judgement:
ivil Appeals Nos.
621 to 626 of 1965.
Appeals by special leave from the judgment and order dated March 6, 1964 of the Allahabad High court in Civil Misc.
Writs Nos.
1428 to 1433 of 1961.
J. P. Goyal and Sobhag Mal Jain, for the appellants (in all the appeals).
section P. Sinha and M. 1.
Khowaja, for respondents Nos.
2 to 4 (In all the appeals).
The Judgment of the Court was delivered 'by Mitter, J.
These six appeals by special leave arise from a common judgment of the Allahabad High Court rejecting six writ petitions filed by the appellants in that court for quashing the orders of the Board of Revenue arising out of cases filed under section 232 of the U.P. Zamindari Abolition and Land Reforms Act.
The relevant facts are as follows. ' In 1945 one Ram Dhari Singh who was the kadar of the proprietary rights of.
a village sued the appellants and the respondents other than the Board of Revenue for their ejectment under section 171 of the U.P. Tenancy Act alleging that the appellants had illegally sublet the lands to the,said respondents.
The appellants and the respondents made a common cause denying the alleged subletting and stating that the entries in the village records about.
the respondents being subtenants were erroneous.
On 3rd March 1946 i.e., towards the end of 1353 F. the suit was dismissed on the ground that there had been ' no ' subletting and that the, entries regarding the sub letting in the village records were not correct.
No attempt was however made by anyone to bring the village records in harmony with the said decision with the result that the said respondents continued to figure therein as sub tenants as before.
On his attention being drawn to this fact, the Lekhpal on his own authority removed the entries in favour of the said respondents s lowing them as sub tenants from the records of the year ending 1358 F. 500 The entries in the year 1356 F. were left undisturbed and it was not within the jurisdiction of the Lekhpal to make any alterations therein.
The U.P. Zamindari Abolition and Land Reforms Act (here inafter referred to as the 'Act) came into force with the commencement of 1360 F. i.e. last July, 1952.
Under section 20(b)(i) every person who was recorded as occupant in the Khasra or Khatauni of 1356 F. prepared under sections 28 and 33 respectively of the U.P. Land Revenue Act was to be called an "adhivasi" and was subject to the provisions of the Act, to be entitled to take or retain possession of the land (unless he would become a bhumidar or an asami).
The second Explanation to the section provided that where any entry in the records referred to in clause (b) of section 20 had been corrected before the date of vesting under or in accordance with the provisions of the U.P. Land Revenue Act, 1901, the entry so corrected was to prevail for the purposes of the said clause.
The third Explanation provided that for the purposes of the second Explanation an entry shall be deemed to have been corrected before the date of vesting if an order or decree of a competent court requiring any correction in the records had been made before the said date, and had become final even though the correction may not have been incorporated in the records.
On the strength of the Khasra and Khatauni of 1356 F. the respondents claimed adhivasi rights under section 20(b) (i) of the Act.
They filed six suits praying for recovery of possession under section 232 of the Act.
According to their case, the appellants were never.
in possession of the lands in dispute at any time.
They lost the suits before the Sub Divisional Officer and the Additional Commissioner of Varanasi but they ultimately succeeded in appeals to the Board of Revenue.
The appellants filed the writ petitions for quashing the orders: of the Board of Revenue.
The Hi Court went elaborately into the procedure for making entries in the records of rights and examined the question as to whether an entry recording a person as a sub tenant was equivalent to an entry recording him as occupant for the purpose of the Act.
The High Court concluded that the impugned orders of the Board of Revenue were wrong but held that the Board had jurisdiction to interpret section 2 it thought proper and as the orders passed by it were final without being subject to any appeal ', they could not be quashed by certiorari as being mere errors of law.
It is from this judgment that the present appeals have been launched.
Learned counsel for the appellants raised the following points in his address 501 (1) The correctness of the entry in the record of rights of 1356 F. can be gone into and is capable of challenge in a court of law exercising jurisdiction under article, 226.
(2) In the present case there was an adjudication in March,, 1946 and the respondents were not sub tenants : consequently, unless they showed that they had hereafter become sub tenants the benefit of the entry in their favour in 1 3 5 6 F. could not be availed of by them.
(3) Under rule 183 of the rules framed under the Act it was incumbent on the respondents to state in their applications the dates of their dispossession and the failure to do so rendered their petitions defective.
(4) In the Khasra of 1356 F. the respondents were only recorded as sub tenants but not as occupants and hence they cannot get the benefit of section 20(b) (i) of the Act.
Before entering into a discussion as to the merits of the points raised, it is worthy of note that before the Board of Revenue ie.
the ultimate fact finding authority the contention on behalf Of the respondents who were the appellants before the Board, was that they had been recorded as occupants in the revenue papers of 1356 F. and hence they were entitled to be reinstated to possession, it being unnecessary for them to prove that they were in actual possession in 1356 F. The arguments before the Board of Revenue on behalf of the present appellants were : (1) as the appellants were not in possession, they were not sub tenants either in 1356, F. or before and hence they could not be regarded ' as occupants in 1356 F: in support of this proposition reliance was placed on a decision, of this Court in The Upper Ganges Sugar Mills Ltd. vs Khalil ulRahman and others( ') which will be discussed later : (2) as both the courts below and the Board of Revenue, had concurrently found that there was no contract of sub tenancy, the respondents could not be regarded as sub tenants and could not rely on an entry in the year 1356 F. in their favour, and (3) a sub tenant was not an occupant and as such not, entitled ' to maintain an application under section 232 of the Act.
All these contentions were turned down by the Board of ' Revenue.
As regards the first point the Board took the view that the Upper Ganges Sugar Mills (1) case did not lay down that a, person had to be in actual possession before he could get the, benefit of the entry in the record of rights of 1356 F.
With regard to the second point, the Board held that even if the respondents had failed to prove that they were sub tenants they could" (1) ; 502 still be treated as trespassers.
The third point was disposed of by the Board placing reliance on an earlier decision of its own to the effect that the entry of sub tenancy should be held to be an entry of a recorded occupant.
There are two decisions of this Court which negative the points canvassed before us.
In the Upper Ganges Sugar Mill?(") case, the appellant company, a thekadar up to 1355 F. (June 1948) had retained possession of the lands in dispute by virtue of stay orders granted although the landlord had succeeded in the ejectment suit under the U.P. Tenancy Act in all the courts up to the Board of Revenue.
During the pendency of the company 's appeal to this Court, the Act came into ' force.
The company star proceedings to recover actual possession under section 232 of the Act read with sections 12 and 20.
The trial court decided in favour of the company and ordered delivery of possession under both the sections.
The landlords lost in appeal.
Thereupon there was a Second Appeal to the Board of Revenue which was dismissed in January 1956.
The landlords came to this Court on special leave, The appeals were remanded by this Court for a finding whether the company had acquired any rights under section 20 of the Act.
The Board held that the company was entitled to such benefit and had acquired Adhivasi rights thereunder.
Before this Court at the final hearing, there was a good deal of discussion as to the meaning of the expression "a person in occupation".
It was held, that in order that the company could take the benefit of section 20 it should have been recorded as in occupation of the land in dispute in the year 1356 F. and the only limitation.
placed by judicial decisions on the meaning of the word occupant" was that a person should be in occupation in his own right and not on behalf of some cane else.
On behalf of the landlords it was argued that the company was not in possession in its own right firstly because there was an order for ejectment in November 1948 and thereafter it retained in possession only on account of the stay orders; and secondly, as a , thekadar the possession of the company was on behalf of the landlords.
This Court held that on the landlords" own showing the company was not in possession as a thekadar is the theka had expired before 1356 F. and consequently the nature of occupation of the company was on its own behalf and not on behalf of the court or of the landlords.
In the result, the company was held entitled to Adhivasi rights.
This case establishes that a person recorded as an occupant on the relevant date although found by courts of law to have no right to I possession even prior thereto, is not to be denied Adhivasi rights.
