judgement:
Appeal No. 617 of 1963.
Appeal from the judgment and order, dated March 15, 1960, of the Madras High Court in Case referred No. 87 of 1955.
Gopal Singh and R.N. Sachthey, for the appellant.
K. Rajinder Chaudhuri and K.R. Chaudhri, for the res pondent.
April 16.
The Judgment of the Court was delivered by SUBBA RAO, J.
This appeal by certificate is preferred against the order of the High Court of Judicature at Madras holding that a sum of Rs. 12,447/ received by the respondent from the Government during the accounting year 1950 51 was not assessable to tax for the assessment year 1951 52.
Gajapathy Naidu, the respondent, was supplying provisions to the Government Stanley Hospital.
Royapuram, Madras.
During the financial year April 1, 1948 to March 31, 1949, he entered into a contract with the Government for the supply of bread to the said hospital at the rate of Rs. 0 4 6 per lb.
As the respondent was maintaining his accounts on mer cantile basis, it is common case that the amount due from the Government under the terms of the said contract was credited in the accounts of the respondent for that year.
For the assessment year 1949 50 the Income tax Officer assessed the respondent to income tax on the basis of the accounts so made.
It appears that some time after March 31, 1949, representations were made to the Government for relieving the respondent from the loss sustained in the supply of bread to the hospital.
The Government by its order dated November 24, 1950, directed payment of compensation for the loss sustained by the respondent in respect of the supply of bread to the hospital during the year 1948 49 under the said contract.
The respondent re 769 ceived on that account payment of Rs. 12,447/ during the year of account 1950 51.
In the assessment year 1951 52 the, income tax Officer included the said amount in the assessment of that year.
The assessee, inter alia, contended that he received the said sum in respect of the contract that was entered into by him with the Government during the accounting year 1948 49 and, therefore, it could not be included in the assessment year 1951 52.
This contention was rejected by the Income tax Officer and, on appeal, by the Appellate Assistant Commissioner and also, on further appeal, by the Income tax Appellate Tribunal.
But the contention received favour with the High Court on a reference made to it under section 66(1) of the Indian Income tax Act, 1922, hereinafter called the Act.
The following two questions were referred to the High Court: "1.
Whether the sum of Rs. 12,447/ is assessable to income tax? " "2.
If so, whether it has been rightly assessed in the as sessment year 1951 52.
" On the first question the High Court held that the said amount was directly related to the business of the assessee and, therefore, was taxable as a trade receipt.
It answered the first question in the affirmative.
No argument was raised before us on the question of the correctness of this finding.
Therefore, nothing further need be said about it.
The High Court answered the second question in the negative.
Its conclusion is based upon the following three steps: 1.
"The only right of the assessee, on the date, when he supplied the bread, was to debit the Government the contract rate.
He was entitled to nothing further.
The Government Order which raised the rates, came into existence long after payment thereunder was ex gratia, and not on the basis of a right.
Therefore, the amount of Rs. 12,447 was not, and indeed could not have been debited in the books of the assessee for the year, when the supply of bread was made to the hospital, namely, 1948 49.
Those accounts have been closed.
But where a receipt is correlated to and arises out of a commercial transaction between the parties, the right or liability should be deemed to have been established in the past accounting period.
That principle is based not only on any theory of accrual, because there was no legal right existing then; but being correlated to the transaction, it L/P(D)ISCI 25 770 should properly belong to it, and the account should be re opened when the payment came in.
"Being a receipt of an earlier year, the amount could not be included in the assessment for the year 1951 52.
" On the said reasoning the High Court held that though in fact the right to receive the amount did not accrue during the accounting year 1948 49, it should be deemed to have related to the year of contract in respect whereof the amount was paid.
The Commissioner of Income tax has preferred the present appeal against the said order of the High Court.
Learned counsel for the Revenue contended that the High Court misdirected itself on the basis of English decisions and that on its finding that the amount accrued to the assessee only during the accounting year 1949 50 it should have held that the Income tax Officer had correctly included it in the assessee 's income for the year 1950 51.
Learned counsel for the respondent argued that the said amount was paid in respect of the contract entered into between the assessee and the Government and, therefore, the said amount should properly belong to the accounting year 1948 49, and should not have been included in the assessment of the year 1951 52.
To sustain his argument he relied upon certain English decisions referred to by the High Court which held that in such circumstances the relevant account of the year when the amount was due under the contract could be reopened and the additional amount, though an ex gratia payment, could be included therein.
With great respect to the learned Judges of the High Court we must point out that the decision of the High Court is deflected by its reliance on English decisions delivered under circumstances peculiar to that country and on the con struction of provisions which are not in pari materia with the provisions obtaining in India.
The observations made by this Court in Commissioner of Income tax vs Vazir Sultan & Sons(1) may usefully be restated "While considering the case law it is necessary to bear in mind that the Indian Income tax Act is not in pari materia with the British income tax statutes, it is less elaborate in many ways, subject to fewer re finements and in arrangement and language it differs greatly from the provisions with which the courts in England have had to deal.
Little help can therefore be gained by attempting to construe (1) [1959] Supp. 2 S.C.R. 375. 771 the Indian Income tax Act in the light of decisions bearing upon the meaning of the income tax legislation in England.
But on analogous provisions, fundamental concepts and general principle unaffected by the specialities of the English incometax statutes, English authorities may be useful guides.
" The caution administered by this Court shall always be borne in mind in construing the provisions of the Indian statute.
The provisions of the Indian Income tax Act shall be construed on their own terms without drawing any analogy from English statutes whose terms may superficially appear to be similar but on a deeper scrutiny may reveal differences not only in the wording but also in the meaning a particular expression has acquired in the context of the development of law in that country.
The problem raised before us can only be answered on the true meaning of the express words used in section 4 (1)(b)(i) of the Act.
It reads: "Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which if such person is resident in the taxable territories during such year, accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year.
" We are not concerned in this case with the expression "deemed to accrue or arise to him", as that expression refers to cases set out in the statute itself introducing a fiction in respect of certain incomes.
In regard to the question when and whether an income accrues or arises within the meaning of the first part of the said clause, we have a decision of this Court which has clearly enunciated the principles underlying the said expression: that is the decision in E. D. Sassoon and Company, Ltd., vs The Commissioner of Income tax, Bombay City(1).
In that decision this Court accepted the definition given to the words "accrue" and "arise" by Mukerji, J., in Rogers Pyatt Shellack & Co. vs Secretary of State for India(2), which is as follows: ". . both the words are used in contradistinction to the word "receive" and indicate a right to (1) ; , 342:(1954) , 50.
(2) , 371:(1925) I.L.R. L/IP(D) ISCI 25(a) 772 receive.
They represent a stage anterior to the point of time when the income becomes receivable and connote a character of the income which is more or less inchoate.
" Under this definition accepted by this Court, an income accrues or arises when the assessee acquires a right to receive the same.
It is common place that there are two principal methods of accounting for the income, profits and gains of a business , one is the cash basis and the other, the mercantile basis.
The latter system of accountancy "brings into credit what is due immediately it becomes legally due and before it is actually received; and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed.
" The book profits are taken for the purpose of assessment of tax, though the credit amount is not realized or the debit amount is not actually disbursed.
If an income accrues within a particular year, it is liable to be ,assessed in the succeeding year.
When does the right to receive an amount under a contract accrue or arise to the assessee i.e., come into existence? That depends upon the terms of a particular contract.
No other relevant provision of the Act has been brought to our notice for there is none which provides an exception that though an assessee does not acquire a right to receive an income under a contract in a particular accounting year, by some fiction the amount received by him in a subsequent year in connection with the contract, though not arising out of a right accrued to him in the earlier year, could be related back to the earlier year and made taxable along with the income of that year.
But that legal position is sought to be reached by a process of reasoning found favour with English courts.
It is said that on the basis of proper commercial accounting practice, if a transaction takes place in a particular year, all that has accrued in respect of it, irrespective of the year when it accrues, should belong to the year of transaction and for the purpose of reaching that result closed accounts could be reopened.
Whether this principle is justified in the English law, it has no place under the Indian Incometax Act.
When an Income tax Officer proceeds to include a particular income in the assessment, he should ask himself inter alia, two questions, namely, (i) what is the system of accountancy adopted by the assessee? and (ii) if it is mercantile system of accountancy, subject to the deemed provisions, when has the right to receive that amount accrued? If he comes to the conclusion that such a right accrued or arose to the assessee in a particular accounting year, he shall include the said income in the assessment of the succeeding assessment year.
No power is conferred on the Income tax Officer under the Act, to relate back an income that accrued or arose in a 773 subsequent year to another earlier year on the ground that the said income arose out of an earlier transaction.
Nor is the question of reopening of accounts relevant in the matter of as certaining when a particular income accrued or arose.
Section 34 of the Act empowers the Income tax Officer to assess the income which escaped assessment or was under assessed in the relevant assessment year.
Subject to the provisions of the section and following the procedure prescribed thereunder, he can include the escaped income and re assess the assessee on the basis of which the earlier assessment was made.
So too, under section 35 of the Act the officers mentioned therein can rectify mistakes either of their own motion or when such mistakes are brought to their notice by a party to the proceedings.
For that purpose the correct item may be taken into consideration in the matter of assessment.
