judgement:
Appeals Nos. 278 and 279 of 1956.
Appeal from the judgment and order dated November 14, 1950, of the Allahabad High Court in Incometax Miscellaneous Case No. 12 of 1950.
47 A. V. Viswanatha Sastri and A. N. Kirpal for the appellant.
C. K. Daphtary, Solicitor General of India, Rajagopala Sastri, R. H. Dhebar and D. Gupta, for the respondent.
October 3.
The Judgment of the Court was delivered by GAJENDRAGADKAR J.
These are appeals by special leave and they arise from the assessment proceedings taken against the appellant 's husband Seth Ganga Sagar Jatia in respect of his income for the assessment years 1943 44 and 1944 45.
The said Seth Ganga Sagar died on September 22, 1944, leaving behind him his widow the appellant Shrimati Indermani Jatia.
After the death of her husband, the appellant continued the assessment proceedings as his representative and administrator of his estate.
The appellant as well as her husband were residents and ordinarily residents in British India for the relevant years.
The sources of the assessee 's income for the purposes of income.tax assessment were his business, his house property and the dividends earned by him.
This business was carried on by the appellant after his death at Khurja and Aligarh which are part of India and at Chistian in the Indian State of Bahawalpur now a part of Pakistan.
The central set of accounts of the assessee,s business were kept at Khurja.
In this set of accounts income received by the assessee from all sources were incorporated.
For the accounting year relevant to 1943 44 assessment, the interest account in the said books showed credit entries of Rs. 17,132/ as interest received on capital invested in the shop at Cliistian).
Similarly for the accounting period relevant to 1944 45 assessment Rs. 47,029/ had been credited in the said books.
The Income Tax Officer took the view that these two amounts represented the assessee 's taxable income in India and accordingly he levied tax on them.
The appellant filed appeals before the Appellate Assistant Commissioner against the said assessment orders for the assessment years 1943 44 and 1944 45; 48 and on her behalf the Income Tax Officer 's decision about the chargeability to tax of the aforesaid two amounts was challenged.
The appellate authority, however, rejected the appellant 's contention and confirmed the order under appeal.
The appellant then filed appeals before the Income Tax Appellate Tribunal.
The tribunal agreed with the view taken by the income tax authorities, confirmed their conclusion and dismissed the appeals preferred by the appellant.
In the assessment for 1943 44, the appellant had claimed that Rs. 7,512/ , which had been spent in litigation, was an admissible expenditure but this claim was disallowed by the Income Tax Officer and his decision was confirmed by the appellate authority and by the tribunal.
At the instance of the appellant, the tribunal stated the case and referred the following two questions to the High Court at Allahabad under section 66(1): (1) Whether, in the circumstances of the case, the sum of Rs. 17,132/ for 1943 44 and Rs. 47,029/for 1944 45 could be legally deemed to have been received in British India and were liable to tax under section 4(1) of the Act ; (2) Whether, in the circumstances of the, case, the expenditure of Rs. 7,5121 incurred in connection with a criminal litigation was admissible expenditure within the meaning of section 10(2)(xv) of the Act ? The reference was heard by Malik C. J. and V. Bhargava J. on November 14, 1950, and both the questions were answered against the appellant.
The application made by the appellant under section 66A of the Act for leave to appeal to the Supreme Court was dismissed by the High Court on April 23, 1954.
Thereupon the appellant applied for and obtained special leave on December 10, 1954.
That is how these appeals have come to this Court.
Mr. Viswanatha Sastri, for the appellant, did not challenge before us the correctness of the view taken by the High Court on the second question in respect of the expenditure of Rs. 7,512/ .
He conceded that the finding recorded by the income tax authorities 49.
against the appellant on this point is a finding of fact.
and, having regard to the material on the record, the correctness of the said finding cannot be effectively challenged.
He, however, urged that the answer, given by the High Court on the first question referred to it was erroneous in law.
The High Court has held that the two amounts of interest credited in the books of the appellant were liable to tax under section 4(1) of the Act as they must be deemed to have been received by the appellant in British India.
Mr. Sastri argues that the expression " deemed to be received " means, deemed by the relevant provisions of the Act to be received.
It is not disputed that though income may not have been received by the assessee in reality, it can be deemed to be received under the relevant provisions of the Act; and this constructive receipt can be con veniently described as statutory receipt under the Act.
Taxes deducted at source or annual accretion to an employee participating in a recognized firm, for instance, are deemed to be received under section 18(4) and section 58(e) of the Act respectively.
The argument is that there is no relevant provision of the Act under which the two amounts in question can be properly deemed to have been received by the appellant.
No provision has been mentioned in the judgment of the High Court nor has any such provision been cited by the income tax authorities either.
In our opinion, this argument is technically correct.
It must be conceded that the present Proceedings disclose some confusion in the mind of the appellant in the presentation of her case at all stages hereto, in the findings recorded by the income tax authorities, in the form of the question raised by the tribunal, and in the answer given to it by the High Court.
In law and in substance, what the department has done is to tax the said two amounts not because they are deemed to have been received by the appellant during the relevant years, but because they have been actually received by her or treated by her as so received.
In other words, the case against the appellant under section 4(1)(a) is that the amounts of interest constitute her income which is received or treated as received by her.
7 50 Dealing with the question on this basis, Mr. Sastri contends that the inference about the receipt of income by the appellant drawn from her books of account is not valid and should be rejected.
He does not dispute the fact that the books of account are kept by the appellant on mercantile basis.
It was conceded by the appellant 's lawyer in the proceedings before the tribunal that the appellant as the creditor had a right to enforce the payment of interest in British India, and that the liability of the Chistian shop had been extinguished to the extent of the interest paid by it to the head office.
The concessions made by the appellant before the tribunal clearly show that the sum advanced by the appellant 's head office in British India to her shop at Chistian was liable to pay interest and that the credit entry in respect of the two amounts had been made according to the mercantile method of keeping accounts.
It is well known that the mercantile system of accounting differs substantially from the cash system of book keeping.
Under the cash system, it is only actual cash receipts and actual cash payments that are recorded as credits and debits; whereas, under the mercantile system, credit entries are made in respect of amounts due immediately they become legally due and before they are actually received; similarly, the expenditure items for which legal liability has been incurred are immediately debited even before the amounts in question are actually disbursed.
Where accounts are kept on mercantile basis, the profits or gains are credited though they are not actually realised and the entries thus made really show nothing more than an accrual or arising of the said profits at the material time.
The same is the position with regard to debits made.
This position is not disputed by Mr. Sastri.
He,, however, contends that the entries in respect of the receipt Of interest are nevertheless merely book entries and it would not be reasonable to infer actual receipt of the said amount merely from these entries.
In support of this argument, Mr. Sastri invited our attention to the decision of the House of Lords in Gresham Life Assurance Society Ltd. vs Bishop (Surveyor of 51 Taxes)(1).
