judgement:
Appeal No. 2433 of 1966.
Appeal from the judgment and decree dated August 2, 1965 of the Bombay High Court, Nagpur Bench in Appeal No. 113 of 1959 from original decree.
V. section Desai, V. N. Swamy, K. Rajendra Chaudhuri and K. R. Chaudhuri, for the appellants.
M. N. Phadke and A. G. Ratnaparkhi, for the respondents.
The Judgment of the Court was delivered by Shah, C.J.
Dawalatshah and Ranwirshah sons of Pratapshah instituted an action in the Court of the Additional District Judge Chanda, for a decree for possession of property immovable (including the Zamindari of Dhanora) and movable specified in the Schedules annexed to the plaint, and for an order for payment of mesne profits and also for recovery of the amount of compensation in respect of certain lands received by the defendants from the Government of Madhya Pradesh and for an order declaring 326 their right to receive the balance of compensation remaining to be paid.
The plaintiffs relied upon the following genealogy Gangashah Niru Bhakta Sakru Kajur Raju Thakur Thakur Thakur ThakurThakur Sitaram Tanba Chatturshah Thakur Thakur (dead) Nilkanthshah Pratapshah Dawaltshah Ranwirshab Gulab Lallshah (Platff (Platff.
Shah dead) No. 1) No. 2) (dead) Hanmantrao Amarshah Basu Chandarshah Karanshah Niranshah Died Dec. 9, (dead) (dead) 1950) Diwakarrao (Died Sept., 8,1932) Ballarshah Karansbah Dayaram Indersbah (Deft.
No. 1) (Deft.
No. 2) Govinda Budha Rama Laxman (dead,) The plaintiffs claimed that the property in suit originally belonged to Gangashah.
Gangashah had five sons: Hiru, Bhakta, Sakru, Kajur and Raju.
The branches of Sakru and Kajur became extinct a long time ago.
The branch of Hiru (who was 327 the eldest among the five sons of Gangashah) because extinct with the death of Amarshah on December 6, 1950.
The plaintiffs claimed the Zamindari held by Amarshah relying upon the rule of primogeniture, and the other estate of Amarshah as devisees under the will of Amarshah executed on December 3, 1950.
They submitted that the Dhanora Zamindari was granted to Sitaram ancestor of Amarshah as an impartible estate, devolving by the rule of primogeniture; that the Zamindari on that account devolved on the death of Amarshah upon Pratapshah and that on the death of Pratapshah and Zamindari devolved upon the first plaintiff.
The plaintiffs also claimed that the other property including Malguzari lands devolved upon them under a will executed on December 3, 1950 whereby Amarshah devised his estate in their favour.
Accordingly the first plaintiff claimed that he was entitled to the Zamindari on the death of Pratapshah on January 27, 1951 and the plaintiffs claimed the other estate of Amarshah as devisees under his will.
The plaintiffs submitted that Dayaram the first defendant took wrongful possession of the Zamindari and other property, movable and immovable of Amarshah.
The defendants by their written statement maintained that the genealogical table set up by the plaintiffs was incorrect, that by the order of the Governor of Madhya Pradesh dated November 9, 1951, the Zamindari was conferred upon the 1st defendant Dayaram as he was found suitable to hold the, Zamindari and the decision of the Governor was binding upon the plaintiffs; that the decision of the Compensation Officer regarding Malguzari lands which vested in consequence of the enactment of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals Alienated Lands) Act 1 of 1951, had become binding and conclusive against the plaintiffs because no suit challenging the deci sion was instituted within two months from the date thereof and the plaintiffs were on that account not entitled to claim the compensation paid or payable in respect of the Malguzari lands; that Amarshah did not execute the will set up by the plaintiffs; and that Amarshah had made a will dated December 8, 1950 under which his estate was devised in favour of the defendants.
The Trial Court held that the Dhanora Zamindari was impar tible and was governed by the rule of primogeniture and Pratapshah father of the plaintiffs being the eldest member of the seniormost branch from among the descendants of the common ancestor Gangashah was entitled to the Zamindari; that the plaintiffs were entitled to receive compensation in respect of the Malguzari lands and the decision of the Compensation Officer did not operate to deprive the plaintiff of the right to those lands or compensation payable in respect thereof; that the will set up by the plaintiffs 328 dated December 3, 1950 was genuine and the plaintiffs were under the will entitled to the estate devised in their favour by Amarshah; that the will dated December 8, 1950, set up by the defendants was "a fabricated will" and conferred no right or title upon the defendants; and that the genealogical table set up by the plaintiffs represented the true relationship between the descendants of Gangashah.
In appeal by the defendants, the High Court of Bombay con firmed the decree of the Trial Court with a slight modification.
The High Court held that the genealogical table set up by the plaintiffs was correct, that according to the custom governing succession Dhanora Zamindari devolved upon Pratapshah on the death of Amarshah, and on the death of Pratapshah the first plaintiff became entitled to the Zamindari, that the order of the Governor recognising Dayaram as Zamindar was not binding and conclusive, for it was not shown that in making the order the Governor had acted in exercise of the power conferred by the Chanda Patent; that the order was contrary to the customs and the law governing the Zamindari; that the decision of the Governor did not oust the jurisdiction of the the Civil Court; that the will dated December 8, 1950 set up by the defendants was not genuine and the will set up by the plaintiffs dated December 3, 1950, was genuine; and that the plaintiffs ' suit with regard to Malguzart lands was not barred by the decision of the Compensation Officer.
The High Court accordingly confirmed the decree passed by the Trial Court in respect of the Zamindari replying upon the rule of inheritance incorporated in the Wazibul Arz of the Chanda District and by ' succession under the will dated December 3, 1950 in respect of the other property except as to certain occupancy lands held by Amarshah.
With certificate granted by the High Court the defendants have appealed to this Court.
Certain concurrent findings on which not much argument was advanced at the Bar may first be set out.
The High Court agreeing with the Trial Court on appreciation of evidence held that the genealogy set up by the plaintiffs represented the true relationship between the parties.
Again the High Court agreeing with the Trial Court held that the will dated December 3, 1950 set up by the plaintiffs was genuine while the will dated December 8, 1950 set up by the defendants was not genuine.
The argument that the High Court did not give due weight to certain important circumstances in reaching their conclusion relating to the will set up by the plaintiff is without substance.
The circumstances relied upon are that the writing instrument with which the body of the will was written and the writing instrument with which 329 Amarshah, it was claimed, signed or executed the will were different, that the will was not registered, that the appearance of the will was suspicious, that the will was unnatural because it devised the estate in favour of the plaintiffs after giving a life interest in favour of the testator 's widow Ratnabai, that the will had not been produced before the revenue authorities and before the Com pensation Officer when disputes in relation to the estate of Amarshah were pending before those authorities, and that it was produced for the first time nearly seven years after the death of Amarshah, and that the scribe who wrote the will did not belong to the village to which Amarshah belonged.
The Trial Court and the High Court have reached the conclusion that on the circumstances no suspicion as to the genuineness of the will dated December, 1950 arose.
It may be noticed that the plaintiffs were, at the date of their father 's (Pratapshah 's) death minors, and soon after Pratapshah 's death, their mother abandoned them and re married.
Thereafter no one a tended to the pending litigation.
Failure to produce the will before the revenue authorities was therefore not a circumstance in the view of the High Court, which militated against the genuineness of the will.
In the view of the Courts absence of registration, appearance of the will, the contents thereof, the dispositions, thereunder, and the fact that the writer of the will belonged to another village did not in the circumstances of the case give rise to any suspicion.
We do not think that sitting in appeal we would be justified in interfering with the conclusion recorded by the Trial Court and confirmed by the High Court on what is essentially a conclusion on a question of fact.
The will set up by the defendants is not proved to be a genuine will executed by Awarshah.
This again is a concurrent finding of the two Courts and must be accepted in this Court.
No, argument has been advanced ' to pursuade us to take a different view.
The rights of the parties must be adjudged in the light of these findings.
The dispute between the parties relates to three set of properties (a) Dhanora Zamindari (b) Malguzari lands; (c) Occupancy lands and movables.
The ancestors of the parties held an extensive Zamindari in the Chanda District.
After the advent of the British rule, in that region, the revenue authorities commenced settlement operations.
An inquiry was held by the Settlement Officer in connection with the lands held by the family of the parties and statements of some 330 members were recorded.
Chattarshah s/o Kajur stated that the Zamindari of Dhanora was standing in the name of his cousin Sitaram and that all the members of the family were joint and maintained themselves out of the income from the Zamindari.
In his statement Sakru admitted that the rule of primogeniture prevailed in the family.
He stated that Hiru was his eldest brother and Sitaram was the son of Hiru and the Zamindari was recorded in the name of Sitaram according to Awwal Haqq i.e. rule of primogeniture from ancient times, even though he was senior in age, and that there was no quarrel between him and Sitaram and that he and Sitaram were living jointly and were taking the income from the Zamindari.
The Settlement Officer made an order on November 2, 1867 that the "Zamindari is of ancient tenure and the present Zamindar Sitaram Thakur has proved his right to be Zamindar.
Subject to the conditions to be embodied in patent of proprietary right.
I confer proprietary right in the Zamindari of Dhanora on Sitaram Thakur".
The Settlement Officer observed that conferment of proprietary rights was subject to conditions to be embodied in a patent of proprietary rights.
It may reasonably be inferred that a formal grant was made in favour of Sitaram.
The form of the grant which is known as "Chanda Patent" is reproduced in Aitchison 's "Collection of Treaties, Engagements and Sanads" Vol.
II, pp. 573 574.
Under the Chanda Patent it :was declared that the tenure shall be indivisible, and non transferable (save to to the nearest male heir the transfer in such case being subject to the approval of the Chief Commissioner) the land shall be held by one person, the Zamindar or Zamindarin for the time being and shall be held on conditions of (i) loyalty (ii) good police administration and (iii) improvement and cultivation of the estate.
