PETITIONER: STERLING FOODS, A PARTNERSHIP FIRM REPRESENTED BY ITSPARTNER Vs. RESPONDENT: THE STATE OF KARNATAKA & ANR. DATE OF JUDGMENT21/07/1986 BENCH: BHAGWATI, P.N. (CJ) BENCH: BHAGWATI, P.N. (CJ) <NAME>, V. (J) OZA, G.L. (J) CITATION: 1986 AIR 1809 1986 SCR (3) 367 1986 SCC (3) 469 JT 1986 155 1986 SCALE (2)106 CITATOR INFO : R 1987 SC 747 (1) R 1988 SC 992 (4,6,9) R 1989 SC 516 (17) ACT: Sales tax-Exigibility to tax-Whether shrimps, prawns and lobsters subjected to processing like cutting of heads and tails, peeling, deveining, cleaning and freezing cease to be the same commodity and becomes a different commodity for the purpose of the section 5(3) of Central Sales Tax Act, 1956 and therefore exigible to Purchase tax under section 5(3)(b) read with entry 13a of Third Schedule to the Karnataka Sales Tax Act, 1957 as amended. HEADNOTE: The appellants are a partnership firm carrying on business as dealers in shrimps, prawns and lobsters and other sea food products. They are registered as a dealer both under the Karnataka Sales Tax Act, 1957 and the Central Sales Tax Act , 1956. The appellants in the course of their business purchase shrimps, prawns and lobsters locally for the purpose of complying with orders for export and they cut the heads and tails of the shrimps prawns and lobsters purchased by them, peel, devein and clean them and after freezing and packing them in cartons, they export them to foreign buyers outside India under prior contracts of sale. The appellants filed their statement of monthly turnover for the month of April 1982 before the Assistant Commissioner of Commercial Taxes, Mangalore and claimed total exemption from tax in respect of the purchase turn-over of shirmps, prawns and lobsters under the Karnataka Sales Tax Act, 1957. The Assistant Commissioner of Commercial Taxes rejected the said claim by his two assessment orders and issued two notices of demand for Rs.52,610.71 and Rs.44,237.88 respectively against the appellants. The appellants, thereupon, filed a writ petition in <ORG> challenging all the said orders and notices of demand and sought appropriate direction, order or writ restraining the respondents from imposing or collecting purchase-tax on purchase turn-over of shrimps, prawns and lobsters under the Karnataka Sales Tax Act, 1957. The writ petition was dismissed by <ORG>, but having regard to the importance of the question 368 involved a certificate under Article 133 of the Constitution was granted by <ORG>. Allowing the appeal, the <ORG> ^ HELD: 1.1. In order to attract the applicability of sub-section (3) of section 5 of the Central Sales Tax Act, 1956, it is necessary that the goods which are purchased by an assessee for the purpose of com plying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India. The words "those goods" in sub-section (3) are clearly referable to "any goods" mentioned in the preceding part of the sub- section and, therefore, the goods purchased by the assessee and the goods exported by him must be the same. If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export. 1.2 The test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. It is not every processing that brings about change in the character and identity of a commodity. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps different kinds of processing at each stage. With each process suffered, the original commodity experiences change. But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct commodity that it can be said that a new commodity, distinct from the original. has come into being. <CITATION> (1980) 3 SCR 1271 applied. 1.3 The shrimps, prawns and lobsters purchased by the appellants did not lose their original character and identity when they were subjected to processing for the purpose of export. so far as commercial parlance or popular usage is concerned, they remained the same goods. 369 The dealer and the consumer regarded both as shrimps, prawns and lobsters. The only difference is that processed shrimps, prawns and lobsters are ready for the table while raw shrimps, prawns and lobsters are not but still both are in commercial parlance, shrimps, prawns and lobsters. The fact that they undergo a certain degree of processing or frozen for the purpose of preservation and transfer to other places including far off countries in the world makes no difference in character or identity as the original shrimps, prawns and lobsters. Hence, the purchases of raw shrimps, prawns and lobsters by the appellants must be held to be purchases in the course of export and hence exempt from liability to tax under the Karnataka Sales Tax Act, 1957 as amended. [377A-B] East Taxes Motor Freight Lines v. <ORG> (100) L.Ed. 917 quoted with approval. 1.4 Entry 13a of the Third Schedule to the Karnataka Act also makes it clear that even processed or frozen shrimps, prawns and lobsters are known commercially and in the trade as shrimps, prawns and lobsters. When <ORG> excluded processed or frozen shrimps, prawns and lobsters from the ambit and coverage of Entry 13a, its object obviously was that the last purchases of processed or frozen shrimps, prawns and lobsters in the State should not be exigible to State Sales Tax under Entry 13a. <ORG> was not at all concerned with the question as to whether processed or frozen shrimps, prawns and lobsters are commercially the same commodity as raw shrimps, prawns and lobsters or are a different commodity. Merely because <ORG> made a distinction between the two for the purpose of determining exigibility to State Sales Tax, it cannot be said that in commercial parlance or according to popular sense, processed or frozen shrimps, prawns and lobsters are recognised as different commodity distinct from raw shrimps, prawns and lobsters. Further the question whether raw shrimps, prawns and lobsters after suffering processing retain their original character or identity or become a new commodity has to be determined not on the basis of a distinction made by <ORG> for the purpose of exigibility to State Sales Tax because even where the commodity is the same in the eyes of the persons dealing in it <ORG> may make a classification for determining liability to sales tax. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 220 (NT) of 1986 From the Judgment and order dated 20th November, 1985 of <ORG> in Writ Petition No. 27805 of 1982.

<NAME>, <NAME> and <NAME> for the Appellants <ORG>, <NAME> for the Respondents.

The Judgment of the Court was delivered by BHAGWATI, C.J. The short question that arises for determination in this appeal by certificate is whether shrimps, prawns and lobsters subjected to processing like cutting of heads and tails, peeling, deveining, cleaning and freezing cease to be the same commodity and become a different commodity for the purpose of the Central Sales Tax Act , 1956. Can they still go under the description of shrimps, prawns and lobsters or in other words, when we use the words 'shrimps, prawns and lobsters' do they mean only raw shrimps, prawns and lobsters as caught from the sea or do they also include processed and frozen shrimps, prawns and lobsters. This question which falls for determination in the present appeal arising out of the following facts.

