judgement:
Appeals Nos. 589 to 590 of 1964.
Appeal by special leave from the judgment and order dated October 12, 13, 1961 of the Bombay High Court in Income tax Reference No. 56 of 1956.
K. N. Rajagopal Sastri, J. B. Dadachanji, for the appellants.
A. V. Viswanatha Sastri, R. Ganapathy Iyer, R. H. Dhebar and R. N. Sachthey, for the respondent.
The appellant held 1000 shares in an investment company styled Home Mehta and Sons Ltd. (hereinafter called 'the Company ') which carried on the business of investing in shares in companies registered in British India and in the former Indian States.
Dividends from the British Indian companies were received by the Company at its registered office at Bombay, and dividends from the Indian States ' companies were received by the Company at its registered office at Billimora in the State of Baroda.
In the calendar years 1948 and 1949 the appellant received at Billimora Rs. 65,000 and Rs. 2,10,000 respectively as dividend in respect of shares held by it in the Company.
The 2nd Income tax Officer, A I Ward, Bombay, upheld the claim of the appellant that its dividend income received from the Company 581 at Billimora had accrued or arisen in the Baroda State and as the income was not brought into British India, it was exempt from liability to tax by virtue of section 14(2)(c) of the Income tax Act.
The Commissioner of Income tax, Bombay held that the income accrued or arose to the appellant in Bombay where the dividend was declared, and was on that account liable to be assessed under the Income tax Act, 1922.
The Commissioner accordingly directed the Income tax Officer to pass orders imposing tax on the dividend income received by the appellant from the Company.
On appeal, the Income tax Appellate Tribunal held that the dividend income accrued or arose at Billimora and not at Bombay, but by reason of the definition of "taxable territories" the income which accrued at Baroda attracted liability to tax under the Income tax Act and did not qualify for rebate under paragraph 6 of the Merged States (Taxation Concessions) Order, 1949.
The following questions were referred by the Tribunal under section 66(1) of the Indian Income tax Act, 1922, to the High Court: of Bombay for its opinion "(1) Whether on the above facts and circumstances of the case the assessee is entitled to rebate equal to the difference between the British Indian rate and Baroda State rate in respect of the dividend income ? (2) Whether on the facts and circumstances of the case the dividend income accrued or arose to the assessee at Bombay ?" The High Court held, following its earlier judgment in Mrs., Kusumben D. Mahadevia, Bombay vs The Commissioner of Income tax, Bombay City, Bombay(1) that the Merged States (Taxation Concessions) order, 1949 did not apply to the income of a resident assessee and therefore the first question must be answered in the negative.
The High Court declined to answer the second question.
With special leave granted by this Court, the appellant has appealed to this Court.
Income received by the Company from its transactions in the Indian States was retained at its office in Billimora and dividend ' declared out of that income was paid to the appellant at the registered office in the State of Baroda.
This dividend it is common ground was not brought into British India.
To appreciate the claim that the income qualifies for rebate under paragraph 6 of the Merged States (Taxation Concessions) Order, 1949, the (1) Income tax Ref.
No. 28 of 1955 decided, on February 20, 1956 (unreported).
p. C.I`./66 7 5 82 relevant statutory developments in tax laws to effectuate the merger of the former Indian States since August 15, 1947 may be briefly set out.
Under section 14(2) (r.) of the Income tax Act, added by Act 23 of 1941 and amended by Act 22 of 1947, it was enacted that : "The tax shall not be payable by an assessee .
in respect of any income, profits or gains accruing or arising to him within an Indian State unless such income, profits or gains are received or deemed to be received in or are brought into British India in the previous year by or on behalf of the assessee, or are assessable under section 12B or Section 42.
" By paragraph 3 of the States ' Merger (Governors ' Provinces) Order, 1949, it was provided that the States specified in Sch.
11 shall, as from August 1, 1949, be administered in all respects as if they formed part of the Provinces specified in the Schedule, and by paragraph 4 all the laws in force in the merged States or in any part thereof immediately before August 1, 1949, were to continue in force until repealed, modified or amended by a competent Legislature or other competent authority.
The State of Baroda was one of the States specified in the Schedule and it was to be administered as if it formed part of the Province of Bombay.
The Indian Income tax Act was applied to the merged States by section 3 of the Taxation Laws (Extension to Merged States and Amendment) Act 67 of 1949 with retrospective effect from April 1, 1949, and by section 7 corresponding laws relating to income tax in the merged States were repealed.
It was provided that if immediately before the 26th day of August, 1949, there was in force in any of the merged States any law relating to income tax, supertax or business profits tax, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income tax and super tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income tax Act, 1922, as extended to that State by section 3, or, as the case may be, the levy, assessment and collection of business profits tax for any chargeable accounting period ending on or before the 31st day of March, 1948, and for any purposes connected with such levy, assesssment or collection.
By the application of Act 67 of 1949, and the repeal of laws corresponding to those applied to the merged States by section 3, residents in former British India and in the merged States were sought to be treated equally.
But the result was a sudden imposition of high rates of taxation under the Indian Income tax Act read with the appro 583 priate Finance Acts upon the residents of the merged States.