This was a case of life assurance society which carried on business at home and abroad with its head office in London.
At the head office accounts and balance sheets were made.
up, the profits ascertained and the dividends paid.
The interest upon the society 's foreign securities paid abroad was received by the agents and part of it was applied abroad for the purposes of the society.
All the interest on foreign securities was, however, taken into account in the balance sheets upon which the profits were ascertained.
It was held that taking the interest into account was not equivalent to a receipt in the United Kingdom and that income tax was not chargeable upon that part of the interest which was not remitted to the United Kingdom.
The Fourth Case falling under Schedule I which fell to be considered in this case referred to sums " which have been or will be received in Great Britain during the year for which the duty is payable ".
Under this provision, the locality of the receipt is naturally very important.
As Lord Lindley has observed that " what has been done, and all that has been done, is that the Gresham Company, in making up its account with a view to ascertain what profits it could divide in a particular year, entered on its asset side the sum of pound 43,483/ as money received during the year.
This was obviously right; for the object was not to ascertain the profit made in any particular country but the profit made by the company on all its transactions all over the world ".
In fact no account was forthcoming to show that the sum had ever been treated as remitted to the United Kingdom so as to justify the inference that in any commercial sense the same had been received in the United Kingdom as distinguished from other countries.
It is thus clear that the decision turned upon the special features of accounting which is usually adopted in preparing and presenting balance sheets of companies and it shows that an entry in a balance sheet is not receipt of money at the place where the balance sheet is prepared.
In our opinion, there is no analogy between the balance sheet of a (1) ; 52 company and the accounts 'kept by the appellant in respect of her individual business activities.
The principle laid down by the House of Lords in the case of Gresham Life Assurance Society Ltd. (1), appears to have been substantially reproduced in explanation (1) to section 4(1).
The argument that the principle thus statutorily recognized in respect of balance sheets should be extended to private books of account kept according to mercantile system cannot, in our opinion, be accepted.
Mr. Sastri has also invited our attention to the decision of Keshav Mills Ltd. vs Commissioner Income tax, Bombay (2).
In this case a non resident company manufactured textile goods in Petlad outside British India and sold the goods ex mills.
The firm of R. & Co., guaranteed the sale price of goods sold ex mills by the assessee company to purchasers at Ahmedabad within British India.
The assessee maintained its accounts according to the mercantile system and so debited R. & Co. with the price of goods sold and credited the sales account of the bills.
R. & Co. collected the amounts of the bills from the purchasers on behalf of the assessee and credited the sums realised in the assessee 's account with banks at Ahmedabad and also disbursed them to creditors of the assessee in British India.
During the relevant accounting year, the assessee thus received Rs. 12,68,418/ .
The asses.
see also received Rs. 4,40,878/ from sales to purchasers in British India.
The question which arose for decision was whether these two sums were sale proceeds of goods sold by the assessee to merchants in British India and whether they were received in British India and could be included in the assessable income of the assessee in British India.
It was held by this Court that the said amounts were not received by the assessee nor could be deemed to have been received by it when the entries were made in the books of account at Petlad but that they had merely accrued or arisen to the assessee there; that they were first received by R. & Co. and by the banks through whom the railway receipts were negotiated on behalf (1) ; (2) ; 53 of the company in British India and as such were liable to tax under section 4(1)(a) of the Act as having been received in British India on its behalf.
We do not see how this decision can assist the appellant 's case before us.
We are dealing with the appellant who is a resident in British India and the argument that the credit entries made in his books of account should not be treated as income received or treated by her as, received cannot be supported by the decision in Keshav Mills Ltd. (1) or even by any of the observations made by Bhagwati J. who delivered the majority judgment.
Reliance was also placed by Mr. Sastri on the decision of the Full Bench of the Punjab High Court in Sunder Das vs The Collector of Gujrat (2).
This case merely decided that, where the assessee had earned and received income in British Baluchistan (which Province was exempt from the operation of the Act except as to salaries) and had subsequently brought it into Punjab, it was not liable to income tax for the reason that the said income had not been received in the Punjab within the meaning of section 3, sub section
(1) of the Income tax Act.
In other words, this decision shows that the assessee cannot receive the same income twice in two different places but this principle has no application to the present case.
The decision of the Full Bench of the Madras ']High Court in Commissioner of Income tax, Madras vs A. T. K.P.L.S.P.
Subramaniam Chettiyar (3), on the other hand, supports the contention of the department.
In this case the Madras High Court has held that credit entries made on account of interest due by debtor in foreign places to the assessee must be treated as payments though that interest was not actually paid %in British India.
The assessee had a business of his own in Rangoon carried on by an agent and lie was also interested with another or others in a money lending business in Penang in which he was a chief partner.
From the Rangoon business a sum of Rs. 78,768/ and odd was transferred in cash to the Penang business (1) (2) Lah.
(3) Mad.
54 under the orders of the assessee.
In the books of the Rangoon business a sum of Rs. 12,174/. was entered as interest on that money from Penang and the assessee had been assessed in respect of this interest under section 4, sub section
(1) of the Act as income accruing, arising or received in British India.
It was admitted that the assessee kept his books according to the mercantile method of book keeping.
What the assessee sought to do was to treat the relevant entries of interest on cash basis though he adopted the mercantile basis in regard to other entries in the interest account.
This attempt did not succeed because the High Court held that the assessee 's own accounts were " dead against his contention " and they precluded him from arguing that the interest in question is income arising outside British India and not received in British India because in law the transfer called in the assessee 's books an advance to the Penang firm cannot be a loan.
The court came to the conclusion that once the assessee had adopted the mercantile basis of accountancy it was upon that basis and that basis alone that lie had to be assessed.
Thus this decision would show that the effect of making a credit entry in the interest account would be to treat that amount as income or profits received by the assessee or treated by him as received for the purposes of the tax provided the assessee keeps the accounts according to the mercantile method of book keeping.
We are, therefore, not prepared to accept Mr. Sastri 's argument that, despite the concessions made by his client before the tribunal, it would still be open to her to contend that the relevant entries in her books of account did not justify the inference that the appellant has received the amounts in question by way of interest during the relevant period.
Realising the infirmity in his argument on this point, Mr. Sastri contended that the main objection which he wanted to urge before us against the validity of the conclusion reached by the income tax authorities was fundamental and it went to the root of the matter.
Indeed, it was this aspect of the matter which Mr. Sastri seriously sought to press before us.
He contends 55 that the view taken by the Madras High Court in the case of Subramaniam Chettiyar (1), like the conclusion of the income tax authorities against the appellant in the present case, is based on the erroneous assumption that a person can trade with himself.
He urges that it is a rule of universal application that no person can trade with himself and make profit out of dealings with himself; and so his case is that, whatever may be the effect of the other entries made in the appellant 's books in the interest account, the relevant entries in respect of the interest alleged to have been received from the appellant 's own shop at Chistian in law cannot mean the receipt of any income by the appellant.
