judgement:
Appeals Nos. 129 and 130 of 1952.
409 Appeals by Special Leave from the Judgment and Order dated the 26th December, 1951, of the Court of the Judicial Commissioner for the State of Himachal Pradesh at Simla in Civil Misc.
Petitions Nos. 12 and 16 of 1951.
Achhru Ram, (P. section Safeer and Harbans Singh, with him) for the appellants.
C. K. Daphtary, Solicitor General for India (R. Ganapathy Iyer, with him) for respondent No. 1. 1954.
April 22.
The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C.J.
These are two connected appeals by special leave against an order of the Judicial Commissioner.
Himachal Pradesh, dated the 26th December, 1951, rejecting two applications for the issue of writs of mandamus and certiorari under article 226 of the Constitution.
The facts giving rise to the two petitions, out of which these two connected appeals arise, are these: One Trilok Nath was running a business in Himachal Pradesh under the name and style of "Himachal Drug Nurseries" for the extraction, collection and export of medicinal herbs in the year 1949.
He was a partner of Messrs. Prabhu Dayal and Gowri Shanker of Jammu and Kashmir State in timber business carried on in that State under the name and style of "The Kashmir Woods".
It was alleged by him that the business in Chamba was his exclusive business with which the partnership firm "The Kashmir Woods" had no concern whatsoever.
Prabhu Dayal 's case was that the firm "The Kashmir Woods" was started by him in 1943 as his sole proprietary concern, that later on he took Trilok Nath Mahajan as a partner in this concern, that in the year 1949 Sardar Bhagwan Singh induced the partners of this firm to take up the line of crude drugs and herbs which was his line, that a new firm "Himachal Drug Nurseries" was started as a child concern of "The Kashmir Woods" with Bhagwan Singh as one of the partners, that after preliminary investigation it was decided to take up this work at Chamba and in pursuance of this decision two leases 53 410 of two forest divisions were taken on behalf of the Jammu firm, one in the name of Bhagwan Singh and another in the name of Trilok Nath but the finance for this undertaking was supplied by the parent firm at Jammu.
It was alleged that subsequently Trilok Nath manipulated the Jammu books showing a bogus investment of his elder brother Wazir Chand amount ing to Rs. 30,000 in the firm "Kashmir Woods" and that fraudulently and by manipulating the books and by entering into certain agreements Trilok Nath made Wazir Chand the sole owner of "Himachal Drug Nurseries" and transferred the Chamba concern to him without the knowledge of the other partners.
These assertions were not accepted by Wazir Chand or Trilok Nath.
Their case was, that Trilok Nath was the sole owner of the Chamba concern, that he obtained the leases in his own name and not for the Jammu firm from the Chamba forest department, first in the year 1949, and then in the year 1950, that as he had no capital of his own, he borrowed a sum of Rs.
,30,000 from his brother and made him a partner with him in this business and that as later on he was unable to contribute his share of the capital, the part nership was dissolved on 31st August, 1950, and in consideration of a sum of Rs. 20,000 he, Trilok Nath, relinquished and transferred by means of a stamped deed of dissolution made on 10th December, 1950, all ,his, rights in the Chamba concern to Wazir Chand who thus became the sole owner of all the goods belonging to this concern in Chamba and came into possession.
of the same.
On the 3rd April, 1951, Prabhu Dayal lodged a report with the police at Jammu that Trilok Nath had prepared duplicate accounts for production before the income tax authorities, and that he had committed an offence of embezzlement under section 406 of the Indian Penal Code.
The Jammu and Kashmir State police took cognizance of the case and appointed Amar Nath, sub inspector of police, to make investigation.
During the investigation the Jammu police came to Chamba on 25th and 26th April, 1951, and with the assistance of the Chamba police seized 269 411 bags of medicinal herbs worth about Rs. 35,000 and in actual physical possession of Wazir Chand or his men without reporting to, or obtaining orders from, any ,magistrate or any other competent authority.
The goods were handed over to different superduper at different stations in the State of Himachal Pradesh.
Wazir Chand vehemently protested against these seizures alleging that the action taken was illegal and without jurisdiction and that the goods should be released but his representations had no effect.
In the first week.of July, 1951, the Chamba police again, at the instance of the Jammu police, seized 25 bags of dhup from and in the possession of Wazir Chand and these were also handed over to the some superdars.
On the 19th July, 1951, the District Magistrate of Jammu wrote to the District Magistrate of Chamba asking that the goods seized, from the "Himachal Drug Nurseries" be handed over to.
the Jammu and Kashmir State police.
This request has so far not been complied with.
On the 21st August, 1951, Wazir Chand made an application under article 226 of the Constitution of India to the Judicial Commissioner of the State of Himachal Pradesh at Simla praying for the issue of one, or more writs in the, nature of mandamus directing the :respondents to order the release of the seized goods and to refrain from passing any orders about the extradition of these goods.
During the pendency of this petition another 45 maunds of medicinal herbs were seized by the Chamba police at the instance of the Jammu police.
This seizure was challenged by a second petition on 20th September, 1951, under article 226 of the Constitution.
The Judicial Commissioner disposed of both these petitions by a single judgment.
He declined to grant any of the reliefs asked for by the appellant.
The ground of the decision appears from the following quotation from his judgment: "In order to find whether the, entries in those books of account were genuine or forged, or what the effect of those entries on the alleged right of Wazir 412 Chand was, or whether the agreements set up by Wazir Chand were genuine or for consideration, it would be necessary that all these persons, and such witnesses as they might deem it necessary to produce in support of their respective allegations, should appear in the witness box.
A number of affidavits have been filed on behalf of either party those of Wazir Chand and certain alleged employees of the Himachal Drug Nurseries on behalf of the petitioners, and of Prabhu Dayal, Gauri Shankar, Bhagwan Singh and a head constable of the Jammu and Kashmir police on behalf of the respondents; but the truth or falsity of the contents of those affidavits cannot be ascertained without the deponents being subjected to cross examination.
I would not go so far as to hold that the petitioners have failed to prove that they, have any right, title or interest in the goods seized.
It will not be fair to do so in the present summary proceedings.
But this much must certainly be said that it is not possible for this Court, on the material placed before it, or which could possibly be placed in these summary proceedings, to come to a finding whether the petitioners have the right to claim the reliefs prayed for by them The proper remedy for them therefore is not by way of a petition under article 226 of the, Constitution of India, but by any other action, e.g. a civil suit, which may be open to them.
" It was contended before us that the learned Judicial Commissioner was in error in thinking that in order to determine the legality of the seizures and to determine the point whether there had been any infringement of the petitioner 's fundamental rights it was necessary to determine the true nature of the title in the goods seized and that the petitioner could not be granted any relief till he was able to establish this.
It was argued that the good shaving been seized from the actual possession of the petitioner or his :servants, the Chamba ,concern, being admittedly under the exclusive control of Trilok Nath or Wazir Chand, the determination of the question whether Wazir Chand had obtained possession fraudulently was not relevant to this inquiry, and that the only point that needed consideration was 413 whether the seizures were under authority of law or otherwise, and if they were not supported under any provisions of law, a writ of mandamus should have issued directing the restoration of the goods so seized.
It seems to us that these, contentions are well founded.
The Solicitor General appearing for the respondents was unable to draw our attention to any provision of the Code of Criminal Procedure or any other law under the authority of which these goods could have been seized by the Chamba police at the instance of the Jammu police.
Admittedly these seizures were not made under the orders of any magistrate.
The provisions of the Code of Criminal procedure authorizing the Chamba police to make a search and seize the goods are contained in sections 51, 96, 98 and 165.
None of these sections however has any application to the facts and circumstances of this case.
Section 51 authorizes in certain circumstances the search of arrested persons.
In this case no report of the commission of a cognizable offence had been made to the Chamba police and no complaint had been lodged before any magistrate there and no warrant had been issued by a Chamba magistrate for making the search or for the ;arrest of any person.
That being so, sections 51, 96 and 98 had no application to the case '.
Section 165 again is not attracted to the circumstances of this case because it provides that if an officer in charge of a police station has reasonable grounds for believing that anything necessary for the purposes of an investigation into any offence which he, is authorized to investigate, may be found in any place within the limits of the police station of which he is in charge, or to which he is attached, and that such thing cannot in his opinion be otherwise obtained without undue delay, such officer may, after recording in writing the grounds of his belief and specifying in such writing, so far as possible the thing for which search is to be made, search or cause search to be made, for such thing in any place within the limits of such station.
The Chamba police was not authorized to investigate the offence regarding which a report had been made to the Jammu and Kashmir police.
It is doubtful whether in view of the provisions of article 370 of the Constitution any offence committed in Jammu and Kashmir could be investigated by 414 an officer in charge of a police station in the Himachal Pradesh.
The procedure prescribed by the section was not followed.
the Jammu and Kashmir police had no jurisdiction or authority whatsoever to carry out investigation of an offence committed in Jammu and Kashmir in Himachal territory without the authority of any law or under the orders of any magistrate passed under authority of any law.
No such authority was cited before us.
The whole affair was a hole and corner affair between the officers of the Kashmir police and of the Chamba police without any reference to any magistrate.
It is obvious that the procedure adopted by the Kashmir and the Chamba police was in utter violation of the provisions of law and could not be defended under cover of any legal authority.
That being so, the seizure of these goods from the possession of the petitioner or his servants amounted to an infringement of his fundamental rights both under article 19 and article 31 of the Constitution and relief should have been granted to him under article 226 of the Constitution.
All that the Solicitor General could urge in the case was that on the allegation of Prabhu Dayal, the goods seized in Chamba concerned an offence that had been committed in Jammu and being articles regarding which an offence had been committed, the police was entitled to seize them and that Wazir Chand had no legal title in them.
Assuming that that was so, goods in the possession of a person who is not lawfully in possession of them cannot be seized except under authority of law, and in absence of such authority, Wazir Chand could not be deprived of them.
On the materials placed on this record it seems clear that unless and until Prabhu Dayal proved his allegations that the Chamba concern was part and parcel of the Jammu partnership firm (which fact has been denied) and that Trilok Nath who was admittedly one of the partners had no right to put Wazir Chand in possession of the property, no offence even under section 406 could be said to have been committed about this property.
