judgement:
Appeals Nos. 1137 and 1138 of 1965.
14 Appeals by special leave from the judgment and orders dated October 12, 1962 and December 19, 1962 of the Madhya Pradesh High Court, Indore Bench in Civil Revision Nos. 195 and 497 of 1962 respectively.
B.P. Jhanjharia, and P.C. Bhartari, for the appellant (in both the appeals ).
P.K. Saksena and A.G. Ratnaparkhi, for the respondent (in both the appeals ).
The Judgment of the Court was delivered by Sikri, J.
These appeals by special leave are directed against the judgment of the Madhya Pradesh.
High Court in two Civil Revisions, Civil Revision No. 195 of 1962 and Civil Revision No. 497 of 1962.
These revisions came to be filed in the High Court in the following circumstances.
On January 21, 1961, the respondent K.N. Palshikarhereinafter referred to as the applicant filed an application under sections 387(4) and (5) of the Madhya Bharat Municipal Corporation Act, 1956 hereinafter referred to as the Act in the Court of District Judge, Indore.
He alleged that the Municipal Corporation by its memo No. 816 dated October 30, 1959, had informed him that in accordance with the Road Widening Scheme a set back of total, area of 1455.1 sq.
ft. had been cut down from his land comprised in House No. 1 (New No. 38) on Road No. 1, Choti Gwaltoli No. 1, Indore, and that the Municipal Corporation proposed to give him compensation only at the rate of Rs. 2 50 per sq .ft.
which was not acceptable to him.
He further alleged that the arbitrators appointed by the parties had given an award which was also not acceptable to him.
The arbitrators had given Rs. 50/ per sq.
while he demanded Rs. 145/ per sq.
The Municipal Corporation in its reply dated February 28, 1961, submitted that the compensation given by the arbitrators was very much in excess of the actual price of the land and prayed that the application be dismissed.
Various issues were framed by the Additional District Judge, Indore, but they were all directed to determining the fair amount of compensation including interest.
The Municipal Corporation also applied on January 19, 1961, under section 387(4) of the Act praying mat me price of the land be settled as per section 387(4).
In para 10 of this application it was alleged that the memo regarding set back was issued on October 30, 1959, and therefore the price is to be settled at the rates prevailing on that date.
In his reply to this application the applicant, Palshikar, accepted para 10 of the application.
15 The Additional District Judge on February 6, 1962, disposed of both the applications by one order and he fixed the compensation of land in question at the rate of Rs. 30/ per sq.
with interest at 6% per annum from the date of the delivery of the possession.
He further ordered that the applicant shall be entitled to 15% solatium as decided by the award.
He also valued the structure.
During the pendency of these applications the Municipal Corporation applied on August 1, 1961, to the Additional District Judge for withdrawing the claim of the Corporation over a portion of the land in question.
On February 2, 1962, the Additional District Judge passed the following order "The N.A. applied that the Improvement Board is going to acquire portion of the land in question and hence the N.A. shall not be compelled to acquire this land.
At present there is nothing to show that the Improvement Trust is going to acquire the land.
Moreover, I have to fix the compensation in the case.
The N.A. may or may not acquire the land at its own risk.
The application is rejected.
" Against the common order of the Additional District Judge three revisions, two by the Municipal Corporation and one by the applicant, were filed.
Civil Revision No. 195 of 1962 was filed the Municipal Corporation alleging that the compensation awarded by the learned Additional District Judge was excessive and praying that fair compensation be fixed.
The High Court held that the Additional District Judge had given opportunity to the parties to lead evidence and determined the amount of compensation after hearing the parties and in these circumstances it could not be said that he was guilty of committing irregularity in the exercise of his jurisdiction, even assuming that the amount determined as payable was either too high or too low.
The High Court then dealt with the point raised by the learned counsel for the Municipal Corporation that the Additional District Judge had refused to permit the Corporation to withdraw the acquisition proceedings and had thus refused to exercise jurisdiction.
The High Court held that in a proceeding under section 387 (4 ) of the Act there was no provision to enable the Corporation to withdraw from any setback already given and no statutory provision had been pointed out entitling the Court to permit the Corporation to withdraw.
In the result the High Court dismissed the revision petition.
In the meantime the applicant filed an application under section 388 of the Act for execution of the order of the Additional District Judge dated February 6, 1962.
The Corporation objected to the 16 execution on the ground that the applicant had not given possession of the disputed land to the Corporation nor had he executed a sale deed with respect to it in its favour.
The applicant controverted these objections and submitted that demand of possession prior to deposit of the decretal amount was illegal and contrary to section 387(5) of the Act.
lie further submitted that under section 305 of the Act the vesting of the property occurs immediately when,the rebuilding starts and, therefore, there is no necessity of executing the sale deed.
The Corporation again filed an application for permission to withdraw from the acquisition proceedings and in the alternative it was prayed that the money deposited in Court against this execution case may be given to the applicant only when he gives vacant possession of the land covered by the set back scheme.
The Additional District Judge by his order dated October 31, 1962, repelled these contentions and allowed the applicant to withdraw the money deposited by the Corporation.
Against this order the Corporation filed Civil Revision No. 497 of 1962 to the High Court.
The High Court by its judgment dated December 19, 1962, held that "the terms of section 387(5) indicate that taking of possession of the property has to.
follow the payment of the amount of compensation determined by the Court.
In view of the terms of this provision it is not correct to contend that the opponent (applicant) ought first to secure vacant possession of the property and then alone can claim to withdraw the compensation amount.
" The High Court noted in the order that the applicant was willing to.
give such possession as he himself could.
This is the second judgment of the High Court against which the Court gave leave to appeal.
The learned counsel for the Corporation contends: (1 ) that approval of the site plan will not divest the applicant of the ownership and, therefore, it was possible for the Corporation to withdraw from the acquisition proceedings; (2) when the projecting portion is the main building no compensation is payable unless the rebuilding starts and the portion is cleared; (3) that the Act provides only for compensation and not for solatium and (4) that the amount of compensation is excessive.
The learned counsel for the applicant, palshikar, made a statement before us that he was willing to deposit Rs. 6,000/ in the District Court,within 'four months in respect of the area which is in possession of the tenants and that he will be entitled to with 17 draw this amount once the possession is given to the Corporation and not before.
In view of this undertaking it is not necessary to determine point No. 2.
The point is not free from doubt and we hesitate to express our opinion when the point has become academic in view of the undertaking given by the learned counsel for the applicant, Palshikar.
