judgement:
the Court to interpret words of ambiguous meaning in a, broad and liberal sense, 107 826 & CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 61 of 1952.
Appeal by special leave granted by the Supreme Court on the 10th September, 1951, from the Judgment and Order dated the 5th March, 1951, of the High Court of Judicature at Bombay (Chagla C.J. and Bhagwati J.) in Criminal Appeal No. 394 of 1950 arising out of the Judgment and Order dated the 29th May, 1950, of the Court of the Presidency Magistrate, Second Court, Mazagaon, Bombay, in Cases Nos.
630 /P and 635/P of 1949.
M.P. Amin (R. J. Kolah, with him) for appellants Nos. 1, 2 and 4.
As K. Muthuswami for appellant No. 3. C. K. Daphtary, Solicitor General for India (Porus A. Mehta, with him) for the respondent. 1953.
March 30.
The Judgment of the Court was delivered by BOSE, J.
The appellants have been convicted under sections 7 and 9 of the Essential Supplies Act (No. XXIV of 1946) on two counts.
The first appellant is a registered joint stock company, the Seksaria Mills Ltd. It was fined Rs. 10,000 on each of the two counts, that is to say, a total fine of Rs. 20,000, and this was upheld in appeal.
The second appellant is the Director of the Mills.
He was sentenced to two months ' rigorous imprisonment and to a fine of Rs. 2,00,000 on each count.
In appeal the sentence of imprisonment was set aside and the fine reduced to Rs. 10,000 on each count.
The third appellant is the General Manager of the Mills.
He was sentenced to a fine of Rs. 2,000 on each count.
This has been upheld.
The fourth appellant is the Sales Manager of the Mills.
He was sentenced to four months ' rigorous imprisonment and a fine of Rs. 1,00,000 on.
each count.
In appeal the sentence of imprisonment was upheld but the fine was reduced to Rs. 10,000 on each count.
The substantive sentences are to run concurrently.
827 A Government of India Notification dated 2nd February, 1946, required every manufacturer to submit " true and accurate information relating to his undertakings " to the Textile Commissioner C.S.T. Section at Bombay.
In compliance with this Order the first appellant submitted a return, signed by the third appellant, on 10th March, 1947.
This return is Exhibit A 1.
It showed that 13 bales of cloth (20 half bales and 3 full bales) were delivered to Messrs. Dwarkadas Khetan & Company of Bombay during the month of February, 1947, on behalf of the quotaholder Shree Kishan & Company.
Another return of the same date (Exhibit A 2), also relating to the month of February, 1947, showed that 6 bales were delivered to the same Dwarkadas Khetan & Company on behalf of another quota holder Beharilal Bajirathi.
A note on the back of each printed form states.
By 'delivered 'or delivery ' is meant physical delivery of cloth in bales or in pieces but not cloth which though paid for is still in the I physical possession of the seller.
" The offence charged is that this information is not true and accurate.
The case for the prosecution is that the bales remained in the physical possession of the first appellant at all material times and were not physically delivered to Messrs. Dwarkadas Khetan & Company.
Before us the learned Solicitor General added that even if there was physical delivery to Dwarkadas Khetan that did not comply with the requirements of the form because the form requires information regarding physical delivery to the quota holder or his agent and as Dwarkadas Khetan was not the agent of the quota holder, the statement is inaccurate and misleading.
The learned Presidency Magistrate who tried the case, and also the High Court on appeal, hold that the prosecution have established their case and so have convicted and upheld the convictions respectively.
828 The business procedure of the first appellant is explained by Dwarkadas Khetan.
His firm, Dwarkadas Khetan & Company, are the first appellant 's sole selling agents. ' They are del credere agents and guarantee payment to the first appellant of all sales made and, on the other side, guarantee delivery to the purchasers with whom they deal direct.
It is necessary at this stage to understand that because of various orders and rules made under the Essential Supplies Act the first appellant could only sell to specified quota holders and only up to the limits of their quotas.
The two quota holders which concern us are Shree Kishan & Company and Beharilal Bairathi.
The first appellant 's selling procedure is this.
When goods are ready for sale, it sends Dwarkadas Khetan & Company in duplicate a " ready sale note ".
These notes contain particulars about the bales and the persons to whom they are to be delivered.
Upon receipt of this Dwarkadas & Company contact the quota holders or their agents.
The next step is for the quota holder to pay Dwarkadas & Company the price of the goods specified in the " ready sale note".
Upon receipt of the money, one of the two notes is handed over to the quota holder or his agent and he is given a receipt for the money paid.
At the same time Dwarkadas & Company send the first appellant an " advice slip " telling it that the money has been received and asking it to prepare a delivery order.
The first appellant then debits Dwarkadas & Company with the price and not the purchaser.
For payment it looks to Dwarkadas & Company.
Upon receipt of this advice slip the first appellant 's office prepares the delivery order and delivers the goods to the party concerned.
The person receiving the goods then signs the delivery order in token of receipt and the signed order is sent to Dwarkadas & Company who, after making the necessary entries in their books, return the order to the Mills office.
It will be seen that the first appellant has no direct dealing, with the purchaser.
It acts through Dwarkadas & Company in every case.
829 It will now be necessary to trace the history of the two consignments relating to the 13 bales and the 6 bales separately.
We will deal with the 13 bales first.
The quota holder in respect of the 13 bales was Shree Kishan & Company.
This firm was an up country firm and so it was necessary for it to appoint a local agent in Bombay for making payments and receiving delivery.
There was some confusion about the agent so appointed; at first one Dharsi Moolji was appointed and then P. C. Vora.
The letter informing the first appellant that Dharsi Moolji bad been appointed is not on record but we were told at the Bar that it is not disputed that I the letter is dated 7th February, 1947.
In any case, Dharsi Moolji wrote to the first appellant on 20th February, 1947, saying that he had been authorised to take delivery of the January quota on behalf of Messrs. Shree Kishan & Company and on 21 st February, 1947, he paid Dwarkadas Khetan & Company a sum of Rs. 14,000 for this quota.
A receipt and an entry in Dwarkadas ' books evidence the payment.
The same day Dwarkadas Khetan wrote to the first appellant telling it that his firm had received payment in advance from Shree Kishan & Company and that the 13 bales should be sent to "our godown ", Whether the " our " refers to Dwarkadas ' godown or to a godown jointly shared between Dwarkadas and the first appellant is not clear.
The learned High Court Judges hold that the godown belonged to the first appellant, but that, in our opinion, is not very material for reasons we shall give later.
On receipt of this " advice slip " the first appellant prepared what it has called a " ready sale note " on the same.
day, 21st February, 1947, authorising the purchaser to take delivery within a week.
Dharsi Moolji was named as the Commission Agent.
(The man now entered is Prataprai Chunilal, that is, P. C. Vora, but the original name was Dharsi Moolji.
The change was made for reasons which will presently appear).
830 In pursuance of all this, the first appellant dispatched the 13 bales on 28th February, 1947, and sent them to Dharsi Moolji.
But in the meanwhile other events had taken place.
One P. C. Vora wrote to the first appellant on 17th February, 1947, and said that he had been authorised to take possession of these 13 bales.
What had happened in the meanwhile was that the, quota holder Shree Kishan & Company had changed its local agent.
Accordingly, when the goods reached Dharsi Moolji he refused to take delivery.
The selling agent Dwarkadas thereupon telephoned the first appellant.
He explained that he had actually, received the money for the bales from Dharsi Moolji and had not received anything from P. C. Vora and so could not deliver the goods to the latter and equally could not accept money from P. C. Vora until the matter had been straightened out with Dharsi Moolji.
The first appellant thereupon told Dwarkadas to keep the goods in the Dady Seth godown.
On the same day, apparently before all this occurred, the first appellant credited Dwarkadas Khetan with the money he had received from Dharsi Moolji on account of the 13 bales, less Dwarkadas ' commission.
In other words, this adjustment in the accounts was the equivalent of payment for the 13 bales by Dwarkadas Khetan to the first appellant on account of the purchaser Shree Kisban & Company.
It will be remembered that Dwarkadas Khetan & Company were the sole selling agents and they alone were responsible to the Mills for orders ' which. were placed through them.
The muddle between Dharsi Moolji and P. C. Vora was cleared up between 3rd March, 1947, and 14th March, 1947.
On 3rd March, 1947, Dwarkadas Khetan returned the Rs. 14,000 which Dharsi Moolji had paid and on 14th March, 1947, accepted the money from P. C. Vora.
The alteration in the "ready sale note" of 21st February, 1947, was presumably made because of these facts.
Four days later, Dwarkadas Khetan delivered the goods to P. C. Vora.
(There was no need to make any alterations in the first 831 appellant 's account books because Dwarkadas was responsible for the price whatever happened between him and Dharsi and also because in any event the.
goods were sold to Shree Kishan: the only query at that time was who was his agent to accept delivery for him).