How can the appellant be tier own creditor and how can she receive interest in respect of the advance made by her to her own shop at Chistian, asks Mr. Sastri.
He concedes that this point bad not been raised by the appellant at any stage in the proceedings so far but, according to him, it is a Pure question of law and he should be allowed to argue it before us.
It was as early as 1887 that Palles C. B. observed in Dublin Corporation vs M 'Adam (Surveyor of Taxes) (2) that " no man, in my opinion, make, in what is its true sense or meaning, taxable profit by dealing with himself ".
In this case, a city corporation had been empowered by its Water works Act to supply waters beyond the city boundaries.
Any income thus arising had to be put into a consolidated account of the corporation for all the purposes of the Act.
It was held that the excess of receipts over expenditure in respect of the extra municipal supply constitutes profits chargeable to income tax.
Distinction was made between the extra municipal supply of water and supply within the limits of the municipality; and it was held that it was only the excess of receipts over expenditure in respect of the former that constitutes profits chargeable to income tax.
The argument that the income received from the rate payers residing within the limits of Dublin Municipality should be taken into account was repelled on the ground that (1) Mad. 765.
(2) 56 the corporation cannot be treated as in any sense a body distinct from the inhabitants of Dublin.
It was also observed that what was intended to be raised from the citizens was what is enough to pay for the expenses of the water supply and no more and that there was no intention that the corporation should in any sense make a profit from those rate payers.
The said principle has been enunciated very succinctly by Viscount Simon in Ostime (H. M. Inspector of Taxes) vs Pontypridd and Rhondda Joint Water Board (1) when he said that "if the undertaker is a rating authority and the subsidy is the proceeds of rates imposed by it or comes from a fund belonging to the authority, the identity of the source with the recipient prevents any question of profits arising ".
In The Carlisle and Silloth Golf Club vs Smith (Surveyor of Taxes) (2), Buckley L. J. has adverted to the same rule and has observed that a man cannot make profits or loss out of himself and that was the ground of the decision in New York Life Insurance Company vs Styles (Surveyor of Taxes) (3).
In support of the same proposition Mr. Sastri has also relied upon the decision of this Court in Sir Kikabhai Premchand V. Commissioner of Income tax (Central), Bombay (4).
In this case, the assessee carried on business in bullion and shares and kept his accounts in the mercantile system; the method adopted by him for ascertaining his profit,,; was to value stock at the beginning and close of each year at cost price.
In the accounting year he withdrew some silver bars and shares from the business and settled them in trusts, and in the accounts of the business he valued them at the close of the year at cost price.
According to the majority decision, the assessee was entitled to value the silver bars and shares in question at cost price and he was not bound to credit the business with the market price at the close of the year for ascertaining his assessable profits for the year.
Bhagwati J., however, dissented from this view and held that the assessee 's business was entitled to be credited (1) , 278.
(3) (2) (4) 57 with the market value of the assets withdrawn as on the date it was withdrawn whatever be the method employed by the assessee for the valuation of the stock in trade on hand at the close of the year.
Mr. Sastri placed reliance on the observations made by Bose J., who delivered the judgment for the majority view that " disregarding technicalities it is impossible to get away from the fact that the business was owned and run by the assessee himself.
In such circum stances it would be unreal and artificial to separate the business from its owner and treat them as if they were separate entities trading with each other and then by means of a fictional sale introduce a fictional profit which in truth and in fact is non existent ".
Mr. Sastri also contended that the decision of the Allahabad High Court in Ram Lal Bechairam vs Commissioner of Income tax (1) supported the same view.
On the other hand, the Solicitor General contends that the principle on which Mr. sastri relies can no longer be regarded as inflexible and universal; and according to him, permissible invasion of this principle has been recently recognized by the House of Lords in Sharkey (Inspector of Taxes) vs Wernher (2).
In this case Lady Zia carried on a stud farm, an activity which was admittedly husbandry and taxable under Schedule ' D '; she also carried on a separate activity, racing stables, which gave rise to no liability to tax being a " recreational " enterprise.
Horses were bred at the stud farm for the racing stables.
On the transfer of five horses in the relevant year of assessment from the stud to the stables it was held by the House of Lords (Lord Oaksey dissenting) that " where a person carrying on a trade disposes of part of his stock in trade not by way of sale in the course of trade but for his own use, enjoyment, or recreation, he must bring into his trading account for income tax purposes the market value of that stock in trade at the time of such disposition, and that, accordingly, the amount to be credited to the stud farm accounts on the transfer of the horses was their market value and not the (1) A.I.R. 1946 All. 8.
(2) 8 58 cost of breeding them ".
It would be noticed that this decision proceeds on the fictional or notional assumption that the transfer of the five horses from the stud farm of the assessee to her racing stables was a commercial transaction; and that, according to the Solicitor General, is a clear case where an exception is recognized to the general rule that a person cannot trade with himself.
In his speech, Viscount Simonds observed that " if there are commodities which are the subject of a man 's trade but may also be the subject of his use and enjoyment, I do not know how his account as a trader can properly be made up so as to ascertain his annual profits and gains unless his trading account is credited with a receipt in respect of those goods which he has diverted to his own use and enjoyment ".
Then Viscount Simonds referred to the change in law which made the farmer liable to tax under Scheduled ' instead of under Schedule 'B ' and to section 10 of the Finance Act of 1941 and observed that " these provisions emphasize the artificial dichotomy which the scheme of income tax law in many instances imposes.
Lord Radcliffe, dealt with the question at length.
He cited the proposition stated by Palles C. B. and observed that later decisions have shown that this simple proposition may cover what are to be regarded as two separate questions, whether a man can trade or deal with himself, whether a man can make taxable profit by so doing.
In his opinion, " it must now be said that people can carry on trade or business with themselves, as by way of mutual insurance, but that, if they do, a resulting surplus from the operations is not a profit from a trade for the purposes of income tax, or, put another way, their operations do not for the same purposes constitute a trade from which a profit can result ".
Lord Radcliffe referred to the case of Watson Brothers vs Hornby (1) which explicitly decided that it must be necessary for a proper assessment of trade profits under Case I of Schedule d ' to treat a man who supplies himself in his own trade as trading with himself on ordinary commercial (1) 59 terms and stated that the said decision which was given in 1942 laid down a principle that must continuously affect a great many taxpayers and it was only in 1955 that it was said that the case was wrongly decided.
The learned law Lord also considered the decision in Back (Inspector of Taxes) vs Daniels (1) and referred to the observations of Mr. Justice Rowlatt about the assessees ' admission that " in addition to their liability to income tax under Schedule ' B ' the assessees may be liable to income tax on a sum in the nature of a commission to themselves for selling their own potatoes, in the same way as they sell other people 's potatoes in London on the market ".
The assessees in the case before Rowlatt J. were a firm of wholesale potato merchants who carried on business in London where they sold all the potatoes raised by them on land in Fen District.
