PETITIONER: PREM <NAME> Vs. RESPONDENT: SURENDER GANDOTRA AND ORS. DATE OF JUDGMENT27/08/1991 BENCH: <NAME>, JAGDISH SARAN (J) BENCH: <NAME>, JAGDISH SARAN (J) SHARMA, L.M. (J) CITATION: 1991 AIR 2254 1991 SCR (3) 782 1991 SCC Supl. (2) 215 JT 1991 (3) 570 1991 SCALE (2)459 ACT: Delhi Co-Operative Societies Act , 1972. Sections 59 and 60-Dispute relating to irregularities in purchase of build- ing materials by the past <ORG>--Whether falls within the ambit of Section 60 . HEADNOTE: On a complaint made by the <ORG> of the 6th respondent <ORG>, the third respond- ent, Registrar, <ORG>, referred the dispute relating to irregularities in the purchase of building material for construction of flats for members of society by the past <ORG>, of which the appellant was the President at the relevant time, to arbitration. The first respondent-Arbitrator, gave his ex-parte award, on the failure of the appellant and another person to file their reply to the claim of the claimant society, and directed the appellant and the other person to pay the society certain sum with interest thereon. The appellant challenged the award before second re- spondent, <ORG>, which dismissed the same holding that the Arbitrator's act of proceeding ex-parte was justified and that the appeal had no merit. The appellant's writ petition was also dismissed by <ORG>. In the appeal before this Court on behalf of the appel- lant it was contended that it was Sec. 59 dealing with surchage which was applicable to the instant case and not Section 60 , which pertained to settlement of disputes by arbitration since the dispute in question was one which could not be referred to arbitration in terms of Section 60 of the Act. On behalf of the contesting respondents it was submitted that it was Section 60 , which was applicable and not Section 59 . Dismissing the appeal, this Court, HELD: 1.1 Sub-Section (1) of Section 60 of the Delhi Co- operative 783 Societies Act , 1972 indicates the true scope of the Section 60 , while sub-section (2) is merely illustrative, and not exhaustive. Clause (c) of sub-section (1) expressly provides that if any dispute touching the constitution/management or the business of the cooperative society arises between the society or its committee and any past committee. any offi- cer, agent or employee or any past officer of the society, the dispute should be referred to the arbitration. [787H, 788A-B, D] 1.2 In the instant case, the dispute, viz. irregulari- ties in the purchase of building material for construction of flats for the members of the <ORG> by the previous <ORG>, touches the management of the <ORG> and fails within the ambit of Section 60 of the Act. The third respondent, Registrar, <ORG> was, therefore, right in referring the dispute to arbitration. [789D- <CITATION> ..  1 SCR 186, followed. <CITATION> , AIR 1976 63 Delhi 239, disapproved. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3237 of 1991.

From the Judgment and Order dated 10.10.1990 of <ORG> in C.W. No. 3204 of 1990.

<NAME>, <NAME> and <NAME>, Advs. for the Appellant.

Dr. <NAME>, and <NAME> for the Respondents. The Judgment of the Court was delivered by <ORG>, <NAME> is granted.

Respondent No. 6, <ORG>, was formed in 1979 for providing houses to its 130 members including the appel<NAME> <NAME>. The appel<NAME> was earlier the Secretary and then the President of the <ORG> till 1985, by which time substantial con- struction had been completed. The members were allotted three-room flat for a sum of Rs. 1, 10,000. In August, 1985, Respondent No. 3, Registrar, <ORG>, appointed an Administrator to look into the affairs of the <ORG> since the appel. <NAME> and other office bearers had held the office for more than two terms. The controversy giving rise to this proceeding relates to the alleged discrepancy re- garding purchase of some building material in January, 1984, for the construction of flats for members of the <ORG> in Vikas Puri at New Delhi. <ORG> of the <ORG> formed in September, 1986, complained to <ORG> alleging irregularities by the previous Managing Committee of which the appel<NAME> was the President. This matter was referred to arbitration by order dated 12.10.1989 passed by <ORG>, <ORG>. Respondent No, 1, <NAME> was appointed the Arbitrator, who gave his AWard on 1.5. 1990. The relevant portion of the Award is as under:

"It is also interesting to discuss the conduct of these two respondents of this case, <NAME> and <NAME> as they have been moving applications after applications in this court raising vicious and frivolous grounds just to delay the delivery of justice in this case. The miscellaneous applications relating to the dispute of juris- diction of this court and then that since criminal proceedings are pending with <ORG>, proceedings in this Court should be kept pending till final decision in the criminal proceedings. All these applications were properly attended, scrutinized and dis- posed of legally. It is also interesting that despite number of chances/opportunities having been given to the respondent to file reply to the main points of the claimant society, the defendants S/<NAME> and <NAME> did not file any reply and followed delaying and dilatory tactics and to defeat the ends of justice. Even today 30th April, 1990, fixed for hearing none came from the side of S/Shir Poonam Dhand, <NAME> either presonally or through Advocate. The advocate of the claimant society <NAME> argued that ex parte proceedings may be initiated against the respondents who have absented from these proceedings. In view of these cricumstances, and the conduct of 'respondents in this case 0right from the very inception of this case, there is no other alternative left for me but to proceed ex parte against the respondents S/<NAME> and <NAME>.

Ex parte award is announced with the following details; .

Principal amount to be paid by the respon-

dents to <ORG>, Vikas Puri, New Delhi. Rs-1,46,2 10.20 Interest at the rate of 18% from 17.4.1985 till all the dues are cleared by the respond-

ents.

Cost allowed Rs.5,000.00

With the above observations, ex parte award is given against the respondents S/Shri Poonam Dhand, P.3, <NAME> who are jointly and severally responsible to pay <ORG>, Vikas Puri, New Delhi, principal amount of Rs. 1,46,210.00 NPS plus 18% interest from 17.4.1985 till all the dues are cleared and costs of Rs.5,000." , The appellant then filed an appeal under section 76 of the Delhi Cooperative Societies Act, 1972 (hereinafter referred to as 'the Delhi Act ') in <ORG> (Respondent No. 2) challenging the Award dated 1.5.1990. The <ORG> held that the Arbitrator's act of proceeding ex parte against the appellant is justified and taking the view that the appeal had no merit, dismissed the same. The appellant then filed a writ petition in <ORG> challenging the Award and dismissal of his appeal by the <ORG> on 3.7.1990. The said writ petition has been dismissed by <ORG> on 10.10.1990. It is in these circumstances that the appellant assails the Award, dismiss- al of the appeal and then the .writ petition. The argument of <NAME>, learned counsel for the appellant, is that it is section 59 and not section 60 of the Delhi Act which applies to the present case. In reply, Dr. <NAME> on behalf of the contesting respondents contended that section 60 relating to arbitration and not section 59 pertaining to surcharge applies to the present case. Sections59 and 60 of the Delhi Act , insofar as relevant, are quoted hereinbelow:-

"59. Surcharge-(1) If in the course of an audit, inquiry, inspection or the wind- ing up of a cooperative society, it is found that any person, who is or was entrusted with the organisation or management of such society or who is or has at any time been an officer or an employee of the society, has made any payment contrary to this Act, the rules or the bye-laWs or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has misappropriated or fraudulently retained any money or other property belonging to such society, the Registrar may, of his own motion or on the application of the committee, liquidator or any creditor, inquire himself or direct any person authorised by him, by an order in writing in this behalf, to inquire'into the conduct of such person;

Provided that no such inquiry shall be held after the expiry of six years from the date of any act or omission referred to in this sub-section.

(2) Where an inquiry is made under sub-section (1), the Registrar may, after giving the person concerned an opportunity of being heard, make an order, requiring him to repay or restore the money or property or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such extent, as the Registrar may consider just and equitable."

"60. Disputes which may be referred to arbitration(1) Notwithstanding anything contained in any law for the time being in force, if any dispute touching the constitu- tion, management or the business of a coopera- tive society other than a dispute regarding disciplinary action taken by the society or its committee against a paid employee of the society arises--

(a) among members, past members and persons claiming through members, past members and deceased members, or

(b) between a member, past member or person claiming through a member, past member or deceased member and the <ORG>, its com- mittee or any officer, agent or employee of the <ORG> or liquidator, past or present, or

(c) between the society or its commit- tee and any past committee, any officer, agent or employee, or any past officer, past agent or past employee or the nominee, heirs or legal representatives of any deceased officer, deceased agent, or deceased employee of the society, or

(d) between the society and any other cooperative society, between a society and liquidator of another society or between the liquidator of another society. such disputes shall be referred to <ORG> for decisior and no court shall have jurisdiction to entertain any suit other proceedings in re- spect of such dispute..

(2) For the purposes of sub-section (1), the following shall be deemed to be disputed touching the constitution management or the business of a cooperative society namely--

(a) a claim by the <ORG> for any debt or demand due to it from a member or the nominee, heirs or legal rep resentatives of a deceased member, whether such debt of demand is admitted or not;

(b) a claim by a surety against the principal debtor where the society has recov- ered from the surety any amount in respect of any debt or demand due to it from the princi- pal debtor as a result Of the default of the principal debtor, whether such debt or demand is admitted or not;

(c) any dispute arising in connection with the elec tion of any officer of a society other than a society mentioned in sub-section (1) of section 31 .

(3) If any question arises whether a dispute referred to the <ORG>r under this section is or is not a dispute touching the consitution, management or the business of cooperative society, the decision thereon of the <ORG> shall be final and shall not be called in question in an court.

i (4) ................."

In substance the contention of the learned counsel for the appeal lant is that the proper action to take in such a case is to resort to section 59 dealing with surcharge and not to settlement of dispute by arbitration since it is not one of the disputes which may be referred to arbitration in terms of section 60 of the Delhi Act. It was argued that sub-section (2) of section 60 is exhaustive and not merely illustrative, which shows that the present dispute does not fall within the ambit 0 section 60 . Dr. <NAME>, on the other hand, asserted that it is sub section (1) of section 60 which indicates the true scope of section 60 while sub-section (2) is merely illustrative and no exhaustive. It was urged that clause (c) of sub-section (1) of section 60 expressly provides that if any dispute touching the constitution,' management or the business of the cooperative society arises between the society or its committee and any past committee, any officer, agent or employee or any past officer of the society, the dispute shall be refered to arbitration.