The appellants are a partnership firm carrying on business as dealers in shrimps, prawns and lobsters and other sea food products. The appellants are registered as a dealer both under the Karnataka Sales Tax Act, 1957 and the Central Sales Tax Act , 1956. The appellants in the course of their business purchase shrimps, prawns and lobsters locally for the purpose of complying with orders for export and they cut the heads and tails of the shrimps, prawns and lobsters purchased by them, peel, devein and clean them and after freezing and packing them in cartons, they export them to foreign buyers outside India under prior contracts of sale. The appellants filed their statement of monthly turn-over for the month of April 1982 before the Assistant Commissioner of Commercial Taxes, Mangalore and in this statement of monthly turn-over, they claimed total exemption from tax in respect of the purchase turn-over of shrimps, prawns and lobsters on the ground that the same had been purchased in the course of export. The appellants relied on sub-section (3) of section 5 of the Central Sales Tax Act, 1956 which reads as follows:

"Notwithstanding anything contained in sub-section (1) the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export."

The appellants contended that since the purchases of shrimps, prawns and lobsters had been made by them for the purpose of complying with the orders for export, such purchases of shrimps, prawns and lobsters must be deemed to be in the course of export and they were accordingly not taxable under the Karnataka Sales Tax Act 1957. This contention of the appellants was rejected by the Assistant Commissioner of Commercial Taxes and on 30th July 1982 an order was made by the Assistant Commissioner of Commercial Taxes for the month of April 1982 under section 12 B (2) of the Karnataka Sales Tax 1957 assessing the appellants to purchase-tax and other incidental taxes in respect of the purchases of shrimps, prawns and lobsters made by them during the said period. The Assistant Commissioner of Commercial Taxes also passed another order dated 3rd August 1982 assessing the appellants to purchase-tax and other incidental taxes in respect of the purchases of shrimps, prawns and lobsters made by them during the month of May, 1982. These two orders made by the Assistant Commissioner of Commercial Taxes were followed by issue of notices of demand for Rs.52,610.71 and Rs.44,237.88 respectively against the appellants. The appellants thereupon filed a writ petition in <ORG> challenging the assessment orders and the notices of demand issued against them and sought appropriate direction, order or writ restraining the respondents from imposing or collecting purchase tax on purchase turn-over of shrimps, prawns and lobsters under the Karnataka Sales Tax Act 1957. The writ petition was dismissed by <ORG>, but having regard to the importance of the question involved, a certificate under Article 133 of the Constitution was granted by <ORG> and that is how the present appeal by certificate has come before us.

It is clear on a plain reading of sub-section (3) of Section 5 of the Central Sales Tax Act 1956 that in order to attract the applicability of that provision, it is necessary that the goods which are purchased by an assessee for the purpose of complying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India. The words "those goods" in this subsection are clearly referable to "any goods" mentioned in the preceding part of the sub-section and it is therefore obvious that the goods purchased by the assessee and the goods exported by him must be the same. If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export. The question which therefore arises for consideration is as to what happens when shrimps, prawns and lobsters purchased by the assessee are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing before export. Do they cease to be the original commodity and become commercially a new commodity or do they still retain their original identity as shrimps, prawns and lobsters?

Before we proceed to consider this question, it is necessary to refer to certain provisions of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as the 'Karnataka Act') which came into force on 1st October 1957. Section 5 of the Karnataka Act which enacts the charging section provides for levy of tax on sales and purchases of various commodities described in the Schedules to the Act. The Third Schedule to the Karnataka Act, as originally enacted, enumerated the commodities on which a single-point tax was leviable under sub section 3(b) of section 5 and there were 13 entries in this Schedule. None of these 13 entries included shrimps, prawns and lobsters with the result that the purchases of shrimps, prawns and lobsters were not exigible to purchase tax. This position continued right from the time of the original enactment until 31st March 1973 when the Karnataka Sales Tax (Amendment) Act, 1973 introduced a new Entry '13a' in the Third Schedule with effect from Ist April 1973. This entry included "shrimps, prawns and lobsters" in the Third Schedule. There was another amendment made in the Karnataka Act in 1978 by the Karnataka Sales Tax (Amendment) Act, 1978 and section 9 of this Amending Act made certain amendments in Entry 13a with retrospective effect, so that from 1st April 1973 Entry 13a included in the Third Schedule "shrimps, prawns and lobsters other than processed or frozen shrimps, prawns and lobsters" and the Explanation to Entry 13a provided that "processing" shall include "all or any of the following, namely, cutting of head or tail, peeling, deveining, cleaning or freezing". But, Entry 13a in this form continued only up to 31st August 1978 and with effect from 1st September, 1978, a further amendment was made by the Karnataka Taxation and Certain Other Laws (Amendment) Act, 1982 and after this amendment which was made with retrospective effect from 1st September 1978, Entry 13a read: "Shrimps, prawns and lobsters other than frozen shrimps, prawns and lobsters". The amendment made by the 1982 Amendment Act excluded from the scope and ambit of Entry 13a, frozen shrimps, prawns and lobsters and brought within the net of taxation only purchases of shrimps, prawns and lobsters other than frozen shrimps, prawns and lobsters, provided they were last purchases within the <ORG>.

It is in the context of these provisions of the Karnataka Act that we have to consider whether shrimps, prawns and lobsters, when subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, retain their original character and identity or become another distinct commodity. The test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. It is necessary to point out that it is not every processing that brings about change in the character and identity of a commodity. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps different kinds of processing at each stage. With each process suffered, the original commodity experiences change. But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct commodity that it can be said that a new commodity, distinct from the original, has come into being. The test is whether in the eyes of those dealing in the commodity or in commercial parlance the processed commodity is regarded as distinct in character and identity from the original commodity vide <CITATION>  3 SCR 1271.

It is clear on an application of this test that processed or frozen shrimps, prawns and lobsters are commercially regarded the same commodity as raw shrimps, prawns and lobsters. When raw shrimps, prawns and lobsters are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, they do not cease to be shrimps, prawns and lobsters and become another distinct commodity. They are in common parlance known as shrimps, prawns and lobsters. There is no essential difference between raw shrimps, prawns and lobsters and processed or frozen shrimps, prawns and lobsters.

