, has no jurisdiction, or at least should not interfere.

5. These contentions are based on the provisions of Section 215 (2) (which in terms relates to suits only), Section 217 and Section 270 of the Act.

6. From the very nature of the proceedings themselves, and also from the provisions of the Act as contained, for instance, in Chapter XVI it is clear that proceedings on applications for enhancement of rent are judicial proceedings, and in view of the express provisions of Section 224 (2) which allows in certain cases a second appeal to this Court, it cannot in our opinion be contended that Deputy Commissioners in the performance of their judicial duties under the Chota Nagpur Tenancy Act are not Courts subject to the appellate jurisdiction of this Court.

7. No doubt, by the provisions of the sections we have already cited, powers of revision direction and control are vested in the Commissioner and <ORG>. But these sections merely reproduce in practically identical terms the provisions of Sections 151 and 152 of Act X of 1859, and notwithstanding the existence of these provisions in that Act, this Court in a long series of decisions we need here refer only to the case of <CITATION> (1911) I.L.R. 38 Calc 832 has held that it has jurisdiction and has interfered in cases where <ORG> have either exceeded the jurisdiction or failed or refused to exercise the jurisdiction vested in them by the said Act.

8. We are therefore of opinion that in the present case we have jurisdiction and should interfere.

9. We accordingly make this Rule absolute, pet aside the order of the Deputy Commissioner dated the 7th June, 1912, and direct him to proceed with and determine the appeal before him on the merits.

10. We make no order as to costs.


PETITIONER: <ORG> Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX,WEST BENGAL DATE OF JUDGMENT: 23/05/1957 BENCH: <NAME>, J.L. BENCH: <NAME>, J.L. BHAGWATI, NATWARLAL H. AIYYAR, T.L. VENKATARAMA CITATION: 1957 AIR 918 1958 SCR 79 ACT: Income Tax-Business loss of Previous Year-Set-off against income of the Assessment Year-Income from "interest on secu- rities"-Banking business-Securities, part of trading assets- Indian Income-tax Act , 1922 (XI Of 1922), SS.6,8,10, 24(2). HEADNOTE: For the assessment year (1945-46) the assessable income of the appellant bank was computed by the Income-tax Officer by splitting up its income into two heads " interest on securities " and " business income ", and deducting the business loss from interest on securities. In the previous year the assessment showed a loss which was computed by setting off the " business loss against " interest on securities The appellant claimed that in the computation of its profits for the assessment year in question it was entitled to set off the carried over loss of the previous year under s. 24(2) Of the Indian Income-tax Act, 1922. The Income-tax Officer rejected the claim on the ground that the loss was under the head " business " and so could not be set off against income from securities under S. 24(2) of the Act. Both <ORG> and <ORG>, on reference, held that in view of ss. 6 , 8 and 10 of the Act " interest on securities " could not be treated as business income and therefore the appellant could not claim a set-off under S. 24(2) . On appeal to <ORG> it was contended for the appellant that (1) ss. 8 and 10 should be so read that where the securities in the hands of an assessee are trading assets, s. 8 would be excluded, being restricted to capital investments only, and the matter would fall under the head " business " within s. 10 , and (2) in any case, even if the income from securities fell under s. 8 , the appellant would be entitled to a set-off under -s. 24(2) because it carried on only one business, namely banking, and the holding of securities by it was part of the said business. Held, that the scheme of the Indian Income-tax Act , 1922, is that the various heads of income, profits and gains enumerated in s. 6 are mutually exclusive, each head being specific to cover the item arising from a particular source and, consequently, " interest on securities " which is specifically made chargeable to tax under s. 8 as a distinct head, falls under that section and cannot be brought under s. 10, whether the securities are held as trading assets or capital asset," 80 <CITATION> ,  6 I.T.R. 521 Salisbury House Estate Ltd. v. <NAME>, (1930) 15 T. C. 266, <CITATION> , (1928) 3 I.T.C. 23 and <CITATION> ,  20 I. T. R. 579, relied on. The question whether the holding of securities by the appellant formed part of the same business within S. 24(2) , could not be decided in the absence of a finding that the securities in question were a part of the trading assets held by the appellant in the course of its business as a banker, and the case was remitted to <ORG> for a fresh decision on the reference after getting from the <ORG> a fuller statement of facts. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 161 of 1954. Appeal from the judgment and order dated, May 18, 1953, of <ORG> in Income-tax Reference No. 72 of 1951.

<NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the appellant. <NAME> and <NAME>, for the respondent. 1957. May 23. The Judgment of the Court was delivered by <NAME> appeal brought on a certificate of <ORG> raises a point of far-reaching consequence as to the interpretation of ss. 8 , 10 and 24(2) of the Indian Income- tax Act (hereinafter termed the Act).

The assessee (who is the appellant before us) claims that in the computation of its profits for the assessment year under review (1945-46), it is entitled to set off the carried over loss of the previous year against the profits of the year of assessment under s. 24(2) of the Act. The assessee is a Bank carrying on banking business. For the assessment year its assessable income was computed by the Income Tax Officer at Rs. 14,95,826 "by splitting up" its income into 2 heads ..................... "interest on securities" and .................... business income ". " Interest on securities" in the year of assessment was Rs. 23,62,815 and under the head " business income " there was a loss of Rs. 8,86,972. After making the necessary adjust- ments and deducting the business loss from " Interest on securities ", the net income was determined at Rs. 14,95,826. In the previous year there was a loss of Rs. 3,21,929 which was computed by setting off the business loss against "interest on securities ".

Before the Income-tax Officer the assessee made its claim on the basis that it was a part of " the business of the <ORG> to deal in securities............................. and " that no distinction should be made between income from securities and income from business for the purpose of set- off under s. 24 ". It also claimed that it carried on only one business, namely banking as defined by s. 277F of the Indian Companies Act in the' course of which the " <ORG> has to receive money on deposits and invest such deposits in securities, loans and advances " and therefore holdings of securities by it could not be treated as its separate business. The Income-tax Officer was of the opinion that, as there was a loss under the head " business " its claim could; not be sustained and hence it could not be set off under s. 24(2) of the Act.

On appeal to the Assistant Commissioner of Income-tax it was again contended that the assessee was a dealer in securities and that the two heads of income, " Interest on securities " and " profits and gains " in banking business could not be treated separately and were part of the same business of the assessee and therefore it could claim a set-off under s. 24(2) of the Act. But this contention was repelled. The matter was then taken to <ORG> where again the contention was repeated that the business of the assessee could not be split up into two heads under " interest on securities " and banking business". The <ORG>, however, held:

" Reading ss. 6 , 8 and 10 it appears to us that the legislature wanted to keep the income from the two sources as separate. We are therefore of the opinion that the Income-tax Officer was right in splitting up the income of the appellant into two heads and in refusing the set-off of the business loss brought forward  from last year against income from <ORG>. securities earned this year."

It therefore did not allow the loss of the previous year to be set off against the computed profits of the assessment year.

The assessee thereupon asked for a case to be stated to <ORG> and inter alia raised two questions; (1) Whether interest on securities was a part of <ORG>'s income from business carried on by it.

(2) Whether the assessee was entitled to set off the carried over loss of the previous year against income during the assessment year.

The assessee contended that it was carrying on banking business in various towns in India, that " in the usual course of its business it invests moneys in Securities and receives interest thereon " and therefore it claimed that the loss of Rs. 3,21,929, carried forward from the previous year could be set off under s. 24(2) of the Act. The <ORG> stated the case and sought the opinion of <ORG> on the following three questions; (1) " Whether on the facts and in the circumstances of this case, the assessee was entitled to set off the business loss of Rs. 3,21,929 brought forward from the preceding year against this year's income from interest on securities held by the assessee.

(2) Whether on the facts and in the circumstances of this case the assessee was entitled under s. 8 to deduct any part of the administrative expenses out of the income from interest on securities.

(3) Whether in the circumstances of this case, the assessee was entitled under the first proviso to s. 8 of the Income- tax Act to deduct any interest on money borrowed and utilised for investment in tax-free securities." <ORG> answered all the questions in the negative. The learned Chief Justice during the course of his judgment said:

" It appears to me, therefore, that because the several heads under s. 6 in the Indian Act are mutually exclusive and because under any Income-tax Law, an item coming under an exclusive head cannot in any circumstances be charged under another head and also because the interest on securities in the hands of a banker cannot be treated as business income on the principles explained by Mr. Justice <NAME>, I must hold that the contention of the asesssee.................................. must be rejected." We had the benefit of a full and able argument from counsel on both sides. Counsel for the appellant has raised three points:

(1)That ss. 8 and 10 of the Act should be so read that "interest on securities", in cases where the true nature and character of the securities in the hands of an assessee is one of trading assets, would be excluded from the scope of s. 8 and would fall under the head "business" within s. 10 of the Act and alternatively even if ss. 8 and 10 are read as specific heads then s. 10 , being more appropriate, should be applied to the facts of the present case ;

(2)If ss. 8 and 10 are equally applicable the assessee has the option to be taxed under that head which imposes a lighter burden on him; and (3)Lastly he contended that even if the heads of income were to be taken as mutually exclusive so that the "interest on securities" falls under s. 8 and "business" under s. 10 of the Act, the assessee would be entitled to a set-off under s. 24 (2) because "interest on securities" and "profits and gains" from business result from different operations of the same business, the two being different forms of the same business of the assessee.