Reliance is placed on behalf of the appellant on <CITATION> . 1. R. 1976 63 Delhi 299 wherein the learned Single Judge took the view that sub-section (2) of section 60 of the Delhi Act is exhaustive and not merely illustra- tive. That decision overlooks the decision of this <ORG> in Srirakulu referred hereafter and conflicts with it. Further consideration of the same is, therefore, not necessary. Dr. <NAME> placed reliance in <CITATION> .,  1 SCR 186 to contend that this point was concluded against the appellant. In our opinion, the contention of Dr. <NAME> has to be accepted. The decision of this <ORG> in Srirakulu was ren- dered 'with reference to the Madras Cooperative Societies Act , 1932 (hereinafter referred to as 'the Madras Act') wherein section 51 relating to settlement of disputes by arbitration was the provision corresponding to section 60 of the Delhi Act-Clause (c) of sub-section (L) of section 51 of the Madras Act was substantially the same as clause (c) of sub-section (1)of section 60 of the Delhi Act. The explana- tion in sub-section (1) of section 51 of the Madras Act was substantially similar to clause (a)of sub-section (2) of section 60 of the Delhi Act. The material part of section 51 of the Madras Act, on the basis of which the decision was endered in Srirakulu quoted therein is as under--

" S. 51-

Arbitration:

Disputes: 51. (1) If any dispute touching the business of a registered society (other than a dispute regarding disciplinary action taken by the society or its committee against a paid servant of the society) arises-

(a) .......................................

(b) ....................................

<NAME>

(c) between the <ORG> or its com- mittee and any past committee, any officer, agent or servant, or any past officer, past agent or past servant, or the nominee, heirs or legal representatives of any deceased officer, deceased agent or deceased servant, of the <ORG>, or

(d) ............................... Explanation--A claim by a registered society for any debt or demand due to it from a member, past member or the nominee, heir or legal representative of a deceased member, whether such debt or demand be admitted or not, is a dispute touching the business of the society within the meaning of this sub-sec- tion."

In the Madras Act, section 49 was the provision correspond- ing to section 59 of the Delhi Act. It was, therefore, on the basis of similar corresponding provisions that the question arose for decision of this Court in <NAME>. In <NAME> also the facts disclosed in the inquiry that certain loss was caused to the society by the acts of past Managing Committee and, therefore, a special officer ap- pointed to look into the affairs of the society made a claim under section 51 of the Madras Act before the Registrar against the past President of the Society: It was held that the Registrar's order under section 51 of the Madras Act could not be challenged. We do not find any significant difference between the provisions of the Madras Act which form the basis .of this Court's decision in <NAME> and sections 59 and 60 of the Delhi Act with which we are con- cerned to justify taking a different view as suggested by learned. counsel for the appellant. Following the view taken in <NAME>, this appeal must fail. Consequently, the appeal is dismissed with costs quantified at Rs.5,000.

N.P.V. Appeal dis- missed.


ORDER <NAME>, J.

1. These are two applications taken out by the plaintiff. One is an appeal against the order of the Master refusing leave to amend the plaint and the other is for leave to sue on the basis of the plaint sought to be amended.

2. The suit is for specific performance of a contract for the sale of certain lands in Salem District entered into at Madras, and for an injunction restraining the second defendant from bringing about a breach of the said contract. Application No. 260 of 1951 was filed by the plaintiff for amendment of the plaint consequent on the plaintiff having been made aware sub-saquent to the suit that the second defendant claimed to be purchaser of the same property under a sale deed executed in his favour on the 28th September 1950. The plaint is, therefore, sought to be amended by stating that the sale is sham and nominal, and, in any event, the second defendant is not a 'bona fide' purchaser for value without notice, and for directing the execution of the sale deed not only by the first defendant, but also by the second defendant.

3. The application was opposed on the grounds that the amendment could not be allowed, as it substantially alters the cause of action, secondly, that the amendment would covert the suit into a suit for land, and this <ORG> would not have jurisdiction to try the suit, and, thirdly, that in any event, the amendment petition was incompetent, as it was filed without previously obtaining leave of <ORG> to sue in respect of the suit as proposed to be amended. The learned Master held in favour of the plaintiff on the first two contentions, but dismissed the application on the ground that as amendment substantially alters the cause of action, the suit having been filed after obtaining previous leave of <ORG> under clause of the Letters Patent, no amendment could be allowed. The learned Master, however, observed that he considered the question as to whether he should grant the plaintiff an adjournment to enable him to apply for leave to sue in regard to the amendment sought but as the obtaining of the leave was a condition precedent to the presentation of the application for amendment, he considered that no purpose would be served by an adjournment.

4. I am in agreement with the learned Master that but for this objection raised as regards the non-obtaining of leave to sue, the amendment ought to be granted, as it does not seek to set up an inconsistent cause of action, and the amendment has, therefore, to be allowed. I have only to consider whether the amendment should be rejected for the reason that this being a suit instituted after obtaining leave to sue under Clause 12 of the Letters Patent, no further amendment can be ordered and any cause of action to which the plaintiff has become entitled, could only be adjudicated in a separate suit.

5. Clause 12 of the Letters Patent provides that "<ORG>, in exercise of its ordinary original civil jurisdiction, shall be empowered to receive, try, and determine suits of every description............if the cause of action shall have arisen, either wholly, or, in case the leave of the <ORG> shall have been first obtained, in part, within the local limits _ of the ordinary original Jurisdiction of <ORG>........"

6. Leave was obtained initially before the institution of the suit. The plaintiff - now seeks an amendment of the plaint", which he would ordinarily be entitled to but for this objection raised. Does the circumstance that previous leave to institute has been obtained in a suit disentitle the plaintiff from asking for an amendment of the plaint in the suit so instituted? There are three decisions which were referred to by the learned Master and relied upon as establishing the proposition that no amendment could be allowed in a suit so instituted.

7. It is held in 'Rampurtab v. Prem-sukh', 15 Bom 93, that the grant of leave under Clause 12 of the Letters Patent is a judicial act, which must be held to relate only to the cause of action contained in the plaint, as presented to the <ORG> at the time of the grant that such leave, which affords the very foundation of the jurisdiction, is not available to confer jurisdiction in respect of a different cause of action, which was not judicially considered at the time it was granted, that in respect of such a different cause of action, leave under Clause 12 cannot be granted after the institution of the suit, and therefore, the <ORG> cannot try such different cause of action, except in another suit duly instituted, and further that in suits for which leave to sue under Clause 12 of the Letters Patent is necessary, the plaint cannot be afterwards' amended.

8. This decision was referred to by <NAME>, J. (as he then was) in ' <CITATION> ', AIR (26) 1939 Bom 345. In that case, the suit was originally instituted by six persons as representing a firm, and as the defendant was a resident outside the jurisdiction of <ORG>, leave to sue under Clause 12 was obtained before the filing of the plaint. On an objection raised by the defendant that his dealings were not with the firm but with an individual, amendment of the plaint was asked for and granted, and the plaint was amended. The defendant then raised the contention that the <ORG> had no jurisdiction to try the suit and it was pointed out that the individual, who by reason of the amendment proceeded with the suit, had not obtained leave under Clause 12 of the Letters Patent, and the <ORG> had no jurisdiction to try the suit. The learned Judge observed as follows:

"The question goes to the root of the jurisdiction of the <ORG>, and when the facts are pointed out, if is the duty of the <ORG> to consider the question, whether the same" has been raised by the defendant or not. In the present case, the facts are not disputed. The obtaining of the leave under Clause 12, Letters Patent, is the foundation of the Jurisdiction, and it has been held that such leave must be obtained before the institution of the suit and cannot be granted afterwards. In 'Rampurtab v. Premsukh' 15 Bom 93, it was held that the leave granted was confined to the cause or causes of action set forward in the plaint at the time the leave was granted; hence the plaint cannot be amended so as to alter the cause of action. If an amendment, which would alter the cause of action, was made, it necessarily follows that fresh leave should be obtained in respect of the altered cause of action....,.......The two causes of action being thus entirely different and no leave having been obtained when <NAME>), the individual, desired to carry on the suit, this issue must be found against the plaintiff........."

9. <NAME>, J. in 'Barasat Basirhat Light rly. <CITATION> , 24-Parganas', ILR (1944) 2 Cal 101, had occasion to consider a similar question. After referring to the cases, '<NAME> v. <NAME>', 15 Bom 93; ' <CITATION> ', AIR (26) 1939 Bom 345 and other decisions, the learned Judge observes as follows: "The wording and meaning of Clause 12 of the Letters Patent, 1865, is clear, namely, that the <ORG>'s leave shall previously be obtained before it has jurisdiction to receive a suit for which leave is required. The grant of leave is a condition precedent to the <ORG> having jurisdiction to receive such a suit. An amendment to a plaint raising a new cause of action upon which a claim is made is not a fresh suit but is an additional claim made in an existing suit. The <ORG>'s leave is previously required in respect 'of a cause of action before the <ORG> can have jurisdiction to receive the suit in which it is alleged.....in my opinion, the <ORG> has no jurisdiction to receive, try and determine the claims upon the causes of action in the amendment to the plaint since leave was not previously obtained in respect of those causes of action before the suit in which those claims are made was instituted in this <ORG>."