But strictly speaking even in those cases there is no reopening of the accounts of the assessee, but a re assessment is made or the mistake is corrected on the basis of the actual income accrued or received by the assessee.
We do not see any relevancy of the question of reopening of accounts in considering the question when an assessee acquired a right to receive an amount.
We shall now proceed to notice some of the decisions cited at the Bar.
J.P. Hall & Co. vs Commissioner of Inland Revenue(1) is a decision of the Court of Appeal under section 38 of the Finance (No. (5 & 6 Geo.
V, c. 89) dealing with excess profits duty.
There it was held that for the purpose of Excess Profits Duty, the profits from the contracts for the purchase and sale of the control ear arose to the appellant company in the accounting years in which the gear was actually delivered and not in the pre war period ending the 30th June, 1914, in which the contracts were made.
The price of the control gear in that case was increased later without there being any contractual obligation but purely by a voluntary act of the purchaser.
Though the additional amounts accrued to the assessee in a later year, it was regarded as analogous to a trade debt due in respect of the trading operation of the earlier year.
On that principle the accounts were reopened in order to bring the increase into profits of the assessee in the year of transaction.
This decision was accepted and extended in Severns (H.M. Inspector of Taxes) vs Dadswell(2).
As this decision is the basis for the High Court 's view we shall give its facts in some detail.
The respondent therein was granted a licence to mill flour in October, 1941, and carried on the trade of flour milling until September, 1945.
As he had not been a (1) (1921)1 (2) 774 miller at the outbreak of war, he was not entitled to the benefit of a remuneration agreement whereby millers were compensated by the Ministry of Food for losses incurred under wartime arrangements for the purchase of wheat and sale of flour.
Having, however, been informed by the Ministry in 1943 and twice later that the remuneration of millers who had begun milling during the period of control was under consideration, he made a claim in 1949 on the same basis as that laid down in the remuneration agreement and received payments in settlement.
The respondent contended that the sums received in 1949 were not trading receipts but ex gratia payments, and alternatively, that they were received after the cessation of his trade and that if there was a debt arising to the trade at the date of cessation its value at that date was nil.
The Court held that the said payments were ex gratia; and it further held that, if on the discontinuance of a trade payment for work already done in a year had not been finally settled.
accounts for that year could be reopened so as to bring in a gratuitous payment for such work made in a subsequent year.
This judgment cer tainly supports the respondent.
Though it could be distinguished on the ground in that case it was found that the payment for the work already done had not been finally settled whereas in the present case there is nothing on the record to disclose that it was not finally settled.
We would prefer to base our conclusion on the ground that we cannot extend the meaning of the word "accrue" or "arise" in section 4(1)(b)(i) of the Act so as to take in amounts received by the assessee in a later year, though the receipt was not on the basis of the right accrued in the earlier year.
Such amounts are in law received by the assessee only in the year when they are paid.
We cannot apply the English decisions in the matter of construction of the provisions of the Indian Act, particularly when they have received an authoritative interpretation from this Court, in this view, it is not necessary to consider further English decisions cited by learned counsel for the respondent in support of his contention.
Before a Division Bench of the Allahabad High Court in Commissioner of Income tax, U.P. vs Kalicharan Jagannath(1), when a similar question arose, learned counsel appearing for the Revenue relied upon the said English deci sions, but the High Court, rightly, refused to act on them on the ground that they were not relevant in interpreting section 4 of the Indian Income tax Act.
It further made an attempt to distinguish those decisions on grounds based upon the alleged difference in the scope of the provisions 'of the respective countries.
It was said that under the relevant English Act the excess profits duty was payable on computation of profits arising from a trade or business in different chargeable accounting periods and, therefore.
the emphasis there was more (1) 775 upon the carrying on 'of the trade within the chargeable period than on the income accruing during that period.
But we do not propose to express our view on this aspect of the question, as the relevant sections of the English Acts have not been placed before us.
The learned Judges, after having rightly refused to rely upon the English decisions, construed the provisions of the Indian statute.
There.
during the accounting period April 1, 1945 to March 31, 1946, the assessee entered into a contract with and supplied fruits and bullock carts to, the military authorities at two different places at rates fixed by the agreement.
The assessee incurred a loss and he submitted a petition for review under the terms of the agreement.
On November 6, 1947, the military authorities sanctioned the payment of an additional sum which was paid to the assessee on February 17 and 24, 1948.
The Incorne tax Department sought to include this additional sum in the assessment for the accounting year 1945 46.
The High Court held that until the order of review the only right that the assessee had was to claim the money payable at the rates laid down in the agreement itself and that the additional amount became payable to the assessee not by virtue of any right conferred by the agreement, but because of the order passed in review directing the payment of the amount and thus creating a right to this amount in favour of the assessee.
As the right to receive the payment of the additional sum arose after the closing of the accounting year 1945 46, the High Court proceeded to hold that the income did not accrue or arise to the assessee in the accounting year.
It may be pointed out that in that case the original agreement gave a right to apply for review and notwithstanding that fact the court held that the additional payment could not be held to have accrued during the accounting year.
For the reasons already stated by us, we are entirely in agreement with the view expressed by the Allahabad High Court.
In the result, we hold that the High Court in the present case should have answered the second question referred to it in the affirmative.
The order of the High Court is set aside ,and the appeal is allowed with costs.
Appeal allowed.

summary:
A certain sum of money was received by the assessee as payment of compensation for the loss sustained by him in respect of a supply during the previous accounting year.
The .Income tax Officer included the amount in the assessment year it was received.
Appeals to the Appellate Assistant ComMissioner and to the Income tax Tribunal were unsuccessful.
But on a reference, the High Court held that though in fact the right to receive the amount did not accrue during the accounting year of the contract, it should be deemed to have related to the year of contract in respect whereof the amount was paid.
On appeal by certificate, Held: (i) The decision of the High Court was deflected by its reliance on English decisions delivered under circumstances peculiar to that country and on the construction of provisions which were not in pari materia with the provisions obtaining in India.
The provisions of the Indian Income tax Act shall be construed on their own terms without drawing any analogy from English statutes whose terms may superficially appear to be similar but on a deeper scrutiny may reveal differences not only in the wording but also in the meaning a particular expression has acquired in the context of the development of law in that country.
Commissioner of Income tax vs Vazir Sultan & Sons, [1959] Supp. 2 S.C.R., 375, followed;.
(ii) under the definition accepted by this Court of the word "accrue" or "arise" in section 4(1)(b)(i) of the Indian Incometax Act, an income accrues or arises when the assessee acquires ,a right to receive the same.
section D. Sassoon and Co. Ltd. vs Commissioner of Income tax, Bombay City, ; , followed.
Rogers Pyatt Shellack & Co. vs Secretary of State for India Cal. 1, approved.
When an Income tax Officer proceeds to include a particular income in the assessment, he should ask himself, inter alia, two questions, namely (i) what is the system of accountancy adopted by the assessee? and (ii) if it is mercantile system of accountancy, subject to the deemed provisions when has the right to receive that amount accrued? If he comes to the conclusion that such a right accrued or arose to the assessee in a particular accounting year, he shall include the said income in the assessment of the succeeding assessment year.
No power is conferred on the Income tax Officer under the Act, to relate 768 back an income that accrued or arose in a later year to an earlier year on the ground that the said income arose out of an earlier transaction.
(iii) The meaning of the word "accrue" or "arise" in section 4(1)(b)(i) of the Indian Income tax Act cannot be extended so as to take in amounts received by the assessee in a later year, though the receipt was not an the basis of the right accrued in the earlier year.
Such amounts are in law received by the assessee only in the year when they are paid.
J. P. Hall & Co. v Commissioner of Inland Revenue, and Severns (H. M. Inspector of Taxes) vs Dadawall, (1954).
, referred to.
Commissioner of Income tax, U.P. vs P. V. Kalicharan Jagannath, , approved.


judgement:
iminal Appeals Nos.
84 and 85 of 1952.
Appeals by Special Leave granted by the Supreme Court of India on the 17th September, 1951, from the Judgment and Order dated the 6th June, 1951, of the High Court of Judicature at Calcutta in Criminal Appeals No. 175 and 176 of 1950, respectively arising 33 out of the Judgment and Order dated the 29th August, 1950, of the Special Court of Alipur, Calcutta, in Case No. 2 of 1949.
N.C. Chatterjee (section N. Mukherjee and P. N. Mehta, with him) for the appellant in Cr.
Appeall No. 84 of 1952.
Ajit Kumar Dutt and Arun Kumar Dutt for the appellant in Cr.
Appeal No. 85 of 1952.
C. K. Daphtary, Solicitor General for India (B. Sen, with him) for the respondent in both the appeals.
May 22.
The Judgment of the Court was delivered by PATANJALI SASTRI C. J.
These are connected appeals by special leave from the order of the High Court of Judicature at Calcutta dated January 6, 1951, confirming the conviction of the appellants and the sentences imposed on them by the Special Court, Alipur, Calcutta, constituted under the West Bengal Criminal Law Amendment (Special Courts) Act, 1949.
The first appellant was at all material times the proprietor of the firm of Kedar Nath Mohanlal, Managing Agents of Shiva Jute Press Ltd., an incorporated company having a number of godowns at Cossipore in West Bengal, and the second appellant was the Area Land Hiring and Disposals Officer in the service of the Government of India.
