judgement:
Appeals Nos. 311 to 366 of 1964.
Appeals from the judgment and decrees dated December 6, 1957, December 16, 1958, January 29, 1959 of the Allahabad High Court in Special Appeals Nos. 343 and 381 416 of 1955, 548 of 1958 49 55 and 57 67 of 1959 respectively.
M. C. Setalvad, B. P. Jha and J. P. Goyal, for the appel lant.
G. section Pathak, B. Dutta and Naunit Lal, for the respondents (in C.A.s Nos. 311 366/64).
The Judgment of the Court was delivered by Hidayatullah, J.
These appeals involve a short common point of law and to appreciate it the narration of a few simple facts will be sufficient.
On October 29, 1941, the Hardwar Union Municipal Board (for brevity called the Board in this Judgment) issued a notification (No. 4188/XI 416 41) by which it imposed a toll on motor vehicles and tongas entering or leaving the municipal limits with passengers, at the rate of 2 annas per passenger.
There were nine classes of persons who were exempted and one such class was persons travelling in motor vehicles and tongas from Rishikesh.
Exemption certificates valid to the end of the calendar year were available in respect of some of the other classes.
The notification purported to be issued in exercise of powers conferred by section 128(1)(xiv) of the U.P. Municipalities Act 1916 (U.P. Act 2 of 1916).
Accompanying the notification were rules for the levy ,and collection of the toll.
On February 22, 1955, a second notification was issued (No. 830/XXIII 16(C) 53 54), this time in exercise of the powers conferred by section 128(1)(vii) of the Act, and it increased the toll from 2 annas to 4 annas per passenger and added rickshaws to the vehicles.
This notification also removed the exemption in favour of persons travelling from Rishikesh.
The Board established a toll barrier on the Rishikesh/ Hardwar road at a place called Kharkhari within the limits of Hardwar Municipality.
Toll was collected at that barrier from 893 vehicles entering the municipal area or departing from it, at the rate of 4 annas per passenger travelling by motor car, tonga or rickshaw.
On September 18, 1957, a third notification (No. 2706B (a)XI C 57) was issued, once again in exercise of powers conferred by section 128(1)(xiv) and the Board amended the description of the toll in the notification of 1941 and deleted the exemption which had been granted to persons travelling between Rishikesh and Hardwar.
The final description of the tax reads "In the Description of the tax (i) .
"A toll tax on motor vehicles, rickshaws and tongas entering or leaving the limits of the Hardwar Union Municipality with passengers to be levied at the rate of annas 4 per passenger".
(ii)Delete the clause (c) "All persons travelling in motor vehicles and tongas from and to Rishikesh ' given under the proviso 2 to paragraph 1.
" The last notification was issued after the respondents who are owners of motor vehicles plying between Rishikesh and Hardwar had filed their petitions under article 226 of the Constitution challenging the toll.
The judgment, which is impugned here by the Board as appellant, is by a Divisional Bench consisting of Mootham C.J. and Shrivastava J. in a special appeal decided on December 6, 1957.
The special appeal was filed against a judgment of Mehrotra J. dated September 26, 1955.
Mr. Justice Mehrotra had held that toll could not be levied at all on vehicles going outside the Municipal limits and he issued a writ ordering the Board to desist from collecting toll on vehicles leaving Hardwar Union Municipality.
He upheld the levy of toll on vehicles entering the municipal limits.
Other contentions against, the notifications which sought to have the levy of toll in any shape or form declared illegal were rejected.
The Divisional Bench maintained the order but held that although toll could be levied on vehicles leaving the municipal area, it could not be levied on the same vehicle if it had been once levied on its entry into the municipal area.
The Divisional Bench modified the order by adding a direction that the appellant Board should not levy toll on vehicles leaving the municipal limits, which had paid toll on entry into these limits.
The Bench observed further "We think, therefore, with respect, that the learned Judge went too far when he said that a toll cannot be 894 levied on a vehicle going out of the limits of the Municipal Board. .
" Following its own decision the Divisional Bench dismissed the other special appeals but certified all cases as fit for appeal to this Court and that is how these fifty six appeals are before us.
Now it has been ruled on many an occasion in this Court that local authorities like the Board do not act as legislatures when they impose a tax but as the agent of the State Legislatures.
Their powers and the extent of these powers must be found in the statute which erects them and endows them with such powers.
This proposition is so indisputable that Mr. Setalvad for the Board did not seek to contradict it in any way.
We must, therefore, look at the U.P. Municipalities Act first.
Section 128(1) of the Act read in 1941 as follows : "128.
Taxes which may be imposed : (1)Subject to any general rules or special orders of the Provincial Government in this behalf, the taxes which a board may impose in the whole or any part of a municipality are . . .
(vii)a toll on vehicles and other conveyances, animals and laden coolies entering the municipality; . . .
(xiv)any other tax which the Provincial Legislature has power to impose in the Province under the Government of India Act, 1935.
(The words "Provincial Legislature", "Province" and "the Government of India Act 1935" have now been replaced by the words "State Legislature", "State" and "the Constitution" respectively.) Mr. Setalvad has relied upon both the clauses of section 128(1) quoted above.
He has further relied upon the concept of tolls which according to him envisages collection both on entry and departure.
He has drawn particular attention to the first and the third notifications in which cl.
(xiv) is mentioned as the source of power and has contended that the clause being residuary and enabling can bring the full amplitude of the power of the legislature to levy tolls to the aid of cl.
(vii) which is restricted in its operation.
We shall now consider these arguments.
895 The scheme of section 128 is that it enumerates by name certain taxes, and confers power on the Boards to levy them and then it enacts cl.
(xiv) which is intended to cover other taxes which the Provincial (now the State) Legislature has authority to impose but which are not in the enumeration.
In this way the delegated powers of the Boards are equated to the legislative powers of the Legislature of the Province (now the State).
Since tolls were first imposed in Hardwar in 1941, we must view cl.
(Xiv) in the light of the Government of India Act 1935.
The powers of the Provincial Legislature in this context could flow from entries 52 and 53 only of the Provincial Legislative List in the Seventh Schedule of the Constitution Act of 1935.
These entries read 52 "Dues on passengers and goods carried on inland waterways;" 53 "Tolls".
The corresponding provisions under the Constitution are to be found in entries 56 and 59 of the State List.
They read : 56 "Taxes on goods and passengers carried by road or on inland waterways;" 59 "Tolls".
It will thus be seen that in 1941 the Provincial Legislature had no power to impose a tax on passengers carried over inland roads and whether or not the levy we are considering could be regarded at all as a tax on passengers, it could not be so regarded in 1941.
It could be justified as a toll only under entry No. 53.
The difficulty in accepting the first notification in respect of toll on vehicles leaving the municipality which is sought to be supported under cl.
(xiv)is this : the Provincial Legislature expressly gave a limited power to levy toll on vehicles entering the municipality.
Power which flowed from entry 53, whatever it might have been, was made over to the municipal Board to be exercised in a particular manner and that manner was stated in cl.
(vii).
If the matter is confirmed to cl.
(vii) it is clear that the Board could levy toll only on vehicles entering the municipality and not on vehicles leaving the municipality.
The Legislature having expressly so limited the power of the Board, we think that no extension of that power could be contemplated under cl.
(xiv) even if it may be right to say that tolls as such can be levied on vehicles leaving the municipality as well as on vehicles entering the municipality a point which we do not decide.
The larger power, if any, must be held to be cut down by necessary implication.
To permit tolls to be levied on vehicles leaving the municipality would render ineffec 896 tive that part of cl.