(1) ; 503 The case of Amba Prasad vs Abdul Noor Khan and others( ') is more in point.
Amba Prasad was a zamindar of a village before the coming into operation of the Act.
The opposite parties were persons whose names had been recorded in column 23 (miscellaneous) in the Khasra for the year 1356 F. as persons in possession and they claimed to be recorded as occupants of the fields in dispute and to have obtained adhivasi rights under section 20.
The case of the respondents was that they were in occupation of the land, and had been dispossessed after June 30, 1948 by the appellant and as they were recorded occupants in 1356, F. they were not required to prove actual possession.
The appellants stand was that the entry was fraudulently made after July, 1949.
The suits were dismissed by the Sub Divisional Officer but in appeal the Additional Commissioner held that the respondents had ' acquired Adhivasi rights.
This was upheld by the Board of Revenue.
The appellant then filed appeals to this Court.
The real dispute , as noted by this Court was whether a person who was recorded as 'Qabiz ' but not as a tenant or Subtenant would get the advantage of section 2O of the Act and claim Adhivasi rights.
Examining the scheme of section 20 along with its.
Explanations, it was observed: "The section, speaking generally, says that certain persons "recorded" as "occupants" of lands (other than grove lands or lands to which section 16 applies) shall be known as adhivasis and shall be entitled to retain or to regain possession of them after the date of vesting which was July 1, 1952 .
Such persons. must be recorded as occupants, in the khasra or Khatauni for 1356 F. (1 7 48 to 13O 6 49).
If such a., person is in possession , he continues in possession.
If he is evicted after June 30, 1948 he is to be put back in possession notwithstanding anything in any order or decree.
By fiction such persons are deemed to be entitled to regain possession (Explanation I).
The emphasis has been laid on the record ' of khasra or khatauni of 1356 F. and June 30, 1948 is the datum line.
The importance of an entry in these two documents is further apparent from Explanations II and III.
Under the former if the entry is corrected before the date of vesting (1 7 52) the corrected entry is to prevail and under the latter the entry is deemed to be corrected (even though not actually corrected) if an order or decree of a competent court ordering the correction had been made before the date of vesting and the order or decree had become final.
There are thus two date lines.
They are June 30, (1) ; 504 1948 and July 1, 1952, and the title to possession as adhivasi depends on the entries in the khasra or khatauni for the year .1356
F." The Court went on to add that the word 'occupant ' had not been defined in the Act and said.
: "Since khasra records possession and enjoyment the word 'occupant ' must mean a person holding the Ian( in possession or actual enjoyment.
The khasra, however, may mention the proprietor, the tenant, the subtenant and other.
person in actual possession, as the case may be.
If by occupant is meant the person in actual possession it is clear that between a proprietor and a tenant, the tenant, and between a tenant and the subtenant the latter and between him and a person recorded in ' the remarks column as "Dawedar qabiz" the dawedar qabiz are the occupants. .
The section eliminates inquiries into disputed possession by accepting the records in the kha or khatauni of 1356 F. or its correction before July 1. 1952.
It was perhaps thought that all such disputes would have solved them selves in the four years between June 30, 1948 and June 30, 1952.
" With regard to the question as to whether a mere entry in 1356 F. without possession in that year was sufficient, reference ,was made by this Court to the Full Bench decision of the Allahabad High Court in Ram.
Dular Singh and another vs Babu Sukh Ram & others(1) which had endorsed the earlier view in Nanakchand vs Board of Revenue, U.P. (16).
In the last mentioned case the Allahabad High Court had observed that the words in the section were not "every person who was an occupant in 135,6 F." nor were the words "every person who was recorded as an occupant in the year 1356F. and who was in possession in that year.
" According to the Allahabad High Court there was no warrant for introducing words in the section which were not there.
This Court felt that .in view of the long established line, of cases, there was no justification for reopening this question and the decision of the Board of 'Revenue was right.
These decisions negative the first, second and the fourth points sought to be raised on behalf of the appellants.
The record of rights for the year 1356 F. had not been corrected afterwards.
We 'have, to go by the entry in the record of rights and no enquiry need be made as to when the respondents became sub tenants after the decision in favour of the landlord,, Ram Dhani Singh.
The last decision of this Court also shows, that as between the tenant and the sub tenant the entry in the record of Tights in favour of the (1) (2) 505 sub tenant makes him the occupant entitled to the adhivasi rights under section 20 of the Act.
With regard to the point as to the violation of rule 183 it is enough to say that the point was not canvassed before the Board of Revenue and as such we need not look into it.
In the result, the appeals fail and are dismissed with costs.
One hearing fee.
R.K.P.S. Appeals dismissed.

summary:
In 1945 one R who was the thekadar of the proprietary rights of a village, sued the appellants and the respondents, other than the first respondent Board of Revenue, for their ejectment under section 171 of the U.P. Tenancy Act.
alleging that the appellants had illegally sub let the lands to the respondents.
The appellants and the respondents made a on cm denying the alleged 'sub letting and stating that the entries in the village records about the respondents being sub tenants were erroneous.
The suit was dismissed in March, 1946, I.e., towards the end of 1353 F on the ground that there was no sub letting and the entries were not correct No attempt was made by anyone to bring the village records in harmony with this decision and the respondents continued to figure as sub tenants in these records.
On his attention being drawn to this, the Lekhpal, on his own authority, removed the entries in favour of the respondents from the records for the year ending 1358 F but the entries for the year 1356 F were left undisturbed as it was not within the Lekhpal 's jurisdiction to alter these.
After the U.P. Zamindari Abolition and Land Reforms Act came into force in 1952 i.e., at the beginning of 1360 F, on the strength of the Khasra and Khatauni of 1356F, the respondents claimed Adhivasi rights under section 20(b)(i) of the Act and.
file six suits praying for the recovery of possession of the lands under 'section 232 of the Act.
They lost the suits before the sub Divisional Officer and Additional Commissioner of Varanasi but succeeded in appeals to the Board of Revenue.
The appellants thereafter filed writ petitions for quashing the orders of the Board; and the High Court although of the view that the impugmed orders of the Board of Revenue were wrong, held that the Board had jurisdiction to interpret section 20(b) as it thought proper; and as the orders passed by it were final without being subject to any appeal.
they could not be quashed by certiorari as being mere errors of law.
In appeal to this Court, it was contended, inter alia, on behalf of the appellants that (i) the correctness of the entry in the record of rights of 1356 F could be gone into and was capable of challenge in a court of law exercising jurisdiction under article 226; (ii) in the present case there was an adjudication in March 1946 that the 'respondents were not subtenants; consequently, unless they showed that they had thereafter become sub tenants, the benefit of the entry in their favor in 1356 F could not be availed of by them; (iii) in the Khasra of 1356 F the respondents were only recorded as sub tenants but not as occupants and could not therefore get the benefit of section 20 (b) (i) of the Act.
HELD: Dismissing the appeals.
The record of rights for the year 1356F had not been corrected afterwards.
The court had to go by the entry in the record of rights and 499 no enquiry need be made as to when the respondents became sub tenants after the decision in the suit filed by R. As between the tenant and the sub tenant, the entry in the record of rights in favour of the sub tenant made him the occupant entitled to the adhivasi rights under section 20 of the Act.
[5O4 G H] The Upper Ganges Sugar Mills Ltd. vs Khalil ul Rahman and others; , ; Amba Prasad vs Abdul Noor Khan Sukh Ram & Ors.
, ; and Nanakchand vs Board of Revenue U.P. ; applied.


judgement:
Appeals Nos. 631 and 632 of 1965.
Appeals by special leave from the judgment and order dated January 7, 8, 1963 of the Gujarat High court in Civil Revision Applications Nos. 116, 117, 173 and 174 of 1961.