Some of the godowns belonging to the company were requisitioned by the Govern ment for military purposes in 1943 and were released in December, 1945.
The appellants, along with two others who were given the benefit of doubt and acquitted, were charged, with having conspired to cheat, and having cheated, the Government by inducing their officers to pay Rs. 47,550 to the first appellant on behalf of the company as compensation for alleged damage to the godowns on the basis of an assessment made by the second appellant which was false to the knowledge of both the appellants.
It was also alleged that the second appellant recommended 34 the payment of Rs. 1,28,125 to the company for damage caused to the jute stored in the godowns by leakage of rain water through cracks in the roof which the military authorities neglected to repair.
This claim, however, had not been paid as the second appellant 's recommendation was not accepted by the higher authorities who referred it to the Claims Commission for investigation.
The appellants were accordingly charged with having committed offences under sections 120B and 420 of the Indian Penal Code and section 5(2) of the Prevention of Corruption Act (Act No. 11 of 1947).
The West Bengal Criminal Law Amendment Act (hereinafter referred to as " the Act ") came into force on June 23, 1949, and, by notification No. 5141 J dated September 16, 1949, the West Bengal Government allotted the case against the appellants and two others to the Special Court constituted by the Government under section 3 of the Act.
The trial commenced on January 3, 1950, and nine prosecution witnesses were examined in chief before January 26, 1950, when the Constitution came into force.
, After some more witnesses were examined, the charges were framed on February 27, 1950.
On June 9, 1950, prosecution evidence was closed and the appellants were examined under section 342 of the Criminal Procedure Code.
On August 29, 1950, the Special Judge delivered judgment convicting the appellants on all the counts and sentenced them to varying terms of rigorous imprisonment and fine.
In addition to the sentences imposed under the ordinary law the first appellant was fined Rs. 50,000 including the sum of Rs. 47,550 received by him, as required by section 9(1) of the Act.
Though the constitutionality of the Act was not challenged in the High Court, Mr. Chatterjee on behalf of the appellants made it the principal issue in these appeals.
He contended that the Special Court had no jurisdiction to try and convict the appellants inasmuch as section 4 of the Act, under which the case was allotted by the State Government to the Special Court offended against article 14 of the Constitution in that 35 it enabled the Government to single out a particular case for reference to the Special Court for trial by the special procedure which denied to persons tried under it certain material advantages enjoyed by those tried under the ordinary procedure.
Learned counsel placed strong reliance on the majority decision of this court in Anwar Ali Sarkar 's case(1) and, indeed, claimed that that decision ruled the present case.
He further urged that the offence under section 5(2) of the Prevention of Corruption Act was triable exclusively by the court of session under item (1) of the last heading of Schedule 11 to the Criminal Procedure Code as the offence is made punishable under that section with imprisonment for seven years, with the result that the trial which was held in Calcutta would have been by jury in the High Court had the ordinary procedure been followed.
Though the trial by the Special Court began before the commencement of the Constitution, its continuance without a jury after the Constitution came into force vitiated the whole trial, as it would riot be possible to introduce the jury at any subsequent stage.
In support of this view he relied on certain observations in the majority judgment of this court in Qasim Razvi 's case(2).
These observations were made by way of explaining the majority decision in Lachmandas Kewalram Ahuja 's case(3) where it was held that proceedings taken prior to the commencement of the Constitution before a Special Court constituted under section 12 of the Bombay Public Safety Act, which was in the same terms as section 5(1) of the West Bengal Act, remained unaffected by the Constitution, though the special procedure provided by the Act was held to be discriminatory following Anwar Ali Sarkar 's case(1).
On the other hand, the Solicitor General on behalf of the Government maintained that the decision was clearly distinguishable and had no application to this case which is governed by the principles enunciated in the Saurashtra case(4).
Before considering the constitutional validity of the Act in the light of the rulings referred to above, (1) ; (2) (3) ; (4) ; 36 it is necessary to have a look at the provisions of the Act in order to ascertain the underlying policy and purpose of the legislation, what evil it seeks to remedy and what means it employs to that end.
The Act is entitled " an Act to provide for the more speedy trial and more effective punishment of certain offences" and the preamble declares that " it is expedient to provide for the more speedy trial and more effective punishment of certain offences " which are set out in the schedule annexed to the Act.
The Provincial Government is empowered to constitute Special Courts of criminal jurisdiction for specified areas and to appoint persons with prescribed qualifications as Special Judges to preside over such courts (sections 2 and 3).
Section 4 defines the jurisdiction of Special Judges and reads as follows: "4.
(1) The Provincial Government may, from time to time by notification in the Official Gazette, allot cases for trial to a Special Judge, and may also from time to time by like notification transfer any case from one Special Judge to another and withdraw any case from the jurisdiction of a Special Judge or make such modifications in the description of a case (whether in the name of the accused or in the charges preferred or in any other manner) as may be considered necessary.
(2)The Special Judge shall have jurisdiction to try the cases for the time being allotted to him under subsection (1) in respect of such of the charges for the offences specified in the schedule as may be preferred against the several accused, and any such case which is at the commencement of this Act or at the time of such allotment pending before any Court or another Special Judge shall be deemed to be transferred to the Special Judge to whom it is allotted.
(3)When trying any such case as aforesaid, a Special Judge may also try any offence whether or not specified in the schedule which is an offence with which the accused may, under the Code of Criminal Procedure, 1898, be charged at the same trial." 37 Section 5 provides for the procedure and powers of Special Judges.
They are empowered to take cognisance of offences without the accused being committed to their court for trial and are required to follow the procedure prescribed by the Criminal Procedure Code for the trial of warrant cases.
The Special Judges may, for reasons to be recorded, refuse to summon any witness, if satisfied after examination of the accused, that the evidence of such witness will not be material and shall not be bound to adjourn any trial for any purpose unless such adjournment is, in their opinion, necessary in the interests of justice.
Except as aforesaid the provisions of the Code are made applicable so far as they are not inconsistent with the Act, and for the purposes of the said provisions the Special Court is to be deemed to be a court of session trying cases without a jury and without the aid of assessors.
By section 6 the High Court is given all the powers conferred on a High Court by Chapters XXXI and XXXII of the Code as if the court of the Special Judge were a court of session.
Section 7 bars the transfer of any case from a Special Judge, and section 8 lays down certain special rules of evidence to be applied in the trial of offences specified in the schedule.
Section 9 enacts certain special provisions regarding punishment.
Sub section (1) provides that a Special Judge shall impose in addition to any sentence authorised by law a further fine which shall be equivalent to the amount of money or value of other property found to have been procured by the offender by means of the offence, and sub section (4) requires the amount of such fine when recovered to be paid to the Government to which the offence caused loss or if there is more than one such Government to distribute the amount among them in proportion to the loss sustained by each.
Section 10 makes the provisions of the Prevention of Corruption Act, 1947, applicable to trials under the Act.
The schedule sets out eight categories of offences triable by the Special Judges.
Paragraphs 1, 2, 3 and 4 relate to offences in which public servants are concerned or loss of Government property or money is involved.
Paragraph 5 relates 38 to offences of forgery,falsification of accounts and such like.
Paragraph 6 includes offences punishable under the Essential Supplies Act, 1946, and paragraph 7 includes those punishable under section 5 of the Prevention of Corruption Act, 1947, while paragraph 8 relates to conspiracies and attempts to commit, and abetments of, any of the offences specified in the earlier paragraphs.
Before examining whether the present case is governed by the ruling in Anwar Ali Sarkar 's case(1) as urged by Mr. Chatterjee or by the principles laid down in the Saurashtra case(2) as the Solicitor General maintained, it will be convenient to dispose of the contention of Mr. Chatterjee about his clients having been denied the advantage of a jury trial after January 26, 1950.
The contention, supported as it is by the observations in Qasim Razvi 's case (3) to which reference has been made, does not, however, carry the appellant 's case far enough, for, the question still remains whether the legislation impugned in the present case was obnoxious to article 14 as section 5(1) of the West Bengal Act was held to be in Anwar Ali Sarkar 's case (1).
This brings us to the main question referred to above which we now proceed to examine.
Now, it is well settled that the equal protection of the laws guaranteed by article 14 of the Constitution does not mean that all laws must be general in character and universal in application and that the State is no longer to have the power of distinguishing and classifying persons or things for the purposes of legislation.
To put it simply, all that is required in class or special legislation is that the legislative classification must not be arbitrary but should be based on an intelligible principle having a reasonable relation to the object which the legislature seeks to attain.
If the classification on which the legislation is founded fulfils this requirement, then the differentiation which the legislation makes between the class of persons or things to which it applies and other persons or things left (1)[1932] S.C.R. 284.
(3)[1953] S.C.R. 589.
(2)[1952] S.C.R. 435.
39 outside the purview of the legislation cannot be regarded as a denial of the equal protection of the law, for, if the legislation were all embracing in its scope, no question could arise of classification being based on intelligible differentia having a reasonable relation to the legislative purpose.
The real issue, therefore, is whether having regard to the underlying purpose and policy of the Act as disclosed by its title, preamble and provisions as summarised above, the classification of the offences, for the trial of which the Special Court is set up and a special procedure is laid down, can be said to be unreasonable or arbitrary and, therefore, violative of the equal protection clause.