10a. While in agreement with the views of Telang, J. that the grant of leave under Clause 12 of the Letters Patent being a judicial act must relate only to the cause of action contained in the plaint, as presented to the <ORG> at the time of the grant, and that such leave affords the very foundation of the jurisdiction & would not be available to confer jurisdiction in respect of a substantially different cause of action, which was not and could not have been judicially considered at the time it was granted, it does not necessarily follow, that in respect of such a different cause of action, leave under Clause 12, cannot be granted after the institution of the suit, and that, therefore, the <ORG> cannot try such a different cause of action except in another suit duly instituted. <NAME> the language of Clause 12, nor the principle of providing for leave before a suit is tried would necessitate such a conclusion.

10b. In cases, where leave is required, in order to enable <ORG> 'to" have jurisdiction, right is conferred on <ORG> in its ordinary original civil jurisdiction, to receive, try, and determine such suits, provided the leave of the <ORG> is previously obtained. Therefore the grant of leave must Be made before <ORG> receives, tries and determines the suit and the grant 'ipso facto' vests jurisdiction to receive, try and determine such suits. The leave, therefore, must be prior to such receipt, trial and determination, and not after, and must necessarily relate to the cause of action on which the suit is based.

11. In regard to paints in such suits so instituted, could it be said that the plaint cannot be amended at all? There does not appear to be any controversy for the position that an amendment to such a plaint can be granted, if it is only- a formal amendment, which is not based on a substantially different cause of action. But if a <ORG> finds that a cause of action is not inconsistent, and that to avoid multiplicity of suits or for the purpose of determining the real question in controversy raised in the suit between the parties, or for other reasons an amendment is necessary, though based on a different cause of action, the <ORG> has ample power to order an amendment of the plaint, but in view of the decision in '<NAME> v. <NAME>', 15 'Bom 93. followed in 'Barasat Basirhat Light Rly. <CITATION> , 24 Parganas', ILR (1944) 2 Cal 101, such an amendment could not be granted, since the suit happens to be a suit instituted after obtaining leave under Clause 12. What all that is required to be complied with to satisfy the provisions of Clause 12 is that in cases where leave is required, the High <ORG> has no power to receive a plaint before such leave is granted. There is nothing to show that a plaint instituted under Clause 12, would not include an amended plaint, and if an amended plaint after obtaining leave to amend is to be received and the cause of action arising therein is to be tried and determined, which cannot be done since previous leave is required which alone confers jurisdiction, there is no reason why such leave to present an amended plaint should not be granted under Clause 12 on a fresh application stating the cause of action on which the amendment has been applied for and the reasons for grant of leave under Clause 12.

12a. That appears to be the reasoning of <NAME>, <NAME> (as he then was) in ' <CITATION> '. AIR (26) 1930 Bom 345, where the learned Judge after referring to the decision in '<NAME> v. <NAME>', 15 Bom 93 observes that "if an amendment, which would alter the cause of action, was made, it necessarily follows that fresh leave should be obtained in respect of the altered cause of action."

12b. In that case, however, the point as to want of jurisdiction was raised at the time of the trial of the suit and the learned Judge was of opinion that fresh leave, which ought to have been obtained for the amended plaint, was not obtained, obviously being of the view that such leave could be granted in the case of an amended plaint. Though <NAME>, J., in 'Barasat Basirhat light Rly. <CITATION> , 24-Parganas', ILR (1944) 2 Cal 101,.considers this observation of <NAME>, J. and similar argument based thereon, and proceeds to observe that leave was not sought in the case with which he was dealing with respect to the cause of action in the amendment either at the time the application was made to amend or when leave was given for the amendment or when the plaint with the amendment was presented to the <ORG> and states "that this omission and the grant of leave to amend the plaint cannot confer upon the <ORG> jurisdiction which it does not possess." Eventually, however, he says that the "<ORG> has no jurisdiction to receive, try and determine the claims upon the causes of action in the amendment to the plaint since leave wag not previously obtained in respect of those causes of action before the suit in which those claims are made was instituted in this <ORG>."

13. I am of opinion that in cases where the <ORG>, on an application of the plaintiff, considers that the plaint has to be amended so as to include a cause of action, which was not originally in the plaint, on the ground that such an amendment is necessary, it does not prevent the <ORG> from granting such an amendment merety for the reason that it was a suit instituted after obtaining previous leave to sue under Clause 12 of the Letters Patent. It does not also preclude the plaintiff from giving effect to such an order by carrying out the amendment or presenting an amended plaint, before which, however, he should apply for and obtain leave to sue on the cause of action described in 'the amendment under Clause 12 of the Letters Patent. Such an application for leave can be ;filed and leave can be granted, if it comes with-in the scope of Clause 12 of the Letters Patent. '(14) In the present case, Application No. 3257 of 1951 is for grant of leave to sue en the basis of the plaint as sought to be amended. Leave is granted. The appeal is allowed and the order of the Master is set aside and leave to amend the plaint is granted. Time for amendment one week. Additional written statement, if any, two weeks thereafter. Costs in cause.


JUDGMENT <NAME>, <NAME>

1. This is an appeal by the plaintiff, <ORG> against the order of the learned single Judge in IA 2094/94 in Suit 432/94 dated 31.10.1995. By that order, the learned Single Judge dismissed the application of the appellant for grant of temporary injunction under Order 39 Rule 1 CPC against the respondent. The dispute pertains to trade mark, emphasis being on trade dress. Though reference is made in the grounds of appeal to the carton being a piece of artistic work within Section 2(c) of the Copyright Act, arguments were mainly focussed on 'trade dress'.

2. The appellant <ORG> sells Corn Flakes with cartons which describe the cartons as '<ORG>' (the original and the best). The respondent is selling corn flakes using a carton more or less similar in size but with the title "AIMS ARISTO CORN FLAKES" written just at the place where appellant's display the words '<ORG>'. This is done at the left hand top of the carton. The appellants grievance in the suit as well as in the IA was that the carton was likely to confuse the buyers of corn-flakes and there was every likelihood of consumers purchasing the respondent's goods in the belief that they were of the appellant. The learned single Judge after referring to the case-law pertaining to 'trade dress', of the appellant dismissed the IA observing :

"If the trade dress in this case is as was found in the above case (i.e., <ORG> and others v. <ORG> ((1978) RPC 635). I would have had no hesitation to accept the arguments of Mr. <NAME>. Applying the test laid down therein, I am of the view that the trade dress of the defendant in this case is entirely .... different from the trade dress of the plaintiff and there is absolutely no scope for any confusion."

On that basis, the learned Judge stated that the appellant had not proved prima facie case nor balance of convenience and hence no injunction could be granted.

3. In this appeal, we have heard learned counsel, for the appellant at the stage of admission. Learned counsel for the defendant was also present.

4. It was contended before us that the learned single Judge, having accepted the legal principles relied upon for the appellant in respect of 'trade dress' erred, on facts, in holding that there was no scope for confusion among the consumers. It was pointed that the size and shape of the carton was similar being rectangular, that in the words 'FLAKES' in the appellant's carton the words L and A were joined together closely or rather touch each other, that respondent also described his goods as original and the best, that both contain a picture of the corn flakes, that there was a small square on the left hand top where the words '<ORG> CORN FLAKES' were written inside the square, and that the respondent had also put a square on the left hand top with the words 'AIMS ARISTO CORN FLAKES'. It was further stated that in all the cartons of <ORG> in regard to various commodities, there was a red-band at the top which took off from the square on the left top and ran horizontally across on the front top into the right and to the other sides and respondent also used a similar red band taking off horizontally from the square on the left top. It was also argued that even in regard to the square on the left side top, <ORG> used an inner red border, then a white gap, and then an outer green border, running all along the sides of the square while respondent was also using the same red and green borders for the square on the left top. It was argued that these similarities in dress were so clear that purchasers were sure to be misled. It was submitted that there was a presumption that the consumer's memory was short and if a consumer had purchased a carton of appellant's at one point of time, he would easily mistake the respondent's carton for the appellant's. It was further submitted that respondent had done this with dishonest intention.

5. Before we go into the above aspects, it is necessary to refer to a few more facts. If we look at the appellant's carton, we find that the words '<ORG> is displayed very prominently in fairly big letters, above the words, 'CORN FLAKES' in the square on the left hand top. Then to the right of the words '<ORG> CORN FLAKES' there is the picture of the face of a hen, upto its neck. There is a bowl containing corn flakes and a cherry therein with a big spoon. Pouring of milk is shown into the plate. On the right side of the carton, it is stated prominently that the flakes are 99% fat free.

6. When we come to the respondent's carton, we have in the left hand top rectangle the words 'AIMS ARISTO' corn flakes prominently written. We also have ISI in a smaller rectangular bracket but shown quite prominently below the rectangle on the left-top, a plate blue in colour with corn flakes and cashew etc. There is no picture of milk pouring into the plate.

7. In other words, while in the rectangle on the left hand top, the words <ORG>'s corn flakes are prominent for the appellant, the words 'AIMS ARISTO' corn flakes appear very prominently for the respondent, at the same place.

8. It is true that the appellant has referred to certain similarities in the size and shape of the carton, there being a square on the left top with word '<ORG>; the words L and A being joined, border being red and green and a red band running round in the top horizontally. It is true that these similarities were not set out in the order. But in our prima facie view, the prominent display of the words '<ORG>' in bold red letters in white background inside the square on the left-top appellant's carton cannot go unnoticed by any buyer. We have to understand the learned Judge's words "trade dress of the plaintiff is entirely different", in that light, prima facie.

9. The law relating to 'trade dress' is very clear. <NAME> in 'Law of Trade Marks' (12th Ed. 1986, para 16.67) says that it is usually true in some degree that a trader's goods are recognised by their general appearance, or "get-up". Accordingly, resemblance or 'get-up' is not uncommonly an ingredient in passing-off, and it is possible for imitation of get-up alone to amount to passing-off. Such cases are rare, since few traders rely on get-up alone to distinguish their goods, so that trade names and word trade marks are ordinarily present too, and the author says :

"and in these days, in this country, a difference in names is enough to warn the public that they are getting one trader's goods and not the others" (Sapers v. <NAME> ((1953) 70 RPC 173)".