The effect of the decision was that Schedule ' B ' assessment on the profits of occupation prevented any assessment under Schedule ' D ' in respect of the profit the firm made when they sold the potatoes as wholesale merchants in London.
The assessees admitted their liability, to pay the tax on the commission in question ; but the admission did not seem, a strange one to Mr. Justice Rowlatt whose only comment was "but that, on the whole, is the limit of their liability ".
In regard to this decision, Lord Radcliffe has remarked that the limit mentioned by Rowlatt J. required the assessees to include in the receipts of their London business a commission from themselves which of course they never paid for selling themselves their own potatoes.
From the decisions examined by him, Lord Radcliffe drew the inference that they afford instances of the disintegration for tax purpose of a profitable business carried on by a taxpayer in two departments.
The respondent 's argument is that having regard to the decision of the House of Lords in the case of Sharkey vs Wernher (2) it would be necessary for a larger Bench of this Court to reconsider the view expressed by the majority decision in the case of Anglo French (1) (2) 60 Textile Co., Ltd. vs Commissioner of Income tax, Madras (1).
It is urged that the minority view expressed by Bhagwati J. appears to be more consistent with the decision of the House of Lords.
Besides, the Solicitor General has argued that though he is prepared to meet on the merits the new point raised by Mr. Sastri for the first time in appeal before us, he would be entitled to contend that, having regard to the special circumstances of this case, Mr. Sastri should not be permitted to raise the said point.
We are inclined to accept this contention raised by the Solicitor General and so we do not propose to decide the interesting point raised by Mr. Sastri.
We have already indicated that the appellant 's contention throughout has been that the relevant entries do not justify the inference that the amounts in question have been received by her during the years in question as income or profit; and this contention naturally raised the short and simple question as to the effect of the said entries made in the books of account which are admittedly kept on the mercantile basis of bookkeeping.
It is true that the confusion introduced by the appellant 's contention was shared b y the income tax authorities and it persisted throughout the present proceedings until they reached this Court.
That is why even the material question framed by the tribunal and answered by the High Court does not properly disclose the real controversy between the parties.
The reference to the deeming provisions of the Act which is presumably implied in the question as framed by the tribunal and answered by the High Court is clearly out of place; but the fact still remains that the appellant never raised the contention that the two entries in the interest.
account cannot in law show profits received by her because the appellant could not trade with herself.
If the appellant wanted to rely upon this principle the point should have been urged at the earlier stage of the proceedings.
Besides, there are some other factors which would introduce complications in case the point raised by Mr. Sastri were to be upheld.
The business con (1) , 61 ducted by the appellant in the shop at Chistian attracted the provisions of section 14(2)(c) of the Act which was then in force; and so no tax was payable by the appellant in respect of the income, profits or gains accruing or arising to her from the said shop unless such income, profits or gains were received or deemed to be received in or brought into British India in the previous year by or on behalf of the appellant.
In other words, though the appellant is a resident in the taxable territories and her income wherever received would be normally taxable, she would be entitled to the benefit of the exception prescribed by the pro visions of section 14 (2)(c).
Nevertheless the appellant 's profits from her shop at Chistian would be relevant for the purpose of determining the rates at which income tax was payable by the appellant.
They would also be relevant in deciding which part of the profits were received or could be deemed to be received within the meaning of section 14(2)(c).
If it is held that the entries in respect of the two items of interest in question do not represent in law any profits received by the appellant, then appropriate changes would have to be made in the appellant 's account books kept at Khurja as well as at Chistian.
The appellant has been keeping accounts on the mercantile basis for all the years; and it is very unlikely that the two entries before us are the only ones which may be affected if it is held that the appellant could not have traded with herself.
It is clear that the profits made by the appellant in her shop at Chistian have been determined all these years on the basis of credit and debit entries by the appellant according to the mercantile system; and so the question as to the amounts remitted by the appellant from Chistian to herself at Khurja would be affected by making necessary adjustments of all relevant entries, and that would mean reopening the whole enquiry into the appellant 's liability to pay the tax.
In this connection we may refer to the fact that for the assessment year 1943 44 the Income Tax Officer had determined the assessee 's income at Chistian at Rs. 74,982.
He had also held that out of the said profits the appellant had remitted Rs. 51,879 to 62 British India; and so, in the assessment, he added this amount as income in British India on remittance basis and, after giving the statutory allowance of Rs. 4,500, took the balance of Rs. 18,603 as income on accrual basis to be considered for rate purposes only.
On this question the ultimate decision was that no amount could be taxed on remittance basis.
In the supplementary assessment proceedings the appellant proved that a sum of Rs. 7,19,660 was sent to Chistian shop and Rs. 4,17,636 was received from the Chistian shop.
That is why, in the result, the entire income in Bahawalpur State was taken on an accrual basis for income tax.
Having regard to the method adopted by the appellant in keeping her books of account, it seems clear that, if the appellant 's present contention is accepted, the decision as to remittances from Chistian to Khurja as well as the decision as to the rates at which the tax were to be levied on the appellant may have to be reopened.
That is why we think, in the special circumstances of this case, we should not, allow Mr. Sastri to raise the point that the appellant cannot trade with herself and so the relevant entries cannot justify the inference that the appellant has received income even though the entries are made in the accounts kept on mercantile basis.
In the result the appeals fail and must be dismissed with costs.
Appeals dismissed.

dataset_name: IN-Abs

summary:
The assessee, who was ordinarily resident in British India, carried on business at Khurja and Aligarh in India and at Chistian in the Indian State of Bahawalpur.
He kept a central set of accounts of the business at Khurja, which were maintained on the mercantile system.
Under the said system credit entries are made in respect of amounts due immediately they become legally due and even before they are actually received.
In his account books the income received by the assessee from all sources was shown, and the interest account showed credit entries of amounts received as interest on capital invested in the shop at Chistian.
The assessee conceded that as creditor he had the right to enforce the payment of, interest in British India and that liability of the Chistian shop had been extinguished to the 46 extent of the interest paid by it to the head office.
The Income Tax Authorities included these amounts in the assessee 's taxable income in India and levied tax on them.
The assessee contended that the entries in respect of the receipt of interest were merely book entries and that the authorities had wrongly treated these amounts as having been actually received.
Held, that the relevant entries in the books of account did justify the inference that the assessee had actually received the amounts by way of interest.
Where an assessee Keeps accounts according to the mercantile method of book keeping the effect of making a credit entry in the interest account would be to treat that amount as income or profits received by the assessee or treated by him as received for the purposes of the tax.
Commissioner of Income tax vs A.T.K.P.L.S.P. Subramaniam Chettiar, Mad. 765, approved.
Gresham Life Assurance Society Ltd. vs Bishop, (1902) A.C. 287; Keshav Mills Ltd. vs Commissioner of Income tax, Bombay, ; ; Sunder Das vs The Collector of Gujrat, Lah. 349, referred to.