(vii) which lays emphasis on vehicles entering the municipality.
Such an extension of power through cl.
(xiv) cannot be supported.
When the Board amended the notification in 1955 the position regarding tolls remained unaltered.
The power of the Legislature derivable from entry 59 of the Constitution was not available because the tax was not a tax on passengers but on vehicles and the power to levy tolls continued to be res tricted to vehicles entering the municipality.
That restriction made it impossible to extend the power regarding tolls in respect of vehicles leaving the municipality.
The second notification also drew power from cl.
(vii) only and that was patently wrong because that clause limited the power to levy tolls on vehicles entering the municipality.
The third notification was irrelevant as it came after the petitions were filed in the High Court and it was also subject to the same restriction.
We were referred to dictionaries and to rulings of the English Courts in an attempt to widen the meaning of the word "toll".
There were many kinds of tolls and all, of course, must be taken to be comprehended by the entry relating to tolls in the Government of India Act, 1935 or the Constitution.
There were for example toll thorough and toll traverse which were the two main subdivisions and there was toll stallage.
The first was a levy prescribed by towns for animals or men that went through highways of a town or over ferries, bridges etc.
belonging to it.
Toll traverse was charged for passing over a private person 's ground.
Toll stallage was a charge for occupation of land by pitching stalls in fairs and markets.
A toll was thus a tribute or custom paid for a privilege, generally for passage over or for using a bridge, road, ferry, railway and sometimes for occupation of market, port, anchorage etc.
The justification for tolls was that the person charged enjoyed a privilege and the amount went towards the construction, improvement or upkeep of these things.
Tolls were a common feature of mediaeval Europe and England and toll roads and turnpike roads were so common that it was impossible to go any distance without having to pay some charge.
Tolls went out of fashion and were abandoned because they were very unpopular and the charges for maintenance of roads, bridges, ferries etc.
were directly levied as taxes.
They lingered for sometime as octrois which were picturesquely described as "in gate" tolls being collected at the gates of a town or toll barriers.
Even octrois have disappeared in Europe and England but they have continued to persist in India.
Whether such tolls were collected only on entry or only on departure or both on entry and departure it is not easy to say.
897 Mr. Setalvad could give no instance of any practice in which they were levied both on entry and exit on the same vehicle.
The better view appears to be that they can be collected only once and at the point of entry only though for convenience, they may be collected at any one end as for example toll for crossing a bridge which allows either entry to the bridge or takes the toll after the bridge is traversed.
It is taken from those about to enter and from those about to leave but not twice.
We need not concern ourselves with this problem which was placed before us by Mr. Setalvad because toll as such can only be collected under the Municipalities Act from vehicles entering the municipal limits.
This, in our opinion, exhausts all the power delegated by the Legislature to the municipal Boards and that power cannot be extended either by considerations derived from the nature of tolls or from the residuary cl.
(xiv).
It is, therefore, sufficient to say that in the Hardwar Municipality the power to collect tolls was limited in 1941 by cl.
(vii) of section 128 (1 ) and that power continues to be so limited.
In this view of the matter the distinction made by the Divi sional Bench between vehicles which need not pay toll on leaving the municipal limits because they have paid toll on entry and vehicles which have not paid any toll till leaving, may not be quite correct.
Mr. Setalvad contended that this distinction must not continue because the amount of toll is dependent on the number of passengers in the vehicle and the vehicle may enter with few passengers and leave with many more.
That in our opinion is an irrelevant consideration because the right to levy toll is confined to vehicles entering the municipality and no question of vehicles leaving the municipality can enter the discussion.
The Divisional Bench was in error in introducing this consideration and the decision of Mehrotra J. was right in all the circumstances of the case.
As, however, the owners of vehicles have not appealed or objected, we will only dismiss the appeals and order no modification in the order of the Divisional Bench.
The appellant Board shall bear the cases of this appeal.
One hearing fee.
Appeals dismissed.

summary:
In 1941 the appellant Municipal Board issued a notification under section 128 (1) (xiv) of the U.P. Municipalities Act,, 1916, by which it imposed a toll on motor vehicles and tongas entering or leaving the municipal limits with passengers, at the rate of 2 as per passenger.
In 1955, a second notification was issued under section 128(1)(vii) by which the toll was increased from 2 as.
to 4 as.
The respondents, who were owners of motor vehicles, filed petitions under ArT 226 challenging the toll.
Thereafter, a third notification was issued under section 128(1)(xiv) by which the description of the toll was amended.
A single judge of the High Court held that the toll could not be levied on vehicles leaving the municipal limits and issued a writ prohibiting the collecting of toll on such Vehicles.
On appeal, a Divisional Bench of the High Court held that toll could also be levied on vehicles leaving the municipality, but it could not be levied on the same vehicle if the toll had been levied on its entry into the municipality.
In this Court, it was contended by the appellant that, cl.
(xiv) being residuary and enabling, brought the full amplitude of the power of the State Legislature or levy toll to the aid of el.
(vii), and therefore, according to the concept of a toll it could be levied on vehicles both on entering into and departing from the municipality.
HELD:Section 128(1) (vii) which enabled the levy of toll on a vehicle entering the municipality, exhausted all the power delegated by the Legislature to the appellant and that power could not be extended either by the considerations derived from the nature of tolls or from the residuary el.
(xiv).
Therefore, the toll could be collected only from vehicles entering the municipality.
The distinction made by the Divisional Bench between vehicles which pay toll on entering and which do not pay any toll till leaving was irrelevant, because the question of vehicles leaving the municipality could not enter the discussion.
[897 B F] Since the tolls were first imposed in 1941, el.
(xiv) must be viewed in the light of the Constitution Act of 1935.
The scheme of section 128 of the U.P. Act is that it enumerates certain taxes and confers powers on municipalities to levy them and then it enacts el.
(xiv) which is intended to cover the taxes not enumerated which the Provincial Legislature had authority to impose.
The relevant powers of theprovincial Legislature were found in Entries 52 and 53 of the Provincial Legislative List of the Constitution Act of 1935.
Entry 52 could not be relied did not enable the Provincial Legislature to impose taxes carried over inland routes.
The power which flowed from made over to the appellant to be exercised in the particular in el.
(vii), that is, on vehicles entering the municipality, the tolls to be levied on vehicles leaving the municipality el.
(vii) ineffective.
[895 A C, E G, H] on because it on passengers Entry 53 was manner stated and to permit would render 892 The power of the State Legislature derivable from Entries 56 and 59 of the State List of the Constitution was not available for the second notification because, while Entry 56 permitted tax on passengers, the toll was not a tax on passengers but on vehicles; and the power to levy tons under Entry 59 continued to be restricted to vehicles entering the municipality.
Besides, cl.
(vii) under which it was issued limited the power to vehicles entering the municipality.
The third notification was irrelevant, as was issued after the petitions were filed.
[896 A C]


judgement:
Appeal No. 956 of 1964.
860 Appeal by special leave from the judgment and order dated October 7, 9, 1961 of the Bombay High Court in I.T. Reference No. 6 of 1960.
A. V. Viswanatha Sastri, Gopal Singh, B. R. G. K. A char and R. N. Sachthey, for the appellant.
Mahinder Narain, Rameshwar Nath, section N. Andley and P. L. Vohra, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by special leave is directed against the judgment of the High Court of Judicature at Bombay answering the following question against the appellant : "Whether depreciation is allowable on the original cost of the various components of the Plant and Machinery and other assets of the company as acquired and used prior to 1 7 1953 ?" The relevant facts are these.
We are concerned with the assessment year 1955 56 (accounting year being April 1, 1954 to March 31, 1955).
