judgement:
Civil Appeal No. 490 of 1860.
Appeal by special leave from the judgment and order dated October 6, 1958, of the Punjab High Court in Civil Misc.
No. 28 of 1958(File 'A ').
Mohan Behari Lal, for the appellant.
N. section Bindra and P. D. Menon, for the respondent No. 1.
Radhey Lal Agarwal and V.N. Sethi, for respondent No.2.
December 5.
The Judgment of the Court was delivered by DAS GUPTA, J.
The appellant, Jetha Nand (Betab) was enrolled as an Advocate in the Chief Court of Sind on May 14, 1947.
He came away to India at the end of the year 1948 and practised in the courts at Delhi.
On October 8, 1956 an order was passed by the Chief Justice of the Punjab High Court prohibiting the appellant from practising as an 963 Advocate in the courts at Delhi.
On November 8, 1956 the appellant presented an application to the High Court in which he contended that by virtue of his having been enrolled as an Advocate in the Chief Court of Sind he was entitled to practice in all the subordinate courts within the territory of India.
This petition was however rejected by a Full Bench of the Punjab High Court on the view that the appellant could not after the partition of India be considered to be an Advocate enrolled under the provisions of the Bar Councils Act.
Against this order the present appeal has been preferred on special leave granted by this Court.
The petitioner 's case is that as immediately before the partition of India he was entitled to practise in any court in British India his right to practise in those Courts continued to exist even when on partition of India, "British India" ceased to exist and provinces of India took their place; and when thereafter on the formation of the Indian Union under the Constitution these provinces became States of India but those same courts continued, his right to practise in those courts also continued.
On behalf of the respondents it is contended that the petitioner 's right to practise in courts which were not under the Chief Court of Sind ceased as soon as Sind ceased to form part of India and the Chief Court of Sind ceased to be a High Court in India.
As the appellant bases his claim on section 14 (1) (b) of the , it is necessary to examine first the scheme of that Act.
This Act was passed to provide for the constitution and incorporation of Bar Councils for certain courts in British India, to confer powers and impose duties on such Bar Councils and to amend the law relating to legal practitioners entitled to practise in the courts.
It extended to the whole of British 964 India but was in the first instance made applicable to only certain named High Courts the High Court at Calcutta, and the High Courts at Madras, Bombay, Allahabad, Patna and Rangoon.
It was also provided (section 1, sub s.2) that the Act shall apply to such other High Court within the meaning of cl. 24 of section 3 of the as the Governor General in Council may, by notification in the Gazette declare to be High Courts to which this Act applies.
Sections 2,17, 18 and 19 were to come into force at once; but as regards the other provisions it was enacted that they could come into force in respect of any High Court to which the Act applied on such date as the Governor General in Council might by notification direct.
Section 2 defined Advocate as "an advocate" entered in the roll of advocates of a High Court under the provisions of this Act and "High Court" as "a High Court to which this Act applies".
Sections 3, 4 and 5 deal with the constitution and incorporation of Bar Councils.
Section 8 makes it the duty of every High Court to prepare and maintain a roll of advocates of the High Court and also provides that no person shall be entitled as of right to practise in any High Court unless his name is entered in the roll of the advocates of the High Court.
Section 10 empowers the High Court to reprimand, suspend or remove from practice any advocate of the High Court whom it finds guilty of professional and other misconduct.
The manner in which such action can be taken is dealt with in sections 10, 11, 12 and 13.
Of these, section 12 provides inter alia that when any advocate is reprimanded or suspended under this Act a record of the punishment shall be entered against his name in the roll of the Advocates of the High Court and when an Advocate is removed from Practice his name shall forthwith be struck of the roll.
Section 14 provides inter alia that an advocate shall be entitled as of right to practise in any other Court in British India.
965 It is not disputed before us that the Governor General by notification in the Gazette of India did declare the Chief Court of Sind to be a High Court to which this Act applied and that by another notification he also directed that all the provisions of the Act would come into force in respect of the Chief Court of Sind on some date long before 1947.
Consequently, even though these notifications have not been placed before us we must proceed on the bases that on May 14, 1947, when the appellant was enrolled as an advocate in the Chief Court of Sind he was an advocate for the purposes of the and so was entitled as of right to practise in any subordinate courts in what then was British India.
The question is whether this right continued to exist after Sind ceased to form a part of India.
It appears to us clear that when section 2 defines advocate as "an advocate entered in the roll of advocates of High Court", it means an advocate who has been entered in such roll of advocates and whose name continues to be on that roll.
When, for example, the name of the advocate is removed from the roll under section 12 (7) he ceases to be an advocate within the meaning of section 14 in spite of the fact that his name was once entered in that roll.
An advocate entered in the roll of advocates can therefore mean only one whose name continues to be entered in that roll.
What is the position if the High Court ceases to exist, by reason of abolition or otherwise ? The only possible answer to this question is that if the High Court ceases to exist; the roll which used to be maintained by it has also no legal existence and consequently a person whose name was in that roll, is no longer an advocate within the meaning of section 14 or any other section of the Act.
That appears to be exactly the position in the present case.
The Chief Court of Sind was a High Court within the meaning of sections 3 to 19 of the by reason of the notification made by the Governor General in Council under section 1 sub section 2 of the Act.
It would be absurd 966 to think that when Sind ceased to form part of India the Chief Court of Sind still continued to be a High Court for the purposes of Indian law.
All doubts in the matter have however been set at rest by the provisions of the Indian (Adaptation of Existing Indian Laws) Order, 1947.
In this connection it is necessary to recall section 18 sub section
18 sub section
3 of the Indian Independence Act which provides that the law of British India and of the several parts thereof existing immediately before the appointed day shall, so far as applicable and with the necessary adaptations, continue as the law of each of the new Dominions and the several parts thereof until other provision is made by laws of the Legislature of the Dominion in question or by any other legislature or other authority having power in that behalf.
Many adaptations were in fact found necessary to remove complications and confusions which might otherwise have arisen.
Of the several adaptation orders made we are concerned here with the Adaptation Order No.16 which was called the India (Adaptation of Existing Indian laws) Order, 1947.
In this Order, the appointed dated was defined as August 15, 1947.
Section 5 of the Order is in these words : "Any reference in an existing Indian law to a High Court which as from the appointed day ceases to be a High Court for any part of the Dominion of India, shall (a) if the reference be to the High Court of Judicature at Lahore, be replaced by a reference to the High Court of East Punjab, and (b) in any other case, be omitted.
" The Chief Court of Sind (a High Court within the meaning of the ) having ceased as from August 15, 1947 to be a High Court for any part of the Dominion of India references to that Court as one to which the Act applied must be omitted in the application of the Indian Bar 967 Councils Act, 1926 after that date.
In other words, the Chief Court of Sind which was a High Court for the purposes of the up to the August 14, 1947 ceased to exist as a High Court for the purposes of the with effect from the 15th day of August, 1947.
The necessary consequence of this is that the roll maintained by the Chief Court of Sind was from August 15, 1947 no longer a roll maintained by a High Court within the meaning of the and thus any person whose name was entered on the roll of the Chief Court of Sind ceased to be an advocate for the purpose of section 14 of the and therefore ceased to have the right under that section to practise in courts in India.
There can be no doubt whatsoever that in making this adaptation in section 5 of the India (Adaptation of Existing Indian Laws) Order, 1947 the intention of the authority making the order was not only to ensure that rights will not in future accrue on the basis of a High Court now in Pakistan having been formerly a High Court in India but also to prevent the future exercise of any right that may have become vested in any person on such a High Court having been a High Court in India.
