PETITIONER: <NAME> Vs. RESPONDENT: THE COMMISSIONER OF GIFT TAX, DATE OF JUDGMENT: 17/08/2000 BENCH: S.P. Bhuracha , <NAME> , & <NAME> JUDGMENT:

<NAME>

L...I...T.......T.......T.......T.......T.......T.......T..J This appeal is by the assessee against the judgment and order dated 25.4.1988 passed by <ORG> of <ORG>. It relates to the assessment year 1972- 73.

<ORG>, Hyderabad (for short the `Tribunal' ) had referred the following question under 26(1) of the Gift-tax Act , 1958 (for short the `Act') for the opinion of <ORG> :-

"Whether on the facts and in the circumstances of the case, the <ORG> was right in holding that the release by the assessee who was one of the partners in the firm of <ORG>, of his rights in the assets of the firm for a consideration of Rs. 3,00,000/- when the market value of the assets of the firm in proportion to his share was in excess thereof, did not amount to a gift within the meaning of the Gift-tax Act ."

<ORG> by the impugned judgment answered the said question in negative and against the assessee.

Briefly stated, the facts leading to the filing of this appeal are as follows.

The appellant and his brother <NAME> were the partners of a partnership firm constituted on 9.1.1965 under the name and style of "<ORG>". The firm was engaged in the business of a restaurant in a building known as "Mohsin-ul-Mulk Kothi" situated at Abid Road, Hyderabad.

An agreement was entered into between the appellant and his brother <NAME> on 15.4.1971. The terms of the said agreement are set out below: -

"(i) Sri Jagatram (assessee) is to retire before December 31,1971.

(ii) Steps are to be taken to finalise accounts relating to the partnership and determination of the amount due to Sri <NAME> on retirement.

(iii)Sri <ORG> agreed to pay a sum of Rs. 1,50,000 to <ORG> towards the value of 50% share of the goodwill of the firm.

(iv) The above sum of Rs. 1,50,000 payable by Sri Bishanlal to Sri <NAME> shall be in addition to the sum due to Sri <NAME> from the partnership at the time of retirement.

(v) If the total sum including 50% share value of the goodwill, i.e., Rs. 1,50,000/-, payable to Sri <NAME> falls below Rs. 3,00,000, the amount in excess of the balance actually due to Sri <NAME> at the time of retirement shall be treated as the sale value of 50% share of the goodwill belonging to Sri <NAME>.

(vi) Sri <NAME> shall execute proper conveyance in favour of <NAME> conveying 50% share in the land and building in which the business of 3-Aces is carried on.

(vii)It is open to Sri Bishanlal to classify the sum payable to Sri <NAME> as between movable and immovable properties and get necessary documents executed by Sri <NAME>."

Pursuant to the said agreement, a Deed of Dissolution of the partnership was executed on 22.11.1971 w.e.f. that date. The relevant terms contained in the Deed of Dissolution are given below:-

"(i) All the assets and liabilities of the partnership including the land and building are taken by Sri Bishanlal from November 22, 1971.

(ii) Sri <NAME> renounced his interest, share and interest in the said assets and liabilities from November 22, 1971.

(iii)In full settlement and satisfaction of the share, right and interest of Sri <NAME> in the partnership including land and buildings, profits and goodwill and the amounts standing to the credit of Sri <NAME> in the partnership accounts as on November 21, 1971, Sri <NAME> has agreed to receive Rs. 3,00,000.

(iv) Out of the said Rs. 3,00,000, Rs. 1,00,000 has already been paid. The balance of Rs. 2,00,000 is payable by <ORG> against the sale consideration of the undivided 50% share in the land and building known as "Mohsin-ul-Mulk Kothi".

(v) Sri <NAME> should immediately execute a sale deed and register the same in favour of Sri <NAME> conveying his 50% share in the land and building for Rs. 2,00,000."

It was on 10.3.1972 that the appellant and <NAME> executed a document styled as `Release Deed' pursuant to and consistent with the aforementioned two documents.

Originally assessment of gift tax was made on 12.2.1972 on a total gift of Rs. 70,000/. After allowing exemption of Rs. 5,000/- it was determined at Rs. 65,000/-. Subsequently, the Gift Tax Officer took up the proceedings under Section 16 of the Act, 1958 by re-opening the assessment already made. He valued the share of the appellant in the partnership assets at Rs. 12,67,015/-. An amount of Rs. 3,00,000/- paid by <NAME> to the appellant was deducted and thus the value of the property alleged to have been gifted by the appellant to his brother <NAME> was arrived at Rs. 9,67,015/-. On appeal by the appellant, the Commissioner of Gift-tax (Appeals) confirmed the order of the Gift-tax Officer. However, he reduced the total value of the gift by Rs.3,77,000/-. The appellant took up the matter in further appeal before the <ORG>. The <ORG> accepted the appeal holding that the distribution of assets between partners on the dissolution of the firm, even though unequal, does not amount to "transfer of property" within the meaning of Section 2(xxiv) and therefore, did not amount to "gift" as defined in Section 2(xii) of the Act.

At the instance of the <ORG>, the <ORG> referred the above stated question under Section 26(1) of the Act for the opinion of <ORG>. <ORG> referring to the various decisions and for the reasons stated in the impugned judgment took the view in favour of the <ORG>.

In doing so, <ORG> relied on <ORG> vs. <NAME> [1987]166 ITR 124(SC), <NAME> vs. <ORG> [1985] 153 ITR 481 (Mad) and <ORG> vs. <NAME> [ 1982] 133 ITR 317 (Bom.) distinguishing the other cases, particularly the case of <ORG> vs. <NAME> [ 1971] 82 ITR 599(SC) strongly relied on in support of the case of the appellant.

At the outset, the learned counsel for the appellant submitted that the appellant is not challenging the valuation of property of alleged gift. Hence, it is unnecessary for us to go into that question. The learned counsel for the appellant seriously contended that <ORG> manifestly erred in answering the question in favour of the <ORG> contrary to the ratio and principles stated in the case of <NAME> (supra). He further submitted that the decisions relied on by <ORG> in support of its conclusion were not directly on the point and some of them arose under the Estate Duty Act .

Per contra, the learned senior counsel for the respondent argued supporting the view taken by <ORG>.

We have carefully considered the submissions made by the learned counsel for the parties. In order to appreciate the respective contentions of the parties and to resolve the controversy we consider it appropriate to extract definitions of "Gift" and "Transfer of property" from Section 2 of the Act: -

"2 (xii) "gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in section 4 , deemed to be a gift under that section;

Explanation. -- A transfer of any building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-tax Act, by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money's worth, shall be deemed to be a gift made by such person."

"2 (xxiv) "transfer of property" means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes --

(a) the creation of a trust in property;

(b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property;

(c) the exercise of a power of appointment (whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made) of property vested in any person; not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and

(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person;"

This Court in <CITATION>  82 ITR 599 SC ], arising under the Act itself construing and considering the very same provisions held that in a Hindu Joint Family by allotting greater share to other members of coparcenary than that to which they were entitled, the assessee could not be held to have made a gift. Facts of the case were that the assessee was the <NAME> of <ORG> consisting of himself, his son and his six grandsons. There was a partition in the family property. The total value of the properties divided was Rs.8,51,440/- but the assessee, the <NAME> took properties worth only Rs.1,78,343/- allotting the remaining properties to other coparceners. After considering various decisions and provisions of law, this Court arrived at the following conclusions:-

i) That the partition did not effect any transfer as generally understood in law and did not, therefore, fall within the definition of gift in Section 2(xii) of the Act.

ii) That the partition in the family could not be considered to be a disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property within the meaning of those words in Section 2(xxiv) of the Act. iii) That the partition was not a transaction entered into by the assessee with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person and, therefore, Section 2(xxiv)(d) did not apply. (iv) That, therefore, there was no gift by the assessee of which he was liable to pay gift tax. On the reason that a member of Hindu Undivided Family has no definite share in the family property before the division and he cannot be said to diminish directly or indirectly the value of his property or to increase the value of the property of any other coparcener by agreeing to take a share lesser than what he would have got if he would have gone to a court to enforce his claim.

The word 'transaction' in clause (d) of Section 2(xxiv) takes its colour from the main clause; it must be a transfer of property in some way. The words disposition, conveyance, assignment, settlement, delivery and payment are all used to indicate some kind of transfer of property. An interpretation clause which extends the meaning of a word does not take away its ordinary and popular meaning.

It is settled position in law that a partition of Hindu Undivided Family cannot be considered as a transfer in the strict sense. <CITATION> [(1965) 2 SCR 100 = 55 ITR 637] this Court stated thus: -

"But, is a partition of joint Hindu family property a transfer in the strict sense? We are of the opinion that it is not. This was so held in <CITATION> 1951 Mad. 607]. <NAME> (then a judge of <ORG>), after examining several authorities, came to the conclusion that 'partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty. Each one of the shares had an antecedent title and, therefore, no conveyance is involved in the process, as a conferment of a new title is not necessary.' <ORG> again examined the question in <CITATION> [41 ITR 297 (Mad.)], with reference to section 16(3)(a)(iv) . It observed that 'obviously no question of transfer of assets can arise when all that happens is separation in status, though the result of such severance in status is that the property hitherto held by the coparcenary is held thereafter by the separated members as tenants-in-common. Subsequent partition between the divided members of the family does not amount either to a transfer of assets from that body of the tenants-in-common to each of such tenants-in-common'."