In <ORG> v. <NAME> (1976 RPC 653), the plaintiff's bag displayed the words "Fison's Gro Bag" while the defendant's bag contained the words '<ORG> Crop-Bag; and it was held that the prominence given to the name overshadowed the other similarities in get-up. The plastic bags were peculiar. The plaintiffs were manufacturers of the plastic bag filled with a peat-based compost from which plastic rectangles could be removed thereby exposing the compost beneath the plastic. Seedlings could then be planted in the compost so that the bag could function as containing growing element. The bag was partly over-printed with horticultural decoration and instructions and marked '<ORG> Gro Bag'. They were in market for 2 years. The defendants were peat merchants and got plastic bags produced with "identical size" and which bore "over-printed" instructions and decoration somewhat similar to those of the plaintiff's bag. While refusing injunction, <ORG> observed that even accepting that the plaintiff's had a get-up reputation in their growing bags and though there were obvious similarities between the bags in issue, it was inconceivable that any one seeing the defendant's grow bag could fall to observe that it was a product of the defendants' and that a normal purchaser could not be misled. He further said that "if the <ORG> Gro-Bag had not contained the name "<ORG>" or if the name "<ORG>" had not been so prominently displayed, by the defendants, he might have reached a different conclusion. He doubted whether they could have done more to signify to a buyer that he was watching at a product of <ORG> and not at a product of <ORG>'.

10. <CITATION> (22. RPC 327), was also a case of similar 'get-up'. The plaintiff was selling, for 15 years, dried materials for soup in packets of certain size, shape and printing put in steel boxes of a peculiar kind, with the words '<NAME>' displayed thereon. Later, defendants started selling similar preparations for soup which were put up in a series of similar packets and boxes, and the name '<ORG>'s "appearing at the place where <NAME>" appeared on the plaintiff's goods. The plaintiffs also complained against the wrapper of the defendants containing untrue statement as to Prize medals and awards in the same manner as the true statements of the plaintiff. <ORG> refused to grant injunction and in <ORG>, while confirming his order, <NAME> observed that the word '<NAME>' being printed prominently on the packets and the words '<ORG>' printed on defendant's packets, there was no scope for confusion in spite of the similarity in the packets and boxes.

11. In yet another case, relating to similarity in trade-dress, <ORG>, in <ORG> v. <ORG> ((1981) RPC 429), confirmed the judgment of <NAME> of <ORG> of New South Wales. In that case, the plaintiffs were selling lemon squash under the name 'Sole' in greenish-yellow cans with a medallion type label. The defendants launched a lemon squash called 'Pub Squash' and the label was of a medallion type bearing the words 'Pub Squash' on the label. The cans were of the same size and shape with colour yellow as those of plaintiff. The proceedings of the plaintiff brought on the ground of passing off, unfair trading etc. were dismissed. Judgment of <NAME> is elaborate and he held that the defendants had sufficiently differentiated their product by their 'name'. On appeal to <ORG>, it was observed that over emphasis on advertised description of a product might indeed lead to stifling of competition. Lord <NAME> said :

"But competition must remain free, and competition is safeguarded by the necessity for the plaintiff to prove that he has built up an intangible property right' in the advertised description of his product, or, in other words, that he has succeeded by such methods in giving his product a distinctive character accepts by the market. A defendant, however, does no wrong by entering a market created by another and then competing with its creator. The line may be difficult to draw; but, unless it is drawn, competition will be stifled."

Their Lordships then said that the test applied by, <ORG> in the instant case was that one has to see whether the consuming public would be confused or misled by the get-up, the formula or the advertising of the respondent's product into thinking that it was the appellant's dissimilar product. <ORG> held on the facts, that the public were not so decieved.

12. In <ORG> v. <NAME> ((1905) 22 RPC), the appellant was selling Soda Water in bottles, with a neck label around then, the body of the label being of chocolate colour with a white border and a red medallion in the centre of the label. The respondents, subsequently, sold soda water in bottles with a somewhat similar neck lable round them in same colour and with a central red medallion. However, appellants' labels showed '<ORG>'s soda water' printed on them in white characters while respondents' contained the name '<NAME> Soda Water'. Action by plaintiffs failed. It was held by <ORG> that a fraudulent intent cannot be presumed inspite of the similarities in the bottles, labels colour and medallion because the distinguishing feature of name adopted by defendants showed that they had no intention to deceive purchasers. Lord <NAME> LC said :

"I should have thought if you looked at the two bottles together no human being could have mistaken one for the other. If 'Royal' and 'Flag' were sufficiently distinctive in the case to which the learned counsel called our attention <CITATION> . (17 RPC 628), I should have thought 'Gibbens' and 'Schwappes' are equally impossible to be confounded with each other."

Lord <NAME> said it was "ridiculous" to apply the principle of similarity in trade dress in such a situation. He said :

"I can quite understand a case in which, although colourably a defendant has introduced his own name, yet the nature of the wrapping up, the nature of the package itself, or, in this case, the shape of the bottle, may all have been so closely imitated that the mere introduction of some distinctive mark, to which no ordinary observer would have applied his mind, will not get rid of the obvious intention to pass one goods off as the other; but to apply the proposition to this case appears to me to be a little short of ridiculous".

It was held that the name of '<ORG>' was so plainly placed upon the bottle as it could possibly be and it was in the place where 'Schweppes' was on the bottle of the appellant, and there was no intention to deceive.

13. The above case also answers the contention of fraudulent intent argued by the appellant's counsel before us. Similar views as to absence of fraudulent intent were expressed in <CITATION> . (supra), also, to which we have already referred and which came from New South Wales before <ORG> (1981) RPC 429 (PC).

14. In the present case, in spite of any other close resemble ness in the cartons, the name '<ORG>' written prominently on the respondents carton would, in our view, prima facie, as in case before Lord <NAME> show that there was no intention on the part of the defendant to play fraud by misrepresenting his goods as the goods of the appellant. In that very case, Lord <NAME> bury emhasized the need to see the whole description on the goods as one whole and not the individual features in isolation. He said :

"Inasmuch as you and certainly not to impute fraud without proof, you are not to suggest that people are fradulently committing some commercial trick without sufficient evidence, and I cannot conceive here how anybody could gravely argue that the one thing could be mistaken for the other by anybody who looked as it.

**** *** *** *** *** The whole question is these cases is whether the thing - taken in its entirety, looking at the whole thing, is such that in the ordinary course of things a person with reasonable apprehension and with proper eyesight would be deceived."

Thus, the above case also lays down that the trade dress or rather the whole thing must be seen in its entirely and not parts in isolation. It is not permissible, therefore to say that the square on the left side top had a small red and green border or there was a red band horizontally and defendant's carton if examined from close quarters, showed these feature. Viewed as a whole, one can see that the words <ORG>, and <ORG> are prominently displayed on each and therefore there can be no confusion, prima facie.

15. That brings us finally to the question of the failing memory of the customer. The argument is that customer's have short memory and that if the trade dress is similar, the customers are likely to get con fused.

16. It has now been held that there are limitations to the theory of imperfect memory. Halsbury's Laws of England (4th Ed.) (Vol. 48, para 139) says that this principle of imperfect recollection must not be pressed too far. It says :

"The <ORG> must bear in mind that the marks will not normally be seen side by side and quard against the danger that a person seeing the new mark may think that it is the same as one he has seen before, or even that it is a new or associated mark of the proprietor of the formal mark. However, the doctrine of imperfect recollection must not been pressed too far <ORG> v. <ORG> ((1954) 71 RPC 455 at 457). Marks are often remembered by general impressions of by same essential feature (<ORG> ((1951) 68 RPC 106 (PC) 289), (on appeal 71 RPC 348. (CA).

In fact in <ORG> case above referred to, Lord <NAME> said "and if a person is so careless that he does not look, and does not, ........... treats the label fairly but takes the bottle without sufficient consideration and without reading what is written very plainly indeed up - the face of the label on which the trade has placed his own name, then you certainly cannot say he is deceived in fact, he does not care which it is. That would be the true interference which I think a person would draw from conduct so described."

17. Having dealt with the contention of imperfect memory of the coustomer, we shall now deal with the class of purchasers, which is also an important factor. who are the persons who go to purchase '<ORG>'s' Corn Flakes ? Prima facie, in our opinion, these people belong to a middle-class or upper middle class and above who are fairly educated in English and are able to distinguish "<ORG>'s" and what is not "<ORG>". In American Jurisprudence (2d) (Trade Marks Supp. para 19 page 178) it is said that it is necessary to note the fact :

"that customers for fasteners are sophisticated and discerning, that defendant acted with goods faith.

The case was one where customers purchasers of fasteners in the automobile industry. (<ORG> v. <ORG> (LDC III (US PU 106")). Again <NAME>, Law of Trade Marks (12th Ed. 1980) (Para 1706) says that :

"If the goods are expensive and not of a kind usually selected without deliberation, and the customers generally educated persons, these are all matters to be considered (Piano list ((1906) 23 RPC 774), Claudiness Ash v. Invica ((1911) 28 RPC 597 = 29 RPC 465 (CA) (HL) (dentists), Rysta (1943) 60 RPC 87).

18. In Piano list's (supra) case an application was made for the registration as a trade mark of the word 'Neola' for "piano player" being a musical instrument included in class 9". Coming to know of this application, the registered proprietors of the trade mark "Pinole" who were registered for all goods in class 9, opposed the above application for registration. The Registrar overruled the objection and ordered registration. On appeal, Justice <NAME> said that having regard to the kind of customers" for such goods and the distinction in the names, there was not likely to be any confusion and dismissed the appeal.

19. If that was so between 'Neole' and '<ORG>', the case of <ORG> and <ORG>, in our prima facie view, presents no difficulty for distinct identification. <NAME> in fact observed in the above case :

"Of course, one knows that the persons who buy these articles are generally persons, of some education, ........ my opinion is, having regard to the nature of the customer, the article in question and the price at which it is likely to be sold, and all the surrounding circumstances, no man of ordinary intelligence is likely to be deceived ..."