Clauses V, VI, VII of the grant relating to succession to the Zamindari held under the Patent : "V. Subject to the provisions contained in Clause VI, the order of succession shall be as under : On the death of the Zamindar, the estates shall devolve upon his eldest son.
In default of a son, and when adoption has not taken place, the succession should preferably devolve on the nearest male kinsman, the widow receiving a suitable Maintenance.
In the event of the first in order of succession being, in the opinion of the local Government, unfit to carry out the conditions of Clause IV, the Zamindaree 'shall devolve upon the nearest heir who possesses the required qualification.
331 VII.
The Zamindar, in the case of gross misconduct, shall be liable to removal by the local Government; and if such removal be ordered, the succession shall take place as if the Zamindar removed had died.
" Tenure of the grant is entered in the Wajibul arz.
The relevant recitals in the Wajibul arz are as follows PART 1 Rights and liabilities of Zamindar in relation to Government.
(1) Watan Zamindar 's Watan is not partible and it cannot be given to anyone other than quite close (the nearest), male heir.
Changes taking place in this way should have sanction of the Governor in Council.
The Zamindari shall be in the name of only one person and the Zamindari has been granted to the Zamindar in possession at present on the conditions of this remaining loyal to the Government, managing his estate properly and improving the cultivation.
(2) Heirs On the death of Zamindar the estate shall devolve upon his eldest son.
If there is no legitimate or adopted son, it shall devolve upon a very close (the nearest) male relative.
If there arises a dispute regarding right of inheritance, the Governor in Council will decide it in accordance, with the custom in that family.
If the Governor in Council finds that the first heir is unable to abide by the conditions stated in BAB (clause).
the Zamindari shall be granted to a quite close (the nearest) male heir possessing the necessary qualifications.
(3) Dispossessing the Zamindar and forfeiting his rights.
Governor in Council may dispossess the Zamindar on account of his behaviour and bad administration.
Such dispossession may be for a few days or permanent.
If it is for a few days, the Deputy Commissioner will manage the Zamindari on behalf of the Zamindar and if the order of dispossession is permanent, the Zamindar shall so to say be deemed to have died and the heir will get the right.
" The entries in the Wajibul arz substantially reproduce the terms of the Chanda Patent as set out in Vol.
II of Aitchison 's "Collection of Treaties, Engagements and Sanads".
One Major C. B. Lucie Smith made a report relating to the Land Revenue settlement of the Chanda District, Central Pro vinces, 1869.
At pp.
179 to 180 Major Lucie Smith has referred to the Zamindarees of the Chanda District.
He has stated under the head "Zamindarees".
332 "The Zamindarees were settled by me; and in order to explain the principles of settlement adopted if will be necessary to touch first upon the questions of tenure and history.
The weight of testimony goes to show that the Zamindars are the descendants of men on whom were conferred tracts of country, more or less wild with the object of their being brought under cultivation and order maintained.
Naturally, .
while, the law was weak and its administrators distant the Zamindar, as the lord on the spot, exercised large powers but powers apparently never recognised by either the Gand or the Maratta Government.
He was undoubtedly regarded as a noble, bound to furnish a small contingent when required by his sovereign ; but there is nothing to warrant to the supposition that he possessed an absolute right in the soil; indeed, as far as my experience goes, such a right is foreign to the ideas of the races of this part of India.
The rulers of the day evidently made and unmade Zamindars at their pleasure;. . .
Under these circumstances it appeared that the Chanda Chiefs, though the Nobles of the Country, possessed no absolute rights in the soil, and that it rested with Government to confer it; and in conferring it, to prescribe such conditions as might be deemed fitting.
A scheme of conditions to be embodied in the, patent of proprietary right, and in the administration paper of the Zamindarees, was therefore drawn up, based upon the usages actually existing from ancient times; and, with one exception, the proposed arrangements were sanctioned in their entirety by the Government of India, who directed that they were to be taken as a general model for those to be applied to the Zamindarees of the Bala ghat district and to the non feudatory Zamindarees of Chutteesgurh.
The provision not approved as that on the death of a Zamindar, the estate should in default of a son, devolve upon his widow.
This code of succession has obtained among the Chanda Chiefs from time immemorial, and is the rule not only among them but among all classes of landholders in the district.
It suits especially the character of the Gond women. .
Government, however, after weighing the arguments urged ', decided that it was conducive to the interests of 333 the Zamindarees that the, succession should devolve only upon a male member of the family, and the clause was altered accordingly.
" Pratapshah and the 1st defendant Dayaram were descendants of Gangashah and they were related to Gangashah in the same degree.
But Pratapshah was the descendant of Bhakta, and Dayaram was the descendant of Raju.
Bhakta was the elder of the two brothers.
It is recited in the Wajibul arz that the Dhanora Zamindari is impartible, that on the death of the holder it devolves upon his eldest son and in the absence of a legitimate or an adopted son it devolves upon the nearest male relative.
Devolution of, the Zamindari closely resembles the traditional rule of liberal primogeniture.
If the holder dies leaving him surviving no son legitimate or adopted, the Zamindari devolves upon a descendant from the common ancestor of the nearest degree and in the event of there more, descendants from the common ancestor being in the same degree, the descendant in the senior line is preferred.
Succession to the Zamindari is subject to the power of the Governor to dispossess a person found unfit to observe the conditions of loyalty, good police administration and improvement and cultivation of estate.
But if the nearest in the line of succession is not selected the estate must be given to the nearest heir who has the prescribed qualifications and is a successor to the Zamindar.
When the Zamindar is removed, succession takes place as if the Zamindar so removed had died.
By the use of the expression "nearest male relative" the test of propinquity alone may be applied and when there are two or more claimants equally removed from the common ancestor the eldest male member in the senior most line will be preferred.
In adjudging the plaintiffs claim the Court must determine whether Pratapshah father of the plaintiffs, was the nearest male relative of Amarshah.
On the death of Amarshah there were two male relatives they were Pratapshah father of the plaintiffs and the 1st defen dant Dayaram.
The contest between them had to be adjudged in the light of the rules of lineal primogeniture governing an impartible estate which are well established : Succession is governed by the rules which governs succession to partible property subject to such modifications only as flow from the character of the impartible estate; the only modification which impartibility suggests in regard to the right of succession is the existence of a special rule for the selection of a single heir when there are several heirs of the same class who would be entitled to succeed to the property if it were partible under the general Hindu law; and in the absence of a special custom, the rule of primogeniture furnishes a ground of preference.
334 Subramanya Pandya Chokka Talawar vs Siva Subramanya Pillai(1).
In determining a single heir according to the rule of primogeniture the class of heirs who would be entitled to succeed to the property if it were partible must be ascertained first, and then the single heir applying the special rule must be selected.
Counsel for the first defendant submitted that under the terms of the Chanda Patent the Zamindari devolves on the death of the holder on the male relative who is the senior most in age, and not on the eldest member in the senior line.
There is nothing in the Chanda Patent which supports that contention.
By the use of the expression "nearest male relative" the rule of primogeniture is prescribed, it is not intended to confer the estate upon the eldest male relative of the Zamindar.
Counsel also submitted that under the terms of the Chanda Patent and the terms recorded in the Wajib ul arz the Governor having the right to determine inheritance and the right to remove a person who is not loyal or does not manage the property or does not improve the cultivation or who is guilty of bad behaviour or bad administration, it must be assumed that the holder of the Zamindari has merely a life interest and on the death of the holder, the Governor re grants the land consistently with the rules of succession according to the law and custom amongst the members of the family but subject to the dominant purpose of good administration and loyalty to the Government.
Counsel for the first defendant relied upon certain circumstances which he claimed established that the interest of the Zamindar was restricted to his life and on his death there was resumption and re grant of the Zamindari by the Governor.
Counsel submitted that the Zamindari was impartible and develoved upon the nearest male heir, that the sanction of the Governor was necessary for transfer, and also for recording inheritance, that loyalty, good management and improvement of cultivation were the conditions for holding the lands and that if the behaviour of the Zamindar was found unsatisfactory or that he was not capable of good adminis tration he was liable to be removed.
On that ground, said Counsel, the Government alone was competent to decide a dis pute arising out of inheritance.
But the power to take extraordinary steps to protect the interest of the Zamindari by the removed of the holder does not restrict the title of the Zamindar to a mere life interest.
The incidents of the tenure are restrictions on the estate of the Zamindar, but those restrictions do not make him a mere life tenant.
Under the Chanda Patent the lands of the Zamindari held by the family were confirmed in 1867 in favour of Sitaram.
On his (1)I. L. R. at p. 325.
335 death they devolved upon Hanmantrao.
There is no evidence that any fresh grant was made.
On the death of Hanmantrao the lands devolved upon his son Diwakarrao who died on September 8, 1932.
On the death of Diwakarrao dying without leaving any male descendant there arose a dispute between Pratapshah and Amarshah.
Pratapshah claimed to be the adopted son of Diwakarrao and on that ground entitled to take the Zamindari.
An inquiry was held and it was decided that Pratapshah failed to prove the adoption set up by him.
On the death of Amarshah again without leaving any male lineal descendant disputes arose.
The evidence is not clear as to whether any formal grant was issued in favour of Sitaram.
There is no evidence that recognition of the heirs of the successive Zamindars was accompanied by the issue of fresh patents or grants.
Succession was merely recognised by the revenue authorities.
The argument that the grant was for life of the grantee is therefore not supported by the terms of the Chanda Patent, nor by the entries in the Wajib ularz.
nor by the history of the Zamindari.
The right to determine inheritance it is true vests in the Governor but the power is exercisable in accordance with and not in violation of the custom of the family.
In determining the heir the Governor is not granting afresh the Zamindari; he merely determines the successor in accordance with the custom of the family.