In considering this question it is hardly necessary to invoke the accepted principle that " If any state of facts can reasonably be conceived to sustain a classification, the existence of that state of facts must be assumed " [see per Fazl Ali J. in Chiranjit Lal 's case (1), quoting from Constitutional Law by Willis].
In the present case, it is well known that during the post war period various organisations and establishments set up during the continuance of the war had to be wound up, and the distribution and control of essential supplies, compulsory procurement of food grains, disposal of accumulated stores, adjustment of war accounts and liquidation of war time industries had to be undertaken.
These undertakings gave special opportunities to unscrupulous persons in public services placed in charge of such undertakings to enrich themselves by corrupt practices and antisocial acts thereby causing considerable loss to the Government.
Viewed against this background, it will be seen that by and large the types of offences mentioned in the schedule to the Act are those that were common and widely prevalent during this period, and it was evidently to prevent, or to place an effective check upon, the commission of such offences that the impugned legislation was considered necessary.
It is manifestly the policy of the Act to impose, in addition to the penalties prescribed under the ordinary law, deterrent punishment that would make the offender disgorge the (1) ; , 877.
40 ill gotten gains procured by him by means of the offence, and where such gains were obtained at the expense of Governments, to distribute the amount recovered among them in proportion to the loss caused to them by the offence.
This legislative purpose :is indicated clearly not only in the preamble to the Act but also in section 9 which provides for special compensatory fines equal in value to the amount procured by the offender by means of the offence and, as cases involving such offences were known to be numerous at the time, a speedier trial of such cases than was possible under the normal procedure was presumably considered neces sary.
Hence the system of Special Courts to deal with the special types of offences under a shortened and simplified procedure was devised, and it seems to us that the legislation in question is based on a perfectly intelligible principle of classification having a clear and reasonable relation to the object sought to be attained.
Mr. Chatterjee argues that the offences listed in the schedule do not necessarily involve the accrual of any pecuniary gain to the offender or the acquisition of other property by him or any loss to any Government, and that the classification cannot, therefore, be said to be based on that consideration.
Counsel referred in particular to the offences included in the fifth paragraph, namely, forgery, making and possessing counterfeit seals, falsification of accounts, etc., as instances in point.
It may, however, be observed that section 9(1), which makes it obligatory on the Special Court to impose on persons tried and convicted by it an additional compensatory fine of the kind mentioned above, indicates that only those offences, which, either by themselves or in combination with others mentioned in the schedule, are suspected to have resulted in such pecuniary gain or other advantage and, therefore, to merit the compensatory fine, are to be allotted to a Special Court for trial.
It is well known that acts which constitute the offences mentioned in paragraph 5 are often done to facilitate the perpetration of the other offences specified in the schedule, and they may well have been included as ancillary offences.
Article 14 doer, not insist that legislative classification should be 41 scientifically perfect or logically complete and we cannot accept the suggestion that the classification made in the Act is basedon no intelligible principle and is, therefore, arbitrary.
It has been further contended that even assuming that the scheduled offences and the persons charged with the commission thereof could properly form a class in respect of which special legislation could be enacted, section 4 of the Act is discriminatory and void, vesting, as it does, an unfettered discretion in the Provincial Government to choose any particular "case " of a person alleged to have committed an offence falling under any of the specified categories for allotment to the Special Court to be tried under the special procedure, while other offenders of the same category may be left to be tried by ordinary courts.
In other words, section 4 permits the Provincial Government to make a discriminatory choice among persons charged with the same offence or offences for trial by a Special Court, and such absolute and unguided power of selection, though it has to be exercised within the class or classes of offences mentioned in the schedule, is no less discriminatory than the wider power of selection from the whole range of criminal law conferred on the State Government by the legislation impugned in Anwar Ali Sarkar 's case (1).
The vice of discrimination, it is said, consists in the unguided and unrestricted power of singling out for different treatment one among a class of persons all of whom are similarly situated and circumstanced, be that class large or small.
The argument overlooks the distinction between those cases where the legislature itself makes a complete classi fication of persons or things and applies to them the law which it enacts, and others where the legislature merely lays down the law to be applied to persons or things answering to a given description or exhibiting certain common characteristics, but being unable to make a precise and complete classification, leaves it to an administrative authority to make a selective application of the law to persons or things within the, (1) ; 6 42 defined group, while laying down the standards or at least indicating in clear terms the underlying policy and purpose, in accordance with, and in fulfilment of, which the administrative authority is expected to select the persons or things to be brought under the operation of the law.
A familiar example of this type of legislation is the , which, having indicated in what classes of cases and for what purposes preventive detention can be ordered, vests in the executive authority a discretionary power to select particular persons to be brought under the law.
Another instance in point is furnished by those provisions of the Criminal Procedure Code which provide immunity from prosecution without sanction of the Government for offences by public servants in relation to their official acts, the policy of the law being that public officials should not be unduly harrassed by private prosecution unless in the opinion of the Government, there were reasonable grounds for prosecuting the public servant which accordingly should condition the grant of sanction.
It is not, therefore, correct to say that section 4 of the Act offends against article 14 of the Constitution merely because the Government is not compellable to allot all cases of offences set out in the schedule to Special Judges but is vested with a discretion in the matter.
Whether an enactment providing for special procedure for the trial of certain offences is or is not discriminatory and violative of article 14 must be determined in each case as, it arises, for, no general rule applicable to all cases can safely be laid down.
A practical assessment of the operation of the law in the particular circumstances is necessary.
There are to be found cases on each side of the line: Anwar Ali Sarkar 's case(1) is an authority on one side; the Saurashtra case (2) is on the other.
Apart from dicta here and there in the course of the judgments deliver ed in these cases and the decisions based on them, there is no real Conflict of principle involved in them.
The majority decision in Anwar Ali Sarkar 's case(1) proceeded on the view that no standard was laid down (1) ; (2) ; 43 and no principle or policy was disclosed in the legislation challenged in that case, to guide the exercise of discretion by the Government in selecting a " case" for reference to the Special Court for trial under the special procedure provided in the Act.
All that was relied on as indicative of a guiding principle for selection was the object, as disclosed in the preamble of the West Bengal Act, of providing for the " speedier trial of certain offences ", but the majority of the learned judges brushed that aside as too indefinite and vague to constitute a reasonable basis for classification.
"Speedier trial of offences", observed Mahajan J., " may be the reason and motive for the legislation but it does not amount either to a classification of offences or of cases. .
In my opinion it is no classification at all in the real sense of the term as it is not based on any characteristics which are peculiar to persons or to cases which are to be subject to the special procedure prescribed by the Act" (page 314).
Mukherjea J. said, " I am definitely of opinion that the necessity of a speedier trial is too vague, uncertain and elusive a criterion to form a rational basis for the discrimination made.
The necessity for speedier trial may be the object which the legislature had in view or it may be the occasion for making the enactment.
In a sense quick disposal is a thing which is desirable in all legal proceedings.
This is not a reasonable classification at all but an arbitrary selection" (page 328).
Similar observations are to be found in the judgments of Das and Chandrasekhara Aiyar JJ.
at pages 328 and 352 respectively.
It will be seen that the main reasoning of the majority judges in Anwar Ali Sarkar 's case (1) as disclosed in the passages extracted above is hardly applicable to the statute here in question which is based on a classification which, in the context of the abnormal post war economic and social conditions is readily intelligible and obviously calculated to subserve the legislative purpose.
The case, in our opinion, falls on the same side of the line as the Saurashtra ruling(1) where Anwar Ali Sarkar 's case (1) was distinguished (1) ; (2) ; 44 by three of the learned Judges who were parties to the majority decision in the earlier case.
Fazl Ali J. observed: " There is however one very important difference between the West Bengal Act and the present Ordinance which, in my opinion, does afford such justification (for upholding the Ordinance), and I shall try to refer to it as briefly as possible.
I think that a distinction should be drawn between discrimination without reason and discrimination with reason.
The main objection to the West Bengal Act was that it permitted discrimination without reason or without any rational basis The mere mention of speedier trial ' as the object of the Act did not 'cure the defect ', as the expression afforded no help in determining what cases required speedier trial The clear recital (in the Saurashtra Ordinance) of a definite objective furnishes a tangible and rational basis of classification to the State Government for the purpose of applying the provisions of the Ordinance and for choosing only such offences or cases as affect public safety, maintenance of public order and the preservation of peace and tranquillity.
Thus under section 11, the State Government is expected only to select such offences or class of offences or class of cases for being tried in a Special Court in accordance with the special procedure, as are calculated to affect the public safety, maintenance of public order etc.
" (pages 448 449).
Almost the whole of this reasoning would apply mutatis mutandis to the legislation impugned in the present case.
Mukherjea J., after distinguishing Anwar Ali Sarkar 's case(1) on similar grounds, said: "The object of passing this new Ordinance is identically the same for which the earlier Ordinance was passed, and the preamble to the latter, taken along with the surrounding circumstances, discloses a definite legislative policy which has been sought to be effectuated by the different provisions contained in the enactment.
If special courts were considered necessary to cope with an abnormal situation, it cannot be said that the vesting of authority in the State Government to select offences for trial 45 by such courts is in anyway unreasonable." (Page 463.
Italics mine).
The last sentence aptly applies to the present case.