This <ORG> in <NAME> case aforementioned has stated thus: -

"A reading of this section clearly goes to show that the words "disposition", "conveyance", "assignment", "settlement", "delivery" and "payment" are used as some of the modes of transfer of property. The dictionary gives various meanings for those words but those meanings do not help us. We have to understand the meaning of those words in the context in which they are used. Words in a section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve. If so understood, it is clear that the word "disposition" in the context means giving away or giving up by a person of something which was his own, "conveyance" means transfer of ownership, "assignment" means the transfer of the claim, right or property to another, "settlement" means settling the property, right or claim conveyance or disposition of property for the benefit of another, "delivery" contemplated therein is the delivery of one's property to another for no consideration and "payment" implies gift of money by someone to another. We do not think that a partition in a Hindu Undivided Family can be considered either as "disposition" or "conveyance" or "assignment" or "settlement" or "delivery" or "payment" or "alienation" within the meaning of those words in s. 2 (xxiv).

This leaves us with cl. (d) of S. 2 (xxiv) which speaks of a transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of another person. A member of <ORG> who, as mentioned earlier, has no definite share in the family property before division, cannot be said to diminish directly or indirectly the value of his property or to increase the value of the property of any other coparcener by agreeing to take a share lesser than what he would have got if he had gone to court to enforce his claim. Till partition, his share in the family property is indeterminate. He becomes entitled to a share in the family property only after the partition. Therefore there is no question of his either diminishing directly or indirectly the value of his own property or of increasing the value of the property of anyone else. The "transaction" referred to in cl. (d) of s. 2 (xxiv) takes its colour from the main clause viz., it must be a transfer of property in some way. This conclusion of ours gets support from sub-clause (a) to

(c) of clause (xxiv) of s. 2 , each of which deals with one or the other mode of transfer. If <ORG> intended to bring within the scope of that provision partitions of the type with which we are concerned, nothing was easier than to say so. In interpreting tax laws, courts merely look at the words of the section. If a case clearly comes within the section, the subject is taxed and not otherwise."

This Court again in <CITATION> [AIR 1966 SC 1300], considering the provisions of Sections 14 , 15 , 29 , 32 , 37 , 38 and 48 of Partnership Act, 1932 has explained as to the nature of property during subsistence of partnership and after its dissolution. It is held that "from a perusal of these provisions it would be abundantly clear that whatever may be the character of the property which is brought in by the partners, when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realization of this property, and upon dissolution of the partnership to a share in the money representing the value of the property. No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership, however, no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time, and upon the dissolution of the firm to a share in the assets of the firm which remain after satisfying the liabilities set out in <ORG>.

(a) and sub-Cls. (i), (ii) and (iii) of Cl. (b) of S.48."

<CITATION>  120 ITR 49 SC] this Court considered few provisions of Income-tax Act , 1961. Referring to the case of <NAME> and other cases expressed the view that a partnership firm under the Indian Partnership Act is not a distinct legal entity apart from the partners constituting it and that in law the firm as such has no separate rights of its own. When one talks of the property or assets of the firm all that is meant is property or assets in which all partners have a joint or common interest. Hence the contention that upon dissolution of the firm rights in the partnership assets are extinguished, cannot be accepted. It is further, held that the partners own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and there is no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of Section 2(47) of the Income-tax Act, 1961. Although the case arose under the provisions of Income-tax Act , but as to the nature and character of transaction of mutual adjustment of rights between the partners upon dissolution of a firm, it was clearly held that such a transaction did not amount to transfer. If there is a sale or transfer of assets by the assessee to a person, the position would be different. Since a partner in a firm has no exclusive right on any property of the firm he cannot transfer the property. But upon the dissolution of a firm allotment or adjustment of the assets takes place. Hence there was no element of transfer in such a case.

Yet, in another case <CITATION>  68 ITR 240 SC], dealing with the provisions of Section 10(2)(vii) of Income-tax Act again referring to <NAME> case this Court took the view that a partner might in an action for dissolution insist to sell the assets of partnership to realize his share. But where in satisfaction of the claim of a partner to his share in the value of the residue determined on the footing of an actual or notional sale, the properties so allotted cannot be taken to have been sold to him.

On principles and in view of the clear ratio, the decision of <NAME> (supra) of this Court supported the case of the appellant which decision was rightly applied by the <ORG> to the facts of the case. <ORG> in relation to the said decision has stated thus :-

"Be that as it may, it is not for us to express any opinion on the said criticism. By virtue of Article 141 of the Constitution, the said decision and even the observations aforesaid are binding upon us. In our opinion, however, the ratio of the said decision has no application to the distribution of assets as between partners whose shares inter se are specific and determined at any given point of time. Moreover, this decision has to be read and understood in the light of the subsequent decision of <ORG> in CED vs. <NAME>  105 ITR 92, which is, no doubt, a case arising under the Estate Duty Act . Section 2(15) of the Estate Duty Act defines "property" in the following terms."

<ORG> having rightly stated that the said decision and even the observations made were binding on it wrongly did not apply the ratio of the said decision to the facts of the case in hand. Further <ORG> committed an error in stating that the said decision had no application to the distribution of the assets as between the partners whose shares inter-se are specific and determined at any given point of time and that the said decision had to be read and understood in the light of the subsequent decision of this Court in <NAME> case. As in the case of <ORG>, the coparceners do not have exclusive rights on any specific property of the family, the property allotted to their shares become specified only on partition; the same is the position in the case of partner of a firm. No partner of a firm can claim exclusive or specific right in any specific asset of the property of a firm. <ORG> also have definite share in <ORG>. So also the partners have definite share in the partnership. In our considered view, the principles stated in <NAME> case equally apply to case of allotment or adjustment of properties among the partners upon dissolution of a firm. We fail to understand how <NAME> case made any difference. The said case did not show any disagreement with the principles stated in <NAME> case and no distinction was made to take a different view. On the other hand, principles stated in <NAME> case were affirmed. In relation to <NAME> case, in <NAME>, it is stated thus:-

"That a case under the Gift-tax Act , 1958, and the construction of section 2(xxiv) fell for decision. Certainly, many of the observations there, read de hors the particular statute, might reinforce the assessee's stand. This court interpreted the expression "transfer of property" in section 2(xxiv) and held that the expression "disposition" used in that provision should be read in the context and setting of the given statute. The very fact that "disposition" is treated as a mode of transfer takes the legal concept along a different street, if one may use such a phrase, from the one along which that word in the Estate Duty Act is traveling. Mr. Justice <NAME> rightly observed, if we may say so with respect, that:

"Words in the section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve." (pp.605-606).

The word" transaction" in section 2(24) of the Gift-tax Act takes its colour from the main clause, that is, it must be a "transfer" of property in some way. Since a partition is not a "transfer" in the ordinary sense of law, the court reached the conclusion that a mere partition with unequal allotments not being a transfer, cannot be covered by section 2(xxiv) . A close reading of that provision and the judgment will dissolve the mist of misunderstanding and discloses the danger of reading observations from that case for application in the instant case. The language of section 2(15) , Explanation 2, is different and wider and the reasoning of <NAME> cannot therefore, control its amplitude. It is perfectly true that in ordinary Hindu law a partition involves no conveyance and no question o transfer arises when all that happens is a severance in status and the common holding of property by the coparcener is converted into separate title of each coparcener as tenant-in-common. Nor does subsequent partition by metes and bounds amount to a transfer. The controlling distinction consists in the difference in definition between the Gift-tax Act ( section 2(xxiv) and the Estate Duty Act ( section 2(15) ."

We find that <NAME> case supports the view taken in <NAME> case. Added to this, Section 2(15) of the Estate Duty Act, defining "property" came up for consideration in <NAME> case. We may state here itself that the words and expressions defined in one statute as judicially interpreted do not afford a guide to construction of the same words or expressions in another statute unless both the statutes are para-materia legislations or it is specifically so provided in one statute to give the same meaning to the words as defined in other statute. The aim and object of the two legislations, namely, the Gift-tax Act and the Estate Duty Act are not similar.

<CITATION>  79 ITR 594 (SC), it is clearly stated that where in the course of dissolution, the assets of the firm are divided between the partners according to the respective shares, by allotting the individual assets or paying the money value equivalent thereof, no transfer is involved and that it is merely a case of distribution of assets.

The same view is taken in Addl. <CITATION>  165 ITR 166 (SC) that where a partner retires from a firm and receives his share of amount calculated on the valuation of the net partnership assets including goodwill of the firm, no transfer is involved.

