judgement:
N: Criminal Appeal Nos.
274 275 of 1974.
Appeals by Special Leave from the Judgment and Order dated 27 11 73 and 11 1 1974 of the Delhi High Court in Criminal Appeal No. 78/67 and Crl.No. 80/73 respectively.
R. K. Garg, V. J. Francis and D. K. Garg for the Appellant.
Soli J. Sorabji, Addl.
, R. N. Sachthey for the Respondent.
The Judgment of the Court was delivered by KAILASAM, J.
These appeals are by special leave against the judgment of the High Court of Delhi in Criminal Appeal No. 78 of 1967 and Order dated 11th January, 1974 in Cr.
(S.C.A.) No. 80 of 1973.
The appellant was chargesheeted on 26th December, 1963 for an offence under section 120 B, Indian Penal Code, for entering into a criminal conspiracy with one Sirajuddin and one Rehman to accept from them illegal gratification in the discharge of his official duties.
He was also charged with specific offences of accepting Rs. 6000 and Rs. 4000 from Sirajuddin and Rehman being offences punishable under section 161, Indian Penal Code, read with section 5(2) and Section 5(1) (d) of the Prevention of Corruption Act, 1947.
He was also charged for the offence punishable under section 5(2) read with section 5(1) (a) of the Prevention of Corruption Act that in pursuance of the aforesaid conspiracy, he, during the period from 1955 to 1961 habitually accepted illegal gratification from the said two co accused persons.
The Special Judge who tried the case acquitted the appellant by his order dated 19th January, 1967 holding that neither the charge of conspiracy nor any other charge against the accused was proved.
But the Special Judge held that the assets of the appellant from 1st July, 1955 to 30th April, 1961 had exceeded his income by Rs. 33,588.34 and they were disproportionate to the known sources of income of the petitioner.
The learned Judge, however, found that as section 5(3) of the Act had been repealed on 18th December, 1964 and as specific instances of payment of bribe to the petitioner could not be proved the accused could not be held guilty of the charges.
Aggrieved by the decision, the State preferred an appeal to the Delhi High Court on 11th April, 1967.
Pending 819 the appeal before the High Court, Act No. 16 of 1967, received the assent of the President on 20th June 1967 and came into effect on 5 5 1967 reintroducing section 5(3) in the Act w.e.f. 18 12 1964.
In the High Court the appellant challenged the vires of Act No. 16 of 1967 on the ground that survival of section 5(3) of the Act and making it applicable retrospectively was void and unconstitutional as it was in violation of article 14 and 20(1) of the Constitution.
A Division Bench of the High Court of Delhi by its judgment dated 27th November, 1973 allowed the appeal upholding the validity of Act No. 16 of 1967 and remanded the case to be tried from the stage at which it was pending on 18th December, 1964.
Criminal Appeal No. 274 of 1974 is against the order of the High Court remanding the case for fresh trial and Criminal Appeal No. 275 of 1974 is against the order of the High Court refusing to grant a certificate of fitness for appeal to this Court.
Mr. R. K. Garg, the learned counsel for the appellant, submitted that since section 5(3) of the Prevention of Corruption Act, 1947 was repealed on 18th December, 1964, the Courts below cannot take into account the provisions of section 5(3) of the Act after the date of its repeal on 18th December, 1964.
It was further submitted that Act No. 16 of 1967 which gave retrospective operation to section 5(3) of the Act is violative of articles 14 and 20(1) of the Constitution.
In order to appreciate the contention of the learned counsel for the appellant it is necessary to set out the relevant provisions of the Act.
Section 5(1) of the Prevention Act, of 1947, states when a public servant is said to commit the offence of criminal misconduct.
The section before the amendment Act No. 16 of 1967 consisted of four clauses (a), (b), (c) and (d).
The appellant was charged for an offence under section 5(1)(a) and section 5(1) (d) punishable under section 5(2) of the Act.
Section 5(1)(a), and section 5(1)(d) and section 5(2) read as follows: "5.(1) A public servant is said to commit the offence of criminal misconduct in the discharge of his duty (a) if he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person, any gratification (other than legal remuneration) as a motive or reward such as is mentioned in section 161 of the Indian Penal Code.
(b) * * * * (c) * * * * 820 (d) If he, by corrupt or illegal means or by otherwise abusing his position as public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage.
5 (2) Any public servant who commits criminal misconduct in the discharge of his duty shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to seven years and shall also be liable to fine: Provided that the Court may, for any special reasons recorded in writing, impose a sentence of imprisonment of less than one year.
Section 5(2) provides for the punishment of any public servant who commits criminal misconduct as specified in clauses (a) and (d) of section 5(1).
Section 5(3) prescribed a rule of evidence which runs as follows: "5.(3) In any trial of an offence punishable under sub section (2), the fact that the accused person or any other person on his behalf is in possession, for which the accused person cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income may be proved, and as such proof of the Court shall presume, unless the contrary is proved, that the accused person is guilty of criminal misconduct in the discharge of his official duty and his conviction therefor shall not be invalid by reason only that it is based solely on such presumption."
Section 5(3) was repealed on 18th December, 1964 by Act 40 of 1964.
The Act also introduced a new section, section 5 (1) (e) which reads as follows: "(e) if he or any person on his behalf is in possession or has at any time during the period of his office, been in possession for which the public servant cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income." Thus on the date when the Special Judge pronounced his order on 19th January, 1967 section 5(3) was not in existence and the Special Judge acquitted the appellant on the ground that the presumption under section 5(3) was not available for the prosecution on that date.
Subsequently on 5th May 1967 Act No. 16 of 1967 came into force.
Section 2 of the Act provided as follows: "2.Amendment of Anti Corruption Law in relation to certain pending trials.
(1) Notwithstanding (a) the substitution of new provision for sub section (3) of section 5 of the Prevention of Corruption Act, 1947 (hereinafter referred to as the 1947 Act), by section 6(2)(c) of the Anti Corruption Laws (Amendment) Act, 1964 (hereinafter referred to as the 1964 Act); and (b) any judgment or order of any court, the said sub section (3) as it stood immediately before the commencement of the 1964 Act shall apply and shall be deemed always to have applied to and in relation to trial of offences punishable under sub section (2) of section 5 of the 1947 Act pending before any court immediately before such commencement as if no such new provisions had been substituted for the said sub section (3); (2) The accused person in any trial to and in relation to which sub section (1) applies may, at the earliest opportunity available to him after the commencement of this Act, demand that the trial of the offence should proceed from the stage at which it was immediately before the commencement of the 1964 Act and on any such demand being made the court shall proceed with the trial from that stage.
(3) For the removal of doubt it is hereby provided that any court (i) before which an appeal or application for revision against any judgment or order or sentence passed or made in any trial to which sub section (1) applies is pending immediately before the commencement of this Act, or (ii) before which an appeal or application for revision against any judgment, order or sentence passed or made before the commencement of this Act in any such trial, is filed after such commencement 'shall remand the case for trial in conformity with the provisions of this section.
" The contention of the learned counsel for the appellant is that Act No. 16 of 1967 is an ex post facto legislation creating a new offence retrospectively.
We will first consider the effect of repeal of section 5(3) of the Prevention of Corruption Act, Act 2 of 1947.
The nature of section 5(3) has been considered by this Court in several decisions.
In Sajjan Singh vs The State of Punjab this court referring to the sub 822 section held that the sub section provided an additional mode of proving an offence punishable under sub section 5(2) for which an accused person is being tried.
This Court negatived the contention that section 5(3) created a new kind of offence of criminal misconduct by a public servant in the discharge of his official duty.
It held that the section merely prescribed a rule of evidence for the purpose of proving the offence of criminal misconduct as defined in section 5(1) for which an accused person is already on trial.