We may now turn to the scheme of the Act. Section 2(15) defines "total income" to mean "total amount of income, profits and gains.................computed in the manner laid down in the Act." Chapter I of the Act deals with "Charge of income-tax". It consists of two sections-3 & 4. Section 3 provides that "income-tax shall be charged for any year at any rate or rates in accordance with and subject -to the provisions of this Act." Section 4 provides' that "the total income of any previous year of any person includes all income, profits and gains from whatever sources derived".

Chapter 3 deals with "Taxable income". Section 6 enumerates the heads of income chargeable to incometax. It says as under :

S. 6 "Save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income-tax in the manner hereinafter appearing namely

(i) Salaries.

(ii) Interest on securities.

(iii) Income from property.

(iv) Profits and gains of business, profession or vocation.

(v) Income from other sources.

(vi) Capital gains."

The two relevant heads for the purpose of this appeal are

(ii) & (iv), i.e., " interest on securities " and " profits and gains of business" which are dealt with under ss. 8 and 10 of the Act respectively. Section 8 provides that " the tax shall be payable by an assessee under the head " interest on securities " in respect of interest receivable by him on any security of <ORG>................. and in the provisos to this section are given the allowable deductions. The amendment made in the proviso by the Act of 1955 is very relevant for the purpose of this appeal and we &hall advert to it at a later stage.

Section 10 provides:

" The tax shall be payable by an assessee under the head " profits and gains of business, profession or vocation" in respect of the profits or gains of any business, profession or vocation carried on by him "... The assessee contends that securities are a part of its trading assets and this position has throughout been accepted by the <ORG>, and any income which accrues in respect of these assets in the form of interest has the same characteristics as profits or gains of " business " and therefore must be treated as income falling under the head " business " under s. 10 of the Act. In other words the income of the assessee from its banking business which includes dealing insecurities is,really income from the same source and whatever accrues in the form of interest whether from securities or from any other source of investment would fall under s. 10 and not s. 8 because all the interest accrues from the business carried on by the assessee and this business is only one business. The argument thus is that ss. 8 & 10 have to be so construed as to harmonise with each other and the only way they can be harmonised is that income accruing in the form of "interest on securities" should be taken to be accruing from the business of the assessee because securities form part of its trading assets and thus fall within s. 10 and not s. 8 , which must be restricted to capital investments only. It is further contended that if the object of the legislature was to give a separate and exclusive identity to the income from " interest on securities", it would have made the language of s. 8 of the Act as specific as it has made in the case of income from dividends from shares, which income by the addition of sub-s. (I-A) to s. 12 has come to have a specific place under the head "other sources" and is no longer within the head "business" under s. 10 of the Act and thus by statute its nature and character have undergone a change. Reference is in this connection made to <ORG> (1) where it was held by <ORG> that dividend income received by a dealer in shares is chargeable under s. 10 and not under s. 12 of the Act. It is thus contended that in order to preserve the unity and oneness of the business of the assessee and to maintain the unity of its business income the applicability of s. 8 should be circumscribed to "interest on securities" when they are -not trading assets of the assessee.

According to the scheme of the Act discussed above income- tax has to be charged in respect of the "total (1) (1955] 27 I.T.R. 63.