The dealer and the consumer regard both as shrimps, prawns and lobsters. The only difference is that processed shrimps, prawns and lobsters are ready for the table while raw shrimps, prawns and lobsters are not, but still both are, in commercial parlance, shrimps, prawns and lobsters. It is undoubtedly true that processed shrimps, prawns and lobsters are the result of subjecting raw shrimps, prawns and lobsters to a certain degree of processing but even so they continue to possess their original character and identity as shrimps, prawns and lobsters, notwithstanding the removal of heads and tails, peeling, deveining and cleaning which are necessary for making them fit for the table. Equally it makes no difference in character or identity when shrimps, prawns and lobsters are frozen for the purpose of preservation and transfer to other places including far off countries in the world. There can therefore be no doubt that processed or frozen shrimps, prawns and lobsters are not a new and distinct commodity but they retain the same character and identity as the original shrimps, prawns and lobsters.

This view finds ample support from the decision of <ORG> of the United States in <ORG> v. <ORG>, 100 L. Ed. 917, where the question was whether dressed and frozen chicken was a commercially distinct article from the original chicken. <ORG> held that it was not a commercially distinct article but was commercially and in common parlance the same article as chicken. <ORG> pointed out:

"Killing, dressing and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasturising, homogenizing, adding vitamin concentrates, standardising and bottling".

and proceeded to add in words clear and explicit:

" ..... there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cottonseed in the field and cottonseed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cottonseed, as well as the dressed chicken, have gone through a processing stage. But neither has been "manufactured" in the normal sense of the word."

If dressed and frozen chicken is not a commercially distinct article from the original chicken, it must follow on a process of analogical reasoning that processed and frozen shrimps, prawns and lobsters cannot be regarded as commercially distinct commodity from raw shrimps, prawns and lobsters.

This conclusion on principle was not disputed by <ORG> in its judgment and <ORG> conceded that even after processing such as cutting of heads and tails, peeling, deveining, cleaning and freezing, shrimps, prawns and lobsters subjected to such processing continued in common parlance to be called 'shrimps, prawns and lobsters'. But <ORG> took the view that Entry 13a after the amendment effected in it with retrospective effect from 1st September, 1978, made a distinction between raw shrimps, prawns and lobsters and processed or frozen shrimps, prawns and lobsters. In view of this distinction made in Entry 13a, it was not possible to hold that processed or frozen shrimps, prawns and lobsters were the same commodity as raw shrimps, prawns and lobsters. The argument was that when <ORG> itself made a distinction between these categories of commodities by making purchases of one category amenable to sales tax under Entry 13a and leaving out of the scope of taxation under Entry 13a the other category, how could it be said that both these categories represent the same commodity and there is no difference in character and identity between the two. This argument, we are afraid, is not well-founded. It is based on a total misapprehension in regard to the true object and intendment of Entry 13a and it erroneously seeks to project that Entry in the interpretation and application of Section 5 sub- section (3) of the Central Sales Tax Act . In fact Entry 13a as amended, supports the argument that even processed or frozen shrimps, prawns and lobsters are known commercially and in the trade as 'shrimps, prawns and lobsters'. It is because Entry 13a as it stood prior to its amendment, would have, on the plain natural meaning of the expression 'shrimps, prawns and lobsters' included processed and frozen shrimps, prawns and lobsters, that it became necessary for <ORG> to amend Entry 13a with retrospective effect so as to exclude from the scope and ambit of that entry processed or frozen shrimps, prawns and lobsters. Now when <ORG> excluded processed or frozen shrimps, prawns and lobsters from the ambit and coverage of Entry 13a, its object obviously was that the last purchases of processed or frozen shrimps, prawns and lobsters in the State should not be exigible to State Sales Tax under Entry 13a. <ORG> was not at all concerned with the question as to whether processed or frozen shrimps, prawns and lobsters are commercially the same commodity as raw shrimps, prawns and lobsters or are a different commodity and merely because <ORG> made a distinction between the two for the purpose of determining exigibility to State Sales Tax, it cannot be said that in commercial parlance or according to popular sense, processed or frozen shrimps, prawns and lobsters are recognised as different commodity distinct from raw shrimps, prawns and lobsters. The question whether raw shrimps, prawns and lobsters after suffering processing retain their original character or identity or become a new commodity has to be determined not on the basis of a distinction made by <ORG> for the purpose of exigibility to State Sales Tax because even where the commodity is the same in the eyes of the persons dealing in it <ORG> may make a classification for determining liability to sales tax. This question, for the purpose of the Central Sales Tax Act , has to be determined on the basis of what is commonly known or recognised in commercial parlance. If in commercial parlance and according to what is understood in the trade by the dealer and the consumer, processed or frozen shrimps, prawns and lobsters retain their original character and identity as shrimps, prawns and lobsters and do not become a new distinct commodity and are as much 'shrimps, prawns and lobsters', as raw shrimps, prawns and lobsters, sub-section (3) of section 5 of the Central Sales Tax Act would be attracted and if with a view to fulfilling the existing contracts for export, the assessee purchases raw shrimps, prawns and lobsters and processes and freezes them, such purchases of raw shrimps, prawns and lobsters would be deemed to be in course of export so as to be exempt from liability to State Sales Tax.

Here in the present case, it was not disputed on behalf of <ORG> that the purchases of raw shrimps, prawns and lobsters were made by the appellants for the purpose of fulfilling existing contracts for export and after making such purchases the appellants subjected raw shrimps, prawns and lobsters purchased by them to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing and exported such processed and frozen shrimps, prawns and lobsters in fulfilment of the contracts for export. The only argument raised on behalf of <ORG> was that the goods which were exported were not the same as the goods purchased by the appellants because raw shrimps, prawns and lobsters after processings ceased to be the same commodity and became a new distinct commodity. But, for reasons which we have already discussed, this argument cannot be sustained.

The shrimps, prawns and lobsters purchased by the appellants did not lose their original character and identity when they were subjected to processing for the purpose of export. So far as commercial parlance or popular usage is concerned, they remained the same goods and hence the purchases of raw shrimps, prawns and lobsters by the appellants must be held to be purchases in the course of export and hence exempt from liability to tax under the Karnataka Sales Tax Act.

We, accordingly, allow the appeal, set aside the judgment of <ORG> as also the Orders made by the Assistant Commissioner of Commercial Taxes and direct that the purchases of raw shrimps, prawns and lobsters made by the appellants for the purpose of fulfilling the existing contracts for export shall not be included in the tax-able turnover of the appellants. The respondents will pay the costs of the appeal to the appellants.

S.R. Appeal allowed.


REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.3702 OF 2003 COMMISSIONER OF INCOME TAX, -- APPELLANT GUJARAT VERSUS <ORG> -- RESPONDENT LIMITED JUDGMENT

<NAME> J.:

1.This appeal, by special leave, at the instance of the <ORG> is directed against the judgment and order dated 27th June, 2001 delivered by <ORG> at Ahmedabad in Income Tax Reference No.44 of 1986. By the impugned judgment, <ORG> has answered the following questions, referred to it by <ORG>, Ahmedabad (for short "the <ORG>") under Section 256(1) of the Income Tax Act, 1961 (for short "the Act"), in the affirmative and in favour of the assessee.

(i) Whether the <ORG> has not erred in law on facts in holding that the amount of Rs.8,50,000/- received by the assessee was not taxable as revenue receipt in the hands of the assessee?

(ii) Whether the finding of the <ORG> that the receipt relating to liquidated damages cannot be treated as a revenue receipt but must be held to be a capital receipt not exigible to tax is correct in law?

(iii) Whether the assessee is entitled to the addition made to the machinery during the year thus determining the capital employed for the purpose of claim under Section 80J of the Income Tax Act, 1961?

2.At the outset, we may note that insofar as question No.(iii) is concerned, it was conceded on behalf of the <ORG> before <ORG> that answer to the said question stood concluded in favour of the assessee by the decision of this Court in C.I.T., Gujarat Vs. M/s Elecon Engineering Co. Ltd.1. Relying on the said decision, <ORG> answered the question in favour of the assessee. Therefore, only question Nos. (i) and (ii), which in effect involve only one issue, survive for our consideration.

3. The reference pertains to the Assessment Year 1974-75 for which the relevant previous year ended on 30th June, 1973. The factual background in which the issue, covering both the questions, has arisen, is as follows :

The assessee, engaged in the manufacture of cement etc; entered into an agreement with <ORG> <ORG>, Bombay, (hereinafter referred to as "the supplier") on 1st September, 1967 for purchase of additional cement plant from them for a total consideration of Rs.1,70,00,000/-. As per the terms of contract, the amount of consideration was to be paid by the assessee in four instalments.

The agreement contained a condition with regard to the manner in which the machinery was to be delivered and the consequences of delay in delivery. Insofar as the present appeal (1987) 4 SCC 530 is concerned, clause No.6 of the agreement is relevant and it reads as follows:

"6. xxx xxx xxx Delayed Deliveries:

In the event of delays in deliveries except the reason of Force Majeure at para 5 mentioned above, the Suppliers shall pay the Purchasers an agreed amount by way of liquidated damages without proof of damages actually suffered at the rate of 0.5% of the price of the respective machinery and equipment to which the items were delivered late (sic), for each month of delay in delivery completion. It is further agreed that the total amount of such agreed liquidated damages shall not exceed 5% of the total price of the plant and machinery."

As per the said clause in the agreement, in the event of delay caused in delivery of the machinery, the assessee was to be compensated at the rate of 0.5% of the price of the respective portion of the machinery for delay of each month by way of liquidated damages by the supplier, without proof of actual loss. However, the total amount of damages was not to exceed 5% of the total price of the plant and machinery.

4.The supplier defaulted and failed to supply the plant and machinery on the scheduled time and, therefore, as per the terms of contract, the assessee received an amount of Rs.8,50,000/- from the supplier by way of liquidated damages.

5.During the course of assessment proceedings for the relevant assessment Year, a question arose whether the said amount received by the assessee as damages was a capital or a revenue receipt. The Assessing Officer negatived the claim of the assessee that the said amount should be treated as a capital receipt. Accordingly, he included the said amount in the total income of the assessee. Aggrieved, the assessee filed an appeal before <ORG> (Appeals), but without any success. The assessee carried the matter further in appeal to the <ORG>. Relying on the ratio of the decisions of this Court in Commissioner of Income Tax, Nagpur Vs. <NAME> and Others2 and <ORG> Vs. Commissioner of Income-Tax, Calcutta3, the <ORG> came to the conclusion that the said amount could not be treated as a revenue receipt. According to the <ORG>, the payment of liquidated damages to the assessee by the supplier was intimately linked with the supply of machinery i.e. a fixed asset on capital account, which could be said to be connected with the source of income or profit making apparatus rather than a receipt in course of profit earning process and, therefore, (1959) 35 ITR 148 (SC) AIR 1965 SC 65 it could not be treated as part of receipt relating to a normal business activity of the assessee. The <ORG> also observed that the said receipt had no connection with loss or profit because the very source of income viz., the machinery was yet to be installed. Accordingly, the <ORG> allowed the appeal and deleted the addition made on this account.

6.Being dissatisfied with the decision of the <ORG>, as stated above, at the instance of the <ORG>, the <ORG> referred the afore-noted questions of law for the opinion of <ORG>. The reference having been answered against the <ORG> and in favour of the assessee, the <ORG> is before us in this appeal.

7.We have heard Mr. <NAME>, learned Senior Counsel appearing for the <ORG> and Mr. <NAME> on behalf of the assessee.

8.Mr. <NAME> submitted that although the said amount of damages had been received by the assessee under clause 6 of the agreement for breach of contract, yet the said amount had been received as compensation for the loss of profit, and therefore, it is in the nature of a revenue receipt. According to the learned counsel, it was on account of late commissioning of the plant that the assessee could not commence production as per its schedule and thereby suffered loss in its profits, which was compensated by the supplier and, therefore, the said amount should have been considered as revenue receipt.

9.Per contra, Mr. <NAME>, learned counsel appearing for the assessee, while supporting the decision of <ORG> submitted that the amount received by the assessee was by way of compensation for delay in the delivery and installation of the plant and had a direct nexus with the capital asset and therefore, it was in the nature of a capital receipt. Learned counsel also argued that answer to the questions stands concluded in favour of the assessee by the decision of the High court of Madras in <ORG> Commissioner of Income Tax4, which has attained finality on account of dismissal of the Civil Appeal preferred by the <ORG> against the said judgment.

10.Thus, the short question for determination is whether the liquidated damages received by the assessee from the supplier [1998] 233 ITR 335 (Mad) of the plant and machinery on account of delay in the supply of plant is a capital or a revenue receipt?