We now refer to the cases relied on by <ORG> to support its view. In CGT vs. <NAME> [1974] 97 ITR 393 (Guj), this Court reversed the decision of Gujarat <ORG> and in the light of the facts and circumstances of the case, held that there was a gift for the purpose of the Gift-tax Act . In that case, a firm by name M/s. <NAME> came into existence with three partners namely, <NAME>, <ORG> and <ORG> with 7 annas, 4 annas and 5 annas shares respectively. During the assessment year 1963-64, under the new deed, <ORG> retired. The share of <ORG> remained unchanged. One <ORG> became a partner with 4 annas share. The share of assessee <NAME> was reduced to 4 annas. For the remaining 4 annas share, 2 minor sons of <NAME> were admitted to the benefits of the firm with 12% and 13% interest respectively. There was also no change in the share capital standing in the name of the assessee. As can be seen from the facts stated above, <ORG> retired and the firm was reconstituted; two minor sons of <NAME>, one of the partners were admitted to the benefits of the partnership and simultaneously share of said <NAME> was reduced from 7 annas to 4 annas giving 3 annas share to the minor sons. In this situation when at the time of the reconstitution of the firm, a 3 annas share out of <NAME>'s 7 annas share in the partnership firm was given to his minor sons it was taken as transfer of property by way of gift and as such it was taxable. Hence the case of <NAME> did not advance the case of the <ORG> on the facts of the case before us.

The case of <NAME> was also a case where the assessee's share was reduced and his minor children were admitted to the benefits of the partnership with 8% share in the profits and this case was referred to and approved by this Court in <NAME> case. The case of <NAME> is again a case where in the constitution of a firm, minors were admitted to the benefits of the partnership firm. In all these cases, minors were admitted to the benefits of the partnership and if such partner or minor did not bring in capital of his own into the partnership firm corresponding to his share, it was held that the transaction amounted to a gift. But the present case stands entirely on a different footing. It is clearly and merely a case of adjustment or distribution of assets of the firm in regard to share of the appellant on its dissolution and as such no transfer of property was involved in it.

Thus, in our view, the High court was not right in applying the decisions in (1) <NAME> (2) M.K. Kuppuraj, (3) Premji Trikamji to the facts of the case in hand.

The cases of this Court in (1) <NAME>, ( 2) <ORG>, (3) <ORG>, (4) <NAME> and (5) <NAME> aforementioned fully support the appellant on facts and in the circumstances of the case.

Having regard to all aspects and for the reasons stated above, we conclude that <ORG> committed an error in answering the question in negative i.e. in favour of the <ORG> and against the assessee-appellant. Hence this appeal is entitled to succeed. The judgment and order of <ORG> reported in [1988] 172 ITR 632 (AP) are set aside, upholding the order of the <ORG>. The question aforementioned is answered in the affirmative i.e. against the <ORG> and in favour of the assessee-appellant. The appeal is ordered accordingly. No costs.


PETITIONER: UNION OF INDIA Vs. RESPONDENT: COL. J. N. SINHA AND ANR. DATE OF JUDGMENT: 12/08/1970 BENCH: <NAME>, K.S. BENCH: <NAME>, K.S. SHAH, J.C. CITATION: 1971 AIR 40 1971 SCR (1) 791 1969 SCC (2) 662 CITATOR INFO : R 1972 SC2185 (12) F 1973 SC 698 (11) R 1973 SC1252 (14) RF 1975 SC2057 (8) RF 1976 SC2433 (7) R 1976 SC2581 (18) F 1977 SC 854 (9) R 1978 SC 597 (218) R 1978 SC 851 (65,66) R 1980 SC 563 (16,18,21,22,25,27,31) R 1981 SC 594 (5) RF 1981 SC 818 (22,29) R 1984 SC 630 (4) R 1985 SC1416 (99) RF 1986 SC 555 (6) R 1987 SC 65 (2) RF 1987 SC 593 (23) RF 1987 SC1933 (10) R 1989 SC2218 (5) RF 1990 SC1004 (8) R 1990 SC1368 (22) RF 1991 SC 101 (22,152,261) RF 1991 SC 564 (6) R 1992 SC1020 (12,16,17,23,24,25,29,31) ACT: Constitution of India 1950, Arts. 309, 310-Rules made under Art.309- Pleasure doctrine embodied in Art. 310- Fundamental Rule 56(j) embodies pleasure doctrine-Compulsory refirement at age of 50 after a certain number of years of service does not have civil consequences Rules of natural justice cannot be invoked in such case-Rules of natural justice operate only in areas not covered by law validly made. HEADNOTE: The first respondent joined the post of Extra Assistant Superintendent in <ORG> in 1938. Later he was taken into the Class I Service of <ORG> and rose to the post of Deputy Director. He also officiated as -Director. On August 13, 1969 the President of India pleased by an order under Rule 56(j) of the Funda- mental Rules to compulsorily retire the first respondent from Government service. No reasons were given in the order. The appellant challenged the order by a writ petition in <ORG>. The failure on the part of the concerned authority to give opportunity to the first respondent to show cause against his compulsory retirement was held by <ORG> to have amounted to a contravention of the principles of natural justice. Against the judgment of <ORG> <ORG> appealed. HELD : Rules of natural justice are not embodied rules nor can they be elevated to the position of fundamental rights. As observed by this Court in <NAME>'s case these rules can operate only in areas not covered by any law validly made. If a statutory provision can be read consistently with the principles of natural justice, the <ORG> should do so because it must be presumed that the legislatures and the statutory authorities intend to act in accordance with the principles of natural justice. But on the other hand a statutory provision either specifically 'or by necessary implication excludes the application of any or all the principles of natural justice then the court cannot ignore the mandate of the legislature or the statutory authority and read with the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred and the effect of the exercise of the power. [794 G-795 C] Fundamental Rule 56(i) does not in terms require that any opportunity should be given to the concerned Government servant to show cause against his compulsory requirement. It says that the appropriate authority has the absolute right to retire a government servant if it is of the opinion that it is in the public interest to do so. If that authority bona fide forms that opinion the correctness of that opinion cannot be challenged before courts, though it is open to an aggrieved party to contend that the requisite opinion has not been formed or the decision is based on collateral grounds or that it is an arbitrary decision. The respondent had not challenged the impugned order on any of these grounds. [795 D-F] Compulsory retirement does not involve any civil consequence. A person retired under Rule 56(i) does not lose any of the rights acquired 792 by him before retirement. The rule is not intended for taking any penal action against government servants. It merely embodies one of the facets of the pleasure doctrine embodied in Art. 310 of the Constitution. The rule holds the balance between the, rights of the individual government servant and the interests of the public. While a minimum service is guaranteed to the government servant, the government is given power to energise its machinery and make it more efficient by compulsorily retiring those who in its opinion should not be there in public interest. Three months notice is provided to enable the retired employee to find out other suitable employment. [795 G-796 B] On the above view of the law, namely, that no notice to show-cause was required, the appeal must be allowed. <CITATION> , A.I.R. 1965 S.C. 280. <CITATION> , A.I.R. 1970, S.C. 150, <CITATION> .,  2 S.C.R. 625 distinguished. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 381 of 1970. Appeal-from the judgment and order dated December 22, 1969 of <ORG> in Civil Writ No. 746 of 1969. <NAME>, Attorney-General and <NAME>, for the appellant.

<NAME>, <NAME>, and <NAME>, for respondent No. 1.

<NAME>, for respondent No. 2.

The Judgment of the Court was delivered by. <NAME>, J. 'In this appeal by certificate the only question that was canvassed before us was as regards the validity of the order contained in memorandum No. F. 16-42/68-S-1, dated August 13, 1969 issued by the Government of India, <ORG>, retiring the 1st respondent compulsorily from government service in exercise of the powers conferred under cl. (j) -of Fundamental Rule 56 with effect from August 14 1969. That order was attacked before <ORG> on various grounds. <ORG> rejected some of those grounds. It did not find it necessary to decide ' a few others but accepting the contention of the respondent that in making the order, the appellant -had violated the principles of natural justice, it held that the impugned order is invalid <ORG> accordingly issued a writ of certiorari quashing that order.

Before us the only contention presented for -our decision was whether <ORG> was right in holding that in making the impugned order the appellant had violated the principles of natural justice. No other contention was taken before us. Hence we shall address ourselves only to that question.

Before proceeding to examine the contention above-formulated it is necessary to set out the material facts. The 1st respondent. herein Col. <NAME> successfully competed in the examination held by <ORG> in 1938 for the post of Extra-Assistant Superintendent in <ORG>. After selection, he was appointed as an Extra-Assistant Superintendent. He worked as probationer for a period of three years and thereafter he was confirmed in that post in 1941. During the second world war, he Volunteered for active-service in the army and was granted an emergency Commission in the army. He was granted a regular commission in the army with effect from October 23, 1942.

In exercise of the powers conferred by the proviso to Art. 309 of the Constitution, the President of India made on August 17, 1950 rules called the Survey of India (Recruitment from Corps of Engineering Officers) Rules, 1950 for regulating the recruitment and conditions of service of persons appointed from <ORG> of <ORG> to <ORG> Rule 2 of the said Rules provides for the recruitment of Military Officers to <ORG> and Rule 3 provides that the recruited officers will be on probation for two years which may be extended by the <ORG> on the advice of the Surveyor General. The 1st respondent was taken into <ORG> under Rule 2 of the aforesaid 1950 Rules as Deputy Superintendent Surveyor with effect from June 1951. Thereafter the President of India in .exercise of the powers under the proviso to Art. 309 , made on July 1, 1960 the Survey of India Class I (Recruitment) Rules, 1960 for regulating the recruitment of <ORG>. The 1st respondent was subsequently promoted firstly as Superintending Surveyor and then as Deputy Director. After sometime he was promoted as Director and lastly as Director (Selection Grade). The last mentioned promotion was made with effect from October 27, 1966. On May 17, 1969, Fundamental Rule 56(j) was amended. Thereafter on August 13, 1969, <ORG> issued the impugned order. The 1st respondent was given three months pay and allowances in lieu of three months notice prescribed in Fundamental Rule 56(1). The 1st respondent being aggrieved by that order, challenged the validity of the same. As mentioned earlier, <ORG> accepted his plea. <ORG> has appealed against that order.