Purshottam Trikamadas and I. N. Shrojj for the appellant (in both the appeals).
section section Shukla, for the respondent (in both the appeals).
The Judgment of the Court was delivered by Mitter, J.
These are two appeals by special leave against the judgment and order dated January 8, 1963 of the Gujarat High Court dismissing Civil Revision Applications 116 and 117 of 1961 filed by the appellant and all owing similar applications Nos. 173 and 174 of 1961 filed by the respondent against the common judgment dated December 1, 1960 passed by the District and Sessions Judge of Panchmahals.
The matter arises out of assessments made by the appellant constituted under the Bombay Municipal Boroughs Act, 1925 on the respondent under section 73 of the Act.
The respondents are an electricity company owning inter alia properties bearing several numbers in the municipal borough of Godhra.
For the years 1956 57 and 1957 58 the appellant had fixed the valuation of the properties belonging to the respondent at Rs. 3,25,000/ .
On appeal by the respondent, the Judicial Magistrate fixed the valuation of the properties at Rs. 90,000/ .
On the appellant going in revision, the Sessions Judge fixed the valuation at Rs. 1,25,000/ .
As a result of the High Court 's decision the valuation stood reduced to Rs. 90,000/ .
The present appeals are by the Municipality.
Under section 73(1) of the Bombay Municipal Boroughs Act, 1925 (hereinafter referred to as the 'Act ') "Subject to any general or special orders which the State Government may make in this behalf and to the provisions of sections 75 and 76, a municipality may impose for the purposes of this Act any of the following taxes, namely 483 (i) a rate on buildings or lands or both situate within the municipal borough.
" The procedure preliminary to imposing tax is laid down in section 75 and section 78 deals with the preparation of an assessment list.
Section 58 empowers the municipality to make rules prescribing the taxes to be levied in a municipal brought for municipal purposes etc.
Rules 4, 5 and 7 relevant for our purpose read as follows: "4.
Modes of valuation: (1) For the purpose of detennining tax the following properties shall be valued on the capital basis : (a) All open lands, buildings and yards belonging to the Railway Administration.
(b) All buildings and lands other than those which are actually used for residential purposes belonging to Mills and Factories to which the Indian Factories Act, is applied.
(2) All properties other than those mentioned above shall be valued on the basis of the annual letting value as defined in section 3(1) of the Act.
Mode of determining capital value: The capital value of properties mentioned in rule 4(1) shall, in each case, be determined on such reliable data as the Railway Authorities and the Agents of the mills and the factories may furnish when called upon from time to time to do so and in the absence of any such trust worthy reliable data, it shall be determined by the Chief Officer or by expert valuers employed by the municipality for that purpose.
6. . . . . 7.
Amount of tax : (1) in case of properties which as stated above, are valued on the capital basis the tax to be levied shall be assessed at Rs. 0 8 0 per cent of the capital value and it shall be a direct tax thereon provided however that any fraction of hundred in excess of fifty rupees shall be taken as the next higher hundred and any fraction of fifty rupees or less be taken as the lower hundred.
(2) In case of properties which, as stated above, are valued on the annual letting value the tax to be levied shall be assessed as shown in the appendix annexed hereto.
" 484 Under rule 4(1) (b) above, the buildings of the respondent had to be valued on the capital basis.
Under r. 5 the capital, value of properties had to be determined on such reliable data as the respondent might furnish and in the absence thereof, it would be the duty of the Chief Officer to determine the same.
Before the Judicial Magistrate, one R. R. Tewari, an Assistant Secretary of the respondent who had affirmed an affidavit showing that the approximate value of the seven items of property on which tax was sought to be imposed as per the books of the company was Rs. 41,541 12 9.
He sought to rely on the balance sheets and accounts of the company audited under the Companies Act for the purpose.
The Judicial Magistrate observed that the properties were 40 years old and according to Tewari the life of the office buildings was 50 years while that of others was only 30 years.
Acting on the admission of Tewari that the price of building materials had increased three times the original figures in 195657 and taking, into Consideration the properties were over 40 years old, the Magistrate assessed the capital value at Rs. 90,000/ .
The Sessions Judge dealt with the matter in greater detail and noted that neither party had given him real assistance in determining what should be the proper assessment.
According to him the assessment papers preceding the bills had not been produced and neither party had led any evidence as to how the capital value was to be arrived at.
He however felt that the capital value could not mean merely the book value shown in the books of account ,of the assessee.
He noted that according to the balance sheet for 1955 56 the property and assets under the head"buildings" was shown as below: Buildings.
Cost up to 31st March 1955 Rs. 1,72,866 5 11 Additions during the year 12,398 10 3 Total Rs. 1,85,265 0 2 The said figure included the value of all the buildings of the ,company but those which were to be assessed were only seven ,out of which two residential bungalows and servants quarters ' were to be assessed on the rental value.
The Sessions Judge therefore inferred from the above figures that Rs. 1,85,265/ included at least Rs. 1,00,000/ as the cost up to 31st March, 1955 of the factory buildings in question.
The Sessions Judge found himself unable to accept the contention that the depreciated selling value of the property was the capital value for the purpose of assessment of house tax.
He also did not accept the municipality 's ,contention that the cost of construction of buildings had gone up 485 five times since 1920.
Considering the rival contentions he fixed the capital value at three times the figure shown by the company, viz., Rs. 41,541/ and rounded the same off to Rs. 1,25,000/ .
Taking the view that it was not open to "a Judge in India to base his judgment as a whole or in part or his conclusion upon either Halsbury 's Laws of England or Bean and Lock wood 's book on Rating Valuation Practice" on the ground that these books were irrelevant under the Indian Evidence Act, the learned Judge of the High Court held that "capital value" in night possibly bear four different meanings but the meaning given to the expression in Halsbury 's Laws of England was "not appropriate in the context of the Indian enactment and the Indian Rules".
Referring to the rules made by Godhra Municipality he observed that it could not be said that the municipality had adopted the capital value as one of the methods of ascertaining the rental value or that the municipality had adopted the rental value as one of the methods of ascertaining the capital value.
According to the learned Judge, "capital value ' has to be treated as meaning the value of the building treated as capital at the time of the assessment; in other words, the original cost of construction minus the depreciation or at the most the original cost of construction without depreciation.
" Accepting the figure of Rs. 41,541 12 ,9 as the cost of construction of the building in 1920 as found by the courts below, he observed that the capital value should be "either Rs. 41,541 12 9 or something less after deducting depreciation." According to him "the assessee has not come in revision against the order of the Magistrate fixing the value at Rs. 90,000/ .
Both the courts have erred in considering the probable cost of construction of a new building.
" He therefore held that the courts below had committed a material mistake in the exercise of jurisdiction in relying upon the probable cost of constructing a new building of a similar type in order to estimate the capital value as contemplated by Godhra Municipality and accordingly reduced the capital value fixed by the Sessions Judge to Rs. 90,000/ .
We find ourselves unable to accept the views expressed or the reasoning given in the judgment of 'the High Court.
Section 73 empowered the municipality to impose a rate on buildings or lands.
Now the word 'rate ' had not been defined in the Act but it has a well known meaning.
As observed in Patel Gordhandas Hargovindas vs Municipal Commissioner, Ahmedabad( ') the word has come to our country for the purpose of local taxation from England.
" In that case this Court examined Various statutes bearing on the English Rating Law and held that the word " 'rate ' was (1) [1964] 2 S.C.R.608 at 616.
486 used with respect to a tax which was levied on the net annual value or rateable value of lands and buildings and not on their capital value.
It would therefore not be wrong to say that in the legislative history and practice in England up to 1925, 'rate for the purpose of local taxation meant a tax on the annual value of lands and buildings liable to such taxation.
" The Court went on to examine the methods in use for the purpose of ascertaining the rateable value which were generally three.
It was said : "Where the land or building was actually let, the valuation was based on the rent at which it was let.