The respondent, Dharampur Leather Company Ltd., Bombay, hereinafter referred to as the assessee company, was incorporated on June 15, 1943, as a private limited company, and later on November 24, 1949, it became a public limited company.
On August 1, 1949, the Dharampur State merged with the Province of Bombay.
Before its incorporation, the promoters of the assessee company had negotiated with the Ruler of Dharampur and secured from the Ruler total exemption from the State Income Tax of profits of the company for a period of seven years from the commencement of its working.
The factory commenced working from June 15, 1949.
After the merger the assessee company applied to the Commissioner of Income Tax, Bombay, by its letter dated June 22, 1951, for relief under para 15 of the Merged States (Taxation Concessions) Order, 1949.
The Com missioner of Income Tax communicated the decision of the Government in his letter dated March 8, 1952, to exempt the company from income tax and super tax for a period of five years with effect from April 1, 1950.
It was, however, stated that the shareholders of the company would be liable to pay tax on the amount of dividend received by them.
The Merged States (Taxation Concessions) Order, 1949, was issued by the Central Government in exercise of the powers conferred by section 60A of the Indian Income Tax Act, 1922, hereinafter 861 referred to as the Act, and section 23A of the Business Profits Tax Act, 1947.
Para 15 of the said order provides as follows : "15(1) Where any industrial undertaking situate in a merged State claims that it has been granted any exemption from or concession in respect of income =, super tax or business profits tax by the Ruler of the State before the 1st day of August, 1949, it shall submit an application to the Commissioner of Income tax giving the following particulars : 1.
Name of the Industrial undertaking.
Status (i.e. whether public or private company, firm, individual or Hindu undivided family).
Nature of business.
Date of commencement of the business.
Nature of the concessions granted.
Period for which concessions granted.
Unexpired period of the concessions from the 1st day of August, 1949.
(2) The application shall be accompanied by a copy of the orders of the State granting the concession or of the agreement with the State.
(3) The Commissioner shall, after obtaining such other information as he may require, forward the application to the Central Government which, having regard to all the circumstances of the case, may grant such relief, if any, as it thinks appropriate.
" The assessee company contended before the Income Tax Officer in the course of the assessment proceedings for the assess ment year 1955 56 that this being the first assessment year after it commenced working as a factory, no depreciation had in fact been actually allowed to the assessee in any earlier assessment year, and, therefore, the depreciation should be computed on the original cost of the various items of plant and machinery and other assets of the company.
The Income Tax Officer, however, rejected this contention and held that depreciation must be computed on the written down values of machinery computed as if the income of the assessee had been worked out properly in the years when the company was exempted and the depreciation being allowed at the usual rates.
The assessee failed before the Appellate Assistant Commissioner and the Appellate Tribunal.
The Appellate Tribunal held that the words "actually allowed" in section 10(5)(b) 862 of the Act were wide enough to cover the case of the assessee.
The High Court, however, held that if in the prior years no depreciation had been actually allowed then the actual cost incurred by the assessee for acquiring the machinery would be the written down value of the machinery.
Mr. Sastri, the learned counsel for the appellant, first urges that on a proper interpretation of section 10 (5) (b) of the Act, the depreciation must be deemed to have been allowed to the assessee in the years in which the income of the assessee company was ,exempted.
There is no force in this contention.
We have delivered judgment today in Commissioner of Income Tax, Madhya Pradesh vs Messrs Straw Products Limited Bhopal(1) and held that the words "actually allowed" in para 2 of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, did not include any notional allowance.
Following that judgment, we must interpret the words 'actually allowed ' occurring in section 10(5) (b) of the Act in the same manner.
Mr. Sastri next contends that the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, as amended by the Taxation Laws (Merged States) (Removal of Difficulties) (Amendment) Order, 1962, hereinafter referred to as 1962 Order, applies to the facts of the case.
He says that the exemption was ,originally given by the Ruler of Dharampur State under an agreement with the assessee company and the concession by the Commissioner of Income Tax vide his letter dated March 8, 1952, was in fact a continuance of the agreement, and therefore, this exemption must be deemed to have been granted under an agreement with the Ruler, within the meaning of 1962 Order.
We are unable to accede to this contention.
In our opinion, the Explanation inserted by 1962 Order has no bearing on the facts of this ,case.
The exemption granted by the Central Government is granted under para 15 of the Merged States (Taxation Concessions) Order, 1949, which was itself issued under section 60A of the Act.
The result is that the exemption was granted under the Act and not under any agreement.
The case of the assessee must be determined with reference to section 10 (5) (b) of the Act, unaffected by the amendment made by the 1962 Order.
In the result we agree with the High Court that the answer to the question referred to should be in the affirmative.
The :appeal fails and is dismissed with costs.
Appeal dismissed.

dataset_name: IN-Abs

summary:
The respondent company obtained under an agreement with the Ruler of the erstwhile State of Dharampur an exemption from levy of income tax and super tax for the first seven years of its working.
it commenced business in June 1949.
In August 1949 the State of Dharampur merged with the Province of Bombay.
The company then applied for and obtained under para 15 of the Merged States (Taxation Concession) Order, 1949, an exemption from income tax and supper tax for five years commencing from April, 1950.
In the assessment year 1956 57 when the company was to be assessed under the Indian Incometax Act, 1922, for the first time, it claimed that as no depreciation had actually been allowed to it earlier the original cost of its machinery etc. should be taken as the written down value for the purpose of calculating the allowable depreciation.
The assessing and appellate authorities held against the company but the High Court held in its favour.
In appeal to this Court by the Revenue it was contended that (1) on a proper interpretation of section 10(5)(b) of the Indian Income tax Act, 1922 the depreciation must be deemed to, have been allowed to the assessee in the years in which its income was exempted and (2) the concession given by the Commissioner must be deemed to be a continuation of the agreement with the Ruler and therefore the Taxation Laws (Merged States) (Removal of difficulties) Order 1949 as amended by the Taxation Laws (Merged States) (Removal of Difficulties) (Amendment Order,), 1962 applied to the facts of the case.
HELD: (i) The words 'actually allowed ' in section 10(5)(b) did not include any notional allowance and the High Court had rightly decided that the original cost was the written down value.
[862 C] Commissioner of Income tax, Madhya Pradesh vs M/s. Straw Products Limited, Bhopal, [1966] S.C.R. applied.
(ii) The exemption granted to the company under para.
15 of the Merged States (Taxation Concession) Order, 1949 was an exemption under section 60A of the Income tax Act and not under any agreement.
The case of the assessee had therefore to be determined with reference to section 10(5)(b) of the Act unaffected by the amendment made by the 1962 Order.
[862 G]


judgement:
vil Appeal No. 160 of 1950.
Appeal against the judgment and Decree dated the 30th March, 1951, of the High Court of judicature at Bombay (Chagla C. J. and Tendolkar J.) in Income Tax Reference No. 34 of 1950.
C. K. Daphtary, Solicitor General for India, (Porus A. Mehta, with him) for the appellant.
R. J. Kolah for the respondent.
December 18.
The judgment of the Court ,was delivered by MAHAJAN J. This is an appeal from the Judgment of the High Court of Judicature at Bombay delivered on a reference under section 66 (1) of the Indian Income tax Act, 1922, whereby the High Court answered the first referred question in the negative.
The assessment in question concerns the year 194344.
A Hindu undivided family was carrying on business in Bombay.
, Madras and the Mysore State.
Its business was taken over by a registered firm on 17th March, 1942.
For the purpose of this appeal however this circumstance is not material.