The court followed the view held by this Court in C.D.S. Swamy vs The State and in Surajpal Singh vs State of U.P.
The question that arises is what is the effect of repeal of the provision under section 5(3).
By Act 40 of 1964 section 5(3) was repealed prospectively.
The statute does not say that the section shall be deemed not to have been in force at all.
Mr. R. K. Garg the learned counsel for the appellant relying on the dissenting judgment of Fazal Ali J. in Keshavan Madhava Menon vs The State of Bombay, (3) submitted that the effect of a repeal will be that it should be construed as the Act not having been in existence at all.
The view of Tindal C. J. that a repeal of the statute obliterated it completely from the records of Parliament as if it had never been passed was followed by Fazal Ali J. Mahajan J. speaking for the majority disagreed with the view holding that "it would be more consonant with reason and justice to say that the law existed and was good at the time when it was passed but that since the date of its repeal it has no longer any effect whatsoever.
" The view taken by the Chief Justice Jindal was abrogated by the enactment of the Interpretation Act, 1889.
Section 32 of the Interpretation Act deals with the effect of repealing an Act after August 30, 1889.
"Such repealing Acts are, unless contrary intention appears, not to effect the previous operation of any enactment so repealed or anything duly done or suffered under any enactment so repealed or effect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or affect any penalty, forfeiture, or punishment incurred in respect of any offence committed against any enactment so repealed; or affect any investigation, legal proceeding, or remedy in respect of any such right, privilege," obligation, liability, penalty, forfeiture or punishment as aforesaid." (Maxwell on The Interpretation of Statutes, 12th Ed., p.17).
In India the , contain similar provisions as in the Interpretation Act, 1889.
Section 6 of the runs as follows: 823 "6.Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.
" Section 6 provides that the repeal shall not affect the previous operation of any enactment so repealed unless a different intention appears.
The operation of all the provisions of the Prevention of Corruption Act would continue in so far as the offences that were committed when section 5(3) was in force.
The offences that were committed after the date of the repeal will not come under the provisions of section 6(b) of the Section 6(c) also preserves all legal proceedings and consequences of such proceedings as if the repealing Act had not been passed.
In this view it is clear that whether Act 16 of 1967 had been brought into force on 20th June, 1967 or not the rule of evidence as incorporated in section 5(3) would be available regarding offences that were committed during the period before the repeal of section 5(3).
Mr. R. K. Garg the learned counsel submitted that the provisions of Act 16 of 1967 by virtue of which the rule of evidence enacted in section 5(3) is deemed to have always been in existence is violative of article 20(1) of the Constitution.
Article 20(1) of the Constitution is as follows: 824 "No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence."
Article 20(1) deals with ex post facto laws though that expression has not been used in the Article.
Usually, a law prescribes a rule of conduct by which persons ought to be governed in respect of their civil rights.
Certain penalties are also imposed under the criminal law for breach of any law.
Though a sovereign legislature has power to legislate retrospectively creation of an offence for an act which at the time of its commission was not an offence or imposition of a penalty greater than that which was under the law provided violates article 20(1).
In the well known case of Phillips vs Eyre and also in the American case of Calder vs Bull the principle underlying the provision has been fully discussed.
All that article 20(1) prohibits is ex post facto laws and is designed to prevent a person being punished for an act or omission which was considered innocent when done.
It only prohibits the conviction of a person or his being subjected to a penalty under ex post facto laws.
In Rao Shiv Bahadur Singh & Anr.vs The State of Vindhya Pradesh, the Court pointed out that "what is prohibited under article 20(1) is only conviction or sentence under an ex post facto law and not the trial thereof.
Such trial under a procedure different from what obtained at the time of the commission of the offence or by a Court different from that which had competence at the time cannot ipso facto be held to be unconstitutional.
A person accused of the commission of an offence has no fundamental right to trial by a particular Court or by a particular procedure, except in so far as any constitutional objection by way of discrimination or the violation of any other fundamental right may be involved.
" Thus the appellant cannot object to a procedure different from what obtained at the time of the commission of the offence.
The offence that was committed was when section 5(3) was in force and by Act 16 of 1967 the procedure is revived.
It is not as if the procedure is brought into force for the first time.
"Where an Act is repealed and the repealing enactment is then repealed by another, which manifests no intention that the original Act shall continue repealed, the common law rule was that the repeal of the second Act revived the first ab initio.
" Maxwell on the Interpretation of Statutes, 825 12th Ed., p.19).
There can be no objection in law to the revival of the procedure which was in force at the time when the offence was committed.
The effect of the amendment is that sub section (3) of section 5 as it stood before the commencement of 1964 Act shall apply and shall be deemed to have always applied in relation to trial of offences.
It may be if by this deeming provision a new offence was created then the prohibition under Article 20(1) may come into operation.
But in this case, as already pointed out, what is done is no more than reiterating the effect of section 6(1) of the .
Mr. Garg, the learned counsel, submitted that by amending procedure drastically and giving it retrospective effect a new offence may be created retrospectively.
It was contended that by shifting the burden of proof as provided for in section 5(3) of the Prevention of Corruption Act, 1947, a new offence is created.
It is unnecessary for us to consider the larger question as to whether in certain circumstances giving retrospective effect to the procedure may amount to creation of an offence retrospectively.
In the present case the old procedure is revived and no new procedure is given retrospective effect.
The procedure given effect to is not of such a nature as to result in creation of a new offence.
In the result all the contentions raised by the learned counsel for the appellant fail and these appeals are dismissed.
S.R. Appeal dismissed.

summary:
The appellant who was charged for the offences (a) under section 120B I.P.C. (b) under section 161 I.P.C. read with section 5(2) and 5(1) (d) of the Prevention of Corruption Act 1947 and (c) under section 5(2) read with section 5(1) (a) of the Prevention of Corruption Act 1947 was acquitted by the special judge holding that neither the charge of conspiracy nor any other charge against the accused was proved.
But the special Judge held that the assets of the appellant from 1st of July '55 to 30th April 1961 had exceeded his income by Rs. 33,588.34 and they were disproportionate to the known sources of income of the petitioner.
The trial Judge, however, found that as section 5(3) of the Act had been repealed on 18 12 1964 and as specific instances of payment of bribe to the petitioner could not be proved the accused could not be held guilty of the charges.
Aggrieved by the decision, the State preferred an appeal to the Delhi High Court on 11th April, 1967.
Pending the appeal before the High Court, Act No. 16 of 1967, came into force on 5th May 1967 re introducing section 5(1)(e) in the Act.
In the High Court the appellant challenged the vires of Act No. 16 of 1967 on the ground that revival of section 5(3) of the Act and making it applicable retrospectively was void and unconstitutional as it was in violation of article 14 and 20(1) of the Constitution.
A Division Bench of the High Court of Delhi by its judgment dated 27th November, 1973 allowed the appeal upholding the validity of Act No. 16 of 1967 and remanded the case to be tried from the stage at which it was pending on 18th December, 1964.
In appeals by special leave it was contended that (a) Since section 5(3) of the P. O. F. A., 1947 was repealed on 18 12 64 the Court below cannot take into account the provisions of section 5(3) of the Act after the date of its repeal on 18 12 64 and (b) Act No. 16 of 1964 which gave retrospective operation to section 5(3) of the Act is violative of Articles 14 and 20(1) of the Constitution.
^ HELD: 1.
Whether Act 16 of 1967 had been brought into force on 20th June 1967 or not the rule of evidence as incorporated in section 5(3) of the P.O.F.A., 1947 would be available regarding offences that were committed during the period before the repeal of section 5(3).
[823 G] 2.
Section 5(3) of the Prevention of Corruption Act, 1947 provided an additional mode of proving an offence punishable under sub sections 5(2) for which an accused person is being tried and, therefore, prescribes a rule of evidence.