The assessee sought to raise a new point that it was a rule of universal application that no person could trade with himself and that accordingly the interest alleged to have been received from his own shop at Chistian could not amount to receipt of any income by him, and referred to: Dublin Corporation vs M 'Adam, ; Ostime vs Pontypridd and Rhondda joint Water Board, (1944) 28 Tax Cas. 261 ; Caylisle and Silloth Golf Club vs Smith, ; New York Life Insurance Company vs Styles, ; ; Sir Kikabhai Premchand vs Commissioner of Income tax (Central) Bombay, and Ram Lal Bechairam vs Commissioner of Income tax, A.I.R. (1946) All.
The respondent contended that the principle was not inflexible or universal and that the new point having been raised for the first time in appeal ought not to be permitted to be raised.
Sharkey vs Wernher, (1956) A. C. 58, referred to.
Held that, the new point could not be allowed to be raised as that would mean the re opening of the whole enquiry into the question as to the remittances from Chistian to Khurja as well as the rates at which the tax were to be levied on the assessee.
If the assessee wanted to rely upon this principle the point ought to have been urged at the earlier stage of the proceedings.


judgement:
No. 105 of 1973.
(Under Article 32 of the Constitution of India) Kapil Sibal, A.K. Sen, P.C. Jain, Ranbir Chandra, A. Minocha and Ms. Indu Goswami for the Petitioners.
Kuldip Singh, Additional Solicitor General, M.M. Abdul Khadar, L.N. Sinha, V.C. Mahajan, R.B. Dattar, A.K. Gangu|i, R.B. Misra, Ms. A. Subhashini, D.N. Mukharjee, R.P. Gupta, T.V.S.N. Chart, Mrs. Binu Tamta, Mrs. B. Sunita Rao, Ms. Manjula Gupta and Badrinath for the Respondents.
The Judgment of the Court was delivered by RANGANATHAN, J.
The petitioner company obtained mining leases from the Government of Assam to extract sillimanite in the Khasi and Jaintia Hills District.
In pursuance there of, three lease deeds were executed by the State Government in favour of the petitioner.
The first was a lease deed dated 25.4.1952 for a period of 15 years in respect of an area of 129.60 hectares at Lalmati.
The second, dated 10.4.1963, was for a period of 15 years in respect of an area of 986 777.60 hectares at Nongmawait.
The third one dated 8.6.1967 was for a period of 15 years and covered an area of 363 hectares at Wamsophi.
The three lease deeds were to expire on 26.5.77, 9.4.78 and 7.6.82 respectively but there was a clause for further renewal.
The petitioner company had also established a refractory Plant in 1961 near Ramgarh in District Hazaribagh.
It ap pears, however, that petitioner faced a number of difficul ties in operating the refractory plant and was explaining its difficulties to the State of Maghalaya which was formed in 1970.
Between 1970 to 1972, the Union of India, through its public sector companies, Hindustan Steel Ltd. and Bokaro Steel Ltd. negotiated with the petitioner for the purchase of its refractory plant and also for having the mining leases transferred to them.
Though the refractory plant was not functioning properly and was on the verge of closure, the petitioner was not willing to transfer its mining leases to the public sector companies but was willing to supply the required quantity of sillimanite to the Bakaro Steel Plant.
It is also stated that some negotiations took place as a result of which the petitioner was planning to re open the factory on 6.11.
However, in the meantime on the 2nd of November, 1972, the Central Government took over the management of the refractory plant under section 18 AA of the Industries Development & Regulation Act, 1951.
Posses sion of the plant as well as its management was also taken over by the Hindustan Steel Ltd. on the same day.
This take over was challenged by the petitioner company but its chal lenge was repelled by the Delhi High Court and a Special Leave Petition was filed, which is pending in this Court.
We are not concerned with this issue in the present case.
On 12.9.1972, the Mines and Minerals (Regulation and Development) Act, 1951, was amended by Act No. 56 of 1972.
By this amendment, section 4 A was introduced in the Act, which reads as follows: "(1) Where the Central Government, after consultation with the State Government is of opinion that it is expedient in the interest of regulation of mines and mineral development so to do it may request the State Government to make a premature termination of a Mining Lease in respect of any mineral other than a minor mineral, and, on receipt of such request, the State Government shall make an order making a premature termination of such mining lease and 987 granting a fresh mining lease in favour of such Government Company or Corporation owned or controlled by Government as it may think fit.
(2) Where the State Government, after consultation with the Central Government, is of opinion that it is expedient in the interest of regulation of mines and mineral development so to do, it may, be an order, make premature termination of a mining lease in respect of any minor mineral and grant a fresh lease in respect of such mineral in favour of such Government Company or Co operation owned or controlled by Government as it may think fit." This amendment came into effect in September 1972.
At this juncture it may be mentioned that Act 37 of 1986 has further amended the 1951 Act and substituted section 4A by the following section, which insofar as it is relevant for our present purposes reads as follows: "4A (1) Where the Central Government, after consultation with the State Government, is of opinion that it is expedi ent in the interest of regulation of mines and mineral development, preservation of natural environment, control of floods, prevention 'of pollution, or to avoid danger to public health or communications or to ensure safety of buildings, monuments or other structures or for conservation of mineral resources or for maintaining safety in the mines or for such other purposes, as the Central Government may deem fit, it may request the State Government to make a premature termination of a prospecting licence or mining lease in respect of any mineral other than a minor mineral in any area or part thereof, and, on receipt of such re quest, the State Government shall make an order making a premature termination of such prospecting licence or mining lease with respect to the area or any part thereof.
(2) Where the State Government, after consultation with the Central Government, is of opinion that it is expedient in the interest of regulation of mines and mineral development, preservation of natural environment, control of floods, prevention of pollution or to avoid danger to public health or communications or to ensure safety 'of buildings, 988 monuments or other structures or for such other purposes, as the State Government may deem fit, it may, by an order, in respect of any minor mineral, make premature termination of a prospecting licence or mining lease with respect to the area or any part thereof covered by such licence or lease: Provided that the State Government may, after the premature termination of a prospecting licence or mining lease under sub section (1) or sub section (2), as the case may be, grant a prospecting licenee or mining lease in favour of such Government company or corporation owned or controlled by Government as it may think fit. '(3) No order making a premature termination of a prospect ing licence or mining lease shall be made except after giving the holder of the licence or lease a reasonable opportunity of being heard.
In pursuance of the 1972 amendment, the State Government passed an order terminating the mining leases granted to the petitioner and granted fresh leases over the same areas in favour of M/s. Hindustan Steel Ltd., a Government company, fully owned by the Central Government.
The order, made in the name of the Governor, reads as follows: Dated, Shillong 7th Dec., 1972.
No. MG.