11.The question whether a particular receipt is capital or revenue has frequently engaged the attention of the <ORG> but it has not been possible to lay down any single criterion as decisive in the determination of the question. Time and again, it has been reiterated that answer to the question must ultimately depend on the facts of a particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a conclusion. In <NAME> (supra), it was observed thus:

"The question whether a receipt is capital or income has frequently come up for determination before the courts. Various rules have been enunciated as furnishing a key to the solution of the question, but as often observed by the highest authorities, it is not possible to lay down any single test as infallible or any single criterion as decisive in the determination of the question, which must ultimately depend on the facts of the particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a decision. <ORG> v. <NAME>. That, however, is not to say that the question is one of fact, for, as observed in <NAME> (1935) 3 I.T.R. (Eng. Cas.) 17 (H.M. Inspector of Taxes) v. <ORG>, "these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts."

12.In <ORG> (supra), dealing with the question whether compensation received by an agent for premature determination of the contract of agency is a capital or a revenue receipt, echoing the views expressed in Rai Bahadur Jairam Valji (supra) and analysing numerous judgments on the point, this Court laid down the following broad principle, which may be taken into account in reaching a decision on the issue :

"Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue : Where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt."

(1952) 22 I.T.R. (Suppl.) 1

13.We have considered the matter in the light of the afore- noted broad principle. It is clear from clause No.6 of the agreement dated 1st September 1967, extracted above, that the liquidated damages were to be calculated at 0.5% of the price of the respective machinery and equipment to which the items were delivered late, for each month of delay in delivery completion, without proof of the actual damages the assessee would have suffered on account of the delay. The delay in supply could be of the whole plant or a part thereof but the determination of damages was not based upon the calculation made in respect of loss of profit on account of supply of a particular part of the plant. It is evident that the damages to the assessee was directly and intimately linked with the procurement of a capital asset i.e. the cement plant, which would obviously lead to delay in coming into existence of the profit making apparatus, rather than a receipt in the course of profit earning process. Compensation paid for the delay in procurement of capital asset amounted to sterilization of the capital asset of the assessee as supplier had failed to supply the plant within time as stipulated in the agreement and clause No.6 thereof came into play. The afore-stated amount received by the assessee towards compensation for sterilization of the profit earning source, not in the ordinary course of their business, in our opinion, was a capital receipt in the hands of the assessee. We are, therefore, in agreement with the opinion recorded by <ORG> on question Nos. (i) and (ii) extracted in Para 1 (supra) and hold that the amount of Rs.8,50,000/- received by the assessee from the suppliers of the plant was in the nature of a capital receipt.

14.We, therefore, dismiss the appeal with no order as to costs.

<NAME>

(<NAME>) ..................................<NAME>) NEW DELHI;

JULY 9, 2010.


JUDGMENT <NAME> <NAME>

1. This Rule was issued by two of my learned brothers, calling upon the District Magistrate to show cause why the order passed should not be set aside on the first and second grounds stated in the petition.

2. The order referred to was dated the 9th April 1924, and was made by the learned Sessions Judge of Dacca, by which he forfeited the bail bond of the two petitioners, and directed the Sub-Divisional Magistrate to levy the amount due from the two sureties.

3. It appears that, on the 26th September 1923, one <NAME> was ordered by the Sub-Divisional Officer of Munshiganj to execute a security bond of Rs. 300 with two sureties of Rs. 300 each, to be of good behaviour for a period of two years in a proceeding under Section 110, Civil P.C. The record was forwarded to the learned Sessions Judge; and, in the meantime the Sub-Divisional Officer ordered that <NAME> should be detained in prison. On 4th October 1923, an application was made to the learned Judge for the release of <NAME> on bail : and, on 8th October 1923, the learned Judge made an order releasing <NAME> on his own bail of Rs. 200 with two sureties of Rs. 200 each; the surety bond was signed by the two petitioners who are mukhtears. The form of the bond which was executed was as follows:

We the undersigned sureties do hereby execute the surety bond and promise that we shall produce the accused in the above-mentioned case at <ORG> at Dacca whenever called upon to do so; and in default, we bind ourselves to forfeit to His Majesty the King Emperor the sum of two hundred rupees only.

4. Notice was given to the two petitioners on 4th February 1924 to produce <NAME> in <ORG> on 8th February 1924. That notice was not complied with, and <NAME> did not appear on that date, or on subsequent dates, to which the case was adjourned. The learned Judge instituted these proceedings on 26th March 1924, relying upon a report of the Sub-Divisional Officer to the effect that <NAME> was absconding. The order of the learned Judge which is referred to in para. 11 of the petition, was as follows:

Perused the report of S.D.O. of Munshiganj Issue notice on the sureties to show cause why the bail bond should not be forfeited for their failure to produce the accused before this Court. Fix 9th April 1924 for hearing.

5. On 9th April 1924, the muktears appeared and through their learned pleader showed cause why the bond should not be forfeited; and the ground upon which the learned pleader relied, as far as I can ascertain, was that the sureties thought that the accused would not have to be produced until the reference which had been made to the learned Judge was disposed of; that they had sent a letter to the address of <NAME> merely informing him as to the date of hearing and remained satisfied with that without making any serious efforts to find him. That is not the ground which was relied upon in this Court. The first ground of the petition to this Court was as follows:

That the learned Sessions Judge not having complied with the requirements of Section 514, Criminal P.C., and not having recorded or taken any evidence of forfeiture before calling upon your petitioners to show cause under that section, the proceedings of the said learned Judge and the order complained of are illegal, ultra vires and void.

6. Section 514(1) provides:

Whenever it is proved to the satisfaction of the <ORG> by which a bond under this Code has been taken, or of the <ORG> of a Presidency Magistrate or Magistrate of the 1st Class, or when the bond is for appearance before a <ORG>, to the satisfaction of such <ORG>, that such bond has been forfeited, the <ORG> shall record the grounds of such proof, and may call upon any person bound by such bond to pay the penalty thereof; or to show cause why it should not be so paid.

7. In my judgment the provisions of this section indicate that two steps are to be taken : first, it must be proved to the satisfaction of the <ORG> that the bond has been forfeited, whereupon the <ORG> is to record the grounds of such proof; secondly, the <ORG>, on being satisfied as aforesaid, may call upon the person bound by such bond to pay the penalty thereof, or to show cause why it should not be paid.