This conclusion is inevitable from the absence of any saving clause in the Adaptation Order.
Thus, even though the appellant had a right on the 14th August, 1947 to practise in the courts subordinate to any High Court in India such a right ceased to exist after the Adaptation Order mentioned above.
We need merely add that if the appellant 's contention was correct, the anomalous position would have arisen that there would be no court in India which could take disciplinary action against him, in the event of misconduct.
The scheme of the Bar Councils Act is as has been emphasised 968 earlier, that each High Court in the country should have disciplinary jurisdiction over the Advocates on its rolls.
The provisions of the Adaptation order have maintained this position.
In our opinion, the High Court rightly rejected the appellant 's application.
The appeal is accordingly dismissed.
In the circumstances of the case we make no order as to costs.
But the appellant who has filed the appeal as a pauper is directed to pay the court fees which would have been paid by him if he had not been permitted to appeal as a paper.
Appeal dismissed.

summary:
The appellant J who was enrolled as an advocate in the Chief Court of Sind in May 1947 came to India at the end of the year 1948, and practiced in the Courts at Delhi.
The Chief Justice of Punjab High Court prohibited the appellant from practicing as an advocate in the Courts of Delhi.
At 962 the time the appellant was enrolled he was an advocate for the purposes of the , and so was entitled as of right to practice in any subordinate courts in what then was British India.
The question was whether this right continued to exist, after Sind ceased to form a part of India. ^ Held, that the Chief Court of Sind which was a High Court for the purposes of , upto August 14, 1947, ceased to exist as a High Court for the purposes of the , with effect from August 15, 1947, by virtue of section 5 of the India (Adaptation of Existing Indian Law) Order, 1947.
The necessary consequence of this was that the Roll maintained by the Chief Court of Sind was from August 15, 1947, no longer a roll maintained by a High Court within the meaning of the , and any person whose name was entered on the Roll of the Chief Court of Sind ceased to be an advocate for the purposes of section 14 of the , and therefore ceased to have the right under that section to practice in courts of India.
In the present case even though the appellant had a right on August 14, 1947, to practice in the courts subordinate to any High Court in India, such a right ceased to exist after the India (Adaptation of Existing Indian Laws) Order, 1947.


judgement:
l Appeal ,#No. 151 of 1951.
Appeal from a Judgment and Order dated 14/15th September, 1949, of the High Court of Judicature at Bombay (Chagla C.J. and Tendolkar J.) in Income tax Reference No. 2 of 1949.
R. J. Kolah and N. A. Palkiwalla for the appellant.
C. K. Daphtary, Solicitor General for India (P.A Mehta, with him) for the respondent.
January 30.
The judgment of Mehr Chand Mahajan J., Das J. and Bhagwati J. was delivered by Bhagwati J. Bose J. delivered a separate judgment.
BHAGWATI J. This is an appeal from the judgment and order of the High Court of Judicature at Bombay upon a reference by the Income tax Appellate Tribunal under Section 66 (1) of the Indian Income tax Act, 1922, whereby the High Court upheld the decision of the Appellate Tribunal that two amounts of Rs. 12,68,480 and Rs. 4,40,878 were the sale proceeds of goods sold by the appellant to merchants in British India, were received in British India and were liable to income tax in British India.
The appellant is a company registered in the Baroda State, as it then was, prior to its merger with India.
It manufactures textile goods in Petlad in the Baroda State and after the goods are manufactured they are sold by the company ex mills.
The company employs Messrs. Jagmohandas Ramanlal & Co. as guaranteed brokers.
That firm guarantees the sale price of goods sold by the company ex mills to the purchasers from Ahmedabad and receives commission as consideration for the guarantee and the work which it does for the company.
The company is a non resident and its accounts are maintained according to the mercantile system.
953 In the assessment year 1942 43 (the previous year being the calendar year 1941) the total sales of the goods by the company amounted to Rs. 29,68,808.
In making the assessment on the company for that assessment year the following three amounts were considered for the purpose of determining the company 's liability to British Indian tax.
(a) Sale proceeds recovered through Messrs. Jagmohandas Ramanlal & Co. . . . .Rs.
12,68,480 (b) Sale proceeds through British Indian banks and shroffs rec eived by means of drafts or hu ndies drawn by the company. . .Rs.
4,40,878 (Railway receipts handed over to British Indian merchants by the banks on payment).
(c) Sale proceeds received by cheques on British Indian banks and hundies on British Indian shroffs and merchants, and collected by the banks and shroffs . . . . . .
Rs. 6,719735 Total Rs. 23,81,093 As regards item (a) the company debited the account of the firm of Messrs. Jagmohandas Ramalal & Co. with Rs. 13,41,744 which represented sales made by the company to merchants of Ahmedabad whose payments were guaranteed by that firm, and credited the sales account with the amount of the bills.
Messrs. Jagmohandas Ramanlal & Co. collected the amounts of the bills from the merchants at Ahmedabad and credited the sums recovered in the company 's accounts with banks and/or shroffs at Ahmedabad and also made dis bursements under instructions of the company to the creditors of the company in British India.
All these payments were credited by the company to the account of Messrs. Jagmohandas Ramanlal & Co. and during the relevant accounting year the company thus 954 received Rs. 12,68,480 against the total debits of Rs. 13,41,744.
As regards item (b) the company received Rs. 4,40.878 by drawing hundies or drafts for the amounts of its sales bills (including the forwarding charges and the cost of transit from the mills premises to the station) on the merchants in favour of recoginised banks and shroffs in British India, by sending the same to those banks or shroffs with the railway receipts duly endorsed in favour of the merchants and by instructing the banks or shroffs to recover the amounts including the costs of transmitting the same to them.
The amounts of these sales bills were debited by the company to the accounts of the respective merchants and credited to the sales account and the sums recovered by the banks or shroffs from the merchants in British India against the delivery of the relative railway receipts were on receipt of the same by the company credited to the accounts of the respective merchants in their books of account.
As regards item (c), the company received Rs. 6,71,735 from the merchants by cheques and hundies drawn on banks and shroffs in British India in favour of the company.
These cheques and hundies were negotiated by the company in Petlad and sent back for credit to its accounts with those banks and shroffs.
The said cheques and hundies were cashed in British India and the sale proceeds remitted by the banks and shroffs to the company.
The amounts of the sales bills were debited to the accounts of the merchants in the books of the company when the goods were invoiced to the merchants and these accounts were credited with the moneys thus received by the company from the merchants.
The Income tax Officer brought to tax the profits derived by the company represented by the said three items in the assessment year on the basis that the sale proceeds having been received in British India the profits were received in British India.
The Appellate Assistant Commissioner on appeal held that profits 955 from items (a) and (c) were exempt from British Indian tax while those represented by item (b) were rightly taxed.
The Department filed an appeal to the Appellate Tribunal against the decision of the Appellate Assistant Commissioner in regard to items (a) and (c) and the company filed an appeal in respect of item (b).
The Appellate Tribunal held in regard to item (a) that the merchants in British India were not absolved either in law or in fact from their responsibility to pay to the company its dues by virtue of the debit entries in the account of Messrs. Jagmohandas Rainanlal & Co. and in regard to item (b) that the payment of the amounts due was a condition precedent to ' the delivery of goods by the banks in British India on behalf of the company.
The Tribunal therefore held that profits arising from items (a) and (b) were rightly subjected to tax.
As regards item (c) the Tribunal held that Rs. 6,71,735 "were received by the assessee company directly from the merchants in British India by cheques and hundies drawn on banks and shroffs in British India in favour of the company but were negotiated in Petlad and sent for credit to the company 's account.
