<NAME>, J.

1. The applicants, Messrs. Allen Brothers and Co. (India), Ltd., obtained a Rule nisi on the 4th January 1921 calling upon the respondents Messrs. <NAME> and Co., to show cause why an order made by the Controller appointed under the Calcutta Rent Act, 1920, should not be set aside. This Rule was issued both under Section 115 of the Code and under Clause 15 of the Letters Patent.

2. The applicants are tenants of certain premises in Hare Street and hold under the respondents. Their complaint is that an application made by them to the Controller under Section 15 of the Rent Act, for a certificate certifying the standard rent of the said premises, has been dismissed contrary to the terms of the section, which oblige the Controller to fix the standard rent and to certify the same.

3. In my opinion, upon the question of merits, there is no answer to the applicants. The judgment of the Controller is before me. It appears that in Hare Street there is a large building which is numbered 3 4, 5 and 6, and there is some confusion on the part of many people as to which part of the whole building is properly designated by one or other of these numerals. It appears, however, that there is no doubt at all as to the rooms which were let to the applicants. They are occupied by Messrs. <NAME> and Co., and the three rooms in question which Messrs. <NAME> occupy under the applicants and which the applicants took from Messrs. <NAME> and Co. are. Easily ascertainable The Rent Controller in the course of his judgment says: "From the above it will be seen that there is no satisfactory evidence upon the record to prove the number of the premises comprising the three rooms let out to the applicants, whether the number of the premises is 4, and 5 or 5 and 6 or 4, 5 and 6, Hare Streets On this very ground the suit fails.

4. He also states that there is no satisfactory evidence before him to show what the rent of these identical rooms was in November 191.8. The judgment concludes by saying that, "in the circumstances stated above, as there is a confusion in the number of premises of which the rent is required to be standardized, I dismiss this application."

5. In my opinion, Section 15 of the Calcutta Rent Act makes it obligatory on the Rent Controller to grant a certificate certifying the standard rent. In the present case it is beyond dispute that the rooms in respect of which the application is made are perfectly certain, easily enough ascertainable, and are subject to no doubt at all. Either the Rent Controller or any Surveyor appointed by him could have been taken and shown the actual rooms which Messrs. <NAME> and Co. are occupying. It is nowhere suggested and it is not the fact that the Controller required the applicant to give him further particulars and that the applicant made any default in complying with such order. In these circumstances, it matters nothing whatsoever whether the premises in question have got three numbers or one number or have got no number at all, and there is no justification for the Rent Controller's refusal to comply with Section 15 of the Calcutta Rent Act. Nor can any such justification be extracted from the fact that it may be difficult, owing to confusion of numbers, to say at what rent these very three rooms were let in any previous period. By the terms of Section 15 the Controller may fix the standard rent at such amount as he deems just in any of a series of cases, and one of the cases in which he may act in that manner is thus defined: "where for any reason any difficulty arises in giving effect to this Act." For these reasons I do not think that there can be any serious question that if I have jurisdiction to do so I should send the case back to the Rent Controller with a direction to hear and determine the application according to law.

6. Mr. <NAME>, showing cause, takes as his main point the preliminary objection that this <ORG> has no power of superintendence and no revisional jurisdiction as. Regards the Controller. It is not, however, contended that such jurisdiction, if it exists in <ORG>, cannot properly be excercised by a Single Judge sitting on the Original Side in a case such as this where the premises are situated within the limits of the Ordinary Original Civil Juricdiction. This point of re visional jurisdiction has been considered and adjudicated on in more than one case on the Appellate Side, and on the Original Side before now a good many applications have been entertained for a revision of orders passed by the Rent Controller. Mr. <NAME> contended that the decisions, and in particular the decision which contains the fullest treatment of the matter, H. D. Chatterjee v. <NAME> 68 Ind. Cas. 274 : 26 C.W.N. 78 : 49 C. 528 : (1922) A.I.R. (c) 427 can be shown to proceed upon cases which are not in point and upon principles which are not sound. He also contended that insufficient attention had been paid to the fact that <ORG> is subject to a Rule making power which is vested, not in this <ORG>, but in <ORG>. For these reasons he asked leave to argue this question of jurisdiction, and, in the circumstances, I allowed that to be done.

7. The decisions of an Appellate Side Bench are, technically speaking, Sot binding upon me. This is owing to the fact that in many cases the law administered on the Original Side is not the same as the law administered with reference to cases arising in the Mofussil. The present question, however, is exactly the same on whichever side of the Court it arises. The only authority known to me as a guide upon this sort of question is the dictum of Mr. Justice <NAME> in the <CITATION> 9 C. 604 at p. 607 : 13 C.L.R. 142 : 4 Ind. Dec. ( N.S.) 1050. The learned Judge said that he was not prepared to say that he would consider every judgment of an Appellate Bench binding upon him when sitting on the Original Side, yet every such judgment should receive respectful consideration and careful attention and should be followed unless he was very clearly of the opinion that the conclusion arrived at was an erroneous one.

8. The questions raised, quite properly, by Mr. <NAME> are both numerous and difficult. I think it would be no recommendation of any one's opinion to say that he was very clearly of opinion that the contrary view was erroneous. I propose to deal with this matter fully and carefully both out of respect to Mr. <NAME> argument and because I think his client is entitled to this but, in my opinion, it is not true that in the end the question has been decided upon a wrong footing and it is a question on which, though with some difficulty, I incline to the opinion that the decision of <ORG> is right.

9. In the first place, it must be noted that the argument before me proceeded without either party calling into question the validity of the Calcutta Rent Act or the, validity of the Rules made thereunder The first question on this basis is as to what the local legislature has in fact done. In my opinion the Controller, in discharging his duty under Section 15 , and the President of the Tribunal, in discharging his duties under Section 18 , act as Courts of Justice. Whether they are <ORG> within the meaning of any particular enactment is another question but they are both <ORG> in the general sense; they ate authorised to decide judicially, and by judicial methods only, between, persons seeking their civil rights: Nilmoni Singh Deo v. <NAME> 9 C. 295 at pp. 298, 301 : 12 C.L.R. 361 : 9 I.A. 174 : 5 shome L.R. 130 : 4 Sar. P.C.J. 392 : 6 Ind. Jur : 547 : 4 Ind. Dec. (N.S) 846 (P.C.) Such functions as they perform under Sections 15 . And 18 are neither administrative nor ministerial. It is written large, both over the Act and the Rules, that the procedure, to be followed is in general the procedure." of <ORG>

10. By Section 18 , when the Controller has given a decision fixing the standard : rent, and in that event only, a certain right is; given to the parties. It is not called right of appeal but a right "to apply, for revision" of the Controller's order. As Section 24 provides that the procedure shall be that laid down in the Code for the, regular trial of suits "as nearly as may be," it seems that the right is to have a re-trail before a higher <ORG>. It is not what is, technically known as "revision" or "reference "and it does not seem to me exactly, the same thing as "appeal by way, of re-hearing" means in England. But, however the right in question is denominated or defined, its existence puts the Controller in the position of a <ORG> subordinated to another <ORG>, not simply as a matter of dignity or precedence, but in the sense that, the one <ORG> controls the other, to confirm, very or nullify the orders of the other. If I may adopt the language used in <CITATION> for India 61 Ind. Cas. 112 : 48 C. 766 at P. 766 : 25 C.W.N. 80 : 32 C.L.J. 433 "the Index of the relation of superior and inferior <ORG>" is there. The form of jurisdiction may or may not be one hitherto unknown in India as a form of appellate jurisdiction. It is by no means an unknown form elsewhere.

11. As regards the two classes of Courts that are mentioned in Section 18 , two features are clear: first, that the decision shall be final, secondly, in addition to a general power to make Rules "to carry out the purposes of the Act" <ORG> has a particular power to make Rules regulating the procedure of these Courts. This power must doubtless be read with Section 24 .

12. By Section 15 of the Indian High, <ORG> Act , 1861 now replaced by Section 107 of the Government of India Act, power of superintendence is given over all <ORG> subject to the appellate jurisdiction. By the respective Sections 9 and 106 of the same Statutes the several High <ORG> have such appellate jurisdiction as is vested in them by letters Patent. On turning to the fetters Patent to find what is the appellate jurisdiction one finds that it is "from the Civil <ORG> of the Bengal Division of the Presidency of Fort William" and "from all other <ORG> subject to its superintendence." These last Words appear to make a vicious circle but are explained by the fact that Section 9 of the Act, 1861, had transferred to <ORG> every power and authority vested in the <ORG> Which <ORG> superseded. As neither the Rent Controller nor the President of the Tribunal were <ORG>, known in 186, a right of superintendence can only be made out under the Letters Patent in one or other of two ways by establishing that it or some other form of appellate jurisdiction has been since granted with reference to the Rent Controller or the President; or, secondly, by establishing that <ORG> inherited a general jurisdiction over all <ORG> of civil jurisdiction established or to be. Established. "<ORG>," as has been stated, "has superintendence where it has appellate jurisdiction, and has appellate jurisdiction where it has superintendence " <CITATION> 27 B. 575 at P. 582 : 5 Bom. L.R. 562. But some jurisdiction must be shown before the rest can be inferred.