With a view to cushion the impact, the Central Government in exercise of the powers conferred by section 60A of the Indian Income tax Act granted certain exemptions from and reductions in the rates of tax and made certain other modifications in the tax structure in its application to the merged States.
By paragraph 3 (i) of the Merged States (Taxation Concessions) Order, 1949 the expression "Act" was defined as meaning the Taxation Laws (Extension to Merged States and Amendment) Act 67 of 1949.
Paragraphs 4, 5, 6 and 6A of the Order as amended or added by the notification dated March 11, 1949, provided : 4. "The provisions of paragraphs 5, 6, 9, 10 and 11 of this Order shall apply to only so much of the income, profits and gains included in the total income of an assessee as would, had he been resident in British India have been exempt under clause (c) of subsection (2) of section 14 of the Indian Income tax Act, 1922, if the Act had not been passed." 5. "(1) The income, profits and gains of an) previous year ending after the 31st day of March, 1948, which is a previous year (i) for the merged State assessment year 1948 49, or (ii) for the merged State assessment year 1949 50,shall be assessed under the Indian Income tax Act, .1922, if, and only if, such income, profits and gains have not, before the 1st day of August, 1949, been assessed under the State law.
(2) Where the income, profits and gains referred to in sub paragraph (1) have not been assessed under the State law, they shall be assessed under the Indian Income tax Act, 1922, and the tax payable thereon shall be determined as hereunder (i) the tax on the amount of such income, profits and gains included in the total income shall be computed at the Indian rate of tax; (ii) the amount of such income, profits and gains shall be commuted under the State law aid the tax thereon computed at the merged Slate rate of tax; 584 (iii) the amount, if any, by which the tax computed under clause (i) exceeds the tax computed under clause (ii) shall be allowed as rebate from the first mentioned tax, and the amount of the first mentioned tax as so reduced shall be the tax payable.
(3) For the purposes of this paragraph (a) the merged State assessment year 1948 49 means the assessment year which commences on any date between the 1st April, 1948, and the 31st December, 1948, both dates inclusive; and (b) the merged State assessment year 1949 50 means the assessment year which commences on any date between the 2nd January, 1949, and the 31st July, 1949, both dates inclusive.
" 6. "(1) The income, profits and gains of any previous year ending after the 31st day of March, 1948, which does not fall within paragraph 5 of this Order or of any previous year commencing after the previous year referred to in the said paragraph shall be assessed under the Indian Income tax Act, 1922, but the tax payable on so much of the income as pertains to the period ending before the 1st day of August, 1949, shall be determined as hereunder (i) the tax on so much of such income included in the total income shall be computed (a) at the Indian rate of tax and (b) at the rates of tax in force in the merged State immediately before the 1st day of August, 1949; (ii) the amount by which the tax computed under sub clause (a) of clause (i) exceeds the tax computed under sub clause (b) of clause (i) shall be allowed as rebate from the first mentioned tax, and the amount of the first mentioned tax as so reduced shall be the tax payable.
(2) Where any previous year falls partly before and partly on or after the 1st day of August, 1949, the income, profits and gains pertaining to the period falling before the said date shall, unless the Income tax Officer, having regard to any special circumstances, otherwise 585 directs with the approval of the Inspecting Assistant Commissioner of Income tax, be in the proportion which the period before the said date bears to the whole previous year.
" 6A. "The income, profits and gains of any previous year, referred to in paragraph 5 or 6 of this Order, which accrue or arise without the taxable territories to a person who is resident but who would not be resident in the taxable territories if the Act had not been passed, shall be charged to tax in the same manner and to the same extent as specified in the said paragraph 5 or 6, as the case may be." By the application of the Income tax Act, 1922, to the territories of the merged States, income received, accrued or arisen or deemed to be received, accrued or arisen to any person resident within the territory of the merged States became chargeable to tax under that Act.
With a view to avoid hardship caused by the sudden application of high rates of taxation, the Central Government exercised its powers under section 60A of the Indian Income tax Act and modified the tax levy so as to give certain exemptions and benefits to residents in the areas of the former Indian States.
By paragraph 6 of the Merged States (Taxation Concessions) Order, 1949, in respect of the income of any previous year ending with March 31, 1948 which accrued or arose to persons who were residents in the territories of the merged States, benefit of the same rate of income tax to which it was subject in the merged State was granted by providing that the difference between tax computed at the Indian rate and the State rate shall be allowed as rebate.
In respect of income of residents in the merged States arising outside the taxable territories, a similar rebate was to be given (paragraph 6A).
The result was that income of residents of the merged States became chargeable to tax under the Indian Income tax Act, but it was to continue to get for a limited period benefit of the lower rates of tax operative under the law in force in the States before merger.
This concession or benefit was to apply by the express provisions contained in paragraph 4 only to so much of the income, profits and gains included in the total income of an assessee as would, had he been resident in the taxable territories, have been exempt under cl.
(c) of sub section (2) of section 14 of the Indian Income tax Act, 1922, if the Act had not been passed.
Counsel for the appellants claims that paragraph 4 applies to income of all assessees resident within British India as defined 586 in section 2(3A) at the relevant time, and not merely to residents in the territories of the merged States.