The return with which we are concerned was made on 10th March, 1947.
It will be seen from the above that the position at that date was as follows: (1) the selling, agent bad informed the first appellant that he had effected a sale, (2) the selling agent had paid the first appellant for the goods, (3) specific bales had been set aside and appropriated to the sale and consequently the property in the goods had passed, (4) the goods had actually left the Mills ' premises, and (5) they were in the Dady Seth godown under the control of Dwarkadas Khetan.
We say the goods were under the control of Dwarkadas Khetan for three reasons: (1) as shown above, the property in the goods had passed and so the, first appellant no longer had title to them, (2) Dwarkadas says that until be received the money for them from P. C. Vora he would have refused to deliver them, (3).
being a del credere agent he would have been within his rights (a) to refuse delivery to anybody till he was paid and (b) to deliver them despite anything the first appellant might say once he received his money; also because Dwarkadas ' Mehtaji says "If the goods are not, accepted by the merchants or their agents, the same are sent to us and we keep them in the godown.
" Bearing these facts in mind, we will now examine the offending document.
It is a printed form.
The heading is " Manufacturer 's Returns showing detail% of delivery to quota holders or other8 of civil cloth.
" Then there is a note as follows : " IMPORTANT: This form should be completed in accordance with the instructions printed overleaf. giving full details relating to the previous month, 832 Under that is the following "All stocks pledged/hypothecated by manufacturers with banks or others shall be included in this statement.
" The only column in the printed form which could be related to this is column 3 headed " Full name and address of person to whom delivered.
" On the back there are the following instructions: "II.
The word I others ' in the heading of the form includes artificers who are privileged to purchase cloth under General Permission No. TCS 42 / 1, dated 10th August, 1944, and any person to whom deliveries are made under any other General or Special Permission or Order of the Textile Commissioner.
The name of artificers or any other persons shall be 'mentioned in column 3 and against their names, number and date of General or Special Permission shall be mentioned in column 2.
By 'delivered ' or 'delivery 'ismeantphysical delivery of cloth in bales or in pieces but not cloth which, though paid for, is still in the physical possession of the seller.
" The form was filled in as follows : In the column headed 11 Full name and address of quota holder " the name of ShreeKishan & Company is entered.
In the column headed Full name and address of person to whom delivered the name of Dwarkadas Khetan & Company is entered.
The question we,have to decide is whether these two entries are inaccurate.
Dealing first with the learned Solicitor 'General 's argument regarding the construction of the words used in the form, we are of opinion that it cannot be accepted.
The second clause of the portion marked "Important" towards the head of the form states that all stocks pledged or hypothecated with banks or others must also be included, and Instruction No. II on the back directs that the names of "any other person" must be entered in column 3 and that the number and date of the General or Special Permission must be set out in column 2, Whether this means that goods 833 cannot be pledged without permission or that only goods allotted to quota holders can be pledged we do not know, but whatever it means, it is clear that the entry in column 3 is not intended to be confined to quota holders or their agents but means what it says, namely the person to whom physical delivery of the goods has been made whoever he may be.
The only question therefore is whether there was physical delivery to Dwarkadas Khetan.
In one sense, there can be no doubt about that.
The goods left the Mills ' premises, the property in them had passed and when Dharsi Moolji refused to receive them they were handed over to Dwarkadas Khetan and not taken back to the Mills.
Dwarkadas Khetan asked the Mills what he should do with them, and in the end he placed them in the Dady Seth godown.
In any ordinary understanding of the term it would be clear that the goods had been physically delivered to Dwarkadas Khetan.
But the learned High Court Judges do not appear to have concerned themselves with the question of actual physical possession because they say: "It would not be true to say, and the record amply bears it out, that this godown belonged to Dwarkadas Khetan.
Even if Dwarkadas Khetan had control over the godown, the control was exercised on behalf of and as the agent of the Mills.
" Therefore, the test of the sort of possession which they had in mind was not the control over the goods.
But that has always been regarded as one of the tests of physical or de facto possession.
Lancelot Hall distinguishing between possession in law and possession in fact says that "possession in the popular sense denotes a state of fact of exclusive physical control".
See his treatise on Possessory Liens in English Law, page 2.
See also Pollock and Wright in their Essay on Possession in the Common Law, page 119.
Drawing the same distinction they say that "physical possession" may be generally described by stating that 108 834 "when a person is in such a relation to a thing that, so far as regards the thing, he can assume, exercise or resume manual control of it at pleasure, and so far as regards other persons, the thing is under the protection of his personal presence, or in or on a house or land occupied by him, or in some receptacle belonging to him and under his control.
" This would seem exactly to meet the case of Dwarkadas Khetan.
Possession is an ambiguous term.
The law books divide its concept into two broad categories, (1) physical possession or possession in fact and (2) legal possession which need not coincide with possession in fact.
The offending form with which we are concerned draws the same broad line.
But even on the factual side of the border niceties creep in and so the possession of a servant is called custody rather than possession.
But what of an agent ? If a man lives abroad over a period of years and leaves his house and furniture in charge of an agent who has the keys of the house and immedi ate access to and physical control over the furniture, it would be difficult to say that the agent was not in physical possession.
It is true the legal possession would continue to reside in the owner but the actual physical possession would surely be that of the agent.
And so with a del credere agent, because such a person is the agent of the seller only up to a point.
Beyond that he is either a principal or an agent of the buyer.
This distinction was discussed by one of us in the Nagpur High Court in Kalyanji Kuwarji vs Tirkaram Sheolal(1) and was accepted by the Madras High Court in Kandula Radhakrishna Rao vs The Province of Madras(2).
But we need not go into all this.
Here is an Order which is to affect the business of hundreds of persons, many of whom are small petty merchants and traders, the sort of meni who would not have lawyers constantly at their elbow; and even if they did, the more learned their advisers were in the law the more puzzled (1) A.I.R. 1938 Nag.
(2) 835 they would be as to what advice to give,for it is not till one is learned in the law that subtleties of thought and bewilderment arise at the meaning of plain English words which any ordinary man of average intelligence, not versed in the law, would have no difficulty in understanding.
In a penal statute of this kind it is our duty to interpret words of ambiguous meaning in a broad and liberal sense so that they will not become traps for honest, unlearned (in the law) and unwary men.
If there is honest and substantial compliance with an array of puzzling directions, that should be enough even if on some hypercritical view of the law other ingenious meanings can be devised.
In our opinion, Dwarkadas Khetan could, in the circumstances given above, be described, without any straining of language, as the person to whom the goods were actually delivered.
It follows the conviction on this count cannot stand.
We would like to add that in any event, even if ultra technical notions regarding the concept of possession were to be incorporated into the case, it would be wrong to say that there had been anything beyond a technical and unintentional breach of the law.
The facts are truly and accurately given according to the popular and natural meaning of the words used; nothing was hidden.
The goods did reach the quotaholder in the end, or rather his proper agent, and we cannot see what anyone could stand to gain in an unauthorised way over the very natural mistake which occurred owing to what seems to have been a time lag in the consequences of a change of agency.
So, even if there was a technical breach of the law, it was not one which called for the severe strictures which are to be found in the trial court 's judgment and certainly not for the savage sentences which the learned Magistrate imposed.
In the High Court also we feel a nominal fine would have met the ends of justice even on the view the learned Judges took of the law.
The charge on the second count relating to the 6 bales is a similar one and the facts follow the same pattern.
They have been detailed in the High Court 's 836 judgment, so it is not necessary to do more than outline them here.
The quota holder here is Beharilal Bairathi.
In this case also, Dharsi Moolji paid Dwarkadas Khetan for the goods and the Mills sent the bales to Dharsi Moolji for delivery in the same truck as the 13 bales.
Dharsi Moolji refused to accept these bales also, so they were deposited in the Dady Seth godown along with the other thirteen.
Dwarkadas Khetan & Company has been entered as the person to whom delivery was made.
For the reasons given above, we hold that this was a true and accurate return.
The appeal is allowed.
The conviction and sentence in each of the four cases is set aside.
The fines, if paid, will be refunded.
Appeal allowed.
Agent for appellants Nos. 1, 2 & 4: Rajinder Narain.
Agent for appellant No. 3: Ganpat Rai.

dataset_name: IN-Abs

summary:
A Government Notification issued under the Essential Sup plies Act, 1946, required every manufacturer to submit "true and accurate information relating to his undertakings" and a note of the printed form stated that "by 'delivered ' or 'delivery ' is mean physical delivery of cloth in bales and pieces but not cloth which though paid for, is still in the physical possession of the seller.
The appellant Mills were manufacturers of cloth and D.K. & Co. were their sole del credere, selling agents who guaranteed payment to the appellant of the price of all sales made and, on the other side, guaranteed delivery to the purchasers with whom they dealt direct.
One D.M. informed the Mills as the agent of an up country quota holder that he bad been authorised by the latter to take delivery of 13 bales and on this account paid Rs. 14,000 to D.K. & Co. D.K. & Co. wrote to the Mills that they bad received payment.