The case has been dealt with on the assumption that a single assessee carried on, business from 10th October, 1941 to 8th November, 1942, the relevant accounting year.
According to the accounts of the assessee, during this period the Mysore branch purchased goods from the Bombay head office and the Madras Branch of the value of Rs. 2,45,455.
The Income tax officer estimated these purchases of the Mysore branch in British India at Rs. 3,00,000 and its profits at Rs. 75,000 on the sale of these goods in Mysore.
In view of the provisions of section 42 of the Act, half of this profit, i.e., to the extent of Rs. 37,000, was deemed to accrue or arise in British India, because of the business connection of the non resident, branch in British India.
It was contended that the assessee being a person resident in India, section 42 could not be invoked in the case, because that section had application only to 446 cases of non residents.
The Income tax Tribunal following the decision of the Bombay High Court, in Commissioner of Income tax 'V. Western ,India Life, Insurance Co. Ltd.(1), upheld this contention, 'and ruled that no part of the Mysore profit could be taxed in British India.
At the instance of the Commissioner of Income tax/Excess Profits Tax, Bombay City, three questions were referred to the High Court under section 66 (1), the first of these being "Whether in the circumstances of the case can the profits on the sale of goods in the Mysore State be deemed to accrue or arise in British India under ' section 42 (1) of the Indian Income tax Act" The High Court returned an answer to the question ' in the negative after resettling it in these terms : "Whether on the facts and in the circumstances of the case the Income tax Officer was right in applying the provisions of section 42 (1) of the Income tax Act, and holding that Rs. 37,500 were profits deemed to accrue in British India and in including in the assesment a portion thereof.
" This appeal is before us on a certificate granted by the High Court, and the only question canvassed here is whether section 42 (1) of the Indian Income tax Act has application to the case of a resident assesses or whether its scope is limited to a non resident assessee alone.
It is common ground that if section 42 of the Act has no application to the case of a resident assessee, the whole of the Mysore profit, namely Rs. 75,000, cannot be included in the assessment of the year 1943 44.
On the other hand, if such an assessee is within the ambit of the section, in that event the sum of Rs. 37,000 or any part of it would be liable to assessment during the assessment year in question.
Section 42 of the Act is in these terms: "(1) All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in the taxable territories ' (1) [1945]13I.T.R.465. 447 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 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 shall be his warrant for retaining that amount Provided further that the amount recoverable from such agent or person at the time of final settlement shall not exceed the amount specified in such certificate except to the extent to which such agent or person may at such time have in his hands additional assets of such non resident person.
(2) Where a person not resident or not ordinarily resident in the taxable territories carries on business ,with a person resident in the taxable territories, and it appears to the Income tax Officer, that owing to the close connection between such persons the course 448 of business is so arranged that the business done by the resident person with the person not resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom or which may reasonably be deemed to have been derived therefrom, shall I* chargeable to income tax in the name of the resident person who shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax.
(3) In the case of a business of which all the operations arc not carried out in the taxable territories the profits and gain 's of the business deemed under this section to accrue or arise in the taxable territories shall be only such; profits and gains as are reasonably attributable to that part of the, operations carried out in the taxable territories.
" Before its amendment in the year 1939 the first part of the section tin thus: "42(1).
In the of any person residing out of British India, all profits or gains accruing or arising to such person, whether directly or indirectly, through or from any business connection or property in British India, shall be deemed to be income accruing or arising within British India, and shall be chargeable to income tax in the name of the agent of any such person, and such agent shall, be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax:" The rest of the section was substantially in the same terms.
Inspite of its amendment in 1939 the marginal note to the section continued to refer to "non resident" as before, though the words 'residing out of British India" were deleted from the body of subsection (1).
The retention of this marginal note gave rise to conflicting decisions on the question whether the section, in spite of the change made in its language in 1939 still continued to have application to cases of " non residents" alone.
In order to clarify this matter, by Act XXII, of 1947, the marginal note was amended and it now is in these terms: 449 "Income deemed to accrue or arise within British India.
" It is significant that the changes made in section 42 in the year 1939 were consequential to the entire recasting of section 4 of 'the Act., Section 4 as it stood prior to 1939 charged income tax on all income, profits or gains, from whatever source derived, accruing or arising or received in British India or deemed under the provisions of the Act to ' accrue, or arise, or ' to be received in British India.
It further ' provided that the"income,profits and gains accruing or arising , without British India to a person resident in British, ' India, shall, 'if they are received in or brought into British India, be ' deemed to have accrued or arisen in British India and to be income, profits and gains, of the year in which they are so received or brought, notwith standing the fact that they did not so, accrue or arise in that year.
By the amendment in the year 1939, the total income of any previous ' year of any person was defined as including 'all income, Profits and gains from whatever source derived which a) are received or are deemed to be received in British(a) India in such year by or on behalf of such person, or (b) if such person is resident in British India during such year, (1) accrue or arise or are deemed to accrue or arise to him in British India during such year; or (ii) accrue or arise to him without British India during such year ; or. . (c) if such person is not resident in British India during such year, accrue or arise or are deemed to accrue or arise to him in British India during such year;. " This legislative change in the Act made all income accruing or arising or deemed to accrue or arise in British India during the previous year to a resident the subject of a charge, apart from income accruing or arising without British India during the previous year.
450 The term "deemed" brings within the net of chargeability income not actually accruing but which is supposed notionally to have accrued.
It involves a number of concepts.
By, statutory fiction income which can in no sense be said to accrue at all may be considered as so accruing.
Similarly, the fiction may relate to the place, the person or be in respect of the year of taxability.
Section 42(1) defines what income is deemed to accrue within the taxable territories.
It is only by application of this definition that one class of income "deemed to accrue to a resident within taxable territories" within the meaning of section 4(1) (b) () can be estimated.
The words "In the case of any person residing out of British India" were deleted from section 42(1) during the pendency of the amendment.
Bill of 1939 in the Council of State presumably with the object of making the section applicable to any person who had any income which in a primary sense arose in British India, even though technically it had arisen abroad, irrespective of the circumstance whether that person was resident, ordinarily resident or not ordinarily resident.
By section 8 of Act XXIII of 1941, clause (c) was added to section 14 of the Act.
No effect was to be given to this amendment before the year ending 31st March, 1943.
The relevant part of section 14, after this amendment is in these terms: "The tax shall not be payable by an assessee in respect of any income, profits or gains accruing or arising to him within, a Part B State, unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories in the previous year by or on behalf of the assessee, or are assessable under section 12 B or section 42.
" In view of these legislative changes in the provisions of sections 4, 14 and 42 of the Act, the conclusion is irresistible that the object of recasting section 41(1) in general terms was to make the definition of "deemed income" given in the section generally applicable to all classes of assessees.
This sub section has been drafted in the widest terms and there is nothing whatsoever in 451 its language residents only.
Wherever the legislature intended to limit the operation of any part of this section to non residents alone, it said so in express terms.
Sub section (2) and the latter portion of sub section (1) expressly concern themselves with the case of nonresidents, while sub sections (1) and (3) are so framed that they cover both residents and non residents.
A Bench of the Bombay High Court in Commissioner ,,of Income tax vs Western India Life Insurance Co.(1), held that notwithstanding its amendment in 1939 the section applied only to non residents.
Reliance was placed, inter alia, on the circumstance that the marginal note appended to the section indicating that it applied to non residents alone, had not been deleted.
To avoid this criticism and to remove doubts the legislature by Act XXII of 1947 changed the marginal note also.