It will be recalled that section 11 of the Saurashtra Ordinance was in the same terms as section 5(1) of the West Bengal Special Courts Act.
Answering the objection that it committed to the absolute and unrestricted discretion of the executive government the duty of making the selection or classification of cases to be 'placed before the Special Court, the learned Judge observed: "A statute will not necessarily be condemned as discriminatory, because it does not make the classification itself but, as an effective way of carrying out its policy, vests the authority to do it in certain officers or administrative bodies." (Page 459). . .
In my opinion, if the legislative policy is clear and definite and, as an effective method of carrying out that policy, a discretion is vested by the statute upon a body of administrators or officers to make selective application of the law to certain classes or groups of persons, the statute itself cannot be condemned as a piece of discriminatory legislation. . .
In such cases the power given to the executive body would import a duty on it to classify the subject matter of legislation in accordance with the objective indicated in the statute.
The discretion that is conferred on official agencies in such circumstances is not an unguided discretion; it has to be exercised in conformity with the policy to effectuate which the discretion is given, and it is in relation to that objective that the propriety of the classification would have to be tested." (Page 460).
Das J. no doubt laid stress on the fact that although section 1 1 of the Saurashtra Ordinance was in the same terms as section 5(1) of the West Bengal Act, the court had to consider the discriminatory character of the latter enactment in so far as it empowered the West Bengal Government to refer an individual case to the special court for trial, whereas the Saurashtra Government, having by the notification issued under the Ordinance referred only certain offences, the court was called upon to consider the constitutionality of 46 that part of section 1 1 which enabled the executive government to refer "offences, classes of offences and classes of cases".
As regards these three categories, however, the learned Judge held that in the preamble of the old Ordinance, in which the impugned provisions were inserted by way of amendment, there was sufficient indication of policy to guide the executive government in selecting offences or classes of offences or classes of cases for reference to a special court, and concluded thus: "In my judgment this part of the section, properly construed and understood, does not confer an uncontrolled and unguided power on the State Government.
On the contrary, this power is controlled by the necessity for making a proper classifi cation which is to be guided by the preamble in the sense that the classification must have a rational relation to the object of the Act as recited in the preamble.
It is therefore not an arbitrary power.
The legislature has left it to the State Government to classify offences or classes of offences or classes of cases for the purpose of the Ordinance, for the State Government is in a better position to judge the needs and exigencies of the State, and the court will not lightly interfere with the decision of the State Government." (Page 474).
Among the minority Judges both Mahajan and Chandrasekhara Aiyar JJ.
took the view that the preamble which merely referred to the need to provide for public safety, maintenance of public order and the preservation of peace and tranquillity in the State of Saurashtra indicated no principle of classification, as the object was a general one which had to be kept in view by every enlightened Government or system of administration and that every law dealing with commission and punishment of offences was based on this need.
Accordingly, in their view, the decision of the majority in the Saurashtra case(1) marked a retreat from the position taken up by the majority in the earlier case of Anwar Ali Sarkar(2).
However that may be, the majority decision in the Saurashtra case(1) would seem to lay down the principle that if the (1) ; (2) (1952] S.C.R. 284. 47 impugned legislation 'indicates the policy which inspired it and the object which it seeks to attain, the mere fact that the legislation does not itself make a complete and precise classification of the persons or things to which it is to be applied, but leaves the selective application of the law to be made by the executive authority in accordance with the standard indicated or the underlying policy and object disclosed is not a sufficient ground for condemning it as arbitrary and, therefore, obnoxious to article 14.
In the case of such a statute it could make no difference in principle whether the discretion which is entrusted to the executive Government is to make a selection of individual cases or of offences, classes of offences or classes of cases.
For, in either case, the discretion to make the selection is a guided and controlled discretion and not an absolute or unfettered one and is equally liable to be abused, but as has been pointed out, if it be shown in any given case that the discretion has been exercised in disregard of the standard or contrary to the declared policy and object of the legislation, such exercise could be challenged and annulled under article 14 which includes within its purview both executive and legislative acts.
Mr. Chatterjee brought to our notice in the course of his argument a decision of the Calcutta High Court in J. K. Gupta vs The.
State (1) where a Special Bench (Harries C. J., Das and Das Gupta JJ.) inclined to the view that the Act now under challenge did not create a valid class or classes of offences, and held that even if the classification were held to be proper, section 4(1) was ultra vires article 14 of the Constitution in that a discretionary power was given to the State to allot cases to the Special Court or not as the State Government felt inclined, and thus to discriminate between persons charged with an offence falling within the same class.
We are unable to share this view.
There may be endless variations from case to case in the facts and circumstances attending the commission of the same type of offence, and in many of those cases there may be nothing that justifies or calls (1) 48 for the application of the provisions of the special Act.
For example, sections 414 and 417 of the Indian Penal Code are among the offences included in the Schedule to the Act, but they are triable in a summary way under section 260 of the Criminal Procedure Code where the value of the property concerned does not exceed fifty rupees.
It would indeed be odd if the Government were to be compelled to allot such trivial cases to a Special Court to be tried as a warrant case with an appeal to the High Court in case of conviction.
The gravity of the particular crime, the advantage to be derived by the State by recoupment of its loss, and other like considerations may have to be weighed before allotting a case to the Special Court which is required to impose a compensatory sentence of fine on every offender tried and convicted by it.
It seems reasonable, if misuse of the special machinery provided for the more effective punishment of certain classes of offenders is to be avoided, that some competent authority should be invested with the power to make a selection of the cases which should be dealt with under the special Act.
For all these reasons we hold that section 4 of the Act, under which the appellants ' case was allotted by the State Government to the Special Court at Alipur is constitutionally valid, and the Special Court had jurisdiction to try and convict the appellants.
As regards the fine of Rs. 50,000, inflicted on the first appellant, Mr. Chatterjee objected that it could not stand to the extent of Rs. 47,550 found to have been received by the first appellant by the commission of the offence, as it is in contravention of article 20 of the Constitution which provides, inter alia, that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
The offences for which the first appellant has been convicted were all committed in 1947, whereas the Act which authorised the imposition of the additional punishment by way of fine equivalent to the amount of money or value of other property found to 49 have been procured by the offender by means of the offence came into force in June, 1949.
Mr. Chatterjee urged that article 20 on its true construction prohibits the imposition of such fine even in cases where the prosecution was pending at the commencement of the Constitution.
This question, which turns on the proper construction of the article, was recently considered and decided in Rao Shiv Bahadur Singh and Another vs The State of Vindhya Pradesh(1), and according to that decision the sentence of fine to the extent of Rs. 47,550 will be set aside in any event.
The appeal will be heard in due course on the merits, and it would be open to the court, in case the conviction is upheld, to, impose such appropriate fine as it should think fit in addition to the sentence of imprisonment.
BOSE J.
It is with the deepest regret that I again find myself compelled to dissent.
While this was still virgin land there was wide scope for many different points of view, but as decision has followed decision the room for divergencies of view has narrowed down to a small field.
I respectfully and loyally accept the decisions of this court which have gone before and I have no desire to reopen matters which must now be taken to be settled.
But these fundamental provisions of the Constitution are, in my opinion, of such deep and far reaching importance and my views about them are so strong that I cannot in all conscience yield a single inch of ground except where compelled to do so.
So far as I am concerned, the only point in this case is where and how far the matters which arise for decision here have been settled by previous authority.
The West Bengal Criminal Law Amendment (Special Courts) Act, 1949, was enacted and came into force before the Constitution.
At that date, the fundamental provisions were not in force and no question of the equal protection clauses arose.
By reason of the ratio decidendi in the previous decisions of this court I respectfully agree that article 14 has no retrospective (1) ; 7 50 operation.
I concede therefore that up to the 26th of January, 1950, the impugned Act was good law, that the Special Court which was constituted to try this case was validly constituted and that the singling out of the appellants by the Provincial Government for trial by the Special Judge in the Special Court under its special procedure was lawful and proper however much this might have savoured of discrimination after the Constitution.
AR that I accept.
Then, as regards the continuation of the trial after the Constitution, I accept on the basis of Habeeb Mahamed 's case(1) and Qasim Razvi 's case(2), where the previous decisions of this court have been examined and explained, that the continuation of the trial after the Constitution can only be impugned if the procedure followed after that date was substantially discriminatory.
In my opinion it was in this case in at least one vital particular.
Had the normal procedure been followed the appellants would have had a jury trial in the High Court at Calcutta.
In Qasim Razvi 's case(2), the majority dealt with the matter thus: "We may mention here that the impossibility of giving the accused the substance of a trial according to normal procedure at the subsequent stage may arise not only from the fact that the discriminatory provisions were not severable from the rest of the Act and the court consequently had no option to continue any other than the discriminatory procedure; or it may arise from something done at the previous stage which though not invalid at that time precludes the adoption of a different procedure subsequently.
Thus, if the normal procedure is trial by jury or with the aid of assessors, and as a matter of fact there was no jury or assessor trial at the beginning, it would not be possible to introduce it at any subsequent stage.
Similarly having once adopted the summary procedure, it is not possible to pass on to a different procedure on a later date.
In such cases the whole trial would have to be condemned as bad.
" That, in my view, covers this case, (1) (2) , 51 On the question of punishment also there is discrimination but that is severable and would in any event be covered by article 20.