The Mills dispatched the goods to D.M. but meanwhile the quota.
holder had changed his agent and D.M. refused to take delivery.
The Mills credited the money which had been received from D.M. to D.K. godown till the question of delivery was settled.
In a return submitted under the Essential Supplies Act 1946, these 13 bales were shown &a "delivered" to D. K. & Co. The appellants were prosecuted and convicted on the ground that physical delivery was not given to D.K. & Co. and the return, was not therefore true and accurate: Held, that, as the goods had left the Mill premises, the price had been paid and the property in them had passed and as they were in a godown under the control of D. K. & Co., D. K. & Co. were in the circumstances, the persons to whom the goods were actually delivered, and the conviction was illegal.
A del credere agent is an agent of the seller only up to a point.
Beyond that he is either a principal or an agent of the buyer.


judgement:
Appeal No. 597 of 1961.
Appeal from the judgment and order dated July 3, 1959, of the Bombay High Court in 1.
T. Reference No. 45 of 1958.
A. V. Viswanatha Sastri, N. A. Palkhivala, J. B. Daduchanji, O. C. Mathur and Ravinder Narain, for the appellant.
K.N. Rajagopal Sastri and R. N. Sachthey, for the respondent.
December 4.
The judgment of Das, Kapur and Hidayatullah, jj., was delivered by Das, J.
The judgment of Sarkar and Dayal, jj., was delivered by Sarkar, J. 670 S.K. DAs, J. This is an appeal on a certificate of fitness granted by the High Court of Bombay under section 66.A(2) of the Indian Income tax Act, 1922.
The short facts giving rise to the appeal are these.
The original assessee was Purshottamdas Thakurdas, a well known businessman of Bombay.
He died sometime after the proceedings in the High Court had terminated and the appellants herein are his legal representatives.
As nothing turns upon the distinction between the assessee an& his legal representatives in this case, we shall ignore it for the purpose of this judgment.
By a notice issued under section 18 A(1) of the Act the Income tax Officer concerned required the assessee to make advance payment of tax in respect of the assessment year 1947 1948.
On September 15, 1946, the assessee submitted an estimate of his income under sub s, (2) of section 18 A.
In this estimate the assessee showed his total income at Rs. 4,64,000/ .
He deducted the sum of Rs. 3,64,000/ , stated to be his dividend income, on the ground that section 18 of the Act applied to such income.
After claiming credit for Rs. 10,000/ on the ground of double taxation relief, the assessee estimated the advance tax payable by him at Rs. 2,67,752/ .
The Income tax Officer took the view that under section 18 A(2) of the Act the assessee was bound to include in his estimate, and to pay advance super tax on, his dividend income.
Since that was not done and the advance tax paid was less than eighty per cent of the tax determined on the basis of the regular assessment, he levied penal interest on the assessee under sub section
(6) of section 18 A of the Act in respect of the super tax payable on the dividend income.
There was an appeal to the Appellate Assistant Commissioner who confirmed the view of the Income tax Officer.
On a further appeal, the Appellate Tribunal held by its order dated October 25, 1957, that sub section
(6) of section 18 A did not apply to dividend income and the assessee was not 671 liable to pay penal interest in respect of the dividend income.
The Commissioner of Income tax, Bombay City, respondent before us, moved the Appellate Tribunal to state a case to the High Court of Bombay on the following question of law which arose out of the Tribunal 's order : "Whether on the facts and circumstances of the case, the assessee is liable to pay interest in respect of dividend income as provided under section 18 A(6) of the Income tax Act The Tribunal stated a case on the aforesaid question and the reference made by the Tribunal was dealt with by a Division Bench of the High Court of Bombay by its judgment dated July 3, 1959.
The question framed by the Tribunal was slightly altered by the High Court , but the alteration made is not material for our purpose.
Mr. justice J. C. Shah came to the conclusion that dividend income was not income in respect of which section 18 made any provision " 'for deduction of income tax at the time of payment" within the meaning of sub section
(1) of section 18 A and though the phraseology used in sub section
(6) of s.18A was slightly different from the phraseology used in sub section (1) of section 18 A, the two sub sections substantially had the same meaning.
Accordingly, he answered the question in the affirmative and against the assessee.
Mr. justice section T. Desai also gave the same answer to the question, though he reached a somewhat different conclusion.
He held that on a proper construction of sub section
(6) of section 18 A an assessee was liable to pay interest in respect of tax on dividend income to the extent that sub section
(5) of section 18 did not apply to the same.
He said "An assessee who is called upon to make advance payment of tax under section 18 A (1) may under sub section
(2) of that section pay such amount as accords with his own estimate, If he 672 excludes the amount of super tax on dividend income from his estimate he takes the risk of the application of the ratio of eighty per cent resulting in a shortfall and he would have to pay interest "upon the amount by which the tax so paid falls short of the said eighty per cent.
" The eighty per cent would be of the amount of tax determined on the basis of the regular assessment.
so far as such tax relates to income to which the provisions of section 18 do not apply.
The provisions of section 18(5) as I have already pointed out do not apply to super tax and the amount of super tax on the dividend income must be included and taken into consideration in the computation necessary for the purpose of fixing the quantum of tax to which the ratio of eighty per cent is to be applied.
I would, therefore, answer the question as framed by us in the affirmative.
" The assessee then moved the High Court for a certificate of fitness and having obtained such certificate preferred this appeal to this court.
On behalf of the assessee, the contention is that the answer given by the High Court to the question referred to it is not correct and this contention is based on two grounds.
The first ground is that on a proper construction of sub section
(2) of section 16, sub section
(5) of section 18 and section 49 B of the Act, dividend income is income in respect of which provision is made under section 18 for " 'deduction of income tax at the time of payment" and therefore section 18 A is not attracted to it.
The second ground which has been taken in the alternative is that sub section
(6) of section 18 A clearly states that where in any year an assessee has paid tax under sub section
(2) on the basis of his own estimate and the tax so paid is less than eighty per cent of the tax determined on the basis of the regular assessment, so far as such tax relates to income 673 to which the provisions of section 18 do not apply, simple interest at the rate of; six per cent per annum etc.
shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent, It is submitted that thephraseology used in sub.
section (6) of section 18 A is "to whichthe provisions of section 18 do not apply.
Thealternative argument is that sub section
(5) of section 18 is undoubtedly a provision which applies to dividend income and therefore under sub section
(6) of section 18 A the assessee was not liable to pay penal interest by his failure to pay advance tax On that head of income.
Put differently, the alternative argument is that sub section
(6) of section 18 A refers to a category of income wider than what is referred to in sub section (1) of section 18 A and if there is some provision in section 18 relating to a head of income, namely, dividend income, (though that provision may not amount to deduction of income tax at the time of payment '), failure to pay advance tax on that head of account will not attract the penal provisions of sub section
(6) of section 18 A.
We proceed now to consider these two arguments advanced on behalf of the appellants and the replies thereto on behalf of the respondent.
First as to the argument that on a, proper construction of sub section
(2) of section 16, sub section
(5) of section 1 8 and section 49 B of the Act, dividend income is income in respect of which provision is made under section 18 for "deduction of income tax at the time of payment.
" To appreciate this argument it is necessary first to refer to the scheme of sections 18 and 18 A of the Act.
Under the Indian Income tax Act 1922, tax is assessed and paid in the succeeding year upon the results of the previous year of account.
The legislature has by enactings.
18 A, made a provision for imposing a liability uponthe tax payers who had been previously assessedand even upon those who had not been so assessedto make advance payment of 674 tax in respect of income, exceeding a certain amount, for which provision is not made under section 18 for deduction of tax at the time of payment.
Sections 18 and 18 A between themselves exhaust all categories of taxable income.
The Act provides for two modes of collecting taxes . direct levy and levy by deduction at the source.
The ordinary method of collection is direct collection of the tax from the assessee which is dealt with by.
sections
,19, 45 and 46.
Deduction of tax at the source is provided for only in certain specified cases mentioned in section 18.
Sub section
(2) of section 18 relates to salaries and makes the, person responsible for paying any income chargeable under the head salaries" to make deduction of income tax and super tax on the amount payable at a rate representing the average of the rates applicable to the estimated total income of the assessee under that head.
Sub section
(3) relates to interest on securities and makes the person responsible for paying any income chargeableunder the head ",,interest on securities". unless otherwise prescribed in the case of any security of the Central Government, to deduct at the time of payment income tax but not super tax on the amount of interest payable at the maximum rate.
Sub sections
(3 A) to (3 E) relate to certain other cases which are not very material for our purpose.
We need not therefore refer to those sub sections.
section (4) of section 18 says that all sums deducted in accordance with the provisions of this section shall, for purposes of computing the income of an assessee, be deemed to be income received.