The amounts were received at Petlad and once they were received there, they could not be held to have been received again in British India ".
The Department asked the Tribunal to refer to the High Court the question of law arising on item (c) and the company asked the Tribunal to refer to the High Court the question of law arising on items (a) and (b) and the Tribunal therefore referred the following question of law to the High Court: " Whether on the facts and in the circumstances of the case, the sums of Rs. 12,68,480, Rs. 4,40,878 and Rs. 6,71,735, or any of them, which, represents receipts by the assessee company of its sale proceeds in British India, include any portion of its income in British India?" The High Court held that Rs. 12,68,480 were received in British India and included the profits and gains of the business of the assessee company.
It held that Rs. 4,40,878 also were received in British India 956 and the company was liable in respect of that amount.
In regard to the item of Rs. 6,71,735, the High Court found that the facts stated by the Tribunal were not sufficient to enable it to reach a decision and therefore directed that the Tribunal should submit a supplementary statement of case setting out the several aspects set out in the judgment.
The High Court reframed the question in regard to the two items of Rs. 12,68,480 and Rs. 4,40,878 in the manner following: (1)Whether the sums of Rs. 12,68,480 and Rs. 4,40,878 were sale proceeds of the goods sold by the assessee to merchants in British India or were debts due by the said merchants ? (2)Whether if they were sale proceeds, they were received in British India ? and answered them by stating that they were sale proceeds and they were received in British India.
There was also a third question which was comprised in the reference and that question was framed as under: Whether the profits of the assessee 's business are included in the sums of Rs. 12,68,480 and Rs. 4,40,878 ? This question was also answered by stating that they were included in these two sums.
The company obtained leave from the High Court to appeal against the decision in regard to the two sums of Rs. 12,68,480 and Rs. 4,40,878 and hence this appeal.
It is common ground that the company is a nonresident and its accounts have been regularly kept according to the, mercantile system.
Its balance sheets were also prepared on that basis.
The company was assessed to tax in British India on the basis that these two sums of money were received in British India by or on behalf of the company.
In regard to the item of Rs. 12,68,480, even though the amounts of the sales bills were in the first instance debited by the company in its books to the account of Messrs. Jagmohandas Ramanlal & Co. the sale proceeds in accordance with 957 the terms of the sales bills were paid by the respective merchants to Messrs. Jagmohandas Ramanlal & Co. in British India and were either credited by Messrs. Jagmohandas Ramanlal & Co. in the company 's accounts with banks or shroffs in British India or were disbursed by them in accordance with the instructions of the company in British India.
In regard to the item of Rs. 4,40,878 even though the amounts of the sales bills were debited in the first instance by the company to the accounts of the respective merchants in the books of account at Petlad the relative railway receipts were sent by the company to banks or shroffs in British India together with drafts or hundies in connection with the same with instructions that delivery of the railway receipts should be given to the respective merchants against payment and the amounts of the sales bills were thus paid by the respective merchants to the banks or shroffs in British India and were transmitted under the instructions of the company by the banks and shroffs in British India to the company at Petlad.
Prima facie therefore the amounts of the sales bills in both the cases whether they were paid to Messrs. Jagmohandas Ramanlal & Co. or to the banks or shroffs, through whom the railway receipts were negotiated were paid by the merchants in British India and were received by Messrs. Jagmohandas Ramanlal & Co. and the banks or shroffs on behalf of the company,in British India.
The receipt of these amounts thus fell within section 4 (1) (a) of the Act and the profits or gains of this business thus were received in British India by or on behalf of the company.
The company however sought exemption from liability to tax on the grounds (a) that the accounts of the company were kept on the mercantile or book profit basis under which the accrual of profit as shown in the account was the criterion of taxability and section 4(l) (a) had no application at all; (b) that it was obligatory on the authorities under section 13 of the Act to accept that system of maintaining accounts except under the proviso to that section and that the method of computation there was made the very basis of 124 958 chargeability and section 10 read with section 13 operated to save these amounts from chargeability and (c) that the amounts having been treated as received when credit entries were made in the books of account, and chargeability having crystallised on the date when the income accrued or was treated as received, there was no further scope for a charge when the amounts were subsequently actually received and the subsequent handling of the amounts by the company and the receipt thereof in British India were of no consequence.
The mercantile system of accounting or what is otherwise known as the double entry system is opposed.
to the cash system of book keeping under which a record is kept of actual cash receipts and actual cash payments, entries being made only when money is actually collected or disbursed.
That system brings into credit what is due, immediately it becomes legally due and before it is actually received and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed.
The profits or gains of the business which are thus credited are not realised but having been earned are treated as received though in fact there is nothing more than an accrual or arising of the profits at that stage.
They are book profits.
Receipt being not the sole test of chargeability and profits and gains that have accrued or arisen or are deemed to have accrued or arisen being also liable to be charged for income tax, the assessability of these profits which are thus credited in the books of account arises not because they are received but because.
they have accrued or arisen.
Mr. Kolah appearing for the company drew our attention to the following cases: Subramaniyan Chettiar vs Commissioner of Incometax(1), Ahmed Din Alladitta vs Commissioner of Income tax, Punjab(2), Kanwal Nayan Hamir Singh vs Commissioner of Income tax, Ajmer Merwara(3) and (1)(1927) (2)[1934] (3) 959 Commissioner of Income tax vs Shrimati Singari Bai(1).
The assessees there were all residents in British India and maintained their books of account according to the mercantile system.
Except in the case of Commissioner of Income tax vs Singari Bai(1) where the assessment was in respect of the total income or profits, stray items of income treated as received in British India were sought to be charged for tax and they were all assessed for tax not on the basis of actual receipts in British India but on the basis of their having accrued or arisen in British India.
The cases were decided with reference to the law as it stood before the amendment in 1939 which under section 4(l) rendered liable to tax 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, arise or to be received in British India.
The question that arose for the determination of the courts was whether under the mercantile system, profits which were credited in the books could be taxed even though they had in fact not been received and the conclusion reached by the courts was that these profits credited in the books of account were earned and could be charged as having accrued or arisen within British India even though they were in fact not received.
In none of these cases were the courts con cerned with a non resident claiming to have received profits or gains outside British India under the mercantile system of accounting and claiming exemption from liability to tax under section 4 (1) (a) in respect of profits actually received in British India.
It follows from the above that the mercantile system of accounting treats profits or gains as arising or accruing at the date of the transaction notwithstanding the fact that they are not received or deemed to be received and under that system, book profits are, assessed as liable to tax.
If an assessee therefore regularly adopts the mercantile system of accounting he would be liable to tax on the profits thus credited by (1). [1945] 960 him in his books of account subject to all deductions for bad debts as provided in section 10 (2) (xi).
Section 4 (1) (a) has nothing to do with this basis of taxation.
Section 13 which is an integral part of the computation of the total income of the assessee and is compulsory on the income tax authorities as well when computing the total income (vide section 2 (15) ) does not lay down any exemption from liability.
It only sets up a mode of computation of the income which is liable to assessment and imposes upon the income tax authorities an obligation to accept the mode of accounting regularly adopted by the assessee except in the cases where the proviso to that section comes into operation.
The profits earned and credited in the books of account being thus taken as the basis of computation, the system of accounting postulates the existence of debts in so far as moneys re ain due and payable by the parties to whom they have been debited and when it is realised that these debts are not recoverable the assessee gets a deduction for the bad debts under section 10 (2) (xi).