Regarding point No. 1, we agree with the High Court that there is no provision in the Act for enabling the Corporation to withdraw from the acquisition proceedings.
In fact, it seems to us that there iS automatic vesting of the land in the Corporation under section 305 once the requisite conditions are satisfied Section 305 reads as follows: "305.
Power to regulate line of buildings. ( 1 ) If any part of a building projects beyond the regular line of a public street, either as existing or as determined for the future or beyond the front of immediately adjoining buildings the Corporation may (a) if the projecting part is a verandah, step or some other structure external to the main building then at any time, or (b) if the projecting part is not such external structure as aforesaid, then whenever the greater portion of such building or whenever any material portion of such projecting part has been taken down or burned down or has.
fallen down, require by notice either that the part or some portion of the part projecting beyond the regular line or beyond the front of the immediate adjoining building, shall be removed, or that such building when being rebuilt shall be set back to or towards the said line or front; and the portion of land added to the street, by such setting back or removal shall henceforth be deemed to be part of the public street and shall vest in the Corporation: Provided that the Corporation shall make reasonable compensation to the owner for any damage or loss he may sustain in consequence of his building or any part thereof being set back, (2) The Corporation may, on such terms as it thinks fit, allow any building to be set forward for the improvement of the line of the street.
" In this case it is not necessary to determine whether land affected by a notice vests when the notice is given or when the part or some portion of the part projecting beyond the regular line or beyond the front of the immediately adjoining building is removed, or when the building when being rebuilt is set back, 18 because it seems to have been common ground between the parties that the date for the determination of compensation in this case is the date of the memo, i.e., October 30, 1959.
Coming to the third point, the relevant section which requires interpretation is section 387 ( 3 ) which reads: "387.
Arbitration in cases of compensation, etc.
(3) In the event of the Panchayat not giving a decision within one month or such other longer period as may be agreed to by both the parties from the date of the selection of Sarpanch or of the appointment by the District Court of such members as may be necessary to constitute the Panchayat, the matter shall, on application by either party be determined by the District Court which shall, in cases in which the compensation is claimed in respect of land, follow as far as may be the procedure provided by the Land Acquisition Act, 1894, for proceedings in matters referred for the determination of the Court; Provided that (a) no application to the Collector for a reference shall be necessary, and (b) the court shall have full power to give and apportion the costs of all the proceedings in manner it The learned counsel for the applicant relies on the decision of the Bombay High Court in The Borough Municipality of Ahmedabad vs Javendra Vaiubhai Divatia(1).
In that case Beaumont, C.J., interpreting section 198 of the Bombay Municipal Boroughs Act (Born.
Act XVHI of 1925), which section is, in terms, similar to section 387 of the Act, observed as follows: "There is no express provision in the Bombay Municipal Boroughs Act allowing for such addition to the compensation, but under the Land Acquisition Act fifteen per cent is allowed in respect of the compulsory nature ,of the acquisition, and the question is whether that provision in the Land Acquisition Act can be treated as incorporated into section 198 of the Bombay Municipal Boroughs Act as being part of the procedure provided by the Land Acquisition Act.
I agree that, prima facie, a provision of this sort, adding to the compensation to be payable for the value of the land, is not aptly described as Procedure, but still one has to look at the Land Acquisition Act and note the phraseo (1) I.L.R. [1937] Borg.
19 logy adopted.
One finds Part Iii headed "Reference to Court and Procedure thereon. " Then he referred to as.
23, 24 and 25 of the Land Acquisition Act and concluded: "It seems to me that sections 23, 24 and 25 of the Act constitute a code laying down the principles on which the District Court is to act in arriving at the compensation to be paid, and it is quite impossible to leave out of that code sub section (2) of section 23, as Mr. Shah has invited me to do.
His contention is that the fifteen per cent is an allowance of something in addition to the value of the land, which has to be paid for under the Municipal Act.
But the truth is that the sections determine the basis on which the value of the land is to be ascertained on compulsory purchase and the allowance of the fifteen per cent must be set off against matters disallowed under section 24.
Those pro.visions in the Land Acquisition Act are contained in a Chapter entitled "Reference to Court and Procedure thereon" and I think that they must be treated as applicable to proceedings in the District Court under section 198 of the Bombay Municipal Boroughs Act." The learned counsel for the Corporation was not able to cite any authority which has dissented from this view.
We agree with the reasoning of the learned Chief Justice and hold that the Additional District Judge.was right in awarding 15 per cent solatium.
Coming to the fourth point, the revision to the High Court was filed under section 392 of the Act which provides that "notwithstanding anything to the contrary in any other law for the time being in force, the District Court shall exercise all the powers and jurisdiction expressly conferred on or vested in it by the provisions of this Act, and unless it is otherwise expressly provided by this Act, its decision shall be subject to revision by the High Court." ' The High Court could not, in a revision under section 392, go into questions of fact and determine the amount of compensation, and the High Court was right in declining to deal with this question.
It is not necessary to determine whether the powers of revision under section 392 are the same as under section 115, C.P.C., because even if the powers under section 392 of the Act are wider than that under section 115, C.P.C., they do not extend to determining questions fact.
In view of this conclusion this.
point cannot be agitated before us.
In the result the appeals fail, but the applicant Shri Palshikar shall deposit the amount of Rs. 6,000/ in the Court of the Additional District judge within four months, as stated by his 20 counsel., and he shall be entitled to withdraw this amount once vacant possession is given of the land in dispute to the Corporation.
If so requested by the applicant, Shri Palshikar, the Corporation should join as co plaintiff in a suit or proceeding to be filed by him against the tenants for Securing possession.
If it refuses to do so within 3 months from the date the applicant requires it to join as co plaintiff the respondent may withdraw this Rs. 6,000/ deposited by him.
The Corporation shall also give such further assistance as may be required by the applicant in .accordance with law.
The applicant shall be entitled to costs; one hearing fee.
G.C. Appeals dismissed.

summary:
The appellant corporation in accordance with its Road Widening Scheme sought to acquire some of the land belonging to the respondent.
The 'respondent was not satisfied with the compensation offered by the appellant or awarded by the arbitrators, and under 8. 387(4) and (5) of the Madhya Bharat Municipal Corporation Act, 1956 he filed an application for fixation of compensation in the Court of the District Judge, Indore.
The appellant in its reply submitted that the compensation awarded by the arbitrator was too low.