It seems to us that any other construction of the section would create an anomaly, inasmuch as the Part B State income failing under section 42 would not be assessable in the hands of a resident, but it would be assessable in the, hands of a non resident, because the Income tax Act while it ropes in world income of a resident, exempts income accruing within the Part B States from its ambit except when such income is received or is brought into taxable territory or comes within the ambit of section 42.
Such a construction would be contrary to the policy of the Act.
It is unnecessary to dwell on, this point at any great length in view of the circumstance that the decision in 'Commissioner of Income tax vs Western India Life Insurance Co.(1), has been dissented from and for good reasons, in subsequent cases.
In Sutlej Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal(2 ) a Bench of the Calcutta, High Court considered this matter at some length and reached the ,decision that sub sections (1) and (3) of section 42 ,covered cases of both residents as well as non residents.
The same view was taken by a Bench of the Madras High Court in Commissioner of Income tax/Excess (1) [1945]13 I.T.R.405.
(2) A.I.R. 1950 Cal.
452 Profits Tax, Madras,v,.
Parasuram Jethanand (1).
Again the matter was discussed in this court in Commissioner of Income tax, Bombay vs Ahmedbhai Umarbhai & Co.(2) by, Patanjali Sastri J., as he then was, and also by Mukherjea J. in the same case.
This is what Patanjali Sastri J. said on this point: "It is noteworthy that the first part of sub section (1) of section 42 providing that certain classes of ' income,, are to be deemed accrue or arise in British India is not confined in its application to nonresidents, but is in general terms so as to be applicable to both residents and non residents.
Before its amendment in 1939 the subsection began with the words 'in the case of any person residing out of British India ' which obviously restricted the application of the provision to non resident person but in its amended form the sub section has been recast into two distinctparts, the first of which is not so restricted, and the second part alone, which begins with the words 'and, where the person entitled to the income profits and gains is not resident in British India, is made applicable 'to non resident persons, thereby showing that the former part applies to both residents and non residents.
The opening words of the first proviso also point to the same conclusion, for these words would be surplusage if the sub section as a whole applied only to non residents.
A contrary view has, no doubt, been expressed by a Division Bench of the Bombay High Court, in Commissioner of Income tax vs Western India Life Insurance Co. Ltd.(3).
Though reference was made in that case to the alteration in the structure of subsection (1) its significance, as it seems to me, was not properly appreciated.
The facts that the marginal note to the whole section refers to 'non reside ' and that the section itself finds a place in Chapter IV headed 'Liability in special cases ' were relied upon as supporting the view that sub sections (1) as a whole applies only to non residents.
As pointed out 'by the Privy Council in Balraj Kunwar vs Jagatpal Singh(4), marginal notes in an Indian statute, as in an (1) A.I.R. 1950 Mad.
(2) ; (3) (4) 26 All. 393, 406.
453 Act of Parliament, cannot be referred to for the pur pose, of construing the statute, and it may be mentioned in this connection that the, marginal note relied on has since been replaced by the words 'Income deemed to accrue ;or arise within ', British India which makes it clear that the 'main object, of sub section (1) was to define that expression (see section 12 (a) of Act XXII Of 1947).
Nor can the title of a chapter be legitimately used to restrict the plain terms of an enactment.
" The same view was expressed by Mukherjea J. ,Nothing that has been said by Mr. Kolah before us justifies reconsideration of these opinions.
Mr. Kolah argued that when the world income of a resident was, brought within the net of chargeability by section 4 in 1939 it was then wholly unnecessary to include such an assessee in the ambit of section 42.
In our judgment, this contention is fallacious.
Whatever income arises in a primary sense to a resident in taxable territories is chargeable under section 4 (1) (b) (1).
Hence it was necessary to make section 42 applicable to such a case.
Whatever other consideration may arise in estimating the foreign income of a resident will not be applicable to income deemed to accrue within taxable territory.
Moreover, as above pointed out, in view of the provisions of section 14 (c) resident assessees but for section 42(1) would not be liable to assessment regarding income accruing to them in Part B States, even if there is a business connection in taxable territory.
Mr. Kolah was unable to suggest any reasonable explanation for the deletion of the words "any person residing out of British India" from section 42(1) as it stood before 1930.
The Only purpose in deleting these words could be to bring residents within the a ambit of the section.
There is no reason whatsoever for not giving to the plain words of the section the meaning that on the face of it they bear.
For the reasons given above we are of the that the answer by the High of Bombay to the first question referred to it was wrong.
We therefore allow this appeal with costs and answer 7 93 S.C.India/59 454 this question referred to the High Court in the affirmative.
Appeal allowed.

summary:
A Hindu undivided family was carrying on business in Bombay, Madras and the Mysore, being treated as a single assessee and its relevant accounting period was 10th October, 1941, to 8th November, 1942.
During this period, the Mysore branch purchased goods from the Bombay head office and the Madras branch of the value of Rs ' 2 lakhs odd.
The In tax 'Officer estimated these purchases of the Mysore in British India at Its. 3 lakhs and its profits at Rs 75,000 on the sale of these goods in Mysore.
In view of the provisions of section 42 of the Indian Income tax Act, half of this profit, i.e., to the extent of Rs. 37,500, was deemed to accrue or arise in British India because of the business connection of the L non resident branch in British India: Held, that, on the facts and circumstances of the case, the Income tax Officer was right in applying the provisions of section 42 1 of the Income tax Act and holding that RS.
37,500 were deemed to accrue in British India and in including in the assessment a portion thereof.
Held also, that section 42 sub sections
(1) and (3), cover Cases of both residents as well as non residents.
Commissioner of Income tax vs 'Western India Life Insurance Co. dissented from.
Sutlej Cotton Mills Ltd. V. Commissioner of Income tax, West Bengal (A.I.R. 1950 Cal.
551), Commissioner of Income tax/Excess Profits Tax, Madras vs Parasuram Jethanand (A.I.R 1950,Mad. 631), Commissioner of Income tax.
Bombay V. Ahmedbhai Umarbhai & Co. ([1950] S.C.R. 335), referred to. 445


judgement:
N: Civil Appeal No. 798 of 1963.
Appeal by Special Leave from the judgment and Order dated the 19th August, 1960 of the Madras High Court in Second Appeal No. 871 of 1958.
R. Ganapathy lyer, for the appellant.
C. B. Agarwala and R. Gopalakrishnan, for the respondent.
The Judgment of the Court was delivered by Ranmswami, J.
This appeal is brought, by special leave, on behalf of the plaintiff from the judgment of the High Court of Madras dated August 19, 1960 in Second Appeal No. 871 of 1958.
The disputed property consisted of 16 acres and 27 cents of land in Sokkanur village of Coimbatore district of which half share belonged to Palani Moopan and the other half to his daughter Palani Mooppachi.
Palani Moopan executed the document exhibit B 1 with regard to his share of the property in favour of the 1st defendant for a consideration of Rs. 4,000/on May 28, 1946.
Out of the consideration, a sum of Rs. 2,000/was reserved with the vendee to pay off an earlier mortgage and the balance of Rs. 2,000/ was paid to the vendor in cash.
The first defendant discharged the earlier mortgage in accordance with the directions in exhibit B 1.
The document, B 1 was in the form of a sale deed but it contained a stipulation that the 1st defendant should reconvey the property to Palani Moopan on his repaying the amount of Rs. 4,000/ after 5 years and before the end of the 7th year.
After the death of Palani Moopan his sons executed an assignment deed in favour of the plaintiff, exhibit A 1 dated August 10, 1950 for a sum of Rs. 1,600/ .
On the basis of exhibit A 1 the plaintiff has brought the present suit for redemption of the disputed property.