Where, however, the land or building was not let, two methods were evolved for the purpose of finding out the rateable value.
The first was to assume a hypothetical tenancy (such as where the same person is the owner and occupier) and find out the rent at which the premises would be let.
The second was based on the capital value of the premises.
But the tax was not levied on the capital value itself.
; the capital value was determined on the structural value of the building to be assessed by what was known to be contractors method or contractor 's test in addition to the market value of the land.
Sometimes the words "effective capital value" were also used since in most cases the actual capital cost of the building plus the market value of land might for some reason or the other be in effective i.e., it might not be rent producing.
Having arrived at the effective capital value it was necessary to apply percentages thereto in order to arrive at the annual value.
" When legislatures in this country enact statutes which closely resemble statutes in England and have the same purpose and object in view, then unless the expressions used in the Indian Statutes are defined, courts of law cannot go wrong in interpreting them in the way English Judges have done.
Further, the words which have acquired a particular shade of meaning in England may be given the same meaning unless there is anything in the statute itself which would be contra indicative.
In Patel Gordhandas 's case( ') the statute which this Court had to interpret was the same Act which is before us in this case.
Consequently, that decision affords us a good guide in forming our own conclusions in this case.
Section 75 of the Act has an Explanation introduced in 1966 which reads as follows : "Explanation For the purposes of a rate on buildings or lands, the basis of valuation may be (i) the annual letting value; (1) ; 487 (ii) the annual value; (iii) the floor area, in the case of Mills, Factories and buildings and lands connected therewith; (iv) the capital value, in the case of vacant lands.
" The Explanation is deemed always to have been substituted for the original by Maharashtra Act 3 of 1966, section 3(b).
Rule 4 of Godhra Municipal Rules shows what properties are to be valued on the capital basis.
What the capital basis is not defined.
The capital value however can be determined in the way laid down in Patel Gordhandas 's case( ') by adopting the contractor 's method.
What that method is has been explained in Ryde on Rating (Eleventh Edition) Chapter 20.
In R. vs School Board for London( ') Cave, J. applied the contractor 's test to schools.
Ryde points out that it was tacitly recognised as applicable in various other cases.
The principle on which the contractor 's basis rests are given by the author at page 439 and the method of its application is given at page 442.
The learned author notes that in "applying the contractor 's basis it is possible to discern five stages.
The first stage is the estimation of the cost of construction of the building.
" There is a difference of view as to whether it is better to take the cost of relacing the actual building.
as it is, or,the cost of a substitute building on the same plan as the actual building but otherwise in an up to date form.
The second stage is "to make deductions from the cost of construction to allow for age, obsolescence and any other factors necessary to arrive at the I effective capital value.
"The third stage is to estimate the cost of the land.
The fourth stage is to apply the market rate or rates at which money can be borrowed or invested to the effective capital value of the building and the land.
The fifth stage is to con sider whether the result of the fourth stage really represents what the hypothetical tenant would pay for the annual tenancy on the statutory terms, and to make any adjustments necessary to ensure that no higher rent is fixed as the basis of assessments than that which it is believed the owner would really be willing to pay for the occupation of the premises.
Rule 5 of the Godhra Municipal Rules lays down that the capital value is to be determined in each case on reliable data furnished by the Mills and the Factories when called upon to do so and in the absence thereof is to be determined by the Chief Officer or expert valuer.
The learned counsel for the respondent contended that here there were reliable data in that the balance sheet of the company showing the value of these properties for the purpose of the Companies Act and there was no reason why the same figures should not be adopted as the capital value of the lands (1) ; (2) (1885) 55 L.J.M.C. 33; C.A. 488 and buildings within the jurisdiction of Godhra municipality.
This clearly is fallacious as under section 211 of the the balance sheet of a company has to be drawn up in the form prescribed by Schedule VI.
Under the said Schedule, , the value of fixed assets has to be shown "distinguishing as far as possible between expenditure upon (a) good will, (b) land, (c) buildings, (d) leaseholds, (e) railway sidings, (f) plant and machinery, (g) furniture and fittings '.
(h) development of property etc.
The fourth column of the form which gives the instructions in accordance with which assets should be made out shows under each head "the original cost and ' the additions thereto and deductions therefrom during the year, and the total depreciation written off or provided up to the end of the year is to be stated.
" It will there fore be noticed that the figures given in the balance sheet are merely statements in terms of the form given in Schedule VI.
They have no relevance in determining the capital value of property for the purpose of assessment to a rate.
It appears to us therefore that the true method of determination of the capital value was not adopted in the courts below.
We therefore set aside the judgment and order of the High Court and remand the matter back to the District Judge for him to determine the capital value in the light of the observations made by us after giving an opportunity to the parties to adduce evidence on the subject.
The costs will abide by the decision of the District Judge.
G.C. Appeal allowed and case remanded.

dataset_name: IN-Abs

summary:
Under section 73 of the Bombay Municipal Boroughs Act, 1925 read with rr.
4(1) and 5 made thereunder a rate on nonresidential buildings belonging to factories and mills was leviable on a capital basis, and the capital value for this purpose was to be worked out, if 'reliable data ' were furnished by the assessee, on the basis of such data.
The respondent company owned certain buildings on which rat was leviable under r. 4(1) on the basis of capital value.
The respondent company claimed that the actual cost of construction of the buildings in 1920 ought to be taken as the capital value.
The Municipality of Godhra however made its own estimate of the capital value.
Thereafter the Judicial Magistrate and the Sessions Judge made valuations taking into account the rise in the cost of building materials since 1920.
The High Court in revision upheld the view that the actual cost minus depreciation thereon should be the capital value; it observed that the English law and practice as to levy of rates was not relevant in the Indian context.
The Municipality appealed.
HELD: (i) When legislatures in this country enact statutes which closely resemble statutes in England and have the same purpose and object in view, then unless the expressions used in the Indian Statutes are defined courts of law cannot go wrong in interpreting them in the way English judges have done.
Further, the words which have acquired a particular shade of meaning in England may be given the same meaning unless there is anything in the statute its, If which would be contraindicative.
[486 F G] (ii) Section 73 empowered the municipality to impose a rate on buildings or lands.
The word 'rate ' had not been defined in the Act but it has a well known meaning.
In Patel Gordhandas,s, case this Court examined various statutes bearing on the English rating law and held that the word 'rate ' was used with respect to a tax which was levied on the net annual value or rateable value of lands and buildings and not on their capital value, but capital value could be adopted as the basis for working out the annual value.
[485G 486E] (iii) Rule 4 of the Godhra Municipal Rules shows what properties are to be valued on capital basis.
What the capital basis is not defined.
The capital value however can be determined in the way laid down in Patel Gordhandasg case by adopting the contractor 's method.
[487B].
(iv) The figures given in the balance sheet of the company could not be regarded as 'reliable data ' for the purpose of r. 5.
The figures given in the balance sheet are merely statements in terms of the form given in 482 Schedule VI.
They have no relevance in determining the capital value of property for the purpose of assessment to a rate.
[488 B C] [Case remanded to District Judge for determining capital value by adopting contractors method in the light of the observations made by this Court.] Patel Gordhandas Hargovindas vs Municipal Commissioner, Ahmedabad, ; , relied on.
R. vs School Board for London, (1885) 55 L.J.M.C. 33, referred to.


judgement:
Appeal No. 687 of 1965.
Appeal by special leave from the judgment and decree dated October 3, 1961 of the Punjab High Court in Letters Patent Appeal No. 405 of 1958.
C. B. Agarwala and K. P. Gupta, for the appellant.
section N. Anand, for respondent No. 1.
The Judgment of the Court was delivered by Mitter, J.
This is an appeal by special leave from a judgment and order of the Punjab High Court in Letters Patent Appeal No. 405 of 1956.
The matter arises out of an application for execution of an order for possession passed on a compermise between the parties.