The Jammu police without having challenged any of the accused before a magistrate in Jammu, and without having obtained any orders of extradition from a magistrate (if the offence was extraditable) could not proceed to Chamba 415 and with the help of the Chamba police seize the goods and attempt to take them to Jammu by a letter of request written by the District Magistrate of Jammu to the District Magistrate of Chamba.
Lastly it was argued that the petitioner made an application under section 523, Criminal Procedure Code, to the magistrate and that application was dismissed and that a petition for revision against that order was still pending a and that when another remedy had been taken article 226 could not be availed of. 'This contention cannot be sustained, firstly in view of the fact that section 523 has no application to the facts and circumstances of this case, and the magistrate had no jurisdiction to return these goods to the petitioner.
Secondly, the revision application has been dismissed on the ground that there was no jurisdiction in this case to grant relief to the petitioner under section 523.
For the reasons given above we allow this appeal, set aside the order of the Judicial Commissioner and direct an appropriate writ to issue directing the restoration to the petitioner of the goods seized by the police.
The appellant will have his costs of the appeals and ,those incurred by him in the Court of Judicial Commissioner.
Appeal allowed.

summary:
The provisions regarding search and seizure by the Indian police are contained in sections 51 , 96, 98 and 165 of the Code of Criminal Procedure, 1898.
None of these sections had any application to the facts and circumstances of the case.
Any seizure by the Indian police of any property of a citizen not sanctioned under the law stated above or under any other law infringes the fundamental rights of the citizen guaranteed under article 19 and article 31 of the Constitution of India.
This position is not affected even if the citizen whose goods are so seized files an application under section 623 of the Code and his application is dismissed by the Magistrate.
In view of the provisions of article 370 it is doubtful if an offence committed in Jammu and Kashmir could be investigated by the police in India.


judgement:
Appeal No. 1000 of 1965.
Appeal from the judgment and decree, dated December 13, 1962 of the Bombay High Court in Appeal No. 688 of 1959 from original Decree.
C.K. Daphtary, Attorney General, M.S.K. Sastri and S.P. Nayar, for the appellant.
H.R. Gokhale, Y.S. Chitale and K. Rajendra Chaudhuri, for the respondent.
661 The Judgment of the Court was delivered by Sikri, J.
This appeal, by certificate granted by the"High Court of Judicature at ' Bombay is directed ' against its judgment and decree, dated December 30, 1962, whereby it seaside the order made by the, Assistant Charity Commissioner, dated.
August 19, 1955, 'as confirmed by the Deputy Charity Commissioner and by the District Judge, Nasik.
The High Court held that the Nasik Math is not 'liable to be registered under the BOmbay Public Trusts Act, 1950. ' The High Court found the following facts relating to the Nasik Math: "The principal Math is situated in the State of Mysore and as His Holiness is a Sanyasi he generally names the house properties.
with temples as 'Maths '.
The properties at Nasik, Panchavati, are known as properties of Shringeri Math.
The Samadhis have been constructed to look like ' temple, there is Sabha Mandap in which an ,image of; Adya Shankaracharya is installed.
All the expenses have been incurred by His Holiness from the income of the Shringeri Math and some money was borrowed from.
Nasik creditors.
Here religious instructions are not imparted and no spiritual service is rendered to any body of disciples.
Some times people come there and if they are given admission they stay there for a short time.
There being "Samadhis" in these premises, there are some idols and occasional festivals but it is not a temple for purpose of public worship.
No member of the public is allowed to enter the place of worship but 'it is ' carried out by the Pujaris according to Vedic usage.
This property is being maintained by the Principal Math from the very beginning.
The income consists.
(1 ) rent earned by letting the property; (2) offerings made before 'the Samadhis; (3) grant from Nasik Treasury of Rs. ' 289 'per year and.
( 4 ) yearly grant of Rs. 460 1,0 from village Pimpalgaon Funji in Ahmednagar District.
" The High Court further observed: "One of the Sanads regarding the income of Pimpalgaon village is on record ' and it shows that the grant of the income 'of the village is made to Shri Shankaracharya clearly mentioning it to be for the expenses of the 'Sansthan ' but the tenor of the documents shows that the offering iS made to the Shankaracharya himself.
" 662 The relevant provisions of the Bombay Public Trust Act, 1950 ,(Bombay Act XXXIX of 1950) hereinafter referred to as the Act are as follows: The preamble of ' the Act reads: "An Act to regulate and to make better provision for the administration of public religious and charitable trusts in the State of Bombay.
" It would be noticed that the intention is only to deal with the trusts which are in the State of Bombay;it is not the idea to regulate or make better provision for the administration of trusts outside the State of Bombay; and one of the questions which we have to answer is whether Nasik Math can be said to be in the State of Bombay.
The word "math" is defined in section 2( 9 ) of the Act to mean "an institution for the promotion of Hindu religion presided over by a person whose duty it is to engage himself in imparting religions instructions or rendering spiritual services to a body of disciples or who exercises or claims to exercise head ship over such a body and includes places of religious worship or instruction which are appurtenant to the. institution." "Public trust" is defined in section 2( 13 )to mean "an express or constructive.
trust for either a public religions or charitable purpose or both and includes a temple, a math, a wakf, a dharmada or any other religious or charitable endowment and a society formed either for a religious or charitable purpose or for both and registered under the .
" The definition of "temple" may also be noted.
"Temple" means "a place by whatever ,designation known and used as a place of public religious worship and dedicated to or for the benefit of or used as of right by the Hindu community or any section thereof, as a place of public religious worship.
Is. 2(17)].
" Section 18 of the Act provides for registration of public trusts and makes it the duty of the Trustees of a public trust to which the Act applies to make an application for the registration of the public trust.
It is under this section that an 'application was made, under protest, by one Y.M. Krishnamurthy, Revenue Officer and Incharge Officer, Shri Shringeri Mutt and its properties.
The Assistant Charity Commissioner held an enquiry under section 19 of the Act and came to the conclusion that a trust existed and it is a public trust and is liable to be registered under the Act.
An appeal was taken to the Charity Commissioner.
The Deputy Charity Commissioner, exercising appellate powers, confirmed the findings and order of the Assistant Charity Commissioner.
An application was then made under section 72 of the Act to the District Judge to set aside the decision and order of the Deputy Charity Commissioner, but the District Judge confirmed 663 the order and dismissed the petition.
He held that "this institution must be considered as a Branch Mutt even though its origin may be the Samadhis or tombs of the Shankaracharya of the name Abhinava Sachhidanand Bharati." He further came to the conclusion that "the evidence on the record shows that this Institution at Nasik is a place of religious worship within the meaning of the definition in section 2(9) of the Act." He observed; "There is no dispute that there are idols of Shri Adya Shankaracharya and Shri Dattaraya in this institution and worship of those idols is carried on there.
The festivals which are held and which are attended by the public who are invited on such occasions are the Jayantis of Shri Shankaracharya and the deity of Shri Dattatraya.
In this behalf, the printed invitations (Exhibits 12/29, 12/30 and 12/31) may be perused.
There is also day to day worship of these deities which is carried on by the pujaris." He further observed: "Considering from this point of view, this place would be a place of religious worship and there is no dispute that at any rate it is appurtenant to the main institution or the Muth at Shringeri." He further held that "this institution or Foundation at Nasik is admittedly a Branch of the Muth at Shringeri which is founded by Adya Shankaracharya, and this Branch would partake of the nature of the main or principal Institution at Shringeri." He accordingly held that it would be idle to contend that this institution at Nasik would not come within even what is called the 'inclusive portion ' of the definition of 'Muth ' enacted in Section 2(9) of the Act.
The learned counsel for the appellant contends that the Nasik Math is an independent Math within section 2(9) of the Act and, therefore, covered by the provisions of the Act; at any rate, even if the Nasik Math is an adjunct of or dependent upon the principal math at Shringeri, it is covered by the Act.
In Maharajkumari Umeshwari Kuer vs The State of Bihar(1), while considering the provisions of the Bihar Hindu Religious Trusts Act, 1950 (Bihar Act 1 of 1951), Gajendragadkar, J., as he then was, speaking for the Court, observed: "On behalf of the petitioner the learned Attorney General has contended that as a result of our decisions in the group of cases to which we have already referred it is now established that before the Act can apply two (1) petition No. 405 of 1955 decided on December 15, 1960.
664 conditions must be satisfied; first, that the religious trust or the institution itself must be in Bihar, and second, part of its property must be situated in the State of Bihar.
Since the first of these two conditions is not satisfied in the present case the Act cannot apply.
In our opinion this contention is well rounded and must be upheld.
" The facts in that case were that "a temple (was) situated at Vrmdavan Dham in the District of Mathra in Uttar Pradesh.
In this temple were installed the family idol of Shri Radha Gopalji as well as the idol of Radhendra Kishorji in 1872 and 1877 respectively by Maharani Inderjit Kuer of Tikari.
The said Maharani created a waqf of certain properties known as Balkbar Mahal in the District of Gaya by a registered deed of endowment on July 25, 1872, for the purpose of meeting the expenses relating to food, offering, prayers and worship in the said temple.
The Trust owns properties also in Bihar." ' This Court repelled the contention that since the Trustees reside in Bihar and the Trust is substantially administered in Bihar the provisions of the Bihar Act would be applicable, and observed: "It is the situs of the trust of the principal institution or temple with which the trust is integrally connected that determines the applicability of the Act.
The properties in question which are situated partly in Uttar Pradesh and partly in Bihar belong to the temple and the deity is their owner.
This deity is enshrined in the temple situated at Vrindavan Dham, and so it is common ground that the situs of the temple is outside Bihar.
It is also admitted that part of the properties belonging to the trust are in Uttar Pradesh.
Therefore the two tests laid down by this Court inevitably lead to the conclusion that the present trust is outside the purview of the Act.
The fact that the trustees reside in Bihar or that the trust is partially administered in Bihar for charitable purposes can make no difference to this position.