Section 5(3) does not create a new kind of offence of criminal misconduct by a public servant in the discharge of his official duty.
[821 H, 822 A].
817 G.D.S. Swamy vs State, ; , Surajpal Singh vs State of U.P., ; and Sajjan Singh vs State of Punjab ; ; applied.
While repealing section 5(3) by Act 40 of 1964 the statute did not say that the section shall be deemed not to have been in force at all.
Section 6 of the provides that the repeal shall not affect the previous operation of any enactment so repealed unless a different intention appears.
The operation of all the provisions of the Prevention of Corruption Act would continue in so far as the offences that were committed when section 5(3) was in force.
The offences that were committed after the date of the repeal will not come under the provisions of section 6(b) of the .
Section 6(c) also preserves all legal proceedings and consequences of such proceedings as if the repealing Act had not been passed.
[822 C, 823 E F].
Keshavan Madhava Menon vs State of Bombay, [1951] 2 SCR followed.
Article 20(1) of the Constitution deals with ex post facto laws though that expression has not been used in the Article.
Usually, a law prescribes a rule of conduct by which persons ought to be governed in respect of their civil rights.
Certain penalties are also imposed under the criminal law for breach of any law.
Though a sovereign legislature has power to legislate retrospectively creation of an offence for an act which at the time of its commission was not an offence or imposition of a penalty greater than that which was under the law provided violates article 20(1).
All that article 20(1) prohibits is ex post facto laws and is designed to prevent a person being punished for an act or omission which was considered innocent when done.
It only prohibits the conviction of a person or his being subjected to a penalty under expost facto laws.
[824 B D].
In the instant case, the appellant cannot object to a procedure different from what obtained at the time of the commission of the offence.
The offence that was committed was when section 5(3) was in force and by Act 16 of 1967 the procedure is revived.
It is not as if the procedure is brought into force for the first time.
[824 F G].
Rao Shiv Bahadur Singh & Anr.
vs The State of Vindhya Pradesh, ; applied; Phillips vs Eyre, , at pp.
23 and 25 and Calder vs Bull, ; ; at 649; quoted with approval.
There can be no objection in law to the revival of the procedure which was in force at the time when the offence was committed.
The effect of the amendment is that sub section (3) of section 5 as it stood before the commencement of 1964 Act shall apply and shall be deemed to have always applied in relation to trial of offences.
It may be, if by this deeming provision a new offence was created then the prohibition under Article 20(1) may come into operation.
In this case what is done is no more than reiterating the effect of section 6(1) of the .
[825 A B].
818 6.
In the present case the old procedure is revived and no new procedure is given retrospective effect.
The procedure given effect to is not of such a natural as to result in creation of a new offence.
[825 D].


judgement:
Civil Appeal No. 246 of 1973.
Appeal from the Judgment and Order dated 1 11 1971 of the Jammu and Kashmir High Court in W.P. No. 124/69.
section V. Gupte, Attorney General, Altaf Ahmed for the Appellant.
L. N. Sinha, K. P. Gupta, D. B. Tawkley and Vineet Kumar for RR 1 21, 23, 25, 27 to 29 and 31 38.
G. L. Sanghi, R. K. Mehta and Miss Uma Mehta for RR 55 and 72.
section section Khanduja for RR 53.
The Judgment of the Court was delivered by SHINGHAL J.
This appeal by certificate is directed against the judgment of the High Court of Jammu and Kashmir dated November 1, 1971, in writ petition No. 124 of 1969.
That petition was filed against the promotions of respondents Nos. 1 to 46 and others as Professors in supersession of the claims of the writ petitioners who contended that they were senior and more qualified for promotion.
The High Court allowed the writ petition and quashed the State Government 's Order No. 643 HTE dated July 25, 1969, in regard to the appointments of respondents Nos. 3 to 46 and directed that it would be open to the State Government to make a fresh selection of Professors in accordance with the law.
A review petition was filed against the judgment but was dismissed on September 14, 1972.
The State Government is aggrieved and has filed the present appeal.
When the case was taken up for hearing on November 28, 1978.
it was brought to our notice by counsel for the respondents that it will not be possible for them to advance their arguments with reference to article 16 of the Constitution of India as the various sealed covers containing the date on which the selections were made have not been received from the High Court.
Learned Attorney General and the counsel for the respondents were in agreement that as the constitutional point which arises for consideration in this case relates to the interpretation of section 133(2) (b) of the Constitution of Jammu and Kashmir, hereinafter referred to as the Constitution, it will be enough to consider, at this stage, whether that section has been correctly interpreted and whether the Public Service Commission for the State of Jammu and Kashmir, hereinafter referred to as the Commission, has been consulted in accordance with its requirement.
We have accordingly heard the arguments only on these two points, and will confine 872 ourselves to them, leaving the question of the applicability of article 16 of the Constitution of India on the merits for consideration by the Bench before which the case may be taken up for hearing hereafter.
The controversy relates to the interpretation of clause (b) of sub section (2) of section 133 of the Constitution which, when read with the other connected provisions, provides as follows. "133 (2) The Commission shall be consulted (a) . . . (b) on the principles to be followed in making appointments to civil services and posts and in making promotions and transfers from one service to another and on the suitability of candidates for such appointments, promotions or transfers; (c). . . and it shall be the duty of the Commission to advise on any matter so referred to them or on any other matter which the Governor may refer to them: Provided that the Governor may make regulations specifying the matters in which either generally or in any particular class of cases or in any particular circumstances, it shall not be necessary for the Commission to be consulted." Although it has been urged in the written arguments of the appellant that section 133(2) (b) was "not at all attracted in the matters of making promotions in the same service", and its true and correct interpretation would be that "it is applicable only to 'making promotions and transfers from one service to another '," learned Attorney General has, with his usual candour and fairness, stated that he does not find it possible to support that contention.
He has therefore argued that what clause (b) of sub section (2) of section 133 requires is that the Commission shall be consulted; (i) on the principles to be followed in making appointments to civil services and posts and in making promotions and transfers from one service to another, and (ii) on the suitability of candidates for such appointments, promotions or transfers.
He has urged that as this requirement of the Constitution was duly complied with, the High Court erred in taking a contrary view.
The interpretation put by learned Attorney General is quite correct and we have no hesitation in approving it as in our opinion no other interpretation is really permissible on the plain language of the clause.
873 The question whether the requirement for consulting the Commission is mandatory or not does not arise in this case, because it is not disputed, and is in fact the case of the appellant State, that the Commission was consulted.
The question which remains for consideration is whether this was really so.
Learned counsel for the respondents was not able to refer us to any averment in the writ petition that the Commission was not consulted either in regard to the principles to be followed in making the promotions in question, or on the suitability of selected candidates for the promotions.
We have, all the same, gone through the record, and we find that the State Government at first framed rules on November 15, 1968, for selections to be made to posts of Professors in the colleges.
By Notification No. SRO 161 dated March 25, 1969, those rules were replaced by the rules made by the Governor specifically for the appointment of Professors, which were called the "Jammu and Kashmir Professors of Colleges (Selection) Rules, 1969.
" It has been specifically stated on behalf of the State that it consulted the Commission under section 133 of the Constitution, and as the writ petitioners have not ventured to take a plea to the contrary, we have no hesitation in holding, on the facts which have been brought on the record, that the Commission was consulted in regard to the principles to be followed in making the promotions to the posts of Professors.
We have also examined the record to ascertain whether the other requirement of clause (b) of sub section (2) of section 133 of the Constitution that the Commission shall be consulted on the suitability of the candidates for promotions to the posts of Professors, has been complied with.
The State Government has stated in its reply to the writ petition that for every post of Professor, names of four Lecturers, strictly in order of seniority, were sent to the Commission "at its direction" and they were interviewed and examined by the Selection Committee which was "formed" by the Commission, and a member of the Commission was appointed its Chairman.