Then there is sub section
(5) which in so far as it is relevant for our purpose is in these terms "Any deduction made and paid to the account of the Central Government in accordance with the provisions of this section and any sum which a dividend has been increased under sub section (2) of section 16 shall be treated as a payment of income. tax or super tax on behalf 675 of the person from whose income the deduction was made, or of the owner of the security or of the shareholder, as the case may be, and credit shall be given to him therefor on the production of the certificate, furnished under subsection (9) or section 30, as the case may be in the assessment, if any, made for the following year under,this Act Provided that, if such person or such owner obtains, in accordance with the provisions of this Act, a refund of any portion of the tax so deducted, no credit shall be given for the amount of such refund: xx xx xx xx xx xx xx xx Put briefly, the scheme of section 18 is to provide for deduction of income tax at the source in respect of certain categories of income.
With regard to two of the categories, namely, ""salaries" and "interest on securities, there is no difficult.
The difficulty arises with regard to the category of income, referred.
to in sub s.(5) of s.18,: namely, dividend income, and to this difficulty we shall come later.
S.18 A which was inserted in 1944 deals with advance payment of tax.
It was introduced as a war measure probably to combat inflation, but, like many other innovations in taxation legislation it has outlived the exigency which necessitated it.
The section applies to those assessees whose total income in the latest assessment, and also to those hitherto unassessed whose total income of the previous year, exceeded by a certain sum the maximum amount not chargeable to tax.
The section attempts to reconcile the principle of advance payment of tax with the ,scheme of the Act which is to tax the income of the previous year.
The basis of the section is the 676 principle of ""pay as you earn that is, paying tax 'by instalments in respect of the income of the very year in which the tax is paid.
Sub.s.
(1) provides for the payment of tax in respect of the income of " the latest previous year" while under sub.s.
(II) the tax so paid is treated as having been paid in respect of the income of the year of payment and credit therefore is given to the assessee in the regular assessment made in the next financial year.
The 'advance" payment 'of taxis only provisional, and if after the regular assessment is made the tax paid in advance is found to be in excess of the tax payable, the assessee would be entitled to a refund of such excess.
Further, it is worthy of note that the provision for advance payment of tax under section 18 A is only in respect of income from which the tax is not deductible at the source, under section 18.
Where the tax is deductible at the source, that in itself amounts to advance payment of tax and therefore such income is left out of the purview of the section.
Sub section
(2) of section 18 A enables an assessee to make his own estimate if in his opinion, the income of the year is likely to be less than that on which he has been asked to make advance payment of tax ' in accordance with the provisions contained in sub section
Sub section
(6) of section 18 A so far as it is material for our purpose is in these terms "Where in any year an assessee has paid tax under sub section (2) or sub section (3) on the basis of his own estimate, and the tax so paid is less than eighty per cent of the tax determined on the basis of the regular assessment, so far as such tax relates to income to which the provisions of section 18 do not apply and so far as it it not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made, simple interest at the rate of six per cent per annum from the 1st day of January in the financial 677 year in which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent xx xx xx xx xx xx xx xx XX.
It provides for cases where the assesee 's estimate turns out to be too low and it lays down inter alia that where an, assessee has paid advance tax under sub section
(2) and the amount so paid is less than eighty per cent of the final assessment of his income for the particular year, he is liable to pay interest at six per cent.
There is however the necessary qualification that this is in the context of "income to which the provisions of section 18 do not apply. " ' Having regard to the scheme of sections 18 and 18A explained above, the first question before us is this: can it be said that sub section
(5) of section 18 in its true scope and effect treats dividend income as income from which a deduction of income tax has been made at the time of payment of the dividend ? The contention on behalf of the assessee is that sub section
(5) of section 18 read with sub section
(2) of section 16 and section 49 B has that 'effect.
The argument on behalf of the respondent is that it has not that effect.
In our opinion the contention urged on behalf of the assessee is correct.
Sub.s.
(2) of section 16 declares in the first part thereof that any dividend shall be deemed to be income of the year in which it is paid etc.
regardless of the question as, to when the profits out of which the dividend is paid were earned.
A shareholder 's right to dividend arises upon its declaration.
Under the second part of the sub section, the net dividend paid to the shareholder is to be ",grossed up" before in.
, clusion in the shareholder 's total income, by adding 678 thereto the amount of income tax paid by the company.
In general law the company is chargeable to tax on its profits as a distinct taxable entity and it pays the tax in discharge of its own liability and not on behalf of or as agent for its shareholder .
This aspect of the matter has been rightly emphasised by learned counsel for the respondent in his reply.
While it is true that the company pays its own tax, a legal fiction is introduced by section 49 B of the Act.
Under that section when a dividend is paid to a shareholder by a company which is assessed to tax, the income tax (but not super tax) in respect of such dividend is deemed to have been paid by the shareholder himself Since the income tax in respect of the dividend is deemed under section 49 B to have by been paid by the shareholder himself on his own income, though in reality it was tax paid by the company in discharge of its own liability, credit is given therefore to the share.
holder in the assessment, under sub section
(5) of section 18.
He is not liable to pay income tax again in respect of the dividend and may claim a refund under section 48, if the maximum rate of income tax, which is applicable to companies, is not applicable to him The combined effect of sub section
(2) of section 16, section 49B and sub section
(5) of section 18 is that the tax free dividend is not really a dividend of the amount received, but a dividend of a larger sum less the tax thereon, and as in the case of tax free salaries and tax free securities, it is the gross amount which is included in the shareholder 's total income, because the income tax paid by the company remains part of the income derived from the shareholding.
If this be the true effect of the section referred to above, then section 18 in sub section
(5) does provide " 'for deduction of income tax at the time of payment" within the meaning of that clause in sub section
(1) of section 18 A. Learned counsel for the respondent has, however, drawn our attention to that part of subs.
(5) of section IS which refers to ',any deduction made and paid to 679 the account of the Central Government in accordance with the provisions of this section" and "any sum by which a dividend has been increased under sub section
(2) of section 16.
" His argument is that the sub section talks of two different matters : one is deduction of tax referred to in the earlier sub sections and the other is addition of a sum to the dividend.
These two, according to learned counsel, stand on a different footing; one is in reality " 'deduction of income tax at the time of payment" and the other, namely, the sum added to dividend income under sub section
(2) of section 16, is not really " 'deduction of income tax at the time of payment" but is included in the sub section merely for the purpose of giving credit to the shareholder for the amount which has been added to his dividend.
We are of opinion that this line of argument does not give full effect to the legal fiction created by section 49 B under which the tax paid by the company is deemed to have been paid by the shareholder himself in respect of his dividend income grossed up under sub section
(2) of section 16.
If the shareholder is deemed to have paid the tax himself at the time when the company.paid the dividend, we do not see why this payment is not " 'deduction of income tax at the time of payment" within the meaning of that clause in sub section
(1) of section 18A. Deduction at the source is only a mode of collecting tax from the person from whose income the deduction is made .
The tax paid by the company at the time of payment of the dividend is treated as part of the income of the shareholder and the gross amount has to be included in his total income; on the same principle, the tax deducted at the source and paid to the Government is treated as having been paid by the shareholder himself.
In this view of the matter, sub section
(5) merely works out the principle of sub section
(41 of section 18, namely, that all sums deducted in accordance with the provisions of the section shall, for the purpose of computing the income of an assessee, be deemed to be income received.
680 There was some argument before us as to the omission of the word "shareholder" in the first proviso to sub section
(5) of section 18.
The Amending Act of 1939 which added the reference to the " 'shareholder" in the substantive part of the sub section did not make similar addition to the first two provisos; whether this was an over sight, as one commentator has said, or not is not a matter which need be decided in this case.
We have rested our conclusion on the substantive part of sub section
In the view which we have taken on the main argument urged on behalf of the appellant, section 18 A is not attracted to the dividend income of the assessee in this case.
The assessee was not therefore liable to penal interest under sub section
(6) of section 18 A.
It becomes unnecessary, therefore, to decide this case on the alternative argument presented on behalf of the appellant which is based on the phraseology of sub section
We need only point out that sub section
(6) uses the phraseology "income to which the provisions of section 18 do not apply.
" It is difficult to see how it can be said that sub section (5) of section 18 does not "apply" to dividend income.
It refers to dividend income in express terms.
The argument on behalf of the respondent is that sub section
(6) of section 18A will be unworkable in the matter of dividend income., unless it has the same meaning as in sub section (1).
Learned counsel has relied on two decisions of this court : Commissioner of Income tax vs Teja Singh (1) and Gursahai Saigal vs The Commissioner of Income tax, Punjab (2).
The first decision lays down that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which the fiction can operate. a decision which is really against the respondent on the main argument.
The second decision related to sub section
(8) of section 18 A and proceeded on the rule that it is proper to give a machinery provision an interpretation which makes it workable.
We do not think that sub section
(6) (1) [1959] Supp. 1 S.C.R. 394.