income" of the previous year of every assessee and "total income" is defined under s. 2(15) to comprise all income, profits and gains from whatever source derived subject to certain exemptions. Chapter 3 which is entitled "Taxable income" comprises ss. 6 to 17 (both sections inclusive ). Section 6 enumerates the various heads of income, profits and gains which are chargeable to income-tax. Each of these heads of income, profits and gains is dealt with under a separate section and these sections also give the details of allowances and exemptions in regard to each different head. The argument raised by counsel for the <ORG> is that according to the decision of <ORG> in <CITATION> (1) s. 6 is the charging section and that the words of ss. 7 to 12 show that the various heads of income are mutually exclusive and items which specifically fall under these various heads have to be charged under only that head and would fall under one of these several but appropriately specific sections. It is true that <ORG> in <CITATION> (supra) did point out that s. 6 was a charging section, but this was because ss. 3 and 4 were then differently worded as pointed out by <NAME>, J., in <NAME>, In re (2 ) at p. 43 and by <NAME>, J., in the, same case at p. 57. <ORG> in <CITATION> (3) said: The liability to pay the tax is founded on ss. 3 and 4 of the Income-tax Act which are the charging sections". The judgment of <ORG> in <CITATION> (4) also shows s. 3 to be the charging section.

It is then argued that s. 6 of the Act being mandatory all items of income, from whatever source they arise, would fall only under one of the heads enumerated under s. 6 and therefore one of the ss. 7 to 12 would specifically apply and s. 8 which relates to " interest on securities" must be held to apply to income from that source. It is also contended by counsel for the (1) (1930) L.R. 57 I.A. 228, 238.

(2) [1946] 14 I.T.R. 10.

(3) [1947] 15 I.T.R. 302, 308.

(4) [1948] 16 I.T.R. 240.

Revenue that even if there is any overlapping between ss. 8 and 10 "interest on securities" whether accruing from securities held as a capital asset or trading assets falls under s. 8 alone and s. 10 should be so read as to altogether exclude the income from " interest on securities".

Counsel for the <ORG> has referred us to the form of the Return, prescribed under s. 22(1) of the Act at the relevant time of the assessment under review. The heads there shown are (1) Salary, (2) Interest on securities, (3) Property, (4) Business, profession or vocation, (5) other sources, and income from each source is to be shown in a separate column, in each one of which reference is made to a particular note relevant to that head of income. In the column under the head "interest on securities" reference is made to note 9 which is in the following words:

"Interest on securities" means interest on promissory notes or bonds issued by <ORG> or any other <ORG> or the interest on debentures or other securities issued by or on behalf of a local authority or company. The gross amount before deduction of income-tax should be entered.

Entries under this head should be accompanied by persons paying the interest under section 18(9) of the Act. Deductions are allowable in respect of-

(a) Commission charged by a banker for collecting the interest.

(b) Interest payable on money borrowed for the purpose of investment in the securities except certain interest payable to persons abroad from which tax has not been deducted (see section 8 of the Act for details). Full particulars (in a separate statement if necessary) should be given of any deduction claimed."

This is a statutory form and it gives what is meant by " interest on securities ", what documents are to accompany the Return in order to entitle an assessee to claim refund and what deductions are to be made."

The mandatory character of s. 6 is indicated by the language employed in that section and the phraseology of all the sections following, i.e., 7 to 12, employing the words " the tax shall be payable under the head................... in respect of " the different and distinct heads of income, profits and gains, salaries " Interest on securities ", and "property ", business etc. is indicative of the intention of the legislature making the various heads of income, profits and gains mutually exclusive. So every item of income, whatever its source, would fall under one particular head and for the purpose of computing the income for charging of income-tax the particular section dealing with that head will have to be looked at. The various sources of income, profits and gains have been so classified that the items falling under those heads become chargeable under ss. 7 to 12 according as they are income of which the source is "salaries') " interest on securities property business, profession or vocation ", " other sources or " capital gains ". Looked at thus the contention of counsel for the <ORG> that under the scheme of the Act and on a true construction of these relevant sections" interest on securities " by whomsoever and for whatever purpose held has to be taxed under s. 8 and under no other section is well founded and must be sustained. It being a specific head of chargeability of tax, income from " interest on securities " whether held as a trading asset or capital asset would have to be taxed under s. 8 and not under s. 10 of the Act.

The amendment made in the proviso to s. 8 in the year 1955 allowing a deduction in respect of any remuneration paid to any person other than the banker for realising interest on behalf of the assessee, supports this interpretation. Thus this proviso now provides that reasonable amount can be deducted by an assessee for commission paid to a <ORG> or remuneration paid to anybody else for realising interest on its behalf which clearly indicates the intention of the legislature that interest on securities specifically falls under s. 8 and under no other section. This amendment shows that even a <ORG>, if it buys securities as a part of its trading assets, is entitled to make a deduction for remuneration paid by it to any person for realising interest which postulates that "interest on securities" would fall under s, 8 of the Act, This interpretation receives further support from the language of s. 18 which deals with payment after deduction at source. Section 18(3) requires a person responsible for paying " interest on securities " to deduct income tax on the amount of the interest payable at the maximum rate and the person so responsible is required, after deduction of the income-tax, to pay to the account of the Central Government within 7 days of the deduction, the sum so deducted and under s. 18(5) the maximum rate is to be charged for the year in which the the amount is paid and not at the rate of the assessment year.