This however does not mean that the transaction as it has been recorded in the books of account under the mercantile system of accounting or the double entry system is metamorphosed or the relationship between the parties assumes a different character.
What was in its inception a transaction of sale and purchase is not converted into another transaction as between creditor and debtor.
The relationship as between vendor and purchaser still subsists and there does not come into existence a new relationship as between creditor and debtor with all its necessary consequences.
The transaction as it has been recorded in the books of account has got to be worked out to its fullest extent.
Merely because the goods have been supplied and the price thereof has been de bited to the purchaser the rights and obligations of the vendor and purchaser inter se are not in any manner affected.
The vendor is bound to fulfil all his obligations under the contract and continues to be liable for all the consequences of his default including rejection of his goods by the purchaser or a claim for damages 961 for breach of warranty by him.
The purchaser is equally entitled to reject the goods or to claim the damages as on breach of warranty by the vendor and all these rights and obligations have got to be worked out in spite of the fact that the entries 'are made in the books of account by the vendor in accordance with the mercantile system of accounting adopted by him.
The vendor could not say that he is under no further obligation to the purchaser and that the purchaser must pay the price of the goods debited to him as a debt arising out of the book entry.
The count in any action filed by the vendor against the purchaser would be a count for the price of goods sold and delivered and would not be a count on an assumpsit for recovery of a debt due by the debtor to him.
It is clear that under these circumstances there is no receipt of the moneys at all, either actual or constructive, in cash or in kind, by actual payment or by adjustment or settlement of accounts.
There is also no scope for the argument that even though these sums may not be said to be either actually or constructively received they should be "deemed to be received".
The expression "deemed to be received" only means deemed by the provisions of the Act to be received.
The phrase statutory receipt might be con veniently employed to cover income which is 'deemed to be received ' and instances of such statutory receipts are to be found in the provisions of the Act, e.g., section 18 (4), section 58 (E), section 58 (J) (3), section 7(2), section 16(1) (c) and sections 19 (2) (vii) and 16(2).
(See the observations of Beaumont C.J. in Commissionei, of Income tax, Bombay vs New India Assurance Co. Ltd.(1).
An amount cannot be "deemed to be received" merely by the volition or sweet will of an individual.
In all the cases which we have mentioned above the profits earned which were credited in the books of account according to the mercantile system of accounting were at best "treated as having been received" which is neither "received" nor "deemed to be received" and therefore not within the purview of section 4 (1) (a).
(1) at p. 614.
962 If then profits which have been thus credited cannot be said to be received nor deemed to have been received when the entries were made in the books of account, the contention urged before us by Mr. Kolah that there could not be a second receipt of the amount in British India does not survive.
It is true that the words used in section 4(l) (a) relate to the first receipt after the accrual of the income.
Once it is received by the party entitled to it, in respect of any subsequent dealing with the said amount it cannot be said to be " received" as income on that occasion.
[Per Kania J. in B. M. Kamdar (1)].
The "receipt" of income refers to the first occasion when the recipient gets the money under his own control.
Once an amount is received as income, any remittance or transmission of the amount to another place does not result in "receipt", within the meaning of this clause, at the other place.
This was definitely established by the Privy; Council in Pondicherry Railway Co. vs Commissioner of IncomeTax 2) and in Commissionei, of Income tax vs Mathias (3).
If, therefore, the income, profits or gains have been once received by the assessee even though outside British India they do not become chargeable by reason of the moneys having been brought in British India, because what is chargeable is the first receipt of the moneys and not a subsequent dealing by the assessee with the said amount.
In that event they are brought, by the assessee as his own moneys which he has already received and had control over and they cease to enjoy the character of income, profits or gains.
This ratio however does not apply to the facts of the present case before us.
The moneys were neither received by the company nor could be deemed to have been received by it when the entries were made in the books of account at Petlad.
They had merely accrued or arisen to it and so far as the receipt thereof is concerned they were first received in British India when they were received by Messrs. Jagmohandas Ramanlal (1)[1946] at P. 39, (2)[1931] 58 I.A. 239.
(3) [1939] 66 I.A. 23.
963 & Co. or by the various banks or shroffs in British India through whom the railway receipts were negotiated.
The first receipt of the moneys was therefore when they were paid as such by.
the merchants to Messrs. Jagmohandas Ramanlal & Co. or to the various banks or shroffs as above.
Whatever paid by the merchants to these several parties were the sale proceeds of the goods which had been sold and delivered by the company to them and they were received within the meaning of section 4 (1) (a) of the Act by these several parties on behalf of the company in British India at the time when these payments were made by the merchants to them.
Mr. Kolah pressed into service the argument based on section 13 of the Act that the mercantile system of accounting regularly adopted by the assessee was obligatory on the income tax authorities for computation of his income.
While agreeing generally with that submission in case of residents, we doubt whether that position would be available to a non resident, who maintains his books of account outside British India according to the mercantile system.
The section would only be relevant where the total profits of the assessee have to be computed, in which event he would be entitled to claim that they should be computed according to the system of accounts maintained by him.
But the section would hardly be relevant where stray items of income are caught in taxable territories as received in taxable territories by a nonresident.
The entries in the present case were put in merely to prove that the sale proceeds were received outside British India where the entries were made.
That contention however could not be sustained, as section 4 (1) (a) is concerned with cases of actual receipt and not with cases of paper receipts.
Having regard to the observations made above we have come to the conclusion that the High Court ",as right in holding that the two sums of Rs. 12,68,480 and Rs. 4,40,878 were the sale proceeds of the goods sold and delivered by the appellant to merchants in British India, that they were received by Messrs, 964 Jagmohandas Ramanlal & Co. and by the banks and shroffs through whom the railway receipts were negotiated, on behalf of the appellant in.
British India, that they were liable to tax under section 4 (1) (a) of the ,*Act as having been received in British India on its behalf, that there is nothing either in the facts and circumstances of the case or in law why they should be exempted from such liability, that the answers given to the questions which were ultimately considered by the High Court were correct, and the appellant was rightly held liable for the tax on these two amounts subject to all just deductions and allowances.
The appeal therefore fails and must stand dismissed with costs.
BOSE, J. I respectfully disagree.
Section 3 of the Indian Income tax Act provides that the " total income " is to be charged in accordance with the provisions of the Act.
We have therefore to see what " total income " means.
" Total income " is defined in section 2(15).
It means (not " includes " but means) the total amount of income, profits and gains "referred to in sub section (1) of section 4 computed in the manner, laid down in this Act." Therefore, the computation of all income refeffed to in section 4(l.) has to be "in the manner laid down in the Act ".
Section 4 (apart from the provisos and explanations is divided into three clauses, (a), (b) and (c).
Clause (b) deals with residents and (c) with nonresidents.
As (a) is general, it is legitimate to infer that it refers to both.
Therefore, the words " received" and " deemed to be received " must be construed in the same sense in both cases except of course where it is otherwise provided in the Act, for sub section (1) is made subject to the provisions of the Act.
Now the words "deemed to be received" can be excluded from consideration at once because I agree that they are confined, and are intended to be confined to what I may call the deeming sections in the Act, that is to say, to cases where the deeming must be done 965 under the express provisions of the Act.
That leaves us with the word "received" (I am of course only deal ing with section 4(l) (a) which deals with " receipts ' and not with section 4(l) (c) which refers to "accruals" and "arisals" and to that which is deemed to "accrue" or "arise").
Now this, in my opinion, is to be contrasted with the words "accrue" and "arise" which are used in clauses (b) and (c).