Fundamental Rule 56(j) reads "Notwithstanding anything contained in this Rule the appropriate authority shall, if it is of the opinion that it is in the public interest so to do have the absolute right to retire any Government servant by giving him notice of not less than three months in writing or three months pay and allowances in lieu of such notice

(i) if he is in Class I or Class II Service or post the age limit for the purpose of direct recruitment to which is below 35 years, after he has attained the age of 50 years.

(ii) In any other case after he has attained the age of 5 5 years.

Provided that nothing in this clause shall apply to a Government servant referred to in clause (e) who entered Government service on or before 23rd July, 1966 and to a Government servant referred to in clause (f ) ."

The order impugned merely says that in pursuance of cl. 5 6 ,the President was, pleased to decide that in public interest the 1st respondent should retire from government service with effect from August 13, 1969 and that he would be given three months pay and allowances in lieu of three months notice provided in the said rule. No reasons are given for compulsorily retiring the 1st respondent. Admittedly no opportunity was given to him to show cause against his compulsory retirement. The failure on' the part of the concerned authority to give an opportunity to the 1st respondent to show cause against his compulsory retirement was held by <ORG> to have amounted to a contravention of the principles of natural justice. The validity of Fundamental Rule 56(j) was not questioned before <ORG> nor before us. Its validity is not open to question in view of the decision of this <ORG> in <CITATION> (1). Fundamental Rule 56(j) in terms does not require that any

-opportunity should be given to the, concerned government servant 'to show cause against his compulsory retirement. A government -servant serving under <ORG> holds his office at the pleasure of the President as provided in Art. 310 of the Constitution. But this "Pleasure" doctrine is subject to the rules or law -made under Art. 309 as well as to the conditions prescribed under Art. 311. Rules of natural justice are not embodied rules nor can they be elevated to the position of fundamental rights. As observed by this Court in <CITATION> (2) "the aim of rules of natural justice is to secure justice or to put it negatively to -prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words they do not supplant the law but supplement it." It (1) A. I. R. 1965 S. C. 280 (2) A. I. R. 1970 , S. C. 150.

is true that if a statutory provision can be read consistently with the principles of natural justice. the courts should do so because it must be presumed that the legislatures and the statutory authorities intend to act in accordance with the principles of naural justice. But if on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the principles of natural justice then the court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred / and the effect of the exercise of that power. Now coming to the express words of Fundamental Rule 56(j), it says that the appropriate authority has the absolute right to retire a government servant if it is of the opinion that it is in the public interest to do so. The right conferred on the appropriate authority is an absolute one. That power can be exercised subject to the conditions mentioned in the rule.' one of which is that the concerned authority must be of the opinion that it is in public interest to do so. If that authority bona fide forms that opinion, the correctness of that opinion cannot be challenged before courts. It is open to an aggrieved party to contend that the requisite opinion has not been formed or the decision is based on collateral grounds or that it is an arbitrary decision. The 1st respondent challenged the opinion formed by the government on the ground of mala fide. But that ground has failed. <ORG> did not accept that plea. The same was not pressed before us. The impugned order was not attacked on the ground that the required opinion was not formed or that the opinion formed was an arbitrary one. One of the conditions of the 1st respondent's service is that the government can choose to retire him any time after he completes fifty years if it thinks that it is in public interest to do so. Because of his compulsory retirement he does not lose any of the rights acquired by him before retirement. Compulsory retirement involves no civil consequences. The aforementioned rule 56(j) is not intended for taking any penal action against the government servants. That rule merely embodies one of the facets of the pleasure doctrine embodied in Art. - 3 1 0 of the Constitution. Various considerations may weigh with, the appropriate authority while exercising the power conferred under the rule. In some cases, the government may feel that a particular post may be more usefully held in public interest by an officer more competent than the one who is holding. It may be that the officer who is holding the post is not inefficient but the appropriate authority may prefer to have a more efficient officer. It may further be that in certain key posts public interest may require that a person of undoubted ability and integrity should be there. There is no denying the fact that in all organizations and more so in government organizations, there is good deal of dead wood. It is in public interest to chop off the same. Fundamental Rule 56(j) holds the balance between the rights of the individual government servant and the interests of the public. 'While a minimum service is guaranteed to the government servant, the government is given power to energise its machinery and make it more efficient by compulsorily retiring those who in its opinion should not be there in public interest.

It is true that a compulsory retirement is bound to have some adverse effect on the government servant who is compulsorily retired but then as the rule provides that such retirements can be made only after the officer attains the prescribed age. Further a compulsorily retired government servant does not lose any of the benefits earned by him till the date of his retirement. Three months' notice is provided so as to enable him to find out other suitable employment.

In our opinion <ORG> erred in thinking that the compulsory retirement involves civil consequences. Such a retirement does not take away any of the rights that have accrued to the government servant because of his past service. It cannot be said that if the retiring age of all or a section of the government servants is fixed at 50 years, the same would involve civil consequences. Under the existing system there is no uniform retirement age for all government servants. The retirement age is fixed not merely on the basis of the interest of the government servant but also depending on the requirements of the society. <ORG> was not justified in seeking support for its conclusion from the decision of this <ORG> in <CITATION> and ors.(1) and <CITATION> (').

In <NAME> case(') Dr. <NAME> date of birth was refixed by the government without giving her proper opportunity to show that the enquiry officer's report was not correct. It is under those circumstances this Court held that the order refixing the date of birth was vitiated for failure to comply with the principles of natural justice. Therein the impugned order took away some of the existing rights of the petitioner.

In <NAME>'s case('), a committee consisting of Chief Conservator of, Forest, Kashmir and others was appointed to recommend names of the officers from <ORG> for (1) [1967] 2 S. C. R. 625.

(2) A.I.R. 1970 S.C. 150.

being selected for the Indian, <ORG>. The Chief Conservator of Forests, Kashmir was one of the candidates for selection. Further it was established therein that some of the officers who competed with him had earlier challenged his seniority and consequently his right to be the Chief Conservator and that dispute was pending. Under those circumstances this Court held that there -was contravention of the principles of natural justice.

For the reasons mentioned above, we are unable to agree with the conclusion reached by <ORG> that the impugned order is invalid. We accordingly allow this appeal, set aside the judgment and decree of <ORG> and dismiss the writ petition. In the circumstances of the case we make no order as to costs.

[The <ORG> by order dated November 18, 1970 and January 19, 1971 on an application for review filed by the respondent vacated its order dismissing the writ petition. Instead, the proceedings were remanded to the High <ORG> for decision on such points as were not, dealt with and decided in the judgment of that court. Ed.] G.C. Appeal allowed. Proceedings remanded.


<NAME>, J.

1. Leave granted.

2. <NAME>, on his application, is discharged.

3. Heard the counsel on either side. This is the fourth round of litigation relating to the same subject matter. On June 14, 1979 the first appellant claimed to have entered into an agreement to purchase the residential house situated in Jaipur for a consideration of Rs. 51,000/-. He laid the suit for specific performance and the suit was decreed ex parte. On August 10, 1983, the sale deed was executed through court. On April 28, 1984, the respondent's wife filed Suit No. 83 of 1984 and also sought for temporary injunction from dispossession. In May 1984, <ORG> rejected the application for ad interim injunction which was confirmed, on appeal, by <ORG> on July 14, 1987. Thereafter the suit was got dismissed for non-prosecution. The first appellant filed Execution Application No. 6/85 in which the respondent filed five unsuccessful objections. The first was dismissed on March 4, 1987. The second one on December 4, 1987, which was confirmed on revision by <ORG> on January 20, 1988. The third one on October 4, 1987 and fourth one on January 17, 1989. Even thereafter 5th objection was filed on May 23, 1989 which was dismissed on October 24, 1989. This was also confirmed by <ORG> in Civil Revision No. 109/90 dated August 7, 1990. The third round of litigation was started at the behest of his sons in O.S. No. 278/88 claiming to be the joint family property and for a declaration that the sale does not bind them and they sought for partition. They also sought for ad interim injunction which was rejected on July 7, 1988. On appeal, <ORG> in Misc. Appeal No. 177/88 confirmed it by the order dated July 26, 1988. The 4th round of litigation was started by the respondent in filing the present suit on December?, 1988 pleading, that the first appellant being his counsel played fraud on him, in paragraphs 9 and 10, the details of which are not material for the purpose of this case. He also sought for an interim injunction from dispossession. In the meanwhile a part of the property, namely, shops were obtained as symbolical possession by the first appellant. <ORG> by order dated November 3, 1990 dismissed the application. On appeal, <ORG> in Misc. Appeals Nos. 498/90 and 501/90 by the impugned order dated February 26, 1991 allowed the applications and granted ad interim injunction restraining the appellants from taking possession of the residential portion.