It has further been stated that the commission 's recommendation for selection was made on the basis of the marks obtained by the respondents (to the writ petition) at the interviews and that the selection was also made "on the basis of the recommendation of the Public Service Commission" and there was "no deviation from the merit list prepared by the Public Service Commission.
" The State Government has in fact placed on record the minutes of the Commission dated July 22, 1969, which make it quite clear that the State Government referred the selections to the Commission, a Committee was appointed by the Commission for that purpose, the Committee was 874 presided over by a member of the Commission, the report of the Committee was formally submitted to the Commission under the Chairman 's note dated June 2, 1969, and the Commission then took its decision regarding the recommendation to be made to the State Government for the appointments.
The Commission set out the reasons for its decision, and finally made its recommendation on merits.
The Commission was therefore consulted on the suitability of the candidates for promotion as Professors and the second requirement of clause (b) of sub section (2) of section 133 was also complied with.
It is not provided by section 133 of the Constitution that all the members of the Commission should have interviewed all or any of the candidates, or that it was not permissible for the Commission to entrust the selection to a committee consisting of only one of its members, so long as the Commission reserved to itself the right to approve or disapprove the committee 's report and actually discharged that constitutional responsibility.
No argument to the contrary has in fact been urged for our consideration.
Had the Commission de facto abdicated its power in favour of some committee composed of strangers to the Commission the position might have been different.
Here, it was not so.
It would thus appear that the High Court erred in holding that the Commission was not consulted in the manner required by section 133 of the Constitution and that the selection made by it was invalid for that reason.
With this finding we shall have the rest of the case for decision by the Bench concerned.
V.D.K. Appeal accepted, leaving the merits for decision by another Bench of the Court.

dataset_name: IN-Abs

summary:
The appellant State Government 's Order No. 643 HTE dated July 25, 1969 promoting certain professors was quashed by the High Court of Jammu & Kashmir while allowing the Writ Petition No. 124/69 filed by the respondent.
Leaving out the merits for decision by another Bench of this Court.
^ HELD : 1.
What clause (b) of sub section (2) of section 133 of the Jammu & Kashmir Constitution requires is that the Commission shall be consulted: (i) on the principles to be followed in making appointments to civil services and posts and in making promotions and transfers from one service to another and (ii) on the suitability of candidates for such appointments, promotions or transfers.
No other interpretation is really permissible on the plain language of the clause.
It is not provided by section 133 of the Constitution that all the members of the Commission should have interviewed all or any of the candidates, or that it was not permissible for the Commission to entrust the selection to a committee consisting of only one of its members, so long as the Commission reserved to itself the right to approve or disapprove the committee 's report and actually discharged that constitutional responsibility.
[872 F H, 874 B C] 2.
The question whether the requirement for consulting the Commission is mandatory or not does not arise in this case.
[873 A].
The High Court erred in holding that the Commission was not consulted in the manner required by section 133 of the Jammu & Kashmir Constitution and in regard to the principles to be followed in making the promotions to the posts of professors on the suitability of selected candidates for the promotions.
[873 B, 874 D E] On the facts which have been brought on the record it is established that (a) the Commission was consulted in regard to the principles to be followed in making the promotions to the posts of professors as laid down in the "Jammu & Kashmir Professors of Colleges (Selection) Rules, 1969", and [873 C D].
(b) the Commission was consulted on the suitability of the candidates for promotion as professors and the second requirement of clause (b) of sub section (2) of section 133 was also complied with, since the selection of the respondents (to the Writ Petition) was made on the recommendation of the Public Service Commission after their names were sent strictly in order of seniority as per direction of the Commission, after they had been interviewed and examined by the Selection Committee, formed and presided over by one of the members of the Commission as Chairman.
[873 F H, 874 A] 871


judgement:
ivil Appeal Nos.
565 570 of 1978.
Appeal from the Judgment and Order dated 8 2 1977 of the Calcutta High Court in Income Tax Reference Nos 398, 399 and 400/69 and 456 of 1969.
Devi Pal and D. N. Gupta for the Appellant.
section T. Desai, B. B. Ahuja and Miss A. Subhashini for the Respondent.
The Judgment of the Court was delivered by TULZAPURKAR, J.
These appeals, by certificates are directed against the common judgment and order rendered by the Calcutta High Court on February 8, 1977 in Income Tax Reference No.156 of 1969 and Income Tax References Nos. 398, 399 and 400 of 1969, whereby the assessee 's claim for deduction under s.36(1)(iv) of the Indian Income Tax Act, 1961 (hereinafter referred to as 'the Act ') in respect of three sums of Rs.95,421/ , Rs.1,00,564/ and Rs.1,17,969/ out of the total contributions made by the assessee to a recognised Provident Fund for the assessment years 1962 63, 1963 64 and 1964 65 respectively was disallowed and the principal question raised in these appeals is whether the expression "salary" as defined in Rule 2(h) in Part A of the Fourth Schedule to the Act includes "Commission" paid by the assessee to its salesmen in terms of their contracts of employment ? The assessee is a private limited company and carries on the business of manufacture and sale of duplicating machines and accessories.
It has in its regular employment three categories of salesmen machine salesmen, mixed salesmen and supply salesmen.
As a term of the contract of employment between the assessee and the salesmen of the aforesaid categories, the assessee, besides paying a fixed monthly salary also paid commission to them at fixed percentage of turnover achieved by each salesman, the rate of percentage varying according to the class of article sold and the category to which the salesman belonged.
The assessee maintained a regular Provident Fund for its employees which was recognised by the Commissioner of Income Tax some time in 1937 and the said recognition continued and was in force during the relevant years in question.
In the previous years ending 31st December 1961.
31st December 1962 and 31st December 1963 rele 792 vant to the assessment years 1962 63, 1963 64 and 1964 65 the assessee made contributions, out of its own moneys, to the individual accounts of these salesmen in the said Provident Fund on the basis of salary and commission paid to them and claimed such contributions as allowable deductions under section 36(1) (iv) of the Act and in that behalf reliance was placed by the assessee upon Rule 2 of the assessee company 's Recognised Provident Fund Scheme Rules under which "salary" meant not only the fixed monthly salary but also the commission and dearness allowance as might be paid by the company to its employees.
Out of such total contributions the Income Tax Officer disallowed the sums of Rs. 95,421/ , Rs. 1,00,564/ and Rs. 1,17,969/ on the ground that these amounts pertained to the commission paid by the assessee to its salesmen for the three years respectively and that under Rule 2(h) of Part A of the Fourth Schedule to the Act, which was applicable, the expression "salary" did not include such commission.
Three appeals, for the aforesaid three years, filed by the assessee were heard by two different Appellate Assistant Commissioners, one of whom rejected the appeal for the assessment year 1962 63 in view of Rule 2 (h) of Part A of the Fourth Schedule to the Act but the other Appellate Assistant Commissioner allowed the appeals for the assessment years 1963 64 and 1964 65 by accepting the assessee 's contention.
The assessee as also the Revenue preferred appeals to the Appellate Tribunal.
On the one hand, relying upon the dictionary meaning of the expression "salary" as given in the Shorter Oxford Dictionary and Stroud 's Judicial Dictionary and upon the manner in which the term was defined in Rule 2 of the assessee 's Recognised Provident Fund Scheme Rules, it was contended on behalf of the assessee that the commission of the nature paid by it to its salesmen was nothing but a composite part of the salary itself, the same being determinable as per the terms of the contract and as such the contributions on the basis of such commission made by the assessee to the Provident Fund were deductible under s.36(1)(iv) of the Act; it was further contended that since these payments were being admittedly made to a Provident Fund recognised by the Commissioner of Income Tax, which recognition was in force during the relevant years, the Taxing Authorities could not disallow the deduction claimed by the assessee, and the view taken by the Appellate Assistant Commissioner in respect of assessment years 1963 64 and 1964 65 was canvassed for acceptance.