The case of the plaintiff was that exhibit B 1 must be deemed in law to be a mortgage by conditional sale and that he was entitled to redeem as the assignee of the equity of redemption.
The plaintiff further claimed that being an agriculturist, he was entitled to the benefits of Madras Act TV of 1938 as amended.
The plaintiff pleaded alternatively that if Sup.
Cl/66 12. was held to be an out right sale with a condition to repurchase, the first defendant was bound to reconvey the property to him on payment of the amount of Rs. 4,000/ .
The plaintiff alleged that he tendered the amount to the first defendant several times but the latter refused to accept the same.
The suit was contested by the 1st defendant who denied that exhibit B 1 was a mortgage by conditional sale.
It was alleged that exhibit B 1 was an out right sale with a covenant to repurchase and as no tender was made by the plaintiff within the time stipulated in the document, the suit was barred by time.
Upon these rival contentions the trial court held that exhibit B 1 was a mortgage by conditional sale and accordingly granted a preliminary decree to the plaintiff for redemption under O. 34.
r. 7 of the Civil Procedure Code.
The first defendant took the matter in appeal to the Subordinate Judge of Coimbatore but the appeal was dismissed.
The 1st defendant preferred second appeal in the Madras High Court which set aside the decrees of the lower Courts and ordered that the suit should be dismissed, holding that the transaction was an out right sale and not a mortgage by conditional sale.
As regards the alternative plea based on the covenant for reconveyance, the High Court considered that there was no proof that the plaintiff had tendered the amount within the period stipulated in the document.
The question of law involved in this appeal is whether the document, exhibit B 1 executed by Palani Moopan in favour of the 1st defendant is, in its true effect, a mortgage by conditional sale or a sale with a condition for retransfer.
By section 58(c) of the a mortgage by conditional sale is defined as follows : "58.
(c) Where the mortgagor ostensibly sells the mortgaged property on condition that on default of payment of the mortgaged money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale: 921 Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.
" The proviso to this clause was added by Act 20 of 1929.
Prior to the amendment there was a conflict of decisions on the question whether the condition contained in a separate deed could be taken into account in ascertaining whether a mortgage was intended by the principal deed.
Legislature resolved this conflict by enacting that a transaction shall not be deemed to be a mortgage unless the condition referred to in the clause is embodied in the document which effects or purports to effect the sale.
But it does not follow that if the condition is incorporated in the deed effecting or purporting to effect a sale a mortgage transaction must of necessity have been intended.
The question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances.
The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and mortgagee, the price being charged on the property conveyed.
In a sale coupled with an agreement to reconvey there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to retransfer the property within the period specified.
The distinction between the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt.
The form in which the deed is clothed is not decisive.
The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the document viewed in the light of surrounding circumstances.
If the language is plain and unambiguous it must in the light of the evidence of surrounding circumstances be given its true legal effect.
If there is ambiguity in the language employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts.
In the present case, the document exhibit B 1 reads as follows ". . . . . .
I have settled to sell to you on this day for a suit of Rs. 4,000 0 0 the undermentioned immovable pro 922 perties and have received the consideration of rupees four thousand only, as detailed below : In the matter of my having directed you yourself to pay the sum of Rs. 2,000/ , being my half share payable towards the usufructuary mortgage deed executed on 7th September 1944, in respect of the share of properties detailed below and in respect of some other share of properties, jointly by me and Palani Mooppachi, wife of one Palani Mooppan of the aforesaid place in favour of M. Maniyam P. V. Ramaswami Goundar, son of Venkatachala Goundar, residing in Pattampalayam village cusba, Palladam taluk, for a sum of Rs. 4,000/ and registered as Document No. 1122 of 1944, Book 1, Volume 210, pages 415 and 416 in the Office of the Sub Registrar of Kunnathur to the aforesaid usufructuary mortgagee, get release of the properties mentioned herein and take possession of the same, the amount received by me is Rs. 2,000/ .
The amount which I have received in cash on this day is Rs. 2,000/ .
As, in all, I have received the sale consideration of Rs. 4,000/ as detailed above, you yourself shall, in future, hold and enjoy absolutely the undermentioned properties.
In future, neither myself nor my heirs shall have any right or future claim, whatever, in respect of these properties.
There is no other encumbrance, whatever, except the encumbrance mentioned above, in respect of these properties.
In case anything is left out, I am bound to get the same discharged from and out of my other properties.
Whereof, in all these, and in the well in good condition, situate in Government Survey No. 93/1 and in the cocoanut, palmyrah, tamarind and wood apple trees and in the fruit bearing and timber trees, which are in the aforesaid fields, the half share in common.
In future I have neither share nor right, whatever, in the aforesaid fields.
The aforesaid Palani Mooppachi shall discharge the above mentioned balance usufructuary mortgage amount of Rs. 2,000/ from and out of the balance of the usufructuary of mortgage properties.
Should I pay in cash the aforesaid sale consideration of rupees four thousand after a period of five years within a period of seven years from the date of 923 the execution of the deed, during the date of expiry of the said deed of any year (the said properties) should be reconveyed for the very same amount to me.
This condition is not valid after the aforesaid period.
" We consider that in the present case there are several cir cumstances to indicate that exhibit B 1 was a transaction of mortgage by conditional sale and not a sale with a condition for, retransfer.
In the first place, there is the important circumstance that the condition for repurchase is embodied in the same, document.
In the second place, there is the significant fact that the consideration for exhibit B 1 was Rs. 4,000/ , while the real value of the property was, according to the Munsif and the Subordinate Judge, Rs. 8,000/ .
The High Court has dealt with this question and reached the finding that the value of the property was Rs. 5,5001 , but it is submitted by Mr. Ganapathi lyer on behalf of the appellant that the question of valuation was one of fact and the High Court was not entitled to go into the question in the second appeal.
The criticism of learned Counsel for the appellant is justified and we must proceed on the basis that the valuation of the property was Rs. 8,000/ and since the consideration for exhibit B 1 was only Rs. 4,000/ it was a strong circumstance suggesting that the transaction was a mortgage and not an out right sale.
In the third place, there is the circumstance that the patta was not transferred to the 1st defendant after the execution of exhibit B 1 by Palani Moopan.
It appears that defendant No. I did not apply for the transfer of patta and the patta admittedly continued in the name of Palani Moopan even after the execution of exhibit B 1.
Exhibits A 6 and A 7 are certified copies of thandal extract of patta for the years 1945 54 and they prove this fact.
These exhibits also show that the plaintiff had obtained patta for the land on the basis of exhibit A 2.
The registered deed of transfer of patta was executed by the sons of Palani Moopan in favour of the plaintiff.
There is also the circumstance that the, kist for the land was continued to be paid by Palani Moopan and after his death, by the sons of Palani Moopan.
Lastly, there is the important circumstance that the consideration for reconveyance was Rs. 4,000/ , the same amount as the consideration for exhibit B 1.
Having regard to the language of the document, exhibit B 1 and examining it in the light of these circumstances we are of the opinion that the transaction under exhibit B 1 was mortgage by conditional sale and the view taken by the High Court with regard to the legal effect of the transaction must be reversed.
It follows, therefore, that the plaintiff is entitled to a preliminary decree for redemption under 0.
r. 7, Civil Procedure Code, 924 for taking accounts and for declaration of the amounts due to the 1st defendant under exhibit B 1.
For these reasons we set aside the judgment and decree of the High Court and.
restore the judgment and decree of the Subordinate Judge of Coimbatore granting the plaintiff a preliminary decree for redemption of the mortgage.