4. Order 39, Rule 1(c) provides that temporary injunction may be granted where, in any suit, it is proved by the affidavit or otherwise, that the defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in relation to any property in dispute in the suit, the court may by order grant a temporary injunction to restrain such act or make such other order for the purpose of staying and preventing... or dispossession of the plaintiff or otherwise causing injury to the plaintiff in relation to any property in dispute in the suit as the court thinks fit until the disposal of the suit or until further orders. Pursuant to the recommendation of <ORG> clause(c) was brought on statute by Section 88(i)(c) of the Amending Act 104 of 1966 with effect from February 1, 1977. Earlier thereto there was no express power except the inherent power under Section 151 , C.P.C. to grant ad interim injunction against dispossession. Rule 1 primarily concerns with the preservation of the property in dispute till legal rights are adjudicated. Injunction is a judicial process by which a party is required to do or to refrain from doing any particular act. It is in the nature of preventive relief to a litigant to prevent future possible injury. In other words, the court in exercise of the power of granting ad interim injunction is to preserve the subject matter of the suit in the status quo for the time being. It is settled law that the grant of injunction is a discretionary relief. The exercise thereof is subject to the court satisfying that (1) there is a serious disputed question to be tried in the suit and that an act, on the facts before the court, there is probability of his being entitled to the relief asked for by the plaintiff/defendant; (2) the court's interference is necessary to protect the party from the species of injury. In other words, irreparable injury or damage would ensue before the legal right would be established at trial; and (3) that the comparative hardship or mischief or inconvenience which is likely to occur from withholding the injunction will be greater than that would be likely to arise from granting it.

5. Therefore, the burden is on the plaintiff by evidence aliunde by affidavit or otherwise that there is "a prima facie case" in his favour which needs adjudication at the trial. The existence of the prima facie right and infraction of the enjoyment of his property or the right is a condition for the grant of temporary injunction. Prima facie case is not to be confused with prima facie title which has to be established, on evidence at the trial. Only prima facie case is a substantial question raised, bona fide, which needs investigation and a decision on merits. Satisfaction that there is a prima facie case by itself is not sufficient to grant injunction. The <ORG> further has to satisfy that non-interference by the <ORG> would result in "irreparable injury" to the party seeking relief and that there is no other remedy available to the party except one to grant injunction and he needs protection from the consequences of apprehended injury or dispossession. Irreparable injury, however, does not mean that there must be no physical possibility of repairing the injury, but means only that the injury must be a material one, namely one that cannot be adequately compensated by way of damages. The third condition also is that "the balance of convenience" must be in favour of granting injunction. The <ORG> while granting or refusing to grant injunction should exercise sound judicial discretion to find the amount of substantial mischief or injury which is likely to be caused to the parties, if the injunction is refused and compare it with that it is likely to be caused to the other side if the injunction is granted. If on weighing competing possibilities or probabilities of likelihood of injury and if the <ORG> considers that pending the suit, the subject-matter should be maintained in status quo, an injunction would be issued. Thus the <ORG> has to exercise its sound judicial discretion in granting or refusing the relief of ad interim injunction pending the suit.

6. Undoubtedly, in a suit seeking to set aside the decree, the subject-matter in the earlier suit, though became final, the <ORG> would in an appropriate case grant ad interim injunction when the party seeks to set aside the decree on the ground of fraud pleaded in the suit or for want of jurisdiction in the <ORG> which passed the decree. But the <ORG> would be circumspect before granting the injunction and look to the conduct of the party, the probable injuries to either party and whether the plaintiff could be adequately compensated if injunction is refused. This case demonstrates (we are not expressing any opinion on the plea of fraud or their relative merits in the case or the validity of the decree impugned), suffice to state that the conduct of the respondent militates against the bona fides. At present there is a sale deed executed by the <ORG> in favour of the first appellant. If ultimately the respondent succeeds at the trial. They can be adequately compensated by awarding damages for use and occupation from the date of dispossession till date of restitution. Repeatedly the Civil <ORG> and the High <ORG> refused injunction pending proceedings. For any acts of damage, if attempted to make, to the property, or done, appropriate direction could be taken in the suit. If any alienation is made it would be subject to doctrine of lis pendence under Section 52 of the Transfer of Property Act. The High <ORG> without adverting to any of these material circumstances held that balance of convenience lies in favour of granting injunction with the following observations, "keeping in mind the history, various facts which have been brought to my notice, and looking to the balance of convenience and irreparable loss, I think it will be in the interest of justice to allow these appeals and grant temporary injunction that the appellants may not be dispossessed from the suit property". The phrases "prima facie case"; "balance of convenience" and "irreparable loss" are not rhetoric phrases for incantation, but words of width and elasticity, to meet myriad situations presented by man's ingenuity in given facts and circumstances, but always is hedged with sound exercise of judicial discretion to meet the ends of justice. The facts are eloquent and speak for themselves. It is well nigh impossible to find from facts prima facie case and balance of convenience. The respondents can be adequately compensated on their success.

7. In our considered view, <ORG> committed manifest error of law in jumping to the above conclusion to allow the appeal., This appeal is, accordingly, allowed. The! order of <ORG> is set aside and that of! <ORG> is confirmed. It is made clear that any observations made either by <ORG> or <ORG> or of this Court should be taken to be not relevant at the trial on merits. These are our only prima facie observations, subject to adduction of evidence and proof at the trial on merits in the suit. The parties are directed to bear their own costs.


JUDGMENT <NAME>, J.

1. This is an appeal from a judgment of <ORG> at Bombay dated March 27, 1945, given upon the reference of a question of law made to the <ORG> under Section 66(2) of the Indian Income-tax Act by <ORG>.

2. The question referred to <ORG> was in the following terms :

Whether, in the circumstances of this case, that portion of the income received by the assesses from the principal company of <ORG> which is proportionate to the 'agricultural income' earned by the principal company, is 'agricultural income 'within the meaning of Section 2(1) of the Indian Income-tax Act, 1922, and exempt from assessment under the provisions of Section 4(3)(viii) of the Act.

3. <ORG> answered this question in the negative, taking the same view of the law as had been taken by the Income Tax Officer, the Appellate Assistant Commissioner of Income Tax, Bombay, and <ORG>. Their Lordships have no doubt that the view unanimously held by the <ORG> in India is correct.

4. The assessee, at all material times, was the Managing Agent of <ORG> (hereinafter called "<ORG>"), under an agreement dated February 1, 1926, and made between the principal company of the one part and the assessee (by its then name of <ORG>) of the other part. The remuneration of the assessee was regulated by Clause 2 of the agreement and under Sub-clause (b) the assessee was entitled to :

A commission at the rate of ten per cent, per annum on the annual nett profits of the principal company after making all proper allowances and reductions from revenue for working expenses changeable against profits but without making any deduction for depreciation or in respect of any amount carried to reserve or sinking fund or any payment on account of super tax or any deduction for expenditure on capital account provided that such commission shall not in any year amount to a less sum than rupees ten thousand.

5. The year of assessment was the year 1942-43. In that year the assessee received as remuneration under the Managing Agency Agreement a commission at the rate of ten per cent, of the nett profits of the principal company, that sum being in excess of the minimum salary secured by the agreement. The whole of this remuneration, less certain deductions which are not in question, was assessed to income tax by the Income-tax Officer.

6. One of the sources of income of the principal company is the manufacture of sugar from cane grown on its own farms and from other cane bought from outside, and it is not disputed that in so far as its income is derived from sugar manufactured from its own cane such income is agricultural income and as such is exempt from income tax. The assessee claimed that as its remuneration was calculated with reference to the income of the principal company, part of which was agricultural income, such part of the remuneration as was proportionate to the agricultural income of the principal company, was itself agricultural income and as such exempt from income tax. As already indicated, this claim was rejected by the Income-tax Officer, and in appeal by the Assistant Commissioner of Income Tax and <ORG>. At the request of the assessee <ORG> referred to <ORG> the question already mentioned.

7. "Agricultural income" is rendered exempt from income tax by Section 4(3)(viii) of the Indian Income-tax Act. "Agricultural Income" is denned by Section 2(1) of the Act, so far as relevant, as :

(a) Any rent or revenue derived from land which is used for agricultural purposes....

(b) Any income derived from such land by :

(i) Agriculture, or

(ii) The performance of certain specified acts which may be paraphrased as acts necessary to render agricultural produce lit for market and sale.

8. Nothing turns on the exact words of this sub-section.

9. In the opinion of their Lordships the effect of the managing agency agreement is that the assessee is entitled, in consideration of services rendered, to a minimum annual salary of Rs. 10,000 which is payable irrespective of whether or not the principal company has made any profit. If, in any year, ten per cent, of the profits made by the principal company exceeds Rs. 10,000, then the agent gets remuneration calculated as a percentage upon the profits of the principal company, without regard to the sources from which those profits are derived.