The Division Bench of the Punjab High Court felt itself unable to help the decree holder because of an earlier decision in the execution proceedings which was held to constitute res judicata against her.
The main question for consideration is, whether it was right in doing so.
The relevant facts are as follows.
As far back as April 1950.
Harbans Lal, the late husband of the appellant before us, obtained an order for eviction from the Rent Controller against Lal Chand and Ram Rattan Dass Jain in respect of certain, premises which were being used as a factory.
This decree was upheld in appeal and in July 1951 the decree holder applied for execution.
The court bailiff made a report dated the 14th July 1951 that on his going to give delivery of possession resistance was offered by a number of persons and being apprehensive of breach of peace he could not effect delivery of possession.
The judgment debtors appear to have approached the Department of Industries and informed them of the attempt at their eviction by the, decree holder.
The copy of a letter from the Extra Assistant Director of Industries to the Chief Inspector of Factories dated July 18, 1951 exhibited at the instance of the judgment debtors, goes to show that the machinery installed in the factory could not be removed without 7 Sup.
C.I./68 8 508 the prior permission of the Chief Inspector of Factories.
Obviously the judgment debtors wanted to thwart the decree holder from getting possession through court by invoking the aid of the East Punjab Factories (Control of Dismantling) Act XX of 1948, hereinafter referred to as the Act.
The judgment debtors applied for stay of execution of the decree on August 23, 1951.
The Subordinate Judge issued notices but did not grant stay.
On appeal the District Judge accepted the appeal noting that the Subordinate Judge had not given any finding about the applicability of the Act.
He had before him the report of the bailiff that possession of the premises could not be given over as there were machinery stored therein.
By order dated October 11, 1951 he directed the Subordinate Judge to decide the objections under the Act.
The Subordinate Judge framed a number of issues including one which read : 'whether the judgment debtors could not be dispossessed of the factory and machinery could not be dismantled without permission of the Government ?" Taking evidence of the parties and noting the contents of the letter of the Industries Department, he observed that the judgment debtors had not secured permission but the decree holder might follow up the matter through court.
He stayed execution of the decree in so far as it involved the dismantling or removal of the machinery but allowed the same for securing possession of the part of the premises where no machinery was stored.
This was on 7th February, 1953.
Both parties filed appeals from this order which were dismissed.
The appellate court was of the view that machinery and spare parts were lying practically in all the rooms of the building and the locking and sealing of the factory would result in its closure which would go against the provisions of the above mentioned Act.
The decree holder was therefore directed to pursue the matter with the State Government.
Incidentally, the court noted that the decree holder had not challenged the proposition that the court could not order delivery of possession without the requisite sanction for the dismantling of the factory.
This order dated 22nd April 1953 was not challenged by any appeal to the High Court.
It appears that the court consigned the execution proceedings to the record room on July 25, 1953.
On August 18, 1953 the decree holder applied for execution proceedings being restarted.
On November 7, 195 3 the executing court observed that a reply from the State Government had been received to the effect that permission for demolition of the factory could not be given.
execution file was therefore ordered to be consigned to the record room once more.
From this order.
an appeal was preferred by the 'decree holder.
The Additional District Judge held that in view of.the imperative provisions of section 3 of the Act the decree holder could not be granted posses 509 sion in execution of the decree and dismissed the appeal by order dated January 8, 1954.
On further appeal, a learned Judge of the High Court by order dated July 13, 1955 observed that in the execution proceedings no evidence had been adduced on the points arising under Punjab Act XX of 1948.
He therefore said as follows : "On the present record it is not possible for me to decide whether the execution of the decree would defeat the provisions of section 3 of the Punjab Act XX of 1948.
That being the position of matters, I set wide the order passed by the Subordinate courts and direct the court of execution to give fresh decision on the points that arise under section 3 of Punjab Act XX of 1948.
In proceedings pursuant to this order parties will be given opportunity to examine hearing on the points that arise under section 3 of Punjab Act XX of 1948.
" On remand the Subordinate Judge by order dated 30th De cember, 1955 hold that the Act was not intended to cover involuntary dismantling in execution of orders of competent courts : further the Rent Restriction Act, 1949 passed after Act XX of 1948 did not take any notice of the prohibition contained in the said Act ' In the result he found that the respondent was liable to be ejected in execution of the decree for eviction but as the application had become over a year old it would be struck off the file and the decree holder be at liberty to take out execution of the decree by a fresh application.
The judgment debtors went up in appeal to the court of the District Judge.
The District Judge by order dated December 31, 1956 hold that the Act did not apply to involuntary dismantling of factories and that the issue raised by the Subordinate Judge in this connection did not arise but in fact it had been decided against the landlord by the High Court in Revision.
According to him, the order of the High Court Went to show that section 3 of Act XX of 1948 covered delivery of possession even in execution of the order of the Rent Controller or otherwise the revision application would, have been accepted by him straightaway.
In the result he dismissed the execution petition.
The appellant went up in Second Appeal to the High Court at Chandigarh.
A single Judge of that Court dismissed the appeal.
The decree holder filed a Letters Patent Appeal.
Although of the view that delivery of possession was not barred in execution of the decree by Act XX of 1948, the Division Bench concluded that so far as the parties before it were concerned, the matter had become, res judicata inconsequence of the decisions of the executing court and the first appellate court on the 510 first execution application and the decision of a single Judge in revision on the previous occasion in the second execution application.
Section 3 sub section
(1) of East Punjab Act XX of 1948 provides as follows : "No person shall, without the written permission of the State Government or of an officer authorised in this behalf by the State Government, dismantle any factory or remove from a factory any spare parts kept for maintaining the machinery of the factory in order.
" The Act which contains only eight sections makes no reference to any decree for possession against the owner of a factory.
By ordering delivery of possession of the premises the executing court does not make an order for dismantling a factory and a bailiff charged with execution of a warrant for possession does not infringe the above provision of law by rendering possession of the property to the decree holder.
So far as the judgment debtor ' the owner of the factory, is concerned, it would be his look out to take the matter up with.
the State Government, if necessary and we have no doubt that in a 'case like this where there is no collusion between the decree holder and the judgment debtors the State Government would not prosecute the judgment debtors or refuse to accord sanction to the judgment debtors for removal of the machinery from the premises of which they could not lawfully continue in possession.
it appears that the Subordinate Judge, the District Judge and the Judges of the Punjab High Court were all of the view that the Act did not bar the delivery of possession in execution of a decree.
In our opinion there was no final order about the inexecut ability of the decree on the first application for execution which was consigned to the record room by order dated July 25, 1953.
Further, the judgment of the learned single Judge of the Punjab High Court dated July 13, 1955 did not decide the question as fin whether the decree for possession would be inexecutable in view of Act XX of 1948.
He stated expressly that It was not possible for him to decide whether, the execution of the decree would defeat the provisions of section 3 of Punjab Act XX of 1948 and being unable to come to a decision on the record he remanded the matter to the court of execution.
He found himself unable to interpret the section on the evidence before him.
The proceedings subsequent to the remand order culminated in the order of the Division Bench from which the present appeal arises.
The order dated July 13, 1955 was not a final order which put a seal on the proceedings.
The course of litigation subsequent to the order for eviction in 1950 is truly amazing.
For 17 years the decree holder has 511 been unable to reap the fruits of the decree although practically all the courts felt that the Act of 1948 could not be called in aid by the judgment debtors to resist execution by delivery of possession.
We cannot but condemn in very strong terms the attitude ,of the judgment debtors who, to say the least, are persons who have little regard for sanctity of their own solemn promise made before a court of law.
On June 29, 1,950 in Miscellaneous Civil Appeal No. 39 of 1950 they stated on oath that they had reached an agreement with the landlord that they would "remain on the premises only up till 31st March 1951 when they would of their own accord vacate the premises" and on their failure to do so the landlord would be entitled to take out execution against them.