" In Mahant Ramswarup vs Motiram Khandu(1), a case governed by the Bombay Public Trusts Act, Shelat, J., observed: "There.
is no dispute that the trust is administered at Burhanpur and the bulk of its properties, except the three ' pieces of lands situate in the District of Dhulia, are all situate in the, Madhya Pradesh State.
The fact that a part of its properties is situate in Maharashtra (1) [1968] Mh.
L.J. 363.
665 State, though the trust is within Madhya Pradesh State, would not mean that the trust would be governed partly by the Madhya Pradesh Act and partly by the Bombay Act.
Such a division of the Trust and its administration is not contemplated by either of the two Acts.
" It seems to us that, in view of the above authorities, in order o determine the situs of the trust, which consists of a Math and subordinate so called math or maths, it is the situs of the principal math which will determine the applicability of the Act.
We need not here decide the position of an independent real math bough connected with another math.
The ' High Court has ound in this case that in the Nasik Math no religious instructions are imparted and no spiritual service is rendered to any body of disciples.
Further no member of the public is allowed 0 enter the place of worship without permission although worship s carried out by the Pujaris according to vedic usage.
In view these findings the Nasik Math cannot be held to be a real math or temple within the definitions set out above.
In our opinion, the High Court was right in holding that the Nasik Math is not liable to be registered under the Act.
The appeal accordingly fails and is dismissed with costs.
R.K.P.S. Appeal dismissed.

dataset_name: IN-Abs

summary:
The Assistant Charity Commissioner, Bombay, held an enquiry under section 19 of the Bombay Public Trusts Act, 1950 and came to the conclusion that the Nasik branch of the principal Shringeri Math situated in the State of Mysore was a public trust and liable to be registered under section 18 the Act.
The Charity Commissioner in appeal confirmed this finding and an application under section 72 to the District Judge by the respondent was rejected on the view that the institution at Nasik was a place of religious worship within the meaning of the definition in section 2(9) of the Act.
However, the High Court allowed an appeal and set aside the order of the Assistant Charity Commissioner.
On appeal to this Court by a certificate, HELD: The High Court was right in holding that the Nasik Math was not liable to be registered under the Act.
The High Court had found in the present case that in the Nasik Math no religious instructions were imparted and no spiritual service, was rendered to any body of disciples.
Furthermore, no member of the public was allowed to enter the place of worship without permission although worship was carried on by the Pujaris according to Vedic usage.
In view of these findings the Nasik Math could not be held to be a real Math or temple within the definition in section 2(9) of the Act.
[665 B D] HELD also: In order to determine the situs of ' the trust which consists of a Math and a subordinate so called Math or Maths, it ' is the situs of the principal Math which will determine the, applicability of the Act.
[665 B] Maharaikumari Umeshwari Kuer vs The State of Bihar, Petition No. 405 of 1955 decided on December 15, 1960; and Mahant Ramswarup vs Motiram Khandu, (1968) Mh.
L.J. 363; referred to.


judgement:
Appeals Nos. 1052, 1054 to 1058, 1060 to 1087, 1089 to 1095, 1097, 1100 to 1112, 1114 to 1118, 1120 to 1129, 1131 and 1133 to 1145 of 1968.
Appeals by special leave from the judgment and order, dated July 7, 1966 of the Kerala High Court in Writ Appeals Nos. 35, 38 to 40, 43, 44, 46, 47, 57, 59 60 to 69, 71 to 77, 79 to 82, 84 to 86, 88, 89.92 to 95, 97, 99, 102, 184 to 186, 190 to 195, 202, 217, 218, 222 to 224, 226, 227, 231 to 240, 242, 245,247, 249 to 252, 257, 273, 274, 305 to 307, and 312 of 1965 respectively and Civil Appeals Nos. 1146 and 1147 of 1968.
Appeals by special leave from the judgment and order, dated September 19, 1966 of the Kerala High Court in Writ Appeals Nos.
42 and 246 of 1965.
B.R.L. lyengar and ,A. G. Pudissery, for the appellant (in all the appeals).
Sardar Bahadur, Vishnu Bahadur and yougindra Khushalani, for the respondent (in C.As.
1080 and 1137 of 1968).
H.R. Gokhale and J. B. Dadachanji, for the respondent (in C.As.
Nos. 1094 and 1144 of 1968).
A.V.V. Nair, for the respondents Nos. 2 and 3 (in C.As.
1053, 1112 and 1139 of 1968).
Lily Thomas, for the respondent (in C.As.
1056, 1087 and 1128 of 1968) A. Sreedharan Nambiar, for the respondent (in C.As.
Nos; 1067, 1075, 1091 and 1136 of 1968).
M.C. Chagla, 1.
B. Dadachanji and Thomas Vallapally for intervener (in C.A. No. 1144 of 1968).
, Shah, J.
This group of appeals arises out of an order passed by the High Court of Kerala holding that the Kerala Buildings Tax Act 19 of 1961 is ultra.
vires the Legislature in that it infringes the equality clause of the Constitution.
The State Kerala has appealed against the decision With special leave granted by this Court.
647 The material provisions of the Kerala Buildings Act, 1961, may be briefly set out.
The Act extends to the whole of the State of Kerala; section 1 (2), and shall be deemed to have come into force with effect from March 2, 1961; section 1(3).
An "assessee" is defined by section 2(b) as meaning a person by whom building tax or any other sum of money is payable under the Act and includes every person in respect of whom any proceeding under the Act has been taken for the assessment of building tax payable by him.
Section 2(d) defines "building" as meaning a house, out house, garage or any other structure or part thereof whether of masonry, bricks, wood, metal, or other material, but does not include any portable shelter or any shed constructed principally of mud, bamboos, leaves, grass or thatch or a latrine which is not attached to the main structure.
"Floorage" is defined by section 2(e) as meaning the area included in the floor of a building, and where a building has more than one floor of a building, the aggregate area included in all the floors together.
By section 3 buildings owned by the State Government, the Central Government or any local authority and buildings used principally for religious, charitable or educational purposes or as factories or workshops are exempt from payment of tax under the Act.
By section 4 it is provided that there shall be a charge to tax in respect of every building the construction of which is completed on or after March 2, 1961, and which has a floor area of one thousand square feet or more, and that the building tax shall be payable by the owner of the building.
The Schedule to the Act sets out the rates of building tax.
Buildings having a total floor area of less than 1,000 sq.
ft. are not liable to pay tax.
The Act, on a bare perusal, discloses some singular provisions.
The liability to tax in respect of buildings having total floor area between 1,000 to 2,000 sq.
ft. varies between Rs. 100 to Rs. 200; for buildings with a floor area between 2,000 to 4,000 sq.
ft. varies between Rs. 400 to Rs. 800; for buildings having total floor area between 4,000 to 8,000 sq.
it varies between Rs. 1,200 to Rs. 2,400; for buildings, with total floor area of 8,000 to 12,000 sq.
it varies between Rs. 3,200 to Rs. 4,800; and in respect of buildings having total floor area exceeding 12,000 sq.
a rate of 50 np.
per sq.
foot i.e., Rs. 6,000 or more per annum.
For determining the quantum of tax the sole test is the area of the floor of the building.
The Act applies to the entire State of Kerala, and whether the building is situate in a large industrial town or in an insignificant village, the rate of tax is determined by the floor area: it does not depend upon the purpose for which the building is used, the nature of the structure, the town and locality in which the building is situate, the economic rent winch may be obtained from the building, the cost of the building and other related circumstances which may appropriately be taken into 648 consideration in any rational system of taxation of building.
Under the Seventh Schedule List H Entry 49, the State Legislature has the power to legislate for levying taxes on lands and buildings.
But that power cannot be used arbitrarily and in a manner inconsistent with the fundamental rights guaranteed to the people under the Constitution.
No tax may be levied or collected under our constitutional set up except by authority of law: and the law must not only be within the legislative competence of the State, but it must also not be inconsistent with any provision of the Constitution.
It has been frequently said by this Court that the validity of a taxing Statute is open to question on the ground that it infringes fundamental rights.
In K.T. Moopil Nair V. State of Kerala,(1) Sinha, C.J., delivering the judgment of the majority observed at p. 89: "Article 265 imposes a limitation on the taxing power of the State in so far as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat.
It has to be done by authority of law, which must mean valid law.
In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in article 13 of the Constitution.
One of such conditions envisaged by article 13(2) is that the Legislature shall not make an) ' law which takes away or abridges the equality clause in article 14, which enjoins the State not to deny to any person equality before the law or the equal protection of the laws of the country.
It cannot be disputed that if the Act infringes the provisions of article 14 of the Constitution.
it must be struck down as unconstitutional.
: Similar observations were made in Khandige Sham Bhat V. Agricultural, Income tax Officer.
(2) The principles which have been expounded by this Court in determining whether there has been denial of equal protection of the laws are also well settled: see Shri Ram Krishna Dalmia V. Shri Justice S.R. Tendolkar and Ors.(3).
It is true that in the application of the principles, the Courts, in view of the inherent complexity of fiscal legislation admit a larger discretion to the Legislature in the matter of classification, so long as it adheres to the fundamental principles underlying the doctrine of equality.
The power of the Legislature to classify is, it is said, of "wide (1) ; (2) ; (3) ; 649 range and flexibility" so that it can adjust its system of taxation in all proper and reasonable ways Khandige Sham Bhat V. Agricultural Income tax Officer(1).
But in enacting the Kerala Building Tax Act, no attempt at any rational classification is made by the Legislature.
As already observed, the Legislature has not taken into consideration in imposing tax the class to which a building belongs, the nature of construction, the purpose for which it is used, its situation, its capacity for profitable user and other relevant circumstances which have a beating on matters of taxation.
They have adopted merely the floor area of the building as the basis of tax irrespective of all other considerations.
Where objects, persons or transactions essentially dissimilar are treated by the imposition of a uniform tax, discrimination may result, for, in our view, refusal to make a rational classification may itself in some cases operate as denial of equality.