(2) ; 681 of section 18 A will be unworkable, even if it refers to an income wider in category than that referred to in sub section
It is unnecessary, however, to go into this point more elaborately.
Our conclusion is that sub section
(5) of section 18 read with sub section
(2) of section 16 and section 49 B provides for " 'deduction of income tax at the time of payment" in respect of dividend income; therefore, section 18 A does not apply to such income.
We would accordingly allow this appeal, set aside the judgment of the High Court, and answer the question referred to the High Court in the negative and in favour of the assessee: The appellants will be entitled to their costs of this court an in the High Court; SARKAR, J. Under.the Income tax Act, 1922, the usual rule is to charge tax for a year on the income of the previous year.
Section 18A of the Act makes a departure from this usual rule and provides for advance payment of tax, that is, payment of tax on income during the year in which the income is earned.
The question in this appeal is as to the interpretation of certain provisions in section 18A and of a few other sections of the Act.
The contention advanced in this case can be appreciated only after these provisions have been referred to.
Sub section (1) of section 18A states, "In the case of income in respect of which provision is not made under section 18 for deduction of income tax at the time of payment, the Income tax Officer may. . require an assessee to pay quarterly. . . . an amount equal to one quarter of the income tax and super tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed.
" This liability to pay arises only however if the total income of the latest previous year exceeds a certain 682 amount mentioned in the subsection.
Under this sub section, therefore, the amount demanded as payment of tax in advance is calculated on income found in a previous assessment.
Now it may so happen that the assessee thinks that his income for the period for which the demand had been made would be less than his income in that previous assessment.
Sub section (2) provides that in such a case the assessee may "send to the Income tax Officer an estimate of the tax payable by him. . . and shall pay such amount as accords with his estimate in equal instalments. . . .
So under sub s.(2) the assessee is given the liberty to make his own estimate of the tax payable in advance instead of paying according to a previous regular assessment by the revenue authorities.
As in the case of sub section
(1), in making the estimate of the tax under sub section
(2), the assessee is only to take into account income in respect of which provision is not made under section 18 for deduction of income tax at the time of payment.
Sub section (3) provides for the case of an assessee who has never been assessed before but whose total income is likely to exceed the amount upon which tax is payable in advance under sub section
it requires such an assessee to "send to the Income tax Officer an estimate of the tax payable by him on that art of his income to which the provisions of section 18 do not apply", and to pay that amount on certain specified dates.
Here also the assessee makes his own assessment.
Payment of tax in advance under sub sections
(1), (2) or (3) is only provisional and the assessee would be entitled to a refund if on regular assessment after the year it is found that he had paid more than he is liable to pay; or he may be called upon to pay more if he had 'paid less than what is due from him.
As the responsibility for making the assessments under sub sections (2) and (3) is on the assessee, sub section
(6) is intended to provide a machinery whereby the 683 assessee is put under a certain disadvantage if it is found that his estimate is erroneous beyond a certain limit.
This appeal turns largely on this sub section and, so far as relevant, it is in these terms "Where in any year an assessee has paid tax under sub section (2) or sub section (3) on the basis of his own estimate, and the tax so paid is less than eighty percent of the tax determined on the basis of the regular assessment, so far as such tax relates to income to which the provisions of section 18 do not apply. . . . simple interest at the rate of six percent per annum. . . shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent.
" This sub section also prescribes the period for which the interest payable under it is to be calculated but it is not necessary to trouble ourselves with such period in this appeal.
Now, Purshottamdas Thakurdas, the assessee in this case, sent an estimate under sub section
(2) of, section 18A of the tax payable by him in advance in the year 1947 48.
In that estimate he did not include the dividends received on shares held by him.
Upon regular assessment it was found that the tax estimated by him was less than eighty per cent of the regular assessment and on this shortfall he was held liable to pay interest under sub section
(6) of section 18A. The shortfall would not have arisen if the assessee had taken the dividends into account in making the estimate of the tax payable by him.
Against this decision the assessee appealed to the Appellate Assistant Commissioner but his appeal failed.
He then appealed to the Income tax Appellate Tribu nal and was successful there.
Thereafter, at the instance of the respondent Commissioner of Income tax, the Tribunal referred under section 66 (1) of the Act 84 the following questions for the decision of the High Court.
"Whether on the facts and circumstances of the case the assessee is liable to pay interest in respect of dividend income as provided under Section 18A(6) of the Income tax Act?.
The High Court answered the question in the affirmative though the reasons upon which the learned judges constituting the bench deciding the case based themselves were somewhat different.
The assessee has now come to this Court in further appeal.
Pending the appeal here, the assessee died and his legal representatives have been substituted in his place and are the appellants now.
The real question in, this appeal is whether in making an estimate under section 18A (2) of the tax payable by him, the assessee should have taken into account the dividends received by him.
Now, it is not in dispute that in making this estimate only that income "in respect of which provision is not made under section 18 for deduction of income tax at the time of payment" is to be taken into account.
Learned counsel for the appellants contends that dividend is income in respect of which provision is made under section 18 for deduction of income tax at the time of payment.
If this contention is sound, then of course no interest is payable under section 18A (6).
Now, the appellants ' contention was based on sub section
(2) of section 16, sub section
(5) of section 18 and section 49B of the Act.
The first of these, that is, sub section
(2) of section 16, says that for the purpose of inclusion in the total income of an assessee, a dividend shall be deemed to be income of the previous year in which it is paid and shall be increased in a certain manner, and without going into the question of the increase in great detail, which would be unnecessary for the 685 purposes of this case, it would perhaps be right to say that the increase is to be substantially by such amount as would be payable by the company as income tax on the amount of the dividend at the rate applicable to it in the financial year in which the dividend is paid.
Sub section (5) of section 18 provides.
"Any deduction made and paid to the account of the Central Government in accordance with the provisions of this section and any sum by which a dividend has been increased under sub section (2) of section 16 shall be treated as a payment of income tax or super tax on behalf of the person from whose income the deduction was made, or of the owner of the security or of the shareholder, as the case may be, and credit shall be given to him therefor on the production of the certificate furnished under sub section (9) or section 20, as the case may be, in the assessment, if any, made for the following year under this Act;" Lastly, section 49B states that "Where any dividend has been paid. . or deemed to have been paid. to any of the persons specified in Section 3 who is a shareholder. .such person shall, if the dividend is included in his total income, be deemed in respect of such dividend himself to have paid the income tax (exclusive of super tax) of an amount equal to the sum by which the dividend had been increased under sub section (2) of section 16.
" Now, the contention of the learned counsel for the appellants is that as a result of the two provisions last referred to, there is a fictional deduction of tax on dividends which fiction must be given effect to and, therefore, in making an estimate of income under section 18A (2) dividends have to be excluded and 686 they have to be treated in view of the fiction, as income in respect of which tax has been deducted at the time of payment.
We are wholly unable to accept this argument All that the provisions on which the learned counsel for the appellants relies, show is that a shareholder who received dividends on his shares is entitled in his assessment to have a certain sum. paid or payable as tax by the company, treated as paid as tax on his behalf and to require that sum to be deemed to have been paid as tax by himself.
We are not concerned with payment of tax by or on behalf of the assessee.
We are concerned with income, income tax on which has been deducted at the time of payment by the payer of it under section 18.
Payment of tax by the assessee or on his behalf is not deduction of tax on the income by the payer of that income.
We are wholly unable to agree that payment of tax by the assessee, fictional or otherwise, on income received by him is in any sense a deduction of tax under section 19 by the person who pays the income to the assessee.
Clearly there is no deduction as contemplated by section 18.
We do not see that sections 16 (2), 18(5), and 49B require any fiction of a deduction under section 18 to be raised.
Indeed section 18(5) by mentioning expressly and separately "Any deduction made. . . in accordance with. . . . this section" and " 'any sum by which a dividend has been increased under sub section (2) of section 16" shows that these two are different, or, in other words, that the increased amount is not a deduction under section 18.
It is important also to remember that for section 18A(1), (2) and (3) there has to be a deduction under section 18 to exclude a part of the income; deduction under other provisions will not do.
Then again, under section 18(5) an assessee is entitled to credit for the amount to be added to the dividend under section 16(2) as tax paid on his behalf 687 but this only at the time of the assessment, if any. for the following year.
Obviously, there is no question of giving any credit till assessment later, that is to say, later than the time of payment of the dividend to the assessee.
This again shows that dividends are not income in respect of which tax is deducted under section 18 at the time of payment.
We would also point out that if there is no assessment of the assessee, then no tax can be treated as having been paid by him.
The position under section 49B is the same.
If tax is deducted at the source under section 18, it would be deducted in all cases and the deduction would not depend on any assessment.
This is a further reason for saying that dividends are not income on which tax is deducted at the time of payment under section 18.
The appellants then contend that even if dividends are not income from which tax is deducted at the time of payment, still no interest is chargeable in this case under section 18A(6) for another reason.