10. In determining the question at issue some previous decisions of this Board must be noticed. <CITATION> (1935) L.R. 62 I.A. 207, s.c. 37 Bom. L.R. 215, s.c. 37 Bom. L.R. 822 the assessee was entitled to an annuity under a contract, the annuity being made a charge upon agricultural land. The Board held that the annuity was not rent or revenue derived from land; it was money payable under a contract imposing personal liability on the covenantor, the discharge of which was secured by a charge on land. <CITATION> (1935) L.R. 62 I.A. 215, s.c. 37 Bom. L.R. 822 the assessee carried on business as a money lender. As security for a debt due to him in respect of his business he was put into possession of agricultural land as a mortgagee. It was held that the rents received by the assessee from the agricultural land were agricultural income and exempt from income tax, and that the exemption was not affected by the circumstance that the rents were received as part of the money lending business of the assessee, the exemption depending on the kind of income received and not on the character of the recipient. <CITATION> (1942) L.R. 70 I.A. 14, s.c. 46 Bom. L.R. 189 the assessee as the mutawalli of a <ORG> received as remuneration for his services a monthly salary. It was held by the Board that the fact that the income of the <ORG> was derived from agricultural land did not make the remuneration paid to the mutawalli "agricultural income", since the remuneration did not depend either on the nature of the properties which constituted the <ORG> estate, or on the amount of income derived therefrom by the estate.

11. With this case may be compared <NAME> v. Commissioner of Income-tax, Central and United Provinces [1942] All. 425 where <ORG> held that the assessee as mutawalli of a wakf was entitled, by way of remuneration for his services, to retain as a beneficiary the agricultural income of the wakf estate and that such remuneration was, therefore, free from income tax.

12. In their Lordships' view the principle to be derived from a consideration of the terms of the Income-tax Act and the authorities referred to is that where an assessee receives income, not itself of a character to fall within the definition of agricultural income contained in the Act, such income does not assume the character of agricultural income by reason of the source from which it is derived, or the method by which it is calculated. But if the income received falls within the definition of agricultural income, it earns exemption, in whatever character the assessee receives it. In the present case the assessee received no agricultural income as denned by the Act; it received remuneration under a contract for personal service calculated on the amount of profits earned by the employer, payable, not in specie out of any item of such profits, but out of any moneys of the employer available for the purpose. The remuneration, therefore, is not agricultural income and is not exempt from tax.

13. For these reasons their Lordships will humbly advise His Majesty that this appeal be dismissed. The appellant must pay the costs.


PETITIONER: LALA RAM SWARUP AND OTHERS Vs. RESPONDENT: SHIKAR CHAND AND ANOTHER DATE OF JUDGMENT: 10/11/1965 BENCH: GAJENDRAGADKAR, P.B. (CJ) BENCH: GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. RAMASWAMI, V. SATYANARAYANARAJU, P. CITATION: 1966 AIR 893 1966 SCR (2) 553 CITATOR INFO : R 1971 SC 530 (253,237,387) ACT: U.P. (Temporary) Control of Rent and Eviction Act , 1947 (U.P. 3 of 1947), ss. 3(3), 3(4) and 16-Jurisdiction of Civil Court--If barred--Revisionary powers of Commissioners- Scope. HEADNOTE: The appellants sued the-respondents-their tenants for ejectment from their shop. They had applied to the District Magistrate for the requisite permission to institute the suit under s. 3(1) of the U.P. (Temporary) Control of Rent and Eviction Act . When the permission was refused they moved the Commissioner in his revisional jurisdiction under s. 3(2) of the Act and the Commissioner gave the permission.. The <NAME> decreed the suit. This was confirmed in appeal by the District Judge. <ORG>, on appeals, upheld the respondents contention that the permission granted by the Commissioner under s. 3 (3) of the Act, was invalid in law, and so concluded that the appellants' suit was incompetent. In this Court the appellants contended - (i) ss. 3(4) and 16 of the Act totally excludes the jurisdiction of civil courts in relation to the question as to whether permission has been properly or validly granted or refused by the appropriate authority exercising their powers under the relevant provisions of the Act, and (ii) the decision of <ORG> that the permission granted by the Commissioner was invalid in law was inconsistent with the true scope and effect of the provisions prescribed by s. 3(3) of the Act. HELD:(i) Section 3 (4) and 16 of the Act create a bar against pleas which challenge the correctness or propriety of the orders in question. [558 G] The two tests, which are often considered relevant in dealing with the question about the exclusion of civil courts' jurisdiction are (a) whether the special statute which excludes such jurisdiction has used clear and unambi- guous words indicating that intention; and (b) does that statute provide for an adequate and satisfactory alternative remedy to a party that may be aggrieved by the relevant order under its material provisions. Applying these tests the inference is inescapable that the jurisdiction of the civil courts is intended to be excluded. [558 D-G] This conclusion, however, does not necessarily mean that the plea against the validity of order passed by. the District Magistrate, or the Commissioner, or the State can never be raised in a civil court. The bar excluding the jurisdiction of civil courts cannot operate in cases where the plea raised before the civil court goes to the root of the matter and would, if upheld, lead to the conclusion that the impugned order is a nullity. [558 G-H] (ii)<ORG> was not justified, in introducing a limitation pertaining to questions of jurisdiction in determining the scopeof the width of the revisional power conferred on the Commissionerby s. 3 (3). There are three categories of cases in which the commissioner'can interfere with the order passed by the District Magistrate :(a) if the District Magistrate has acted illegally; (b) if he has acted with material irregularity and(c) if he has wrongly refused to act. This last ground is wide enough 5 54 to empower the Commissioner to correct the error committed by District Magistrate in making an order brought before it; clearly if the District Magistrate refused to grant permission and the Commissioner thinks that in doing so, he has committed an error, that would be a case where the District Magistrate "has wrongly refused to act" and that would give the Commissioner jurisdiction to exercise his revisional powers. [562 C-E, H] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 116. of 1964. Appeal from the judgment and order dated September 13, 1960, of <ORG> in Special Appeal No. 212, of 1956.

<NAME> and <NAME>, for the appellants. <NAME> and <NAME>, for the res- pondents.

The Judgment of the Court was delivered by <NAME>, C.J Appellant No. 1, <NAME>, and five other members of his family sued the two respondents, <NAME> and his son, for ejectment from the shop situated in Qasba Chandausi, Bazar Waram, on the allegation that the said premises had been let out to the respondents to conduct their shop on a monthly rent with effect from the 11th April, 1952, for a year. At the time when the present suit was brought, the U.P. (Temporary) Control of Rent and Eviction Act , 1947 (U.P. Act III of 1947) (hereinafter called 'the Act') was in force. Section 3 of the Act imposes certain restrictions on the landlord's right to eject his tenant from the premises to which the Act applies. Broadly stated, the effect of the provisions contained in S. 3(1) is that a landlord can evict his tenant if he satisfies two conditions. The first condition is that he must obtain the permission of the District Magistrate to file such a suit; and the second condition is that he must provethe existence of one or the other of the seven grounds; enumeratedin clauses (a) to (g) of S. 3(1) . We shall presently refer to therelevant provisions of this section.

In their plaint, the appellants pleaded that they needed the premises in suit to carry on their own business in the shop, and they alleged that they had applied for permission-to the District Magistrate, Moradabad, under S. 3 (1 ) of the Act; that the said permission had been refused by him, whereupon they had moved the Commissioner in his revisions jurisdiction under S. 3(2) of the Act; and that the Commissioner had given them permission to file the suit. That is how the appellants claimed to have satisfied both the, conditions prescribed by S. 3 (1). The appellants further claim-

ed ejectment of the respondents and asked for a decree for damages. for use and occupation of the suit premises from 11th April, 1953 to 11th July, 1954 Rs. 35/- per month. The suit (No. 349, of 1954) was filed on the 14th July, 1954.

The respondents resisted the claim made by the appelants on. several grounds. They urged that the suit was bad for non- joinder of necessary parties; that the permission to sue granted to the appellants by the Commissioner was not valid in law; that the rent note executed by them was not admissible in evidence; and that the notice given by the appellants under section 106 of the Transfer of Property Act was also invalid in law.

On these pleadings, the learned Munsif, Chandausi, framed appropriate issues. Evidence wag led by both the parties in support of their respective contentions. The learned trial Judge recorded findings in favour of the appellants on all the issues and decreed their suit with costs on the 25th March, 1955.

The respondents then preferred an appeal (Civil Appeal No. 213 of 1955) in <ORG>, Moradabad, and urged that the findings recorded by the trial Judge were erroneous and asked for the reversal of the decree passed by him. The learned District Judge rejected the respondents' contentions and confirmed the decree under appeal on the 2nd June, 1955.

That took the respondents to <ORG> at Allahabad in second appeal (No. 1106 of 1955). The learned single Judge of the said <ORG> who heard this appeal, upheld the respondents' contention that the permission granted by the Commissioner under s. 3(3) of the Act was invalid in law; and so, he came to the conclusion that the appellants' suit was incompetent. This judgment was delivered on the 26th July, 1956. The learned Judge, however, allowed the appellants leave to file a Letters Patent Appeal. The Letters Patent Appeal was placed before a larger Bench of three learned Judges of <ORG>, because it was thought that the question raised by the appellants was of some importance. On the question as to whether the permission granted by the Commissioner was valid or not, the learned Judges who heard the appeal differed. Two of the learned Judges held that the said permission was invalid, whilst the third learned Judge held that it was valid. In accordance with the majority opinion the Letters Patent appeal.preferred by the appellants was dismissed on the 13th September, 1960. The appellants then applied for and obtained a certificate from <ORG> and it is with the said certificate that this appeal has come to this Court.