This Court in a recent judgment has decided that the levy of tax in exercise of the power under Entry 49 List II of the Seventh Schedule in respect of factory buildings in a municipal area based on floor area was illegal: New Manek Chowk Spinning and Weaving Mills Co. Ltd. V. Municipal Corporation of the City of Ahmedabad(2).
The Court held in that case that the method of adopting a flat rate for a floor area for determining the annual value adopted by the Corporation of Ahmedabad in exercise of the powers conferred upon it by the Bombay Provincial Municipal Corporation Act 49 of 1949 was against the provisions of the Act and the Rules made thereunder as well as all recognized principles of valuation for the purpose of taxation.
If levy of tax in a municipal district based on floor area in respect of a factory building violates article 14 of the Constitution when the tax is sought to be levied by the Municipal Corporation, we see no reason to uphold the tax imposed under the impugned Act when the State, in exercise of legislative authority conferred by Entry 49 List II Sch. VII, imposes liability to tax buildings solely on floor area.
The vice of the Act in the present case is more pronounced than it was in New Manek Chowk Spinning & Weaving Mills Case(2).
In that case the Rules under which the tax was sought to be levied on the basis of floor area were restricted in their operation to factory buildings within the Corporation limits of Ahmedabad, whereas Act 19 of 1961 which is challenged in the present case applies to the whole State of Kerala in respect of buildings completed on or after March 2, 1961, whatever may be the nature or class of the building, the use to which it is put, materials used in its construction and the extent of profitable user to which the building may be put, its cost and its economic rental.
It is unnecessary in the circumstances to consider whether imposition of a tax only on buildings constructed (1) ; (2) [1967] 2 S.C.R. 679.
650 after March 2, 1961, and exempting buildings completed before that date may not violate article 14 of the Constituiton.
The High Court was, in our judgment, fight in holding that the charging section of the Act is violative of the equality clause of the Constitution.
The appeals therefore fail and are dismissed with costs.
Parties appearing in different groups of appeals through the same Advocate in tiffs Court will be entitled to one hearing fee.
G.C. Appeals dismissed.

summary:
Under section 4 of the Kerala Buildings Tax Act, 1961, buildings constructed after the coming into force of the Act and having a floor area of one thousand square feet or more were subjected to tax on a graduated scale.
The tax was levied on the basis of floor area only and no classification was attempted.
The High Court in writ petitions filed by the present respondents held the charge to be invalid because of violation of the equality clause of the Constitution.
The State appealed.
HELD: (i) The law bY which a tax is levied must not only be within the competence of the legislature concerned but it must also not be inconsistent with any provision of the Constitution.
The validity of a taxing statute is open to question on the ground that it infringes the fundamental rights.
[648 B C] K.T. Moopil Nair vs State of Kerala, ; and Khandige Sham Bhat vs Agricultural Income tax Officer, ; , relied on.
(ii) In the application of the principles expounded by this Court for determining whether there has been denial of equal protection of the laws, the Courts, in view of the inherent complexity of fiscal legislation admit a larger discretion to the Legislature in the matter of classification, so long as k adheres to the fundamental principles underlying the doctrine of equality.
The power of the legislature to classify is of 'wide range and flexibility ' so that it can adjust its system of taxation in all proper and 'reasonable ways.
[648 H] But when objects persons or transactions essentially dissimilar are treated by the imposition of a uniform tax, discrimination may result, for, refusal to make a rational classification may itself in some cases result in denial of equality.
[649 C] in enacting the Kerala Building Tax Act no attempt at any rational classification has been made by the Legislature.
The Legislature has not taken into consideration in imposing tax the class to which a building belongs, the nature of construction, the purpose for which it is used, its situation, its capacity for profitable user and other relevant circumstances which have a bearing on matters of taxation.
They have adopted merely the floor area of the building as the basis of tax irrespective of all other considerations.
The High Court was therefore right in holding that the charging section of the Act was violative of the equality clause of the Constitution.
[649 B] Shri Ram Krishna Dalmia vs Shri Justice S.R. Tendolker & Ors. ; , referred to.
646 New Manek Chowk Spinning & Weaving Mills Co. Ltd. V. Municipal Corporation o/the City of Ahmedabad; , , applied.
[Question whether imposition of a tax only on buildings constructed after the coming into force of the Act and the exempting building completed before that date would violate article 14 of the constitution left open.] [650 A]


judgement:
Appeal No. 2454 of 1966.
Appeal from the Judgment and order dated February 19/22, 1965 of the Bombay High Court in Income tax Reference No. 2 of 1962.
Sanat P. Mehta, and J.B. Dadachanji, for the appellant.
Niren De, Solicitor General, B.R.L. lyengar, and R.N. Sachthey, for the respondent.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal is brought by certificate from the, judgment of the Bombay High Court dated the 22nd February, 1965 in Income tax Reference No. 2 of 1962.
In the year 1951 the assessee Maneklal Ujamshi (hereinafter referred to as the assessee) made a gift of 1,184 ordinary and 155 preference shares in Changdeo Sugar Mills Ltd. to his wife Bai Laxmibai.
The total value of these transferred shares on the date of the transfer was Rs. 68,730/ .
Subsequent to the transfer the company converted the preference shares into ordinary shares giving the shareholders 8 ordinary shares for each preference share with the result that on December 31, 1954, Bai Laxmibai held in all 2,424 ordinary shares of the mills.
Out, of these 2,424 shares.
Bai Laxmibai sold 2,400 shares on August 1. 1956, for the sum of Rs. 1,54,800/ resulting in a capital gain of Rs. 70,860/ as computed under section 12B of the Income tax Act.
The whole amount realised by the sale of the shares was deposited ' by Bai Laxmibai with M/s. A.H. BhivandiwaIla & Co., in which Maneklal as well as his son, Sevantilal, happened to be partners.
The amount deposited by Bai Laxmibai fetched a yearly interest of Rs. 9,288/ .
In the assessment of Maneklal for the assessment year 1957 58 the Income Tax Officer included the amount of Rs. 70,860/ which was the profit made by Bai Laxmibai on the 362 sale of the shares, as income of Maneklal under section 16(3)(a)(iii) of the Indian Income Tax Act.
Similarly, in the assessment of Maneklal for the assessment years 1958 59 and 1959 60, the Income Tax Officer included in each year the amount of Rs. 9,288 which was the interest earned by Bai Laxmibai on the deposit of the sale proceeds with M/s. Bhivandiwalla and Co. as the income of Maneklal under section 16(3)(a)(iii).
According to the Income Tax Officer the gain which had resulted from the sale of the shares was the income of the wife of the assessee which arose directly or indirectly from the assets transferred by the assessee to his wife otherwise than for adequate consideration and therefore was required to be included in the computation of the total income of Maneklal.
The Income Tax Officer also took the view that the amount of interest which Bai Laxmibai had received from the sale proceeds deposited by her with M/s. Bhivandiwalla & Co. was also income of the wife of Maneklal which arose directly or indirectly from the assets transferred by Maneklal to her.
Accordingly, in the assessment order for the first year, the Income Tax Officer included the amount of Rs. 70,860/ and in the assessment orders for the next two years, he included the amount of Rs. 9,288/ in the total taxable income of Maneklal.
Appeals against all these three assessment orders were filed before the Appellate Assistant Commissioner.
In the appeal against the first assessment order for the assessment year 1957 58 the Appellate Assistant Commissioner agreed with the view taken by the Income Tax Officer and dismissed the appeal.
In the other two appeals, he partly allowed the appeals taking the view that only that part of the interest which was attributable to the monetary value of the shares covered by the shares at the time of the gift was liable to be included in the total income of Maneklal in accordance with the provisions o.f section 16(3)(a)(iii) and the balance could not be included under the said provision.
Since the monetary value of the shares gifted to Bai Laxmibai at the time when the gift was made was only Rs. 69,730/ , the interest attributable to it worked out at Rs. 4,l 38/ .
Out of the total interest of Rs. 9,288/ which was received by Bai Laxmibai in each of those years, he directed that only an amount of Rs. 4,183/ should be included in the total income of Maneklal in each of those two years and the balance of Rs. 5,105/ should be deleted.
Against the orders of the Appellate Assistant Commissioner on these appeals the assessee appealed to the Appellate Tribunal.
The Department, on the other hand, appealed against the orders of the Appellate Assistant Commissioner for the years 1958 59 and 1959 60 insofar as they allowed exemption in respect of Rs. 4,183/ out of the total amount of Rs. 9,288/ for each year.
The Appellate Tribunal dismissed the appeal of the assessee with regard to the assessment year 1957 58.
For the assessment years 363 1958 59 and/959 60, the Appellate Tribunal allowed the appeals of the Department and dismissed the appeal of the assessee for the assessment.
year 1959 60.
According to these decisions of the Appellate Tribunal the result was that for the assessment year 1957 58 the order of the Income Tax Officer that the amount of Rs, 70,860/ which was the profit or gain on the sale of the shares by Bai Laxmibai was liable to be included in the total income of Maneklal was upheld and for the later two, years the entire amount of interest viz., Rs. 9,288/ was held to be liable to be included in the total income of Maneklal in each of those two years.
Thereafter, at the instance of the assessee, the Appellate Tribunal stated a case to the High Court on the following questions of law: "1.
Whether in computing the total income of Maneklal for the assessment year 1957 58, the sum of Rs. 70,860/ has been properly included therein in accordance with the provisions of section 16(3)(a)(iii) of the Income tax Act, 1922 ? 2.
Whether in computing the total income of Maneklal for the assessment year 1958 59 the sum of Rs. 5,104/ has been properly included therein in accordance with provisions of section 16(3)(a)(iii) of the Income tax Act, 1922? 3.
Whether in computing the total income of Maneklal for the assessment year 1959 60, the sum of Rs. 4,183/ has been properly included therein in accordance with the provisions of section 16(3)(a)(iii) of the Income tax Act, 1922 ? 4.
Whether in computing the total income of Maneklal for the assessment year 1959 60, the sum of Rs. 5,105/ has been properly included therein in accordance with the provisions of section 16(3)(a)(iii) of the Income tax Act,1922 ?" By its judgment dated February 19, 1965 the High Court answered the first question in the affirmative and against the assessee.