Even before the time to vacate the premises came, one of the judgment debtors filed a suit for a perpetual injunction to restrain the decree holder from obtaining possession in terms of the consent order of 29th June 1950.
The suit was dismissed on July 11, 1951.
The judjement debtors also lost the appeal filed against that dismissal.
At every step and turn for nearly two decades they have successfully resisted delivery of possession by raising an illusory plea.
Learned counsel for the respondents argued that even now his clients can urge the plea that the decree was not executable because of the provisions of Act XX of 1 1948.
According to him, the agreement was in contravention of a statute and 'the respondents could not be estopped from pleading or proving facts which would render the agreement void.
His, case was that Act XX of 1948 being in force on June 29, 1950 any agreement arrived at between the parties in contravention of its provisions would not be binding on the parties.
No exception can be taken to the broad proposition of law but no question of estoppel ever arose in this case because Act XX of 1948 did not operate as a bar to the delivery of possession of premises in execution of a decree.
In the result, the appeal is allowed with costs throughout from the 18th August 1953 irrespective of any order in that behalf made at any time thereafter.
It is unfortunate the decree holder has been kept out of possession so long; but she is partly responsible for it herself.
If she had preferred an appeal from the order of the District Judge passed on 22nd April, 1953 to the High Court.
probably her troubles would have ended long ago.
Y.P. Appeal allowed.

summary:
The eviction of the Respondent 'from the appellants premises, which was used as a factory, was decreed and application for execution of an order for possession was made.
The respondents resisted the execution on the plea that the machinery installed in the factory could not be re moved without the prior permission of chief Inspector of Factories as provided by the East Punjab Factories (Control of Dismantling) Act.
The premises was allowed.
Both parties appealed.
The appellate Court took of the machinery was stayed, but the Possession of the part the premises was allowed.
Both parties appealed.
The appellate Court took the view that the machinery and spare parts were lying practically in all the rooms, and the locking and sealing of the factory would result in its closure which would be against the provisions of the Act, and therefore directed the appellant to pursue the matter with the State Government.
The order dated April 22, 1953 was not challenged by any appeal.
But the appellant restarted the execution proceedings in which it was held that the State Government had refused permission for demolition of the factory, so the file was ordered to be consigned to the record room. 'Me appellant filed an appeal, which was dismissed, but in further revision the High Court by its order dated July 13, 1955 observed that on the record it was not possible to decide whether the execution of the decree would defeat the provisions of section 3 of the Act, so it set aside the order and directed the executing court to give decision on points that arose under section 3 of the Act. 'Me executing court found that the provisions of the Art did not prohibit the execution and as such the respondents were liable to ejectment but since the application had become over a year old it would be 'struck off the file with liberty to make a fresh application.
The respondents appealed.
The District Judge held that the Act did not apply to involuntary dismantling of factories and that the issue raised by the executing court did not arise but in fact it had been decided against the appellant by the High Court in revision.
The appellant 's appeal to High Court was dismissed by a Single Judge, and in the Letters Patent Appeal, it was held that the delivery of possession was not barred in execution of decree by the Act, but the matter had become res judicata in consequence of the decisions in the first execution application and the decision of the High Court dated July 13 1955 in the second execution applica tion.
Allowing the appeal, HELD : The Act does not bar the delivery of possession in execution, of a decree.
It makes no reference to any decree for Possession against the owner of a factory.
By ordering delivery of possession of the premises, the executing court does not make an order for dismantling a factory and a bailiff charged with execution of a warrant for possession, does not infringe the provision of law by rendering possession of the property to the decree holder.
[510 C D] 507 There was no final order about the inexecutability of the decree on the first application for execution.
Further the High Court by its order dated July 13, 1955, did Dot decide the question as to whether the decree for possession would be inexecutable in view of the Act.
It stated expressly that it was not possible for it to decide whether the execution of the decree would defeat the provisions of the Act, and being unable to come to a decision on the record it remanded the matter to the court of execution.
It found itself unable to interpret the section on the evidence beforeit.
The proceedings subsequent to the remand order culminated in theorder of the Division Bench from which the present appeal arose.
The order dated July 13, 1955 was not a final order which put a seal on the proceedings.
[510 F H]


judgement:
Appeals Nos.
1919 1920 of 1966.
Appeals from the judgment and order dated October 12, 13, 1962 of the Bombay High Court in Income tax Reference No. 2! of 1959.
section T. Desai, 0.
P. Malliotra, and 0.
C. Mathur, for the appellant (in C.A. No. 1919 of 1966) and the respondent (in C. A. No. 1920 of 1966).
D. Narsaraju and R. N. Sachthey, for the appellant (in C.A. No. 1920 of 1966) and the respondent (in C.A. No. 1919 of 1966.
The Judgment of the Court was delivered by Shah, J.
These are cross appeals from the order passed by the High Court of Bombay recording answers to questions sub mitted in a reference under section 66 of the Indian Income tax Act, 1922.
Messrs Killick Nixon & Co. hereinafter called "the assessee" was a firm which carried on diverse trading activities in Bombay.
The assessee agreed to sell on November 28, 1947 to a Company called "Killick Industries Ltd.", the benefit of managing agency contracts held by it, shares of limited Company (including 240 shares of the Cement Agencies Ltd.) and debentures, and book and other debts in consideration of 79,993 shares of the face value of Rs. 100/ each or Killick Industries Ltd. and Rs. 700/ in cash.
By another agreement dated January 29, 1948 the assessee agreed to sell to "Killick Nixon & Co. Ltd." goodwill of the business of the.
assessee freehold and leasehold hereditaments, plant and machinery, stock in trade and book debts, Government securities and shares and full benefit of all shipping and general agencies, distributorships etc.
in consideration of 9,996 shares in the Vendee Company of the face value of Rs. 100/each and Rs. 400/ in cash.
The assessee was dissolved and its business was discontinued with effect from February 1, 1948.
In a proceeding for assessment to tax payable by the assessee for the year 1949 50 (the relevant previous year being the year ending June 30, 1948) the Income tax Officer assessed the capital gains made by the assessee, on the transfer of its capital assets to the two Companies, ,it Rs. 32,01,747/ .
In appeal, the Appeal 9 7 3 late Assistant Commissioner modified the order.
He was of the view that the assessee had made capital gains amounting to Rs. 25,40,737/ by sale of shares to the two companies and other assets transferred to Killick Nixon & Co. Ltd. and had suffered a capital loss of Rs. 4,00,530/ , being the difference between the market value of the managing agencies, 240 shares of the Cement Agencies Ltd. and the goodwill on January 1, 1939 estimated at Rs. 51,40,802/ and the market value of those assets on February 1, 1948 estimated at Rs. 47,4Q,272 /.
Debiting the loss against the capital (rains made by sale of shares, the Appellate Assistant Commissioner brought to tax an amount of Rs. 21,06,455/ .
The Appellate Assistant Commissioner rejected the claim of the assessee to the benefit of section 25(3)) & (4) of the Income tax Act, 1922.
The Appellate Tribunal confirmed the, order passed by the Appellate Assistant Commissioner.
The Tribunal drew up a statement of the case and referred two questions numbered (I) & (2) below to the High Court of Judicature at Bombay.
Two more questions numbered (3) & (4) were submitted pursuant to the order made by the High Court under section 66(2) of the Act.
The questions were : "(1) Whether on the facts and circumstances of the case, the assessee firm is entitled to the benefit contained under section 2 5 ( 3 ) in respect of capital gains assessed to tax under section 12B of the Income tax Act ? (2) Whether on the facts and in the circumstances of the case, the assessee firm is liable to pay capital gains in respect of profits and gains arising from the sale of its assets to the limited companies ? (3) Whether section 12B of the Indian Income tax Act, 1922, at all applied to the applicant 's case ? (4) Whether on the facts and in the circumstances of the case, the Tribunal misdirected itself in law and or acted without evidence or in disregard of the most material evidence on record in making the valuation of the applicant 's assets on first day of January one thousand nine hundred and thirtynine ?" The High Court answered the first question in the negative, and the second, the third and the fourth questions in the affirmative.