133/72: Whereas the Central Govt., having consulted the Govt.
of Meghalaya, is of opinion that it is expedient in the interest of mineral regulation and development that the mining leases of sillimanite mentioned below held by M/s. Assam Sillimanite Ltd. (having its Registered Office at 13 A.T. Road, Gauhati) in Meghalaya are terminated forth with; And, whereas, in terms of Sec.
4A of the Mines and Minerals (Regulation & Development) Act, 1957, as amended by the Mines and Minerals (Regulation & Development) Amended Act, 1972, the Central Govt.
has requested the Govt.
of Meghalaya to make a premature .
termination of the said mining leases held by M/s. Assam Sillimanite Ltd.; 989 Now, therefore, the Govt.
of Meghalaya in exercise of the powers conferred by Sec.
4A(1) of the Mines and Minerals (Regulation & Development) Act, 1957, as amended by the Mines & Minerals (Regulation & Development) Amendment Act, 1972 hereby terminates prematurely the mining leases of sillimanite mentioned below held by M/s. Assam Sillimanite Ltd. with immediate effect and grants fresh mining leases over the same areas in favour of M/s. Hindustan Steel Ltd., a Government Company, fully owned by the Central Government.
Lease Locality Area in Period of Date of No. hecteres Lease expiry 5.
Lalmati 129.60 15 years 24.4.1977 6.
Nongmawait 777.60 do 9.4.1978 7.
Wamsophi 363.00 do 7.6.1982" The petitioner filed a writ petition in the Gauhati High Court against the order dated 7.12.
1972 but it was not able to obtain any ex 'parte interim orders.
The petition was withdrawn from the Gauhati High Court and the present peti tion under Article 32 has been filed in this Court.
On 5.3.
1973, this Court issued rule nisi and also directed the maintenance of the status quo pending notice.
It, however, appears that Hindustan Steel Ltd. had taken possession of the properties in question and the interim stay was also vacated on 20th of January, 1987.
The present position, therefore, is that the mining leases have been granted to the Hindustan Steel Ltd. and they have also been operating the mines for the past several years.
Though several objections have been raised to the action of the State Government in the writ petition, including a challenge to the validity of section 4A, the arguments before us were restricted by Shri P.C. Jain to only two aspects.
He submitted that, admittedly, no notice had been issued by the State Government before terminating the leases prematurely.
This, according to him, amounts to denial of natural justice and vitiates the order dated 7.12.
The second contention is that the order does not fulfil the requirements specified in section 4 A justifying the prema ture termination of leases in pursuance thereof.
990 This writ petition came up for hearing on earlier occa sions but it was adjourned from time to time as the same issue was pending decision in this Court in the case of State of Haryana vs Ram Kishan & Ors., Civil Appeals Nos.
1472 77 of 1987.
Our task in the present writ petition has been considerably simplified because the above civil appeals have been disposed of by this Court by its judgment dated 6th May, 1988, which is reported in ; Shri P.C. Jain, learned counsel for the petitioner company submits that the first point raised by him has been squarely decided in his favour in the above case and that, therefore, he is entitled to succeed in the present writ petition.
Learned counsel also referred to a decision of the Delhi High Court reported in Dharam Veer vs Union of India, AIR 1989 Delhi 227, which has followed the decision in Ram Kishan 's case.
In that case, a similar order of premature termination was set aside by the High Court and the lessees were directed to be put back in possession of the leased premises which had been taken away from them in pursuance of their unlawful order.
Learned counsel submits that, in the present case, having regard to the comparatively long peri ods of leases and the lapse of time, be would not pray for the petitioner being put back in possession of the leased premises but he contends that the least that could be done is to award compensation to the petitioner company for, (what has now to be held to be), the wrongful premature termination of the leases.
He submits that the petitioner is willing to have this aspect of the matter referred to arbi tration by any arbitrator appointed by this Court.
On the other hand, Shri R.B. Datar, learned counsel for the Union of India submits that, in the State of Haryana vs Ram Kishan and Others, ; , the Central Government had expressed its willingness to reconsider the matter after hearing the parties concerned and that, there fore, the decision of this Court in that case is distin guishable.
He sought to contend, on the strength of observa tions made by this Court in The Barium Chemicals Ltd. and Anr.
vs Company Law Board and Others, [1966] Suppl.
S.C.R. 311 as well as the decision in R.S. Dass vs Union of India and Others, that rules of natural justice can be statutorily excluded either expressly or by necessary implication.
In the present case, he submits that it became expedient in the interest of regulation of mines and mineral development, to have the mining operations in respect of raw materials necessary for the production of iron and steel entrusted to public sector companies and a policy decision to this effect had been taken by the Govern ment.
In this context, he submits, the grant of an opportu nity to the lessee would be totally meaningless and futile.
He 991 says that the object and purpose of the statute clearly excludes the provision of an opportunity to the lessees before termination of the leases.
If at all, he submits, it will be open to a lessee, whose lease is prematurely termi nated under section 4 A, to challenge the order of premature termination, after it was passed, on the ground that it did not satisfy the conditions set out in section 4 A but that the section should not be construed as envisaging a hearing of the lessees before an order of premature termination is made.
Referring to the amendment of section 4 A in 1986, which specifically provides for an opportunity of hearing under sub section (3), Shri Datar says that this provision became necessary because the grounds for premature termina tion set out in the new sub section (1) of section 4 A were made wider and made more comprehensive.
Under the new sub section, premature termination of leases was permissible in various other circumstances, such as: preservation of natu ral environment, control of floods, prevention of pollution, avoidance of danger to public health or communications, ensuring of safety of buildings, monuments and other struc tures, conservation of mineral resources, maintenance of safety in mines and such other purposes as the Central Government may deem fit.
These were purposes in respect of which an opportunity of hearing to the lessee would be really needed and helpful but that, in the context of earli er sub section, which was much narrower, no such opportunity of hearing was at all contemplated.
We do not propose to reconsider this matter as, in our opinion, the contention raised by Shri P.C. Jain is directly and squarely concluded by the decision in Ram Kishan 's case (supra).
It is no doubt true that in that case the Central Government appears to have been willing to reheat the par ties but the court did not proceed on the basis of any concession.
The court discussed the provisions of section 4 A at great length and held that there was no suggestion in the section to deny the right of the affected persons to be heard and that the section must be interpreted to imply that the person who may be affected by such a decision should be afforded an opportunity to prove that the proposed step would not advance the interest of mines and mineral develop ment.
Not to do so, it was held, would be violative of the principles of natural justice.
The court concluded that the lessee respondents were entitled to be heard before a deci sion to prematurely terminate their leases was taken and that, since it was not done, the High Court was right in quashing the order passed under section 4 A.
In our opinion, the decision in Ram Kishan 's case fully covers the present case and should be followed by us.
In fact, we think that the 992 subsequent amendment in 1986 lends support to the plea of the petitioners.