It answered questions Nos. 2 & 4 in favour of the assessee and against the Department.
As regards question No. 3, the High Court answered it in the affirmative and in favour of the Department.
The reason was that Counsel for the assessee did not press it or challenge the correctness of the view taken by the Appellate Tribunal and accepted as correct the conclusion of the Tribunal with regard to the point involved in that question.
Section 16(3)(a)(iii) of the Income Tax Act, 1922 provides as follows: 364 "in computing the total income of any individual for the purpose of assessment, there shall be included : (a) so much of the income of a wife of such individual as arises directly or indirectly . . (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart".
Section 2(6C) of the Income tax Act, 1922 states: "Income ' includes . . (vi) 'any capital gain chargeable under section 12B; Section 12B of the Income Tax Act enacts: (1) The tax shah be payable by an assesee under the head 'capital gains ' in respect of any profits or gains arising from the sale, exchange, relinquishment or transfer of a capital asset effected after the 31st day of March, 1956, and such profits and gains shall be deemed to be income of the previous year in which the sale.
exchange, relinquishment or transfer took place;. " With regard to the first question Mr. Mehta put forward the argument that what comes within the ambit of section 16(3)(a)(iii) is the income from the transferred assets, which is different from the profit or gain arising from the sale of the transferred assets, or in other words, "the capital gains" from the transferred assets.
It was argued in the first place that what comes within the ambit of section 16 (3) (a) (iii) was 'the income from the assets ' i.e., the income which the asset produces while it continues to remain in the hands of the assessee and does not include the gain which the assessee makes by selling the asset and parting with possession of it.
We see no justification for this argument.
In our opinion there is no logical distinction between income arising from the asset transferred to the wife and income arising from the sale of the assets so transferred.
The profits or gains which arise from the sale of the asset would arise or spring from the asset, although the operation by which the profits or gains is made to arise out of the asset is the operation of the sale.
If the asset employed, say by way of investment and produces income, the income arises or springs from the asset; the operation, which causes the income to spring from the asset, is the operation of the investment.
In the operation of the investment, income is produced, 365 while the asset continues to belong to the assessee, while in the operation of a sale, gain is produced, which is still income but in the process the title to the asset is parted with.
Although the processes involved in the two cases are different, the gain which has resulted to the owner of the asset, in each case, is the gain, which has sprung up.
or arisen from the asset.
There is hence no warrant for the argument.
that the capital gain is not income arising from the assets but it is income which arises from a source which is different from the asset itself.
It was argued in the second place that section 16(3)(a)(iii) was enacted in 1937 when the word 'income ' did not include 'capital gains ' and income from property was understood to be income falling under that head in section 6 of the Act.
The inclusion of 'capital gains ' in the definition of 'income ' was for the first time enacted in 1947.
It is true that at the time when section 16(3)(a)(iii) was enacted, the definition of ' 'income ' did not include 'capital gains ' but capital gains having been brought within the meaning of 'income ' in section 2(6C) the expression 'income ' as used in section 16(3) (a) (iii) must be construed according to the amended definition of the word and would, therefore, include capital gains.
There is nothing in the context or language of section 16(3) (a) (iii) of the Act to suggest that capital gains are excluded from its scope.
We see no reason why a restricted interpretation should be given to the provisions of section 16(3)(a)(iii) as contended for the appellant.
On the contrary, the object of the enactment of the section is to prevent avoidance of tax or reducing the incidence of tax on the part of the assessee by transfer of his assets to.
his wife or minor child.
It is a sound rule of interpretation that a statute should be so construed as to prevent the mischief and to advance the remedy according to the true intention of the makers of the statute.
We are, therefore, unable to accept Mr. Mehta 's argument on this aspect of the case.
For the reasons given we hold that the High Court has rightly answered the first question against the assessee and this appeal is accordingly dismissed with costs.
R.K.P.S. Appeal dismissed.

summary:
The appellant made a gift in 1951 of certain ordinary and preference shares in a company to.
his wife and on the date of transfer the value of the shares was Rs. 69,730.
After the company had converted the preference shares into ordinary shares the appellant 's wife sold most of the shares held by her for Pa. 1,54,800, resulting in a capital gain of Rs. 70,860 as computed under section 12B of the Income Tax Act.
She deposited the entire amount realised from the sale of shares with a firm and thereby earned an interest of Rs. 9,288 per year.
In the appellant 's assessment for 1957 58, the Income Tax Officer included the amount of Rs. 70,860 on the view that the gain resulting from the sale of the shares was the income of the appellant 's wife which arose directly or indirectly from assets transferred by him within the meaning of section 16 (3)(a)(iii) of the Income Tax Act, 1922.
Similarly, in the appellant 's assessment for the year 1958 59 ' and 19591 60, the interest amount of Rs. 9,288 was also included as income within the meaning of section 16 (3) (a) (iii).
In appeals made against the three assessment orders, while the Appellate Assistant Commissioner dismissed the appeal in respect of the assessment year 1957 58 be partly allowed the other two appeals taking the view that only that part of the interest which was attributable to the monetary value of the shares at the time of the gift was liable to be included in the appellant 's total income under section 16 (3)(a)(iii); since the monetary value of the shares gifted to the wife at the time when the gift was made was.
only Rs. 69,730.
the interest attributable to it worked, out at Rs. 4,138 and only this amount could be included in the appellant 's income.
The Appellate.
Tribunal dismissed the appellant 's further appeal and also allowed cross appeals filed by the Department.
The High Court.
upon a reference.
held that the sum of Rs. 70,860 was properly included in the appellant 's income, in 1957 58 but that the interest amount in excess of Rs. 4.138 was not liable to be included in his income for 1958 59 and 1959 60.
In the appeal to this Court the only question for consideration was whether the amount of Rs. 70.860 was the appellant 's income under section 16 (3)(a)(iii).
It was contended on his behalf (i) that what comes within the ambit of section 16(3.)(a)(iii) is the income from the transferred assets.which is different from the profits or gains arising from the sale of the transferred assets.
or in other words "the capital gains" from the transferred assets; and (ii) that section 16(3)(a)(iii) was enacted in 1937 when the word 'income ' did not include 'capital gains ' and income from the property was understood to be income falling under that head in section 6 of Act.
HELD: The High Court had rightly decided that the amount.
of Rs. 70,860 was properly included in the assessees income under section 16 (3) (a) (iii).
361 (i) There is no logical distinction between income arising from the asset transferred to the wife and arising from the sale of the assets so transferred.
The profits or gains which arise from the sale of the asset would arise or spring from the asset, although the operation by which the profits or gain is made to arise out of the asset is the operation of sale.
[364 G H] (ii) Although at the time when section 16(3)(a)(iii) was enacted the definition of 'income ' did not include 'capital gains ', capital gains having been brought within the meaning of 'income ' in section 2(6C), the expression 'income ' as used in section 16(3)(a)(iii) must be construed according to the amended definition of the word and would, therefore, include capital gains.
There is nothing in the context or language of section 16(3)(a)(iii) of the Act to suggest that capital gains are excluded from its scope and there is no reason why a restricted interpretation should be given to the provisions of section 16(3) (a) (iii).
[365 C E]


judgement:
ON: Civil Appeals Nos. 1319 and 1320 of 1966.
Appeals by special leave from the judgments and orders dated February 16, 1966 and February 1, 1966 of the Andhra Pradesh High Court in Writ Appeals Nos.
143 of 1966 and 166 of 1965 respectively and Writ Petition No. 103 of 1966.
C1/68 13 692 Petition under article 32 of the Constitution of India for the enforcement of fundamental rights.
B.C. Misra, Om Prakash Gupta and M.V. Goswami, for the appellant/petitioner (in all the matters).
B. Sen and R.N. Sachthey, for the respondent (in all the matters ).
The Judgment of the Court was delivered by Shah, J.
Kapurchand Shrimal a Hindu undivided family committed default in payment of income tax due by it for the assessment years 1955 56 to 1959 60.
The Income tax Officer, Special Investigation Circle, Hyderabad, issued certificate on ,June 16, 1959, under section 46 of the Income tax Act, 1922, fox ' recovery of tax due by the family.
Pursuant to the certificate, properties of the Hindu undivided family movable and immovable and outstandings were attached for realizing the tax dues.
In exercise of the powers conferred by r. 76 of Sch.
II of the Income tax Act, 1961, the Tax Recovery Officer directed on August 10, 1965, that Kapurchand Shrimal manager of the family be detained in civil prison for fifteen days.
The manager then moved a petition in the High Court of Andhra Pradesh against the order of detention.
The petition was rejected by a single Judge of the High Court holding that the manager had, in contravention of r. 16(2) of Sch.
II of the Income tax Act, 1961, dealt with the properties of the family after receiving notice of the issue of the tax recovery certificate.
In appeal against that order, the manager applied for leave to raise the contention that where a Hindu undivided family had committed default in payment of the tax, its Karta not being the assessee against whom the certificate is issued,.
is not liable to be detained for recovery of tax due by the Hindu undivided family.
The High Court declined to allow the contention to be raised and held that the manager having acted in contravention of r. 16(2) of Sch.
II of the Income tax Act, 1961, the ingredients of r. 73 were attracted and he was liable to be detained in civil prison.
A, day before this order was passed the appellant filed another petition under article 226 of the Constitution challenging the validity of the proceedings against him on the ground that he was not a "defaulter".
That petition was dismissed by the High Court holding that the earlier judgment of the High Court operated to bar investigation into the plea raised.
Appeals Nos.
1319 & 1320 of 1966 arise out of the orders made by the High Court in the two petitions under article 226 of the Constitution.
The manager was, after the order of the High 693 Court, arrested and sent to prison for six months.
The manager then filed petition under article 32 of the Constitution praying for a writ in the nature of habeas corpus for an order for his release from the custody of Superintendent District Prison, Hyderabad.
In our judgment the claim of the manager that he is not liable to be arrested and detained in prison for failure to satisfy the tax due by the Hindu undivided family in enforcement of the certificate issued under section 222 of the Income tax Act, 1961,, must be upheld.