Though there may be overlapping in some cases, I do not think the three are intended to mean the same thing.
The Privy Council thought in Commissioner of Income tax vs Mathias(1) that there is some variation in meaning between them and in Commissioner of Income tax vs Chunilal B. Mehta(2) they drew attention to the antithesis between "accruing and arising in" and "received in", though they also said in the earlier case that there is not a complete disjunction between them and that they are not three mutually exclusive qualifications (page 56); that is, that there may be some overlapping in certain cases.
Next, we turn to section 6 which divides the various sources of income under various heads for the purposes of computation and chargeability and states that each head shall be " chargeable" "in the manner hereinafter appearing".
It is to be observed that the word "shall" has been used and not " may " thereby implying that there is no option in the matter.
So far as business is concerned, the head is No. (iv) "Profits and gains of business etc.
" That carries us on to sections 10 and 13 which prescribe the method of computation.
Here again, the language is imperative and in the case of a business the method of computation has to be in accordance with the method of accounting regularly employed by the assessee: see Commissioner of Income tax vs Kameshwar Singh(3).
Now in the present case, the method of accounting was the mercantile system.
The essential difference (1) at 56.
(3) at 100 and 101.
(2) [1938] P I.T.R. 521 at 527, 125 966 between this and the cash basis system is that in the latter actual receipts and disbursements are taken into account.
In the former, sums which are due to the business are entered on the credit side immediately they are legally due and before they are actually received and expenditures are entered the moment a legal liability to pay arises and before the actual disbursements.
The profit or loss at the end of the accounting year is therefore based, not on a difference between what was actually received and what was actually paid out, but on the difference between the right to receive and the liability to pay.
I find it impossible in such a case to say that the taxation is on income, or profits and gains which were "received".
It can only be oil profits which " accrued " or "arose" to the assessee in the accounting year: see the Privy Council in Feroz Shah vs Commissioner of Income tax( ').
That, in my opinion, excludes section 4(l) (a) and that in turn means that in such a case a resident is taxed under section 4(l) (b) and a non resident under section 4(l) (c).
Now, this to my mind is of vital importance.
The primary object of the Income tax Act is to tax and not merely to ascertain an income.
The computation of the income is subsidiary and is only for the purposes of ascertaining the quantum of the tax: see Commissioner of Income tax vs Kameshwar Singh(2).
Therefore, if the legislature chooses to lay down different methods of computation and say that the taxation shall be on the amount so computed, it is essential that these methods be adhered to.
In some cases this may be to the advantage of the assessee and in others it may operate to his disadvantage.
But that is immaterial.
The importance lies in this.
All that can be taxed in a given year are the profits and gains which are received or which arise or accrue in the " previous year", and if the Act directs that the profits are to be computed in a given case on "accruals" or "arisals" and not on actual receipts it is essential that that be (1) 224 and 225.
(2) [1933] 1 I.T.R. 94 at 100.
967 done; and it follows from that that the tax in such a case can only be on the accruals or arisals and not on the actual receipts, for clearly you cannot tax on that which you are forbidden to compute in a case where the tax can only be levied on what is computable.
under the Act.
It is important to draw the distinction for this reason.
The rate of tax varies from year to year, therefore if the book profits which are directed to be taxed in a given year are, say, Rs. 10,000 and the actual receipts only Rs. 100, it makes a lot of difference which figure is taken; nor does it even itself out in the long run, for if the rate of taxation increases in the following year and the state of the business is just the reverse, namely that the book profits are only Rs. 100 whereas the actual receipts arising from the previous year 's transactions are Rs. 10,000, it will make a considerable difference to the assessee in the aggregate of tax payable over the years, whether he pays oil the basis of book profits or actual receipts in the two years.
I am not able to draw a distinction between a resident and a non resident in these matters.
I can find no ground for holding that in the case of a resident the mercantile system must be adopted for computing the profits if that is the system of accounting regularly employed but that that need not be done in the case of a non resident.
If the assessee had been a resident company, the taxation would, in my opinion, have been under section 4(l) (b) on profits and gains which had accrued or arisen and not under section 4 (1) (a) on profits which had been received.
The same principle must, in my opinion, be applied in the case of a nonresident and therefore section 4 (1) (c) is attracted, provided the profits and gains have actually accrued or arisen in the taxable territories or they can, because of section 42, be deemed to have accrued or arisen there.
If section 4 (1) (c) is not attracted, then the tax cannot be levied.
Now, applying section 4 (1) (c), the question is where do the profits and gains arise or accrue, in a case 968 like the present ? This is not free from difficulty and various views have been, and can be, taken.
But as these expressions have not been defined and as they are not words of art, I think they should be construed in their ordinary meaning which businessmen would ordinarily and easily understand in a business transaction.
When goods are sold it is to my mind evident that the profit or the loss on any particular transaction arises out of the sale, for until there is a sale there can be no profit.
The profit may not be wholly attributable to the sale but that is another matter.
It is to my mind unquestionable that they arise, in part, at any rate, out of the sale.
Therefore, if the goods are sold in the taxable territories, then, to my mind, the profits, or a portion of them, arise there.
As the Privy Council pointed out in Commissioner of Income tax vs Chunilal B. Mehta(1), in determining where the profits arise the place of the formation of the contract is not the sole criterion, other matters, as for example acts done under the contract are also material.
I am not here attempting to go behind the decision of the Supreme Court to the effect that the place of sale is not necessarily the place of the receipt of the profits.
I am construing the word "arise " and not "receive".
That brings me to the next question, where were the goods in the present ease sold ? That is a, mixed question of fact and law and must vary in each case and must, in my opinion, be answered in a commonsense way and not necessarily in the artificial manner laid down by the Sale of Goods Act to determine where and when the property passes.
What are the facts here ? In the case of the Rs. 4 lakhs odd, the control over the corpus of the goods was retained by the assessee right up to the moment the price was paid; and the price was paid not outside British India but to his nominees in this country, namely, to the assessee 's banks in British India.
These banks retained the documents of title and had the right to refuse (1) [1938]61.T.R.521 at533.
969 delivery until the money was actually handed over.
Therefore, the right to get possession of the goods and to take delivery accrued or arose in British India where the money was actually paid, and that to my mind must be taken to be the place where the profits accrued and arose for income tax purposes, not because the money was received there, for we are not concerned with actual receipts, but because the right which accrued at the date of the transaction was to receive the money in British India and hand over the goods there on the receipt of the money.
As I have said, the substance of the transaction must be viewed and that cannot be made to depend upon the method of book keeping.
Even if there are no books the profits on such a transaction would accrue in the place where the money is to be paid and the goods are to be handed over.
I cannot see how that can alter by reason of the method of accounting employed.
Accordingly, I agree that the method of accounting adopted by the assessee cannot affect the substance of the transactions between the parties or affect their nature.
The rights and liabilities of the parties inter se cannot be made to depend on the way in which one of them chooses to keep its books.
But that is not the case when we come to the question of taxation for income tax purposes.
There the method of accounting is vital.
But even there the substance of the transaction must be viewed, for the substance cannot alter by a mere method of accounting.
It is evident that if the assessee had been resident in British India and these transactions had been omitted from tile books, the sums which ought to have been entered would be taxable as items which had escaped assessment even if there had been no actual receipts in that or in any following year.
Therefore, it is not the entry in the books which attracts the taxation but the profits on the transaction itself, and when the mercantile system is used the profits arise when the right to receive them accrues and not when the entry is made.