We are, on the facts of the case before us, prima facie of the same opinion in regard to <ORG> and <ORG>.

20. Learned counsel for the appellant placed reliance on <ORG> v. <NAME>, (supra). In that case, the plaintiff was selling toothpaste as "<ORG>". The appellant used packages with colours red, white and dark blue the respondents also used red, white and blue. It was held that the defendant borrowed features from the plaintiff's packaging, tubes and labels and the ordinary purchaser of normal memory was not to be expected to examine the goods keeping them side by side, and the get-up would cause confusion. In our prima facie view, this case is clearly distinguishable because, apart from the fact that the get up was the same, the name used by the defendant was found to be deceptively similar. The question of imperfect memory was relevant there because the purchaser could be a person who would not discern whether the tooth paste was <ORG> or <ORG>.

21. We shall now deal with likewise <CITATION> . ((1989) (1959) RPC 83), cited for the appellant. There, no doubt, both parties sold sweet or 'fruit drops' in decorated tins. No doubt the names, <ORG> fruit flavoured drops and <ORG> fruit flavoured drops were somewhat different but, if one looks at the box, one can find the trade dress was too prominent and the names not that prominent. The learned Judge <NAME>, J. held that it was possible that purchasers might get confused. Prima facie, the case goes against the view expressed by <ORG> in the cases referred to above. Further this case has been placed in a special category by writers because here the picture of the sweets on the top of the boxes was so similar, spreading over the entire face of the box, and the learned Judge felt more impressed by that fact though the names were not so similar, this view appears from Halsbury's Law of England 4th Ed. para 168 which says that we should look at the photographs of the boxes. <NAME> says (para 16.6.7) that this case was treated as a case of deliberate copying offending plaintiff's copyright. It was also held that there was infringement of registered trade mark. So far as passing off was concerned, it was seen as a case where having regard to the arrangement of the picture of the sweets on the top of the box, that a person with imperfect memory could be misled. Monday v. <NAME> ((1905) 22 RPC 273), cited for the appellant is also distinguishable. The appellants mark there was of an 'ace of clubs' with the word 'club' upon bottles which were sold with label "Club Black Enamel", while defendants did likewise sell with 'ace of spades' and label "hub Black Enamel". Injunction was granted on the ground of fraudulent get up. The words 'Hub' and 'club' were treated as similar and likely to create confusion. This case is also distinguishable.

22. In the result, on our prima facie conclusions, we reject the plea of similarity or likelihood of confusion, we reject the plea of fraud as well as the one based on imperfect memory. We are of the view, prima facie that even though the get up is similar, the different names <ORG> and <ORG> prominently displayed, make all the difference and this is not a fit case for interference with the order of the learned Single Judge refusing injunction.

23. These are prima facie views and it is made clear that the suit will be disposed of on the basis of such evidence as may be produced therein without being influenced by anything said here. Appeal is dismissed.


<CITATION> .

(1) Two questions are raised by this writ petition. The first relates to the true meaning of the word "information" in section 147(b) of the Income-Tax Act, 1961 (hereinafter called "the Act" in short). This has received enough attention in judicial decisions to produce a conflict between them. The resulting uncertainty makes further discussion necessary. The second is so fundamental as to require careful consideration to reach a definitive conclusion. It is this :-Can the writ Court refuse to grant the relief to a petitioner on such grounds as (a) his conduct, or (b) he has not suffered any injustice, or (c) that the grant of the relief to him would result in injustice.

(2) The petition raising these questions is filed by the petitioner who belonged to the former <ORG> was a former Chief Justice of <ORG> and is now a retired Judge of <ORG> on the following facts :-

The petitioner took a loan of Rs. 65,000 from his Provident Fund as a non-refundable advance in 1958-59 and spent it along with his own Rs. 13,000 in buying and re-constructing a house at Allahabad. He sold the said house in 1967 for Rs. 1,25,000 without obtaining the prior permission of the Government. As the petitioner parted with the possession of the house contrary to rule 7-E(1) of the Indian Civil Service Provident Fund Rules (hereafter called "the Rules" in short), the sum withdrawn by him became payable together with interest thereon amounting to Rs. 27.932 by him as the subscriber to the Fund under rule 7-E(2). The petitioner paid the amount with interest to his Fund accordingly. In calculating income-tax payable on "Capital gains" under section 48 of the Act, the petitioner deducted from the sale proceeds of the house the interest of Rs. 27,932 as expenditure incurred wholly and exclusively in connection with the transfer of the house in addition to the cost of acquisition of the said house. In doing so, the petitioner stated that on the sale of the house "it became necessary to refund this Sum of Rs. 65,000 together with interest amounting to Rs. 27,932 as calculated by the Accountant-General, <ORG>. Consequently, a total sum of Rs. 92,932.00 was paid to the Accountant- General, <ORG>. The amount of interest of Rs. 27,932.00 is expenditure laid out wholly and exclusively in connection with the transfer of the house, because, under the terms of the advance from the Government, this interest was compulsorily payable on the sale of the house, so that the capital gain by selling the house could not possibly be earned without making this payment to the Government." The Income-Tax Officer assessed the income-tax on "capital gains" solely on the basis of the representation made by the petitioner on March 26, 1973, however a notice under section 148 of the Act was issued to the petitioner by <ORG> staling that the latter had reason to believe that the petitioner's income chargeable to tax had escaped assessment within the meaning of section 147 of the Act. When the petitioner asked <ORG> as to what was the subsequent information received on the basis of which the latter proposed to make a re-assessment, <ORG> replied that the petitioner had "claimed that this amount of interest was expenditure laid out wholly and exclusively in connection with the transfer of house because under the terms of advance, interest was compulsorily payable on the sale of the house. Subsequently, after 27-5-1969 (date of assessment) I got information that interest was not compulsorily payable. It became payable only because this house was sold in contravention of the provision of rule 7-E of the J. C. S. Provident Fund Rules.. ....Since deposit in <ORG> including the interest- accuring thereon belongs to the depositor only repayment is deferred, payment of this interest cannot be treated as expenditure."

(3) The petitioner prays that the abovementioned notice under section 148 of the Act be quashed. His learned counsel <NAME> assisted by <NAME> supported the petition on the following grounds :-

(1) No income has escaped assessment within the meaning of section 147 of the Act because the interest paid by the petitioner on the loan taken from his Provident Fund was paid to the Government. It became a part of <ORG> of India, that is, the property of the Government, it was, therefore, expenditure incurred wholly and exclusively in connection with the transfer of the house within the meaning of section 48(1) .

(2) Even if the interest was paid into the petitioner's own account in the Provident Fund and thus continued to belong to the petitioner without becoming the property of the Government, this information was known to the Income-Tax Officer at the time of the assessment. It did not become known to him subsequently. The said Officer thus had no jurisdiction to make the re-assessment under section 147(b) of the Act.

(4) Both these contendons were repelled in the defense. It was pointed out that :-

(1) The interest paid by the petitioner did not become the property of the Government and did not become a part of the Consolidated Fund of India. It was paid to his own account in <ORG> and remained his own property. It did not, therefore, amount to any expenditure by him muchless expenditure incurred in connection with the transfer of the house; and (2) On the return and the representation made by the petitioner, " it was not apparent that the interest which had been paid by the petitioner was in fact credited to his account and the true and correct interpretation of rule 7-E was brought to the notice of the I.T.O. by the Revenue Audit authorities as well as by <ORG> that the petitioner was, in law, not entitled to deduction of the amount of interest paid."

(5) We ourselves put the following further points to the counsel and heard them on the same, viz, (1) whether the conduct of the petitioner debars him from relief, (2) whether he has suffered no injustice by the issue of the impugned notice, and (3) whether positive injustice would result if the relief prayed for is granted to the petitioner.

(6) The first question is whether the notice under section 148 read with section 147(b) was issued with jurisdiction. It is a condition precedent to the issue of such a notice that the Income-Tax Officer should have come into the possession of "information" subsequent to the date of the assessment. He has sworn an affidavit that he came to know of it after the date of the assessment. He has also sworn that "as the time when original assessment was made, it was not apparent that the interest was in fact credited to his account." This averment is substantiated by the representation made by the petitioner at the time of the original assessment. In the return he repeatedly stated that the interest was paid by him to the Government. This representation was contrary to rule 7-E (2) which states that "the sum withdrawn by him shall forth with be repayable together with interest thereon at the rate determined under rule 4 by the subscriber to the Fund." Neither in the petition nor in the argument was any explanation given as to why the petitioner told the Income-Tax Officer that the interest was paid to the Government when under rule 7-E(2) it was paid to the Fund. It has been seriously contested by and for the petitioner that the interest was paid to the Government and that it went to <ORG>. The Income-Tax Officer, out of regard, to the petitioner, made the assessment solely relaying on the representation and the return made by the petitioner. The information that the interest was paid to the Fund and not to the Government was not given by the petitioner to the Income-Tax Officer. It is true that the Income-Tax Officer could have himself found out from rule 7-E whether the interest was really paid to the Fund. The fact remains, however, that this vital information was not apparent to the Income-Tax Officer at the time of the assessment.

(7) The affidavit of the Income-Tax Officer further states that subsequently " the true and correct interpretation of rule 7-E was brought to the notice of the I.T.O. by the Revenue Audit authorities as well as by <ORG>." This would mean that these two authorities pointed out to the Income-Tax Officer that on a true meaning of rule 7-E the interest went to the Fund and continued to belong to the petitioner. It was not, therefore, an expenditure by the petitioner.