I am also compelled to dissent from the view that the impugned Act does not fall foul of the Constitution.
I am aware that this Act has been repealed and so cannot be used again.
But we are now laying down a pattern for the future and I am apprehensive of other Acts being framed along the same lines at some future date because of our decision in this case.
The ratio decidendi of the majority proceeds on the assumption that this Act would have been good even if it had been enacted after the Constitution.
I must with the very greatest respect record a strong and emphatic dissent.
I bow with respect to the wisdom of my colleagues who have laid down the classification test, and indeed I have myself agreed that that is one of the matters to be borne in mind in any given case.
In so far therefore as the Act makes provision for the setting up of Special Courts and of Special Judges, and in so far as it selects classes of offences which can be tried by them, it is, I think, on the basis of our previous decisions, good.
Where, in my opinion, it is bad is in section 4(1) where it empowers the Provincial Government to pick out cases from among the specified classes and to send them to Special Courts and thus discriminate between man and man in the same class.
I am not concerned here with reasonableness in any abstract sense, nor with the convenience of administration nor even with the fact, which may well be the case here, that this will facilitate the administration of justice.
The solemn duty with which I am charged is to see whether this infringes the fundamental provisions of the Constitution; and though I recognise that there is room for divergencies of view, as indeed there must be in the case of these loosely worded provisions, and deeply though I respect the views of my colleagues, I am nevertheless bound in the conscientious discharge of my duty to set out my own strong views so long as there is, in my opinion, scope still left for a divergence of view.
52 In my opinion, the West Bengal legislature could not, and indeed Parliament itself could not, have selected case A and case B and case C and accused X and Y and Z and sent them to the Special Courts for trial leaving others, similarly placed in the same class, for trial by the ordinary courts of the land; and what the legislature itself could not do cannot be done by a delegated authority.
Having made a classification, having given reasons for it, the legislature could not, in my judgment, without assigning reasons for a subclassification, arbitrarily select A, B and C and set them as a class apart in the classification already made.
It is, in my view, as objectionable to make an arbitrary sub classification out of a good classification as it is to make an arbitrary classification in the first instance; and to pick out A, B and C from an already classified class and set them apart for special treatment is nothing more nor less than a fresh classification.
If it is not arbitrary; if it falls within the rules laid down in our previous decisions: good.
If it does not: then bad.
I am clear on the strength of previous authority that if the legislature had done this the Act would have been bad, at any rate to that extent.
It is in my judgment equally bad when the discrimination is left to a lesser power.
I do not think the preventive detention laws afford a proper guide to interpretation here.
They are a class apart and have been engrafted as an exception to the fundamental rights in the very chapter on those rights.
I feel all this is fraught with the gravest danger.
We cannot have Star Chambers or their prototypes in this land; not that these tribunals have any resemblance to Star Chambers as yet.
But we are opening a dangerous door and paving a doubtful road.
If we wish to retain the fundamental liberties which we have so eloquently proclaimed in our Constitution and remain a free and independent people walking in the democratic way of life, we must be swift to scotch at the outset tendencies which may easily widen, as precedent is added to precedent, into that which in the end will be the negation of freedom and equality.
To 53 this extent and with the deepest regret I express my respectful dissent.
In my view, the convictions cannot be upheld and there should be a retrial in the normal way.
Appeals dismissed.
Agent for the appellant in C.A. No. 84: Sukumar Ghose.
Agent for the appellant in C.A. 'No,. 85: R. R. Biswas.

dataset_name: IN-Abs

summary:
Whether an enactment Providing for special procedure for the trial of certain offences is or is not discriminatory and violative of article 14 of the Constitution must be determined in each case as it arises, for no general rule applicable to all cases can safely be laid down.
The West Bengal Criminal Law Amendment (Special Courts) Act, 1949, which was entitled an Act to provide for the more speedy trial and more effective punishment of certain offences, and the preamble of which declared that it was expedient to provide for the more speedy trial and the more effective punishment of certain offences which were set out in the Schedule to the Act, empowered the Provincial Government (by sections 2 and 3) to constitute Special Courts of criminal jurisdiction for specified areas and to appoint Special Judges to preside over such courts.
Section 4 31 of the Act provided that the Provincial Government may, from to time, allot cases for trial to a Special Judge, that the Special Judge shall have jurisdiction to try the cases for the time being allotted to him in respect of such of the charges for offences specified in the Schedule as may be preferred against the accused.
The procedure laid down for trial by the Special Judges varied in several particulars from the ordinary trials.
It was contended on behalf of the appellants who were convicted and sentenced by a Special Judge under the Act that section 4 of the Act was void as it contravened article 14 of the Constitution in that it enabled the Government to single out a particular case for reference to the Special Court for trial by a special procedure which denied to the persons tried under it certain material advantages enjoyed by those tried under the ordinary procedure : Held, per PATANJALI SASTRI C.J., MUKHERJEA, GHULAM HASAN and JAGANNADHA DAS JJ.
(VIVIAN BOSE J. dissenting): (i) that when a law like the present one is impugned on the ground that it contravenes article 14 of the Constitution, the real issue to be decided is whether, having regard to the underlying purpose and policy of the Act as disclosed by its title, preamble and provisions, the classification of the offences for the trial of which the Special Court is set up and a special procedure is laid down can be said to be unreasonable or arbitrary and therefore violative of the equal protection clause; (ii) having regard to the fact that the types of offences specified in the Schedule to the Act were very common and widely prevalent during the post war period and had to be chocked effectively and speedily tried, the legislation in question must be regarded as having been based on a perfectly intelligent principle of classification, having a clear and reasonable relation to the object sought to be achieved, and it did not in any way contravene article 14 of the Constitution ; (iii)the impugned section cannot be said to contravene article 14 merely because the Government was vested with a discre tion to allot any particular case to the Special Judge and is not required to allot all cases of offences set out in the Schedule, to the Special Court, for if the impugned legislation indicates the policy which inspired it and the object which it seeks to attain, the mere fact that the legislation does not itself make a complete and precise classification of the persons or things to which it is to be applied, but leaves the selective application of the law to be made by the executive authority in accordance with the standard indicated or the underlying policy and object disclosed, is not a sufficient ground for condemning it as arbitrary and therefore obnoxious to article 14.
In the case of such a statute it makes no difference in principle whether the discretion which is entrusted to the executive Government is to make a selection of individual cases or of offences, classes of offences or classes of cases.
For, in either case, the discretion to make the selection is a guided 32 and controlled discretion and not an absolute or unfettered one and is equally liable to be abused but if it be shown in any given case that the discretion has been exercised in disregard of the standard or contrary to the declared policy and object of the legislation, such exercise could be challenged and annulled under article 14 which includes within its purview both executive and legislative acts.
VIVIAN BOSE J. (i) Up to the 26th of January, 1950, the impugned law was a good law and the Special Court which was constituted to try the present case was therefore validly constituted and the allotment of this case to a Special Judge for trial was also lawful.
But the continuation of the trial after the 26th January, 1950, when the new Constitution came into force was illegal as the procedure followed after that date was discriminatory at least in one vital particular, namely, the accused did not have the benefit of a trial by jury which they would have had if the normal procedure had been followed.
(ii)The impugned Act in so far as it makes provision for the setting up of Special Courts and of Special Judges and in so far as it selects classes of offences which can be tried by them is, on the basis of the previous decisions of this court, valid, but section 4(1) of the Act is bad in so far as it empowers the Provincial Government to pick out cases from among the specified classes and to send them to the Special Courts and thus discriminate between man and man in the same class.
Held also, by the Court, that under article 20 of the Constitution the accused could not be subjected to any fine greater than that which might have been imposed on them under the law in force when the offence was committed, even though the Act of 1949 empowered the Court to inflict a greater fine.
Rao Shiv Bahadur Singh and Another vs The State of Vindhya Pradesh ([1953] S.C.R. 1188) followed.
Anwar Ali Sarkar 's case ([1952] S.C.R. 284), Quasim Ravi 's case , Lakshmandas Kewalram Ahuja 's case ([1952] S.C.R. 710) explained.
Saurashtra case ([1952] S.C.R. 435) applied.


judgement:
Appeals Nos.
507 508 of 1963.
Appeal by special leave from the judgment and order dated November 4, 1950, of the Orissa High Court in Special Jurisdiction Cases Nos. 38 and 39 of 1958.
R.Ganapathy Iyer and R. N. Sachthey, for the appellant (in both the appeals).
817 B.Sen and section N. Mukherjee, for the respondents (in both the appeals).
April 21, 1964.
The Judgment of the Court was delivered by SIKRI, J.
The respondent, hereinafter referred to as the the dealer, filed a return for the quarter ending June 30, 1951, under the Orirsa Sales Tax Act (Orissa Act XIV of 1947) (hereinafter referred to as the Act).
He claimed a deduction of Rs. 2,40,000/ under section 5(2)(a)(ii) in respect of the goods sold to a registered dealer, named M/s. Lal & Co. Ltd., BA 1335.
Similarly, for the quarter ending September 30.
1951, he claimed a deduction of Rs. 15,677/1/3.
By two assessment orders passed under section 12(2) of the Act, the Sales Tax Officer, Cuttack III circle, Jaipur, Orissa, determined the tax payable allowing the deduction of Rs. 2,40,000/ and Rs. 15,677/l/3, under section 5(2)(a)(ii).