The Additional District Judge rejected an application filed by the appellant for withdrawing its claim over a portion of the land in question.
He fixed compensation for the land at the rate of Rs. 30/ per sq.
with interest at 6% per annum from the date of the delivery of the possession, and also awarded a solatium of 15% to the respondent.
The 'revision application filed against the judgment of the Additional District Judge by the Corporation was dismissed by the High Court.
On the question of compensation the High Court held that it could not interfere with the order of the Additional District Judge as he had committed no irregularity in the exercise cf his jurisdiction.
By special leave the Corporation appealed to this Court.
The questions that fell for consideration were (i) whether the Corporation was entitled under law to withdraw from acquisition proceedings, (ii) whether the respondent was entitled under the Act to a solatium in addition to the compensation, (iii) whether the High Court was right in 'refusing to go into the question of sufficiency of compensation.
HELD: (i) There was no provision in the Act for enabling the .Corporation to withdraw from the acquisition proceedings.
In fact there automatic vesting of land in the Corporation under section 305 once the requisite conditions were satisfied.
[17 B C] (ii) The Additional District Judge was right in awarding 15% solatium.
[ 19 E] The Borough Municipality of Ahmedabad vs Yavendra Vajubhai Divatis, I.L.R. , approved and applied.
(iii) The High Court could not in a revision under section 392 go into questions of fact and determine the amount of compensation and it was right in declining to go into.
the question.
Even if the powers under section 392 are wider than those under section 115 of the Code of Civil Procedure they do not extend to determining questions of fact.
[19 G]


judgement:
Appeal No. 714 of 1966.
Appeal by special leave from the judgment and order, dated September 17, 1964 of the Kerala High Court in Income tax Referred Case No. 62 of 1963.
R.N. Sachthey, T.A. Ramachandran and B.D. Sharma, for the appellant.
C.S. Venkateswara lyer, Sardar Bahadur Saharya and Yougindra Khusalani, for respondent No. 2.
The Judgment of the Court was delivered by Grover, J.
The sole question for determination in this appeal by special leave is whether on a true interpretation and construction of the second proviso to section 10(2)(vii) of the Income Tax Act 1922, sale of the assets of an assessee effected for the purpose of closing down the business would be covered by that proviso and would be assessable as profit.
The assessee was running the business of plying buses in the name of Kumar Motor Service.
During the assessee 's previous year which was the year ending August 16, 1959 the buses had been plied for part of the year but they were sold between August 16, 1958 and January 13, 1959.
Two of the buses had been sold for Rs. 78,000 and the other four for Rs. 35,000, the total consideration received being Rs. 1,13,000.
The assessee claimed a payment of Rs. 2,000 as brokerage.
The Income tax Officer fixed a sum of Rs. 25,000 as the route value and held this amount to be a capital gain assessable to tax.
On the balance of Rs. 86,000 he worked out the profits in the following manner : Sale price of 6 buses: .
Rs. 86,000 Written down value of six Rs. 36,712 buses .
Rs. 49,288 The Income Tax Officer consequently assessed the sum of Rs. 49,288 as profit under the second proviso to.
section 10(2)(vii).
Before the Appellate Assistant Commissioner in appeal the assessee contended that the business had been transferred as a whole and therefore no profit could be taxed under the aforesaid provision.
This contention was rejected by the Appellate Assistant Commissioner on the ground that the transaction was only of sale of buses, along with the route value and this constituted sale of major assets but the business as such was not transferred or handed over to any party.
Before the Income Tax Appellate 533 Tribunal the determination of Rs. 86,000 as the value of six buses was not disputed and the only point agitated related to the assessability of the amount of Rs. 49,288 as business profit under ' the second proviso.
The tribunal was of the opinion that the buses had been plied by the assessee for part of the previous year and the profit on the sale of these buses was taxable under the said provision.
The tribunal in its appellate order noticed the decision of this Court in Commissioner of Income Tax, Madras vs Express Newspapers Ltd., Madras(x) in which the question arose whether the second proviso would apply where the sale had been made in the process of winding up of a company but distinguished it on the ground that this Court in that case considered the second proviso as it stood before the amendment made by section 11 of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949 (67 of 1949).
The decision of this Court in Commissioner of Income Tax, Kerala vs West Coast Chemicals and Industries Ltd.(2) was also held by the tribunal to be inapplicable to the facts .of the present case.
The assessee moved the tribunal for making a reference to.
the High Court and the following question was referred: "Whether on the facts and in the circumstances of the case, the sum of Rs. 49,288 was assessable as profit under the provisions of section 10(2)(vii) ?".
Although the tribunal had given no finding that the whole of the.
bus service business had been wound up during the relevant period, the High Court proceeded to answer the question on that assumption.
It is difficult to see how the High Court was justified in saying that the tribunal had apparently accepted the contention that the sale was a closing down or a realization sale.
In such a situation we might have followed the course which commended itself in Commissioner of Income Tax, Kerala vs
R.R. Ramakrishna Pillai(3); but we are of the opinion that even on the assumption that the sale of the buses was a closing down or a realization sale it would.
nonetheless be taxable since the sale was made after the amendment of the second proviso by Act 67 of 1949.
The High Court in the present case referred to the observations in the Commissioner of Income Tax vs Express Newspapers Ltd., Madras(1) and to the three conditions laid down therein for bringing the sale proceeds to charge under the second proviso.
The High Court thought that the third condition was not satisfied as the sale of the buses was a closing down or a realization sale which was a mere incident of the winding up process of the business.
It was consequently held that the question: (1) [19641 8 S.C.R. 189, 195.
(2) (3) 534 referred must be answered in favour of the assessee and against the Revenue.
Now the second proviso was in the following terms: "section 10 . . . . . (2). . . . . .
Proviso (1) . . . . . (2) Provided further that where the amount for which any such building, machinery or plant is sold (whether during the continuance of the business or after the cessation thereof), exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place;" The words within brackets did not exist before the amendment made by Act 67 of 1949 and were inserted by that Act.
In The Liquidators of Pursa Limited vs Commissioner of Income Tax, Bihar(1) the controversy arose out of the proceedings relating to the assessment of Pursa Limited for the assessment year 1945 46.
Attempts had been made from 1942 onwards to sell the entire business of the company but without success.
In December 1943 an agreement was executed whereby the assessee agreed to sell all the lands, buildings, machinery, plant etc., used in connection with the sugar factory which was being run by the company.