A combined reading of ss. 3 , 4 , 6 , 8 , 10 , 18 and refund section, s. 48, shows that income-tax is to be charged at the rate or rates prescribed in the Finance Act on the total income of the assessee as defined in s. 2(15) of the Act and computed in the manner given in as. 7 to 12 which are not charging sections but are provisions for the computation of " total income ". In the words of Viscount <NAME> in <ORG> v. Fry(1):

" Now, the cardinal consideration in my judgment is that the income tax is only one tax, a tax on the income of the person whom it is sought to assess, and that the different schedules are modes in which the Statute directs this to be levied ".

As has been pointed out in that judgment there are no separate taxes under the various schedules but only one tax. But in order to arrive at the total income on which tax is to be charged " you have to consider the nature, the constituent parts, of his (assessee's) income to see which schedule you are to apply." If these words may be used with reference to the language of the Indian Act , we have to look at the source of " income, profits and gains" and then see under what head it appropriately and specifically falls and if it falls under one particular head then computation is to be made under the section which covers that particular head of income. We cannot treat any one of the sections from ss. 7 to 10 to be general or specific for the purpose of any one particular source of income. The (1) (1930)15 T.C.266,306.

language shows that they are all specific and deal with the various heads in which the item of income, profits and gains in the case of an assessee falls.

Sir George Rankin in <CITATION> (l) said:

" The effect of s. 6 is to classify profits and gains, under different heads for the purpose of providing for each appropriate rules for computing the amount; its language is " shall be chargeable in the manner hereinafter appearing." One of the heads is " business ", which as a head of income stands alongside salaries, interest on securities, professional earnings and other sources. True, the classification of income is according to the character of the source But the list of " heads in s. 6 is a list of sources not in the sense of attributing the income to one property rather than another, one business rather than another, but only in the sense of attributing it to property as distinct from employment, or business as distinct from investment............ What is to be learnt from an examination of the language of sub-s. (1) of s. 4-income , profits and gains, described or comprised in s. 6 from whatever source derived-is that s. 6 is intended as describing different kinds of profits In that case the question for decision was whether a resident carrying on business in India and controlling transactions abroad in the course of such business was liable to income tax on such transactions, it was held that the profits arising under such transactions do not arise or accrue in India merely because of control by the assessee in India. The judgment of <ORG> shows what s. 6 of the Act means-each head refers to income, profits and gains attributable to the source-salary, interest on securities, property, business, profession etc. This supports the contention of each head being separate, exclusive and specific.

Decided cases all support the contention of counsel for the <ORG> that the various heads of income enumerated in s. 6 of the Act and more particularly (1)  6 I.T.R. 521, 529.

dealt with in ss. 7 to 12 are exclusive heads and if an item of income falls under one of these heads then it has to be treated for the purpose of income tax under that head and no other. In <ORG> v. <NAME> (1) the assessee was a limited company which was formed for the express purpose of acquiring Salisbury House and utilising it. In this building there were 800 rooms which were let to tenants. The company also maintained a staff of servants to render various kinds of services to the occupants of the rooms. The company was assessed to income tax under Sch. A upon gross valuation of the premises and as the actual rent received was higher, the <ORG> wanted to assess income again under Sch. D. The company contended that so far as the proceeds of the property were concerned they had already been taxed under Sch. A and could not again be brought "in computo" under Sch. D.

Viscount <NAME> at p. 306 observed:

" Now, if the income of the assessee consists in part of real property you are, under the Statute, bound to apply Sch. A ".

Lord <NAME> at p. 319 said:

" the dominance of each Sch. A, B, C & E over its 'own subject matter is confirmed by reference to the Sections and Rules which respectively regulate them in the Act of 1842. They afford a complete code for each class of income, dealing with allowances and exemptions, with the mode of assessment, and with the officials whose duty it is to make the assessments. ............ .....................I find no ground for assessing the taxpayer under Sch. D for any property or gains which are the subject matter of the other specific Schedules."