The dealer filed appeals to the Assistant Collector, Sales Tax, challenging the assesment on grounds which are not relevant.
The dealer later filed revisions against the decision of the Assistant Collector.
While the revisions were pending, the legislature amended the Orissa Sales Tax Act, in 1957, by Orissa Sales Tax (Amendment) Act (Orissa Act XX of 1957).
The effect of this amendment was that revisions were treated as appeals to Sales Tax Tribunal, and it enabled the Government to file cross objec tions.
The State of Orissa, in pursuance of this amendment, filed memorandum of cross objections challenging the deduc tion of Rs. 2,40,000/ and Rs. 15,677/l/3, on the ground that the dealer had not produced any declaration, as required under r. 27(2) of the Orissa Sales Tax Rules, 1947, as evidenced from the Check Sheet kept on record.
The Tribunal upheld this objection and directed that fresh assessments be made.
Certain other questions were raised before the Tribunal by the dealer, but as nothing turns on them as far as these appeals are concerned, they are not being mentioned.
The Tribunal stated a case to the High Court and one of the questions referred to was "whether the assessing officer was not wrong in allowing deduction of Rs. 2,40,000/ for the quarter ending on 30 6 51 and Rs. 15,677/1/3 for the quarter ending on 30 9 51 from the respective gross turnover of the applicant.
" The High Court, following its earlier decision in Member, Sales tax Tribunal, Orissa vs Messrs section Lal & Co. Limited (1) answered the question in the affirmative.
The State of Orissa having obtained special leave from this Court, these appeals are now before us for disposal.
Mr. Ganapathy lyer, on behalf of the State of Orissa, has contended before us that it is clear that r. 27(2) was not complied with, and, therefore, the Sales Tax Officer was wrong (1) (1961) 12 S.T.C. 25. 818 in allowing the said deduction.
The answer to the question referred depends on the correct interpretation of section 5(2)(a)(ii), Co. and r. 27(2).
They read thus: "section 5(2)(a)(ii) sales to a registered dealer of goods specified in the purchasing dealer 's certificate of registration as being intended for resale by him in Orissa and on sales to a registered dealer of containers or other materials for the packing of such goods.
Provided that when such goods are used by the registered dealer for purposes other than those specified in his certificate of registration, the price of goods so utilised shall be included in his taxable turnover." "Rule 27(2).
Claims for deduction of turnover under sub clause (ii) of clause (a) of sub section (2) of section 5 A dealer who wishes to deduct from his gross turnover on sales which have taken place in Orissa the amount of a sale on the ground that he is entitled to make such deduction under sub clause (ii) of clause (a) of sub section (2) of section 5 of the Act, shall produce a copy of the relevant cash receipt ,or bill according as the sale is a cash sale or a sale .on credit in respect of such sale and a true declaration in writing by the purchasing dealer or by such responsible person as may be authorised in writing in this behalf by such dealer that the goods in question are specified in the purchasing dealer 's certificate of registration as being required for resale by him or in the execution of any contract: Provided that no dealer whose certificate of registration has not been renewed for the year during which the purchase is made shall make such a declaration and that the selling dealer shall not be entitled to claim any deduction of sales to such a dealer.
" It is, plain from the terms of section 5(2)(a)(ii) that a selling ,dealer is entitled to a deduction in respect of sales to a registered dealer of goods, if the goods are specified in the purchasing dealer 's certificate of registration as being intended for re sale by him in Orissa.
No other condition is imposed by the above section.
The proviso deals with consequences that follow if the purchasing dealer uses them for purposes other than those specified in his certificate of registration, and ,directs that, in that event, the price of goods so utilised shall 819 be included in his turnover.
Therefore, there is nothing in the section itself that disentitles a selling dealer to a deduction, but if the contingency provided in the proviso occurs, them the price of goods is included in the taxable turnover of the buying dealer.
But Mr. Ganapathy lyer says, be it so, but the rule making authority is entitled to make ruler, for carrying out the purposes of the Act, and r. 27(2) is designed to ensure that a buying dealer 's certificate of registration does, in fact, mention that the goods are intended for resale by him, and for that purpose it has chosen one exclusive method of proving the fact before a Sales Tax Officer.
He further urges that no other method of proving that fact is permissible.
Rule 27(2) is mandatory and if there is breach of it the selling dealer is not entitled to deduction.
The learned counsel for the res pondent, on the other hand, contends that r. 27(2) is directory.
He points out that the word 'shall ' should be read as 'may ', in the context.
He further says that supposing the selling dealer brought the original certificate of registration of a buying dealer and produced it before the Sales Tax Officer, according to the appellant, this would not be enough, but this could never have been intended.
In our opinion, r. 27(2) must be reconciled with the section and the rule can be reconciled by treating it as directory.
But the rule must be substantially complied with in every case.
It is for the Sales Tax Officer to be satisfied that, in fact, the certificate of registration of the buying dealer contains the requisite Statement, and if he has any doubts about it, the selling dealer must satisfy his doubts.
But if he is satisfied from other facts on the record, it is not necessary that the selling dealer should produce a declaration in the form required in r. 27(2), before being entitled to a deduction.
We are, therefore, of the opinion that the High Court came to a correct conclusion.
The High Court is correct in holding that the production of a declaration under r. 27(2) is not always obligatory on the part of a selling dealer when claiming the exemption.
It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of section 5(2)(a)(ii) of the Act.
In this case, the Sales Tax Officer was satisfied by a mere statement of the dealer and it has not been shown that in fact the registration certificate of the buying dealer, M / s section Lal & Co., did not contain the statement that the goods were intended for resale by him in Orissa.
The appeals accordingly fail and are dismissed with costs.
One set of hearing fee.
Appeals dismissed.

summary:
Assessment orders were passed by the Sales Tax Officer allowing the deductions of two amounts claimed by the respondent dealer under section 5(2)(a)(ii) of the Orissa Sales Tax Act in respect of goods sold to a registered dealer.
The respondent dealer filed appeals to the Assistant Collector Sales Tax, challenging the assessment on grounds which were not relevant and against those decisions revisions were filed by the dealer.
While the revisions were pending the Orissa Sales Tax Act was amended by Orissa Sales Tax (Amendment) Act (Orissa Act, 10 of 1957) with the result that revisions were treated as appeals to the Sales Tax Tribunal, and it enabled the Government to file cross objections.
In pursuance, the State filed cross objections challenging the deductions on the ground that the dealer had not produced any declaration as required under r. 27(2) of the Orissa Sales Tax Rules, 1947.
The Tribunal upheld this objection and directed that fresh assessments be made.
On statement of the case, the High Court answered that the assessing officer was not wrong in allowing the deductions.
On appeal by special leave).
Held:(i) There is nothing in section 5 (2) (a) (ii) itself that disentitles a selling dealer to a deduction, but if the contingency provided in the proviso occurs, then the price of goods is included in the taxable turnover of the buying dealer.
(ii)The production of a declaration under r. 7(2) is not always obligatory on the part of a selling dealer when claiming the exemption.
It is open to him to claim exemption by adducing other evidence so as to bring the transaction within the scope of section 5(2)(a)(ii).
Rule 27(2) must be reconciled with the section and the rule can be reconciled by treating it as directory.
But the rule must be substantially complied with in every case.
It is for the Sales tax Officer to be satisfied that, in fact.
the certificate of registration of the buying dealer contains the requisite statement, and if he has any doubts about it, the selling dealer must satisfy his doubts.
But if he is satisfied from other facts on the record, it is not necessary that the selling dealer should produce a declaration in the form required in r. 27(2).
before being entitled to a deduction.
Member Sales tax Tribunal, Orissa vs Mls.
section Lai & Co. (1961) 12 S.T.C. 25, referred to.


judgement:
Appeal No. 587 ,of 1963.
Appeal by special leave from the judgment and order dated November 30, 1960 of the Madhya Pradesh High Court, in Miscellaneous Civil Case No. 73 of 1960.
K.N. Rajagopal Sastri and R. N. sachthev, for the appellant.
S.K. Kapoor, section Murty and K. K. fain, for the respondent, 811 April 17, 1964.
The judgment of the Court was delivered by SIKRI, J.
The respondent, Swadeshi Cotton & Flour Mills, hereinafter referred to as the assessee, is a limited company which owns and runs a textile mill at Indore.
For, the assessment year 1950 51 (accounting year calendar year 1949), which was its first year of assessment under the Indian Income tax Act, 1922 (hereinafter referred to as the Act) it claimed that under section 10(2)(x) of the Act it was entitled to an allowance in respect of the sum of Rs. 1,08,325/ which it had paid as bonus for the year 1947 in the calendar year 1949, as a result of the award of the Industrial Tribunal, dated January 13, 1949.
The claim of the assessee was not accepted by the Income Tax authorities.
The Appellate Tribunal held that it was a liability relating to an earlier year and not the year 1949.
However, on an application by the assessee it stated a case and referred two questions.
We are concerned only with one which reads thus: "Whether on the facts and in the circumstances of the case the assessee is entitled to claim a deduction of bonus of Rs. 1,08,325/ relating to the calendar year 1947 in the assessment year 1950 51? The High Court of Madhya Pradesh answered the question in the affirmative.