The assessee has appealed against the answers recorded on the first three questions; against the order recording the answer on the fourth question, the Commissioner has appealed.
The appeal filed by the Commissioner may first be considered.
The assessee contended before the Tribunal, relying upon the evidence on record, that the value of the managing agencies, 240 9 7 4 shares of the Cement Agencies Ltd. and the goodwill on January 1. 1939 considerably exceeded Rs. 51,4O,8O2/ .
The Tribunal observed in paragraph 10 of its judgment "We do not think it is necessary to deal with in detail the evidence produced before the Income tax authorities in respect of the valuation as on 1 1 1939.
The stand taken by the assessee, in our opinion, is in consistent.
A uniform method must be adopted both as on, the date of the transfer and as on 1 1 1939.
It is not open to the assessee to value an asset by applying one method on 1 2 1948 and another on 1 1 1939.
" The Tribunal then observed that since the assets were transferred to a company in which the partners of the assessee were interested, and the transfer was made for a consideration which was less than the market value, it was not open to the assessee to contend that the market value of the assets on January 1, 1939 should be taken into account; that the assessee was not entitled to reduce the capital gain by adopting the valuation of those assets which had a market quotation and in respect of assets which had no market quotation by adopting the sale price,; and that "if the goodwill of the business on January 1, 1939 was worth Rs. 8 lakhs its value on February 1, 1948 should be higher." The Tribunal recorded its conclusion that : "For the purpose of this appeal, it is enough to say that if the value of the assets in question was Rs. 46,40,279/ on 1 2 1948, it could not be higher than Rs. 51,40,802/ as on I. I 1939.
Speaking for ourselves, we think, the Income tax authorities by allowing the loss of Rs. 4 lakhs have taken a liberal view of the whole question.
" The Tribunal also observed "The valuation placed by the Department, in our opinion, is reasonable.
Even if the business was to be valued is a whole, it could not affect the assessment made.
The valuation has to be done on the same basis both on 1 1 1939 and 1 2 1948." .LM0
The High Court in dealing with the questions referred observed that under the third proviso to section 12B(2), of the Income tax Act, 1922 the assessee was entitled to substitute the fair market value ,of the assets as on January 1, 1939, if the capital assets had been held by the assessee before January 1, 1939 in place of the cost ,of the assets for the purpose of determining the capital gain, and that it was common ground that the full value of the consideration for which the assets were transferred was Rs. 1,16,75,108/ .
The High Court then observed : 97 5 .LM15 "it is clear beyond any doubt that the assessee was entitled to take the fair market value of the three assets, viz. the managing agencies, 240 shares of the Cement Agencies Limited and the goodwill of its busi.
ness as on 1 1 1939 for the purpose of the computation of the capital gains and the said capital gains,, if any, had to be determined by deducting the said valuation as on 1 1 1939 from the full value of the consideration.
, which the assessee, had received and which, it was common ground between the parties, was Rs. 1,16,75,108/ .
The Appellate Assistant Commissioner had proceeded to determine the value of its assets as on 1 1 1939.
As against the said valuation arrived at by the Appellate Assistant Commissioner, the assessee has raised o@jections before the Tribunal which objections the Tribunal had to consider on their merits.
In so far as the Tribunal has failed to do so and has proceeded on the erroneous view, which it has taken that it was not necessary to deal in detail with the evidence produced before the Income tax authorities, the Tribunal has clearly misdirected itself and had also not applied its mind properly to the material on record.
" Section 12B which was introduced in the Indian Income tax Act, 1922 with effect from the 31st day of March, 1947, omitting parts not material reads as follows : "(1) The tax shall be payable by an assessee under the bead 'Capital gains ' in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March 1946; and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place (2) The amount of a capital gain ' shall be computed after making the following deductions from the full value of the consideration for which the sale, exchange or transfer of the capital asset is made, namely; (i) expenditure incurred solely in connection with such sale, exchange or transfer; (ii) the actual cost to the assessee of the capital asset, including any expenditure of a capital nature incurred and home by him in making any additions or alterations thereto, but excluding any expenditure in respect of which any allowance is admissible under any provision of sections 8, 9, 10 and 12.
97 6 Provided that where a person who acquires a capital asset from the assessee, whether by sale, exchange or transfer, is a person with whom the assessee is directly or indirectly connected, and the Income tax Officer has reason to 'believe that the sale, exchange or transfer was effected with the object of avoidance or reduction of the liability of the assessee under this section, the full value of the consideration for which the sale, exchange or transfer is made shall, with the prior approval of the Inspecting Assistant Commissioner of Income tax, be taken to be the fair market value of the capital asset on the date on which the sale, exchange or transfer tookplace : Provided further. .
Provided further that where the capital asset became the property of the assessee before the 1st day of January 1939, he may, on proof of the fair market value thereof on the said date to the satisfaction of the, Income tax Officer, substitute for the actual cost such fair market value which shall be deemed to be the actual cost to him of the asset, and which shall be reduced by the amount of depreciation, if any, allowed to the assessee after the said date and increased or diminished, as the case may be, by any adjustment made under clause (vii) of sub section (2) of section 10;" Computation of the capital gains under section 12B is to be made by deducting from the market value of the consideration of the sale, exchange or transfer, expenditure incurred in connection with such sale, exchange or transfer and the actual cost to the assessee of the capital asset or at his option, where the capital asset became the property of the assessee before January 1, 1939, the fair market value of the asset on January 1, 1939.
It is open to the Income tax Officer, if it appears to him, that with the object of avoidance or reducing of the liability of the assessee to pay tax, the full value of the consideration for which the sale, exchange or transfer is made is understated and the person acquiring the capital asset is a person with whom the assessee is directly or indirectly connected, to determine the fair market value of the capital asset on the date on which the sale, exchange or transfer tool, place.
The difference between proviso one and proviso three may be noticed.
By virtue of the first proviso the Incometax Officer is, in the conditions set out therein, entitled to determine the fair market value of the asset at the date of the sale, exchange or transfer.
Under the third proviso, the assessee when he has exercised the option to adopt the value on January 1, 1939 is, for computation of the ictual cost to him of an asset 97 7 transferred, required to prove the fair market value of the asset on January 1.
1939, when the asset transferred belonged to him before that date.
There was no dispute in the present case about the market value at the date of the, transfer of the assets conveyed.
The first proviso therefore did not come into play.
The dispute related to the value to the assessee on January 1, 1939 of three assets ', the managing agencies, 240 shares of the Cement Agencies Ltd. and the goodwill.
The capital gain or loss had to be determined by deducting from the market value of the asset on February 1. 1948 the fair market value of those assets oil January 1. 1939, proved by the assessee to the satisfaction of the Income tax Officer.
The Appellate Assistant Commissioner estimated the value of the three assets on January 1, 1939 at Rs. 51,40,802/ .
The assessee contended that the evidence on the record showed that the market value exceeded the estimated value.
It is true that the onus lay upon the assessee to prove the fair market value of the assets on January 1, 1939 to the satisfaction of the Income tax Officer and therefore of the Tribunal.
The Tribunal did not consider the evidence and disposed of the claim of the assessee after observing that the value of the assets could not exceed the amount at which it was estimated by the Appellate Assistant Commissioner.
Under the scheme of the Incom tax Act, the Tribunal is the final authority on questions of fact.
The Tribunal in deciding an appeal is bound to consider all the evidence, and the argumerits raised before it by tile parties.
The Tribunal apparently did not consider the evidence : it merely recorded a bare conclu.
,ion without setting out any reasons in support thereof.
It is therefore not possible to say whether the Tribunal considered the evidence and the contentions raised 'by the assessee :it cannot be assumed merely because a conclusion is recorded that the Tribunal considered the evidence.