On the other hand, the Revenue contended before the Tribunal that the definition of the expression "salary" as given in Rule 2(h) of Part A of the Fourth Schedule to the Act which applied to the recognised Provident Fund governed the matter and since that definition excluded all other allowances and perquisites the commission 793 paid by the assessee to its salesmen, which was nothing but some sort of allowance, could not be regarded as salary and, on that basis the Tribunal was pressed to accept the contrary view taken by the Appellate Assistant Commissioner for the assessment year 1962 63.
The Tribunal on a consideration of the rival submissions held that the commission paid by the assessee to various classes of salesmen was a part of the contractual obligation and as such was a part of the salary of the employees and contributions made on that basis were liable to be deducted under s.36(1)(iv) of the Act.
It also took the view that since the Provident Fund maintained by the assessee was a recognised Fund and since it fulfilled the condition laid down in Rule 4(C) of Part A of the Fourth Schedule to the Act the contributions by the employer to the same would be entitled to deduction under the said provision.
In this view of the matter the Tribunal by its order dated June 12, 1968 allowed the assessee 's appeal and dismissed the appeals of the Department.
At the instance of the Revenue the following two questions were referred to the High Court for its opinion: "(1) Whether, on the facts and in the circumstances of the case, the sums of Rs. 95,421/ , Rs. 1,00,564/ and Rs. 1,17,969/ disallowed by the Income Tax Officer out of the total contributions made by the assessee towards the provident fund were allowable under section 36(1)(iv) of the Income Tax Act, 1961 for the assessment years 1962 63, 1963 64 and 1964 65 respectively ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provident fund maintained by the assessee satisfied the condition laid down in Rule 4(c) of the Fourth Schedule, Part 'A ' of the Income Tax Act, 1961 ?" The former question was the subject matter of Income Tax Reference No.156 of 1969 made under s.256(1) of the Act while the latter was the subject matter of Income tax References Nos. 398, 399 and 400 of 1969 made under s.256(2) of the Act.
These References were heard together and disposed of by the High Court by a common judgment and order dated February 8, 1977.
Rejecting the contentions urged on behalf of the assessee the High Court answered both the questions in the negative and in favour of the Revenue.
In doing so the High Court principally relied upon (3) Rule 2(h) of Part A of the Fourth Schedule to the Act where the expression "salary" has been defined as inclusive of dearness allowance but exclusive of all 794 other allowances and perquisites, (b) Circular No. 6 dated January 16, 1941 issued by the Central Board of Revenue under the Indian Income Tax Act, 1922 but which has been continued under s.297(k) of the Act, which provided that unless commission and bonuses are fixed periodical payments not dependent on a contingency, they are not covered by the term "salary" as used in Chapter IXA of the Act (1922 Act) and (c) observations of this Court in M/s Bridge & Roofs Co. Ltd. vs Union of India and Ors.
to the effect that "commission and other similar allowances are excluded from the definition of "basic wages" under the Provident Fund Act 1952 because it was not a universal rule that each and every establishment must pay commission to its employees".
The High Court further held that the Circular No. 80 dated March 4, 1972 on which reliance was placed by the assessee and which stated that "if the terms and conditions of service are such that commission is paid not as a bounty or benefit but is paid as a part and parcel of the remuneration for services rendered by the employees such payment may partake of the nature of salary rather than as a benefit or perquisite" could not be availed of because the same was not in existence during the relevant years and further it had been issued under s.40(c) (iii) of the Act and would not apply to s.36(1)(iv).
The High Court also held that the ordinary meaning of "salary" was a fixed monthly payment while "commission" was not such payment and, therefore, it could not be included within the scope and ambit of the term "salary", the meaning of which could not be extended by the assessee company by defining it in a particular manner in its Provident Fund Scheme Rules for the purposes of recognition of its Fund and deductibility as well.
The High Court 's view on both the questions is challenged by the assessee in the instant appeals preferred on the strength of the certificates granted by that Court under s.261 of the Act.
Counsel for the assessee raised a two fold contention in support of the appeals.
In the first place he contended that once recognition was granted by the Commissioner of Income Tax to the Provident Fund maintained by the assessee under the relevant rules and such recognition was in force during the relevant assessment years, the Taxing Authorities could not disallow the deductions claimed by interpreting the expression "salary" in Rule 2(h) of Part A of the Fourth Schedule to the Act so as to exclude the "commission" that was paid by the assessee to its salesmen, for, by doing so the Taxing Authorities would be sitting in judgment over the recognition granted and allowed to be retained by the Commissioner of Income Tax to the assessee.
It was 795 pointed out that Rule 4 of Part A of the Fourth Schedule to the Act set out the conditions, particularly, the one contained in cl.(c) of the said rule that were required to be satisfied before recognition could be granted and in the instant case the Commissioner after having been satisfied that the said conditions had been fulfilled had granted recognition to the Provident Fund maintained by the assessee.
In particular, counsel placed reliance upon the correspondence which took place between the assessee and the Commissioner of Income Tax, West Bengal, during the course of which, the Commissioner had by his letter dated September 9, 1937 required the assessee to inform him of the basis on which the commission payable to the salesmen participating in the fund was computed with a view to seeing whether the commission would be includible in the definition of "salary" for purposes of Chapter IXA of the 1922 Act and the assessee had by its reply dated September 11, 1937 stated that the commission was the monthly amount payable to the salesmen in accordance with their written contract and was based on a fixed term of rate and that it was after such correspondence that recognition was granted to the Provident Fund of the assessee and that the said recognition had continued and was in operation during the relevant assessment years.
He, therefore, urged that it was not open to the Taxing Authorities to reach a conclusion that the Provident Fund of the assessee did not satisfy the condition laid down in Rule 4(c) of Part A of the Fourth Schedule to the Act during the relevant years nor was it open to them to disallow the deductions claimed under s.36 (1)(iv) of the Act by interpreting the expression "salary" in Rule 2(h) in Part A of the Fourth Schedule to the Act as being exclusive of the commission of the nature and kind paid by the assessee to its salesmen.
Secondly, counsel contended that on a true and proper construction of the expression "salary occurring in the said Rule 2(h) the commission of the nature and type paid by the assessee to its salesmen under the terms of their contract of employment would be included or covered by that expression.
According to him, commission in business practice covered various kinds of payments made under different circumstances and in the cases where a servant was employed by a businessman and as a condition of his employment it was agreed that he would be paid for his services at a fixed rate of percentage over the turnover it was clear that such commission payable to the employee will par take of the character of "salary" received by him for his services.
the percentage basis being the measure of the salary; in other words, according to him, there was no difference between the concept of salary and the concept of commission if the latter was of the aforesaid nature or kind and as such the expression salary in Rule 2 (h) would include such commission.
In this behalf he relied upon a decision of the Allaha 796 bad High Court in the case of Raja Ram Kumar Bhargava vs Commissioner of Income Tax, U.P. He urged that the decision of this Court in M/s Bridge & Roofs Co. Ltd. vs Union of Indian & Ors.
(supra) on which the High Court has relied was inapplicable since it was a case under the Provident Fund Act, 1952 and this Court was required to construe the term 'basic wages ' appearing in that Act and in that context it observed that that term did not include any bonus, commission or other similar allowances.
He, therefore, urged that the Tribunal was right in allowing the deductions claimed by the assessee under s.36(1)(iv) of the Act.