At p. 320, he pointed out that Sch. D is a residuary Schedule and all Schedules are mutually exclusive. Referring to investments in securities he said: Income derived by a trading company from investments of its funds, whether temporary or permanent, in government securities must be taxed under (1) (1930) 15 T.C. 266.

Sch. C, and cannot for the purposes of assessment under Sch. D be brought into account."

This shows that even though Sch. D is residual all Schedules are mutually exclusive and if income falls under one Schedule, it must be assessed under that Schedule because the Schedules are a complete code for each class of income, dealing with, allowances and exemptions and with the mode of assessment. A significant passage in the judgment of Lord <NAME> (at p. 321) is:

" I find it difficult to say that companies which acquire and let houses for the purposes of their trade, such as breweries in respect of their tied tenants, and collieries and other large employers of labour in respect of their employees, do not let the premises as part of their operation of trading. Personally I prefer to say that even if they do trade in letting houses their income so far as it is derived from that part of their trading must be taxed under Sch. A and not Sch. D."

Thus even though the assessee was a company carrying on business or trade, income from the head " property " was taxed under Sch. A and not Sch. D. This case supports the contention that different Schedules being distinctly applicable to each individual head of income would exclude the applicability of any other head.

In <NAME> v. <ORG> (1), a British company controlled in Egypt was carrying on business of lending money on mortgage of land in Egypt or on the security of debentures by mortgage of land. In case of default the bank could take action in <ORG> either to sell the property or to take possession with a view to future sale. The General Commissioners held that the acceptance of ,securities for money lent was only an incident of the company's business and that income was not assessable under Case 4 of Sch. D. The company claimed that the assessment should be under Case 5 of Sch. D and not Case 4. It was held that the <ORG> had the right to tax under Case 4 but even if the assessee satisfies (1) (1928) 13 T.C. 803, 809, 810.

that Case 5 is also applicable it was still for the <ORG> to decide and tax under Case 4 provided both cases applied equally. <NAME> said:

"A banker could never ask to be repaid the tax which had been deducted from the Government securities which he held, because he held them as a banker, the point being that when you have once got a security (we will say) the interest on which is taxed by the Act, you cannot get out of it because you say that you look a little further and see this is only embedded in a business."

It means in terms of the Indian Statute that in the case of interest on securities if chargeable under a specific section, the assessee even though he is a banker cannot claim that they be treated as "business income." in <NAME> v. <ORG> (1), the respondent company carried on business as a loan and finance company. During the material years the company bought treasury bonds cum-coupons and on the same day sold bonds of the same nominal value retaining the coupons and received on encashment a half year's interest under deduction of income tax. The <ORG> contended that in computing the Company's profits for assessment to income tax under Case I of Sch. D there, should be included, as receipts, the amounts realised by the sale of bonds ex-coupons and the net proceeds of the coupons and, as disbursements, the amounts paid by the company for the bonds cum-coupons. But it was held that the interest received by the company was income of the company taxed by deduction under Sch. C and that no part of the proceeds of the coupons should be included in the computation of the company's liability under Sch. D. Rowlatt J. at p. 400 said:

" The Crown cannot treat a transaction which has its own character for income tax purposes as if it were something of a different character..."

and Lord Hanworth M.R. at p. 406 put the matter thus: (1) (1932) 16 T.C. 394.

Now in the present case it is plain that this subject matter of tax, government bonds and coupons payable out of the government funds, have got to be taxed under Sch. C; they cannot be taxed anywhere else."

In Volume I of Simon's Income Tax (1948 Ed.) p. 54 the law is thus stated:

" These Schedules are prima facie mutually exclusive and consequently if a particular kind of income is charged under one Schedule the <ORG> cannot elect to charge it under another." This is in accord with the decisions discussed above.

<CITATION> - tax, Bengal(1) was a case of a registered company whose sole object was to acquire lands,, build houses and let them to tenants, the sole business of the company being the management and collection of rents from the properties. The assessment was made under s. 9 of the Act but the company claimed that they were carrying on a business assessable under s. 10 and not under s. 9 . The Court held that the company was rightly assessed under s. 9 , its income being derived from its ownership of buildings. <NAME> said at p. 26:

" In my judgment the words of s. 6 and s. 9 and s. 10 must be read so as to give some effect to the contrast that is there made between income, profits and gains from " property " and from " business " and I entirely refuse my assent to the proposition that because it happens that the owner of a property is a company which has been. incorporated for the purpose of owning such property, therefore the income derived from " property must be regarded as income derived from business ". In my judgment, income derived from " property is a more specific category applicable to the present case".