By virtue of section 297(2)(j), notwithstanding the repeal of the Indian Income tax Act, 1922, any stun payable by way of income tax, super tax, interest, penalty or otherwise under the Income tax Act, 1922, may be recovered under the Act of 1961, but without prejudice to any action already taken for the recovery of such sum under the repealed Act.
Proceedings could therefore be taken for recovery of the tax due for the assessment years 1955 56 to 1959 60 by the Hindu undivided family under the Income tax Act of 1961.
Section 220 of Act 1961 deals with payment of tax and the conditions in which an assessee may be deemed to ' be in default.
Under the Act tax assessed has to be paid within thirty five days of the service of a notice of demand: if the amount is not paid within the time limited at the place and to the person mentioned in the said notice, the assessee shall be deemed to be in default.
Section 222 provides for the issue of certificate to the Tax Recovery Officer.
It provides, in so far as it is material: "( 1 ) When an assessee is in default or is deemed to be in default in making a payment of tax, the Income tax Officer may forward to the Tax Recovery Officer a certificate under his signature specifying the amount of arrears due from the assessee, and the Tax Recovery Officer on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein by one or more of the modes mentioned below, in accordance with the rules laid down in the Second Schedule (a) attachment and sale of the assessee 's movable property; (b) attachment and sale of the assessee 's immovable property; (c) arrest of the assessee and his detention in prison; (d) appointing a receiver for the management of the assessee 's movable and immovable properties".
By r. 1 (b) of Sch.
II of the Income tax Act, 1961, "defaulter"" means the assessee mentioned in the certificate.
Rule 2 provides 694 that when a certificate has been received by the Tax Recovery Officer from the Income tax Officer for recovery of arrears under Sch.
II, the Tax Recovery Officer shah cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would b.e taken to realise the amount under the Schedule.
Rule 16 provides that where a notice has been served on a defaulter under r. 2, the defaulter shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer.
Rule 73 provides that no order for the arrest and detention in civil prison of a defaulter shah be made unless the Tax Recovery Officer has, issued and served a notice upon the defaulter calling upon him to appear on the date specified in the notice and to show cause why he should not be committed to the civil prison, and unless the Tax Recovery Officer, for reasons to be recorded in writing, is satisfied and that the defaulter with the object or effect of obstructing the execution of the certificate, has, after the receipt of the certificate in the office of the Tax Recovery Officer, dishonestly transferred, concealed, or removed any part of his property; and (b) that the defaulter has, or has had since the receipt of the certificate in the office of the Tax Recovery Officer, the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same.
Rule 76 provides for the issue of an order of detention of the defaulter by the Tax Recovery Officer.
The scheme of the Income tax Act, 1961, is to treat the assessee failing to pay the tax due within the period prescribed a defaulter.
The Income tax Officer may, where the assessee is found to be in default, issue a certificate for recovery and forward it to the Tax Recovery Officer specifying the amount of arrears due from the assessee.
The amount due may be recovered by resort to any one or more of the four modes prescribed by section 222 of the Act.
If the defaulter fails to comply with a notice issued by the Tax Recovery Officer requiring the defaulter to pay the amount within fifteen days from the date of the service of the notice, proceedings for recovery may be taken against the assessee for recovery of 'the tax.
But under the scheme of the Act and the Rules, the assessee alone may be treated in default.
The Act and the Rules contemplate that the notice for payment of the tax arrears may be issued against the assessee, and proceedings for recovery of the tax may be taken against the assessee alone.
Under the Income tax Act, 1961, a Hindu undivided family is a distinct taxable entity.
apart from the individual members who constitute that family.
Section 4 of the Income tax Act charges tax for any assessment year, the total income of the previous 695 year of every person and 'person ' is defined in section 2 (31 ) as including (i) an individual, (u) a Hindu undivided family, (iii) a company, (iv ) a firm, (v ) an association of persons or a body of individuals, whether Incorporated or not, (vi) a local authority and (vii) every artificial juridical person, not falling within any of the preceding sub clauses.
The Legislature having treated a Hindu undivided family as a taxable entity distinct from the individual members constituting it, and proceedings for assessment and recovery of tax having been taken against the Hindu undivided family, it was not open to the Tax Recovery Officer to initiate proceedings against the manager of the Hindu undivided family for his arrest and detention.
It is true that if properties of the family movable and immovable are to be attached, proceedings may be started against the Hindu undivided family and the manager represents the family in proceedings before the Tax Recovery Officer.
But by the clearest implication of the statute the assessee alone may be deemed to be in default for non payment of tax, and liability to arrest and detention on failure to pay the tax due is also incurred by the assessee alone.
The manager by virtue of his status is competent to represent the Hindu undivided family, but on that account he cannot for the purpose of section 222 of the Act of 1961 be deemed to be the assessee when the assessment is made against the Hindu undivided family and certificate for recovery is issued against the family.
Counsel for the Revenue invited our attention to section 140(b) and section 282(2) of the Income tax Act, 1961, in support of his contention that when tax is assessed against the Hindu undivided family there is no distinction between the representative status of the manager of the family and his personal status.
Section 140(b) authorises the manager in the case of a Hindu undivided farofly to sign and verify the return of income, and section 282(2) provides for the mode of service of notice or requisition issued under the Act, amongst others, against a Hindu undivided family.
But because the manager of a Hindu undivided family is authorised to sign and verify the return of income and a notice under the Act could be served upon him when it is addressed to a Hindu undivided family and such service is treated as service upon the Hindu undivided family for the purpose of the Act, the manager cannot be deemed to be the assessee where the income assessed is of the Hindu undivided family.
The expression 'assessee ' under section 2(7) means a person by whom any tax or any other sum of money is payable under the Act, and includes (a) every person in respect of whom any proceeding under the Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed 696 to be an assessee under any provisions of the Act; (c) every person who is deemed to be an assessee in default under any provisions of the Act.
For purposes of cl.
(a) the person against whom any proceeding under the Act has been taken is deemed an assessee: but that necessarily postulates that the proceeding should be lawfully taken against the person before he could be deemed to be an assessee for the purpose of section 222.or r. 2 and r.73.
There is no provision in the Act which deems the manager to be the assessee, for the purpose of assessment and recovery of tax, when the income of the Hindu undivided family of which he is the manager is assessed to tax.
Nor is there any provision enabling the Income tax Officer or the Tax Recovery Officer to treat the manager of the Hindu undivided family as an assessee in default under the provisions of the Act.
Section 160 provides for treating a person as a representative assessee and section 161 prescribes the liability of a representative assessee.
Section 179 makes a special provision for rendering the Directors of private company in liquidation to be jointly and severally liable for the payment of tax which cannot be recovered from the assets of the private company in liquidation.
The Legislature has made no such provision for recovery of tax by resort to the personal property of the manager of the Hindu undivided family, or by his arrest and detention for default by the family in paying the tax due.
Sections 276, 276A, 277 and 278 on which reliance was placed by counsel for the Revenue in support of his argument also do not assist him.
These sections occur in a chapter relating to penalties, and they seek to penalise failure to carry out specific provisions mentioned therein.
We are unable to hold that the expression "person" in sections 276, 276A and 277 is used m the sense in which it is defined in section 2 (31 ) of the Act.
For each specific act which is deemed to be an offence under those provisions, an individual who without reasonable cause or excuse fails to do the acts prescribed by statute or acts in a manner contrary to the statute or makes a declaration on oath which he believed to be false or does not believe to be true, is made liable to be punished.
Section 278 penalises the abetment or inducing any person to make and deliver an account, statement of declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe to.
be true.
In the context in which the expression "person" occurs in sections 276, 276A, 277 and 278, there can be no doubt that it seeks to penalise only those individuals who fail to carry out the duty case by the specific provisions of the statute.
or are otherwise responsible for the acts done.
For the default of the Hindu undivided family, therefore.
in payment of tax.
the Karta cannot be arrested and detained in prison.
697 The High Court, we think, took a somewhat technical view in declining to allow the contention raised by the appellant in the first writ petition presented before the High Court that he was not liable to be arrested and imprisoned for non payment of the tax arrears, since he was not an assessee.
and then in treating the judgment of the High Court in the first writ petition operating constructively as res judicata in the second petition.
The appeals are allowed and the order of detention passed by the Tax Recovery Officer against the appellant is declared unauthorized.
No order in Petition No. 103 of 1966.
The appellant will be entitled to his costs in Appeal No. 1320 of 1966 in all the three Courts.
There will be no order as to costs in Appeal No. 1319 of 1966 and Writ Petition No. 103 of 1966.
Y.P. Appeals allowed.

summary:
A Hindu undivided family committed default in payment of income tax, and a certificate for recovery of tax due to the family was issued by the Income Tax Office in exercise of the power conferred by rule 76 of Sch.
II of the Income Tax Act, 1961.
The Tax Recovery Officer directed the arrest and detention in prison of the karta of the family for non payment of tax.
The Karta then moved a petition in the High Court of Andhra Pradesh challenging his detention on the ground that he was not a defaulter.
The petition was rejected.
The Karta appealed.
He also moved a petition under article 32 of the Constitution in the Supreme Court for an order for his release from custody.
HELD : The Legislature having treated a Hindu undivided family as a taxable entity distinct from the individual members constituting it,.
and proceedings,for assessment and recovery of tax having been taken! against the Hindu undivided family, it was not open to the Tax Recovery Officer to initiate proceedings against the manager of the Hindu undivided family for his arrest and detention.
The manager by virtue of his status is competent to represent the Hindu undivided family, but on that account he cannot for the purpose of section 222 of the Act of 1961 be deemed to be.
the assessee when assessment is made against the Hindu undivided family and certificate for recovery is also issued against the family.
[695 B D] For the purposes of cl.
(a) of section 2(7) the person against whom, any proceeding under the Act has been taken is deemed an assessee: but that postulates that the proceeding should be lawfully taken against the person before he may be deemed to be an assessee for the purpose of section 222 or r. 2 and r. 73.
There is no provision in the Act which deems the manager to be the assessee for the purpose of assessment and recovery of tax, when the income of the Hindu undivided family of which he is the Manager is assessed to tax.