On the date of the sale the company possessed sugar stocks valued at Rs. 6 lakhs which the company continued to sell up to June 1944.
The company went into voluntary liquidation on June 20, 1945.
The Income Tax Officer held that the profits of the sale of machinery and plant were liable to assessment under section 10(2)(vii).
The Appellate Asstt.
Commissioner and the Income Tax Appellate Tribunal affirmed that order.
After the matter had been taken to the High Court it came finally in appeal to this Court.
It was held that the intention of the company was to discontinue its business and the sale of the machinery and plant was a step in the process of the winding up of the business culminating in the voluntary liquidation of the company and even if the sale of the stock of sugar be regarded as carrying on of business of the company and not a realisation of its assets with a view to winding the machinery or plant not having been used at all, section 10(2) (vii) would have no application to the sale of any such machinery or plant.
The controversy in Commissioner of Income Tax, Kerala vs West Coast Chemicals and Industries Ltd.(2) arose out of the assessment of the company for the accounting year ending April 30, 1944.
The assessee company had entered into an agreement (1) ; (2) 535 in 1943 for the sale of the lands, buildings, plant and machinery of a match factory with a view to close down the business.
The purchaser made default in payment and a few months later a fresh agreement was entered into between the parties for the sale of the property mentioned in the first agreement and also chemicals and paper used for manufacture which had not been included in the first agreement.
The Department sought to assess the profits derived from the sale of the chemicals and paper as profits from the business.
The assessee contended that it was a realisation sale and this amount was not liable to tax.
It was held that on the facts of that sale the sale of chemicals and materials used in the manufacture of matches was only a winding up.
sale to close down the business and to realise all the assets.
Therefore the tax liability was not attracted.
In Commissioner of Income Tax, Madras vs Express Newspapers Ltd., Madras(1) a decision on which the High Court relied a great deal in the present case the question again arose out of the assessment made before the amendment made in 1949, the accounting year being 1946 47.
Reference was made by Subba Rao, J., (as he then was) delivering the judgment of this Court to the decision in the case of The Liquidators of Pursa Limited(2) as also to other decisions and after an examination of the relevant provisions the following three conditions were laid down for bringing the sale proceeds to charge under the second proviso to section 10(2)(vii): "( 1 ) During the entire previous year or a part of it the business shall have been carried on by the assessee; (2) the machinery shall have been used in the business; and (3) the machinery shall have been sold when the business was being carried on and not for the purpose of closing it down or winding it up.
" There can be no doubt that according to the law laid down by this Court the view of the High Court would have been sustainable if the sale in the present case had been effected during the assessment year prior to the amendment of the proviso by Act 67 of 1949.
The critical words which were inserted by that proviso namely, "whether during the continuance of the business or after the cessation thereof ', must be given their 'proper meaning.
It is quite plain that if the building, machinery or plant is sold during the continuance of the business or after the business ceases the sale proceeds would be liable to tax in accordance with that proviso.
The only question therefore is whether when a sale is made for the purpose of closing down the business or effecting its cessation the proviso would be inapplicable.
When the legislature clearly provided that the proviso would apply even if the sale (1) (2) ; 536 was made after the cessation of the business it is difficult to conceive that it was intended to exclude from the ambit of the proviso realisation sales of the nature contemplated in the previous decisions of this Court.
Such a result would be illogical.
Even logic is not necessarily to govern the interpretation of a taxing provision, the rule of reasonable interpretation cannot be ignored.
Indeed this Court in a recent judgment Commissioner of Income Tax vs Ajax Products Ltd.(1) clarified the position about the effect of the amendment made in 1949 in the proviso and reference was made to the three conditions for the applicability of the second proviso before the amendment which were laid down in the previous decision of this Court.
It was then observed: "the words whether during the continuance of the business or after the cessation thereof were not present in the unamended proviso.
In the two decisions cited earlier, in the absence of such words, this Court held that to attract the said proviso the machinery shall have been sold before the business was closed down.
This clause omits that condition for the exigibility of the tax".
The above observations clearly show that the amending words in the proviso eliminated the third condition which had been laid down for its applicability in the previous decision namely, that the machinery shall have been sold when the business was being carried on and not for the purpose of closing it down or winding it up.
Once that condition disappears as a result of the amendment only the first two conditions remain and all that has to be seen is whether during the entire previous year or a part of it the business has been carried on by the assessee and that the machinery has been used in the business.
Both these conditions, according to the finding given by the tribunal, exist in the present case.
The result would be that the profits.
arising out of the sale of buses in question as determined by the Income Tax Officer would be chargeable to tax in accordance with the second proviso to section 10(2) (vii).
The answer to the question referred in the present case has to be in the affirmative and against the assessee.
The appeal is consequently allowed with costs and the answer returned by the High Court is discharged.
We are informed at the Bar that K.B. Kalikutty one of the legal representatives of the assessee 'had died before Special Leave was granted.
It will be open to the Tribunal to decide the effect of death of the said legal representative and to non impleadment of the legal representatives of the deceased at the hearing under section 66(5) of the Act.
R.K.P.S. Appeal allowed.

dataset_name: IN-Abs

summary:
The assessee was running a business of plying buses and during its previous year ending on August 16, 1959, the buses had been plied for part of the year but were sold thereafter.
The Income tax Officer assessed the difference between the sale price of the buses and their written down value to tax as profit under the second proviso to section 10(2) (vii).
In appeal, the Appellate Assistant Commissioner rejected the assessee 's contention that the business had been transferred as a whole and therefore the profit in question could not be taxed.
The Tribunal also dismissed an appeal taking the view that the buses had been plied by the assessee for part of the previous yea.r and the profit on the sale of these buses was taxable under the said provision.
However, the High Court, upon a reference, held that the amount in question was not assessable as profit under section 10(2)(vii) on the assumption that the whole of the bus service business had been wound up during the relevant period.
On appeal to this Court.
HELD: allowing the appeal: Even on the assumption that the sale of the buses was a closing down or a realization sale it would nonetheless be taxable since the sale was made after the amendment of the second proviso.
section 10(2)(vii) by Act 67 of 1949.
[533 F G] According to the law laid down by this Court the view of the High Court would have been sustainable if the sale in the present case had been effected during the assessment year prior to the amendment of the proviso by Act 67 of 1949.
The critical words which were inserted by that proviso namely, "whether during the continuance of the business or after the cessation thereof", must be given their proper meaning.