The right of the Governor to remove a holder who is disloyal or does not manage his estate properly or does not improve cultivation or is otherwise of "bad behaviour" or guilty of bad administration, does not involve a condition that the interest of the Zamindar is only for his life.
When a holder of the Zamindari is removed, the Governor is bound to hand over the Zamindari to the next heir in the order of succession if the Zamindar removed had died and the heir will get the right.
Counsel, then contended that in any event the decision of the Governor in 1950 declaring Dayaram to be the successor on the death of Amarshah was 'binding and conclusive and could not be reopened.
Counsel urged that Pratapshah and the 1st defendant Dayaram were related to the common ancestor in the same degree, and it was open to the Governor to select one of the two members of the family related to the last holder in the same degree even though the person selected did not belong to the senior most line.
But if succession to the Zamindari is governed by the rule of lineal primogeniture, selection of a member of a branch in preference to a member of the senior branch would be plainly illegal.
Again, the evidence does not warrant the view that the Governor purported to pass any order in pursuance of the provisions of the Chanda Patent or the rules of succession recorded in 336 the Wajib ul arz.
The order of the Governor is in the form of a memorandum addressed to the Deputy Commissioner, Chanda, ,dated November 9, 1951 and it states that "Government are pleased to recognise Shri Dayaram Bapu son of Ballarshah Bapu Raj Gond as the Zamindar of Dhanora Zamindari in the Carchiroli tahsil of the Chanda District till the date of vesting of the Zamindari in the State Government".
There is no evidence that the Governor made any enquiry to determine the successor of Amarshah.
An order by the Gover nor purporting to exercise powers under the Chanda Patent con templates a quasi _judicial inquiry.
The order does not show that any inquiry was made for determining the rights of the contesting claimants or that any notice was issued to them or that they were heard before the Governor decided the issue.
There is nothing in the pleadings in that behalf.
The Governor is invested with quasi judicial power, and if there be a dispute.
the dispute must be decided after holding an inquiry, and the decision must be reached consistently with the rules of natural justice and in accordance with the custom of the family.
A bald statement that the "Government are pleased to recognise Dayaram Bapu son of Ballarshah Bapu as the Zamindar of Dhanora Zamindari" does not disclose the reason for rejecting the claim of Pratapshah who according to the custom of the family was "the nearest male relative".
There is no evidence on the record that the Governor was even aware that there were other claimants and if he was aware what their claims were and that the Governor had considered those claims before recognizing the claim of Dayaram.
In the 'absence of any evidence that the order was made by the 'Governor in exercise of the power conferred by the Chanda Patent it is unnecessary to consider whether any order made by the Governor is in exercise of the powers 'of the patent excludes the jurisdiction of the civil court.
The decision of Governor was apparently reached without any inquiry and was plainly contrary to the rules of Hindu Law and the custom of the family in the light of which alone the Governor was by the express mandate competent to adjudicate the claim.
It is true that there were mutation proceedings in regard to the Zamindari before the Naib Tahsildar Garchiroli Tahsil.
The Naib Tahsildar by his order dated May 9, 1951 held that the dispute relating to the mutation was raised by Pratapshah, that Amarshah had died issueless, that the genealogical tree set up by Daulatshah son of Pratapshah was incorrect being unsupported by reliable evidence,, that copies of settlement of 1867 were mere statements of interested persons, that the genealogical tree filed by Dayaram resembled the genealogical tree filed by Pratapshah 337 and was held to be genuine; that Amarshah had clearly admitted in his statement that Dayaram was entitled to succeed to the Zamindari after him and that Dayaram was the nearest male kinsman to the deceased Amarshah.
This decision of the Naib Tahsildar proceeded upon a genealogy produced by Dayaram which on the findings of the Trial Court as well as the High Court in this case is incorrect.
The decision of the Naib Tahsildar in a mutation proceeding even as a piece of evidence has little evidentiary value when it is founded on a material piece of evidence which was untrue.
The proceedings were carried in appeal before the Deputy Commissioner.
The Deputy Commissioner confirmed the order by his decision dated August 8, 1951.
He also accepted the genealogy set up by Dayaram and held that there were no other nearer male descendants in the branch and that Pratapshah was one degree more removed than Dayaram.
In view of the infirmity attaching to the genealogy relied upon by the Revenue Officer that decision has also little evidentiary value.
The orders passed by the Governor and the revenue authori ties do not exclude the jurisdiction of the civil court to decide the question of kinship.
In that view we agree.
with the High Court that the Zamindari originally confirmed in favour of Sitaram must according to the tenure as recorded in the Wajib ul arz devolve upon the first plaintiff Dawalatshah to the exclusion of the first defendant Dayaram.
The right in Malguzari land was since the death of Amarshah extinguished by the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act 1 of 1951.
The Malguzari lands are by the devise contained in the will dated December 3, 1950 given to the plaintiffs.
Compensation in respect of the lands would therefore belong to the plaintiffs.
But it is urged that notwithstanding the devise, because of the order of the Claim Officer under Section 14 of Act 1 of 1951, the plaintiffs were not entitled to agitate the question of heirship.
It is enacted by section 3 of the Act that on and from a date to be specified by a notification by the State Government in that behalf, all proprietary rights in an estate, mahal, alienated village or alienated land as the case may be, in the area specified in the notification, vesting in a proprietor of such estate, mahal, alienated village, alienated land, or in a person having interest in such proprietary right through the proprietor, shall pass from such proprietor or such other person to and vest in the State for the purposes of the State free of all encumbrances.
Section 4 sets out of the consequences of the vesting of the land in the Government by N irtue of the notification issued under section 3.
Section 8 provides for assessment of compensation payable to every proprietor, who is 8 L807SupCI/71 338 divested of proprietary rights.
The compensation is to be, determined in accordance with the rules contained in Sch.
Section 12 requires that a proprietor who is divested of proprietary rights by virtue of a notification issued under section 3 shall, within such period as may be prescribed, file a statement of claim in the prescribed form and specify the particulars mentioned therein.
Section 13 authorises the Compensation Officer to determine the amount of compensation.
Section 14 provides: "(1) If during the course of an enquiry by the Compensation Officer, any question is raised regarding the proprietary right in any property divested under Sec. 3 and such question has not already been determined by a court of competent jurisdiction, the Compensation Officer shall proceed to enquire summarily into the merits of such question and pass such orders as he thinks fit." (2) The order of the Compensation Officer under sub section (1) shall not be subject to any appeal or revision, but any party may, within two months from the date of such order, institute a suit in the civil court to have the order set aside, and the decision of such court shall be binding on the Compensation Officer, but subject to the result of such suit, if any, the Compensation Officer shall be final and conclusive".
Counsel for Dayaram urged that the Compensation Officer had decided by his Order dated August 30, 1951 that compensation in respect of the Malguzari land was payable to Dayaram and since no suit was filed by the plaintiffs for setting aside that decision, the order of the Compensation Officer became final and conclusive and could not be reopened in a suit filed more than six, years after that date.
We are unable to accept that contention.
The Compensation Officer is entitled to decide a question only regarding the proprietary right in the property divested under section 3.
He is not concerned with determination of any question relating to a private dispute between two or more persons who make competing claims in the matter of compensation, relying upon their respective titles.
A question regarding the pro prietary rights may in ordinary course be raised only in a claim against the State, and if that claim be decided against the claim ' ant in a summary inquiry held by the Compensation Officer, a suit to set aside the decision must be filed within two months from that date and if no suit is filed, the order becomes final and conclusive.
section 14 was enacted with a view to put an end to disputes with regard to the claims to proprietary rights which by 339 virtue of the notification issued under section 3 are extinguished.
It is not intended by an Order under section 14 to determine complicated questions of title by the adjudication of a revenue officer in a summary inquiry without even a right of appeal and to make his adjudication conclusive unless a suit be filed within two months from the date of the order.
That is also clear from the terms of section 35(7) of Act 1 of 1951 which provides "The payment of compensation under this Act to the creditors of a proprietor or to the proprietor in accordance with the prescribed manner shall be a full discharge of the State Government from all liability to pay compensation for the divesting of proprietary rights, but shall not prejudice any rights in respect of the said rights to which any other person may be entitled by due process of law to enforce against the person to whom compensation has been paid as aforesaid".
The Civil Court is declared competent to determine disputed questions with regard to title to 'compensation.
We agree With the High Court that section 14 of Act 1 of 1951 does not invest the Compensation Officer.
with jurisdiction to determine competing claims, of persons claiming proprietary rights to the property vesting in the Government by the operation of section 3 of the Act.
Section 14 is intended to determine only the proprietary rights in the land, qua the State.
Finally it was urged that the Trial Court granted Rs. 10,000/as mesne profits, and even though the, High Court disallowed the claim of the plaintiffs with regard to certain items no reduction was made in the total amount of mesne profits awarded corresponding to the claim disallowed.
Counsel for the plaintiffs concedes that the High Court was in error in not reducing the amount of mesne profits awardable to the plaintiffs.
He agrees that instead of the figure of Rs. 10,000/ awardable to the plaintiff Rs. 8,000/ should be substituted.
We modify the mesne profits awarded.
Subject to this modification, this appeal fails and is dismissed with costs.
K.B.N. Appeal dismissed.

summary:
Under the Chanda Patent and the terms recorded in the Wajibul Arz the Dhanora Zamindari was impartible and on the death of the holder it devolved upon his eldest son and in the absence of a legitimate or an adopted son it devolved upon the nearest male relative.
The succession to the Zamindari was subject to the power of the Governor to dispossess a person found unfit to observe the conditions of loyalty, good police administration and improvement of the estate.
The respondent instituted an action for possession of certain immovable properties including the zamandari and for recovery of compensation, in respect of malguzari lands, paid to the appellants in consequence of the enactment of the Madhya Pradesh Abolition of Proprietary Rights (Estate, Mahals, Alienated Lands) Act, 1951.