It was said that in finding out the shortfall under subs.
(6) of section 18A you have to compare the amount of tax paid by an assessee on his own estimate with the amount of tax ascertained on the regular assessment taking into account only that part of the income " 'to which the provisions of section 18 do not apply.
" Hence it is contended that in ascertaining for the purpose of this sub section the tax payable on regular assessment that part of the assessee 's income should be kept out of consideration to which the provisions of section 18 apply.
Then it is pointed out that sub section
(5) of that section applies to income received in the shape of dividends.
Therefore, in finding out the amount of tax payable on regular assessment under sub section
(6) of section 18A, dividends have to be kept out of account and if that is done, then the shortfall would disappear.
It is true that if the dividends were excluded from the regular assessment as also the estimate, then there would be no shortfall.
688 Now, it seems to us that this argument is fallacious.
The words are ""tax determined on the basis of the regular assessment, so far as such tax relates to income to which the provisions of section 18 do not apply".
Obviously, these words refer to tax on income of a certain type, namely, income of any one of the different varieties mentioned in any of the provisions in section 18.
Only income of such types is to be left out of consideration for the purpose of making the regular assessment under section 18A (6).
Let us turn to section 18.
It consists of a very large number of sub sections.
Sub section (1) has been omitted.
We may also leave out of consideration sub sections
(2A), (2B), (4) and (6) to (9), for they do not deal with any particular kind of income which has not been dealt with in the other sections.
Each of the rest of the sub sections, excepting sub section
(5), deals with deduction of tax at the source from one particular kind of income.
In some of the cases, both income tax and super tax are deducted while in others, only income tax is deducted.
It is not necessary to discuss this distinction for the purpose of this judgment.
We will now have to refer to the various sub sections dealing with deductions from different kinds of income.
Sub section (2) deals with deduction from salaries, sub section
(3 ) from interest on securities in the case of residents, sub section
(3A) from interest on securities in the case of non residents, sub section
(3B) from interest not being interest on securities or any other sum chargeable under the provisions of this Act in the case of non residents, sub section
(30) from any sum chargeable under this Act other than interest payable to a non resident and sub section
(3D) from dividends payable to nonresidents.
As the section stood at the relevant time, there was no provision in it for deduction of income tax from dividends paid to a resident shareholder.
Indeed, it is because of this that all this argument has arisen.
Sub section (5), it would have been noticed, does not deal with any particular or individual type of income but it deals 689 with all the various kinds of income mentioned earlier as also with dividends payable to a resident.
Therefore, it seems to us that this sub section is not one of those provisions in section 18 which is contemplated in section 18A (6).
It does not particularise any kind of income which has to be kept out of account in considering the amount due on regular assessment under sub section
(6) of section 18A.
It seems to us, therefore, that the words in that subsection now under discussion refer to the provisions of section 18 which specify particular kinds of income and provide for deduction of tax from them.
It is clear that any other view of the matter would produce anomalous results which could not have been intended.
In the view that we have taken on the first contention of the appellants, it is obvious that under sub section
(1) of section 18A dividend income cannot be left out of account for the purpose of calculating tax payable in advance.
Under sub section
(2) the position 'is the same.
Now if sub section
(2) requires dividend income to be taken into account in making an estimate, then how is that requirement to be enforced if interest under sub section
(6) is not made payable on the failure to take dividends into account.
Question of interest under sub section
(6) arises only on regular assessment.
The amount found due on regular assessment can be realised in the usual way but that would not enable the obligation imposed by sub section (2), namely, payment in advance, to be enforced.
On such reading, there would be no effective provision for payment of tax in advance in a case where the assessee makes his own estimate.
That could not have been intended.
It is of interest to note that sub section
(3) contains the same words " 'income to which the provisions of section 18 do not apply".
Now if these words are interpreted in the way suggested by the appellants, then in a case under this sub section dividends need not 690 be included in the income for the purpose of computation of tax payable in advance.
But clearly dividends would be liable to be included in cases where sub section
(1) or (2) applies.
It is impossible to imagine that the legislature could have intended to provide differently for a case coming under sub section
As we have already said, the main purpose of section 18 is to provide for deduction of tax at the source.
Therefore, it is correct to interpret the words " 'income to which provisions of section 18 do not apply" as referring to that type of income in respect of which section 18 provides for deduction of tax at the source.
That fits in also with the scheme of section 18A. If once tax has been deducted, then no question of paying tax on it again in advance or otherwise would arise.
For all these reasons, it seems to us that income contemplated in the words " 'income to which provisions of section 18 do not apply" does not include dividends payable to a resident assessee.
For these reasons we would dismiss the appeal with costs.
By COURT: In accordance with the opinion of the majority, this appeal is allowed with costs.

summary:
The assessee submitted his estimate of income for advance payment of tax under section 18 A, in which he did not include his dividend income.
The Income tax Officer held that under section 18 A(2) the assessee was bound to include in his estimate, and to pay advance super tax, on his dividend income.
Since that was not done and the advance tax paid was less than 800% of the tax determined on regular assessment, he levied penal interest under section 18 A(6) in respect of the super tax payable on the dividend income.
The assessee contended (i) that the dividend income was income in respect of which provision was made under section 18 for "deduction of income tax at the time of payment" and as such section 18 A was not applicable to it, and (ii) that since section 18(5) was applicable to dividend income the penal provisions of section 18 A(6) were not attracted.
Held, (per Das, Kapur and Hidayatullah, jj., Sarkar and Dayal,JJ., dissenting) that section 18(5) read with sections 16(2) and 49 B provided for the deduction 'of income tax at the time of payment" in respect of dividend income and therefore section 18.A did not apply to such income.
A shareholder 's right to the dividend arises upon its declaration.
Under the leg, Al fiction 669 introduced by section 49 B, when dividend is paid to a shareholder 'by a company which is assessed to tax, the income tax (but not super tax) in respect of such dividend is deemed to have been paid by the shareholder himself and credit is given therefore to him under section 18(5).
If the shareholder was deemed to have paid the tax himself at the time when the company paid the dividend, the payment was "deduction of income tax at the time of payment" within the meaning of section 18 A(1).
Per Sarkar and Dayal, JJ The dividend income should have been included in the estimate of income and the penal interest was properly levied on the assessee.
Dividend income is not one on which tax was deducted at the time of payment under section 18.
Payment of tax by the assessee, fictional or otherwise, on income received by him was not a deduction of tax under section 18 by the person who paid the income to the assessee.
for purposes of section 18 A there had to be a deduction under s.18; deduction under other provisions was not relevant.
Under section 18(5) credit for the tax paid by the company was to be given to the shareholder not at the time of payment of the dividend but later at the time of assessment, Further, the provisions of section 18 A(6 ) were applicable in respect of dividend income.
The words "Income to which provisions of section 18 do not apply" in section 18,A(6) refer to that type of income in respect of which section 18 provides for deduction of tax at the source and they do not include dividend income.


judgement:
Appeal No. 339/60.
Appeal from the judgment and decree dated November 17, 1955, of the Andhra Pradesh High Court in A. section No. 51/1951.
A. Banganadham Chetty, A. V. Rangam, A. Vedavalli and K. R. Chaudhri.
for the appellants.
B. Ganapathy Iyer, R. Thiagarajan and G. Gopalakrishnan, for the respondent No. I. 1962.
December 12.
The judgment of ' the Court was delivered by 997 MUDHOLKAR, J. This is an appeal by a certificate granted by the High Court of Andhra Pradesh under article 133 (1) (a) of the Constitution.
The relevant facts arc these The plaintiff respondent Ramaswamy & Co who carry on business in tobacco at Guntur instituted a suit against the appellant firm which also carries on similar business at that place and its alleged partners Kurapati Venkata Mallayya and Mittapalli Abbayya, for the recovery of the price of 112 bales of DB tobacco strips (hereafter referred to as DB strips) sold to them on June 5, 1946, amounting to Rs. 14,099/ and interest thereon from the date of purchase to the date of suit.
In addition, the respondent firm claimed interest from the date of suit to the date of realization.
It is the respondent firm 's case that the tobacco weighed 28,196 pounds and that the appellant firm purchased it by agreeing to pay its price at 8 annas per pound.
Further according to the respondent firm the appellant firm agreed to pay interest on the amount at 9% per annum.
The appellant firm denied having purchased 112 bales of tobacco from the respondent firm and denied also having agreed to pay its price at annas per pound or at any other rate.
They also denied the existence of any agreement to pay any interest.
According to the appellant firm in May, 1946 it secured a contract to supply to the Russian Government 3,000 bales of inferior tobacco at the rate of 8 annas per pound.
One Kottamasu Venkateswarlu (who was distantly 'related to the partners of the appellant firm) was managing partner of the respondent firm.