It is quite plain that if the building, machinery or plant is sold during the continuance of the business or after the business ceases, the sale proceeds would be liable to tax in accordance with the proviso.
When the legislature clearly provided that the proviso would apply even if the sale was made, after the cessation of the business, it is difficult to conceive that it was intended to exclude from the ambit of the proviso a sale made for the purpose of closing down the business or effecting its cessation.
[535 F H] Commissioner of Income tax, Madras Iv.
Express Newspapers Ltd., Madras, , 195; Commissioner of Income tax, Kerala vs West Coast Chemicals and Industries Ltd. ; Commissioner of Income tax, Kerala vs
R.R. Ramakrishna Pillai, and The Liquidators of Pursa Limited vs Commissioner of Income tax, Bihar; , ; distinguished.
Commissioner of Income tax vs Ajax Products Ltd., ; ; referred LI 3Sup.
CI/68 3 532


judgement:
l Appeals Nos.
1764 to 1767 of 1967.
Appeals from the judgment and decree dated January 17, 1964 of the Allahabad High Court in Income tax Reference No. 193 of 1955.
C.K. Daphtary, Attorney General, R. Gopalakrishnan, R.N. Sachthey and B.D. Sharma, for the appellant (in all the appeals).
M.C. Chagla and R.P. Kapur for 1.
N. Shroff, for the respondent (in C.A. No. 1764 of 1967).
R.P. Kapur for 1.
N. Shroff, for the respondent (in C.As.
1765 to 1767 of 1967).
The Judgment of the Court was delivered by Shah, J.
M/s. Madan Gopal Radhey Lal hereinafter called the assessees deal in shares and securities.
They held in the relevant years as part of their stock in trade shares of certain companies.
The assessees received from the Companies at different times bonus shares proportionate to their equity holding.
From time to time the assessees sold the bonus shares received by them.
The Income tax Officer brought to tax Rs. 55,607 in the assessment year 1946 47; Rs. 41,625 in the assessment year 1948 49; Rs. 1,43,050 in the assessment year 1949 50 and Rs. 33,170 in the assessment year 1950 51 being the sale proceeds of the bonus shares, holding that those receipts represented income of the assessee arising from their business in shares.
The order of the Income tax Officer was confirmed by the Appellate Assistant Commissioner and by the Income tax Appellate Tribunal.
At the instance of the assessees, the Tribunal referred the following question of law to.
the High Court of Allahabad for opinion: "Whether the sale proceeds of bonus shares which had been issued in respect of shares which formed part of the assessee 's stock in trade of the share dealing business are liable to inclusion in the assessee 's total incomes for the respective years as profits of the share dealing business?" The High Court called for a supplementary statement of case.
Full Bench of the High Court (Manchanda, J., dissenting) ans 9 wered the question in the negative.
The Commissioner has appealed to this Court with certificate granted by the High Court.
The Articles of Association of the various Companies which had issued the bonus shares.
are not on the record.
It has been assumed that the Companies had issued bonus shares in exercise of the power conferred upon them by the ArtiCles of Association, and no argument has been raised in that behalf.
A company when authorised by its Articles of Association may convert its accumulated profit into capital and then utilise such profit by issuing additional shares.
by way of bonus to the shareholders.
Under the Income tax Act, 1922, at the relevant time, issue of such bonus shares by capitalisation of the accumulated profit was not treated as distribution of dividend.
In commissioners of Inland Revenue vs John Blott(1) the House of Lords (by majority) held that bonus shares issued by a Company in exercise of the power under the Articles of Association are not dividend, and therefore not income of the shareholder.
Viscount Haldane observed at p. 126: " .
I think that it is a matter of principle within the power of an ordinary joint stock company with articles such as those in the case before us to determine conclusively against the whole world whether it will ' withhold profits it has accumulated from distribution to its shareholders as income, and as an alternative, not distribute them at all, but apply them in_ paying up the capital sums which shareholders electing to take up unissued shares could otherwise have to contribute.
If this is done, the money so applied is capital and never becomes profit in the hands of the shareholder at all.
What the latter gets is no doubt a valuable thing.
But it is a thing in the nature .of an extra share certificate in the company.
His new shares do not give him an immediate right to a larger amount of the existing assets.
These remain where they were.
The new shares simply confer a title to a larger proportion of the surplus.
assets if and when a general distribution takes place, as in the winding up.
In these assets, the undistributed profits now allocated to capital, will be included profits which will be used by the company for its business, but henceforth as part of its issued share capital.
" Similarly Lord Cave observed at p. 135: "The profits remained in the hands of the Company as capital, and the shareholders received a paper certificate as evidence of his interest in the additional capital (1) 2Sup.
C.I./69 2 10 so set aside.
The transaction took nothing out of the Company 's coffers, and put nothing into the shareholders ' pockets; and the only result was that the Company, which before the resolution could have distributed the profit by way of dividend or carried it temporarily to reserve, came thenceforth under an obligation to retain it permanently as capital.
It is true that the shareholder could sell his bonus shares, but in that case he would be realising a capital asset producing income, and the proceeds would not be income in his hands.
" The principle of the case was affirmed by the Judicial Committee in a case arising under the Indian Income tax Act, 1922: Commissioner of Income tax, Bengal vs Mercantile Bank of India and Others(1).
Accordingly bonus shares given by a Company in proportion to the holding of equity capital by a shareholder are, in the absence of any express provision to the contrary liable to be treated as capital and not income.
We are unable to agree with the judgment of the Bombay High Court (to which reference was made by the Tribunal) in Commissioner of Income tax, Central Bombay vs Maniklal Chunnifat and Sons Ltd., Bombay I.T. Reference No. 16 of 1948that bonus shares received by a shareholder who carries on business in shares and securities "ipso facto become accretion to his stock in trade." Bonus shares would normally be deemed to be distributed by the Company as capital and the shareholder receives the shares as capital.
The bonus shares are accretions to the shares in respect of which they are issued, but on that account those shares do not become stock in trade of the business of the shareholder.
A trader may acquire a commodity in which he is dealing for his own purposes, and hold it apart from the stock intrade of his business.
There is no presumption that every acquisition by a dealer in a particular commodity is acquisition for the purpose of his business: in each case the question is one of intention to be gathered from the evidence of conduct and dealings by the acquirer with the commodity.
Bonus shares having been received by the assessees in respect of their stock in trade did not therefore become part of their stock in trade, merely because they were accretions to the stock intrade.