The High Court was, therefore, right in recording an answer in the affirmative on the fourth question.
It will be the duty of the, Tribunal in disposing of the appeal undeir section 66(5) of the Income tax.
Act to hear the parties and to determine on a consideration of the evidence the value of the three assets on January 1, 1939 in the light of the third proviso to section 12B(2).
In the appeal filed by the assessee, counsel for the assessee has not challenged the finding recorded on questions Nos.
(2) & (3) and nothing more need be said in respect of those questions.
Counsel claimed that by virtue of section 25(3) of the Indian Incometax Act, the assessee is exempted from paying tax in the. year in which the business was closed.
Reliance is placed upon section 25(3)) 978 of the Indian Income tax Act.
It provides, insofar as it is material "Where any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income tax Act, 1918, (VII of 1918), is discontinued, then, unless there has been a succession by virtue of which the provisions of sub section (4) have been rendered applicable, no tax shall be payable in respect of the income, profits and gains of the period between the end of the previous year and the date of .such discontinuance It is common ground that the assessee was assessed to tax in respect of the income from business under the Indian Income tax Act 7 of 1918 and the case is not one of succession by virtue of which the provisions of sub section
(4) of section 25 are rendered applicable.
Prima facie, the assessee was entitled to the benefit of section 25(3) i.e. it was exempted from payment of tax in respect of the income, profits and gains earned by carrying on business for the period between the end of the previous year and the date of discontinuance of the business.
This Court observed in Commissioner of Income tax Bombay City I vs Chugandas and Co.(1) that 'the exemption under section 25(3) is not restricted only to income on which tax was payable under the head "Profits and gains of business, profession or vocation" under the Act of 1918.
Counsel for the assessee contended that even though under the Act of 1918 capital gain was not charged to tax under the Income tax Act, 1922, as amended in 1947, since capital.
gains earned by the assessee form part of the income of the assessee as defined in section 2(6C) of the Act, and are on that account exigible to tax as income of the business, the assessee is entitled to the benefit of exemption prescribed by section 25 (3) of the Act.
Counsel for the Commissioner contended that on income earned from business which is discontinued, the assessee is en titled to exemption from payment of tax for the period during which the business was carried on in the year in which the business was discontinued.
He conceded that income which qualifies for exemption is income earned by carrying on business and not merely income computed for purposes of tax under section 10 of the Act. ' but he contended that the exemption does not apply to receipts which are not earned by carrying on the business, and are only fictionally deemed income for the purpose of the Incometax Act.
He said that in any event capital gains cannot be said to be income resulting from the activity styled "business", and on that account capital gains are not admissible to exemption under section 25(3) of the Act.
(1) ; 979 Chugandas & Company 's case(1) has, in our judgment, no application to the present case.
In that case the assessee firm was charged to tax on its income from business under the Indian Income tax Act, 1918.
The assessee firm discontinued its business on June 30, 1947, and in respect of interest on securities which formed part of the assessee 's business income, exemption was claimed under section 25(3).
This Court accepted the contention of the assessee.
It was observed at p. 338 : "When, therefore, section 25(3) enacts that tax was charged at any time on any business, it is intended that the tax was at any time charged on the owner or any business.
If that condition be fulfilled in respect of the income of the business under the Act of 1918, the owner or his successor in interest qua the business, will be entitled to get the benefit of the exemption under it if the business is discontinued.
The section in terms refers to tax charged on any business, i.e., tax charged on any person in respect of income earned by carrying on the business.
Undoubtedly, it is not all income earned by a person who conducted any business, which is exempt under sub section (3) of section 25 non business income will certainly not qualify for the privileges.
It is not necessary for the purpose of these appeals to decide whether an assessee is entitled to exemption under section 25(3) in respect of a receipt which was not chargeable as income under the Act of 1918, for, in our view, capital gains though they are income within the meaning of section 2(6C) as incorporated by Act 7 of 1939, and modified by Act XXII of 1947, are not income earned from trading activity carried on by an assessee, and therefore cannot be admitted to exemption under section 25(31).
In Commissioner of Income tax, Madras vs Express Newspapers Ltd.(1) this Court expounded the true nature of capital gains at p. 202 : "Under that section (section 12B) the tax shall be payable by the assessee under the head 'capital gains ' in respect of any profits or gains arising from the sale of a capital asset effected during the prescribed period.
It says further that such profits or gains shall be deemed to be income of the previous year in which the sale etc., took place.
This deeming clause does not lift the capital gains from the sixth head in section 6 and place it under the fourth head.
It only introduces a limited (1) ; (2) 1.
T. R. '50 980 fiction, namely, that capital gains "accrued will be deemed to be income of the previous year in which the sale was effected.
This fiction does not make them the profits or gains of the business.
" Capital gains by the definition under section 2(6C) are income, and they are liable to tax by virtue of section 6 read with section 12B; and if they are not income arising from a trading activity, the benefit of exemption from taxability arising from the discontinuance of the business will not, in our judgment, be available in respect of that head of income.
it is only income which is earned by carrying on business which is entitled to exemption under section 25 (3) and capital gains not being income which arise from trading activity, they are not entitled to exemption.
Both the appeals therefore fail and are dismissed with costs.
V.P.S. Appeals dismissed.

summary:
The assessee firm sold its assets to two companies and discontinued its business with effect from 1st February 1948.
For the assessment year 1949 50 the income tax department sought to assess, under section 12B of the Indian Income tax Act, 1922, the capital gains made by the asessee.
Capital gains under the section are computed, in a case (a) where there is no dispute about the market value of the asset on the date of transfer and (b) where the assessee has exercised the option under the third proviso to the section to adopt the value of the asset on 1st January 1939 as its actual cost, by deducting from the market value of the asset on the date of transfer the value of the asset on January 1, 1939.
In the present case the department accepted the market value of the assets on February 1, 1948, the date of transfer, and estimated the value of the assets on 1st January 1939, at a certain figure, and brought to tax the difference between the two, rejecting the assessee 's claim under section 25(3) to the benifit of exemption from taxability arising from discontinuance of the business.
The Appellate Tribunal confirmed the order.
It rejected the contention of the assessee that the evidence on the record showed that the market value of some of the assets on 1st January 1939 exceeded the value as estimated by the department and that therefore the capital gains to be taxed would be much less, by merely recording a bare conclusion that the value of the assets on 1st January 1939 could not be more than the estimated value, without considering the evidence.
The High Court, on reference, (1) held against the.assessee that it was not entitled to the benefit under section 25(3), and (2) held aginst the department that the Tribunal misdirected itself in not considering the evidence produced before the Income tax Authorities regarding the valuation on 1st January 1939.
The assessee and the Commissioner of Income tax appealed to this Court.
HELD : (1) It is only income earned by carrying on business that is entitled to exemption under section 25(3).
Capital gains, though by the definition in section 2(6C) are income and liable to tax by virtue of section 6 read with section 12B, not being income which arises from a trading activity, are not entitled to such exemption.
[98OB C] Commissioner of Income tax, Bombay City I vs Chugandas & Co. ; and Commissioner of Income tax, Madras vs Express Newspapers Ltd. , referred to.
[Whether an assessee was entitled to exemption under section 25(3) in respect of a receipt, such as capital gains, which was not chargeable is income under the Income tax Act 7 of 1918, not decided.] [979E] (2) Under the scheme of the Income tax Act, the Appellate Tribunal is the final authority on questions of fact.
While the onus lies upon the 9 7 2 assessee to prove the market value of the assets on January 1, 1939 the Tribunal, in disposing of the appeal under section 33(4) of the Act, is bound to hear the parties and consider the entire evidence produced before the Income tax Authorities.
In the present case, therefore, the Tribunal bad to determine, on a consideration of all the evidence, the value of the assets of the assessee on 1st January 1939.
[977E G]