At the hearing of this appeal, the first point which Mr. <NAME> for the appellants has raised for our decision is that the courts below had no jurisdiction to consider the question about the validity of the permission granted by the Commissioner. He contends that s. 3 of the Act provides a self-contained code for the grant of permission, and all questions in relation to the grant or refusal of the said permission have to be decided by the appropriate authorities constituted under the Act. Once the question about the grant of permission asked for by a landlord is determined by the appropriate authorities, their decision is final and cannot be questioned in a civil court. In support of this argument, Mr. <NAME> has based himself on the provisions contained in S. 3 (4) and s. 16 ,of the Act. Section 3 (4) provides that the order of the Commissioner under sub- section (3) shall subject to any order passed by the State Government under s. 7-F , be final. Similarly, S. 16 provides that no order made under this Act by the State Government or the District Magistrate shall be called in question in any Court. The combined effect of these two provisions, according to Mr. <NAME>, is to exclude the jurisdiction of the civil courts to entertain the question about the correctness, propriety or legality of the order passed by the Commissioner in the present case whereby he granted permission to the appellants to bring the present suit.

In order to appreciate the validity of this argument, it is necessary to consider the scheme of the, relevant provisions of the Act. Section 3(1) reads thus.:-

"Subject to any order passed under sub-section (3) no suit shall, without the permission of the District Magistrate, be filed in any Civil Court against a tenant for his eviction from any accommodation, except on one or more of the following grounds".

It is unnecessary to cite the said grounds, because it is not disputed that the ground of personal need set out by the appellants justifies their claim for the respondents' ejectment. Section 3(2) and (3) as they stood at the relevant time read thus :-

"(2) The party aggrieved by the order of District Magistrate granting or refusing to grant the permission referred to in sub- section (1) may, within 30days from the date of the order or the date on which it is communi-

5 57 cated to him, whichever is later, apply to the Commissioner to revise the order. (3) The Commissioner shall, as far as may be, hear the application within six weeks from the date of its making, and, if he is satisfied -that the District Magistrate has acted illegally or with material irregularity or has wrongly refused to act, he may confirm or set aside. the order of the District Magistrate".

We have already referred to s. 3(4) .

It would thus be seen that the scheme of s. 3 is that if a landlord wants to bring a suit to eject his tenant, he has to apply to the District Magistrate for permission to do so. The District Magistrate may grant or refuse to grant such permission. After the District Magistrate makes an order on the landlord's application, the party aggrieved by the order can apply in revision to the Commissioner within 30 days; and the Commissioner, in exercise of his revisional jurisdiction, has to deal with the revision application under s. 3(3) . If he is satisfied that the District Magistrate has acted illegally or with material irregularity, or has wrongly refused to act, he can make an appropriate order; and the order thus made by him is final under sub-s. (4), subject to any order that <ORG> may pass under s. 7-F of the Act. Section 7-E provides for the revisional powers of <ORG> in very wide terms. It reads thus :-

"<ORG> may call for the record of any case granting or refusing to grant permission for the filing of a suit for eviction referred to in section 3 or requiring any accommodation to be let or not to be let to any person under section 7 and may make such order as appears to it necessary for the ends of justice".

It is clear that the power conferred on <ORG> by s. 7-F to revise the orders passed by the Commissioner under s. 3 (3 ) is very wide. In the first place, <ORG> need not necessarily be moved by any party in that behalf. It may call for the record suo moto and it can exercise its powers in the interests of justice. In other words, whenever it is brought to the notice of <ORG> either by a party aggrieved by the order passed by the Commissioner, or otherwise, that the order passed by the Commissioner is unfair or unjust, <ORG> may in the ends of justice pass an appropriate order revising -the order made by the Commissioner. That, in brief, is the scheme of. the relevant provisions of the Act relating to the grant of permission to the landlord to sue his tenant in ejectment.

Mr. <NAME> contends that the words of s. 3 (4) read with s. 16 are clear and unambiguous, and they indicate that the jurisdiction of the civil courts is completely excluded in relation to the question as to whether permission has been properly or validly granted or refused by the appropriate authorities exercising their powers under the relevant provisions of the Act. It cannot be seriously disputed that the jurisdiction of the civil courts to deal with civil causes can be excluded by the <ORG> by special Acts which deal with special subject-matters; but the exclusion of the jurisdiction of the civil courts must be made by a statutory provision which expressly provides for it, or which necessarily and inevitably leads -to that inference. In other words, the jurisdiction of the civil courts can be excluded by a statutory provision which is either express in that behalf or which irresistibly leads to that inference. One of the points which is often treated as relevant in dealing with the question about the exclusion of civil courts' jurisdiction, is whether the special statute which, it is urged, excludes such jurisdiction, has used clear and unambiguous words indicating that intention. Another test which is applied is : does the said statute provide for an adequate and satisfactory alternative remedy to a party that may be aggrieved by the relevant order under its material provisions ? Applying these two tests, it does appear that the words used in s. 3 (4) and s. 16 are clear. Section 16 in terms provides that the order made under this Act to which the said section applies shall not be called in question in any court. this is an express provision excluding the civil courts' jurisdiction. Section 3 (4) does not expressly exclude the jurisdiction of 'the civil courts, but, in the context, the inference that the civil courts' jurisdiction is intended to be excluded, appears to be inescapable. Therefore, we are satisfied that Mr. <NAME> is right in contending that the jurisdiction of the civil courts is excluded in relation to matters covered by the orders included within the provisions of s. 3 (4) and s.

16. This conclusion, however, does not necessarily mean that the plea against the validity of the order passed by the District Magistrate, or the Commissioner, or <ORG>, can never be raised in a civil court. In our opinion, the bar created by the relevant provisions of the Act excluding the jurisdiction of the civil courts cannot operate in cases where the plea raised before the civil court goes to the root of the matter and would, if upheld, lead to the conclusion that the impugned order is a nullity. Take,, for instance, the case of an order purported to have been passed by a District Magistrate who is not a District Magistrate in law. If it is shown by a party impeaching the validity of the order in a civil court that the order was passed by a person who was not a District Magistrate,-the order in law would be a nullity, and such a plea cannot be ruled out on the ground of the exclusion of the jurisdiction of the civil court. Similarly, if an order granting permission to a landlord is passed by a District Magistrate of one District when the property in question is situated in another district outside his jurisdiction, a party would be entitled to urge before a civil court that the permission purported to have been granted by the District Magistrate is wholly invalid and a nullity in law. Let us take another case to illustrate the position. If S. 3 had provided that before a District Magistrate grants permission to the landlord to sue his tenant, he shall issue notice to the tenant and give him an opportunity to represent his case before the application of the. landlord is dealt with on. the merits; and in the face of such a statutory provision, the District Magistrate grants permission ex parte without issuing notice to the tenant; in such a case, the failure of the District Magistrate to comply with the mandatory provision% prescribed in that behalf, would render the order passed by him completely invalid, and a plea that an order has been passed by the District Magistrate without complying with the mandatory provision of the Act, would be open for examination before a civil court. Likewise, in the absence of such a statutory provision, if it is held that the proceedings before the appropriate. authorities contemplated by S. 3 are in the nature of quasi-judcial proceedings and they must be tried in accordance with the principles of natural justice, and it is shown that in a given case, an order has been passed without notice to the party affected by such order, it would be open to the said party to contend that an order passed in violation of the principles of natural justice is a nullity and it existence should be ignored by the civil court. Such a plea cannot, in our opinion, be excluded by reason of the provisions contained in S. 3 (4) and S. 16 of the Act.

In this connection, we may incidentally refer to a recent deciSion of this Court in Lala Shri Bhagwan & A nr. v. Shri Ram Chand and Another(1). In that case, -this Court upheld the decision of <ORG> which had set aside the order passed by the appropriate authority under the relevant provisions the Act on the ground that in passing the said order, principles of natural (1) [1965] 3 S.C.R, 218 justice had not been followed. The view which was taken by this Court in that case was that the proceedings taken by a landlord under S. 3 are proceedings of a quasi-judicial nature and the appropriate authorities, in exercising their powers in relation to such proceedings, must act in accordance with the principles of natural justice. It must, however, be made clear that in that ,case, the question as to whether such a plea can be raised in a civil court having regard to the bar created by sections 3 (4) and 16 of the Act, was not raised and has not been considered. We ought to point out that the provisions contained in sec- tions 3(4) and 16 undoubtedly raise a bar against pleas which ,challenge the correctness or propriety of the orders in question. The merits of the order are concluded by the decision of the ,appropriate authorities under the Act and they cannot be agitated in a civil -court. But where a plea seeks to prove that the impugned order is a nullity in the true legal sense, that is a plea -which does not come within the mischief of the bar created by sections 3(4) and 16 of the Act.