On the other hand, counsel for the Revenue contended that notwithstanding the recognition accorded to the assessee 's Provident Fund by the Commissioner of Income Tax the assessee had to satisfy the taxing authorities every year that the Provident Fund maintained by it satisfied the conditions of Rule 4, particularly, the one contained in Rule 4(c) of Part A of the Fourth Schedule to the Act and if for any particular assessment year the assessee 's Provident Fund failed to satisfy the condition in Rule 4(c) of Part A of the Fourth Schedule to the Act the assessee could not claim deduction under s.36(1)(iv) of the Act in respect of such portion of the contribution made by it to the Fund as was in breach of the said condition.
Secondly, he urged that by relying upon the fact of recognition obtained by it and the further fact that such recognition had remained in force during the relevant assessment years the assessee could not by pass the real question that arose for determination before the taxing authorities for the relevant assessment years, namely, whether the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act included or excluded commission paid by the assessee to its salesmen and he urged that the definition of the expression 'salary ' as given in the said Rule 2(h) clearly showed that the 'salary ' did not include commission, for, according to him, the definition merely included dearness allowance and excluded all other allowances and perquisites and commission payable by the assessee to its salesmen was nothing but an allowance paid without reference to any time factor which is associated with salary or wages as an important concomitant thereof.
In this behalf reliance was also placed by him upon the Circular No.6 dated January 16, 1941 issued by the Central Board of Revenue under the 1922 Act and continued under s.297(k) of the 1961 Act wherein on the question whether the term 'salary ' as used in Chapter IXA (of the old Act) 797 included commissions and bonuses paid to the employees, the Board expressed its view that "unless commissions and bonuses are fixed periodical payments not dependent on a contingency they are not covered by the term 'salary ' as used in Chapter IXA of the Act." Counsel further contended that in the matter of deductions claimable in respect of contributions to the Provident Fund the position of the employer could not be different from that of the employee and in regard to employee 's contribution the condition required to be satisfied in Rule 4 (b) was to the effect that the contribution of an employee in any year shall be a definite proportion of his 'salary ' for that year and shall be deducted by the employer from the employee 's 'salary ' in that proportion at each periodical payment of such salary in that year, and credited to the employee 's individual account in the Fund and under s.80C read with Rule 7 of Part A of the Fourth Schedule to the Act the employee is entitled to a deduction in respect of his contribution which pertains to a definite proportion of the 'salary ' which would not include commission.
He therefore, urged that the High Court was right in answering both the questions against the assessee and in favour of the Revenue.
As stated at the outset, in our view, the main question raised in these appeals is whether the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act includes commission payable by an assessee to his or its employees in terms of their contracts of employment ? We shall, therefore, address ourselves to that question first and then deal with the aspect regarding the true impact of the recognition granted by the Commissioner of Income Tax under the relevant Rules to a Provident Fund maintained by an assessee.
The expression 'salary ' has been defined in section 17 of the Act as well as in Rule 2(h) of Part A of the Fourth Schedule to the Act but each of the said definitions serves a different purpose.
Section 17 defines the expression 'salary ' for purposes of sections 15 and 16 which deal with "Salaries" as a head of income, and under cl.(iv) of sub s.(1) that expression includes: "any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages.
" In Part A of the Fourth Schedule to the Act, which contains rules relating to Recognised Provident Funds the word 'salary ' has been defined in Rule 2(h) thus : "Salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.
" 798 Since we are concerned in this case with contributions made to a recognised Provident Fund and deductions thereof under section 36(1) (iv) it will be the definition of 'salary ' as given in Rule 2(h) of Part A of the Fourth Schedule to the Act and not the one given in section 17 that will be applicable and will have to be considered.
Under section 36(1) (iv) the deduction allowable is in respect of "any sum paid by the assessee as an employer by way of contribution towards a Recognised Provident Fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the Provident Fund or approving the superannuation fund, as the case may be." Rule 2(c) of Part A of the Fourth Schedule defines contribution" as meaning "any sum credited by or on behalf of any employee out of his salary, or by an employer out of his own monies, to the individual account of an employee, but does not include any sum credited as interest." Rule 4 of Part A of the Fourth Schedule lays down the conditions which are required to be satisfied by a Provident Fund in order that it may receive and retain recognition and the conditions in cls.(b) and (c) are material and these conditions are: "4(b) the contributions of an employee in any year shall be a definite proportion of his salary for that year, and shall be deducted by the employer from the employee 's salary in that proportion, at each periodical payment of such salary in that year, and credited to the employee 's individual account in the fund; (c) the contributions of an employer to the individual account of an employee in any year shall not exceed the amount of the contributions of the employee in that year, and shall be credited to the employee 's individual account at intervals not exceeding one year.
" It may be stated that so far as the employer is concerned the contributions credited by him to the employee 's individual account in the funds are deductible under section 36(1) (iv) whereas the contributions of an employee are deductible in the computation of his total income under s.80C read with Rule 7 of Part A of the Fourth Schedule to the Act and the scheme of cls.(b) and (c) of Rule 4 of Part A of the Fourth Schedule does suggest that in the matter of deductions claim 799 able in respect of contributions to the recognised Provident Fund the position of both the employer and the employee would be the same; but since in the case of an employee his contributions are to be a definite proportion of his salary for a particular year, the question whether such proportion would be inclusive of commission received by him from his employer must depend upon the true meaning or construction of the expression 'salary ' as occurring in Rule 2(h) of Part A of the Fourth Schedule; in other words, in the matter of deductions claimable in respect of contributions to the Recognised Provident Fund qua both the employer and the employee the question has to be answered by reference to the true meaning of the expression 'salary ' occurring in Rule 2(h).
Now, Rule 2(h) of Part A of the Fourth Schedule does not define the expression 'salary ' conceptually but merely proceeds to state what is included therein and what is excluded therefrom and, therefore, one is required to turn to the dictionary meaning of that expression as also to ascertain how judicial decisions have understood that expression.
According to the Shorter Oxford English Dictionary (3rd Edn.) 'salary ' means: "To recompense, reward; to pay for something done;" In Jowitt 's Dictionary of English Law (1959 Edn.) the term is explained thus: "a recompense or consideration generally periodically made to a person for his service in another person 's business; also wages, stipend or annual allowance." In Stroud 's Judicial Dictionary (4th Edn.) the expression 'salary ' is explained at item (2) thus: "Where the engagement is for a period, is permanent or substantially permanent in character, and is for other than manual or relatively unskilled labour, the remuneration is generally called a salary".
[Per Latham C. J., in Federal Commissioner of Taxation vs Thompson (J. Walter) (Aus.) Pty. Ltd. 69 C.L.R. 227].
It appears that conceptually 'salary ' and 'wages ' connote one and the same thing, namely, remuneration or payment for work done or services rendered but the former expression is generally used in connection with services of a higher or non manual type while the latter is used in connection with manual services.
In Gordon vs Jennings Grover J. observed as follows: 800 "Though this word (wages) might be said to include payment for any services, yet, in general, the word 'salary ' is used for payment or services of a higher class, and 'wages ' is confined to the earnings of labourers and artisans." In Mohmedalli vs Union of India this Court, while repelling the contention that the Employees ' Provident Fund Act 1952 was intended by Parliament to apply to employees who were mere wage earners and not salaried servants, has made observations clearly indicating that there is no difference between the two concepts of salary and wages.
Chief Justice Sinha speaking for the Court observed in para 10 of the judgment as follows: "It is a little difficult to appreciate the distinction sought to be made.
Both 'salary ' and 'wages ' are emoluments paid to an employee by way of recompense for his labour.
Neither of the two terms is a 'term of art '.
The Act has not defined wages; it has only defined "basic wages" as all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable in cash to him,. . 'Salary ', on the other hand, is remuneration paid to an employee whose period of engagement is more or less permanent in character, for other than manual or relatively unskilled labour.
The distinction between skilled and unskilled labour itself is not very definite and it cannot be argued, nor has it been argued, that the remuneration for skilled labour is not 'wages '.
The Act itself has not made any distinction between 'wages ' and 'salary '.