Though it is true that the scope of section 4 A (1) has been widened, the insertion of sub section (3) clearly reflects a statutory intention that an opportunity of hearing must be given before the order of termination is passed, presumably as such an order widely affects the rights of the lessees.
We are not able to agree with Shri Datar that under section 4 A, as it stood before 1986, no useful purpose would have been served by the giving of such an opportunity.
Several situations and circumstances can be conceived of where, given an opportunity of hearing, the lessee may be able to either dissuade the Government from terminating the leases prematurely or in persuading the government to do it subject to certain safeguards for its benefit.
For example, the lessee may be able to show that the public sector corporation to whom it is proposed to entrust the working of the mines is not yet adequately equipped to exploit the mines and that, atleast for some more time the status quo should continue; or, again, if there is only a short period before the leases are to expire in the normal course, the lessee may be able to persuade the Government that no great advantage would be derived by premature termination of the lease.
These are only illustra tive.
Several such other situations can be thought of.
It is very difficult, therefore, to accept the contention that because an order under section 4 A is to be passed in order to give effect to a policy of the Government, it is not necessary or useful to provide the lessees, whose leases are about to be terminated, an opportunity of hearing.
We, therefore, hold, respectfully following the decision in Ram Kishan 's case (supra), that the order passed under section 4 A dated 7.12.1972 is null and void as it violated the principles of natural justice and was passed without giving an opportunity to the lessees of being heard.
The next question is regarding the relief to be granted to the petitioner.
Shri Datar submits that in the writ petition the only prayer made by the petitioners is for the quashing of the order dated 7.12.
1972 and that no further claim has been made in the writ petition.
He submits that if the petitioners are aggrieved because of the premature termination of the leases, it is open to them to file a suit or take other appropriate remedies for obtaining compensa tion in respect of the unlawful termination.
We do not think that this a fair course to be adopted in this case.
The writ petition was filed by the petitioner company as early as in February 1973 and has been pending in this Court for about 17 years.
It is true that the petitioner could have filed a suit for the same purpose with a prayer for additional relief by way of compensation or damages.
But we do not think that it should now be 993 asked to go back to file a suit for compensation or damages which may be barred by limitation.
After the lapse of such a long time, in our opinion, the proper course is to adopt some method for deciding the quantum of relief that could be granted to the petitioner by way of compensation and dam ages, which can at once be simple and expeditious and which will avoid further unnecessary litigation.
We think that the request of the learned counsel that the matter may be re ferred to arbitration is a fair one and indeed this course is also not seriously resisted by the respondents.
The short question that remains to be decided is whether the petition ers have suffered any damages as a result of the premature termination of the three leases in their favour either in the shape of loss of profits for the unexpired periods of the leases or in any other material respect.
We, however, direct that, having regard to the circumstances of the case, the compensation/damages should be restricted to a period of five years from the date of termination of the leases or upto the date of expiry of the original lease deeds referred to above whichever is less and not for the entire unexpired period of all the leases.
We refer this issue to arbitra tion.
Shri Justice section Natarajan, retired Judge of this Court, is appointed as Arbitrator to decide the above issue.
The Union of India has promised to place the services of a mining engineer/expert at the disposal of the arbitrator to assist him on the technical aspects of the matter.
The name of the nominee should be communicated to the arbitrator within four weeks from today.
It will be open to the arbi trator to avail himself of the services of such nominee.
Parties may settle the terms of arbitration with the arbi trator.
The company and Union of India should, however, deposit Rs. 10,000 each with the arbitrator as soon as the terms are settled to enable him to start the proceedings without delay.
The Arbitrator may enter upon the reference within four weeks of the date of communication of this order to him.
He may make his award within a period of four months thereafter.
He will not be obliged to give reasons for his conclusions.
A copy of this order may be sent to the learned Arbitrator by the Registry.
The writ petitions disposed of in the above terms.
In the circumstances, we make no order as to costs.
R.S.S. Petition disposed of.

summary:
The petitioner company had obtained three mining leases from the Government of Assam to extract sillimanite in the Khasi and Jaintia Hills District, for a period of 15 years.
Negotiations between the Union of India and the peti tioner for having the mining leases transferred to the public sector companies, Hindustan Steel Ltd. and Bokaro Steel Ltd., having failed, the Government of Meghalaya, on the request of the Central Government, passed an order dated 7th December, 1972 prematurely terminating the mining leases in terms of section 4 A(1) of the Mines and Minerals (Regu lation & Development) Act, 1957 as amended by the Mines & Minerals (Regulation and Development) Amendment Act, 1972.
Thereupon, the petitioner company filed the present petition under Article 32 of the Constitution.
On behalf of the petitioner it was inter alia contended that since no notice had been issued by the State Government before terminating the leases prematurely, it amounted to denial of natural justice thus vitiating the order of termi nation.
State of Haryana vs Ram Kishan & Ors., [1988] 3 S.C.C. 416, relied upon.
It was further submitted that having regard to the comparatively long periods of leases and the lapse of time, the petitioner would not pray for being put back in posses sion of the leased premises but would be content with an award for compensation for wrongful premature termination, to be determined by any arbitrator appointed by the Court.
On behalf of the respondents it was submitted that the decision of 984 this Court in Ram Kishan 's case was distinguishable; that the rules of natural justice could be statutorily excluded either expressly or by necessary implication; that grant of an opportunity to the lessee would be totally meaningless and futile; that the object and purpose of the statute clearly excluded the provision of an opportunity to the lessee before termination of the leases; that amendment of section 4 A of 1986 specifically providing for an opportuni ty of hearing became necessary because the grounds for premature termination set out in the new subsection (1) of section 4 A were made wider and more comprehensive; that in the writ petition the only prayer made was for quashing the order of premature termination; and that it was open to the petitioner to file a suit or take other appropriate remedies for obtaining compensation in respect of the unlawful termi nation.
The Barium Chemicals Ltd. and Anr.
vs Company Law Board and Others, [1966] Supp.
S.C.R. 311 and R.S. Dass vs Union of India and Others, [1985] Supp.
S.C.C. 617, referred to, Disposing of the writ petition, this Court, HELD: (1) The order dated 7.12.1972 passed under section 4A of the Act whereby the leases were terminated prematurely was null and void as it violated the principles of natural justice and was passed without giving an opportunity to the lessee of being heard.
State of Haryana vs Ram Kishan & Ors., ; , followed.
Dharam Veer vs Union of India, AIR (1989) Delhi 227, re ferred to.
(2) Though it is true that the scope of section 4 A (1) has been widened, the insertion of sub section 4 A(3) clear ly reflects a statutory intention that an opportunity of hearing must be given before the order of termination is passed, presumably as such an order widely effects the rights of the lessees.
[992A] (3) It is difficult to accept the contention that be cause an order under section 4 A is to be passed in order to give effect to a policy of the Government, it is not neces sary or useful to provide the lessees, whose leases are about to be terminated, an opportunity of hearing.