Similar questions have often been considered by judicial ,decisions to some of which we will now refer. In The Secretary ,of <ORG> for India in <ORG> v. <NAME> -and A nr., (1) dealing with the effect of s. 6 of the Bengal Alluvion and Diluvion Act (IX of 1847), the Privy <ORG> observed that -the finality of the orders specified in the said section had to be read subject to two conditions; the first was that the said orders -should not suffer from any fundamental irregularity, that is to -say, "a defiance or noncompliance with the essentials of the procedure"; and the second condition was that the alleged defiance or non-compliance, with the essentials of the procedure must be strictly proved by the party alleging it. This decision show that if the special statute prescribes certain mandatory conditions -subject to which the orders in question can be passed, and the said mandatory provisions are violated, the validity of the said orders ,can be challenged in a civil proceeding. Similarly, if principles ,of natural justice are not complied with, the orders passed in violation of the said principles would be wholly inoperative in law and their validity can be impeached in civil proceedings.

The same principle has been emphasised by <ORG> in <CITATION> .(1). In that case, though the words used in sections 188 and 191 of the Sea Customs Act (1878) were held to exclude the jurisdiction of the civil courts, (1) A.I.R. 1924 P.C. 175.

(2) 67 1. A. 222 <ORG> observed that even where jurisdiction is excluded, the civil courts have jurisdiction "to examine into cases where the provisions of the Act have not been complied -with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure". This latter clause presumably covers cases where orders are passed in violation of the principles of natural justice.

<CITATION> (1), while dealing with a similar point, this Court has considered the effect of the two decisions of <ORG>, one in

-the case of <ORG>), and the other in <CITATION> in Council(3). The conclusion reached by this Court in M/s. Kamala Mill's case(1) also supports the view which we are taking in the present appeal.

Therefore, while upholding the contention raised by Mr. <NAME> that the jurisdiction of the civil- courts is barred, we wish to make it clear that this contention will not avail Mr. <NAME> if the respondents' plea, if upheld, would render the permission granted by the Commissioner totally invalid land a nullity.

The second point which then calls for our decision in the present appeal is: is the permission granted by the Commissioner without jurisdiction and as such, a nullity ? The majority decision of <ORG> is in favour of the respondents; and Mr. <NAME>'s argument is that the said decision is inconsistent with the true scope and effect of the provisions prescribed by s. 3 (3) of the Act. The decision of this point lies within a very narrow compass. The majority decision is that the jurisdiction conferred on the Commissioner under s. 3(3) is exactly similar to the jurisdiction conferred on <ORG> under s. 115 of the Code of Civil Procedure. It will be recalled that. 115 of the Code confers revisional jurisdiction on <ORG> to make such order as it thinks fit in a given case, if the subordinate court whose order is brought before <ORG> under s. 115 "appears

(a) to have exercised a jurisdiction not vested in it by law, or (b) to have failed to exercise a jurisdiction so vested, or- (c) to have acted in exercise of its

-jurisdiction illegally or with material irregularity". There is no doubt that the requirements of clauses (a), (b) & (c) all centre round the question about the jurisdiction of the subordinate court, and the view which has been accepted by the majority decision under appeal is that the same limitation must be imported in construing (1) (1966) 1 S.C.R. 64.

(3) 74 T. A. 50, at pp. 62-63.

(2) 67 I.A. 222.

56 2 the scope of the authority and power conferred on the Commissioner by S. 3(3) .

Let us examine whether this conclusion is right. In construing the provision of s. 3 (3), one factor which is patent is that it ,does not refer to any considerations of jurisdiction at all.. In fact, it is not easy to conceive of a limitation as to jurisdiction being relevant in s. 3(3) , because the said provision deals with .orders passed by District Magistrates, and the District Magistrates normally would have jurisdiction to deal with applications made by landlords. But quite apart from this aspect of the matter, the words used in S. 3(3) are unambiguous. There are 'three ,categories of cases in which the Commissioner can interfere with the order passed by the District Magistrate. If the District Magistrate has acted illegally, the Commissioner can interfere with his order; so can he interfere with the order if the District Magistrate has acted with material irregularity; and lastly, the Commissioner can interfere with the order of the District Magistrate if the District Magistrate has wrongly refused to act. This last -clause is wide enough to empower the Commissioner to correct the error committed by the District Magistrate in making an order brought before it; quite clearly if the District Magistrate refuses to grant permission and the Commissioner thinks that in doing so, he has committed an error, that would be a case where the District Magistrate has wrongly refused to act, and that would give the,Commissioner jurisdiction to exercise his revisional power.

It is significant that the revisional application can be made to the Commissioner only against orders passed by the District Magistrate granting or refusing to grant such permission. It is, we think, fallacious to assume that a party can move the Commissioner under s. 3(3) in cases where the District Magistrate just refuse- to make an order on the application made by the landlord for permission to bring a suit against the tenant. If a District Magistrate just does not deal with the application and passes no, order on it, the party aggrieved may be justified in applying for an appropriate writ to <ORG> or adopt some other suitable remedy in law; but a revision in such a case does not appear to be competent under s. 3 (3). Besides, the illegality or the irregularity to which s. 3 (3) refers need not necessarily be correlated with questions of jurisdic- tion. Therefore, we are satisfied that <ORG> was not justified in introducing a-limitation pertaining to questions of jurisdiction in determining the scope of the width of the revisional-,visional power conferred on the Commissioner by S. 3 (3). That is why it must be held that <ORG> was in error in coming to the conclu-

sion that the permission granted by the Commissioner in exercise of the powers conferred on him by s. 3 k 3) is invalid in law. As we have already emphasised, the only plea which can be raised before a civil court in relation to orders passed under the relevant provisions of the Act can be a plea which, if sustained, would render the order wholly invalid and as such, a nullity. No other plea can be raised, because all other pleas are barred by ss. 3 (4) and 16 of the Act.

In this connection, we may incidentally point out that by a subsequent amendment of s. 3(3) , the <ORG> has made it clear that its intention is to confer wide jurisdiction on the Commissioner. The amendment in question has been introduced by Act 17 of 1954. The amended provision reads thus :-

"'The Commissioner shall hear the application made under sub-section (2), as far as may be, within six weeks from the date of making it, and he may, if he is not satisfied as to the correctness, legality or propriety of the order passed by the District Magistrate or as to the regularity of proceedings held before him, alter or reverse his order, or make such other order as may be just and proper".

There is no doubt that under this amended provision, the Commissioner can deal not only with the legality, but also with the correctness and propriety of the order passed by the District Magistrate. In our opinion, the position about the Comissioner's powers was not different even under the unamended provision.

It may also be relevant to point out that the power conferred on <ORG> at all material times by s. 7-F was very wide. As we have already indicated, in exercise of its powers under s. 7-F , <ORG> can pass such orders as appear to it to be necessary in the ends of justice. Therefore, there is no doubt that the relevant provisions of the Act did not intend, even prior to the amendment of 1954, to limit the jurisdiction of the Commissioner only to cases where irregularity or illegality bad been committed by the District Magistrate in granting or refusing, to grant permission.

The result is, the appeal is allowed, the order passed by <ORG> in the Letters Patent Appeal is set aside, and that of <ORG> restored with costs throughout.

Appeal allowed.

<NAME>


<NAME>, J.

1. The Commissioner of Income-tax noticed that the assessment of the assessee for the year 1968-69 "was erroneous and prejudicial to the interests of the revenue inasmuch as he did not disallow the interest attributable to that part of the capital borrowed by the firm, which was not utilised for the purposes of the firm's business and advanced indirectly to two partners, <NAME> and <NAME>, as investment in the properties". The Commissioner of Income-tax issued a notice to the two partners. A detailed written statement raising objections was filed before the Commissioner. Without dealing with the objections raised before him, the Commissioner held that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the revenue and directed the Income-tax Officer to reframe the assessment after giving the assessee necessary opportunity to adduce evidence to prove the points raised by the assessee. The assessee preferred an appeal to <ORG>. The <ORG> took the view that the Commissioner had failed to indicate the material or the nature of the evidence before him on the basis of which he came to the conclusion that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the revenues. The <ORG> also observed that the Commissioner had not given any reasons to justify his satisfaction that the order passed by the Income-tax Officer was prejudicial to the interests of the revenue. At the instance of the revenue, the following question has been referred to us for our opinion :

"Whether, on the facts and in the circumstances of the case, the <ORG> was right in setting aside the order passed by the Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961."

2. A perusal of the order of the Commissioner of Income-tax clearly shows that the criticism of the <ORG> is well-founded. There is no indication in the order of the Commissioner as to the basis on which he came to the prima facie conclusion that the capital borrowed by the firm was utilised for purposes other than that of the firm's business. When the assessee filed a detailed written statement before him, the Commissioner did not deal with any of the points raised in the statement. He thought that the best course in the circumstances was to remand the matter to the Income-tax Officer for consideration of the points raised in the assessee's written statement. That certainly was not the proper course to be adopted by him. It was necessary for the Commissioner to state in what manner he considered that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the revenue and what the basis was for such a conclusion. After indicating his reasons for such a conclusion, it would certainly have been open to him to remand the matter to the Income-tax Officer for such other investigation or enquiry as might be necessary. But that was not the course which the Commissioner pursued. The <ORG> was, therefore, justified in setting aside the order of the Income-tax Commissioner. The learned counsl for the revenue urged that, while setting aside the order of the Commissioner, the <ORG> had purported to restore the order passed by the Income-tax Officer and this meant that the Commissioner was precluded from taking up the matter again. We do not want to express any opinion on this question, since our jurisdiction is confined only to answering the question referred to us. The question referred to us is answered in the affirmative. There will be no order as to costs.