Nor is there any provision in the Act enabling the Income tax Officer or the Tax Recovery Officer to treat the manager of the Hindu undivided family as an assessee in default in respect of tax due by the Hindu undivided family.
The Legislature has again made no provision for recovery of tax by resort to the personal property of the manager of the Hindu undivided family assessed to tax or by his arrest and detention for default by the family in paying the tax due.
[695 H696D]


judgement:
Appeal No. 731 of 1966.
779 Appeal by special leave from the judgment and order dated October 22, 1964 of the Madras High Court in Tax Case No. 197 of 1963 (Revision No. 126).
A.K. Sen and A.V. Rangam, for the appellant.
S.T. Desai and T.A. Ramachandran, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by special leave in which the sole question for decision is whether the respondent company was liable to pay sales tax on an amount of Rs. 4,20,000 being the sale price of two arc furnaces which 'had been purchased in 1952 and sold in 1958.
The respondent company carried on business at 38, Mount ROad, Madras.
its main business 'being the.
manufacture and sale of machinery and parts of machinery. ,and accessories.
For manufacturing parts of the machinery, the company maintained a foundry and in 1952 it purchased two arc furnaces for a sum of Rs. 2,13,512.81 for the purpose of using the same in its foundry.
In the account books and the balance sheet of the company these furnaces were shown under the heading "workshop equipment".
According to the company.the furnaces were found to be unsuitable for the purpose for which they had been purchased and therefore they were disposed of in 1958 to a purchaser in Calcutta for a sum of Rs. 4,20,000.
For the assessment year 1958 59 the assessing authorities sought to include the amount of Rs. 4,20,000 in the turnover of the company although it was maintained by the company that the sale represented an isolated sale of its fixed capital assets.
The appeal before the Sales Tax Appellate Tribunal, Madras, also failed.
The view of the tribunal may be stated in its own words : ' "It is not denied that the appellant comes within the scope of the definition of "dealer".
It has to be seen whether the sale of the two arc ' furnaces had a reasonable connection with the normal course of business of the assessee.
The fact that the appellant could, not use them or that they are surplus machinery cannot take it out of the ambit of the appellant 's business of sales of machinery or part of machinery.
The necessity to dispose of unwanted machinery is ingrained in the very nature of business of sale of machinery which the assessee was carrying on and it had to effect sales of such surplus materials".
A revision petition was presented to the High Court of Madras under section 38 of the Madras General Sales Tax Act (Act 1 of 1959) read with section 9(3) of the Central Sale Tax Act, 1956 (Act LXXIV of 1956), hereinafter called the Madras Act and the Central Act 780 respectively. 'Before the High Court it was argued on behalf of the assessee that the furnaces were purchased for the purpose of being installed in the factory.
It was therefore to be used as capital asset and not as a part of the stock in trade.
At the time of purchase the assessee had no idea of selling the furnaces and there was no intention of making any profit.
The business which was carried on by the assessee was entirely different, namely, production of machinery and parts and the sale of the furnaces, when they were found to be unserviceable, was not made in the course of the normal business activity of the assessee.
The position taken up on behalf of the State was that when the assessee carried on the business of selling machinery of various kinds the sale of arc furnaces must be regarded as sale of machinery in the normal course of its business activity.
The learned Judges of the High Court referred to a large number of decided cases including the decision of this Court in State of Andhra Pradesh vs Abdul Bakshi & Bros.(1) Reliance was finally placed on the observations in Ambica Mills Ltd. vs State of Gujarat(2) in which it was observed inter alia that the machinery which had been disposed of had been obviously purchased and installed for use for production of textile goods.
The view taken in that decision was that a person could not be said to be carrying on business of selling assets of that business when sale of such assets had been made only because they had become useless and unserviceable by usual wear and tear or because of the necessity for substituting modern machinery.
In the present case the learned Madras Judges were of the opinion that it was impossible to hold that the sale of the arc furnaces was either ingrained in the business activity of the assessee or 'would constitute its normal business activity.
According to them the mere fact that the sale price exceeded the cost price of the arc furnace was not sufficient to establish that their sale was a business activity or that it was actuated by the profit motive.
It was consequently held that the turnover of the assessee was not liable to sales tax.
Mr. A.K. Sen for the appellant contends that the assessee being a dealer in heavy machinery and accessories thereof the sale of arc furnaces could not be said to be wholly different and unconnected with its usual business activity.
He has emphasised the fact that the assessee had admittedly made a profit of Rs. 2,07,000 from the aforesaid transaction and in addition collected sales tax from the Calcutta dealer.
He has called attention to the finding of the Appellate Assistant Commissioner of Commercial Taxes that the sale in the present ' case was not one of used asset and that whatever the intention at the time of the purchase might be, once the machinery was found not usable, the (1) 15 S.T.C. 644.
(2) 15 S.T.C. 367.
781 assessee "has got necessarily to get into a business venture of selling it and in point of fact sold it at good profit".
It is further urged that the arc furnaces became a part of stock or machinery for sale because the assessee was dealing in manufacture and sale of heavy machinery and it must be deemed to have put the furnaces into its stock in due course of business activity.
Mr. Sen has next pointed out that the respondent fell squarely within the definition of the word "dealer" as defined by section 2(b) of the Central Act.
In support of his submission Mr. Sen sought to rely on a decision of this Court in The State of Andhra Pradesh vs Abdul Bakshi & Bros.(1) In that case the respondents had purchased undressed hides and skins and tanning bark together with other material required in their tannery as they carried on the business of tanning hides and skins and of selling tanned skins in the town of Hyderabad.
For the assessment year 1954 55 the Sales Tax Officer sought to include in the total turnover a certain, amount representing the price paid for buying tanning bark required in their tannery.
The respondents submitted that the tanning bark had been bought for consumption in tannery and not for sate and they were accordingly not dealers in tanning bark.
Therefore the price paid for buying tanning bark was not liable to duty under the Hyderabad General Sales Tax Act.
The departmental authorifles as also the Sales Tax Appellate Tribunal rejected this contention but it was accepted by the High Court of Andhra Pradesh.
The High Court rejected the claim of the taxing authorities to tax the tanning bark on the ground that the purchaser was liable to pay tax only when he was carrying on business of buying and selling the commodity and not when he brought it for consumption in the process for manufacturing an article to be sold by him.
This view was reversed and it was observed as a follows: "A person to be a dealer must be engaged in the business of selling or buying or supplying goods.
The expression "business" though extensively used is a word of indefinite import.
In taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit.
To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure".
Mr. Sen has laid stress on what has been said further at pages 647 and 648 : "The Legislature has not made sale of the very article bought by a person a condition for treating him as a (1) 15 S.T.C. 644.
782 dealer: the definition merely requires that the buying of the commodity mentioned in rule 5(2) must be in the course of business, i.e. must be for sale or use with a view to make profit out of the integrated activity of buying and disposal.
The commodity may itself be converted into another saleable commodity, or it may be used as an ingredient or in aid of a manufacturing process leading to the production of such saleable commodity".
The facts in the decision of this Court under discussion were different and distinguishable from the present case.
The tanning bark: was actually consumed in the process of manufacturing another commodity and it was either used as an ingredient or for aiding the process of manufacture which cannot be said about the arc furnaces which were indisputably bought for being installed in the foundry as a part of the manufacturing plant.
The words "in aid of a manufacturing process" have to be read in the context in which they appear in the passage extracted above and cannot be taken to mean that even a part of manufacturing plant will become a salable commodity if it is found to be unusable or no longer required.
Such a view is untenable and cannot be regarded as sustainable in the light of the decision of this Court.
In State of Gujarat vs Raipur Manufacturing Co. Ltd.(1), the tribunal had held that where a cotton textile mill had managed to collect unserviceable article in the course of manufacture of cloth which were sold, sales of these articles must be regarded as a part of the business of the textile mill if the transactions of sale were large and frequent.
After referring to the definition and the expression "dealer" in section 2 (6) of the Bombay Sales Tax Act, 1953 and the other relevant provision of that Act as also the law laid down in the State of Andhra Pradesh vs Abdul Bakshi & Bros.(2) it was observed that by the use of the expression "profit motive" it was not intended that profit must, in fact, be earned nor did the expression cover a mere desire to make some monetary gain out of the transaction or even a series of transactions.
It predicates a motive which pervades the whole series of transactions effected by the person in the course of his activity.
Where a person came to own, in the course of his business of manufacturing or selling a commodity some other commodity which is not a byproduct or a subsidiary product of that business and he sold that commodity, cogent evidence that he had the intention to carry on the business of selling that commodity would be required.
It was further observed that where a person in the course of carrying on the business was required to dispose of what might be called his fixed assets or his discarded goods acquired in the course of business, an inference that he desired to carry on the (1) 19 S.T.C. 1.
(2) 15 S.T.C. 644.
783 business of selling his fixed assets or discarded goods would not ordinarily arise.
In the State of Gujarat vs Vivekananda Mills(1), the assessee was carrying on the business of manufacturing cotton fabrics.
It had agreed to purchase under user 's import licence 500 bales of Californian cotton in January 1953.
Believing that the shipment would arrive after six months the assessee made arrangement to purchase 300 bales of similar cotton to meet its immediate requirements.
The consignment of Californian cotton arrived unexpectedly in April 1953.
A large sum of money belonging to the assessee was blocked up and with the sanction of the authorities the assessee sold 411 bales of this cotton to other mills.
It was held that in selling the cotton with a view to avoid locking up of funds, it could not be inferred that.
the assessee had sold the goods with the intention to carry on the business of selling cotton and the sales were not liable to tax.
It was clear from the supplemental statement of the case which had been submitted that though the assessee had been selling cotton from the year 1946 onwards except for three intervening years the sales were in respect of goods purchased for the business of manufacturing cotton cloth and the sales had been effected either because the cotton was surplus or the assessee had to accommodate its sister concern or with the view that the finances were not blocked up by detaining cotton which the assessee did not need for its business.
The facts and circumstances which have been established in the present case are stronger than those in the previous decisions of this Court.