(8) It is mixed question of law and fact whether the interest paid by the petitioner was expenditure. The question of law is whether the payment of the interest to the Fund meant a payment to the petitioner himself or to the Government in considering the second question; we shall show that it amounted to the payment to the petitioner himself inasmuch as the account in the Provident Fund belonged to the petitioner and that the interest remained the property of the petitioner even after the payment to the Fund. The question of fact is whether the petitioner had made the payment to me Fund or to the Government. The representation by the petitioner that it was paid to the Government was not correct. As required by rule 7E(2) it was paid to the Fund. <CITATION> . (1968) 67 1. T. R. 11, (i) <ORG> has made it clear that the information could consist either of fact or of law. The fact that the payment was made to the Fund was not disclosed in the representation made by the petitioner and was not, therefore, apparent to the Income-Tax Officer. The law that the payment amounted to the petitioner himself and not to the Government was pointed out to the Income-Tax Officer by <ORG> and <ORG> subsequent to the assessment. Thus information about the fact as well as the law came into the possession of <ORG> after the assessment.

(9) It was contended by the learned counsel for the petitioner, on the authority of <CITATION> ., (1971) 80 I.T.R. 188 that "information as to the state of law by any and every person cannot constitute 'information' so as to entitle the Income-Tax Officer to reopen the assessment." We respectfully agree with this proposition laid down by <NAME>, C.J., speaking for the Division Bench of the Gujarat High Court in the abovementioned decision. The objects of the requirements in section 147(b) that the information must be subsequent to the date of the assessment and that it should be from a source external to the Income-Tax Officer are meant to prevent an abuse of power exereisable under section 147(b) by the Income-Tax Officer. In their absence, the Income-Tax Officer would be able to change his opinion after making the assessment and the finality of the assessment would be destroyed not by any external causes but at the will of the Income-Tax Officer himself. It is also necessary to ensure that the Income-Tax Officer is, not able to ascribe the information about the law given to him subsequent to the assessment to any person whatever. It would then be difficult to know whether it was his own re-thinking or it really came to him from some person who either had the power or the duty to give such information in the form of an opinion to the Income-Tax Officer. The externality of the source of the information has to be understood in this manner with a view to achieve the object of section 147(b) . <NAME>, <NAME> attempted to circumscribe the externality of the source of the income in the following words at page 193 of the report:-

"IT must be, as already stated by us, a statement or expression of the correct state of the law by a person, body or authority competent and authorised to pronounce upon the law, so that it is invested with some definitencss and authority."

(10) With respect, we think that this test unless narrowly construed, is not materially different from the test of power and/or duty suggested by us above. It is in the light of this test that we have to decide whether the information coming from the Audit department and/or <ORG> could amount to "information" within the meaning of section 147(b) . The question was answered in the negative by <ORG> of <ORG> in the following words at page 194 of the report :-

'THE audit department is not an authority competent and authorised to declare the correct state of the law or to pronounce upon it."

(11) If by the words "declare the correct state of the law or to pronounce upon it" is meant the authoritative decision of law which is binding on parties, ^courts and other authorities, then such authority is possessed only by the courts or other statutory authorities empowered to decide questions of law. This raises the question whether the test of the externality of the source of information laid down by <ORG> in <ORG> referred to above, is not being unduly circumscribed by these words.

(12) The legal work is done not only by lawyers and judges but also by other qualified persons particularly in the working of the <ORG> on cases many of which do not come to courts at all. Legal advisers of the <ORG> advise the <ORG>. In performing the function of assessment, the Income-Tax Officer acts partly as an administrator and partly as a quasi-judicial authority. His position is different from that of the <ORG>. He is required statutorily to obey the instructions and directions issued by <ORG> under section 119 of the Act (<ORG> v Commissioner of Income-tax, . Such a direction by <ORG> would constitute an "information" under section 147(b) even though it may not have been given by a <ORG> of law and an appellate authority under the Act.

(13) Under Article 74 of the Constitution the President exercises his functions on the aid and advice of <ORG>. Under Article 77(3) the President has made rules for the more convenient transaction of the business of <ORG> and for the allocation among Ministers of the said business. Under the said rule the function of advising the <ORG> on all questions of law is given to <ORG>. In his executive capacity, an Income-Tax Officer is a part of the <ORG>. <ORG> has, therefore, the power and/or duty to give advice on questions of law for the guidance of the Income-Tax department. The opinion of <ORG> becomes the opinion of the <ORG> in view of these rules of business. The Income-Tax Officer has, therefore, to pay due regard to the said opinion.

(14) Under Article 148 of the Constitution the Comptroller and Auditor General of India is appointed as an independent authority not removeable from office except in the manner and on the grounds as a Judge of <ORG> would be removed. It is well known that his department is divided into two parts, namely, Accounts and Audit. The function of the auditors is to examine and check the work of the <ORG> officers, point out mistakes, if any, committed by them and lay down instructions for their correct working. The report of the Comptroller and Auditor-General of India on the functioning of the departments of the <ORG> is submitted to the President under Article 151 and is laid before <ORG>. <ORG> of the <ORG> sees to it that this report is complied with by the <ORG> as far as possible. <ORG> is a part of this Audit department. The officers of <ORG> must be experts who can examine and check upon the work of Income-Tax Officers. They are presumed to know the work of the Income-Tax Officers including the law of income-tax. The Income-Tax Officer has, therefore, to pay due regard to the notes of such auditors. As <ORG> and <ORG> have the power and duty to guide the functioning of the Income-Tax Officers in this respect, advice and instructions given by them have to be regarded as "information" within the meaning of section 147(b) as being external to the Income-Tax Officer but at the same time not coming from a mere interloper not connected with the work of the Income-Tax Officer. In regard to the audit notes being "information" we are supported in our conclusion by all the other decisions of <ORG> placed before us, viz., <CITATION> , (1964) 51 I.T.R. 479 (Mysore), per Hegde and <NAME>, JJ., Commisioner of Income-Tax v. <NAME>, (1972) 85 I.T.R. 102 (Kerala) per Mathew and Krishnamoorthy lyer, <CITATION> , (1973)90 I.T.R. 503 (Kerala) per <NAME> and <NAME>, Jj, and Commissioner of Income-Tax v. <NAME>, (1972) 84 I.T.R. 584, per <NAME> and <NAME>, JJ. of this Court .

(15) On the first question, therefore, our finding is that the Income- Tax Officer received "information" within the meaning of section 147(b) of the Act when subsequent to the assessment <ORG> and the Revenue Audit pointed out that as a question of fact the payment of interest by the petitioner was made to his own account in the Provident Fund and as a question of law the money so paid did not vest in the Government but continued to belong to the petitioner and, therefore, the income of the petitioner had escaped assess- ment which was made on the basis that such payment of interest had amounted to an expenditure incurred by the petitioner in connection with the transfer of his house. The Income-Tax Officer had, therefore, jurisdiction to issue the impugned notice under section 148 read with section 147(b) of the Act.

(16) On this finding, we need not have answered the second question but we would prefer to do so to completely deal with the points raised by the petitioner and argued before us. Under Article 266 of the Constitution, <ORG> is constituted of only three elements, namely, (1) revenues received by <ORG>, (2) loans raised by that Government by the issue of treasury bills, loans or ways and means advances, and (3) all moneys received by that Government in repayment of loans. Learned counsel for the petitioner argued that: the repayment of a loan taken from the provident Fund along with interest on it would come under the last element of <ORG>. This argument ignores not only the true interpretation of Article 266 but also of the other connected provisions of the Constitution. Under Article 284 all moneys received by or deposited with (a) any officer connected with the affairs of the <ORG> or of a <ORG> in his capacity as such, other than revenues or public moneys raised or received by <ORG> or the Government of the <ORG>, as the case may be, or (b) any court within the territory of India to the credit of any cause, matter, account of persons, shall be paid into the public account of India or the public account of the <ORG> as the case may be. It is to be noted that as contrasted with <ORG>, the public account of India contains moneys which are received by the Government officers or courts but which continue to belong to persons to whom such moneys are payable. They do not belong to the Government. The contrast between <ORG> and the public account of India is brought out by the following features, namely :-

(1) Under Article 266(2) all other public moneys received by or on behalf of <ORG> shall be credited to the public account of India. That is to say, all moneys other than the revenues, loans and repayments of loans are credited to the public accounts and not to <ORG>.

(2) Under article 266(3) no moneys out of <ORG> shall be appropriated except in accordance with law and for the purposes and the manner provided in the constitution.

(3) The annual appropriation Act is passed and then only the <ORG> can spend the money out of <ORG> after the budget is voted upon by <ORG>. There is no such: requirement for payment of the moneys from the public account. The reason is that the former Fund belongs to the <ORG> while the latter account contains moneys which do not belong to the <ORG>.

(4) It is a matter of common knowledge that the instances of "other public moneys" which go to the public account under Article 266(2) and 284 include deposits, remittances and service -funds <NAME> Commentary on the Constitution of India 5th Edn. Volume 4, pages 261-262). Instances of moneys deposited in the public account are the Provident Funds, Postal Savings Bank Accounts, Life Insurance Funds, etc. Under Article 283. the operation of <ORG>, the public account and <ORG> can all be regulated by law. This does not mean, however, that like <ORG> and <ORG>, the ownership of the moneys in the public account must belong to <ORG>.

(17) That the money in the petitioner's account in the Provident Fund continued to belong to the petitioner and not to the Government of India is also clear from the following :-

(1) The object of constituting a Provident Fund is to provide for the eventuality of retirement or the death of the subscriber. This is why the moneys paid into the Fund are not repayable to the subscriber ordinarily till those eventualities occur.

(2) The very fact that <ORG> is constituted would show that the Fund is different from <ORG> or <ORG>. As the Government has to keep the custody of the money and manage it, <ORG> formed part of the public account of the Government.

(3) A person subscribes to <ORG> or contributes to it. He does not give away his money thereby.

(4) The money and the interest on it is credited into the Fund.

(5) Such money is credited to the account of the subscriber.

(6) Such money may be withdrawn by the subscriber ordinarily on his retirement or be paid to his nominees or heirs on his death or in certain circumstances even earlier but in all events it remains his money payable to him or .his nominees or heirs.

(7) The language of the Indian Civil Service Provident Fund Rules shows that the money continued to belong to the subscriber and does not vest in the <ORG>.