Both may be paid weekly, fortnightly or monthly, though remuneration for the day 's work is not ordinarily termed 'salary '.
Simply because wages for the month run into hundreds, as they very often do now, would not mean that the employees is not earning wages, properly so called.
A clerk in an office may earn much less than the monthly wages of a skilled labourer.
Ordinarily he is said to earn his salary.
But, in principle, there is no difference between the two.
" It will thus appear clear that conceptually there is no difference between salary and wages both being a recompense for work done or 801 services rendered, though ordinarily the former expression is used in connection with services of non manual type while the latter is used in connection with manual services.
It is further common knowledge that this compensation to the labourer or artisan could be a specified sum for a given time of service or a fixed sum for a specified work i.e. payment made by the job, the commonest example of the latter category being a piece rated worker.
In other words, the expression 'wages ' does not imply that the compensation is to be determined solely upon the basis of time spent in service; it may be determined by the work done; it could be estimated in either way.
If conceptually salary and wages mean one and the same thing then salary could take the form of payment by reference to the time factor or by the job done.
In fact, in the case of salary the recompense could be determined wholly on the basis of time spent on service or wholly by the work done or partly by the time spent in service and partly by the work done.
In other words, whatever be the basis on which such recompense is determined it would all be salary.
Having reached the above conclusion, we have to consider the nature of recompense that is being made by the assessee to its salesmen, whether the whole of it partakes of the character of salary or not? The definition of 'salary ' in Rule 2(h) includes dearness allowance if the terms of employment so provide and excludes all other allowances and perquisites.
It does not in terms exclude 'commission ' as such and, in our view rightly, for, though ordinarily according to the Shorter Oxford English Dictionary 'commission ' means 'a pro rata remuneration for work done as agent ', in business practice commission covers various kinds of payments made under different circumstances.
In Raja Ram Kumar Bhargava vs Commissioner of Income Tax, U.P. (supra) the Allahabad High Court has pointed out how in certain circumstances commission payable to an employee may, in fact, represent the salary receivable by him for the services rendered to the employer.
At page 694 of the report the relevant observation run thus: "The word "commission", in business practice, covers various kinds of payments made under different circumstances.
There are cases where a servant is employed by a businessman and, as a condition of his employment, it is agreed prior to the services having been rendered that he would be paid for his services at a fixed rate of percentage of the turnover or profits.
In such a case, it is clear that the commission payable to the employee will, in fact, represent the salary to be drawn by him for his services.
The payment on the percentage basis will only determine the measure of the salary.
" 802 It is thus clear that if under the terms of the contract of employment remuneration or recompense for the services rendered by the employee is determined at a fixed percentage of turnover achieved by him then such remuneration or recompense will partake of the character of salary, the percentage basis being the measure of the salary and therefore such remuneration or recompense must fall within the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act.
In the instant case before us, admittedly, under their contracts of employment the assessee has been paying and did pay during the previous years relevant to the three assessment years to its salesmen, in addition to the fixed monthly salary, commission at a fixed percentage of the turnover achieved by each salesman, the rate of percentage varying according to the class of article sold and the category to which each salesman belonged.
The instant case is therefore, an instance where the remuneration so recompense payable for the services rendered by the salesmen is determined partly by reference to the time spent in the service and partly by reference to the volume of work done.
But it is clear that the entire remuneration so determined on both the basis clearly partakes of the character of salary.
In our view, therefore, the commission paid by the assessee to its salesmen would clearly fall within the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act and as such the three sums of Rs. 95,421/ , Rs. 1,00,564/ and Rs. 1,17,969/ representing proportionate contributions appertaining to the commission paid by the assessee to its salesmen would be deductible under section 36(1) (iv) of the Act.
Turning to the Circular dated January 16, 1941 issued by the Central Board of Revenue on which counsel for the Revenue has relied, it cannot, in our view, affect the question of deductibility, for, if the commission paid by the assessee to its salesmen is covered by the expression 'salary ' on its true construction, which, according to us, it does, the Board 's view or instructions cannot detract from the legal position arising on such proper construction.
In any case we are of the view that by the said Circular what the Board wants to keep out of the term 'salary ' are payments by way of commission which do not partake of the character of salary.
Similarly the decision of this Court in M/s. Bridge & Roof Co. 's case (supra) on which the High Court has relied cannot avail the Revenue.
In the first place it was a case under the Provident Fund Act, 1952 where this Court was required to construe the expression 'basic wages ' as defined in section 2(b) of that Act and to decide whether 'production bonus ' was included in that expression and it was in that context that this Court made observations 803 to the effect that the said expression as defined therein did not include any bonus, commission or other similar allowances.
Secondly, as against the definition of 'basic wages ' in section 2(b) (ii) which excluded any dearness allowance, house rent allowance, over time allowance, bonus, commission or any other similar allowance, section 6, of the Act provided for inclusion of dearness allowance for the purposes of contribution and, therefore, this Court was concerned with trying to discover some basis for the exclusion in cl.
(ii) of section 2(b) as also for the inclusion of dearness allowance and retaining allowance (if any) in section 6 of that Act and the Court found that the basis for inclusion in section 6 and exclusion in cl.
(ii) of section 2(b) was that whatever was payable in all concerns and was earned by all permanent employees was included for the purpose of contribution under section 6 but whatever was not payable by all concerns and was not earned by all employees of a concern was excluded for the purposes of contribution and that is why commission or similar allowances were excluded from the definition of 'basic wages ', for commission and allowances were not necessarily to be found in all concerns nor were they necessarily earned by all the employees of the same concern.
It is, therefore, clear that the ratio of the decision and the observations made by this Court in a different context in that case would be inapplicable to the facts of the present case.
Having regard to the above discussion it is clear that the High Court 's view on the first question is clearly unsustainable and that question must be answered in favour of the assessee and against the Revenue.
Dealing next with the second question it seems to us clear that having regard to our view on the proper construction of the expression 'salary ' occurring in Rule 2(h) of Part A of the Fourth Schedule to the Act it must be held that the Tribunal was right in holding that the Provident Fund maintained by the assessee satisfied the condition laid down in Rule 4(c) of Part A of the Fourth Schedule and that question also must be answered in favour of the assessee and against the Revenue However, we would like to make some observations with regard to the true impact of the recognition granted by the Commissioner of Income Tax to a Provident Fund maintained by an assessee.
The facts in the present case that need be stressed in this behalf are that it was as far back as 1937 that the Commissioner of Income tax had granted recognition to the Provident Fund maintained by the assessee under the relevant rules under 1922 Act, that such recognition had been granted after the true nature of the commission payable by the 804 assessee to its salesmen under their contracts of employment had been brought to the notice of the Commissioner and that said recognition had continued to remain in operation during the relevant assessment years in question; the last fact in particular clearly implied that the Provident Fund of the assessee did satisfy all the conditions laid down in Rule 4 of Part A of the Fourth Schedule to the Act even during the relevant assessment years.
In that situation we do not think that it was open to the taxing authorities to question the recognition in any of the relevant years on the ground that the assessee 's Provident Fund did not satisfy any particular condition mentioned in Rule 4.
It would be conducive to judicial discipline and the maintaining of certainty and uniformity in administering the law that the taxing authorities should proceed on the basis that the recognition granted and available for any particular assessment year implies that the Provident Fund satisfies all the conditions under Rule 4 of Part A of the Fourth Schedule to the Act and not sit in judgment over it.
There is ample power conferred upon the Commissioner under Rule 3 of Part A of the Fourth Schedule to withdraw at any time the recognition already granted if, in his opinion, the Provident Fund contravenes any of the conditions required to be satisfied for its recognition and if during assessment proceedings for any particular assessment year the taxing authority finds that the Provident Fund maintained by an assessee has contravened any of the conditions of recognition he may refer the question of withdrawal of recognition to the Commissioner but until the Commissioner acting under the powers reserved to him withdraws such recognition the taxing authority must proceed on the basis that the Provident Fund has satisfied all the requisite conditions for its recognition for that year; any other course is bound to result in chaos and uncertainty which has to be avoided.