They claimed the Zamindari relying upon the rule of primogeniture and other estates as devisees under a Will.
The trial court decreed the suit and the High Court affirmed the decree with slight modifications.
in the appeal to this Court the appellants urged that (1) the Zamindari devolved on the death of the holder on the male relative who is senior most in age and not the eldest member in the senior line; (2) by the order of the Governor the Zamindari was conferred upon the first appellant as he was found suitable to hold the zamindari and since the Government had the power to determine inheritance and the right to remove a person, the holder of the zamindari had merely a life interest; and (3) the compensation officer had decided by his order under section 14 of the Act that compensation in respect of malqutari land was payable to the first appellant and since no suit was filed by the plaintiffs for setting aside that decision within the period specified, the order of the compensation officer became final and conclusive.
HELD : (1) By the use of the expression "the nearest male relative" the test of propinquity alone may be applied and when there are two or more claimants equally removed from the common ancestor the eldest male member in the senior most line will be preferred.
The contest between the parties had to be adjudged in the light of the rules of lineal primogeniture governing an impartible estate.
In determining a single their according to the rules of primogeniture the class of heirs who would 325 be entitled to succeed the property if it were partible must be ascertained first, and then the single heir applying the special rule must be selected.
By the expression "nearest male relative" it was not intended to confer be estate upon the eldest male relative of the Zamindar.
The High Court was, therefore, right in holding that the Zamindari devolved upon the first respondent to ' the exclusion of the first appellant.
[333 C F] (2) The power vested in the Governor to take extraordinary steps to protect the interest of the zamindari by the removal of the holder did not restrict the title of the zamindar to a mere life interest.
The power had to be exercised in accordance with the custom of the family and an order by the Governor purporting to exercise powers under the Chanda Patent contemplated a quasi judicial inquiry.
The order does not show that any inquiry was made for determining the rights of the contesting claimants.
[334 G] (3) Section 14 of Act 1 of 1951 does not invest the compensation officer with jurisdiction to determine competing claims of persons claiming proprietary rights to the property vested in the Government by the operation of section 3 of the Act.
Section 14 is intended to determine only the proprietary rights in the land qua the State.
[339 D E]


judgement:
Appeals Nos. 589 and 590 of 1967.
Appeals by special leave from the judgment and order dated May 7, 1965 of the Calcutta High Court in Income tax Reference Nos. 183 and 238 of 1961.
C. K. Daphtary, B. P. Maheshwari and N. R. Khaitan, for the appellant (in both the appeals).
section C. Manchanda, section K. Aiyar, R. N. Sachthey and B. D. Sharma for the respondent (in both the appeals).
The Judgment of the Court was delivered by Grover, J.
These appeals by special leave from a judgment of the Calcutta High Court arise out of certain questions of law which were referred relating to the assessment for the assessment year 1956 57, the relevant accounting year being from September 1, 1954 to August 31, 1955.
The assessee owned a colliery called the Western Kajoria Colliery, hereinafter referred to as "colliery".
It entered into an agreement with another company on November 29, 1954 to sell the colliery to it.
According to this agreement the vendor was to sell and the purchaser was to buy as on and from September 1, 1954 all the underground rights etc of the colliery with the machinery and other articles detailed in the schedules annexed to the agreement.
It is not necessary to give the details of the other stock intrade which the purchaser was to purchase.
The sale was to be completed within one year from the date of the execution of the agreement.
According to clause 7 of the agreement pending completion of the sale or delivery of possession of the premises to the purchaser the vendor was to carry on business on behalf of the purchaser and run the said colliery as on and from September 1, 1954 on the account and at the cost of the purchaser.
The purchased was to get all the profits and was liable for all the losses from that date.
385 The price fixed for the colliery was Rs. 3,50,000.
The book, value of the assets was Rs. 4,80,290/ .
In the relevant assessment year the loss of Rs. 70,290/ was claimed by the assessee.
The Income tax Officer rejected the claim for deduction of the loss from the assessee 's other income on the ground that during the accounting period the assessee did not carry on the business of colliery since the transfer took place with effect from September 1, 1954.
After making adjustment for certain assets which, according to the Income tax Officer, were not entitled to depreciation he determined the figure of loss to be Rs. 11,257/ .
This loss was also disallowed.
The Appellate Assistant Commissioner upheld the order of the Income tax Officer.
The Appellate Tribunal, however accepted the contention of the assessee that it carried on business till November 29, 1954 but did not allow the loss as the Tribunal was of the view that it had resulted from a closing down sale.
There was another item of dividends received from certain shares held by the assessee during the relevant accounting year.
The Income tax Officer included these dividends in the Company 's income under section 12 of the Income tax Act, 1922, hereinafter called the "Act".
The assessee failed to satisfy the authorities that the income received on account of the dividends could be set off against the loss in business of earlier years brought forward.
The Tribunal made a reference of the following two questions under section 66(1) of the Act : "(1) Whether on the facts and in the circumstances of the case the sum of Rs. 11,257/ being a claim for loss on sale of assets on which depreciation was allowable in earlier years is allowable under Section 10 (2) (vii) in computing the total income of the assessee? (2) Whether on the facts and in the circumstances of the case dividend income was to be taken as income, profits and gains of business of the company and set off against losses brought forward from earlier years under section 24(2)?" Since certain other questions had been sought to be referred by the assessee in respect of which the Tribunal declined to make a reference the assessee moved the High Court and the High Court directed that the following questions be referred "(3) Whether in the facts and circumstances of the case, the interest income from Western Kajoria Collieries Ltd. is income taxable under Section 10 of the Indian Income tax Act or under Section 12 of the said Act ? 11 L807SupC.1171 386 (4) Whether on the facts and circumstances of I the case there was any material to hold that the loan of M/s Shri Vijoy Corporation Ltd. was an accommodation loan not advanced during the normal course of money lending business? (5) If the answer to question (4) is that the loan was a business loan whether the debt had become bad in the year of account and deductible in computation of the total income? (6) Whether in the facts and circumstances of the case the Tribunal was right in refusing to allow set off of earlier years business losses under section 24(2)?" The two references were dealt with together by the High Court.
On the first question the High Court was of the view that the sale was a closing down sale and the net result of the transaction was that the assessee was working the colliery from September 1, 1954 for and on account of the purchaser.
While recognising that the coal business was not stopped as from September 1, 1954 the High Court came to the conclusion that it was on account of the purchaser that the business was carried on and any profits ,or losses which might have resulted until the actual sale were to be those of the purchaser and the vendor was to get only the price fixed together with interest.
The first question was answered against the assessee.
The second question was also answered against the assessee on the view that no colliery business in the relevant year was carried on by it and therefore no question of set off could arise.
The third and the fourth questions were answered in accordance with the findings of fact given by the Tribunal and against the assessee.
The fifth question was not pressed and was not answered.
The sixth question was covered by the second question and therefore no answer was returned with regard to it as well.
In the present appeals we are concerned with the first and the second question.
It has been submitted on behalf of the appellant that the loss of Rs. 11,257/ was allowable under section 10(2) (vii) of the Act in computing the total income of the appellant.
The Tribunal had recorded a finding which was one of fact; that in the relevant accounting year the appellant did carry on the colliery business.
The finding of the Tribunal had not been challenged by the department by raising an appropriate question and therefore it was not open to the High Court to go against the finding of the Tribunal and hold that the business was carried on for and on account of the purchaser.
At any rate it was an un 387 disputable fact that the appellant carried on the business upto November 29, 1954 and it was only by virtue of the agreement made on that day that it agreed to treat the business as having been transferred to the purchaser with effect from September 1, 1954.
By means of the agreement it was not possible to alter the actual state of affairs, namely, the carrying on of the business by the appellant.
In our judgment there is a good deal of substance in the above contentions urged on behalf of the appellant.
The Tribunal had, in clear and unequivocal terms, upheld the contention of the appellant that it had actually carried on the business till November 29, 1954.
Section 10(2) (vii) provides that profits or gains shall be computed after making the allowance in respect of any such building, machinery or plant which had 'been sold etc.
the amount by which the written down value thereof exceeds the amounts for which the building, machinery or plant is actually sold or its scrap value.
The first provise requires that such amount should actually be written off in the books of the assessee.
It is difficult to see how all the conditions necessary for the allowance under the above provisions were not satisfied.
The colliery business was carried on by the appellant during part of the relevant accounting year.
The machinery and plant had been used for the purpose of the business.
The sale of the colliery took place during the accounting year.
The loss of Rs. 11,275/ was written off in the books of the appellant The present case appears to be covered by the decision of this Court in Commissioner of Income tax, Bombay City II vs National Syndicate(1) in which all the above conditions for the applicablity of section 10(2) (vii) were held to be, present.
It was said that there was no other condition to be found in the section Dr in the Act which had to be complied with.
There was nothing to show that the business of the assessee should have been carried on for the whole year or that the machinery or plant should have been used for the whole of the accounting period or if the assessee worked only for a part of the year and then sold out the loss that lie incurred was not a business loss.
The decisions which were relied upon by the High Court are hardly of much assistance in the matter and are distinguishable on facts.
The first question should have been answered in favour of the assessee.
On the second question once it is accepted that the colliery business was carried on for a part of the relevant assessment year the assessee would be entitled to get a set off under section 24(2) of the Act if the shares on account of which the dividends were received formed part of the assessee 's trading assets.
It is well settled by the decisions of this Court (see C.I.T. Andhra Pradesh vs Cocanada (1) 388 Radhaswami Bank Ltd.(1) that section 6 of the Act classifies the taxable income under the several heads but the scheme is that income tax is one tax and section 6 only classifies the taxable income under different heads for the purpose of computation of the net income of the assessee.