This firm had some inferior tobacco and Venketashswarlu pressed the appellant firm to take over 112 bales of the tobacco from it and tender them towar ds the contract with the Russian Government saying that the appellent firm may deduct one 998 anna per pound from the price received from the Russian Government towards their expenses and commission.
The appellant firm had reluctantly agreed to this request and despatched 97 out of the 112 bales to Kakinada after getting Agmark certificate with respect to them, with the assistance of Venkateswarlu The representative of the Russian Government, however, rejected the goods on the ground that they were of inferior quality.
Five bales out of these 97 bales were rejected by the Agmark authorities after re inspection of the goods at Kakinada.
Those bales were returned to Guntur along with other rejected bales which belonged to the appellant firm but they were consumed in an accidental fire in the godown of the a pellant firm.
The remaining 92 bales are said to be apeal lying with the shipping agent at Kakinada and that as the tobacco is of very poor quality no purchaser had yet been found for it.
Fifteen bales out of the 112 bales which had not been sent to Kakinada got damaged and had to be rebaled.
As a result of the rebaling they were reduced to ten bales and these are still lying with the appellant firm, which the appellantfirm was willing to return to the respondent firm on its paying the godown charges.
Thus, the main defence of the appellant firm is that it never purchased 112 bales of tobacco from the respondent firm and, therefore, the respondent firm could not sue it for the price of those bales.
It may be mentioned that before the institution of the suit a Receiver had been appointed in another suit for realization of the debts due to the 'respondent firm The court before which the suit was pending had made an order on June 22, 1949 permitting the ]Receiver to collect the debts due to the respondentfirm.
In pursuance of this order the Receiver Suryanarayana instituted the suit out of which this appeal arises, describing himself thus in the plaint: " 'I, Suryanarayana Garu, Receiver appointed 'in O.S. 999 275 of 1948 on the file of the District Munsif 's Court, Guntur".
The appellant firm contended that the suit was untenable because a Receiver has no right to institute a suit in his own name and further that the Receiver had not been expressly authorised by the court to institute the suit in question.
The appellantfirm also contended that the suit was barred by time.
It specifically contended that the respondent firm was not entitled either to the alleged price or to any interest.
The appellant firm further contended that Mittapalli Abbayya ceased to be a Partner of the firm since the vear 1942 because as a result of a partition between Abbayya and his son ., Abbayya 's interest in the appellant firm fell to the share of one of his sons, Kotilingam.
In consequence of the plea taken by the appellant firm that the suit was not tenable the respondentfirm amended the plaint with the leave of the court on December 27, 1949 by describing the plaintiff as ""Messrs. Thondepu Ramaswami & Co., represented by Suryanarayana Garu receiver appointed in O.S. 275 of 1948 on the file of the District Munsif 's Court, Guntur" in place of the original "I. Suryanarayana Garu, Receiver appointed in O.S. 275 of 1948 on the file of the District Munsif 's Court, Guntur".
Thereupon the appellant firm filed an amended written statement in which it contended that the amendment was made long after the period of limitation and that it does not cure the initial defect in the suit of having been filed by a person other than the one who was entitled to institute a suit and that consequently the suit was barred by limita.
The trial court held that the respondent firm had established the contract alleged by it but that it had not established that the appellant firm had agreed to pay the price at the rate of 8 annas per pound.
It, however, held that the price of tobacco 1000 was Rs. 5,639 3 0, but it, dismissed the suit on the ground that I, Suryanarayana was not entitled to institute a suit in his capacity as Receiver in 0.
section 275 of 1948, that the amendment of the plaint was made beyond the period of limitation and that, therefore, the suit was barred by time.
In appeal the High Court held that the Receiver was entitled to institute the suit having been authorised by the court to collect the debts of T. Ramaswami & Co., that at the most 'there was a misdescription of the plaintiff firm in the cause title of the suit which could be corrected any time and that consequently the suit was within time.
It further held that the price of tobacco agreed to between the parties was 8 annas per pound and that the plaintiff was entitled to a decree for Rs. 14,098/ and interest at 6% p.a. from the date of delivery of the goods till realisation.
The first point urged before us by Mr. Ranganadham Chetty on behalf of the appellant firm is that the High ' Court, as well as the Subordinate judge were in error in holding that the bales in question had been purchased by the appellant firm from the respondent firm.
This, however, is a question of fact and since the two courts below have found against the appellant firm on this point this court would not ordinarily interfere with such a finding.
Mr. Ranganadham Chetty, however, contended on the authority of the decision in Srimati Bibhabati Devi vs Kumur Ramendra Narayan Roy( ') that the practice of the court in appeals by special leave is not a castiron one and that it, would, therefore, be open to this Court to depart from it in, an appropriate case.
The aforesaid decision was referred to by this Court in Srinivas Ram Kumar vs Mahabir Prasad (2 ) and it was pointed out that when the courts below have given concurrent findings on pure questions of fact, this court would not ordinarily interfere with them (1) (1946) L.R. 73 I.A. 246, 259.
(2) (1951] S.C.R 277,281.
1001 and review the evidence for the third time unless there are exceptional circumstances justifying a departure from the normal practice.
Learned counsel contended that this is an unusual case because the reasons given by the High Court for holding that the transaction was a sale are quite different from those given by the trial court and in fact one of the reasons given by the High Court proceeds on a view of an important piece of evidence which is diametrically opposite to that expressed by the trial court.
Mr. Ringanadham 'Chetty pointed out that in support of its claim the respondent firm relied upon two entries in its account books Exs.
A 13 and A 14, that these entries were not relied tin by the trial court, but the High Court has without giving any reason for regarding them as genuine acted upon them.
What the trial court has said in para 14 of its judgment is as follows : " 'In order to establish the sale of 122 bales of flue cured virginia tobacco strips,, Ramaswami relies on certain entries in the account books of his firm.
Exhibit A 13 is the katha on page 27 of the day book of Thondepu Ramaswami & Co., containing an entry in respect of 112 bales weighing 28, 196 pounds at Re 0 8 0 per pound and debiting a sum of Rs. 14,098/ .
The words " 'Re. 0 8 0 per pound" are contai ned in the third line of the entry.
The words "112 bales weighing 28.,196 pounds at Re. 0 8 0 per pound" appear to be written closely.
The sum of Re. 14,098 appears in different ink.
Exhibit A 14 is the katha of the 1st defendant firm found on page 111 of the corresponding, ledger of Thondepu Ramaswami & Co. On 5 6 1964 a sum of Rs. 14,098 was debited in respect of 112 bales of barn tobacco weighing 28 196 pounds at Re. 0 8 0 per pound. ' In the second line of the entry the price therefore (in Telugue) and the debit 1002 of the sum of Rs. 14,098are found.
On 21st August, 1946 interest of Rs. 267 1 9 was added.
Exhibit A 17 is the interest Katha of Messrs. Thoadepu Ramaswami & Co, Exhibit A 16 is the katha at page 41 of the day book of Thondepu Ramaswami & Co. The katha shows that on 21 8 1946 to balancing entries 21 8 1946 two balancing entries for interest of Rs. 267 13 6 were made in the day book.
The entry on the right hand side has been scored out and Ramaswamy has not been able to explain why and under what circumstances the entry happens to be scored out.
The entry on the left hand side however, was not scored out.
The totals do not tally unless the sum of Rs. 267 13 6 is included in the aggegate sum mentioned on the right hand side on page 41.
It has been commented on behalf of the defendants that Ramaswamy himself has no personal knowledge of the entries, that the clerks who made the entries in the account books have not been examined and that Exhibits A 13, A 14 and A 1 6 cannot be relied on in order to come to the conclusion that the transaction relating to 112 bales was a sale and only a sale.
Though Ramaswamy was not present when the entries were made in the several registers of his firm, it is not disputed that the accounts have been maintained in the usual course of business.
" ling with the question of price the trial court has ob served: " 'Much reliance cannot be placed on the rate mentioned in Exhibits A 13 and A 14 and the price has to be determined independently having regard to the fact that the price of tobacco depreciates gradually with its age.
" If will thus be seen that the trial court has not rejected these entries outright but only rejected them in so far as they were intended to establish the price agreed to be paid to the respondent firm.
1003 Dealing with this matter the High Court has observed thus : " 'Exhibit A 13 is the entry in the day book of Thondepu Ramaswami & Co. under date 5 6 1946 wherein a sum of Rs. 14,098 is debited to the defendant firm in respect of 112 bales of tobacco weighing 286196 pounds at 8 annas per pound.
Though the figures "Rs. 14,098" were written in a different ink from the rest of the entry this is not a suspicious circumstance because the rest of the entry which is in the same ink and which is written in a normal manner contains reference to the sale of 28,196 pounds at 8 annas per pound.
The resultant total is entered in the column on the right hand side as Rs. 14,098.
It may be that the figure of Rs. 14 098 was entered a: little later before the accounts for the day were closed.
Exhibit A 14 is the corresponding ledger of Thondepu Ramaswami & Co. and the entries in the day book are duly incorporated in the ledger.