8. In my judgment the provisions as to the first step were complied with in this case. It appears that notice was given to the petitioners to show cause why the bail bond should not be forfeited. The petitioners appeared before the Sessions Judge to show cause. On that occasion it was admitted by them that they had executed the bond, and that they had received notice on 4th February to produce <NAME> on 8th February 1924 and the learned Judge expressed the opinion that a reasonable time had been allowed for the attendance of <NAME>. It does not appear whether the question as to the time allowed being sufficient and reasonable, was contested or not : If there is anything in this point it will be open to the petitioners to raise it on the further hearing which we propose to direct. The above mentioned facts were recorded by the learned Judge its his judgment and the fact that <NAME> has not appeared on 8th February or on subsequent days was of course known to the learned Judge himself.

9. The learned Judge found that no cause had been shown why the bond should not be forfeited. This finding was not strictly in the proper form; he should have found that the bond had been forfeited. In effect, however, his judgment amounted to a finding that it had been proved that the bond had been forfeited and there is no doubt that he recorded the grounds of such proof.

10. In accordance with the terms of Section 514, Criminal P.C., the learned Judge-should then have called upon the petitioners to pay the penalty of the bond or to show cause why it should not be paid. This step in the proceedings was not taken, although it appears that the petitioners, when showing cause against the forfeiture of the bond, presented arguments to the effect that they should not be called upon to pay the whole of the penalty specified in the bond. The learned Judge did not accept the argument and directed the Sub-Divisional Magistrate to levy the amount due from the petitioners.

11. I am not aware whether the petitioners will be able to produce any reasons, other than those already advanced, why the penalty should not be paid; but it is desirable that the provisions of the section should be observed, and the result, in my judgment, is that the Rule should be made absolute and the matter should be remanded in order that the learned Judge may call upon the petitioner to pay the penalty of the bond or to show cause why it should not be paid.

12. There should be no difficulty in the provisions of the Code in this respect being followed by the learned Judges and Magistrates in the Subordinate Courts, The provisions of Section 514 are clear, and the form 45 in Schedule 5 is given as a guide for the notice to a surety on the breach of a bond given for the appearance of a person before the Court.

13. A further point was taken, viz., that the bond did not specify the time and place in accordance with the provisions of Section 499, Criminal P.C.

14. The bond in this case was to the effect that we shall produce (or cause to appear) the accused at <ORG> at Dacca whenever died upon to do so.

15. In this bond the place was specified and the time mentioned was "whenever called upon to do so."

16. I am not prepared to hold that this form is illegal so as to deprive the learned Judge of jurisdiction.

17. In some cases it may be necessary to use that form. At the same time in my judgment it is desirable to follow the words of the section and to prescribe in the bond not only the place but also the time at which the accused is to attend. This will obviate the necessity of giving further notice to the sureties to procure the attendance of the accused : and even if the case cannot be tried or taken up on the day specified in the bond and has to be adjourned, the bail can be renewed so as to make it available until the day of the adjourned hearing.

18. The Rule, therefore, is made absolute and the matter remanded to the learned Judge so that, if he thinks it necessary to proceed further with the matter, he may take the steps which are prescribed in Section 514, Criminal P.C., and which are indicated in our judgment.

<NAME>, J.

19. I concur.


<NAME>, J.

1. This suit was brought to recover possession of certain properties which the plaintiff alleged to be partly brohmuttur and partly debuttur, the latter being dedicated to certain deities of the names of <NAME>, &c, and also for the possession of the deities themselves from the hands of the first defendant, <NAME>. Although the plaintiff described a part of the claim as her own brohmuttur properties, which have devolved upon her by right of inheritance, yet it appears from the judgment of the <ORG> below that it was admitted by both parties that the whole of the claim consisted of properties which, without a single exception, belong to the aforesaid deities. The witnesses of the plaintiff also described them as debutter properties belonging to those deities. We shall, therefore, consider that the plaintiff in the <ORG> below abandoned her claim upon her own title, and was satisfied to rest the whole suit upon her right to recover possession of the disputed properties as shebait, or manager, on behalf of the aforesaid idols.

2. It was alleged that the properties were in the possession of one <NAME> as shebait of those idols; that <NAME> having no son of his body, took the plaintiff's husband, <NAME>, in adoption, and died in the month of Kartick 1266 (October--November, 1859); the plaintiff's husband being then a minor, her mother-in-law took possession of the properties on behalf of her minor son, the right of shebaitship having devolved upon him in the same way as any other property of the deceased would have devolved upon him by right of inheritance. The plaintiff's case was that the idols were established by a remote ancestor of her husband, and the right of shebait had devolved from one person to another following the same rule of succession as that which governs the succession of an ordinary heritable property.

3. It was further alleged that her mother-in-law thus remained in possession of the properties in suit on behalf of her minor son up to the 24th Bhadro, 1270 (8th September, 1863), when her husband died and the right of shebait devolved upon her as his widow. But she being then a minor, her mother-in-law managed the sbeba for her till the time of the death of her mother-in-law, which event occurred in the month of Falgoon (March, 1864) of the same year.

4. Upon the death of her mother-in-law the defendant No. 1, the father of her husband, attempted to take possession of the disputed properties along with the debsbeba. He was opposed on her behalf by her maternal uncle and father, the second and third defendants.

5. At this time, there having been a number of documents relating to some of the <NAME> properties in <ORG> of the district, the first defendant, as the shebait of the idols, applied to get them back. This application was opposed by a counter-petition by the plaintiff's father on behalf of the plaintiff. While this matter was pending decision by the Income Tax authorities, a compromise was effected between the plaintiff's father and maternal uncle on her behalf on the one side, and defendant No. 1 on the other. By this compromise a portion of the disputed properties, yielding an annual profit of Rs. 3,000, was set apart and made over to the plaintiff for the purpose of defraying the expenses of morning sheba of the deities, which by the terms of the ruffanamah she would be hound to perform; the remaining properties were to he in the possession of defendant No. 1, who was to be considered the chief shebait.

6. The plaintiff, on attaining majority, demanded from the first defendant restoration of the properties left in his possession, and on his refusal to restore them the present suit has been brought.

7. The first defendant alleged that the plaintiff's suit was barred by the law of limitation, and that the plaintiff's husband's adoption was not valid according to the Hindu law; first, because he was the eldest son of the defendant; secondly, because, the relationship between him and the adoptive father was such as would vender an adoption invalid in him (law?); thirdly, because the necessary ceremonies of adoption were not duly performed; and fourthly, because the adoptive father was afflicted with certain incurable diseases which rendered his body impure, and made him incompetent to perform the necessary ceremonies of adoption.