The furnaces were admittedly imported for the purpose of being installed as a part of the plant in the foundry of the assessee.
There is no material whatsoever to show that there was any intention at the time when the furnaces were purchased of selling them at a profit.
According to Mr. Sen himself the assessee decided to sell the furnaces because it was discovered that they were too big to be installed in the manufacturing plant.
The case of the assessee throughout was and no evidence or material to the contrary existed that the furnaces had been shown in the books of the assessee under the classification "workshop equipment".
The same entries existed in the balance sheet.
Although the assessee was dealing in the sale of heavy machinery and machinery part it was nowhere proved that furnaces were ever manufactured or sold by it or were part of its business or ingrained therein.
The arc furnaces were either fixed assets or discarded goods which had been found to be unserviceable or unsuitable.
The assessee could therefore hardly be said to be a dealer within the definition given in section 2(b) of the Central Act which is (1) 19 S.T.C. 103.
784 "dealer" means any.
person who carries on the business of selling goods, and includes a Government which carries on such business.
" This definition has to be read in the light of the principles which have been laid down by this Court in the cases referred to above.
It must therefore be held that the High Court rightly came to the 'conclusion that the sale proceeds of the furnaces could not be included in the turnover of the assessee for the purpose of determining the liability of the assessee to sales tax.
The appeal fails and is dismissed with costs.
Appeal dismissed.

summary:
The respondent Company carried on business of manufacture and sale of machinery and parts of machinery etc.
For its manufacturing activities, it maintained a foundry and in 19 '52 it purchased two arc furnaces for use in this foundry.
As the furnaces were found unsuitable they were sold to a purchaser at a profit.
For the assessment year 195859 the sales tax assessing authorities included the sale price of the furnaces in the turnover of the Company although it was maintained by the Company that the sale represented art isolated sale of its fixed capital assets.
An appeal to the Sales Tax Appellate Tribunal was rejected but the High Court allowed a revision petition on the view that it was impossible to hold that the sale of the are furnaces was either ingrained in the business activity of the assessee or would constitute its normal business activity; and that the mere fact that the sale price exceeded the cost price of the arc furnaces was not sufficient to establish that the sale was a business activity or that it was actuated by the profit motive.
On appeal to this Court.
HELD: The High Court had rightly concluded that the sale proceeds of the furnaces could not be included in the turnover of the assessee for determining its liability to sales tax.
The furnaces were admittedly imported for the purpose of being installed as a part of the plant in the foundry of the assessee.
There was no material to show that there was any intention at the time when the furnaces were purchased of selling them at a profit.
Although the assessee was dealing in the sale of heavy machinery and machinery parts it was nowhere proved that furnaces were ever manufactured or sold by it or were part of its business or ingrained therein.
The are furnaces were either fixed assets or discarded goods which had been found to be unserviceable Or unsuitable.
The assessee could not therefore be said to be a dealer within the definition given in section 2(b) of the Central Act.
[783 F 784 B] State of Andhra pradesh vs Abdul Bakshi & Bros., 15 S.T.C. 644 and State of Gularat vs Raipur Manufacturing Co. Ltd., 19 S.T.C. 1; distinguished.
Ambica Mills Ltd. vs State of Gujarat, 15 S.T.C. 367, State Gujarat vs Vivekananda Mills, 19 S.T.C. 103, referred to.


judgement:
Appeal No. 2458 of 1966.
Appeal by special leave from the judgment and decree dated April 1, 1963 of the Allahabad High Court in Sales tax Reference No. 391 of 1959.
C.B.Agarwala and O.P. Rana, for the appellant.
J.P. Goyal and Sobhag Mal Jain, for the respondent.
711 The Judgment of the Court was delivered by Shah, J.
The Judge [Revisions] Sales Tax, U.P., Lucknow, referred the following question to the High Court of Allahabad for opinion: "Whether the preparation of medicines on prescriptions of the applicant amounted to a manufacture of "medicines and pharmaceutical preparations" within the meaning of notification No. S.T. 3504/X dated 10th May, 1956, and whether the applicant was assessable to tax on the turnover of the medicines so dispensed ?" The High Court held that the respondent was not a manufacturer of medicines and pharmaceutical preparations within the meaning of the notification.
Against the answer recorded by the High Court, the Commissioner of Sales Tax, U.P., has appealed to this Court with special leave.
The respondent is a medical practitioner and in the performance of his professional duties he examines patients, advises them and prescribes medicines which are issued from his dispensary.
The Sales Tax Officer being of the view that the dispensing of medicines, according to the prescriptions issued by the respondent, amounted to manufacture of medicines within the meaning of the notification No. S.T. 3504/X dated May 10, 1956, assessed the respondent to pay tax on a turnover of Rs. 12,943 for the year 1956 57.
The order was confirmed in appeal by the Judge (Appeals) and was further confirmed by the Judge (Revisions) Sales Tax.
The sole question which falls to be deterrained in this appeal is whether by virtue of the notification, the respondent is exempt from liability to pay tax.
Section 3 of the U.P. Sales Tax Act, 1948, makes every dealer liable to pay in each assessment year a tax at a certain rate on the turnover.
Section 3A provides: "Notwithstanding anything contained in section 3 the State Government may . declare that the turnover in respect of any goods . shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify." On May 10, 1965, the Governor of Uttar Pradesh issued a notification No. S.T. 3504/X that "In exercise of the powers conferred by section 3A of the U.P. Sales Tax Act, 1948, as amended from time to time, and in supersession of all the previous notifica 712 tions on the subject, the Governor of Uttar Pradesh is hereby pleased to declare that with effect from May 8, 1956, the turnover m respect of medicines and pharmaceutical preparations shall not be liable to tax except (a) in the case of medicines and pharmaceutical preparations imported from outside Uttar Pradesh, at the point of sale by the importer.
and (b) in the case of medicines and pharmaceutical preparations manufactured, in Uttar Pradesh, at the point of sale by the manufacturer; And the Governor is further pleased to declare that such turnover shall with effect from the said date be taxed at the rate of . " The respondent is not an importer of medicines and pharmaceutical preparations from outside Uttar Pradesh.
That Is common ground.
The Revenue authorities, however, held that when in his dispensary medicines and pharmaceutical preparations as prescribed by him were mixed, the process of mixing resulted in "manufacture" of medicines, by him as a "manufacturer".
The expression "manufacture" has in ordinary acceptation a wide connotation: it means making of articles, or material commercially different from the basic components, by physical labour or mechanical process; and a manufacturer is a person by whom or under whose direction and control the articles or materials are made.
The notification in the first instance exempts from tax sales of medicines and pharmaceutical preparations.
It then proceeds to withdraw the exemption in respect of two classes of sales of medicines and pharmaceutical preparations, (i) sale by an importer of medicines etc., imported from outside the State and (ii) sale by a manufacturer of medicines etc., manufactured in the State.
The tax levied in respect of the excepted categories is a single point tax: it may be levied when medicines and pharmaceutical preparations manufactured in the State of Uttar Pradesh are sold by the manufacturer.
In our judgment when, as prescribed by a medical practitioner, a mixture of different drugs is prepared by the medical practitioner or by his employees specially for the use of a patient in the treatment of an ailment or discomfort diagnosed by the medical practitioner by his professional skill, and which mixture is normally incapable of being passed from hand to hand as a commercial commodity, the medical practioner supplying the medicines cannot be said to be a manufacturer of the mixture and the mixture cannot be said to be manufactured within the mean 713 ing of the notification.
Exemption granted by the notification ceases to apply under cl.
(a) if the importer of medicines and pharmaceutical preparations manufactured outside the State sells them, and under cl.
(b) if the manufacturer of medicines and pharmaceutical preparations manufactured in Uttar Pradesh sells them.
The scheme therefore is to levy sales tax at one point only, viz., at the point of sale by the importer in respect of medicines imported by him into the State,.
and at the point of sale by the manufacturer of medicines manufactured by him within the State.
If preparation of a mixture of drugs as prescribed by a medical practitioner in his own dispensary is not manufacture of medicines or pharmaceutical preparation, the exception clause of the notification will have no application.
Acceptance of the contention by the Revenue would imply that a medical practitioner supplying to his patients medicines and pharmaceutical preparations separately is not liable to tax: when under his direction they are mixed by his employees for the special use of a patient under his treatment and to achieve a specific purpose, the turnover from the resultant mixture is taxable.
In the absence of clearer phraseology, the Court would not in a taxing provision be willing to give that interpretation.
The appeal therefore fails and is dismissed.
The delay in filing the respondent 's statement of the case is condoned.
There will be no order as to costs in this appeal.
G.C. Appeal dismissed.

summary:
The respondent was a medical practitioner in Uttar Pradesh and maintained a dispensary from which medicines were issued to his patients according to his prescriptions.
According to notification No. S.T. 3504/X, dated May 10, 1956 issued under section 3A of the U.P. Sales Tax Act, 1948, tax in respect of sale of medicines and pharmaceuticals manufactured in the State was payable at single point on the sale effected by the manufacture.
The Sales Tax Officer held that dispensing of medicines was manufacture ' within the meaning of the aforesaid notification and assessed the respondent to sales tax for the year 1956 57 on the turnover of medicines dispensed.
The order was confirmed by the appellate and revisional authorities, but the High Court decided in favour of the respondent.
The State appealed.
HELD: When as prescribed by a medical practitioner, a mixture of different drugs is prepared by the medical practitioner or by his employees specially for the use of a patient in the treatment of an ailment or discomfort diagnosed by the medical practitioner by his professional skill, and which mixture is normally incapable of being passed 'from hand to hand as a commercial commodity, the medical practitioner supplying the medicines cannot be said to be a manufacturer of the mixture and the mixture cannot be said to be manufactured within the meaning of the notification.
[712 G H] In the absence of clearer phraseology the Court would not in a taxing provision be willing to give an interpretation whereby a medical practitioner supplying to his patients medicines and pharmaceutical preparations separately is not liable to tax, but when under his direction they are mixed by his employees for the special use of a patient under his treatment and to achieve a specific purpose, the turnover from the resultant mixture is taxable.
[713 D]