(8) The Provident Funds Act , 1925 is applicable to this as well as other Provident Funds. It defines "compulsory deposit" in section 2(a) as one which is not "repayable on demand". But for this provision, the money would have been repayable on the demand of the subscriber which means that it belongs to the subscriber. The repayment is deferred only because the money is held in the Fund to provide for the eventualities of death and retirement.

(9) Under section 3 of the said Act as also under section 60 of the Code of Civil Procedure the money in the account of the subscribers to <ORG> is exempt from attachment. The necessity to provide for such exemption arose because the moneys belong to the depositors and not to the <ORG> and would have been liable to attachment by their creditors as the judgment-debtor's property in execution of a decree or order against him.

(10) Under certain circumstances the moneys in the Provident Fund account can be assigned by the subscribers and can be made payable to nominees by them. This also shows that the moneys belong to the subscribers.

(11) Part Xii of the Income-Tax Rules, 1962 deal with recognised Provident Funds. Section 10(12) of the Income-Tax Act states that the accumulated balance due and becoming payable to an employee participating in a recognised Provident Fund to the extent provided in rule 8 of Part A of the Fourth Schedule would not be included in the total income of an asscssee.

(12) Lastly, the contributions made by the employees and the eir'ployers to the Labour Welfare Fund which is in the nature of a Provident Fund were held to be payable to the employees for whose benefit the contributions were made and not to the Government or any other authority ( <CITATION> , , and <CITATION> , ).

(18) We, therefore, find that the petitioner continued to be the owner of the interest paid by him on the amount withdrawn by him from the Provident Fund. An amount so withdrawn may have been called an advance only because ordinarily the money in the account of the subscriber is not payable to him till his retirement. It is significant that it was not an ordinary advance but an no-retundable advance or loan. An ordinary advance or loan is repayable but this was not repayable because the money had already belonged to the petitioner.

(19) Our finding of fact on this second question, therefore, is that the money paid by the petitioner by way of interest went into his own account in <ORG> and remained his own money. There was thus no expenditure at all incurred by him in making the said payment. The finding of law is that the payment into the petitioner's account in <ORG> does not amount to a payment to the Government and is not an expenditure incurred in connection with the transfer of his house within the meaning of section 48 of the Act.

(20) The finding on this second question means that even if it is assumed for the sake of argument that our finding on the first question is incorrect and section 147(b) does not cover the proposed reassessment, still the <ORG> would have the discretion to refuse relief to the petitioner.

(21) The law is well settled that the issue of a writ or order in the nature of certiorari by this Court under Article 226 is not of course. It does not follow as soon as some legal infirmity is shown by the petitioner in the impugned order. This Court has the discretion to abstain from interference if (a) the conduct of the petitioner is such as to disentitle him to the relief, (b) he has not suffered any injustice, or (c) that the grant of the relief to him would result in injustice. All these three reasons are present in this case. The deduction was allowed to the petitioner without further inquiry because of his statement that the interest was paid to the <ORG> while in fact it was paid to his account in the Fund. The petitioner has been upjustly enriched at the cost of the public interest. To allow the petitioner to retain the undeserved advantage would me&n that the burden of taxation which he should have legally borne is being misplaced. (The dicta of Lord <NAME> in <NAME> v. <ORG>. (1942) 1 K. B. 389 at 397, and of Lord Chancellor Viscount Simon in <NAME> v. <ORG>, (1943) A.C. 377, (11) are instructive in this respect).

(22) <CITATION> , , , the order of the Deputy Commissioner, Sibsagar, purporting to fix minimum wages was challenged as being without jurisdiction. On the facts stated there was a prima facie case to show that the said order might not be supported by section 20 of the Minimum Wages Act, 1948. But their lordships observed in paragraph 16 of the judgment :-

"WE do not propose to decide this question of jurisdiction. ... Whatever infirmities might possibly have attached to the orders passed by the Deputy Commissioner, Sibsagar, on the score of want of jurisdiction, we feel that . . . . no useful purpose will be served by our interfering at this stage."

Their Lordships further observed in paragraph 17 :-

"THERE are moreover special reasons why we should not interfere with the orders of the Deputy Commissioner, Sibsagar. They were the subject, in the first instance, of proceedings under Article 226 of the Constitution in <ORG>. Proceedings by way of certiorari are not of course. (Vide Halsbury's laws of England, Hailsham Edition, Vol. 9, paras 1480 and 1481, pp. 877-878, corresponding to 11, Halsbury's Laws of England, 3rd Edition, paragraph 265). <ORG> had the power to refuse the writs if is was satisfied that there was no failure of justice, and in these appeals which are directed against the orders of <ORG> in applications under Article 226 , we could refuse to interfere unless we are satisfied that the justice of the case requires it. But we are not so satisfied."

(23) The same view was expressed by <NAME>, CJ" speaking for the Constitution Bench in Smt. <NAME> v. State oi Bihar, (Civil Appeal No. 140 of 1964 decided on September 22, 1964) as follows :-

"IT is well settled that under Article 226 , the power of <ORG> to issue an appropriate writ is discretionary. There can be no doubt that if a citizen moves <ORG> under Article 226 and contends that his fundamental rights have been contravened by any executive action, <ORG> would naturally like to give relief to him, but even in such a case, if the petitioner has been guilty of laches, and there are other relevant circumstances which indicate that it would be inappropriate for <ORG> to exercise its high prerogative jurisdiction in favor of the petitioner, ends of justice may require that <ORG> should refuse to issue a writ. There can be little doubt that if it is shown that a party moving <ORG> under Article 226 for a writ is, in substance, claiming a relief which under the law of limitation was barred at the time when the writ petition was filed, <ORG> would refuse to grant any relief in its writ jurisdiction. No hard and fast rule can be laid down as to when <ORG> should refuse to exercise its jurisdiction in favor of a party who moves it after considerable delay and is otherwise guilty of laches. That is a matter left to the discretion of the <ORG>, in this matter too discretion must be exercised judiciously and reasonably."

(24) These observations were followed by <NAME> and <NAME> (in <CITATION> , to make the point that the relief under Article 226 is discretionary.

(25) High <ORG>s have refused to interfere in their writ jurisdiction when not called upon to do so in the interests of justice. The reason is that the remedy sought by the petitioners under Article 226 is not as of right but is in the discretion of this <ORG>. ( <CITATION> , . The discretion is to be exercised to further the interests of justice and not to do injustice (<NAME> v. <NAME>, 1952 S.C.R. 583 at 594 <CITATION> , 1953 S.C.R. 302 at 305 and <CITATION> , (26) A learned commentator (Basu's Commentary on the Constitution of India, 5th Edition, Volume 3, pp. 375-377) has observed that manifest injustice is not a condition precedent to the grant of relief under Article 226. He relies on the decision of <ORG> in <ORG> v. I. T. 0., . But the said decision does not deny such discretion to <ORG>. On the contrary, <ORG> found that the writ of mandamus had to issue in that case because the respondent "failed to carry out a legal duty imposed on him and such failure was destructive of a basic principle of justice". It is to be noted that the expression "ex debito justitiae" used in this connection only means that the petitioner has a locus standi and is an aggrieved person (The King v. <ORG>, 1921-1 K. B. 248. It in no way denies discretion to the <ORG>. <CITATION> . 2nd (1969) Delhi 1016, a Full Bench of this <ORG> refused to quash at the instance of the tenant, the order of the competent authority under the Slum Areas (Improvement and Clearance) Act, 1956 passed without jurisdiction because the tenant had not paid the rent due from him. This <ORG> refused to exercise the discretion in favor of the tenant for this reason.

(27) Even if, therefore, this <ORG> has the option to grant or refuse relief to the petitioner, considerations of justice have to be taken into account in exercising the option. There is nothing surprising in the doctrine. As Lord <NAME> writes "in almost every case, except the very plainest, it would be possible to decide the issue either way with reasonable legal justification" and that in such cases, ethical considerations operate and ought to operate (Law and other Things, page 48). For the above reasons, we dismiss the writ petition with costs.


JUDGMENT <NAME>, J.

1. This is an appeal from a judgment of <ORG> dated November 17, 1938, which was given upon a reference of a question of law made to <ORG> by the Commissioner of Income-tax under Section 66(2) of the Indian Income-tax Act, XI of 1922.

The question was as follows:--

Whether on the facts of this case the Income-tax authorities were entitled to hold that the income from the first six items of loans referred to in paragraph 21 of the Income-tax Officer's assessment order accrued and arose to <ORG> directly or indirectly through or from a business connection in British India within the meaning of Section 42(1) of the Indian Income-tax Act between <ORG> and <ORG>.

2. The Commissioner of Income-tax submitted that this question should be answered in the affirmative. <ORG> (consisting of Sir <NAME>, <NAME> and <NAME>.), decided that the submission of the Commissioner was right and answered the question in the affirmative.

3. From this decision the appellant, <ORG>, has appealed to His Majesty in Council.

4. The reference arose out of the assessment of <ORG>, Kanadukathan (hereinafter for the sake of brevity referred to as <ORG>") as agent of <ORG>, Pudukottai (hereinafter referred to as <ORG>), for the assessment year 1933-34.

5. The assessment proceeded on the basis that certain profits or gains accrued to <ORG>, resident out of British India, directly or indirectly through or from a business connection in British India, and that under Section 42(1) of the Indian Income-tax Act of 1922 such profits or gains were chargeable to income-tax in the name of <ORG>, resident in British India, which was treated as the agent of <ORG> under Section 43 for all the purposes of the Act.