13. In my opinion the position is in no way altered if the question be considered upon the language of the Code. The word "subordinate" is not defined by the Code because Section 3 is not a definition. This section does not claim to be and is not intended to be exhaustive : <CITATION> 17 Ind. Cas. 676 : 37 B. 114 : 14 Bom. L.R. 947. Though not defined, the word "subordinate" plays an important part in the Code as may be seen from Sections 23 , 24 , 100 , 115 , 133  136 and 137 . There are also in the Code several phrases that may be contrasted and compared, thus : <ORG> of a grade inferior ( Section 3 ); <ORG> of highest grade ( Section 63 ); any <ORG> ( Section 113 ); <ORG> subject to their superintendence, ( Section 122 ); any <ORG> of Civil jurisdiction ( Section 141 ). The words "Civil <ORG>" in the Code appear to have a "special meaning though this again is nowhere defined. I take them to mean <ORG> exercising all the powers of <ORG> as distinguished from <ORG>s Which only exercise powers over Civil Matters of a special class or classes, e.g. <ORG> under Act X of 1859, and the Land Acquisition Judge. The two broadest phrases in the Code are to be found in Sections 113 and 141 . The latter in no way touches upon questions of subordination; the former does, because reference is a form of appellate jurisdiction <CITATION> for India 61 Ind. Cas. 112 : 48 C. 766 at P. 776 : 25 C.W.N. 80 : 32 C.L.J. 433. But Order XLVI cuts down its application and it does not apply to the Rent Controller or the President. It may be argued that <ORG> has superintendence over "any <ORG>" because it has power to alter the order and so to give a power of reference to "any <ORG>." Beyond this argument, which in reference to special statutory <ORG>s unknown to the Code seems very precarious, I can see nothing in the Code which even promises to be of any assistance on the present question unless it be that a comparison between Sections 23 and 24 appears to show that a <ORG> may be subordinate within the meaning of the Code in a purely administrative sense.

14. Mr. <NAME> in support of the Rule that all other <ORG> of civil jurisdiction are subordinate to <ORG> and under its appellate jurisdiction in a wide sense unless the <ORG> has expressly provided to the contrary contended it. I assume that, for the purposes of this proposition, some form of territorial, limit is presupposed and I pass over the difficulty that arises from the fact that such a limit may be imposed in various ways. The proposition may mean that if a new <ORG> was established for a new purpose and nothing was said to the contrary, then there would be an unlimited right of appeal in the narrow sense as well as subordination in other ways. But if this is not meant, then I think the proposition is seen to be indefinite and to stand in need of support and definition by authority. As a general proposition applicable to Bengal, it seems to me that on the face of the Act of 1861 and the Letters Patent no proposition so pimple and wide can possibly be correct. It is nowhere expressed and the several jurisdictions carefully defined and conferred are not to be extended or enlarged indefinitely upon general principles to the rigor of which His Majesty is in no way committed. The simple proposition is always tempting, yet I know of no case decided on this simple principle. In many of the decided cases it would have been a complete answer to the problem, yet the <ORG> have made heavy weather before arriving at another answer. As the present case arises within the Ordinary Original Jurisdiction it may be said that this principle was implicit in the authority of the Supreme <ORG> and that, if so, it is continued by Section 9 of the Act of 1861 and; by the, Government of India Act,

15. This has not been argued before me. My own consideration of the matter leads <NAME> to reject the argument. This depends upon the Charter of the Supreme Court of 1774. As Clause 21 applies only to the Courts and Magistrates therein specified as having been established or appointed by the Charter of 1753 it has no application here. The only other clause that can be founded on is Clause 4. As to this clause, both <NAME>, C.J., and <NAME>, J., in <ORG> v. <NAME> Amrita Bazar Patrika. In the matter of 20 Ind. Cas. 81 : 17 C.W.N. 1253 at pp. 1272, 1289 : 14 Cr.L.J. 321 12 C.L.J. 452 : 41 C. 713 were of opinion that it refers to the individual Judges and not to the Course. The frame of the Charter when the purview of its successive clauses is examined strongly supports this reading. I would say that nothing that I am. Now stating is intended to abridge by a single inch the doctrine laid down with reference to cases which are within the revisional power, that, there is no form of judicial injustice which this Court, if need be, cannot reach." <NAME> v. <NAME> 12 C.W.N. 678 at P. 680 : Cr.L.J. 499.

16. It remains; therefore, to enquire what is the Calcutta Rent a Controller as a Court is under <ORG> in any one of in which appellate jurisdiction can be exercised. The decisions of <ORG>, in particular the case already cited H.D. Chatterjee v. <NAME> 68 Ind. Cas. 274 : 26 C.W.N. 78 : 49 C. 528 : (1922) A.I.R. (c) 427. Deal with the problem in this way, in no way proceeding upon any more general principle.

17.The position under the Calcutta Rent Act of 1920 is this. The Act , to begin with, applies only to Calcutta in the sense of Municipal Calcutta, and the word "Calcutta" throughout the Act has that particular meaning. So far as I can find, the area to which the Act extends has never been enlarged since the Act was passed. The appointment of <ORG> is to be found in <ORG> of 5th May 1920, No. 24 T.M., and is "as Controller for Calcutta for the purposes of the said Act." The Rules made by <ORG> under the Act are dated 13th July 1020: the only amendment is dated 8th September 1921 and in no way affects the present question. The result is, therefore, that at present, taking the institution as it exists, no decision of the only Rent Controller appointed is in fact subject to revision by <ORG>. If ever the Act is extended to another area it will be in the option of <ORG> to appoint another officer as Controller for the new area or to appoint the same officer either as a separate office or by way of extension of the area over which his present jurisdiction holds. No doubt mere extension of his area by an administrative Act would put him within the control of <ORG>, As matters stand, the only facts connecting him in any manner with the appellate jurisdiction of <ORG> are these : that he is, as I think, subordinated to the President; that Awards of the <ORG> made under the Calcutta Improvement Act (Bengal Act V of 1911) are appeasable to this Court under Act XVIII of 1911; that in some. Cases the President himself gives decisions which are deemed to be decisions of the <ORG>; and that where the word "Judge," as distinct from "Court" appears in the I and Acquisition Act of 1894, the President is deemed to be the Judge. As between <ORG> on the one hand and <ORG> on the other, the question is, is this a link or a gap?

18. Certain lines of decisions have been thought to touch this question. I will refer first to the cases under the Rent Act (Act X of 1859). By that Act certain suits were made cognizable only by the Collector's <ORG> and upou the terms of the Act. In certain suits the judgment of the Collector was to be final; and in these, if the Deputy Collector tried them, an appeal lay to the Collector whose decision was to be final. In other suits an appeal lay to the Zilla Judge or the Sudder <ORG> according as the amount in the dispute was under or over Rs. 5,000. In 1861, therefore, the Sudder <ORG> possessed appellate jurisdiction over the Collector's <ORG> by the terms of the Act of 1859 itself and the High <ORG> inherited there with a power of superintendence. The cases were fully discussed in <CITATION> 11 Ind. Cas. 207 : 38 C. 832 : 15 C.W.N. 863 : 14 C.L.J. 284.