If the system is properly employed the entry is made as soon as the right to receive the price arises and so for all practical 970 purposes that is the date ordinarily referred to, but a man cannot manipulate the amount of his tax by choosing to enter or not to enter items which ought to be entered on a particular date, as and when he pleases.
Now, the Rs. 4 lakhs odd represent actual receipts but that is not what is taxable when the computation is based on the mercantile system.
What should be taxed, or rather taken into account for the purposes of taxation, are the figures entered in the accounting year as the sale price of the various transactions which the Rs. 4 lakhs represent.
The profits which arise out of these transactions do not, on my view, escape tax because the profits accrue or arise in the taxable territories.
But the figure on which the tax is to be computed is not the 4 lakhs odd which represent the actual receipts but another figure which unfortunately we have not been given.
I am of course assuming that the figures were duly entered in the books at the proper time in accordance with the mercantile system of accounting.
If they were not, then the Income tax authorities have power to tax income which, for one reason or another, has escaped assessment Turning to the Rs. 12 lakhs.
We know that the figure entered in the books relating to these transactions was Rs. 13,41,744.
i am not clear whether that was entered in the accounting year with which we are concerned, though I gathered that that was the case.
The actual receipts, which followed later, amounted to only Rs. 12,68,480.
In my opinion, if anything is computable for the purposes of tax, it is the former figure (assuming all the entries are in the accounting year) and not the latter.
But in order to determine whether the profits on these transactions are taxable at all, we must examine the transactions.
In these cases the sales were to merchants resident in Ahmedabad.
But according to the assessee 's affidavit, " In respect of buyers from Ahmedabad, the apllicant Mills have no account of such buyers.
The 971 price is debited to the account of the said Jagmohandas Ramlal and company and credited to the sales account in the books of the applicant:" and later, Jagmohandas " discharges its debts by making payments to the applicants from time to time towards the balance in their said account in the books of the applicant Mills.
The said amounts are paid by the said firm by paying the same to the credit of the applicant Mills with British Indian banks or shroffs.
" Now, it is evident from this that Jagmohandas & Company do not merely guarantee payment by the Ahmedabad buyers but actually make the payments, or the equivalent of payments, to the assessee company.
So little do the 'buyers matter that their transactions are not even reflected in the accounts.
All we have is Jagmohandas.
It does not, in my opinion, matter whether the actual buyers remained primarily and legally responsible to the assessee or not.
The fact remains that in practice Jagmohandas & Company actually met the obligations of the buyers and discharged their liabilities to the assessee.
it is, equally clear that Jagmohandas & Company must have recouped themselves in some way from the buyers.
The question is how.
If the whole of the transactions occurred outside British India and the buyers or their agents went to Petlad and received the goods there and paid Jagmohandas & 'Company outside British India, then I am clear that the profits and gains did not accrue or arise in British India, simply be cause the (foods were ultimately brought there.
But if Jagmohandas & Company or their agents were paid in British India, the profits and gains, in my opinion, arose there in the same way as in the 4 lakhs case.
If Jagmohandas & Company were the actual agents of the assessee as were the banks in the other case, and the payments were made in the taxable territories, then the accrual and arising was direct.
If, however, they were not the agents in the strict sense of the term, then I am of opinion that section 42 would be attracted because at the very least there would be a "business connection", 972 provided of course the payments were made in the taxable territories.
Now, here again.
, I am looking to what was actually done in order to determine what the rights were, for it is evident that what was done was done in pursuance of some agreement, express or implied, between the parties which agreement regulated their rights, and those rights in turn determine the place where the profits accrued or arose, or must, because of section 42, be deemed to have accrued or arisen.
In my view, the question referred by the Incometax Appellate Tribunal in its statement of the case does not reflect the true position because it concentrates on the actual receipts.
If the cash basis system of accounting was germane here, then I would agree that the Rs. 4,40,878 was part of the assessee 's income in British India, and so also in the other case, provided the payments were made in British India.
But it is misleading to enquire what would have happened in circumstances which are not material in this case because of the mercantile system of accounting which was employed.
As regards the High Court.
The learned Judges refrained the question and answered it without sending the case back to the Income tax Appellate Tribunal for a further statement of the case.
That was not strictly proper.
But, in my opinion, the refrained questions suffer from the same defect.
In my opinion, the case should be sent back to the Income tax Appellate Tribunal for a refraining of the questions along the lines I have indicated and for a further statement of the case.
Appeal dismissed.

dataset_name: IN-Abs

summary:
A non resident company manufactured textile goods at P out side British India and sold the goods ex mills.
A firm, R & Co., guaranteed the sale price of goods sold ex mills by the company to purchasers at Ahmedabad within British India.
As the company maintained its accounts according to the mercantile system, the company debited R & Co., with the price of goods sold and credited the sales account with the amount of the bills.
R & Co., collected the amounts of the bills from the purchasers on behalf of the company and credited the sums realised in the company 's account with banks at Ahmedabad and also disbursed them to creditors of the company in British India.
These payments were credited by the company to R & Co. During the relevant accounting year the company thus received Rs. 12,68,480.
The company also received Rs. 4,40,878 from sales to purchasers in British India.
The amount of the sales bills for which hundis were drawn on the purchasers in favour of banks were debited by the company to the accounts of the respective merchants and credited to the sales account and the sums received by the banks from the purchasers against delivery of the railway receipts were credited by the company to the accounts of the respective purchasers.
In either case there was no change in the relationship of vendor and purchaser between the company and the purchasers by reason of the entries made in the company 's books.
The question as re framed by the High Court was whether these two sums were sale proceeds of the goods sold by the assesses to merchants in British India and whether they were received in British India and could be included in the assessable income of the company in British India: Held, per Mehr Chand Mahajan, section B. Das and Bhagwati J.J., (Vivian Bose J. dissenting) that the two amounts in question were sale proceeds of the goods sold and delivered by the company to merchants in British India ; that they were neither received by the company nor could be deemed to have been received by it when the entries were made in the books of account at P but had 951 merely accrued or arisen to it there; that they were first received by R & Co. and by the banks through whom the railway receipts were negotiated on behalf of the company in British India; and that they were therefore liable to tax under section 4(l) (a) of the Indian Income tax Act as having been received in British India on its behalf.
Though it is true that in the case of residents, if the assessee employs the mercantile system regularly it is obligatory on the income tax authorities to compute the income according to that system, it is doubtful whether that position would be available to a non resident who maintains his books of account outside British India according to the mercantile system.
Section 13 would only be relevant where the total profits of the assessee have to be computed and in that event the assessee would be entitled to claim that they should be computed according to the system of accounts maintained by him; it would not be relevant when stray items of income are sought to be assessed in the taxable territories as received in the taxable territories by a non resident.
Bose J.
In the case of accounts kept in the mercantile system, the profit or loss at the end of the accounting year is based not on a difference between what was actually received and what was actually paid out, but on the difference between the right to receive and the liability to pay.
The taxation in such cases is not on income, profits or gains which were received but on profits which "accrued or arose" to the assessee in the accounting year.
This view excludes section 4(l) (a) and this means that a resident is taxed in such cases under section 4(l)(b) and a non resident under section 4(l) (c).
Applying section 4(l) (c) to the present case, in the case of the Rs. 4 lakhs odd the profits accrued or arose in British India where the right to take delivery of the goods accrued and where the price was actually paid, but what is really taxable under section 4 (1) (c) is not the Rs. 4 lakhs odd, but the figures entered in the accounting year as the price of the various transactions which the Rs. 4 lakhs represented.
Similarly, in the case of Rs. 12 lakhs odd, it is the figure entered in the books in the accounting year relating to the transactions which is taxable.