While sub s.(1) of section 24 provides for setting off the loss under one of the heads mentioned in section 6 against the profits under a different head in the same year sub s.(2) provides for the carrying forward of the loss for one year and setting off the same against the profits or gains of the assessee from the business in the subsequent year or years.
It was emphasised in the aforesaid decision that sub section
(2) of section 24 in contradistinction to sub section
(1) is concerned only with the business and not with its heads under section 6 of the Act.
Dividends are included in the meaning of income under sub section
(1A) of section 12 which is the residuary head.
Applying the principles adverted to before the amount of dividends would form a part of the income from business of the assessee if the shares were a part of the assessee 's trading assets and the assessee would be entitled to a set off as claimed against the loss from its business incurred during the previous years.
It does not appear to have been disputed at any stage that the shares formed part of the stock in trade of the share dealing business of the ass,see.
There could be no reason, therefore, for the assessee not being entitled to the set off claimed.
The High Courts have consistently taken the view that business loss carried forward from earlier years can be set off against dividend income derived from shares held as stock in trade.
(vide Commissioner of Income tax Madhya Pradesh vs Shrikishan Chandmal(2) and Commissioner of Income tax, Ahmedabad vs Bhavnagar Trust Corporation (P) Ltd.(,") The second question, therefore, 'should have been answered in favour of the assessee.
In the result the appeals are allowed with costs in this Court and the decision of the High Court is set aside only with regard to questions 1 and 2, the answers to which are returned as already indicated.
One hearing fee.
R.K.P.S. Appeals allowed.

dataset_name: IN-Abs

summary:
The assessee entered into an agreement with another company on November 29, 1954 for the sale of its colliery.
It was provided in the agreement that pending completion of the sale or delivery of possession, the vendor was to carry on business on behalf of the purchaser and run the colliery as on and from September 1, 1954 on the account and at the cost of the purchaser.
In the course of the appellant 's assessment to income tax for which the accounting year was from September 1, 1954 to August 31, 1955, the Income Tax Officer, after making adjustment for certain assets which according to him were not entitled to depreciation, worked out the figure of loss at Rs. 11,257.00; however he rejected a claim to set off this loss against the appellant 's other income on the view that the assessee did not carry on the business of the colliery during the year since the transfer took place with effect from September 1, 1954.
The Appellate Assistant Commissioner upheld this order and, although the Tribunal, in appeal, accepted the assessee 's contention that it carried on business till November 29, 1954, it did not allow the loss on the view that it had resulted from a closing down sale.
In respect of the same year, certain dividends on shares received by the assessee were included in its income under section 12 but its claim to set off this income against the loss in business for earlier years brought forward, was disallowed.
The High Court, upon a reference made to it, held against the appellant on both these issues.
On appeal to this Court, HELD : The Tribunal had, in clear and unequivocal terms, upheld the contention of the appellant that it had actually carried on the business till November 29, 1954.
Section 10(2) (vii) provides that profits or gains shall be computed after making the allowances in respect of any such building, machinery or plant which had been sold etc.
, the amount by which the written down value thereof exceeds the amount 'for which the building, machinery or plant is actually sold or its scrap value.
The first proviso requires that such amount should actually be written off in the books of the assessee.
It is difficult to see bow all the conditions necessary for the allowance under the above provisions were , not satisfied.
The colliery business was carried on by the appellant during part of the relevant accounting year.
The machinery and plant had been used for the purpose of the business.
The sale of the colliery took place during the accounting year; and the loss of Rs. 11,237.00 was written off in the books of the appellant.
[387 C F] Commissioner of Income Tax, Bombay City II vs National Syndicate, ; followed.
384 Once it is accepted that the colliery business was carried on for a part of the relevant assessment year, the assessee would be entitled to get a set off under section 24(2) of the Act if the shares on account of which the dividends were received formed part of the assessee 's trading assets.
It was not disputed that the shares formed part of the stock in trade of the share dealing business of the assessee.
There could be no reason, therefore, for the assessee not being entitled to the set off claimed.
[388 B D] C.I.T., Andhra Pradesh vs Cocanada Radhaswami Bank Ltd., ; Commissioner of Income Tax Madhya Pradesh vs Shrikishan Chandmal, and Commissioner of Income Tax, Ahmedabad vs Bhavnagar Trust Corporation (P.) Ltd., ; referred to.


judgement:
Appeal No. 133 of 1951.
Appeal by special leave granted by the Supreme Court on the 1st December, 1950, from the Judgment dated the 24th April, 1950, of the Central Government Industrial Tribunal, Dhanbad, in Appeal No. 1 of 1950, arising out of Order dated the 2nd February, 1950, of the Regional Labour Commissioner (Central) Dhanbad.
N. C. Chatterjee (section L. Chhibber, with him) for the appellants.
section P. Sinha (section N. Mukherjee, with him) for the res pondent.
December 12.
The Judgment of the Court was delivered by DAS J.
This appeal by special leave is directed against the decision dated April 24, 1950, of the Central Government Industrial Tribunal at Dhanbad confirming the decision dated February 2, 1950, of 430 the Regional Labour Commissioner (Central), Dhanbad, which had declared the one day strike by the appellants that took place on November 7, 1949, to be an illegal strike.
The relevant facts are as follows: On October 13, 1949, the appellants through the Secretary of their Union gave a notice to the respondents, under section 22(1) of the , that they proposed to call a one day strike on the expiry of November 6, 1949, for the fulfilment of demands, 16 in number, noted therein.
This strike notice was, in accordance with rule 85 of the rules framed under the , sent to (1) the Conciliation Officer (Central), Dhanbad, (2) the Regional Labour Commissioner (Central), Dhanbad, (3) the Chief Labour Commissioner, Department of Labour, Government of India, New Delhi, (4) Secretary, Ministry of Labour, Government of India, New Delhi, and (5) A.D.C., Dhanbad.
This notice was received at the office of the Regional Labour Commissioner (Central), Dhanbad, on October 15, 1949. 'The Regional Labour Commissioner (Central) held conciliation proceedings at Dhanbad on October 22, 1949, but the appellants, by their letter of the same date , declined to participate in the proceedings alleging that they were convinced that nothing would come out of the same and that the proceedings should, therefore, be considered "to be ceased.
" On the same day the Regional Labour Commissioner (Central), Dhanbad, addressed letter No. RLC/CON 5 (Token) 7910 to the Chief Labour Commissioner, New Delhi, stating that after receipt of the notice of strike he had issued notice to the parties for conciliation, that the employers ' representatives were ready to discuss the demands but the Union 's representative filed a petition in writing saying that they did not want to participate in the proceedings and that no fresh material had been placed before him to change his view and that he was not in favour of recommending a reference of the demand to the Industrial Tribunal.
The letter ended with a request that the Government 431 may be informed of the situation.
It appears that this report was received in the office of the Chief Labour Commissioner, New Delhi, on October 25, 1949.
Although the Chief Labour Commissioner, in his letter ' of November 17, 1949, to the Regional Labour Commissioner ( Central), Dhanbad, states that the contents of the latter 's report had already been communicated to the Ministry of Labour, a copy of the report was actually sent to and received by the Ministry of Labour only on that day.
In the meantime on November 7, 1949, the appellants about 700 in number, went on one day strike as per their strike notice.
Apparently the respondents contended that the strike was illegal and they made an application, under section 8 (2) of the Coal Mines Provident Fund and Bonus Scheme Act, 1948, to the Regional Labour Commissioner (Central), Dhanbad, for a deci sion on the question whether the strike was legal or illegal.
By his order dated February 2, 1950, the Regional Labour Commissioner (Central), Dhanbad, declared that the strike was illegal.
Being aggrieved by the aforesaid decision the appellants, under section 8 (4) of the last mentioned Act, preferred an appeal to the Central Government Industrial Tribunal at Dhanbad which, however, also held that the strike was illegal and that the conclusions arrived at by the Regional Labour Commissioner (Central) were correct and accordingly dismissed the appear The appellants thereafter applied for and obtained special leave to appeal to this Court.
The only question raised on this appeal is whether the strike was illegal.
Section 24 (1) of the Act provides, inter alia, that a strike shall be illegal if it is commenced or declared in contravention of section 22 or section 23 of the Act.
Section 22 (1) provides as follows: " 22.
(1) No person employed in a public utility service shall go on strike in breach of 'contract(a) without giving to the employer notice of strike, as hereinafter provided, within six weeks before striking; or 56 432 (b) within fourteen days of giving such notice; or (c) before the expiry of the date of strike specified in any such notice as aforesaid; or (d) during the pendency of any conciliation proceedings before a conciliation officer and seven days, after the conclusion of such proceedings.
" Notice of strike having been given in terms of clause (a) and 14 days having elapsed after the giving of such notice as required by clause (b) and the actual strike having taken place after November 6, 1949, being the date specified in the strike notice, the only other question for consideration is whether the strike took place during the pendency of any conciliation proceedings before a Conciliation Officer, and seven days after the conclusion of such proceedings.
Under section 20(1) a conciliation proceeding shall be deemed to have commenced on the date on which a notice of strike under section 22 is received by the Conciliation Officer.
In this case the strike notice was received by the Regional Labour Commissioner (Central) who is the Conciliation Officer, 'on October 15, 1949, and the conciliation proceedings, therefore, commenced on that date under section 20(1).
The relevant portion of sub section (2) of that section runs as follows: A conciliation proceeding shall be deemed to have concluded (a). . . . . . . (b) where no settlement is arrived at, when the report of the Conciliation Officer is received by the appropriate Government or when the report of, the Board is published under section 17, as the case may be, or (c). . . . . . .
The Regional Labour Commissioner (Central), who is the Conciliation Officer in this dispute, is required by section 12 to hold conciliation proceedings in the prescribed manner and, without delay, investigate the dispute and to do all such things as 433 he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute.