19. They show that a right of appeal however limited, will let in the full general power of super intendence, but the right of appeal in those cases is clearly given by the special Code itself and applies to cases within the special jurisdiction conferred thereby, I may observe here that in dealing with a long line of decisions the important point to observe is the principle upon which the authorities in the end settle down. That is far more important than general language used in the earliest cases. The earliest case was apparently a Full Bench case, <NAME> v. <NAME> 7 W.R. 520 : B.L.R. Sup. Vol. 714 where the order assailed was made under Section 151 of Act X. There was no complaint that the <ORG> of limited jurisdiction had exceeded its authority. The point was that the <ORG> had refused to do something on the ground that it had no power. In that case the judgment of Mr. Justice <NAME> showed by its reference to "cases in which no appeal lies to the Judge" that there is no reason to attribute the decision to any wider principle than I have mentioned; wider language was used in <NAME> v. <NAME> 10 W.R. 341. Where the Collector had in fact exceeded his jurisdiction but I do not read that allaying down that every <ORG> of limited jurisdiction must be under the superintendence of the High <ORG>; the true basis of the <ORG>'s interference under the Act of 1859 was considered in <NAME> v. <ORG> 23 Ind. Cas. 896 : 19 C.L.J. 300 : 18 C.W.N. 782 where it is rested on the provision for appeals. Perhaps, the neatest illustration of this reasoning is afforded by the case of <CITATION> 20 Ind. Cas. 420 : C. 518 : 17 C.L.J. 593 a decision under the Chota Nagpur Tenancy Act (Bengal Act VI of 1908) where a general power of revision was based on the fact that by Section 224 Sub-clause (2), a second appeal lay to this <ORG> in certain cases. These cases deal also with difficulties as to whether the Acts expressly or impliedly vested power of superintendence elsewhere or took it away. They show that the Rule making power or even greater powers vested elsewhere do not avail to take away those powers of the <ORG> which follow from its position as a <ORG> of Appeal. Though a provision that the Commissioner shall be the High <ORG> has this effect Darbari Panjiara v. Bhathi Roy 23 Ind. Cas. 883 : 41 C. 915 : 18 C.W.N. 575 : 19 C.L.J. 294 as also a provision that the appeal shall be to the Commissioner <NAME> v. <ORG> 23 Ind. Cas. 896 : 19 C.L.J. 300 : C.W.N. 782 These cases, therefore, are in my opinion, as Mr. <NAME> argued, of no very direct application to the case of the Rent Controller.

20. By the Land Acquisition Act of 1894 an appeal lies to <ORG> from any award of the <ORG> established by the Act. Leaving on one side the cases in which the Collector's duty was not a judicial duty, I come to those in which it has been held that, in acting under Section 18 , the Collector is a <ORG> and his proceedings are subject to revision. Administrator-General of Bengal v. Land Acquisition Collector 12 C.W.N. 241 and <CITATION> 13 Ind. Cas. 470 : 16 C.W.N. 927 : 16 C.L.J. 165 The later case simply followed the earlier and not without doubt. In the earlier case attention was almost entirely devoted to the question whether the Collector's function was judicial. The, reasoning on that assumption is very condensed but if this <ORG> is a <ORG> of Appeal from the award it would certainly seem to have superintendence over judicial proceedings for the initiation of the reference.

21. It is clear enough that, under all these special Statutes, appeal lies to <ORG>. "For the purposes of the application of the power of superintendence it is not necessary that an appeal should lie to this <ORG> in the very proceeding in which the power of superintendence is invoked" <NAME> v. <ORG> 23 Ind. Cas. 896 : 19 C.L.J. 300 : C.W.N. 782 If a case should arise by reason of an extension of the are under the Calcutta Rent Act, 1920, in which <ORG> should have jurisdiction a question would then emerge which the cases I have been referring to do not answer. That question, but for the specific right of appeal conferred by the Land Acquisition Act , would have arisen under it also. The question is this when a new and special jurisdiction is conferred upon <ORG> so as to make it for certain limited purposes a <ORG> of special jurisdiction, the powers and duties of which are defined by Statute, has <ORG>, in the absence of any special provision conferring appellate jurisdiction in any form, as regards those purposes, a right of superintendence arising out of the ordinary relationship between the two <ORG>s? As I understand the view of <ORG> in <NAME> v. <NAME> 68 Ind. Cas. 274 : 26 C.W.N. 78 : 49 C. 528 : (1922) A.I.R. (c) 427 {supra) they answer this question in the affirmative, aid I am in no way prepared to dissent. But the question at present is not solved by any reference even to this principle. From the Act of 1861, from the Letters Patent, and from the decisions, I draw this conclusion that it is not enough for the purposes of the Code or the Letters Patent which deal on definite principles with a regular order of <ORG>s, that from the limited nature of the powers conferred, or from a mere comparison with other <ORG>s, or from possible relationships there to not yet subsisting, a new <ORG> may be styled an "inferior <ORG>". An actual leadership to this <ORG> must be established: an existing thread of connecting authority must be disclosed. The President of the <ORG> is the person who is set up as a <ORG> by Section 18 of the Rent Act of 1920. Under the Calcutta Improvement Act of 1911, "<ORG>" is set up but that "<ORG>" is the <ORG> and not the President ( Section 70 ) The Act of the Governor-General in Council of the same year deals with appeals from, awards of the <ORG> as the preamble shows. For the purpose of determining what is the award of the <ORG> the President's decision is in certain cases the only thing that matters, and in certain cases he is entitled to sit alone and to exercise all powers of the <ORG> ( Section 77 ). In addition to that the Calcutta Improvement Act has made the President the "Judge" in the sense of the Land Acquisition Act wherever the word "Judge" occurs. Now, superintendence is over <ORG>s, not over jurisdictions. The present question must, it seems to me, be decided ultimately upon consideration whether the giving of a new jurisdiction to the President is to be regarded as a new jurisdiction conferred on an existing <ORG> or to be regarded as the setting Up of a new <ORG> for a new purpose. On that question I have entertained much doubt. The position is not quite the same as where a new jurisdiction is given to the Civil <ORG>s. The <ORG> or the President have no general jurisdiction at all. On the question whether there is one. <ORG> from which in one jurisdiction an appeal lays to this <ORG> or two <ORG>s, which should be regarded-as absolutely, separate, I have come to the conclusion that the decision of <ORG> has all the common sense of the matter even if it may be doubted whether it has all the strict logic on its side. After all, the President for some purposes is "the Judge" and is "the <ORG>;" appeals within the Calcutta Improvement Act lie mostly from his decisions; and in view of he fact that appeals from a Rent Controller's decisions may come as occasion arises either the Civil <ORG>s of the District or, in Calcutta, to the President, I am in no way prepared to hold that an opinion which has been entertained by some four or five Judges of this <ORG> is not the better opinion.

21. For these reasons or, perhaps, I should say, in these circumstances, the Rule-will be made absolute with costs.


PETITIONER: <ORG> LTD.,BOMBAY Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX,BOMBAY DATE OF JUDGMENT: 26/05/1950 BENCH: <NAME>, MEHR CHAND BENCH: <NAME>, MEHR CHAND FAZAL ALI, SAIYID SASTRI, M. PATANJALI MUKHERJEA, B.K. CITATION: 1950 AIR 165 1950 SCR 553 ACT: Indian Income-tax Act (XI of 1922),s. 9 (1) (iv)--Income from property--Computation--Deduction--" Annual charge, not being capital charge"--"Annual charge" and 'capital charge", meanings of-- Charge for municipal property tax and urban immoveable property tax--Wheather deductible--City of Bomabay Municipal Act, 1888, s. 212- - Bombay Finance Act, 1932, s. 22 . HEADNOTE: The charge created in respect of municipal property tax by s. 212 of the City of Bombay Municipal Act, 1888, is an "annual charge not being a capital charge" within the mean- ing of s. 9 (1) (iv) of the Indian Income-tax Act , 199.2, and the amount of such charge should therefore be deducted in computing the income from such property for the purposes of s. 9 of the Indian Income-tax Act. The charge in respect of urban immoveable property tax created by the Bombay Finance Act, 1939., is similar in character and the amount of such charge should-also be deducted. The expression "capital charge" in s.9(1) (iv) means a charge created for a capital sum,that is to say, a charge created to.' secure the discharge of a liability of a capi- tal nature; and an "annual charge" means a charge to secure an annual liabili- ty. 554 JUDGMENT:

APPELLATE JURISDICTION: Civil Appeal No. LXVI of 1949.

Appeal from <ORG>, Bombay, in a reference under section 66 of the Indian Income-tax Act, 1022.

<NAME> (<NAME>, with him), for the appel-

lant. ' <NAME>, Attorney-General for India (<NAME>, with him), for the respondent.

1950. May 26. The judgment of the Court was delivered by <NAME> is an appeal against a judgment of <ORG> at Bombay in an income-tax matter and it raises the question whether munici- pal property tax and urban immoveable property tax payable under the relevant Bombay Acts are allowable deductions under section 9 (1) (iv) of the Indian Income-tax Act . The assessee company is an investment company deriving its income from properties in the city of Bombay. For the assessment year 1940-41 the net income of the assessee under the head "property" was computed by the Income-tax Officer in the sum of Rs. 6,21,764 after deducting from gross rents certain payments. The company had paid during the relevant year Rs. 1,22,675 as municipal property tax and Rs. 32,760 as urban property tax. Deduction of these two sums was claimed under the provisions of section 9 the Act. Out of the first item a deduction in the sum of Rs. 48,572 was allowed on the ground that this item represented tenants' burdens paid by the assessee, otherwise the claim was disal- lowed. The, appeals of the assessee to the Appellate As- sistant Commissioner and to <ORG> were unsuccessful. The <ORG>, however, agreed to refer two questions of law to <ORG> at Bombay, namely,-

(1) Whether the municipal taxes paid by the applicant- company are an allowable deduction under the provisions of section 9 (1) (iv) of the Indian Income- tax Act;

(2) Whether the urban immoveable property taxes paid by the applicant-company are an allowable deduction under section 9 (1) (iv) or under section 9 (1) (v) of the Indian Income-tax Act .