The bonus shares were received as capital: they could be converted by the assessees into their stock in trade or retained as their capital asset.
The Tribunal observed in paragraph 5 of its order that "the assessee deals in shares and the sales proceeds of the bonus shares was (were) received by him in the course and as part of his share (1) 11 dealing business.
The amount received by the assessee is therefore part of his profit from the share dealing business and is liable to tax as such".
Counsel for the assessees contended that the Tribunal has not referred to any evidence in support of its conclusion and has made a cryptic statement which is not capable of the interpretation that the assessees had converted the bonus shares into their stock in trade.
If there is no presumption that the accretion to the stock in trade necessarily gets incorporated into the stock in trade, says Mr. Chagla, in the absence of evidence showing that the bonus shares were treated by the assessees as stock.in trade the finding of the Tribunal cannot be sustained Counsel invited our attention to the supplementary statement of case in which the Tribunal recorded that in the copies of balance sheets filed by the assessees as of February 14, 1948, March 8, 1949 and March 8, 1950, the shares did not find a place and that the sale proceeds of the bonus shares were credited in the capital account of the assessees for the four years in question on the last dates of the relevant accounting years.
But the Tribunal has found that the sale proceeds of the bonus shares were received in the course and as part of their business in shares and were on that account taxable.
It is.
somewhat unfortunate that the Tribunal has not set out in detail the facts found by it and the inference drawn therefrom.
Even in the supplementary statement no attempt has been made to set out the facts on which the conclusion was based.
The orders of the Income tax Officer and the Appellate Assistant Commissioner are also not before us.
The mere circumstance that in the copies of the balance sheets tendered by the assessees the bonus shares did not find a place has, in our judgment, no importance, and the credit entries in the capital account on the last dates of the respective accounting years in the four years in question also do not support an inference in favour of the assessees.
The question posed for the opinion of the Court was not whether the conclusion of the Tribunal was rounded on evidence, but whether the sale proceeds of the bonus shares were of the nature of revenue.
On this question an inquiry into whether the conclusion of the Tribunal is supported by the evidence cannot be made.
In India Cements Ltd. vs Commissioner of Income tax(x) this Court observed that in a reference under the Income tax Act the High Court must accept the findings of fact made by the Appellate Tribunal, and it is for the person who has applied for a reference to challenge these findings first by an application under section 66( 1 ).
If he has failed to file an application under section 66(1 ) expressly raising the question about the validity of the findings of fact, he is not entitled .to urge before the High Court that the findings are (1) 12 vitiated for one reason or another. 'The principle of that case applies here.
It is not open to the assessees to contend on the question, raised that the finding of the Tribunal is not supported by evidence.
The answer recorded by the High Court is discharged '.
The answer to the question submitted is in the affirmative.
No order as to costs of the appeal to this Court and of the reference ' in the High Court.
V.P.S. Appeal allowed.

summary:
The assessee, a dealer in shares and securities, held as part of its stock in trade, shares of certain companies.
The assessee 'received from those companies, at different times, bonus shares proportionate to its equity holding.
On the question whether the sale proceeds of such bonus shares are liable to be included in the assessee 's total income as profits of the share dealing business, the Tribunal found that the sale proceeds of the bonus shares were received by the assessee in the course of and as part of its business in shares, and held that the proceeds were, on that account, taxable as income.
The High Court, on reference, held in favour of the assessee.
In appeal to this Court, HELD: (1 ) A trader may acquire a commodity in which he is dealing, for, his own purposes, and hold it apart from the stock in trade of his business.
There is no presumption that such an .acquisition, even if it is an accretion to the stock in trade of the business, is an acquisition for the purpose of his business: in each case the question is one of intention to be gathered from the evidence of conduct and dealings by the acquirer with the commodity.
Bonus shares given by a company in proportion to the holding of equity capital by a shareholder are, under the income tax Act at the relevant time (1946 50), liable to be treated as capital and not as income.
Therefore, the bonus shares received by the assessee did not become part of its stock in trade merely because they were accretion to its stock in trade.
[10 C, F, G] C.I.T. Central Bombay vs Maneklal Chunilal, I.T. Ref.
No. 16 of 1948 (Bombay High Court), disapproved.
C.I.T., Bengal vs Mercantile Bank of India, 4 I.T.R. 239(P.C.), applied.
Commissioner of Inland Revenue vs John Blottt, 8 T.C. 101 (H.L.) referred to.
(2) In the present case, however, the Tribunal found that the bonus shares, received as capital, were converted by the assessee into its stockin trade and were not retained as a capital asset.
The question posed for the opinion of the High Court was no whether the finding of the Tribunal was rounded on evidence, but whether the sale proceeds of the bonus shares were of the nature of revenue.
On this question, when the assessee had not filed any application under section 66(1) of the Income tax , expressly raising the question about the validity of the Tribunal 's finding of fact, the High Court must accept the finding and cannot enquire whether the finding is supported by evidence or not.
The High Court was therefore, not justified in interfering with the finding and conclusion of the Tribunal.
[11 D, F H] India Cements Ltd. vs
C.I.T., followed.


judgement:
Appeals Nos. 688 and 689 of 1968.
Appeals by special leave from the judgment and order dated April 17, 1963 of the Bombay High Court in Misc.
Petitions Nos. 229 and 230 of 1962.
Sukumar Mitra, S.K.Aiyar, R.N. Sachthey and B.D. Sharma, for the appellant (in both the appeals ).
M.C. Chagla, B. Datta and P.C. Bhartari, for the respondent in both the appeals ).
The Judgment of the Court was delivered by Ramaswsmi, J.
The respondent is a limited company incorporated under the Indian Companies Act, 1913 and carries on business of manufacturing and selling diesel trucks and bus chassis locomotives and other heavy engineering products.
The respondent manufactures diesel trucks and bus chessis in collaboration with the German firm "Daimler Benz A.G." The business of manufacturing locomotives is carried on by the respondent in collaboration with the German firm "Krauss Maffei A.G." For each of the assessment years from 1955 56 to 1961 62, the Income Tax Officer issued a notice to the respondent under section 43 of the Indian Income Tax Act, 1922 (hereinafter called the "Act ') intimating that he intended treating the respondent as the Agents of the two German firms.
In pursuance of the notices the Income Tax Officer actually passed orders under section 43 of the Act treating the respondent as agent of the said two German firms.