[992D] (4) It is true that the petitioner could have filed a suit or taken 985 other appropriate remedies for obtaining compensation in respect of the unlawful termination.
But, in the facts and circumstances of this case, it is not fair to ask the peti tioner to go hack and file a suit for compensation or dam ages which may be barred by limitation.
The writ petition was filed by the petitioner company in 1973 and has been pending in this Court for about 17 years.
After a lapse of such a long time the proper course is to adopt some method for deciding the quantum of compensation and damages, which can at once be simple and expeditious and which will avoid further unnecessary litigation.
[992G H; 993A] (5) The request made on behalf of the petitioner that the matter may be referred to arbitration is a fair one and indeed this course is also not seriously resisted by the respondents.
The issue of compensation/ damages is accord ingly referred to Arbitration.
[993B] (6) Having regard to the circumstances of the case, the compensation/damages should be restricted to a period of five years from the date of termination of the leases or upto the date of expiry of the original lease deeds whichev er is less and not for the entire unexpired period of all the leases.
[993C]


judgement:
it Petition (Civil) No. of 1990.
(Under Article 32 of the Constitution of India) N.D.R. Ramachandra Rao and Vineet Kumar for the petitioner.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, CJ.
This is a petition under article 32 of the Constitution of India.
The petitioner claims to be "a public spirited individual".
He further claims to be a person aggrieved and seeks to assail the constitutional validity of the State of Karnataka and the Union of India not promoting, enforcing and carrying out the policy of prohibition i.e. manufacturing, sale and consump tion of intoxicating drinks and drugs throughout the coun try India Bharat, and also assails the constitutional validity of clause (b) of sub rule 1 of rule 3 of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968 as amended by the Karnataka Excise (Sale of Indian and Foreign Liquors) (Amendment) Rules, 1989 which came into fore on 10th September, 1989.
The petitioner refers to the Preamble to the Constitution which, 3 according to him, explains the general purpose behind the general provisions of the Constitution.
He refers to Mahatma Gandhi and his commitment to prohibition.
According to the petitioner, manufacture, sale and consumption of intoxicat ing drinks and drugs have become a stumbling block and a dangerous dragon to the progress and stability of the nation as a whole.
The petitioner states that unless this dragon is completely destroyed the country could never think of achieving the objects of the Constitution and justice social, economic and political.
People are flouting the laws of this country, therefore, the petitioner objects that the State should take upon the business of selling liquors.
He has asserted that the State of Karnataka instead of bringing total prohibition in the State, has evinced interest in taking up the responsibility of selling liquors to the general public.
Hence, it is bad and contrary to the Constitution, and he challenges the amendment which pre scribes the licence for sale shall be issued to only such company owned or controlled by the State Government as the State Govt.
may specify.
According to the petitioner, such a rule is unconstitutional.
He draws our attention to Article 47 of the Constitution of India which indicates directive principles.
In the aforesaid view of the matter he claims that this Court should direct the Union of India and other State Governments to enforce the policy of total prohibition throughout the country including the State of Karnataka and to impose restrictions on manufacture, sale and consumption of intoxicating drinks and to declare rule 3 of the these rules as void and unconstitutional.
We are unable to entertain this writ petition under article 32 of the Constitution.
The petition of the peti tioner is that the policy of prohibition is not being imple mented as enjoined by article 47 of the Constitution.
In our opinion, it is not entertainable.
Article 47 of the Consti tution, which is part of our Directive Principles of State Policy enjoins that the State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and, in particular, the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health.
Article 47 is in Part IV of the Constitution which contains Directive Principles of State Policy.
Article 37 enjoins that the provisions of this Part shall not be enforceable by any court, but the principles therein laid down are nevertheless fundamental in the gover nance of the country and it shall be the duty of the State to apply these principles in making laws.
It has to be borne in mind that Article 4 32 of the Constitution gives the Supreme Court the power to enforce rights which are fundamental rights.
Fundamental rights are justifiable, Directive Principles are not.
Direc tive Principles are aimed at securing certain values or enforcing certain attitudes in the law making and in the administration of law.
Directive Principles cannot in the very nature of things be enforced in a court of law.
See in this connection the observations of this Court in Akhil Bharatiya Soshit Karamchari Sangh vs Union of India, ; Whether a law should be made embodying the prin ciples of Directive Principles depends on the legislative will of the legislature.
What the petitioner seeks to achieve by this application is to inject a sense of priority and urgency in that legislative will.
Determining the choice of priorities and formulating perspective thereof, is a matter of policy.
Article 32 is not the machinery through which policy preferences or priorities are determined and this Court is not the forum where the conflicting claims of policies or priorities should be debated.
See the observa tions of this Court in Rustom Cavasjee Cooper vs Union of India, ; at p. 584.
We find no direct or casual violation of any fundamental right of which the petitioner can legitimately claim en forcement in this application.
To make the State accept a particular policy, desirable and necessary as the policy might be is not the function of Article 32 of the Constitu tion.
Article 32 of the Indian Constitution is not the nest for all the bees in the bonnet of 'public spirited persons '.
In the aforesaid view of the matter, we decline to entertain this application and the same is accordingly dismissed.
P.S.S. Petition dismissed.

summary:
Clause (b) of sub rule (11) rule 3 of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968 as amended by the Amendment Rules, 1989, requires the State Government to issue distributor licence only to such company owned or controlled by it as may be specified.
The petitioner assailed the constitutional validity of clause (b) on the ground that the policy of prohibition was not being implemented as enjoined by Article 47 of the Constitution inasmuch as the State of Karnataka instead of bringing total prohibition in the State, had evinced inter est in taking up the responsibility of selling liquors to the general public, and sought a direction to the Union and other State Governments to enforce the policy of total prohibition.
Dismissing the writ petition, the Court, HELD: 1.
There is no direct or casual violation of any fundamental right of which the petitioner can legitimately claim enforcement.
Article 47 is in Part IV of the Constitution which contains Directive Principles of State Policy.
Article 37 enjoins that the provisions of this part shall not be en forceable by any court.
Article 32 gives the Supreme Court the power to enforce rights which are fundamental rights.
Fundamental rights are justifiable, Directive Principles are not.
2 Directive Principles are aimed at securing certain values or enforcing certain attitudes in the law making and in the administration of law.
Directive Principles cannot in the very nature of things be enforced in a court of law.
Akhil Bharatiya Soshit Karamchari Sangh vs Union of India, ; , referred to.
Whether a law should be made embodying the principles of Directive Principles depends on the legislative will of the legislature.
In the instant case, what the petitioner sought to achieve by his application was to inject a sense of priority and urgency in that legislative will.
Determin ing the choice of priorities and formulating perspective thereof, is a matter of policy.
Article 32 is not the ma chinery through which policy preferences or priorities are determined.
It is not the nest for all the bees in the bonnet of 'public spirited persons '.
Rustom Cavasjee Cooper vs Union of India, , referred to.