A supplementary reference was made covering a third question which was not raised before us and it is not there- fore necessary to refer to it. <ORG> answered all the three questions in the negative and hence this appeal. The question for our determination is whether the munic- ipal property tax and urban immoveable property tax can be deducted as an allowance under clause (iv) of sub-section (1) of section 9 of the Act. The decision of the point depends firstly on the construction of the language employed in sub-clause (iv) of sub-section (1) of section 9 of the Act, and secondly, on a finding as to the true nature and character of the liability of the owner under the relevant Bombay Acts for the payment of these taxes. Section 9 along with the relevant clause runs thus:-- (1) The tax shall be payable by an assessee under the head ' income from property' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of Which he is the owner, ........ subject to the following allowances, namely :-

(iv) where the property is subject to a mortgage or other capital charge, the amount of any interest on such mortgage or charge; where the property is subject to an annual charge not being a capital charge, the. amount of such charge; where the property is subject to a ground rent, the amount of such ground rent; and, where the property has been acquired, constructed, repaired, renewed or recon- structed with borrowed capital, the amount of any interest payable on such capital; ............. "

It will be seen that clause (iv) consists of four sub- clauses corresponding to the four deductions allowed under the clause. Before the amending Act of 1939, clause

(iv) contained only the first, third and fourth sub- clauses. Under the first sub-clause interest is deductible whether the amount borrowed on the security of the property was spent on the property or not. There is no question of any capital or other expenditure on the property. The expression "capital charge" in the sub-clause cannot connote a charge on the capital, that is, the property assessed. That would be a redundancy as the opening words themselves clearly indicate that the charge is on the property. We are therefore of opinion that capital charge here could only mean a charge created for a capital sum, i.e., a charge to secure the discharge of a liability of a capital nature. In 1933 <ORG> decided the case of <NAME>. <CITATION> (1 ). It was not an assessment under section 9 but an assess- ment on the general income of an assessee who was liable to pay maintenance for his step-mother which had been charged on all his assets by a decree of <ORG>. It was not a li- ability voluntarily incurred by him but one cast on him by law. <ORG> held that the amount paid by him in discharge of that liability formed no part of his real income and so should not be included in his assessment. Though the decision proceeded on the principle that the outgoings were not part of the assessee's income at all, the framers of the amending Act of 1939 wanted, apparently, to extend the principle, so far as the assessment of property was concerned, even to cases where obligatory payments had to be made out of the assessee's income from the property charged with such payments, and the second sub-clause, namely, "where the property is subject to an annual charge not being a capital charge, the amount of such charge" was added. It is this sub-clause which the appellant invokes in support of its claim to deduction of the municipal and urban, property taxes in the present case. In view of the opening words of the newly added sub-clause, the expression "capital charge" also used therein cannot have reference to a charge on the property, and we think it must (1) I.L.R. 60 cal. 1029.

be understood in the same sense as in sub-clause (1); that is to say, the first sub-clause having provided for deduc- tion of interest where a capital sum is charged on the property, this sub-clause provides for a deduction of annual sums so charged, such sums not being capital sums, the limiting words being intended to exclude cases where capital raised on the security of the property is made repayable in instalments.

<CITATION> (1), a Bench of <ORG> considered the meaning of these words. As regards "annual charge," Beau- mont C.J. observed as follows :--

"The words, I think, would cover a charge to secure an annual liability."

<NAME>, as he then was, said as follows :--

"I do not see how a charge can be annual unless it means a charge in respect of a payment to be made annually."

This construction of the words has been followed in the judgment under appeal.

<CITATION> (2) (the connected appeal before us), the Bench of <ORG> agreed with the construction placed on these words in the Bombay case, i.e., the words "annual charge" mean a charge to secure an annual liability. It is therefore clear that there is no conflict of judicial deci- sions as to the meaning of the phrase "annual charge" occur- ring in section 3 (1) (iv) and the meaning given is the natural meaning of these words.

As to the phrase "capital charge", <ORG> in the case above referred to took the view that the words mean a charge on capital. <NAME>, however, took a different view and observed that he was not prepared to accept the sugges- tion that a document which provides for a certain payment to be made monthly or annually and charged on immoveable property or the estate of an individual becomes a capital charge. In the Allahabad judgment under appeal these (1) I.L.R. 1943 Bom. 628. (2) I.L.R. 1944 All. 780.

words were considered as not meaning a charge on capital. It was said that if an annual charge means a charge to secure the discharge of an annual liability, then, capital charge means a charge to secure the discharge of a liability of a capital nature. We think this construction is a natu- ral construction of the section and is right. The determination of the point whether the taxes in dispute fall within the ambit of the phrase "annual charge not being a capital charge" depends on the provisions of the statutes under which they are levied. Section 143 of the City of Bombay Municipal Act, 1888, authorises the levy of a general tax on all buildings and lands in the city. The primary responsibility to pay this property tax is on the lessor (vide section 146 of the Act). In order to assess the tax provision has been made for the determination of the annual rateable value of the building in section 154 . Section 156 provides for the maintenance of an assessment book in which entries have to be made every official year of all buildings in the city, their rateable value, the names of persons primarily liable for payment of the property tax on such buildings and of the amount for which each building has been assessed. Section 167 lays down that the assess- ment book need not be prepared every official year but public notices shall be given in accordance with sections 160 to 162 every year and the provisions o+ the said sec- tions and of sections 163 and 167 shall be applicable each year. These sections lay down a procedure for hearing objections and complaints against entries in the assessment book. From these provisions it is clear' that the liabil- ity for the tax is determined at the beginning of each official year and the tax is an annual one. It recurs from year to year. Sections 143to  168 concern themselves with the imposition, liability and assessment of the tax for the year. The amount of the tax for the year and the liability for its payment having been determined, the Act then pre- scribes for its collection in the chapter "The collection of taxes." Section 197 provides that each of the property taxes shall be payable in advance in half yearly instalments on each first day of April and each first day of October. The provision as to half yearly instalment necessarily connotes an annual li- ability. In other words, it means that the annual liability can be discharged by half yearly payments. Procedure has also been prescribed for recovery of the instalments by presentment of a bill, a notice of demand and then distress, and sale. Finally section 212 provides as follows :--

"Property taxes due under this Act in respect of any building or land shall, subject to the prior payment of the land revenue, if any, due to the provincial ,Government thereupon, be a first charge ........ upon the said build- ing or land .... "

It creates a statutory charge on the building. Urban immove- able property tax is leviable under section 22 of Part VI of the Bombay Finance Act, 1932,on the annual letting value of the property. The duty to collect the tax is laid on the municipality and it does so in the same manner as in the case of the municipal property tax. Section 24 (2) (b) is in terms similar to section 212 of the Bombay Municipal Act. It makes the land or the building security for the payment of this tax also. For the purposes of section 9 of the Indian Income-tax Act both these taxes, namely, the munici- pal property tax as well as the urban immoveable property tax are of the same character and stand on the same foot- ing.

Mr. <NAME>, the learned counsel for the appellant con- tended that both the taxes are assessed on the annual value of the land or the building and are annual taxes, although it may be that they are collected at intervals of six months for the sake of convenience, that the income-tax itself is assessed on an annual basis, that in allowing deductions all payments made or all liabilities incurred during the previ- ous year of assessment should be allowed and that the taxes in question fell clearly within the language of section 9 (1) (iv). The learned Attorney-General, on the other hand, argued that although the taxes are assessed for the year the liability to pay them arises at the beginning of each half year and unless a notice of demand is issued and a bill presented there is no liability to pay them and that till then no charge under section 212 of the Act could possibly arise and that the liability to pay being half yearly in advance, the charge is not an annual charge. It was also suggested that the taxes were a capital charge in the sense of the property being security for the payment. We are satisfied that the contentions raised by the learned Attorney-General are not sound. It is apparent from the whole tenor of the two Bombay Acts that the taxes are in the nature of an annual levy on the property' and are assessed on the annual value of the property each year. The annual liability can be discharged by half yearly instalments. The liability being an annual one and the property having been subjected to it, the provisions of clause (iv) of sub-sec- tion (1) of section 9 are immediately attracted. Great emphasis was laid on the word"due" used in section 212 of the Municipal Act and it was said that as the taxes do not become due under the Act unless the time for the payment arrives, no charge comes into existence till then and that the charge is not an annual charge. We do not think that this is a correct construction of section 212 . The words "property taxes due under this Act" mean property taxes for which a person is liable under the Act. Taxes payable during the year have been made a charge on the property. The liability and the charge both co-exist and are co-exten- sive. The provisions of the Act affording facilities for the discharge of the liability do not in any way affect their true nature and character. If the annual liability is not discharged in the manner laid down by section 197 , can it be said that the property cannot be sold for recovery of the whole amount due for the year ? The answer to this query can only be in the affirmative, i.e., that the proper- ty is liable to sale.