For the assessment year 1962 63 no notice under section 43 'of the Act had been issued or served upon the respondent by the Income Tax Officer and no order under that section had been passed treating the respondent as the agent of the two German firms.
On September 8, 1961, the respondent received from the Income Tax Officer notices of demand under section 29 of the Act together with an order under section 18A(i) calling upon the respondent to make advance payment of the tax for the assessment year 1962 63 as agent of the said two German firms.
The tax demanded was Rs. 90,833.29 in the case of Krauss A.G. and Rs. 6,32,629.62 in the case of Daimler A.G.
By its reply dated September 22, 1961, the respondent denied its liability to make advance payment of tax.
The respondent also made a represen 23 tation to the Commissioner of Income Tax but on April 16, 1962 the respondent received a communication from the Commissioner rejecting its representation.
The respondent thereupon flied two petitions m the Bombay High Court challenging the action of the Income Tax Officer demanding advance tax and asking for the grant of a writ in the nature of certiorari to quash the notices of demand under section 29 of the Act.
By its judgment dated April 17/18, 1963, the High Court allowed the petitions and granted a writ quashing the notices of demand issued to the respondent and restraining the Income Tax Officer from taking any further steps or proceedings in the enforcement of the said notices.
These appeals are brought by special leave to this Court on behalf of the Income Tax Officer, Companies Circle, Bombay, hereinafter called the 'appellant '.
Sections 18A, 42 and 43 of the Act, as they stood at the material time, are to the following effect: "18A. (1)(a) In the case of income in respect of which provision is not made under section 18 for deduction of income tax at the time of payment, the Income tax officer may, on or after the 1st day of April in any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government on the 15th day of June, 15th day of September, 15th day of December and 15th day of March in that year, respectively, an amount equal to one quarter of the income tax and super tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed, if that total income exceeded the maximum amount not chargeable to tax in his case by two thousand five hundred rupees.
Such income tax and super tax shall be calculated at the rates in force for the financial year in which he is required to pay the tax, and shall bear to the total amount of income tax and super tax so calculated on the said. ' total income the same proportion as the amount of such inclusions bears to his total income or, in cases where under the provisions of sub section (1 ) of section 17 both income tax and super tax or super tax are chargeable with reference to the total world income, shall bear to the total amount of income tax and super tax which would have been payable on his total world income of the said previous year had it been his total income the same proportion as the amount of such inclusions bears to his total world income: 24 Provided that, where the previous year of the assessee in respect of any source of income ends after the 31st day of December and before the 30th day of April, the order in writing issued by the Income tax Officer requiring the payment of income tax and super tax on that source of income shall substitute for the four quarterly payments hereinbefore specified, three payments of equal amount to be made on the 15th day of September, the 15th day of December and the 15th day of March, respectively: (b) If the notice of demand issued under section 29 in pursuance of the order under clause (a) of this sub section is served after any of the dates on which the instalments specified therein are payable, the tax shall be payable in equal instalments on each of such of those dates as fall after the date of the service of the notice or demand, or in one sum on the 15th day of March if the notice is served after the 15th day of December.
(2) If any assessee who is required to pay tax by an order under sub section (1 ) estimates at any time before the last instalment is due that the part of his income to which that sub section applies.
for the period which would be the previous year for an assessment for the year next following is less than the income on which he is required to pay tax and accordingly wishes to pay an amount less than the amount which he is so required to.
pay, he may send to the Income tax Officer an esti mate of the tax payable by him calculated in the manner laid down in sub section (1 ) on that part of his income 1 for such period, and shall pay such amount as accords with his estimate in equal instalments on such of the dates specified in sub section (1)(a) as have not expired or in one sum if only the last of such dates has not expired: (3) Any person who has not hitherto been assessed shall, before the 15th day of March in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed the maximum amount not chargeable to tax in his case by two thousand five hundred rupees, send to the Income tax Officer an estimate of the tax payable by him on that part of his 25 income to which the provisions of section 18 do not apply of the said previous year calculated in the manner laid down in sub section ( 1 ), and shall pay the. amount, on such of the dates specified in that sub section as have not expired, by instalments which may be revised according to the proviso to sub section (2). ' "42.
(1 ) All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in the taxable territories, or through or from any property in the taxable territories, or through or from any asset or source of income in the taxable territories, or through or from any money lent at interest and brought into the taxable territories in cash or in kind or through or from the sale, exchange or transfer of a capital asset in the taxable territories, shall be deemed to be income accruing or arising within the taxable territories, and where the person entitled to the income, profits or gains is not resident in the taxable territories, shall be chargeable to income tax either in his name or in the name of his agent, and in, the latter case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax: Provided that where the person entitled to the income, profits or gains is not resident in the taxable territories, the income tax so chargeable may be recovered by deduction under any of the provisions of section 18 and that any arrears of tax may be recovered also in accordance with the provisions of this Act from any assets of the non resident person which are, or may at any time come, within the taxable territories.
: Provided further that any such agent, or any person who apprehends that he may be assessed as such an agent, may retain out of any money payable by him to such non resident person a sum equal to his estimated liability under this sub section, and in the event of any disagreement between the non resident person and such agent or person as to the amount to be so retained, such agent or person may secure from the Income tax Officer a certificate stating the amount to be so retained pending final settlement .of the liability, and the certificate so obtained shah be his warrant for retaining that amount: L2Sup CI/69 33 26 "43.
Any person employed by or on behalf of a person residing out of the taxable territories, or having any business connection with such person, or through whom such person is in the receipt of any income, profits or gains upon whom the Income tax Officer has caused a notice to be served of his intention of treating him as the agent of the non resident person shall, for all the purposes of this Act, be deemed to be such agent: Provided that where transactions are carried on in the ordinary course of business through a broker in the taxable territories in such circumstances that the broker does not in respect of such transactions deal directly with or on behalf of a non resident principal but deals with or through a non resident broker who is carrying on such transactions in the ordinary course of his business and not as a principal such first mentioned broker shall not be deemed to be an agent under this section in respect of such transactions: Provided further that no person shall be deemed to be the agent of a non resident person, unless he has had an opportunity of being heard by the Income tax Officer as to his liability.
Explanation.
A person, whether residing in or out of the taxable territories, who.
acquires, after the 28th day of February, 1947, whether by sale, exchange or transfer, a capital asset in the taxable territories from a person residing out of the taxable territories shall, for the purposes of charging to tax the capital gain arising from such sale, exchange or transfer, be deemed to have a business connection, within the meaning of this section, with such person residing out of the taxable territories.