The decision in this case shows that the ownership of the house property was not considered as "business" and that income derived from such source would more specifically and appropriately fall within the head "property". (1) (1928) 3 I.T.C. 23.

The applicability of s. 8 directly arose and was discussed in <NAME> v, Commissioner of Income-tax, Madras(1). The assessees in that case had several sources of income, one of which was interest on securities. The business of the assessees showed a loss but the assessees claimed earned income relief in respect of interest on securities on the ground that securities, which they had purchased and sold as part of their business, formed their stock-in-trade and the interest therefrom should be treated as "business" profits. But s. 8 of the Act was held applicable to the facts of that case.

<NAME>, J. said "

of the Act which deals with interest on securities is a separate and distinct head, and if an income is chargeable under that head, it is not open either to the assessee or to the department to change the head and claim to tax it under a different head....

It was also pointed out in this judgment following Commissioner of Income_tax v. Bosotto Bros. (2) that if income falls under more than one head the assessee has the option to choose the head which makes the burden on his shoulders lighter.

The following two cases were relied upon by the assessee:- (1) <ORG> v. <ORG> (3) where a limited company incorporated for the purpose of milling rice leased out the buildings, plant, machinery etc., to another company for a fixed annual rent. The lessees were to do the necessary repairs to keep the mill in good working condition and the lessors were to bear the loss of depreciation. The assessee company claimed the allowances for depreciation under s. 10(2) (vi) of the Act. It was held that the company was carrying on the business of letting a rice mill and as such was entitled to a deduction for depreciation. The judgment of <NAME>, J., shows that it was clear from the facts of the case that the company was carrying on business (1)  20 I.T.R. 579, 587. (3) (1926) 2 I.T.C. 251. (2)  8 I.T.R. 41.

of letting the mill for the purpose of being worked by lessees and it was under these circumstances that s. 10 was- held applicable. The other case is <NAME>, In re (1) the facts of which were similar to the facts of <ORG> v. <ORG> (supra). It was held that letting of a Jute Press at rent was as much a business as the letting of a ship to freight or letting of motor-car or any other kind of machines or machinery for hire, and therefore allowances for depreciation were allowed like in <NAME>'s case (supra). Neither of these cases throws any light on the question now before us. The appellant's contention that looking at the real nature and character of the source of income arising from "interest on securities" in the case of the present assessee, the <ORG>, s. 10 of the Act would apply and not s. 8 can receive no support from the decision in <NAME> v. <NAME> (2). That was a case where an actress earned her living by accepting and fulfilling professional engagements, her activities being acting in stage-plays in England and America, performing for the films and on the wireless and performing for gramophone companies. These were held to fall under Sch. D and not E as whatever contracts she made were nothing but incidents in the conduct of her professional career. The use of the following words by Sir <NAME> in <CITATION> (3):

But the list of "heads" in s. 6 is a list of sources not in the sense of attributing the income to ............. one business rather than another but only in the sense of attributing it to business as distinct from investment." is no surer foundation for saying that " interest on securities " is severable into income from securities held as a capital investment and income from those held as trading assets. The language of ss. 6 , 8 and 10 is destructive of any such contention.

(1) [1935] 3 I.T.R. 114.

(2) [1931] 2 K.B. 628.

(3) [1938] 6I.T.R. 521, 529.

Thus on a true construction of the various sections of the Act the income of an assessee is one and the various ss. 7 to 12 are modes in which the Statute directs that income-tax is to be levied and these sections are mutually exclusive. The head of income of which the source is " interest on securities " has its' characteristics for income-tax purposes and falls under the specific head covered by s. 8 of the Act, and where an item falls specifically under one head it has to be charged under that head and no other. This interpretation follows from the words used in ss. 6 , 8 and 10 which must be read so as to give effect to the contrast between " income, profits and gains " chargeable under the head " interest on securities " and income, profits and gains " chargeable under the head business ". Thus on this construction the various heads of " income, profits and gains " must be held to be mutually exclusive, each head being specific to cover the item arising from a particular source. It cannot, therefore, be said that qua the assessee in the present case and for the purpose of securities held by it, s. 8 is more specific and s. 10 general or vice-versa, and therefore no question of the applicability of the principle " generalia specialibus non derogant " arises. This finds support from the decided cases which have been discussed above. Thus both on precedent and on a proper construction, the source of income " interest on securities " would fall under s. 8 and not under s. 10 as it is specifically made chargeable under the distinct head " interest on securities " falling under s. 8 of the Act and cannot be brought under a different head even though the securities are held as a trading asset in the course of its business by a banker. In this view of the matter no question of exercise of option by the assessee or the <ORG> arises. Consequently Lord <NAME>'s observation in <ORG> (1): " It appears to me that this selection is not only justified in law but is founded upon the soundest and most elementary principles of business,"