<CITATION> (1) Beaumont C.J., while rejecting the claim for the deduction of the taxes, placed reliance on (1) I.L.R. 1943 Bom. 628.

section 9 (1) (v) which allows a deduction in respect of any sums paid on account of land revenue. It was observed that land revenue stands on the same footing as municipal taxes and that as the legislature made a special provision for deduction of sums payable in regard to land revenue but not in respect of sums paid on account of municipal taxes that circumstance indicated that the deduction was not allowable. For the same purpose reference was also made to the provi- sions of section 10 which deal with business allowances and wherein deduction of any sum paid on account of land reve- nue, local rates or municipal taxes has been allowed. In the concluding part of his judgment the learned Chief Jus- tice said that it was not necessary for him to consider what the exact meaning of the words was and that it was suffi- cient for him to say that it did not cover municipal taxes which are made a charge on the property under section 212 of the Bombay Municipal Act. Without determining the exact meaning of the words used by the statute it seems to us it was not possible to arrive at the conclusion that the taxes were not within the ambit of the clause. It is elementary that the primary duty of a <ORG> is to give effect to the intention of the legislature as expressed in the words used by it and no outside consideration can be called in aid tO find that intention. Again reference to clause (v) of the section is not very helpful because land revenue is a charge of a paramount nature on all buildings and lands and that being so, a deduction in respect of the amount was mentioned in express terms. Municipal taxes, on the other hand, do not stand on the same footing as land revenue. The law as to them varies from province to province and they may not be necessarily a charge on property in all cases. The legis- lature seems to have thought that so far as municipal taxes on property are concerned, if they fall within the ambit of clause (iv), deduction will be claimable in respect of them but not otherwise. The deductions allowed in section 10 under the head "Income from business" proceed on a different footing and a construction of section 9 with the aid of section 10 is apt to mislead.

<NAME> in the above case in arriving at his conclusion was influenced by the consideration that these taxes were of a variable character, i.e., liable to be increased or re- duced under the various provisions of the Municipal Act and that the charge was in the nature of a contingent charge. With great respect, it may be pointed out that all charges in a way may be or are of a variable and contingent na- ture. If no default is made, no charge is ever enforceable and whenever there is a charge, it can be increased or reduced during the year either by payment or by additional borrowing.

In <ORG> v. <ORG> (1) it was held by <ORG> that the fact that certain payments were contingent and variable in amount did not affect their character of being annual payments and that the word, "annual" must be taken to have the quality of being recurrent or being capable of recurrence. In <NAME>'s Trustees v. <ORG> (2) it was held that the payments were capable of being recur- rent and were therefore annual payments within the meaning of schedule D, case III, rule 1 (1), even though they were not necessarily recurrent year by year and the fact that they varied in amount was immaterial. The learned Attorney-General in view of these decisions did not support the view expressed by <NAME>

Reliance was placed on a decision of <ORG> in <CITATION> (3), in which moneys paid as urban immoveable property tax under the Bombay Finance Act were disallowed as inadmis- sible under section 9 (1) (iv) or 9 (1) (v) of the Indian Income-tax Act . 'This decision merely followed the view expressed in Commissioner of income-tax, Bombay v. <NAME> (4)and was not arrived at on any independent or fresh reasoning and is not of much assistance in the deci- sion of the case. <ORG> (1)  A.C. 785. (2)  1 A.E.R.

150. (3) I.L.R. 1944 Mad. 399. (4) I.L.R. 1943 Bom. 628.

in <NAME> v. Commissioner of <ORG> (1) (the connected appeal) took a correct view of this matter and the reasoning given therein has our approval. The result is that this appeal is allowed and the two questions which were referred to <ORG> by <ORG> and cited above are answered in the affirmative. The appellants will have their costs in the appeal.

Appeal allowed.

Agent for the appellants: <NAME>. Agent for the respondent: <NAME>.


JUDGMENT <NAME>, J.

1. These two petitions have been filed by <ORG>, against the two Income-tax Officers, <ORG>, Bombay, and against <ORG>. In the first petition it challenges three rectification notices under section 154 of the Income-tax Act, 1961 (hereinafter referred to as "the Income-tax Act "), for the assessment years 1965-66, 1966-67 and 1967-68 and the rectification orders made pursuant to those notices and notices of demand demanding Rs. 30,03,872 by way of additional taxes. In Petition No. 226 of 1973 the petitioner challenges the rectification notice dated March 12, 1973, in respect of the assessment year 1968-69.

2. The facts leading to these petitions are as follows :

For all the four years covered by the two petitions the petitioner had created some development rebate reserve and claimed development rebate under section 33 of the Income-tax Act. Apart from of the plant and machinery installed by the petitioner during these years, it had also installed some rolling mill rolls. It is admitted that during these four years the petitioner had not created the development rebate reserve after taking into consideration the rolling mill rolls installed by it and it had not claimed any rebate in respect of the same. The petitioner explains that the commission was due to the fact that it was not the practice of the income-tax authorities then to allow development rebate in respect of rolling mill rolls and that the income-tax authorities did not include these rolls in the expression "plant and machinery". It appears that some sugar mills contended that rolling mill rolls installed by them were as much plant and machinery as they other item of plant and machinery. The contention was considered by <ORG>, Government of India, who on November 16, 1968, issued a circular which is exhibit A to the petition and directed all Income-tax Officers to allow development rebate on the cost of rolling mill rolls.

3. One of the conditions prescribed by section 34 of the Income-tax Act for allowance of development rebate is that an amount equal to 75% of the development rebate to the actually allowed should be debited to the profit and loss account of the relevant previous assessment year and credited to development rebate reserve account. There has been considerable controversy throughout the country as to the time at which such reserve should be created : whether it should necessarily be created during the year of installation of plant and machinery or whether it could be created when the company makes profits and development allowance is actually allowed or whether in cases of insufficiency or absence of creation of such reserve due to a bona fide mistake the income-tax authorities must give opportunity to the assessee to create a reserve or further reserve at a subsequent time.

4. In our judgment dated April 25, 1973, in Miscellaneous Petitions No. 184 of 1973 <CITATION> , we have held that an assessee is not bound to create development rebate reserve during the year of installation of plant and machinery if there is no profit in that year and that it is sufficient if the reserve is created when there is profits and, therefore, development rebate is actually allowed. In the said case we did not decided the other points as to the time of creation of development reserve and left those question for decision in appropriate proceedings as they did not arise in the matter then before us.

5. The petitioner has drawn our attention to a circular date November 12, 1958, issued by <ORG> regarding allowance of development rebate to tea companies which is exhibit B to the petition and which is admitted to be of general application. The said circular states that where there is no deliberate contravention of the conditions to creation of reserve fund equal to 75% of the development reserve allowance and the assessee has made his own bona fide computation, but the amount so provided is found by the Income-tax Officer at the time of the assessment to fall short of the development rebate actually allowable, the Income-tax Officers are instructed to condone genuine deficiencies subject to the shortfall being made good by the assessee through creation of an additional adequate reserve in the current year's books within the time allowed by the Income-tax Officer.

6. The petitioner states that after the circular, exhibit A, and on the basis of the circular, exhibit B, the petitioner claimed development rebate on the rolling mill rolls for the four years covered by these two petitions and for that purpose created additional development rebate reserves and made the necessary provision in the accounts of the respective assessment years. The petitioner filed revised returns and the Income-tax Officers granted it the additional development rebate for the four years. However, on February 7, 1972, the petitioner received a notice under section 154 of the Income-tax Act whereby the Income-tax Officer proposed to rectify the assessment for the years 1966-66, 1966-67 and 1967-68 on the ground that the development rebate was wrongly allowed on the rolling mill rolls in view of the <ORG> judgment in the case of <CITATION> . This notice is exhibit G to the petition. After the petitioner was heard, the income-tax authorities made an order dated February 28, 1972, purporting to rectify the assessment orders for these three years. The said notice and the rectification order are the subject-matter of Miscellaneous Petition No. 190 of 1972. In respect of the year 1968-69 the petitioner received a rectification notice dated March 12, 1973. The petition has been filed before the rectification order had been made. This rectification notice is the subject-matter of Miscellaneous Application No. 226 of 1973.