By the Full Court.
The expression "deemed to be received" in section 4 (1) (a) means deemed by the provisions of the Act to be received.
Subramaniyan (Chettiar vs Commissioner of Income tax (2 I. T. C. 365), Ahmed Din Alladitta vs Commissioner of Income tax, Punjab , Kanwal Yayan Hanir Singh vs Commissioner of Income tax, Ajmer Merwara , Commissioner of Incometax vs Singari Bai (13 l.
T.R. 224) distinguished.
B.M. Kamdar, In re , Pondicherry Railway Co. vs Commissioner of Income tax (58 I.A. 239) and Commissioner of 952 Income tax vs Mathias (66 I.A. 23), Commissioner of Income tax vs Kameswar Singh , Commissioner of Income tax vs Chunilal Mehta referred to.


judgement:
Civil Appeal No. 94 of 1959.
Appeal by special leave from the judgment and decree dated May 7, 1957, of the Punjab High Court (Circuit Bench) at Delhi in Civil Revision Application No. 144 D of 1957.
Bishan Narain R. Mahalingier and B. C. Misra for the appellants.
935 Gurbachan Singh and Harbans Singh, for the respondent.
December 5.
The Judgment of Sinha, C.J., Hidayatullah and Shah, JJ., was delivered by Hidayatullah, J. Kapur, J. delivered a separate judgment.
HIDAYATULLAH, J.
The appellants (in this appeal by special leave) are the sons of one Gauri Shankar, who owned a bungalow known as 5, Haily Road, New Delhi.
This bungalow was given to the respondent by Gauri Shankar on a monthly rent of Rs. 234 6 0, excluding taxes.
The suit, out of which this appeal arises, was brought by the appellants against the respondent, Rao Girdhari Lal Chowdhury, for his eviction on the ground (among others) that he had sub let a portion of the bungalow after the commencement of the Delhi and Ajmer Rent Control Act, 1952 (38 of 1952) to one, Dr. Mohani Jain, without obtaining the consent in writing of the landlord, as required by section 13(1)(b)(i) of the Act.
The defence was that the original contract of tenancy was entered into sometime in 1940 and a term in the contract gave the tenant right to sub let.
It was alleged that a letter written by the tenant which embodied the terms of the tenancy was in the possession of the landlord and a demand was made for its production.
The case of the tenant was that the sub tenancy commenced in the year 1951, that is to say, before the passing of the Act of 1952, and the tenant was not required to obtain the written consent of the landlord to sublet Admittedly, in this case, no written consent was proved.
We need not mention the other allegations and counter allegations which are usual in proceedings between landlords and tenants, the most important of them being about the arrears of rent, which the tenant under permission of the Court ultimately deposited in Court.
936 The issue on which the decisions below have differed was framed by the Sub Judge, First Class, Delhi, in the following terms: "Did the plaintiff consent to the sub letting of parts of the demised premises by the defendant ? If so, when and to what effect.
" The trial Judge found that there was no evidence that the landlord was ever consulted before a portion of the bungalow was sublet to Dr. Mohani Jain, and further that the sub tenancy was created after June 9, 1952, the date on which the Act came into force.
In reaching the latter conclusion, the trial Judge made a reference to a dispute between the tenant and Dr. Mohani Jain for fixation of standard rent before the Rent Control authorities.
In those proceedings, Dr. Mohani Jain had alleged that she was living as a sub tenant from the end of 1951, but the tenant had denied this fact.
The proceedings before the Rent Control authorities ended in a compromise, but the admission of the tenant was relied upon to support the conclusion that the sub tenancy commenced after the Act.
The trial Judge decreed the suit.
The decision of the trial Judge was confirmed on appeal by the Additional District Judge, Delhi.
Though Dr. Mohani Jain gave oral evidence in this case that her sub tenancy commenced in December 1951, the Additional District Judge found categorically that the sub tenancy commenced sometime after the coming into force of the Act.
He held that even if Dr. Mohani Jain was living there even from before it was a guest and not as a sub tenant.
Against the order of the Additional District Judge, a revision was filed under section 35 (1) of the Act.
That section reads as follows: "The High Court may, at any time, call for the record of any case under this Act for the purpose of satisfying itself that a decision 937 made therein is according to law and may pass such order in relation thereto as it thinks fit.
" Acting in accordance with a decision of the Punjab High Court as to the ambit of this section, the learned single Judge, who heard the revision application, thought that it was competent for him to reconsider the concurrent findings about the time when the sub tenancy commenced.
He held that Dr. Mohani Jain 's statement showed that the sub tenancy commenced prior to the passing of the Act, and that the landlord 's consent in writing was not necessary.
In reaching this conclusion, the learned Judge was of opinion that all the evidence was not considered by the two Courts below, and that he was entitled, in view of the interpretation placed upon the section above quoted, to go into the matter afresh, and decide the question of fact.
It may be pointed out that while the suit was pending before the Subordinate Judge, an application was made for the production of the letter referred to in the written statement of the tenant, to which a passing reference has already been made.
A letter was produced, and it is exhibit D 1.
That letter does not disclose all the terms of the tenancy and it would appear, therefore, that the terms of the original tenancy have not been proved in this case, and there is no material on which it can be said either way as to whether a right to sublet was conferred upon the tenant.
The defendant did not insist in the Court of first instance that there was yet another letter, and the argument to that effect in this Court cannot be entertained.
In reaching the conclusion that all the evidence pertinent to the issue was not considered, the learned Judge of the High Court stated that Ex.
P 19, which was the petition filed by Dr. Mohani Jain under section 8 of the Act to get the standard rent fixed was not taken into account by the Additional District Judge.
That petition contained an averment 938 that her sub tenancy commenced on December 1, 1951 with a rent of Rs. 100/ per month, and that a cheque for Rs. 1,800/ as advance rent for 18 months was given by her in the name of the daughter of the tenant, because the tenant represented that he had no account in the bank and therefore a cheque should be given in the name of his daughter.
This, the learned Judge felt, adequately supported the statement of Dr. Mohani Jain to the same effect as a witness in this case.
The learned Judge was in error in thinking that exhibit P 19 was not taken into account by the Additional District Judge.
The latter had, in fact, considered exhibit P 19, the petition of Dr. Mohani Jain, before the Rent Control authorities.
exhibit P 20, the reply of the tenant to that petition and Ex.
P 21, the petition of compromise; but he cited Exs.
P 20 and P 21 only.
There is internal evidence to show that exhibit P 19 was, in fact, considered, because after mentioning the two Exhibits, the learned Additional District Judge goes on to say as follows: "The first of these is the written statement of the present appellant which he had filed in a case brought by Dr. Mohani Jain against him for the fixation of fair rent.
There he had completely denied somewhere in the year 1953 that Dr. Mohani Jain was his subtenant and could not sue for fixation of rent.
This was enough to show that right up to the year 1953 the appellant himself did not regard Dr. Mohani Jain as a sub tenant.
" This clearly shows that the learned Additional District Judge was weighing exhibit P 19 as against exhibit P20 and was acting on exhibit P 20, which contained a material admission by the tenant before the present dispute had begun.
The learned single Judge was, therefore, in error in departing from a concurrent finding of fact on a wrong supposition.
939 But the question that arises in this appeal is one deeper than a mere appraisal of the evidence.
It is whether the High Court in the exercise of its revisional power is entitled to re assess the value of the evidence and to substitute its own conclusions of fact in place of those reached by the Court below.
This question requires an examination of the powers of revision conferred on the High Court by section 35 of the Act.