A period of six months is granted for payment of the amount under the preliminary decree.
The appeal is accordingly allowed with costs.
Appeal allowed.

summary:
M executed a document exhibit B 1 on May 28, 1946, in respect of his half share in certain lands in favour of the defendant for a consideration of Rs. 4,000/ .
The document was in the form of a sale deed but it contained a stipulation that the defendant should reconvey the property to M on his repaying the amount of Rs. 4,000/ after five years and before the end of the seventh year.
After M 's death his sons executed an assignment deed in favour of the plaintiff in August 1950 for a sum of Rs. 1,600/ and on the basis of this deed, the plaintiff filed a suit for re demption of the disputed property.
He claimed, inter alia, that exhibit B 1 must be deemed in law to be a mortgage by conditional sale and that he was entitled to redeem as the assignee of the equity of redemption; or alternatively, that exhibit B 1 was a sale with a condition to repurchase and the defendant was bound to reconvey the property to him on payment of Rs. 4,000/ and that although this amount had been tendered several times, the defendant had refused to accept it.
On the other hand the defendant denied that exhibit B 1 was a mortgage by conditional sale and contended that it was an outright sale with a covenant for repurchase and as the plaintiff did not tender the amount within the time stipulated in the document, the suit was barred by time.
The trial court held that exhibit B 1 was a mortgage by conditional sale and granted a preliminary decree; but the High Court, in appeal, reversed this decision.
On appeal to this Court, HELD : exhibit B 1 was a transaction of mortgage by conditional sale and not a sale with a condition for retransfer.
The question whether by the incorporation of a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances.
The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and mortgagee, the price being charged on the property conveyed.
In a sale coupled with an agreement to reconvey there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to retransfer the property within the period specified.
The distinction between the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt.
[921 C F] In the present case the following circumstances indicated that the transaction was a mortgage by conditional sale : (i) As required by the proviso to section 58(c).
the condition for repurchase was embodied in the same document; (ii) the consideration for exhibit B 1 was Rs. 4,000/. while the real value of the property was Rs. 8,000/ ; 919 (iii)the patta was not transferred to the defendant after the execution of exhibit B 1 by M; (iv) M, and after his death, his sons, continued to pay kist for the land; and (v) the consideration for reconveyance was the same amount as the consideration for exhibit B 1, i.e. Rs. 4,000/ .
[923 B G]


judgement:
ivil Appeal No. 243 of 1965.
Appeal by special leave from the judgment and order dated January 13, 1965 of the Madhya Pradesh High Court in Misc.
Petition No. 624 of 1964.
S.V. Gupte, Solicitor General, and 1.
N. Shroff, for the appellant.
A.G. Ratnaparkhi, for the respondent No. 3.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal raises an important question as to the scope and interpretation of section 62(c) of the Motor Vehicles Act and as to whether the appellant The Madhya Pradesh State Road Transport Corporation was entitled, in the circumstances of the case, to the grant of a temporary permit for 4 months under section 62(c) of the Motor Vehicles Act.
On November 27, 1962 applications were invited for a permit for running a town bus service in Raipur.
On February 20, 1963 it was decided by the Regional Transport Authority to grant a permit for the service to the 3rd respondent Madhya Pradesh Transport Co. (Pvt.) Ltd, Raipur but the 3rd respondent did not produce buses of the required specifications for operating the service though several opportunities were given.
The order granting the permit to the 3rd respondent was consequently revoked by the Regional Transport Authority on September 13, 1964.
Shortly thereafter the Regional Transport Authority granted a temporary permit to the appellant for a period of two months i.e. from September 29, to November 28, 1964 in respect of the aforesaid bus service.
By the order dated November 25, 1964 the Regional Transport Authority granted another temporary permit for 4 months to the appellant.
The order of November 25, 1964 states: 788 "From the large number of letters from some responsible members of the public received with this application and the statistics of the traffic catered to by the buses operated by the Corporation, it is now clear that the public of Raipur is feeling the need of the town bus operations.
It has been decided by this Authority separately that applications for regular operations on two routes actually operated temporarily with some extensions and one additional route be invited.
However, it has to be accepted that expectations of the public for these transport facilities at least on the existing two routes have been aroused and have created a particular need which has to be met temporarily till regular operations are introduced.
The restrictions put by the first proviso to section 62 of the Motor Vehicles Act and which has been emphasized in the decision of their Lordships of the M.P. High Court in Shri Ram Khanna vs Raingopal Satyanarain (1961 M.P.L.J. notes 121) will not operate in sanctioning a further grant for a period of four months till nearly the end of March when the academic year may end for a large number of students availing of this facility.
A temporary permit for a period of four months from the date of expiry, i.e., 28 11 1964, on the routes and timings covered by the previous order of ,grant dated 19 9 1964 is approved.
This will stand cancelled if regular operations covering these routes are introduced in the meantime.
" The 3rd respondent thereupon moved the High Court Of Madhya Pradesh on December 19, 1964 for grant of a writ of certiorari to quash the order of the Regional Transport Authority granting temporary permits to the appellant for operating the bus service.
The application was allowed by the High Court on January 13, 1965 and a writ in the nature of certiorari was issued quashing the order of the Regional Transport Authority dated November 25, 1964 by which a temporary permit was granted to the appellant.
The High Court took the view that a temporary permit cannot be granted for any route when there is a permanent need for providing transport facilities on that route and it has been decided to invite applications for that purpose.
This appeal is brought, by special leave, by the Madhya Pradesh 'State Road Transport Corporation against the judgment of the High Court in the writ petition.
Section 62 of the Motor Vehicles Act states: "62.
A Regional Transport Authority may without following ,the procedure laid down in section 57, grant permits.
to be ,effective for a limited period not 'in any case.
789 to exceed four months, to authorise the use of a transport vehicle temporarily (a) for the conveyance of passengers on special occasion such as to and from fairs and religious gatherings, or (b) for the purposes of a seasonal business, or (c) to meet a particular temporary need, or (d) pending decision on an application for the renewal of a permit; and may attach to any such permit any condition it thinks fit: Provided that a temporary permit under this section shall, in no case, be granted in respect of any route or area specified in an application for the grant of a new permit under section 46 or section 54 during the pendency of the application: Provided further that a temporary permit under this section shall, in no case, be granted more than once in respect of any route or area specified in an application: for the renewal of a permit during the pendency of such application for renewal.
" On behalf of the appellant it was contended, in the first place, that there was a particular temporary need for the provision of transport facilities and the High Court was erroneous in taking view that whenever there was a permanent need there could be no temporary need, and so temporary permit could not be granted under section 62(c) of the Motor Vehicles Act.
In our opinion, the argument put forward by the learned Solicitor General on behalf of the appellant is well founded and must be accepted as correct.
It appears from the order of the Regional Transport Authority that after the regular permit granted to respondent No. 3 was can , celled there was a shortage of necessary number of transport vehicles on the route and the Regional Transport Authority thought it fit to provide for this temporary need until regular operations were introduced and regular permits were granted after following the procedure prescribed under section 57 of the Motor Vehicles Act.
Section 62(c) of the Motor Vehicles Act states that the Regional Transport Authority may grant a temporary permit meet a particular temporary ' need" and.
we see no reason why this clause should be given any special or restricted meaning.
There is no antithesis between a particular temporary need and a permanent need and it is manifest that these two kinds of need :may coexist on a particular route.
If, therefore.
the Regional Transport Authority considered that, in the circumstances of the case, there.
790 was a particular temporary need, and granted a temporary permit to the appellant, the action of the Regional Transport Authority cannot be challenged as legally invalid.