7. In Miscellaneous Petition No. 190 of 1972 there is an additional point. <ORG>, is a subsidiary of the petitioner. The petitioner had received from that company a deposit of Rs. 20,00,000 on December 21, 1962. Under the provisions of section 2(22)(e) of the Income-tax Act this deposit was treated as a loan and as such a dividend and was taxed in the assessment year 1964. For the assessment years 1965-66 the petitioner received from <ORG>, a dividend of Rs. 17,29,647. This dividend was adjusted against the loan of Rs. 20,00,000 and was, therefore, not treated as dividend in view of proviso (iii) to section 2(22)(e) . It was not included by the petitioner in its total income for that year and was not taxed. In the original assessment for the year 1965-66 the Income-tax Officer granted the petitioner further tax relief on the said amount under the then existing section 85 of the Income-tax Act pertaining to now industrial undertakings. On the basis of section 85 , out of the aforesaid dividend an amount of Rs. 14,12,954 was held exempt from tax in the hands of the petitioner. However, March 31, 1971, the petitioner received a rectification notice under section 154 of the income-tax Act for the assessment year 1965-66 stating that relief under section 85 had been wrongly given to the petitioner as the dividend was adjusted the loan and neither treated as dividend nor included in the total income of the petitioner. It was contended by the Income-tax Officer that if the dividend was not included in the total income, there could be no exemption under section 85 . By another order dated February 28, 1972, this assessment was rectified and relief allowed on the amount of Rs. 14,12,954 was withdrawn and additional tax was levied. The petitioner is challenging this rectification notice and rectification order also in Miscellaneous Petition No. 190 of 1972.

8. On behalf of the respondents, Miss <NAME>, Income-tax Officer, <ORG>), Bombay, has made two affidavits, one dated June 13, 1973, and the other dated June 14, 1973. The first affidavits is in replay to Miscellaneous Petition No. 190 of 1972 and seeks to support the rectification orders challenged in the petition. The second affidavits was made in the same petition under circumstances which we shall set out later in the judgment. No affidavit has been filed in Miscellaneous Application No. 226 of 1974.

9. Section 154 of the Income-tax Act relates to rectification of mistakes. It provides that with a view to rectifying any mistake apparent from the record, the Income-tax Officer may amend any order of assessment. Mr. <NAME> on behalf of the petitioner contended that there was no error or mistake apparent from the record at all and there is, therefore, no occasion for amending the original assessment orders in these two petitions. He invited our attention to the case of <CITATION> , wherein <ORG> held that a mistake apparent on the record must be an obvious and patent mistake and not something which could be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. In fact this court had earlier taken a similar view in the case of <CITATION> and <CITATION> . We shall follow the test laid down by <ORG> in the case of <ORG> and by <ORG> in the two cases aforesaid in deciding this matter. Mr. <NAME> for the petitioner has informed us that there are appeals filed by the petitioner against the rectification orders and that the petitioner will withdraw any appeal that may be pending against the rectification order which is set aside by this judgment.

10. For rectifying an alleged mistake in the assessment orders pertaining to rolling mill rolls the grounds given by the income-tax authorities in the rectification orders is that, according to them, <ORG> has held in the case of <CITATION> that development rebate cannot be allowed to an assessee for a particular assessment year unless the assessee had created the necessary development rebate reserves before making up the profits and loss account of the relevant assessment year and that, in this case, as the petitioner had not created the necessary development rebate reserves in the relevant years before the original assessments were made, it was a mistake to have allowed development rebate on rolling mill rolls in subsequent years to the extent that there was shortfall in the reserve. According to the income-tax authorities, <ORG> has followed the decision of <ORG> in the case of <CITATION> . The petitioner contends that the said decision of <ORG> has no relevance whatsoever to its case and does not operate to justify the rectification made. According to Mr. <NAME>, <ORG> did not decide the issue in question and <ORG> has misconstrued the said decision.

11. The judgment of <ORG> in <CITATION> was rendered in an appeal against the judgment of a Division Bench of <ORG> consisting of <NAME> (as he then was) and <NAME> in the case of <CITATION> . In that case the assessee company had claimed development rebate and contended that it had set apart a sum of Rs. 6,00,000 during the assessment year out of its net profits which not only satisfied the requirements of section 17 the Banking Companies Act, but also the requisites of the Indian Income-tax Act , 1922, with regard to the creation of development rebate reserves. <ORG> held that, as the assessee while setting apart the sum of Rs. 6,00,000 had not expressed the purpose for doing so, the conditions with regard to the creation of a development rebate could not be allowed. <ORG> further held that even if it were assumed that the reserve was created under the Banking Companies Act , it could not be said to be available for any other purpose. <ORG> observed that the provision for creation of a development rebate reserve was not a mere formality, but was intended to enable the revenue to trace the fund debited as part of the development rebate in the profit and loss account and credited to a reserve account. Unless this condition was complied with, development rebate could not be claimed. In our opinion, all that <ORG> decided was that a reserve created for the Banking Companies Act was not available as a development rebate reserve and that, as no development rebate reserve had been created in that case, the rebate could not be claimed. In the appeal from the above judgment <ORG> held in <CITATION> that creation of a reserve in compliance with section 17 of the Banking Companies Act was not sufficient compliance with the requirements of creation of development rebate reserve in the Income-tax Act . There are two observations in <ORG> judgment which have led to differences of opinion between various Indian High courts to which we shall refer presently. One observations is "the amount to be transferred to that reserve is debited before the profit and loss account is made up" and the other is that "it is also clear from the terms of the proviso that the transfer to the reserve fund should be made at the time of making up the profit and loss account". We must bear in mind that <ORG> was dealing with a case where it came to the conclusion that no development rebate reserve had been created. It was not dealing with the question of time when such development rebate reserve could be created. The observations in quotation marks reproduced hearing above appear to us to be no more than a mere discussion of the matter and not dicta, whether obiter or otherwise.

12. <ORG> had an occasion to consider the above judgment of <ORG> in the case of <CITATION> . In that case the plant an machinery had been installed in 1960. Development rebate was claimed for the assessment year 1960-61 and an income of Rs. 2,57,029 was declared for that year. No development rebate was originally claimed in the return, but when the attention of the assessee was drawn to the fact that it was entitled to development rebate, it made the necessary entry creating development rebate reserve on July 23, 1961, i.e., after the end of the assessment year in which development rebate was claimed. The development rebate was actually allowed by the Income-tax Officer, but was later on disallowed by the department as a result of a notice under section 154 for rectification. <ORG> also disallowed the rebate. We must point out that was a case in which no development rebate was created during the assessment year 1960-61, although there was a profits far exceeding the amount of the development rebate of Rs. 36,144. An entry allowed to have been made after the end of the assessment year was held not to have complied with the condition of creation of a development rebate reserve in the relevant year. The learned judges of <ORG> took the view that in the case of <ORG>, <ORG> had decided that "unless the reserve was created in the very same according year, development rebate should not be granted", agreeing with the view of <ORG> and overruling the decision of the Andhra Pradesh and <ORG>. <ORG> held that in view of the aforesaid decision of <ORG> the benefit of the development rebate could not be granted to the assessee in the case before it because of the non-compliance with the requisite conditions as to creation of a development rebate reserve. The learned judges of the Gujarat High court also took the view that section 154 of the Income-tax Act was attracted as there was a mistake apparent on the record of the case. With regard to the judgment of <ORG> we must say with respect that, in our opinion, <ORG> nowhere lays down in <CITATION> the time at which the development rebate reserve must be created. We are unable to read in the judgment of <ORG> any observation to the effect that development rebate reserve must be created in the year of installation or fixation of the machinery irrespective of profits in that year or that the income-tax authorities could not permit the assessee to make up any deficiency in development rebate reserve which has occurred bona fide in subsequent years. In the case before <ORG> no development rebate reserve had been created at all at any time and, therefore, the claim for rebate was disallowed.

13. <ORG> has taken a view contrary to that of <ORG> in the case of <CITATION> . In that case the assessee had not created a development rebate reserve before the close of the accounting year, but was allowed by the Income-tax Officer to make necessary entries before the assessment was complete. The Income-tax Officer disallowed the rebate and appeals to the Appellate Assistant Commissioner and the <ORG> failed. <ORG>, however, took the view that as the entries had been allowed to be made before the assessment was finalised by the Income-tax Officer, the assessee was entitled to the benefit of the rebate.