That question is one of common occurrence in Acts dealing with some special kinds of rights and remedies to enforce them.
Section 35 is undoubtedly worded in general terms, but it does not create right to have the case reheard, as was supposed by the learned Judge.
Section 35 follows section 34, where a right of appeal is conferred; but the second sub section of that section says that no second appeal shall lie.
The distinction between an appeal and a revision is a real one.
A right of appeal carries with it a right of rehearing on law as well as fact, unless the statute conferring the right of appeal limits the rehearing in some way as, we find, has been done is second appeals arising under the Code of Civil Procedure.
The power to hear a revision is generally given to a superior Court so that it may satisfy itself that a particular case has been decided according to law.
Under section 115 of the Code of Civil Procedure.
the High Court 's power are limited to see whether in a case decided, there has been an assumption of jurisdiction where none existed, or a refusal of jurisdiction where it did, or there has been material irregularity or illegality in the exercise of that jurisdiction.
The right there is confined to jurisdiction and jurisdiction alone.
In other acts, the power is not so limited, and the High Court is enabled to call for the record of a case to satisfy itself that the decision therein is according to law and to pass such orders in relation to the case, as it thinks fit.
The phrase "according to law" refers to the decision as a whole, and is not to be equated to 940 errors of law or of fact simpliciter.
It refers to the overall decision, which must be according to law which it would not be, if there is a miscarriage of justice due to a mistake of law.
The section is thus framed to confer larger powers than the power to correct error of jurisdiction to which section 115 is limited.
But it must not be overlooked that the section in spite of its apparent width of language where it confers a power on the High Court to pass such order as the High Court might think fit is controlled by the opening words, where it says that the High Court may send for the record of the case to satisfy itself that the decision is "according to law".
It stands to reason that if it was considered necessary that there should be a rehearing, a right of appeal would be a more appropriate remedy, but the Act says that there is to be no further appeal.
The section we are dealing with, is almost the same as section 25 of the Provincial Small Cause Courts Act.
That section has been considered by the High Courts in numerous cases and diverse interpretations have been given.
The powers that it is said to confer would make a broad spectrum commencing, at one end, with the view that only substantial errors of law can be corrected under it, and ending, at the other with a power of interference a little better than what an appeal gives.
It is useless to discuss those cases in some of which the observations were probably made under compulsion of certain unusual facts.
It is sufficient to say that we consider that the most accurate exposition of the meaning of such sections is that of Beaumont, C.J. (as he then was) in Bell & Co. Ltd. vs Waman Hemraj (1) where the learned Chief Justice, dealing with section 25 of the Provincial Small Cause Courts Act, observed: "The object of section 25 is to enable the High Court to see that there has been no miscarriage of justice, that the decision was given according to law.
The section does not enumerate 941 the cases in which the Court may interfere in revision, as does s.115 of the Code of Civil Procedure, and I certainly do not propose to attempt an exhaustive definition of the circumstances which may justify such interference; but instances which readily occur to the mind are cases in which the Court which made the order had no jurisdiction or in which the Court has based its decision on evidence which should not have been admitted, or cases where the unsuccessful party has not been given a proper opportunity of being heard, or the burden of proof has been placed on the wrong shoulders.
Wherever the court comes to the conclusion that the unsuccessful party has not had a proper trial according to law, then the Court can interfere.
But, in my opinion, the Court ought not to interfere merely because it thinks that possibly the Judge who heard the case may have arrived at a conclusion which the High Court would not have arrived at.
" This observation has our full concurrence.
What the learned Chief Justice has said applies to section 35 of the Act, with which we are concerned.
Judged from this point of view, the learned single Judge was not justified in interfering with a plan finding of fact and more so, because he himself proceeded on a wrong assumption.
The appeal thus succeeds, and is allowed with costs.
The order under appeal is set aside, and that of the Additional District Judge restored.
As regards eviction, the respondent has given an undertaking that he would vacate the house on or before April 25, 1962, and this has been accepted by the appellants.
KAPUR J.
I agree that the appeal should be allowed and that the High Court was in error in interfering with the finding of fact, but in my 942 opinion the power of revision under section 35(1) of the Delhi & Ajmer Rent Control Act is not so restricted as was held by Beaumont, C. J., in Bell & Co. Ltd. vs Waman Hemraj(1), a case under section 25 of the Provincial Small Cause Courts Act.
The section provides that the order passed should be in accordance with law and if it does not then the High Court can pass such order as it thinks fit.
The language used in section 35(1) of the Act is almost identical with the words of the proviso to s.75(1) of the Provincial Insolvency Act.
The power under that proviso has been thus commented upon by Mulla in his Law of Insolvency at page 787 of 2nd Edition: "The power given to the High Court by this proviso is very wide.
In the exercise of this power the High Court may set aside any order if it is not `according to law '.
" The power under the Insolvency Act has not, by the Courts in India, been considered to be do restricted as the observations of Beaumont, C. J. in Bell & Co. Ltd. vs Waman Hemraj(1) seem to suggest in regard to section 25 of the Small Cause Courts Act.
This power of interference by the High Court is not, in my opinion, restricted to proper trial according to law or error in regard to onus of proof or proper opportunity of being heard.
It is very much wider than that.
When, in the opinion of the High Court, the decision is erroneous on a question of law which affects the merits of the case or decision is manifestly unjust the High Court is entitled to interfere.
The error may not necessarily be as to the interpretation of a provision of law, it may be in regard to evidence on the record.
Thus when material evidence on the record is ignored or a finding is such that on the evidence taken as a whole no tribunal could, as a matter of legitimate inference arrive at.
It is neither possible nor desirable to enumerate all 943 cases which would fall within the jurisdiction of the High Court under section 35(1) of the Act but it is not to be narrowly interpreted nor to be so widely interpreted as to convert the revision into an appeal on facts.
Appeal allowed.

summary:
In an ejectment suit under the Delhi & Ajmer Rent Control Act, 1952, the trial Judge decreed the suit and on appeal under s.34 of the Act the Additional District Judge confirmed 934 the decision.
The Act did not provide for a second appeal, and under section 35 (1) a revision was filed against the Order of the Additional District Judge The single Judge of the Punjab High Court following a previous decision of the same High Court, was of opinion that in assessment as all the evidence was not considered it was competent for him to reconsider the concurrent findings of the courts below.
The question is whether the High Court in exercise of its revisional powers is entitled to re assess the value of the evidence and to substitute its own conclusions of facts in place of those reached by the courts below.
^ Held, (per Sinha, C. J., Hidayatullah and shah, JJ, that though section 35 of the Delhi and Ajmer Rent Control Act is worded in general terms, but it does not create a right to have the case re heard.
The distinction between an appeal and revision is a real one.
A right to appeal carries with it right of re hearing on law as well as fact, unless the statute conferring the right to appeal limits the re hearing in some way.
The power to hear a revision is generally given to a superior court so that it may satisfy, itself that a particular case decided according to law.
The phrase "according to law" in section 35 of the Act refers to the decision as a whole, and is not to be equated to errors of law or of fact simplicitor.
All that the High Court can see is that these has been no miscarriage of justice and that the decision is according to law in the sense mentioned.
per Kapur, J.
The power under section 35 (1) of the Act of interference by the High Court, is not restricted to a proper trial according to law or error in regard to onus of proof or proper opportunity of being heard.
It is very much wider than that when in the question of the High Court the decision is erroneous on a question of law which affects the merits of the case or decision is manifestly unjust the High Court is entitled to interfere.
Bell and Co. Ltd. vs Waman Hemraj approved.