The material facts may be stated as follows:--

6. <NAME> Sir Annamalai Chettiar of Chettinad with his three sons had a large money lending business with many branches in Burma, Ceylon, the Federated Malay States and French Cochin China. In 1929 they formed <ORG> which has its headquarters at Kanadukathan in British India. Kanadukathan lies about two miles from the border of the State of Pudu kottai and eighteen miles from the town of Pudukottai, the capital of the State. In 1930 they formed <ORG> and also registered in Pudukottai a company called <ORG>, both of which have their registered offices at Pudukottai, The business carried on by the <NAME> and his sons were wound up and all the assets and liabilities transferred to the three companies. The assets and liabilities of the branches in Burma (which until April 1, 1937, was a part of British India), were transferred entirely to <ORG>. The assets and liabilities of the branches in the Federated Malay States were mostly transferred to <ORG>. The assets and liabilities of the branches in Ceylon were transferred partly to the Colombo branch of <ORG> and partly to the Branches of <ORG>, in Ceylon. Part of the value of the excess over liabilities was adjusted against the paid-up capital of the three companies. The balance was apportioned and the sums treated as being deposits of the <NAME> and other members of his family with these companies.

7. The nominal capital of <ORG> is Rs. 3,00,00,000 and the paid-up capital Rs. 1,00,00,000, divided into 20,000 shares of Rs. 500' each. All the shares of the company are held by the <NAME> and members of his family. The directors are the <NAME>, his wife and two outsiders, neither of whom holds any shares: one is an employee and the other the agent of the <NAME>.

8. The nominal capital of <ORG> is Rs. 2,00,00,000, and its paid-up capital is Rs. 1,70,00,000, divided into 20,000 shares, of which 10,000 are Rs. 700 each paid up and 10,000 of Rs. 1,000 each fully paid up.

9. All these shares, except three, are held by the <NAME> and the members of his family. The directors are the <NAME>, his wife and his son, and two outsiders, each of whom holds one share. There is no doubt that the two companies are controlled by the same people.

10. <ORG> has twenty-two branches, twenty in Burma, of which one is at Rangoon, and one at Bentong, in the Federated Malay States and one at Colombo.

11. <ORG> carries on no money lending business at Pudukottai, but it has a branch at Kualalumpur, situated about thirty miles from Bentong in the Federated Malay States.

13. It appears that between September, 1930, and February 1933, loans amounting to Rs. 1,32,86,888 were made by <ORG> to <ORG>. The loans were carried out through the Kualalumpur branch of <ORG> and the Bentong branch of <ORG>.

14. They fall under the following nine heads, as stated in the reference made by the Commissioner of Income-tax:--

(1) .. .. .. .. .. .. .. 45,00,000 (2) .. .. .. .. .. .. .. 9,74,100 ($6,34,327) (3) .. .. .. .. .. .. .. 5,24,191 (4) .. .. .. .. .. .. .. 2,35,000 (5) .. .. .. .. .. .. .. 19,38,505 (6) .. .. .. .. .. .. .. 4,40,000 (7) .. .. .. .. .. .. .. 5,15,092 (8) .. .. .. .. .. .. .. 34,60,000 (9) .. .. .. .. .. .. .. 7,00,000 Total .. .. .. .. .. .. 1,32 86,888

15. The Bentong branch of <ORG> did no money-lending business and the only duties of the officer in charge of that branch appear to have been to receive hundies from the Kualalumpur branch of <ORG> and to pass them on to the Rangoon branch after making the relevant entries in the books.

16. The first six of the above-mentioned items represent monies used in the Rangoon business of <ORG> in accordance with the procedure hereinbefore indicated: They are the six items mentioned in the reference to <ORG>, and the income arising from the said loans is the subject matter of the assessment, which is now in question.

17. The Commissioner of Income-tax in his reference stated that "in substance these loans represent money lent by <ORG> to <ORG>, but the transactions have been unnecessarily complicated by resorting to a series of entries which are as superfluous as they are confusing."

18. Their Lordships think it necessary once more to protest against the suggestion that in revenue cases "the substance of the matter" may be regarded as distinguished from the strict legal position.

19. In the case of <ORG> v. <ORG> (Duke) [1936] A.C. 1 disapproval of this doctrine was expressed in the opinions of Lord <NAME> and and Lord <NAME> of Killowen.

20. A passage from the opinion of Lord <NAME> of Killowen at page 24 may usefully be cited. It is as follows:--

I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if, in accordance with a <ORG>'s view of what it considers the substance of the transaction, the <ORG> thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case. As Lord <NAME> said many years ago in <NAME> v. Attorney-General (1869) L.R. 4 H.L. 100, 122: as I understand the principle of all1 fiscal legislation it is this: If the person sought to; be taxed comes within the: letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the <ORG>, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.

21. The question on this part of the case is not whether "in substance" the loans represented money lent by <ORG> to <ORG>, but it is whether in fact <ORG> lent the said money to <ORG>.

22. Their Lordships have no doubt that on the facts of the case the said six: items did represent loans made by <ORG> to <ORG>, and that the money was used in the branch of <ORG> at Rangoon, which was then in British India.

23. The fact that the transactions were negotiated through the branches of the banks does not affect this question; the branches were not separate entities, but were parts of the two respective banks, and it is obvious that the business so transacted by the two branches was the business of the two banks.

24. The questions to be considered are whether on the facts of this case <ORG> had a business connection in British India and whether the profits in question accrued or arose to <ORG> directly or indirectly through or from such business connection within the meaning of Section 42(2) of the Act.

25. It was argued on behalf of the appellant bank that in order to bring the case within the section it must be shown by the income-tax authorities that <ORG>, non-resident in British India, had a business connection in British India in relation to the actual transactions in question, that a business connection arises out of business transactions and that the transactions in this case, namely, the above-mentioned loans, were made not in British India but in the Malay States and were to be repaid in the Malay States in the Malay States currency. Consequently it was argued that although the profits of such transactions did accrue to <ORG>, they did not accrue through a business connection in British India.

Section 42(1) is as follows:--

26. In the case of any person residing out of British India, all profits or gains accruing or arising, to such person, whether directly or indirectly, through or from any business connection or property in British India, shall be deemed to be income accruing or arising within British India, and shall be chargeable to income-tax in the name of the agent of any such person, and such agent shall be deemed tot be, for all the purposes of this Act, the assesses in respect of such income-tax:

27. The terms of the section are very wide, and their Lordships are not prepared to place upon them the limitation for which the appellant contends. The words are wide enough to cover profits or gains which can be said to accrue or arise to <ORG> directly or indirectly through or from any business connection which may exist between <ORG> and <ORG> in British India.

28. That <ORG> had a business connection with <ORG> in British India cannot on the facts be doubted, and the transactions in question could not have been carried out but for the existence of <ORG> which was in British India, and the business connection between that bank and <ORG>.

29. It has already been shown that the two banks are controlled by the same; people, viz., the <NAME> and his family. It further appears that the main function of <ORG> was to finance the Kanadukathan bank, that the loans advanced by <ORG> to <ORG> represented a large part of the capital of <ORG>, that the flow of business between the two banks was secured by the complete control exercised by the <NAME> and his family over the business of both banks, so that the loans could be safely made without security and for indefinite periods. In view of these facts their Lordships are of opinion that <ORG> was right in holding that <ORG> had a business connection with <ORG> in British India during the year of assessment, and they are further of opinion that the profits and gains, the subject matter of the assessment, accrued to <ORG> directly or indirectly through such business connection in British India.

30. There remains the question whether the Income-tax Commissioner was correct in treating <ORG> as the agent of <ORG> within the meaning of Section 43 of the Act.

31. It is to be noted that the agent contemplated by the section is so to speak an artificial creation, for it is provided that any person having a business connection with a person residing out of British India, upon whom the Income-tax Officer has served a notice of his intention of treating him as agent of the non-resident person, is to be deemed to be such agent.

32. In view of the above-mentioned conclusions it is clear that the Income-tax Officer was acting within the power conferred upon him by Section 43 in treating <ORG> as the agent of <ORG> for the purposes of the Act.

33. Several cases were cited to their Lordships, but, with one exception, they were not of much assistance, for the facts in the cited cases were different from those of the present appeal, and the decision in each case must of course depend upon its own facts. The exception is <CITATION> . (1930) L.R. 58 I.A. 42, s.c. I.L.R. 55 Bom. 243, 33 Bom. L.R. 413. The headnote of that case is as follows:--

A company incorporated in the U.S.A., and hereinafter called 'the American company', carried on business in New York, and there manufactured and sold typewriter machines. The respondent company had been incorporated under the Indian Companies Act , 1913, and had purchased from the American company for shares the goodwill of that company in the Bombay Presidency and adjoining territory; the American company held all its shares except three issued to that company's nominees, Two other companies had been incorporated in India, each being in substance in the same position towards the American company as the Bombay company; their respective business territory covered the rest of India.

34. It was held that there was a business connection within the meaning of Section 43 and Section 42 , Sub-section (1) of the Indian Income-tax Act , 1922, between the American company and each of the Indian companies, and consequently under Section 43 the respondent company could be deemed for the purposes of the Act to be the agent of the American company, and as its agent could be charged to tax under Section 42 , Sub-section (1), in respect of profits made by the American company upon machines exported to British India.

35. The question whether the necessary business connection existed was argued before the Board, although no appeal had been lodged by the respondents and their Lordships had no doubt that the necessary business connection did exist. It was stated in the judgment that (p. 48):--

<ORG> was formed for the express purpose of acquiring from the American company and carrying on i;n a particular area the American company's business of selling the American company's manufactures. Although no contractual obligation exists by which <ORG> is compelled to purchase any of the manufaetures of the American company, the flow of business between the two companies is secured by the fact that the ultimate and complete control of <ORG> is vested in the American icompany, which owns all its shares.

36. It was further held that the profits and gains in question accrued or arose to <ORG> directly or indirectly through or from a business connection in British India.

37. This case is material, because in their Lordships' opinion, if the appellant's contention in this appeal were correct, viz., that the business connection existed only in respect of actual business which was transacted by the branches of the two banks outside British India, the above cited case should have been decided the other way in so far as it related to the matter now under consideration.

38. For the above-mentioned reasons their Lordships are of opinion that this appeal should be dismissed and that the appellant should pay the respondent's costs of this appeal. They will humbly advise His Majesty accordingly.