14. In the case of <ORG> held that it was not necessary that the entries about the development rebate should be made in the accounts on or before the last day of the accounting year or even before preparation of the profit and loss account, it held that it was open to the assessee to make the entry at any time before the assessment is completed. The entries become final only when the assessment is made. Till then they are in a fluid state and any defect or error in them could be corrected. The income-tax authorities relied upon the decision of <ORG> in the case of <CITATION> . With regard to it the learned judges of <ORG> observed :

"This decision was delivered by their Lordships of <ORG> in an appeal from the judgment of <ORG> in <ORG> Commissioner of Income-tax. The question that fell for determination by their Lordships of <ORG> was whether a reserve under section 17 of the Banking Companies Act, 1949, was a reserve within the meaning of section 10(2)(vib) , proviso (b), of the Income-tax Act , and their Lordships were of the opinion that such a reserve could not be treated as a reserve for development rebate under section 10(2)(vib) , proviso (b) of the Act. The question with which we are concerned was not debated before their Lordships and all that their Lordships said was that the requirements of the proviso had to be complied with. So far as the present case is concerned, the requirements have been complied with. The only argument stressed before us is that the requirements should be complied with before the close of the accounting year or before making up of the profit and loss account. In our opinion it was open to the assessee to make these entries at any time before the assessment was completed. The entries only become final as an when they are accepted or rejected by the Income-tax Officer, i.e., when the assessment is made. Till then, they are in a fluid state and any error or defect in them could be corrected."

15. We respectfully agree with the learned judges of <ORG> as to the ambit of the decision of <ORG> in the case of <CITATION> .

16. In the case of the <CITATION> .,a Division Bench of <ORG> held that a company can make the necessary entries for the purpose of complying with section 10 of the Income-tax Act, 1922, at any time before the return of income-tax is filed under the Act. Even if the entries are made thereafter during the pendency of the assessment proceedings, the Income-tax Officer may take them into consideration and allow the development rebate. The statute does not specify any period of time within which the relevant entries must be made. They could be made only after the year of account concluded when it is possible to know the extent of the profits available for the purpose of creating a reserve. The learned judges then proceeded to deal with the judgment of <ORG> in <CITATION> as under :

"It is urged that <ORG> took the view that the entries must be made at the time when the profit and loss account is made up originally and that they cannot be made later. That is how, it is pointed out, those observations were construed by <ORG> in <CITATION> regards the observations of <ORG> in <ORG>, we are unable to infer from them that the profit and loss account originally prepared and passed by a company cannot be subsequently amended by it, and that the Income-tax Officer has no power to allow development rebates if the entries are made after the filing of the original return of income. The revenue relies upon <ORG>, where <ORG> appears to have taken the view that compliance with the proviso (b) to section 10(2)(vib) cannot be effected after the profit and loss account has once been made up and that subsequent entries debiting the profit and loss account and crediting the development reserve can be of no avail. With great respect to the learned Judges who have delivered that judgment, we are unable to agree with the view taken by them...... But we have been unable to read those observation in the same light..."

17. Reviewing the above decisions we find that <ORG> has not decided in <CITATION> that the profit and loss account originally prepared and passed by a company cannot be subsequently amended by it and that the Income-tax Officer has no power to allow development rebate if the entries are made after the filling of the original return of income or even at a subsequent date in cases of bona fide mistake. We have expressed our own view about the judgment of <ORG> in <CITATION> and the views of the Punjab and Haryana High Court and <ORG> with regard to the construction of <ORG> judgment by the Gujarat High court. We have also set out the view of <ORG>. Mr. <NAME> on behalf of the petitioner did not argue before us as to what was the correct position in law on a true interpretation of section 34 as to the proper time for creating a development rebate reserve. He said that, in view of his second argument on the point, to which we will come presently, it was not necessary for us to put any construction on section 34 as to the time of creation of reserve. Mr. <NAME> on behalf of the respondents, however, contended that, in view of <ORG> judgment in <CITATION> , as interpreted by <ORG> in <CITATION> , profit and loss account originally prepared and passed by a company cannot be subsequently amended by it and that the Income-tax Officer has no power to allow development rebate by the end of the assessment year in 1969 after requisite entries had been made by the petitioners in their account for preceding years creating a development rebate reserve respectively. In view of the fact that Mr. <NAME> did not argue the point on merits, we do not propose to decide the point. We, however, take the view that <ORG> has not decide the point, and, with respect, we do not agree with construction placed by <ORG> on the judgment of <ORG>. The Andhra Pradesh, Punjab & Haryana and <ORG>s have taken views different from the view taken by <ORG>. If after long drawn process of reasoning on a point on which there obviously are two opinions, <ORG> in India have taken different views, it is obvious that it is a debatable point of law. There can, therefore, be no mistake apparent from the record or which is an obvious or patent mistake. In our opinion, notice under section 154 and the rectification orders cannot be sustained as valid.

18. Mr. <NAME> next argued that the question involved in this case is not regarding the interpretation of section 34 of the Income-tax Act, but the manner of execution of that provision. The most important point, according to him, in the present case is that it was under the express instructions of <ORG> and <ORG> issued to all the Income-tax Officers to permit additional development rebate reserves to be created later on and to allow development rebate that the Income-tax Officer had allowed the development rebate to the petitioner on the said rolls. He contended that the instructions of <ORG> are binding on the Income-tax Officer and they are bound, in the execution of the Act, to carry out those instructions. The reference of Mr. <NAME> is to the circular dated November 16, 1968, exhibit A to the petition, and date November 21, 1958 exhibit B to the petition.It is not contended by the respondents that the circular, exhibit A, is limited to sugar mills. It is admitted that it applies to rolling mill rolls by whom so ever installed. Similarly, it is admitted that the application of the circular dated November 21, 1958, is not confined to tea companies. It is admitted that it is a circular of general application.

19. At this stage we may refer to the affidavit of Miss <NAME>, dated June 14, 1973. The arguments in this case began on June 13, 1973, and after Mr. <NAME> had finished his arguments and Mr. <NAME> had partly argued that this affidavit was tendered. We have refused to take it on the file on the ground that it was tendered at a late stage and the petitioner had no opportunity of dealing with it either by an affidavit in rejoinder or in the arguments. The affidavit not being on the file we need noactually deal with it. But we propose to deal with it none the less. The contention now taken is that in view of the judgments of <ORG> and <ORG> is was a mistake to have allowed development rebate on the rolls to the extent there was shortfall of development reserve, and that such mistakes can be rectified under section 154 of the Income-tax Act. The income-tax authorities also claim to have withdrawn the circular, exhibit B to the petition, on January 17, 1972. In our opinion, such withdrawal after the rebate has been allowed cannot affect the legal position in this matter. It was argued by Mr. <NAME> that these circulars had no legal effect as they were in the nature of mere interpretation put by <ORG> on the relevant Provisions of the Income-tax Act . We cannot accept this argument as in our opinion these circulars give administrative relief strictly beyond the terms of the relevant sections.

20. Mr. <NAME> next argued that in this case there was no compliance with the circular of November 21, 1958, exhibit B to the petition, as this was a case of non-creation of development rebate reserves and not of insufficiency in the said reserves. He pointed out that in the petition it is admitted that the petitioner had not originally created a development rebate reserve in relation to the rolling mill rolls. He contended that this was not a case of bona fide deficiency. We are afraid, we cannot accept this argument. It is not in dispute that in the relevant years the petitioner debited large amounts to profits and loss account and credited the same to development rebate reserve account. This was done in respect of "plant and machinery". The circular, exhibit A to the petition, accepts the position that rolling mill rolls are plant and machinery. There is no provision in law for separate development rebate reserve created itemwise. There is, therefore, no question of non-creation of reserve in respect of rolling mill rolls. It is clear that development rebate reserve was created and that it was not sufficient to cover the rolling mill rolls. This was obviously due to bona fide mistake because in the years prior to the assessment years the income-tax authorities had not been treating rolling mill rolls as plant and machinery for the purpose of development rebate and it was for the first time by circular, dated November 16, 1968, that <ORG> were instructed to allow development rebate in respect of such rolls. The mistake was not only bona fide, but arose from the previous stand taken by the income-tax authorities themselves. The case of the petitioner, in our opinion, falls squarely within the circular of November 21, 1958.