" On behalf of the appellant Mr. Sukumar Mitra addressed the argument that an appointment made under section 43 of the Act was good for all purposes of the Act and therefore also for the purpose of section 18A of the Act.
It was said that under s.18A, advance payment of tax is liable to be made in the current financial year that the assessment year 1961 62 is the same as the financial year 1961 62 and that for the said financial year in which the advance payment of tax was called to be made by the respondent, there was already an appointment of the respondent as the statutory agents of the non resident firms, the advance payment of tax was rightly demanded from the respondent.
The appointment of the respondent under section 43 of the Act was made on October 21, 1961 and the notices of demand in the present case were issued 27 on November 2/3, 1961 and therefore subsequent to the said appointment.
It was therefore contended that the advance payment of tax was properly demanded from the respondent and the respondent could not challenge the notices issued to it.
In our opinion, there is no warrant or justification for the argument advanced on behalf of the appellant.
The liability imposed upon a person by his appointment as a statutory agent under section 43 of the Act is.
only in respect of the liability for the assessment year for which the appointment is made.
The appointment of the respondent for the assessment year 1961 62 was in respect of the liability of the non resident firms.
for the income of the previous year for the said assessment year 1961 62.
Having regard to the scheme of the Act, the assessment for each year is self contained and the vicarious liability imposed by an appointment under section 43 of the Act only extends to the liability for the assessment of the year for which the appointment is made and cannot extend to the liability for any other assessment.
Nor can the expression "for all purposes" used in section 43 of the Act extend the liability to any other assessment excepting the liability for the assessment year for which the appointment is made.
The expression "for all purposes", in our opinion, only indicates that when an appointment is made for a particular assessment year it is good for all purposes as far as that assessment is concerned i.e., for all purposes for imposing tax liability, determining the quantum of the liability and for recovering it.
The liability sought to be imposed under section 18A of the Act is not in respect of the income tax for the assessment year for which the appointment is made but for a subsequent assessment year.
For the recovery of income tax of the said subsequent year unless there is a fresh appointment of the respondent under section 43 of the Act as a statutory agent, no such liability can be imposed on the respondent by the Income Tax authorities.
It is true, as Mr. Sukumar Mitra contends that advance tax which is required to be paid under section 18A is charged during the financial year.
But it must be remembered that it is charged not in respect of the previous year for which the financial year is the proper assessment year but it is charged for the tax liability of the subsequent year.
In the present case, it is admitted that there was no appointment of the respondent under section 43 of the Act as statutory agent of the two German firms for the assessment year 1962 63.
No notice was served upon the respondent under section 43 of the Act intimating to the respondent that the appellant intended, ' to treat it as the agent of the non resident German firms for the assessment year 1962 63.
No opportunity was given to the respondent to be heard in the matter, nor was any formal order passed under section 43 of the Act by the appellant treating the respondent as the agent of the non resident German firms for the assessment year 1962 63.
Although a person may fail in a particular year to resist the.
claim that he is an agent, circumstances may 28 alter in the next year and he may be able to resist the claim then.
Hence notice shall have to be given by the Income tax Officer for each assessment year to appoint a person as agent.
It follows therefore that the respondent could not be treated as an agent of the two German firms for the assessment year 1962 63 and advance tax could not be demanded under section 18A of the Act for that assessment year treating the respondent as such statutory agent.
We are accordingly of the opinion that the notices of demand issued by the appellant to the respondent dated September 5, 1961 were illegal and ultra rites and rightly quashed by the High Court by the grant of a writ in the nature of certiorari under article 226 of the Constitution.
For the reasons expressed we hold that these appeals fail and are accordingly dismissed with costs there will be one set of hearing fee.
Y.P. Appeals dismissed.

summary:
The respondent company, carried on manufacturing business in collaboration with so.me. non resident German firms.
For each of the assessment.years up to.
1961 62, the Income tax Officer issued a notice to the respondent under section 43 of the Indian Income tax Act, 1922, intimating that he intended treating the respondent as the agent of the non resident firms, and thereafter passed orders treating the respondent as agent of the firms.
For the assessment year 1962 63 no notice under section 43 was issued ' or served upon the respondent by the Income tax Officer and no order under that section was passed treating the respondent as their agent.
The respondent received from the Income tax Officer notices if demand under section 29 together with an order under section 18A(1) calling upon the respondent to make advance payment of the tax for the assessment year 1962 63 as agent of the firms.
The respondent denied its liability to make advance payment of tax.
The Commissioner of Income tax 'rejected the respondent 's representation.
The respondent, thereupon, filed writ petitions in the High Court challenging the demand of the advance tax and for quashing the notices of demand.
The High Court granted the writ.
Dismissing the appeals, this Court, HELD: The respondent could not be treated as an agent if the nonresident firms for the assessment year 1962 63 as advance tax could not be demanded under section 18A for that assessment year treating the respondent as such statutory agent.
Having regard to the scheme of the Income tax Act, the assessment for each year is self contained and the vicarious liability imposed by an appointment under section 43 only extends to the liability for the assessment of the year for which the appointment is made and cannot extend to the liability for any other assessment.
Nor can the expression "for all purposes" used in section 43 extend the liability to any other assessment excepting the liability for the assessment year for which the appointment is made.
The expression for all purposes", only indicates that when an appointment is made for a particular assessment year it is good for all purposes as far as the assessment is concerned i.e., for all purposes for imposing tax liability, determing the quantum of the liability and for recovering it.
The liability sought to be imposed under section 18A in the present ease is not in respect of the income tax for the assessment year for which the appointment is made, but for a subsequent assessment year.
For the recovery of income tax of the said subsequent year unless there is a fresh appointment of the respondent under section 43 of the Act as a statutory agent, no such liability can be imposed on the respondent by the income tax Authorities.
[27 C F] In the present case, no notice was served on the respondent intimating that it would be treated as the agent of the non resident firms for the 22 assessment year 1962 63.
No. opportunity was given to the respondent to be heard in the matter, not was any formal order passed under section 43 by the appellant treating the respondent as the agent of the non:resident firms for the assessment ,year 1962 63.
Although a person may fail in a particular year to resist the claim that he is an agent, circumstances may alter in the next year and he may be able to resist the claim then.
Hence notice shall have to be given by the Income tax Officer for each assessment year to appoint a person as agent.
[27 G 28 A]