Having regard to the above discussion, both the questions are accordingly answered in favour of the assessee and the appeals are allowed with costs.
P.B.R. Appeal allowed.

summary:
The expression "salary," under section 17(1)(iv) of the Income Tax Act, 1961, includes "any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages"; under r. 2(h) in Part A of the Fourth Schedule to the Act, which contains Rules relating to recognised Provident Funds, the term `salary ' includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites, where an assessee, as an employer, has paid any sum by way of contribution towards a recognised provident fund, section 36(1)(iv) allows such sum as a deduction in computing the income subject to such limits as may be prescribed for the purpose of recognising the provident fund.
The term "contribution ' is defined in r. 2(c), of part A of the Fourth Schedule as any sum credited by or on behalf of any employee out of his salary or by an employer out of his own moneys to the individual account of an employee but does not include any sum credited as interest.
The assessee maintained a provident fund which was recognised by the Commissioner of Income tax in 1937.
Under r. 2 of the Provident Fund Scheme Rules "salary" meant not only fixed monthly salary but also commission and dearness allowance as might be paid by the company to its employees.
As a term of the contract of employment, in addition to monthly salary, the assessee paid to each of the salesmen commission at a fixed percentage of turnover achieved by them.
The assessee 's shares of the contribution to the provident fund was calculated on the basis of both salary as well as the commission paid to each of the salesmen.
In respect of assessment years 1962 63, 1963 64 and 1964 65 the assessee claimed the whole amount paid by it towards provident fund contributions, as a deduction allowable under section 36(1)(iv) of the Income tax Act and for this purpose it relied on r. 2 of its Provident Fund Scheme Rules.
Out of the total Provident Fund contributions claimed as allowable deduction under section 36(1)(iv) the Income tax Officer disallowed that part of the assessee 's contribution which related to the amounts calculated on the basis of commission paid to the salesmen on the ground that under r. 2(h) of Part A of the Fourth Schedule the expression "salary" did not include commission paid to the employees.
789 The assessee 's appeal in respect of the assessment year 1962 63 was rejected by an Appellate Assistant Commissioner; but in respect of the other two assessment years another Appellate Assistant Commissioner allowed its appeals.
On further appeals both by the assessee and the Department the Appellate Tribunal held that the commission paid being a part of the contractual obligation, it was a part of the salary paid to the employees and therefore contributions made towards provident fund on the commission were allowable as a deduction under section 36(1)(iv) of the Act, and secondly since the provident fund was a recognised fund which fulfilled the conditions laid down in r. 4(c) of Part A of the Fourth Schedule, the employer 's contributions were entitled to be deducted.
The High Court answered the reference in favour of the Department.
It held that since commission, unlike salary, was not a fixed monthly payment it could not be included within the meaning of "salary" and that the meaning of the term "salary" could not be extended by the assessee by defining it in a particular manner in its provident fund scheme rules for the purpose of recognition of its fund.
The High Court relied upon a circular dated January 16, 1941 issued by the Central Board of Revenue which provided that unless commission and bonuses were fixed periodical payments not dependent on a contingency, they were not covered by the term "salary".
On further appeal to this Court it was contended on behalf of the Revenue that the definition of "salary" in r. 2(h) clearly showed that it did not include commission and since commission was nothing but an allowance paid without reference to any time factor which is associated with salary or wages, it is not deductible under section 36(1) (iv).
Allowing the assessee appeals, ^ HELD : The commission paid by the assessee to its salesmen would clearly fall within the expression "salary" as defined in r. 2(h) of Part A of the Fourth Schedule to the Act and the amounts representing proportionate provident fund contributions made by the assessee to its salesmen would be deductible under section 36(1)(iv) of the Act.
[802 E] 1(a) The expression "salary" has been defined in section 17 as well as in r. 2(h) of Part A of the Fourth Schedule.
But each of the definitions serves a different purpose.
Since this case is concerned with contributions made to a recognised provident fund and deductions thereof under section 36(1)(iv), it would be the definition of "salary" as given in r. 2(h) of Part A of the Fourth Schedule, and not the one given in section 17, that will be applicable.
A B] (b) Conceptually salary and wages connote one and the samething viz., remuneration or.
payment for work done or services rendered.
The former expression is generally used in connection with services of higher or non manual type while the latter is used in connection with manual services.
If conceptually salary and wages mean one and the same thing then salary could take the form of payment by reference to the time factor or by the job done.
In the case of salary the recompense could be determined wholly on the basis of time spent on service or wholly by the work done or partly by the time spent on service and partly by the work done.
In other words, whatever be the basis on which such recompense is determined it would all be salary.
[799 G; 801C] 790 Gordon vs Jennings, ; Mohmedalli vs Union of India, AIR 1964 SC 980: referred to.
(c) The definition of "salary" in r. 2(h) includes dearness allowance if the terms of employment so provide and excludes all other allowances and perquisites.
It does not, in terms, exclude commission.
But though the dictionary meaning of the term "commission" is "a pro rata remuneration for work done as agent", in business practice commission covers various kinds of payments made under different circumstances.
[801 E] (d) If under the terms of the contract of employment remuneration or recompense for the services rendered by the employee is determined at a fixed percentage of turnover achieved by him, then such remuneration or recompense will partake of the character of salary, the percentage basis being the measure of the salary.
Therefore, such remuneration or recompense must fall within the expression "salary" as defined in r. 2(h).
[802 A] In the instant case under the term of the contract of employment the assessee had been paying to the salesmen, in addition to the fixed monthly salary.
commission at a fixed percentage of the turnover.
It is, therefore, a case where remuneration or recompense payable for the services rendered by the salesman is determined partly by reference to the time spent in the service and partly by reference to the volume of work done.
The entire remuneration so determined on both the bases clearly partakes of the character of salary.
[802 C D] (e) The Circular dated January 16, 1941 issued by the Central Board of Revenue did not affect the question of deductibility because if the commission paid by the assessee to its salesmen was covered by the expression "salary" on its true construction, the Board 's view or instructions could not detract from the legal position arising on such construction.
What the Board, by the said circular, wanted to keep out of the term "salary" were payments by way of commissions which did not partake of the character of salary.
[802 F G] Bridge & Roofs Co. Ltd. vs Union of India & Ors. ; at p. 1477: held inapplicable.
2(a) The Tribunal was right in its view that the provident fund maintained by the assessee satisfied the condition laid down in r. 4(c) of Part A of the Fourth Schedule.
[803 G].
(b) After taking into account the true nature of the commission payable by the assessee to its salesmen under the terms of the employment, the Commissioner granted recognition to the provident fund, as far back as 1937 and that recognition continued to remain in operation during the relevant assessment years.
The provident fund clearly satisfied all the conditions laid down in r. 4 of Part A of the Fourth Schedule.
It was, therefore, not open to the Taxing Authorities to question the recognition on the ground that the assessee 's provident fund did not satisfy any particular condition mentioned in r. 4.
For the sake of certainty and uniformity in administering the law the Taxing Authorities should proceed on the basis that the recognition granted and available for any particular assessment year implied that the provident fund satisfied all the conditions in that rule.
Under r. 3 the Commissioner had ample power to withdraw at any time the recognition already granted if the provident fund contravened any of the conditions required to be satisfied for its recognition.
791 But until the Commissioner withdrew such recognition, the Taxing Authorities must proceed on the basis that the provident fund satisfied all the requisite conditions for its recognition for that year.
Any other course would result in uncertainty.
[803 H 804 F]