21. Mr. <NAME> invited our attention to section 119 of the Income-tax Act which provides that the <ORG> may from time to time issue such orders, instructions and directions to other (other than Appellate Assistant Commissioner in the exercise of his appellate functions) income-tax authorities as it may deem fit the proper administration to this Act, and such authorities and all other persons employed in the execution of the Act shall observe and follow such orders, instructions and directions of the <ORG>. Mr. <NAME> contended that the circulars, dated November 16, 1986, exhibit A to the petition, and November 21, 1958, exhibit B to the petition, were issued under section 119 of the Income-tax Act and were biding on the Income-tax Officers. Mr. <NAME> for the respondents conceded that they were binding on the Income-tax Officers, but contended that they were not binding on the court and that the court must decided the matter on the interpretation of section 34 and irrespective of the circulars. We may say that this argument appeared to us to be quite plausible in the beginning until our attention was drawn to the judgment of <ORG> to which we shall refer presently. In the case of <CITATION> when the Income-tax Act was sought to be amended so as to define "dividend" to include loans and advances made by a company to its shareholder, the Minister in-charge of the legislation gave an assurance in <ORG> that XGH outstanding loans and advances will not be subjected to tax if it is shown that they had been genuinely refunded to the respective companies before June 30, 1965. Pursuant to the said assurance a circular was issued by the Central <ORG> of Revenue on May 10, 1965. Referring to the said circular <ORG> observed :

"It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution the Act under section 5(8) of the Act."

22. In the said case <ORG> itself gave effect to the circular. Mr. <NAME> contended that in that case <ORG> enforced the circular as it was issued pursuant to the assurance of a Minister given to <ORG>. We are, however, of the view that it is only the circular which is binding on the Income-tax Officer and can be enforced by the courts and not an assurance given by a Minister in <ORG>. It is the circular that gives legal validity to the assurance.

23. The above case was followed by <ORG> in the case of <CITATION> where effect was given to a circular issued by <ORG> which clearly deviated from the provisions of the Income-tax Act as did the circular in <NAME>'s case. <ORG> gave effect to it. Mr. <NAME> invited our attention to a judgment of <ORG> in the case of <NAME> v. commissioner of Income-tax, where the said court observed that circulars were binding on the Income-tax Officers but not on the courts. In that case the court did not give effect to the circular because it had not been made a part of the case. We might mention that the judgment of <ORG> in <CITATION> was not cited before the Allahabad High court and was not considered by it.

24. In view of the two judgments of <ORG> referred to herein above we hold that the circulars dated November 16, 1968, exhibit A to the petition, and November 21, 1958, exhibit B to the petition, would be binding on the Income-tax Officers and must be given effect to by this court. While so holding we must, however, strike a note of caution that the binding nature of circulars issued by <ORG> must be confined to tax laws and that also for the purpose of giving administrative relief to the taxpayer and not for the purpose of imposing a burden on him. In view of the above finding as to the binding nature of the circulars we hold that there is no mistake at all and, in any event, there is non apparent from the record and the income-tax authorities are not entitled to rectify the assessment in respect of the development rebate allowed by them to the petitioner.

25. There remains one more point which arises only in Miscellaneous Petition No. 190 of 1972. <ORG>, is a subsidiary of the petitioner. The petitioner had received a deposit of Rs. 20,00,000 from this subsidiary company on December 21, 1962, which was treated by <ORG> as a loan and as "deemed dividend" under section 2(22)(e) for the assessment year 1963-64 and was taxed. For the assessment year 1965-66, <ORG>, declared a dividend of Rs. 17,29,647 as payable to the petitioner. This was adjusted against the deposit or loan of Rs. 20,00,000. This was treated by the authorities not to be "dividend" by virtue of proviso (iii) to section 2(22)(e) . The petitioner did not include the amount in the total income in the return of income. In the original assessment <ORG>, however, granted to the petitioner relief under the them existing section 85 of the Act under which dividend attributable to the income from a new industrial undertaking was exempt from taxes. The <ORG>, was incorporated in 1959 and was a new industrial undertaking at that time. On the basis of section 85 , out of the aforesaid dividend, a sum of Rs. 14,12,954 was held exempt from the taxes in the hands of the petitioner. On March 31, 1971, however, the petitioner received a notice under section 154 whereby <ORG> sought to rectify the assessment order for that year on the ground that relief under section 85 was wrongly given to the petitioner since the dividend adjusted in the deposit was not treated as dividend or included in the total income. Ultimately, by an order date February 28, 1972, the rectification order was made.

26. Under section 2(22)(e) "dividend" includes any payment by a company of any sum by way of advance or loan to a shareholder, being a person who has a substantial interest in the company or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. It is not in dispute that on December 21, 1962, <ORG>, Possessed accumulated profits. The deposit of Rs. 20,00,000 made on December 21, 1962 by the said subsidiary company to its shareholder, the petitioner, was therefore, clearly a "dividend" within the meaning of section 2(22)(e) . Accordingly, it was taxed as such. It is not the contention of Mr. <NAME> in this petition that this deposit treated as a dividend attracted the provisions of section 85 which provides that income-tax shall not be payable by a shareholder in respect of so much of any dividend paid or deemed to be paid to him out of the profits and gains derived by a company from an industrial undertaking to which section 84 applies and is attributable to that part of the profits and gains on which income-tax is not payable by the company under section 84 . Section 84 pertains to income of newly established industrial undertakings or trade. There is, therefore, no dispute about the fact that the amount of Rs. 20,00,000 was rightly taxed in the assessment year 1963-64.

27. The contention of Mr. <NAME> is that the amount of Rs. 14,12,954 out of the said dividend of Rs. 17,29,647 was exempt from tax under the then section 85 of the Income-tax Act in the hands of the petitioner as it was a dividend from a newly established undertaking. Mr. <NAME> has pointed out that section 2(22)(e) , proviso (iii), states that "dividend" does not include any dividend paid by a company which is set off by the company against the whole or part of any sum previously paid by it and treated as a dividend within the meaning of section 2(22)(e) to the extent to which it is set off. Mr. <NAME> contended that in view of the fact that the amount of Rs. 17,29,647 was set off against the deposit treated as a dividend under section 2(22)(e) , the dividend of Rs. 17,29,647 was not a dividend at all by virtue of the proviso and hence not include in the total income. We find this argument incontrovertible. Mr. <NAME> tried to argue that in fact this amount of Rs. 17,29,647 was by its own nature a dividend, but for the purpose of section 2(22)(e) it was not to be treated as a dividend as it was being set off. But it would be a dividend for the purpose of section 85 , because, according to him, section 2(22)(e) as deeming provision and so was the proviso (iii) and the intention in enacting the proviso was merely to give tax relief under section 2(22)(e) and that this deeming must not be extended to section 85 . We do not accept this argument because to accept it would be to hold that what is not a dividend for the purpose of section 2(22)(e) is a dividend for the purpose of section 85 in the same Act and we find no warrant for such a distinction.

28. Mr. <NAME> further pointed out that section 85 was a part of Chapter VII, the heading of which was "Incomes forming part of total income on which no income-tax is payable". He pointed out that because the dividend of Rs. 17,29,647 was not treated as dividend, it was not included in there turn filed by the petitioner in the total income. It was, therefore, not taxed at all. Mr. <NAME> pointed out that the petitioner was not content with the fact that this amount was not taxed at all, but it goes further and contends that by virtue of section 85 an amount equal to income-tax payable on the amount of Rs. 14,12,954 should be paid to the petitioner as relief under section 85 . He admitted that this had been done by the Income-tax Officer in the original assessment, but this was obviously a mistake and was liable to be rectified.

29. In our view, the amount of Rs. 17,29,647 was not a dividend by virtue of proviso (iii) to section 2(22)(e) and as such it was not included in the total income under Chapter VII. In fact, no income-tax was paid on it. There is, therefore, no question of the petitioner getting relief under section 85 in respect of the said amount. This relief was granted to the petitioner in the original assessment obviously due to a mistake which the income-tax authorities are entitled to rectify. There will, therefore be no relief given to the petitioner in respect of the amount of Rs. 14,12,954.

30. In the result Miscellaneous Petition No. 190 of 1972, rectification notice dated February 14, 1972, part of exhibit G collectively, is set aside. The rectification orders dated February 28, 1973, in so far as they pertain to development rebate are also set aside, but not in so far as they pertain to the tax on Rs. 14,12,954. As both the parties have partly succeeded, there will be no order as to costs. The demand notice in respect of the assessment year 1965-66 to stand reduced in accordance with this judgment. The remaining demand notices are set aside.

31. In Miscellaneous Application No. 226 of 1974 the rule will be made absolute in terms of prayers (a) and (b) with costs.