In this case the Regional Labour Commissioner (Central), held conciliation proceedings on October 22, 1949, but no settlement could be arrived at as the appellants declined to take part in the proceedings on the ground that they were convinced that nothing would come out of it.
That being the position, under section 12 (4) it became the duty of the Regional Labour Commissioner (Central) to "as soon ' as practicable after the close of the investigation, send to the appropriate Government a full report setting forth the steps taken by him.for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof together with a full statement of such facts and circumstances.
and the reasons on account of which,in this case, a settlement could not be arrived at ".
Subsection (6) of this section.
requires that the report shall be submitted within fourteen days of the commencement of the conciliation proceedings or within such shorter period as may be fixed by the appropriate Government.
As already stated, the conciliation proceedings commenced on October 15, 1949.
The report, therefore, was to be submitted within fourteen days from that date.
, In point of fact the report was sent by the Regional Labour Commissioner (Central) to the Chief Labour Commissioner New Delhi, on October 22, 1949 (which was well within 14 days from the commencement of the conciliation proceedings), with the request that the Government may ' be informed of the situation.
Under sub section (4) the report has to be sent to the " appropriate Government " which according to the definition under section 2 (a) means, in relation to an industrial dispute concerning a mine, the Central Government.
The Regional Labour Commissioner (Central) did not send the report direct to Central Government but sent it to the Chief Labour Commissioner, New Delhi, in accordance with what has been called the usual course and routine of 434 official business.
Therefore,however, was received by the Central Government on or about November 17, 1949, and it is only on such receipt that the conciliation proceedings are to be deemed to have concluded according to the provisions of section 20(2)(b).
Prima, facie, therefore, the strike which took place .on
November 7, 1949, was during the pendency of the conciliation proceedings as held by the authorities below.
Shri N. C. Chattanooga, however, argues that in point of fact the conciliation proceedings came to an end when the appellants had withdrawn from the proceedings and the Regional Labour Commissioner (Central) had Bent his report.
It is by a legal fiction, introduced by section 20 (2) (b), that the conciliation proceedings are prolonged until the actual receipt of the report by the appropriate Government.
According to Shri N. C. Chatterjee the conciliation pro ceedings should be held to ' terminate when the Regional Labour Commissioner (Central) sent his report within fourteen days of the commencement of the conciliation proceedings.
The difficulty in accepting this ' argument is that while the word "send is used in section 12 (4) and the word " submitted in section 12(6), the word used in section 20 (2), (b)is " received ".
That word obviously implies the actual receipt of the report.
To say that the conciliation proceedings shall be deemed to have concluded when the report should, in the ordinary course of business, have been received by the appropriate Government would introduce an element of uncertainty, for the provisions of section 22 (1) (d) clearly contemplate that the appropriate Government should have a clear seven days ' time after the conclusion of the conciliation proceedings to make ' up its mind as to the further steps it should take.
It is, therefore, necessary that the beginning of the seven days ' time should be fixed so that there would be certainty as to when the seven days ' time would expire.
It is, therefore, provided in section 20 (2) (b) that the proceedings shall be deemed to have 435 concluded, where no settlement is arrived at,when the report is actually received by the appropriate Government.
Shri N. C. Chatterjee on the other, hand strongly urges, and not without some force, that on that construction it may be possible for the Government or its officers to withhold the report ' designedly or the report may be lost in course of transit or may be actually received after the expiry of the date fixed for the strike in the notice under section 22 (I).
Shri N. C. Chatterjee also points out that it will not be possible for the workers to know when the report is actually received and their right to strike may thus be taken away from them ' Shri N. C. Chatterjee contends that the Government cannot take advantage of its own wrong.
While we feel considerable force in Shri N. C. Chatterjee 's argument based on hardship we are bound to assume that the.
public officers concerned would act fairly and properly.
Further, it is not a case of the Government taking advantage of its own wrong as suggested by Shri N. C. Chatterjee, for here we are concerned with a dispute between the employers and the employees and there is no material before us to justify our attributing the misdeeds, if any, of the Regional Labour Commissioner (Central) or of the Chief Labour Commissioner, to the respondents, the employers who are entitled to take their stand on the language of the law.
The Court can only construe the statute as it finds it and if there is any defect in the law it is for other authority than this Court to rectify the same.
Shri N. C. Chatterjee also urges that the Regional Labour Commissioner (Central) should have, under section 12, sent his report to the appropriate Government, which in this cage means the Central Government, and he should not have sent the report to the Chief Labour Commissioner.
Assuming that that is the position then.
the fact will still remain that the Central Government did not receive the report and, therefore, the conciliation proceedings did not come to an end when the strike took place.
Shri 436 N. C. Chatterjee also suggests that the Chief Labour Commissioner should have returned the report to the Regional Labour Commissioner (Central) because under the law the report should not have been made to him.
He, however, did not return the,same to the Regional Commissioner but took upon himself to.for ward the same to the Labour Ministry.
In the circumstances, Shri N. C. Chatterjee urges, on the authority of Chaturbhuj Ram Lal vs Secretary of State for India (1), that the Chief Labour Commissioner must be deemed to be the agent of the Central Government for the purpose of receiving the report.
We adjourned this case in order to enable Shri N. C. Chatterjee to ascertain whether there was any delegation of authority in this behalf by the Central Government to the Chief Labour Commissioner.
Shri N. C. Chatterjee has not been able to discover any such delegation of authority.
It seems obvious to us that the Chief Labour Commissioner cannot possibly be regarded for this purpose as the Central Government.
In point of fact by a notification in the Gazette of India dated April 5, 1947$ the Chief Labour Commissioner has been appointed as a Conciliation Officer.
and, therefore, in conciliation proceedings conducted by him he has to submit his report to the Central Government.
It follows, therefore, that the Chief Labour Commissioner must be an authority separate from the Central Government.
According to rule 85 to which reference has been made the strike notice has to be sent, amongst others, to the Chief Labour Commissioner as well as to the Department of Labour of the Government of India, which again.
indicates that the two are different entities.
The Chief Labour Commissioner is, therefore, only the channel or post office through which correspondence between the Regional Labour Commissioner (Central) and the Central Government is to pass and he cannot possibly be regarded as an agent of the 'Central Government for the purpose of receiving the report.
The Chief Labour Commissioner (1) A.I.R. 1927 All, 2i5.
437 being the official channel the ruling relied upon by Shri N. C. Chatterjee can have no application to the facts of this case.
For reasons stated above we are of opinion that the conclusions arrived at by the authorities below on this point are correct and that this appeal must be dismissed.
In the peculiar circumstances of the case, however, we think that there should be no order as to costs and the parties should bear their own costs.
Before concluding we must draw the attention of the authorities concerned to the slack and unbusinesslike manner in which the matter was dealt with in the office of the Chief Labour Commissioner.
The Act requires that the Conciliation Officer must submit his report within 14 days from the commencement of conciliation proceedings and then on receipt of the report by the appropriate Government the conciliation proceedings are to be deemed to have concluded.
Although factually the conciliation proceedings terminate when a settlement is arrived at before the Conciliation Officer or when it is found that no settlement can be arrived at, the Act, by a legal fiction, prolongs the conciliation proceedings until the actual receipt of the report by the appropriate Government and goes on to provide that the appropriate Government must have seven days ' time to consider what further steps it would take under the Act.
Up 'to the expiry of this period of 7 days the Act permits no strike but after that period is over the employees are left free to resort to collective action by way of a strike.
Indeed, it is on the basis of these provisions that the date of strike has to be carefully selected and specified in the notice of strike to be given by the employees under section 22 (1) of the Act.
Thus, even a cursory perusal of the Act makes it clear that time is of the essence of the Act and that the requirements of its relevant provisions must be punctually obeyed and carried out if the Act is to operate harmoniously at all.
In this case the conciliation officer submitted his report on October 438 22, 1949, i.e., well within 14 days from the commencement of the conciliation proceedings as required by section 12 (6) of the Act.
The report was sent through what has been called the routine official channel.
Admittedly, it was received in the office of the Chief Labour Commissioner at New Delhi on October 25, 1949, but surprisingly it was not passed on to the Ministry of Labour, which is also in New Delhi, until about November 17, 1949.
The employees had no means of knowing when the report was actually received by the Central Government which is the appropriate Government in this case or when the period of 7 days after such receipt expired.
But in the belief, entertained, we think, quite legitimately, that the official business had been conducted regularly and promptly the employees went on strike on November 7, 1949, as previously notified. ' It now transpires that the report had not been actually received by the Central Government and, therefore, on the letter of the law, the strike must be hold to be illegal and the employees must face and bear the consequences of an illegal strike and may even be deprived ' of benefits to which they would otherwise have been entitled.
This hardship has been thrown upon the employees for no fault of their own but simply because of the callous indifference or utter inefficiency and slackness apparently prevailing in the office of the Chief Labour Commissioner which cannot be too strongly deprecated.
It is to be hoped that public officers would, in the discharge of their official duties in future, show a greater sense of responsibility than, what they have done in the case before us.
Appeal dismissed.

summary:
A conciliation proceeding cannot be deemed to have concluded under section 20 (2) (b) of the , in a case where no settlement has been arrived at, as soon as the Conciliation Officer sends his report.
It can be deemed to have concluded only when the report is actually received by the appropriate Government.
(1) ; 429 The Chief Labour Commissioner, New Delhi, is not, in the absence of any express delegation of powers by the Central Government, the agent of the latter for the purpose of receiving the report of a Conciliation Officer.
The appellants who had sent notice of their intention to strike declined to participate in conciliation proceedings which were initiated by the Regional Labour Commissioner, and the latter sent his report to the Chief Labour Commissioner, New Delhi, on October 22, 1949.
The report was received by the Chief Labour Commissioner on October 25, but a copy of the report was sent by the Chief Labour Commissioner, and received by the Ministry of Labour, only on November 17.