The appellant, having failed to get a certificate under section 66A(2) of the Act, obtained special leave from this Court, and that is how the appeal is before us.
The facts and circumstances referred to in the question have been set out in the statement of the case.
Unfortunately, the facts are meagre, but since the appellant is content to base his case on a few facts, which will be referred to shortly, it is not necessary to call for a further statement of the case.
The facts, in brief, are as follows.
The assessee paid as bonus to its employees the sum of Rs. 1,08,325/9/3 for the calendar year 1947 in terms of an award made on January 13, 1949 under the Industrial Disputes Act.
This amount was debited by the assessee in its profit and loss account for the year 1948 and the corresponding credit was given to the bonus payable account.
The books for 1948 had not been closed till the date of order of the Industrial Tribunal, January 13, 1949.
This bonus was in fact paid to the employees in the calendar year 1949, the relevant assessment year being 1950 51.
The Appellate Assistant Commissioner had further found that upto 1946 when the order for payment of bonus used to be received before the company 's accounts for the year were finalised, the amount of bonus used to be in fact 812 debited to the profit and loss account of the respective year.
this finding is repeated by the Appellate Tribunal in its appellate order.
On these facts the learned counsel for the appellant, ,Mr. Sastri, contends that according to the mercantile system of accounting, which is followed by the assessee, and on which its profits have been computed for the accounting calendar year 1949, the year to which the liability is properly attributable is the calendar year 1947 and not 1949.
He says that it was a legal liability of the assessee which arose in 1947 and should have been estimated and put into the accounts for 1947.
In the alternative he has invited us to reopen the accounts for the year 1947, following the practice which,according to him, obtains in England.
Inour opinion, the answer to the question must depend on theproper interpretation of section 10(2)(x), read with section 10(5), of theAct.
These provisions read as follows: "section 10(2)(x) Any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission; Provided that the amount of the bonus or commission is of a reasonable amount with reference to (a)the pay of the employee and the conditions of his service , (b)the profits of the business, profession or vocation for the year in question; and (c)the general practice in similar businesses, professions or vocations.
" section 10(5) In sub section (2), "paid" means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under this section;. " If we insert the definition of the word 'paid ' in sub cl.
(x), it would read as follows: any sum actually paid or incurred according to the method 'of accounting upon the basis of which the profits or gains are computed under this section, to an employee as bonus. " As the assessee 's profits and gains have been computed according to the mercantile system, the question, using for .he time being the terms of the clauses, comes to this: "Has this sum of Rs. 1,08,325/ been incurred by the assessee according to the mercantile system in the calendar year 1947 or 1949?" 813 At first sight the sentence does not read well, but the meaning of the word 'incur ' includes 'to become liable to ' Therefore, the question boils down to: "In what year did the liability of this sum of Rs. 1,08,325/ arise, according to the mercantile system ? " The mercantile system of accounting was explained in a judgment of this Court in Keshav Mills Ltd. vs Commis sioner of Income Tax, Bombay(1) thus: "That system brings into credit what is duc, immediately it becomes legally due and before it is actually received, and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed.
" These observations were quoted with approval in Calcutta ,Co. Ltd. vs Commissioner of Income Tax, West Bengal(2).
On the facts of this case, when did the legal liability arise in respect of the bonus? This depends on the facts of the case and the nature of the bonus awarded in this case.
This Court has examined the nature of profit bonus it is common round, that the bonus with which we are concerned with was a profit bonus in various cases.
It is explained in Muir Mills vs Suti Mills Mazdoor Union(3) that "there .are two conditions which have to be satisfied before a demand for bonus can be justified and they are (1) when 'wages fall short of the living standard, and (2) the industry makes huge profits part of which are due to the contribution 'Which the workmen make in increasing production.
The demand for bonus becomes an industrial claim when either or both these conditions are satisfied.
" This matter was again considered in the case of Associated Cement Co. vs Their Workmen(4).
This Court observed: "It is relevant to add that in dealing with the concept of bonus this Court ruled that bonus is neither a gratuitous payment made by the employer to his workmen nor can it be regarded as a deferred wage.
According to this decision, where wages fall short of the living standard and the industry makes profit part of which is due to the contribution of labour, a claim for bonus can be legitimately made." ; (2) ; ; (4) 814 In 1961, this Court was able to say that "the right to claim bonus which has been universally recognised by indus trial adjudication in cases of employment falling under the said Act has now attained the status of a legal right.
Bonus can be claimed as a matter of right provided of course by 'the application of the Full Bench formula it is shown that for the relevant year the employer has sufficient available surplus in hand." (Vide Gajendragadkar, J., as lie then was, in Workmen vs Hercules Insurance Co.(1).
The Indian Tea Association vs Workmen(2) this Court held that "the profit bonus can be awarded only by reference to a relevant year and a claim for such bonus has therefore to be made from year to year and has to be settled either amicably between the parties or if a reference is made, it has to be determined by Industrial adjudication.
A general claim for the introduction of profit bonus cannot be made or entertained in the form in which it has been done in the present proceedings.
" It follows from the above decisions of this Court that: (a) workmen are entitled to make a claim to profit bonus if certain conditions are satisfied; (b) the workmen have to make a claim from year to year; (c) this claim has either to be settled amicably or by industrial adjudication; and (d) if there is a loss or if no claim is made, no bonus will be permissible.
In our opinion it is only when the claim to profit bonus, if made, is settled amicably or by industrial adjudication that a liability is incurred by the employer, who follows the mercantile system of accounting, within section 10(2)(x), read with section 10(5) of the Act.
On the facts of this case, it is clear that it was only in 1940 that the claim to profit bonus was settled by an award of the Industrial Tribunal.
Therefore, the only year the liabiiity can be properly attributed to is 1949, and hence we are of the opinion that the High Court was right in answering the question in favour of the assessee.
The second contention of the learned counsel does not appeal to us.
We are of the opinion that this system of reopening accounts does not fit in with the scheme of the Indian Income Tax Act.
We have already held in Commissioner of Income Tax, Madras vs A. Gajapathy Naidu, Madras(,) that as far as receipts are concerned, there ,an be no reopening ; (2) [1962] Supp.
(1) S.C.R. 557.
(3)A.I.R. 815 of accounts.
The same would be the position in respect of expenses.
But even in En land accounts are not opened in every case.
Halsbury gives various instances in footnote (m) at p. 148.
Vol.20.
Mr. Sastri has relied on various English cases but it is unnecessary to refer to them as Lord Radcliffe explains the position in England, in Southern Railway of Peru Ltd. vs Owen(1) thus: "The courts have not found it impossible hitherto to make considerable adjustments in the actual fall of receipts or payments in order to arrive at a truer statement of the profits of successive years.
After all, that is why income and expenditure accounting is preferred to cash accounting for this purpose.
As I understand the matter, the principle that justified the attribution of something that was in fact, received in one year to the profits of an earlier year, as in such cases as Isaac Holden and Sons vs Inland Revenue Comrs.
and Newcastle Breweries Ltd. vs Inland Revenue Comrs.
was just this, that the payment had been earned by services given in earlier year and, therefore, a true statement of profit required that the year which had borne the burden of the cost should have appropriated to it the benefit of the receipt.
" The principle mentioned by Lord Radcliffe would not apply to a profit bonus.
As stated above, a profit bonus is strictly not wages, at least not for the purpose of computing liability to income tax; it is not an expense, in the ordinary sense of the term, incurred for the purpose of earning profits.
A fortiori profits have already been made.
It is more like sharing of profits on the basis of a certain formula.
One other point raised by Mr. Sastri remains.
He urged that the word "for the year in question" in the proviso to sub section 10(2)(x) mean "for the year in which allowance is claimed.
" We are unable to agree with him.
The words 'for the year in question ' mean the year in respect which bonus is paid.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.

summary:
The respondent company paid to its employees Rs. 1,08,325/ as bonus for the year 1947 in the calendar year 1949, as a result of the award of the Industrial Tribunal dated January 13, 1949.
This amount was debited by the company in its profit and loss account for the year 1948 and the corresponding credit was given to the bonus payable account.
The books for 1948 were not closed till the date of the award of the Industrial Tribunal.
For the relevant assessment year, 1950 51, the company claimed that under section 10(2)(x) of the Indian Income tax Act, 1922, it was entitled to an allowance in respect of the amount paid as bonus, but the claim was rejected by the Income tax authorities on the ground that according to the mercantile system of accounting which was followed by the assessee the year to which the liability was properly attributable was the calendar year 1947 and not 1949.
It was the case of the Income tax authorities that it was a legal liability of the assessee which arose in 1947 and should have been estimated and Put into the accounts for 1947, and that, if necessary, the amounts for the year 1947 should be reopened.
It was admitted that the bonus in the instant case was a profit bonus.
Held:(i) It was only when the claim to profit bonus, if made, was settled amicably or by industrial adjudication that a liability was incurred by the employer, who followed the mercantile system, within section 10(2)(x), read with section 10(5), of the Indian Income tax Act, 1922; and as it was only in 1949 that the claim to profit bonus was settled by an award of the Industrial Tribunal, the only year the liability could be properly attributed to was 1949.
(ii) The system of reopening accounts was not applicable under thescheme of the Indian Income tax Act.
(iii) The words "Year in question." in proviso (b) to s.10 (2)(x) of the Act meant "year in respect of which bonus was paid".