8. The defendant further alleged that the plaintiff, being a female, was not competent to perform those duties which ordinarily devolve upon a shebait; and that the succession of a female to shebaitship was opposed to the custom of their family; that the plaintiff, therefore, being not entitled to succeed as a shebait, he, the defendant, as the nearest male cognate relation of the last shebait, was entitled to succeed; that originally this debsheba was founded by an ancestor of the present <NAME>, and that the title of a shebait was not complete unless confirmed in his appointment by the Rajah of <NAME> for the time being; that <NAME>, the present Rajah, had made the necessary confirmation in his favour. <NAME>, who has been added as a defendant, put in a written statement in support of the defendant's allegations.

9. The lower Court overruled the plea of limitation, finding that the present suit had been brought within twelve years from the death of the last shebait, who was admittedly in possession, and through whom the plaintiff professes to make her title.

10. The lower Court further found that the plaintiff's husband was duly adopted by I juckun Acharjea, and that the necessary ceremonies of adoption were performed; but that the plaintiff's husband was the eldest son of <NAME>, and that, according to the Hindi; law, the adoption of the eldest son being not legal, his adoption by <NAME> was invalid. As regards the rule of succession to this estate, the lower Court found that it was admittedly a debuttur property; that the ordinary law of inheritance did not regulate the succession of one shebait to another; that the object for which the sheba was established, and the duties devolving upon the shebait, wore such that a Hindu widow under the law would be incompetent to fulfil; that the ruffanamah, far from being injurious, was highly benedficial to the interests of the plaintiff; that although the defendant had in a petition admitted that the plaintiff's husband was the adopted son, yet he was not estopped from questioning the validity of the adoption.

11. Upon these grounds <ORG> dismissed the plaintiff's suit with costs.

12. In appeal the first question raised before us is, whether the decision of the lower Court upon the validity of the plaintiff's husband's adoption is correct in law, or not.

13. That Dattaka Chandrika and Dattaka Mimansa are works of paramount authority on the Hindu law of adoption, is admitted on all hands. Referring to them we find the contention of the appellant is fully borne out. Paras. 29 and 30, Section 1 of Dattaka Chandrika are to the following effect: "29. In answer to the question by whom is a son to be given, <NAME> declares: 'By no man having an only son is the gift of a son to be ever made. By a man having several sons such gift is to be anxiously made.' 30. The author, apprehending an extinction of lineage in case of the gift of a son by one even having two sons, says--By one having several sons.'"

14. On the same subject the following rules are laid down in Dattaka Mimansa (Para 1. Section iv.); "1. Next, in reply to the question as to the qualification of the person to be affiliated, <NAME> declares: 'By no man having an only son (ekaputra) is the gift of a son to be ever made. By a man having several sons (bahuputra) such gift is to be made on account of difficulty (prayatnatos).' 2. Pie who has one son only, is ekaputra, or one having an only son; by such a one the gift of that son must not be made; for a text of <NAME> declares, 'an only son let no man. give,' Ac. 3. Since the word gift' means the establishing another's property after the previous extinction of one's own, and another's property cannot be established without his acceptance, the author (<NAME>) implies this also in his text in question. Therefore, prohibition likewise against acceptance is established by that very text. Accordingly <NAME>: 'An only son let no man give or accept,' &c., &c. 4. To this he subjoins a reason, 'for lie is (destined) to continue the line of his ancestors.' His being intended for lineage, being thus ordained, in the gift of an only son, the offence of extinction of lineage is implied. Now this is incurred by both the giver and adopter also. For the (reason in question) is subjoined after both (verbs, viz., 'give and accept'). 5. As for another text of recorded law: 'In instruction, the father is absolute over a son and sons' wives, but not so with respect to the son in sale and gift;' and the text of the holy saint, 'Except a wife and a son other things may be given.' These texts regard the case of an only son. 6. ('Ever') in a time of calamity, accordingly, <NAME> says: 'A deposit, a son, and a wife, the whole estate of a man who has issue living, the sages have declared unalienable, even by a man oppressed by grievous calamities, although the property be solely that of the man himself.' This text also regards an only son, for it is declaratory of the same import as the texts of <NAME> and <NAME>. 7. Next, the author replies to the question--By whom is a son to be given? By one having several sons.' He who has several sons, is 'bahuputra,' or 'one having several sons.' 8. 'By no man having an only son.' From this prohibition, the gift by one having two sons being inferrible. This part of the text ('by one having several sons, &c.') is subjoined to prohibit the same by one having two sons also; for the speech of <NAME> to <NAME> expresses : He who has only one son is considered by me as one destitute of male issue,' oh ! descendant of <NAME>, one who has only one eye is as one destitute of both; should his only eye he lost he is absolutely blind."

15. From these passages it is clear that the gift and acceptance of an only son are strictly prohibited, but there is no prohibition against the gift of the eldest son. On the other hand, the text--"by a man having several sons such gift is to be anxiously made,"--clearly implies the validity of the adoption of the oldest out of several sons.

16. The only authority relied upon by the other side is to be found in paragraphs II and 12 of Section 11, Chapter I, Mitakshara, which are to the following effect: '11. So an only son must not be given (nor accepted,) for <NAME> ordains 'Let no man give or accept an only son.' 12. Nor, though a numerous progeny exist, should an oldest son be given; for he chiefly fulfils the office of a son as is shown by the following text: 'By the eldest son, as soon as born, a man becomes the father of male issue.'"

17. Comparing these paragraphs with the rules laid down in Dattaka Chandrika and Dattaka Mimansa quoted above, we do not think that paragraph 12 of Chapter I, Section 11 of the Mitakshara ought to be construed so as to render an adoption of the eldest son out of several sons invalid in law. It only repeats a doctrine well established amongst the Hindu lawyers that amongst several sons of a Hindu father, the eldest born occupies the first rank. The prohibition is only admonitory, if I may so express myself, and not mandatory : that this is the correct construction of the paragraph in question is also clear from the preceding verse, There the prohibition is clear, the text quoted distinctly declaring--"Let no man give or accept an only son." It is not so in paragraph 12, which, on the other hand, has a tendency to indicate that the prohibition as to the gift of the eldest son is not intended to be regarded as a legal prohibition.