Meanwhile the appellants went on strike on November 7: Held, confirming the decision of the Industrial Tribunal, that under section 20 (2) (b) of the Act the conciliation proceeding held by the Regional Labour Commissioner concluded only on November 17 when his report was received by the Central Government, and as the appellants went on strike before that date, it was a strike during the pendency of conciliation proceedings and therefore illegal under section 22 (1) (d) of the Act.
The provisions of several sections of the , show that time is of the essence of the Act and the requirements of its relevant provisions must be punctually obeyed and carried out, if the Act is to operate harmoniously.


judgement:
Appeal No. 2555 of 1966.
Appeal from the judgment 'and order dated March 16, 1966 of the Calcutta High Court in Income Tax Reference No. 76 of 1962.
section C. Manchanda.
G. C. Sharma, R. N. Sachthey and B. D. Sharma, for the appellant.
A. K. Sen, T. A. Ramachandran and D. N. Gupta, for the respondent.
775 The Judgment of the Court was delivered by Shah, J.
The respondent Company appointed one Harvey its Managing Director.
Under the terms of agreement, Harvey was to retire on attaining the age of 55 years.
The Company arranged to provide a pension to Harvey on retirement, and executed a deed of trust on September 16, 1948 appointing three trustees to carry out that object.
The respondent Company set apart in 1948 Rs. 1,09,643/ and in each of the six subsequent years Rs. 4,364/ , and delivered the various amounts to the trustees who were authorised to take out a deferred annuity policy to secure an annuity of pound 720 per annum payable to Harvey for life.
from the date he attained the age of 55 years, and in the event of his death before that date an annuity of pound 611.12 annually to his widow.
In its return for the assessment year 1949 50 the Company claimed that in the computation of its taxable income Rs. 1,09,643/ paid in 1948 to the trustees under the deed of trust were allowable as an amount wholly and exclusively,expended for the purpose of its business.
In the subsequent years of assessment the Company claimed allowance of the annual payment of Rs. 4,364/ .
The Income tax Officer disallowed the claim.
The Company disputed the decision and carried it to the Income tax Appellate Tribunal.
The Tribunal submitted a statement of case to the High Court of Calcutta on the question whether the payments . 'constituted 'expenditure ' within the meaning of that word in section 10(2)(xv) of the Indian Income tax Act, 1922, in respect of which a claim for deduction can be made subject to the other conditions mentioned in that clause being satisfied".
The High Court answered the question in the negative.
The view taken by the High Court was confirmed by this Court in appeal: Indian Molasses Co. (P) Ltd. vs Commissioner of Income tax, West Bengal(1).
This Court held that the expenditure deductible for income tax purposes is one towards a liability actually existing at the time, but a sum of money set apart which may be deemed appropriated to a purpose for which it was intended on the happening of a future event was not expended within the meaning of section 10(2)(xv) of the Act, until the event occurs, and since the Company had dominion through the trustees over the funds and there was a possibility of a trust resulting in its favour, by setting apart.
the funds no "expenditure" within the meaning of section 10(2)(xv) of the Indian Income tax Act, 1922, may be deemed incurred.
During the pendency of those proceedings the Company ar ranged to give an "enhanced pension" to Harvey and executed a supplementary deed of trust on October 29, 1954 and set apart an additional sum of Rs. 47,607/ to enable the trustees to take out an annuity policy in the names of the trustees in favour of Harvey (1) , 776 and his wife to cover the "enhanced pension".
The terms of the original trust deed were made applicable to the supplementary deed.
Harvey died in May 1955 (before he was due to retire) and in the return of its taxable income for the assessment year 1956 57 the Company claimed that Rs. 1,83,434/ being the total amount paid by the Company to the trustees in terms of the original trust deed dated September 'I 6, 1 94 8 and the supplementary deed dated October 29, 1954, be allowed as a permissible expenditure in the computation of the Company 's business profits in the previous year ending December 31, 1955.
The Income tax Officer disallowed the claim without assigning any reasons.
In appeal the Appellate Assistant Commissioner confirmed the order observing that the amount paid long before the commencement of the previous year were not admissible under section 10(2)(xv) of the Income tax Act, 1922.
The Income tax Appellate Tribunal in appeal reversed the order and allowed the claim of the Company holding that the amount of Rs. 1,83,434/ was "effectively disbursed during the accounting year" and was on that account an admissible allowance in the computation of the Company 's business profits.
At the instance of the Commissioner of Income tax, the Tri bunal submitted a statement of the case to the High Court of Calcutta on the following two questions : "(1) Whether on the facts and in the circumstances of the case, the sum of Rs. 1,83,434/ was an expenditure effectively laid out or expended during the accounting year 1955 within the meaning of section 10(2)(xv) of the Income tax Act ? (2) If the answer to Question No. (1) is in the affirmative, then whether the said expenditure of Rs. 1,83,434/ represented a revenue expenditure ?" The High Court of Calcutta recorded answers in the affirmative on both the questions.
With certificate granted by the High Court under section 66A(2) of the Indian Income tax Act, 1922, this appeal is preferred by the Commissioner of Income tax.
Answer recorded by the, High Court on the first question was, in our judgment, correct.
This Court had in the earlier decision Indian Molasses Co. (Private) Ltd. vs The Commissioner of Income tax( ') held that the Company had not parted with control over the amounts set apart between the years 1948 and 1954 for securing the 'pension benefit to Harvey, and on that account no amount was appropriated to make it expenditure within the meaning of section 10(2)(xv) of the Act.
At the date when different sums of money were set apart there was no existing liability and the sums (1) 777 of money set apart to meet an obligation which may or may not arise on the happening of a future event, the Company did not lay out or expend the sums within the meaning of section 10(2)(xv).
The amounts set apart became subject to the obligation to pay the pension arranged to be given only when Harvey died, and must be deemed expended then within the meaning of section 10(2)(xv) of the Indian Income tax Act, 1922.
But on the materials before us we are unable to answer the second question, for the Tribunal has found no facts on which the admissibility of the allowance may be determined, and the High Court has declined to allow the argument to be raised by the Commissioner that in the circumstances of the case the amounts expended were not admissible under section 10(2)(xv) of the Act.
Sections 10(1) and 10(2)(xv) of the Act, insofar as they are relevant, provide : section 10(1) "The tax shall be payable by an assessee under the head "profits and gains of business, profession or vocation, in respect of the profit or gains of any business, profession or vocation carried on by him." section 10(2) "Such profits or gains shall be computed after making the following allowances, namely (xv) any expenditure (not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation.
" Sub section (4A) of section IO which was added by the Finance Act of 1956 with effect from April 1, 1956, may also be read : "Nothing in sub section (2) shall, in the computation of the profits and gains of a Company be deemed to authorise the making of (a) any allowance in respect of any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or a person who has a substantial interest in the company within the meaning of sub clause (iii) of clause (6C) of section, 2, or (b) any allowance in respect of any assets of the company used by any person referred to in 778 clause (a) either wholly or partly for his own purposes or benefit.
if in the opinion of the Income tax Officer any such allowance is excessive or unreasonable having regard to the legitimate business needs of, the company and the benefit derived by or accruing to it therefrom.
Explanation.
The provisions of this sub section shall apply notwithstanding that any amount disallowed under this sub section is included in the total income of any person referred to in clause ( a)." An amount proved to be expended by a tax payer carrying on business is (subject to sub section
(4A) of section 10), a permissible allowance in the computation of taxable income of the business, if it be established that the allowance claimed is (a) expenditure which is not of the nature described in cls.
(i) to (xiv) of section 10(2); (b) that it is not of the nature of capital expenditure or personal expenses of the assessee; and (c) that the expenditure was laid out or expended wholly and exclusively for the purpose of such business, profession or vocation.
The expenditure incurred by the Company is not allowance of the nature described in any of the clauses (i) to (xiv) inclusive of section 10(2), nor is it of the nature of capital expenditure or personal expenses of I the assessee.
In our judgment, the argument advanced before the High Court that the expenditure resulting from the setting apart of the money for securing an annuity to provide pensionary benefit to Harvey and his wife was of a capital expenditure was rightly negatived by the High Court.
To attract the exemption under section 10(2) (xv)it had still to beestablished that the amount set apart was laid out or expended wholly and exclusively for the purpose of the business of the Company.
On this part of the case there is no discussion in the orders of the taxing authorities and the Tribunal.
To recall, the Income tax Officer recorded no reasons for, disallowing the expenditure.
The Appellate Assistant Commissioner disallowed it on the, ground that it was not debited in the profit and loss account of the Company in the previous year.
The Tribunal assumed, and in our judgment erroneously, that this Court had in the earlier judgment pronounced upon the applicability of all the conditions of section 10(2)(xv) of the Act to the amount set apart when it became expenditure.
This Court did not express any opinion on that question.
, The language in which the question was framed in the earlier case clearly indicated that the enquiry contemplated was only whether the amounts set apart were expended and no other.
779 The judgment of this Court also does not imply that in the view of the Court if the setting apart of the amount was expenditure, the other conditions for the expenditure to be a permissible allowance under section 10(2) (xv) were satisfied.
It cannot be, assumed that because on the death of Harvey the amounts previously set apart were deemed expended, the outgoing was admissible as expenditure under section 10(2)(xv) read with section 10(4A).
The Tribunal considered two questions only : (1) whether the setting apart of the amounts amounted to expenditure within the meaning of section 10(2) (xv); and (2) if it was expenditure, whether it could be regarded as capital expenditure and not revenue expenditure.
On both the contentions the Tribunal decided in favour of the Company.
But before section 10(2)(xv) could be called in aid to support the claim of the company it had to be established that it represented expenditure laid out or expended wholly and exclusively for the purpose of the business, and that it was authorised under section 10(4A).
The High Court was of the view that because before the Tri bunal the question was not expressly raised that "the other conditions inviting the application of section 10(2)(xv) were not satisfied, the allowance was not admissible", the Commissioner was incompetent to urge that plea before the High Court.