Reference may be made, in this connection, to section 62(d) which contemplates that temporary permits may be granted to authorise the use of a transport vehicle temporarily pending decision on an application for the renewal of a permit.
This sub section, therefore, contemplates that there may exist a temporary need for transport facilities on a particular route even in case of permanent need for such facilities.
We are accordingly of opinion that the Regional Transport Authority was right as a matter of law in granting a temporary permit to the appellant under section 62(c) of the Motor Vehicles Act in the circumstances of this case and the view expressed by the High Court is not correct.
It was also contended on behalf of respondent No. 3 by Mr. Ratnaparkhi that, in any event, the Regional Transport Authority ought not to have granted a temporary permit for a total period exceeding the limit of 4 months.
Learned Counsel placed reliance the words "in any case" appearing in section 62 of the Motor Vehicles Act which has already been quoted.
It was urged that the words "in any case" mean that under no circumstances a temporary permit can be granted on any route for more than a total period of 4 months.
We are of opinion that the words "in any case" do not mean "in any circumstance".
The section means that at any one time the Regional Transport Authority is not permitted to issue to any person a temporary permit for a period exceeding 4 months, but if the temporary need persists, as, for example, where 'the formalities under section 57 are not completed within a period of 4 months, it would, in our opinion, be permissible for the Regional Transport Authority to grant a second temporary permit in order to meet the temporary need.
We should, of course, make it clear that the Regional Transport Authority cannot abuse its power : 'and go on granting temporary permits in quick succession and not 'take speedy action for completing the procedure under section 57 of the Motor Vehicles Act.
If upon the facts of any particular case it appears that the Regional Transport Authority is so abusing its powers its action is liable to be corrected by grant of a writ, but 'where such abuse of power is not alleged or shown the mere fact that the Regional Transport Authority has granted a temporary permit for a second time and the total duration of the two periods 'is more than 4 months, would not invalidate the second permit.
We accordingly reject the argument of learned Counsel for respondent No. 3 on this point.
With regard to the construction of section 62(c) of the Motor Vehicles Act there is divergen of opinion among ,the various High Courts.
In Jairam Dass vs Regional Transport Authority(1) (1) I.L.R. 791 it was held by the Rajasthan High Court that in a case where the Regional Transport Authority was of the view that the.
existing regular bus service was not sufficient to meet the traffic and decided to increase the number of regular buses plying on the route, it had the power to grant a temporary permit till the necessary formalities for increasing the regular permits were gone through and that this would amount to a temporary need.
The same view has been taken by the Assam High Court in Chandi Prasad Mahajan vs The Regional Transport Authority, Gauhati(1) in which it was said that section 62(c) of the Motor Vehicles Act is quite general in terms and is not restricted to an existing particular need but includes a particular temporary need created by the inability of government or an individual to provide transport immediately.
A contrary view has been expressed by Madras High Court in Sri Rama Vilas Service Ltd. vs The Road Traffic Board, Madras,C) by Kerala High Court in Balagangadharan vs Regional Transport Board, Quiton,(3) by Nagpur High Court in Shah Transport Co., Chhindwara vs The State of Madhya Pradesh,(4) and by Mysore High Court in Mallasattappa vs The Chairman, Regional Transport Authority, Bangalore.(5) For the reasons already expressed, we hold that the view taken by the Rajasthan High Court in Jairam Dass vs Regional Transport Authority(6) and the Assam High Court in Chandi Prasad Mahajan vs The Regional Transport Authority, Gauhati(1) as to the interpretation and the effect of section 62(c) of the Motor Vehicles Act is correct.
It was submitted on behalf of respondent No. 3 that the order of the Regional Transport Authority dated November 25, 1964 had already expired and the Regional Transport Authority had invited fresh applications for permanent permit by Gazette notification dated December 14, 1964.
It was contended by Mr. Ratnaparkhi that any declaration that this Court may make with regard to the grant of temporary permit dated November 25, 1964 would be academic.
But the Solicitor General submitted on behalf of the appellant that it was necessary for this Court to declare the true position in law, so that in consideration of fresh applications for a temporary permit in future no mistake may be made.
The view taken by the High Court in the judgment under appeal would bind the Regional Transport Authorities in the State unless it is set aside.
We agree with the contention of Solicitor General and consider that, in the circumstances of this case, the question is not totally academic.
(1) I.L.R. (2) A.I.R. 1948 Madras 400.
(3) A.I.R. 1958 Kerala 144.
(4) A.I.R. 1952 Nagpur 353.
(5) A.I.R. (6) I.L.R. 792 We accordingly allow this appeal and set aside the order passed.
by the High Court dated, January 13. 1965 and declare that the order of the Regional ' Transport Authority dated November 25.
1964 granting a temporary permit to the appellant is legally valid.
There will be no order with regard: to costs of this appeal.
Appeal allowed.

summary:
In February, 1963, the first respondent, Regional Transport Authority, granted a permit to the third respondent for running a town bus service in Raipur, but as the latter was unable to.
put the service into operation, the permit was revoked in September, 1964.
Thereafter, the first respondent granted a temporary permit to the appellant for a period of two months and in November, 1964 pending the grant of a permit for permanent regular operations, granted a second temporary permit to the appellant for four months.
The third respondent thereupon filed a petition in the High Court for a writ of certiorari to quash the order of the first respondent granting a temporary permit to the appellant on the ground, inter alia, that such grant was in violation of section 62 of the Motor Vehicles Act.
The High Court allowed the petition, being of the view that a temporary permit could not be granted for any route when there was a permanent need for providing transport facilities on that route and it had been decided to invite applications for that purpose.
In the appeal before this Court, it was also contended that the provision in section 62 that a temporary permit could be granted for a period not "in any case" to exceed four months meant that under no circumstances could a temporary permit be granted on any route for more than a total period of four months.
On the other hand, it was the appellant 's contention that in the circumstances of the case, there was a "particular temporary need" within the meaning of section 62(c) and the High Court was in error in taking the view that whenever there was a permanent need, there could be no temporary need.
HELD: (i) The Regional Transport Authority was right as a matter of law in granting a temporary permit to the appellant under section 62(c) of the Act in the circumstances of the case.
[790 C] After the regular permit granted to the third respondent was ,cancelled, in view of a shortage of transport vehicles on the route the Regional Transport Authority thought it fit to provide for this temporary need until permanent regular operations could be introduced in accordance with the procedure prescribed in section 57.
There was no reason why the clause "to meet a particular temporary need" should be given any special or restricted meaning.
There is no antithesis between a particular temporary need and a permanent need and it is manifest that these two kinds of need may co exist on a particular route.
[789 G H] 786 787 (ii) The words "in any case" in section 62 do not mean "in any circumstance".
The section means that at any one time the Transport Authority is not permitted to issue to any person a temporary permit for a period exceeding 4 months; but if the temporary need persists then, except where an abuse of the power is shown, it would be permissible to grant a second temporary permit to meet the temporary need.
[790 D F] Jairam Dass vs Regional Transport Authority, I.L.R. ; Chandi Prasad Mahajan vs The Regional Transport Authority, Gauhati, I.L.R., , approved.
Sri Rama Vilas Service Ltd. vs The Road Traffic Board, Madras, A.I.R., 1948 Madras 400, Balagangadharan vs Regional Transport Board, Quilon, A.I.R., 1958, Kerala 144, Shah Transport Co., Chhindwara vs The State of Madhya Pradesh, A.I.R., 1952 Nagpur 363, Mallasattappa vs The Chairman, Regional Transport Authority, Bangalore, A.I.R., , disapproved.