18. Only two decided cases from Bengal have been quoted before us--<NAME> v. <NAME> Rep. 260 and <NAME> v. <NAME> S.D.A. 1859 p. 1556; p. see 1560.--the former supporting the contention of the appellant, and the latter taking an opposite view. For the reasons given above, we are inclined to follow the <ORG> ruling, which, as far as we have been able to ascertain, is fully supported by decisions of the Bombay and Madras Courts. We are, therefore, of opinion that the lower Court was not right in holding that the adoption of the plaintiff's husband was invalid by reason of his having been the eldest son of his natural father.

19. Another contention has boon made in this Court on behalf of the respondent regarding the invalidity of the plaintiff's husband's adoption, which was not raised in the Court below. It has been argued that at the time of the adoption, the plaintiff's husband was one of two sons of his natural father, and that the texts from <NAME> and <NAME>, quoted above, established that an adoption under such circumstances is invalid in law.

20. We do not think that we ought to entertain this objection. This question of law can only arise upon the establishment of a particular fact, which was neither alleged in the <ORG> below nor any issue raised upon it. We, therefore, abstain from discussing it any further.

21. Then we come to the most important question in the case,--namely, who, upon the death of the plaintiff's husband, was entitled to succeed as <ORG> to the <ORG> properties in dispute in this case.

22. There are certain peculiarities in the history of this office which render it necessary to approach the consideration of this question with very great caution. But finding as we do the defendant <NAME> in possession of the office, and the objects of the endowment being carried out under an arrangement undoubtedly made in good faith by the members of the family for that purpose, we feel the greatest unwillingness to disturb that arrangement. Without, therefore, saying that there is anything in the nature of this office which would prevent its being confined to the members of a particular family and being regulated by the ordinary rules of inheritance, and without accepting the view taken by the Subordinate Judge that females would by reason of their sex be excluded from the succession, we still think that the plaintiff ought to make out clearly that (as she asserts) she is entitled as heiress of her husband to succeed to the office, and to turn out the defendant <NAME>, The presumption in her favour from her husband having boon in possession would not apply in this case in the same way and with the same force as if the question were--who was to succeed to her husband's private estate. There the ordinary rule of inheritance must prevail unless displaced by some special rule. Here the very question at issue is whether the rule of inheritance prevails at all. It is, therefore, necessary to look into the history of the endowment since its establishment to see how the office of shebait has in fact devolved from one holder to the other. We may say at once that there is, in our opinion, no satisfactory evidence before is that the appointments. Have been made by the <NAME> of <NAME>. The attempt, to base the claim of the defendant <NAME> to be shebait upon his appointment by the <NAME>, and the claim of the <NAME> to the right to appoint, have therefore failed, Then what is the evidence that the office descends in the family of the plaintiff's husband according to the rules of inheritance under Hindu law? The first shebait, <NAME>, left only a daughter, <NAME>, who married, and the issue was again an only daughter, <NAME>. This daughter also married, and a third time the only issue was a daughter, <NAME>, And, according to the plaintiffs case, this curious coincidence was again repeated by <NAME> having an only daughter called <NAME>, who married <NAME>, the great grandfather of the plaintiffs husband. There has been much contention whether (as the plaintiff asserts) these four daughters succeeded each other as shebaits, or whether, as the defendant <NAME> asserts, their husbands were the shebaits. The Subordinate Judge takes the latter view. <NAME> thinks that, in each case, the shebait for the time selected his successor, and married his daughter to him. On the other hand, there is, undoubtedly, evidence that the daughters in some cases continued to hold possession of the guddee after the death of their husbands. This was certainly so in the case of <NAME>, who is said to have held the guddee nearly 60 years; and this seems inconsistent with the notion that the daughters had no independent title. But this at least is certain that the succession has not followed the ordinary rules of inheritance undoHindu law. W bother the husbands or the wives were shebaits, neither after the first generation could claim by inheritance. There is no pretence that the husbands were heirs to each other or to <NAME>, and the daughter of a daughter is not an heir except in certain classes of stridhun. <NAME> herself was no heiress; nor was her mother <NAME>; nor was her daughter <NAME>. The Hindu law of inheritance, for which the plaintiff contends, does not explain the devolution of the office in either of the two lives contended for.

23. There is no doubt very considerable difficulty in ascertaining what is the true rule of succession to this office. Probably it has hitherto been disposed of in a manner which has been generally approved of by all parties concerned. It is sufficient for us to say that the evidence does not, in our opinion, establish the plaintiffs right to succeed under the Hindu law of inheritance.

24. The decree of the lower Court was, therefore, right, and this appeal must be dismissed. The plaintiff, appellant, will pay the costs of the defendant, respondent, <NAME>: the <NAME> will pay his own costs.


<NAME>, J.

1. The Judge of <NAME>, in making this reference to the Court, and in observing on the precedents which have been cited before him or brought to his notice, appears not to have remarked the change in the law introduced by Section 6 of the present Limitation Act . The corresponding section of the repealed Act IX of 1871 declared that--"When by any law not mentioned in the schedule hereto annexed, and now or hereafter to be in force in any part of British India, a period of limitation differing from that prescribed by this Act, is specially prescribed for any suits, appeals, or applications, nothing herein contained shall affect such law;" so that when by any special enactments, which continued in force, such as the Rent Act , any period of limitation differing from that prescribed by Act IX of 1871 was prescribed, then the provisions of Act IX were wholly inapplicable to such cases, and, therefore, the petitioner for review would be bound to present his application precisely within the time specified by the law in question. But Section 6 of the present Act is in these terms: "When by any special or local law, now or hereafter in force in British India, a period of limitation is specially prescribed for any suit, appeal, or application, nothing herein contained shall affect or alter the period so prescribed." So that, according to this section, the period prescribed by Section 103 of Beng. Act VIII of 1869 remains unaltered, but the rules prescribed by the Limitation Act for computing the period of limitation are applicable. Therefore the party applying for review would be entitled to the benefit of the rules contained in Section 12 of the Act. At the same time it is not apparent that any useful purpose has been answered by making this reference, because the application is to review the judgment of Mr. <NAME>, who was the acting Judge of <NAME> in the month of September last. The application is made to Mr. <NAME> in the month of November, and as it will appear from a perusal of the petition which we sent for that purpose, that the application rests upon supposed errors of judgment. It would seem that Section 624 of the Procedure Code would bar the entertainment of the application by any Judge other than the Judge who delivered the judgment.