In support of that view they relied upon the judgment of this Court in Commissioner of Income tax, Bombay vs Scindia Steam Navigation Co. Ltd(1).
The High Court observed that before the Tribunal the plea that the expenditure was not laid out or expended wholly and exclu sively for the purpose of the business of the Company was not argued, and since the question raised and referred "was not wide enough to include that submission", the Commissioner could not urge it before them. 'We are unable to hold that the decision in Scindia Steam Navigation Company 's case( ') supports the opinion of the High Court.
The plea that the amount claimed to have been expended was not admissible as an allowance was raised by the Department.
The Appellate Assistant Commissioner had decided in favour of the Department and the order was sought to be supported before the Tribunal by the Departmental representative.
Granting that an aspect of the question was not argued before the Tribunal, the question was on that account not one which did not ,arise out of the order of the Tribunal.
In our judgment, the expression "question of law arising out of such order" in section 66(1) is not restricted to take in only those questions which have been expressly argued and decided by the Tribunal.
If a question of law is raised before the Tribunal, even if an 'aspect of that question is not raised, in our judgment, that aspect may be urged before the High Court.
The judgment of this Court in Scindia Steam Naviga tion Co. Ltd. 's case( ') does not only not lend any assistance to the (1) ; 780 view taken by the High Court, but negatives that view.
In that case certain steamships belonging to the assessee Company were lost during the World War 11 by enemy action.
The Government of India paid to the Company compensation which exceeded the written down value of the steamships.
The Department sought to charge the excess amount to tax under the fourth proviso of section 10(2)(vii) of the Income tax Act, 1922 inserted by the Income tax (Amendment) Act, 1946, which came into force in the yea of assessment.
The Income tax Officer held that the material date for the purpose of the fourth proviso to section 10(2)(vii) was the date when the compensation was in fact received and therefore the ' amount was assessable in the assessment year 1946 47.
At the instance of the Company the Tribunal referred the question whether the difference between the written down value and compensation was properly included in the total income for the assessment year 194647.
Before the High Court the Company for the first time raised the contention that the fourth proviso to section 10(2)(vii) did not apply to the assessment as it was not in force on April 1, 1946 and the liability of the Company had to be determined as on April 1, 1946, when the Finance Act, 1946 was brought into force.
The Commissioner of Income tax contended that the question did not arise out of the order of the Tribunal within ' the meaning of section 66 as it was not raised before nor dealt with by the Tribunal, and it was not referred to the Court.
The High Court overruled the objection.
This Court held that the High Court had jurisdiction to entertain the Company 's contention raised for the first time before it, that the fourth proviso to section 10(2)(vii) did not apply to the as sessment as the contention was within the scone of the question as framed by the Appellate Tribunal and was really implicit therein.
The Court in that case held that the question as framed was comprehensive enough to cover the question of the applicability.
of the fourth proviso to section 10(2)(vii) of the Income tax Act.
Venkatarama Aiyar, J., observed at p. 612 " Section 66 (I ) speaks of a question of law that arises out of the order of the Tribunal.
Now a question of law might be a simple one, having its impact at one point, or it may be a complex one.
trenching over an area with approaches leading to different points therein.
Such a question might involve more than one aspect, requiring to be tackled from different standpoints.
All that section 66(1) requires is that the question of law which is referred to the Court for decision and which the Court is to decide must be the question which was in issue before the Tribunal.
Where the question itself was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects (1) ; 781 of the question which had been argued before the Tribunal.
it will be an over refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66 (1) of the Act.
" The second question raised in the present case, in our judg ment, permits an enquiry whether the amount claimed is an admissible allowance under section 10(2)(xv).
We are unable to hold that it is restricted to an enquiry whether the expenditure is of a capital nature.
The Tribunal did not consider whether the amount was laid out or expended wholly and exclusively for the purpose of the business of the Company.
Expenditure is admissible as an allowance under section 10(2)(xv).
if all the conditions prescribed thereby are satisfied and is authorised by section 10(4A).
We are unable to hold that the question framed and referred excluded an enquiry Whether the expenditure was wholly and exclusively laid out or expended for the purpose of the business of the Company.
Nor are we able to hold that because before the Tribunal stress was not pointedly laid upon the ingredients which enable an expenditure to be claimed and allowed, the question does not arise out of the order of the Tribunal.
The matter in dispute before the Tribunal was whether the Company was entitled to the allowance under section 10(2)(xv) ,of the Indian Income tax Act 1922.
The Tribunal considered whether the amount claimed to have been laid out or expended became expenditure within the meaning of section 10(2)(xv) on the death of Harvey, and whether it was capital expenditure.
They did not consider whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the Company.
Since the Tribunal gave no finding on this part of the case, we are unable to answer the question on the materials placed before US.
The High Court was, in our judgment, in error in refusing to allow the argument to be raised that the requirements of section 10(2)(xv) were not satisfied, and the expenditure on that account was inadmissible.
Two courses are now open to us : to call for a supplementary statement of the case from the Tribunal; or to decline to answer the question raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under section 66(5) in the light of the answer of this Court.
If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will, according to the decisions of this Court, (New Jehangir Vakil Mills Ltd. vs Commissioner of Income tax, Bombay North, Kutch and Saurashtra( '); Petlad Turkey Red Dye Works Co, Ltd. vs Com missioner of Income tax( '); and Keshav Mills Co. Ltd. vs Commissioner of Income tax, Bombay North, Ahmedabad( '), be res (1) (3) 782 tricted to the evidence on the record and may not be entitled to take additional evidence.
That may result in injustice.
In the circumstances we think it appropriate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the Company and has not considered all appropriate provisions of the statute applicable thereto.
It will be open to the Tribunal to dispose of the appeal under section 66(5) of the Income tax Act, 1922, in light of the observations made by this Court after determining the questions which ought to have been decided.
There will be no order as to costs in this appeal.

summary:
The respondent company appointed a managing director who was to retire at the age of 55.
The company arranged to provide a pension to him on retirement, or a pension to his widow if he died before attaining the age of 55.
It executed a trust deed on September 16, 1948, and paid to the trustees certain amounts to enable the trustees to take out an annuity policy to cover the pension.
On October 29, 1954, the company arranged to give enhanced pension to the director or his wife and set apart an ,additional sum on the same terms.
The director died in 1955 before attaining the age of 55, and the company claimed, in the return of its taxable income for the assessment year 1956 57, the total amount paid by it to the trustees as a permissible expenditure in the computation of the company 's business profits in the previous year.
The Appellate Tribunal, held; (i) that the setting apart of the funds amounted to expenditure Within the meaning of s.10(2)(xv), and (ii) that it amounted to revenue expenditure and not capital expenditure.
The Tribunal did not however consider whether the outgoing represented expen diture laid out or expended wholly and exclusively for the purpose of the business and whether it was authorised under s.10(4A).
The Tribunal referred to the High Court two questions, namely : (1) whether the amounts constituted expenditure during the relevant accounting year 1955 within the meaning of the section and (2) whether it represented a revenue expenditure.
The High Court held in favour of the company.
When the Department sought to urge the plea that before the section could be called in aid, it had also to be established that the expenditure was wholly and exclusively for the purpose of the business and that it was authorised by s.10(4A), the High Court did not permit the plea to be raised as it was not expressly raised before the Tribunal.
In appeal to this Court, HELD : (1) The amounts set apart became subject to the obligation to pay the pension arranged to be given, only when the director died, and since he died in May 1955, they must be deemed to have been expended only then, that is during the accounting year 1955.
[776 H; 777 A B] 774 Indian Molasses Co. (P) Ltd. vs Commissioner of Income tax, West Bengal, , referred to.
I I (2) An amount proved to be expended by a tax payer carrying on business is a permissible allowance under s.10(2) (iv) in the computation of the taxable income of the business if it is established; (i) that the allowance claimed is expenditure which, is not of the nature described in cls.
(i) to (xiv) of section 10(2); (ii) that it is not of the nature of capital expenditure or personal expenses of the assessee; (iii) that the expenditure was laid out or expended wholly and exclusively for the purposes of such business; and (iv) that it was authorised under section 10 (4A).
[778 C F] (3) The expression 'question of law arising out of such order ' in s.66(1), is not restricted to take in only those questions which have been expressly argued before and decided by the Tribunal.
If a question of law is raised before the Tribunal, even if an aspect of the question was not raised, that aspect may be urged before the High Court.
In the present case, the second question as framed and referred, does not exclude an enquirY whether the expenditure was wholly and exclusively laid out or expended for the purpose of the business of the company.
It cannot be held that, because before the Tribunal, stress was not pointedly laid upon the ingredients which enable an expenditure to be claimed and allowed, the question did not arise out of the order of the Tribunal.
Therefore the High Court was in error in refusing to allow the argument to be raised that the requirements of section 10(2) (xv) were not satisfied.
[779 H; 780 A; 781 B F] Commissioner of Income tax, Bombay vs Scindia Steam Navigation Co. Ltd. ; , explained and followed.
(4) Since the Tribunal gave no finding on that part of the case, a supplementary statement could be called from it, but such a supplementary statement would be restricted to the evidence on record and may result in injustice to the parties.
[781 F] New Jahangir Vakil Mills Ltd. vs Commissioner of Income tax, 'Bombay North, Kutch & Saurashtra, Petlad Turkey Red Dye Works Co. Ltd. vs Commissioner of Income tax and Keshav Mills Co. Ltd. vs Commissioner of Income tax, Bombay North.
Ahmedabad, , referred to.
(5) Therefore.
it is appropriate to decline to answer the second question on the ground that the Tribunal bad failed to consider and decide the question whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the company and that it had not considered all appropriate statutory provisions.
and to leave it to the Tribunal to dispose of the appeal under section 66(5) of the Act [782 A C]