" Then later on the High Court has observed "At the same time the entries in the regularly kept books of the plaintiff firm cannot be thrown overboard particularly when no challenge was made of their genuineness.
" The High Court has also stated : ""It is apparent from Exhibit A 23 that the defendant firm was shown to be a debtor not merely with respect to Rs. 14,098 the price of 28,196 pounds but also in respect of the interest due upon the sum, and the plaintiff firm has paid income tax thereon." toto the High Court has given certain reasons and even though we may not agree with them it cannot be said that there is any unusual circumstance which would warrant our reviewing afresh the evidence on 1004 the point as to whether the transaction in question was a sale or not.
Mr. Ranganadham Chetty next contended that the courts below have not borne in mind the true significance of the words ""no price" occurring in the entry relating to the 112 bales in question in the verification register exhibit A 28.
The Entry reads thus "5 6 46 For 112 bales of Baru tobacco no price at Re. 0 8 0 per pound The entries were in Telugu and the actual words used are and according to Mr. Ranganadham Chetty they mean that there was no sale.
The Courts below, however, which were conversant with the language, have understood the entry to mean "no price" and that is how the ' expression has been translated in the paper book and it is not open to Mr. Ranganadham Chetty to say that the meaning is otherwise than this.
Mr. Chetty then contended that even accepting that the meaning is only " 'no price" the proper inference to be drawn is that there was no transaction of sale and that the rate of 8 annas per pound stated in the entry is given merely for valuing the 112 bales.
That may be so but it does not negative the effect of the other entries which clearly point to the transaction being a sale.
Some point was also sought to be made by Mr. Ranganadham Chetty from the fact that no copy of the transport permit required to be taken for the transfer of excisable articles from one bonded warehouse to another was placed on record.
We fail to see the significance of this because the appellant firm admits that 112 bales of tobacco were actually received by it from the respondent firm.
It will thus be seen that there are no exceptional circumstances or unusual reasons which would induce us to re examine the entire evidence on the point ourselves.
We, therefore, decline to do so.
1005 The next question is whether the suit was in proper form and was within time.
Though the case of section for the suit arose on June 5, 1945, it is admitted before us that the courts were closed on June 5, 1949 and the suit was filed on the day on which they reopened.
It would, therefore, be within time if it was properly constituted on the date on which it was filed.
In Jagat Parini Dasi vs Naba Gopal Chaki (1) which is the leading case on the point it was held by the Calcutta High Court that a court must authorise a Receiver to sue in his own name and a Receiver who is authorised to sue though not expressly in his own name, may do so by virtue of his appointment with full powers under section 503 of the Code of Civil Procedure (Act XIV of 1882).
In coming to this conclusion the learned judges pointed out that though, the object and purpose of the appointment of a Receiver may be generally stated to be the Preservation of the subject matter of the litigation pending judicial determination of the rights of the parties it does not necessarily follow that if he is authorised to sue, he cannot sue in his own name.
Then the learned judges pointed out : ,,Though he is in one sense a custodian of the property of the person, whom in certain respects he is made to supplant, there seems to be no reason why his power should not be held to be co extensive with his functions.
It is clear that he cannot conveniently perform those functions, unless upon the theory that he has sufficient interest in the subject matter committed to him, to enable him to sue in respect thereof by virtue of his office, in his own name.
On the whole, we are disposed to take the view that, although a receiver is not the assignee or beneficial owner of the property entrusted to his care, it is an incomplete and inaccurate statement of his relations to the property to say that (1) Cal.
305. 1006 he is merely its custodian, When a Court has taken property into its own charge and custody for the purpose of administration in accordance with the ultimate rights of the Parties to the litigation, it is in custodia legis.
The title of the property for the time being, and for the purposes of the administration, may, in a sense, be said to be in the Court.
The receiver is appointed for the benefit of all concerned; he is the representative of the Court, and of all Parties interested in the litigation, wherein he is appointed.
He is the rightarm of the Court in exercising the jurisdiction invoked in such cases for administering the property; the Court can only administer through a receiver.
For this reason; all suits to collect obtain possession of the property must be prosecuted by the receiver, and the proceeds received and controlled by him alone.
If the suit has to be nominally prosecuted in the name of the true owners of the property, it is an inconvenient as well as useless form inconvenient, because in many cases, the title of the owners may be the subject matter of the litigation in which the receiver has been appointed useless, because the true owners have no discretion as to the institution of the suit, no control over its management, and no right to the possesion of the proceeds." (pp. 316 317) Later the learned judges pointed out, that for the time being and for the purpose of administration of the assets the real party interested in the litigation is the Receiver and, therefore, there is no reason why the suit could not be instituted in his own name.
The learned Judges then referred to a number of cases in support of their conclusion.
It seems to us that the view of the Calcutta High Court that a Receiver who is appointed with full powers to administer the property which is Custodia legis or 1007 who is expressly authorised by the court to institute a suit for collection of the assets is entitled to institute a suit in his own name provided he does so.
in his capacity as a Receiver.
If any property is in custodia legis the contesting parties cannot deal with it in an manner, and, therefore, there must be some authority competent to deal with it, in the interest of the parties themselves.
A Receiver who is placed in charge of the property on behalf of a court can be the only appropriate person who could do so.
His function cannot be Limited merely to the preservation of the property and it is open to a court if occasion demands, to confer upon him the power to take such steps including instituting suits in the interest of the parties themselves.
Here apparently the Receiver was not a person with full powers but by its order dated June 26, 1949 the, court authorised him to collect debts, particularly as some debts were liable to get barred by time.
The Receiver, therefore, had the right to institute the suit in question.
It is, however, contended that the order does not say specifically that he should institute a suit.
In our opinion, the authority given to the Receiver ",to collect the debts" is wide enough to empower the Receiver to take such legal steps as he thought necessary for collecting the debtsincluding instituting a suit.
The suit as originally instituted, was thus perfectly competent.
The High Court has observed that even assuming that it would have been more appropriate for the Receiver to show in the cause title that it was the firm which was the real plaintiff and that the firm was suing through him it was merely a case of misdescription and that the plaint could be amended at any time for the purpose of showing the correct description of the plaintiffs We agree with the High Court that where there is a case of misdescription of parties it is open to the court to allow an amendment of the plaint at any time and the question of limitation would not arise in such a case.
1008 [His Lordship then dealt with the point regarding the rate of interest.] x x x x x x x x x Accordingly we set aside the decree of the High Court, allow the appeal in part and pass a decree in favour of the respondent firm for Rs. 5,639/3/ with interest at 6 per cent per annum from the date of the transaction till realization.
The respondent firm will proportionate costs throughout from the appellant firm, which would bear its own costs.
Appeal allowed in part.

summary:
A Receiver authorised and appointed by a Court to collect the debts due to the plaintiff respondent instituted a suit against the appellant firm and its alleged partners for the recovery of the price of tobacco and interest thereon.
The right of the receiver to institute a suit in his own name was challenged by the appellant.
Thereupon the respondent firm amended the Plaint by describing the plaintiff as "M/s. T. R. & Co., represented by I. Surayanarayana Garu receiver appoin.
ted in O.S. 275 of 1948 on the file of the District Munsiff 's Court Guntur.
" The appellant firm amended the written statement and contended that the amendment of the plaint was timebarred, that it did not cure the initial defect in the suit and that consequently, the suit was barred by limitation.
The trial court dismissed the suit on the ground that Suryanarayana was not entitled to institute a suit in his capacity as Receiver, that the amendment of the plaint was beyond time and that the suit was therefore time barred.
On appeal the High 996 Court held that the Receiver was entitled to institute the suit, that at the most there was a misdescription of the plaintifffirm in the cause title of the suit which could be corrected any time, that consequently the suit was within time and that the plaintiff was entitled to a decree with interest from the date of delivery of the goods till realization.
Held, that a Receiver invested with full powers to administer the property which is custodia legis or who is expressly authorised by the court to institute a suit for collection of the assets is entitled to institute a suit in his own name provided he does so in his capacity as a Receiver.
His function cannot be limited merely to the preservation of the property and it is open to a court, if occasion demands, to confer upon him the power to take such steps including instituting suits in the interest of the parties themselves.
The suit as originally instituted, was thus perfectly competent.
The High Court rightly held, that where there is a case of misdescription of parties it is open to the court to allow an amendment of the plaint at any time and the question of limitation would not arise in such a case.
Jagat Tarini Dasi vs Naba Gopal Chaki (1907) r. L. R. , relied on.
Held, further that this court does not interfere with the concurrent findings of the courts below on a pure question of fact, unless there are exceptional circumstances or unusual reasons which induce it to re examine the entire evidence.
Srimati Bibhabati Devi vs Kumar Ramendra Narayan Boy, (1946) L. R. 73 1.
A. 246 and Sriniwas Ram Kumar vs Mahabir Prasad, ; , referred to.