(1) (1913) 6 T.C. 327, 376.

will be inapplicable to the facts of the present case, and so also the rule as to choosing the head which imposes on the assessee's shoulders burden which is highter as given in <CITATION> ., (supra) and reiterated in <CITATION> (supra).

To the third point raised by counsel for the assessee that even if interest on securities falls under s. 8 of the Act and not under s. 10 the assessee is entitled to 'Yet a set- off under s. 24(2) of the Act, counsel for the <ORG> has taken the objection that this plea is not available to the appellant because it was not placed before <ORG> for being referred to <ORG> nor was it raised before <ORG>. How the question was specifically raised before the Income Tax Officer and the Appellate Assist. ant Commissioner and also before <ORG> has already been mentioned. In its application to the <ORG> for stating the case to <ORG> the assessee specifically raised in two suggested questions its right to set off the business loss of Rs. 3,21,929 brought forward from the previous year against the income of the assessee in the assessment year. It does not appear from the judgment of <ORG> that the question was argued in the manner it has been debated in this court. The appellant seems to have rested his case on the applicability of s. 10 to the profits under the head "interest on securities" because of the securities being trading assets but this contention was repelled and the same question has been raised before us but the assessee now supports his case on an alternative argument that even if the securities fall under s. 8 still the profits from that source are from an item of the assessee's business and therefore the loss of the previous year from the banking business of the assessee can be set off against the profits of the assessment year whatever be the source of that profit. The case is similar to the one in <CITATION> . <ORG> (1). The question framed by the <ORG> is a general one and what is to be determined is whether (1)  1 S.C.R. 185, 196, 198.

the loss of the previous year can be set off against the income of the assessment year within the provisions of s. 24(2) of the Act. The question is wide enough to cover the point raised before us. In the circumstances of this case the third point, raised by counsel for the assessee, is open to be canvassed before us.

Counsel for the <ORG> contends that the words used in s. 24(2) were " the same business " and therefore this set-off would be allowable only against any profits or gains of the game business and no other business. He further contends that the scheme of s. 24(1) and (2) shows that profits and gains must be arising under s. 10 and not under any other section because the expression used is profits or gains which goes with " business " under s. 10 and cannot have reference to income, profits and gains arising from interest on securities " which are under s. 8 of the Act. Counsel for the assessee on the other hand submits that the use of the word " same " signifies the identity of the business in which the loss has occurred and has no reference to the head under which the profits are chargeable. In other words interest does not cease to be profits and gains of the same business merely because for the purpose of chargeability it falls under a different head, i.e., under s. 8 and not under s. 10 . Section 24 of the Act deals with the set-off of loss in computing the aggregate income. He also contends that the business which the assessee was carrying on was the business of dealing in money and credit and that banking and dealing in securities constitute one and the same business. He refers to s. 277 F of the Indian Companies Act and relies on the <ORG> decision in <CITATION> (1) in which it was pointed out that in the ordinary case 'of a bank the business consists in its essence of dealing with money and credit. The banker has always to keep enough cash or easily realisable securities to meet any probable demand by depositors, and if some of the securities are realised to meet (1)  8 I.T.R. 635.

withdrawals by depositors, this is clearly a normal step in carrying on the banking business. It is an act done in what is truly carrying on of the banking business. In view of the order we propose to make, we do not find it necessary to express any opinion on the respective contentions raised by counsel for the parties. In <ORG> case (supra) a finding had been given that the purchase and sale of securities was as much the assessee's business as receiving deposits from clients and withdrawals by them. In the case before us no such finding has been given and in the absence of such finding no opinion can be given as to whether the holding of securities out of which interest was derived formed part of the same business within s. 24(2) or not.

The appeal would therefore, be allowed and the case remitted to <ORG> for a fresh decision of the reference after getting from the <ORG> a fuller statement of facts about this part of the case, whether the securities in question were a part of the trading assets held by the assessee in the course of its business as a banker. The costs of this appeal will be costs in the reference before <ORG>.

Appeal allowed. Case remitted.