It is contended that by paragraph 4 it was intended not only to give the benefit of the State rate of taxation to residents of the former Indian States which were merged with the Provinces under the States Merger (Governors ' Provinces) Order, 1949, but also to preserve the benefit which was conferred by section 14(2) (c) of the Income tax Act to residents of the territories of British India before August 15, 1.947 in respect of income arising or accruing to them within the teffitory of the merged States.
It is said that by the application of Act 67 of 1949 all residents in the taxable territory became liable to pay tax at Indian rates, but with a view to maintain the status quo ante, it was intended by the Taxation Concessions Order, 1949 to restore the State rates of taxation to residents in the former Indian States, and also to continue the exemption in respect of the income of the former British Indian residents arising or accruing in the territory of the merged States within the limits prescribed by section 14(2) (c).
But paragraph 4 of the Taxation Concessions Order, 1949, is not susceptible of any such interpretation.
Paragraph 4 of the Order, and sections 3, 4, 4A, 4B and section 14(2) (c) of the Income tax Act must be read together.
The Indian States specified in the Schedule to the States Merger Order on their merger with the Provinces of British India ceased to be separate entitles and became part of British India, and by the application of Act 67 of 1949 the Indian Income tax Act was applied to the territories comprised within British India.
Section 14(2)(c) undoubtedly remained in force even after the merger of the Indian States effected by the States Merger Order, but its operation was restricted.
After the merger of the States, income arising or accruing within the territory of such merged State, could not be deemed to be income arising or accruing within an Indian State, for the State had ceased to exist, and the income was for the purpose of section 4 of the Income tax Act income arising or accruing to a person resident within the taxable territories.
There is nothing in paragraph 4 of the Concessions Order which seeks to grant exemption from liability to tax in respect of income which prior to merger of the States was not liable to tax by virtue of section 14 (2) (c), but has since the application of the Income tax Act become so liable.
The claim that paragraph 4 applies to income of residents of former British India which was exempt from taxation under section 14(2) (c) is belied by the plain words of the Order.
Para graph 4 does not substantively grant any exemption : it merely designates income to which the provisions of the Order granting 587 exemption will apply.
It applies to income which would, if Act 67 of 1949 had not been passed, have been regarded as accruing or arising in an Indian State, and the assessee would in respect of that income had he been a resident of the taxable territory before merger, have been exempt under section 14(2) (c).
The use of the expression "had he been a resident ' implies that the benefit is not to enure to persons who were before the merger entitled to the exemption under section 14(2) (c).
The Order provides that paragraphs 5, 6, 9, 10 and 11 apply to a slice of income and not to the entire income of an assessee, and by the express terms, it is that slice of the income, as would, had the assessee been resident in the taxable territories, have been exempt under cl.
(c) of sub section (2) of section 14 of the Indian Incometax Act, if the Taxation Laws Act, 1949, had not been passed.
In terms the concession is not given to residents of the territories of British India, and the context does not warrant an implication to the contrary.
It is true that by this interpretation of paragraph 4, British Indian residents are denied the benefit of the exemption under section 14(2) (c) in respect of income arising or accruing in the territories of the former merged States.
But that denial is the result of merger of the States into British India.
The operation of section 14 (2) (c) had become restricted by the modification of the definition of British India.
Since that amendment, income accruing or arising after the merger in Indian States outside British India alone would be exempt under section 14 (2) (c) There is nothing in the Concessions Order which suggests that it was intended to ensure continuance of the exemption under section 14(2) (c) to residents of British India as it was before merger, as if the merger had not taken place.
The use of the expression "had he been resident in the taxable territories" introduces a fiction : it grants the benefit of section 14(2) (c), though on the express terms it is not available, to a person who was not before the merger covered thereby, and in respect of income which would have been, if the Merger Act had not been passed, exempt from taxation in his hands, if he had been resident in British India.
In our view, Chagla, C.J., was right in observing in Mrs. Kusumben D. Mahadevia 's case(1) that : "A person resident in a Merged State, whose income accrued to him there, could not possibly claim exemption under Section 14 (2) (c).
Such an exemption could "only be claimed by a person resident in the taxable territories.
In order to give this particular (1) Income tex Ref.
No. 28 of 1955 decided on February 20, 1956 (unreported).
588 concession to a resident in a merged State this paragraph was enacted, and the particular language which we find in this paragraph was used.
" In the view we have taken on the first question, it is unnecessary to record an answer on the second question.
The appeals therefore fail and are dismissed with costs.
Appeals dismissed.

summary/full:
By the Taxation Laws (Extension to Merged States and Amendment) Act of 1949 the Income tax Act.
1922 was applied to the territories of the former Indian States which were merged with the former British Indian Provinces under the States Merger (Governors ' Provinces) Order.
By such application, the income received, accrued or arisen or deemed to be received, accrued or arisen to any person resident within the territory of the merged State became chargeable to income tax.
With a view to avoid hardship to residents of former Indian States, caused by the sudden application of the high rates of taxation, the Central Government issued the Merged States (Taxation Concessions) Order of 1949 under a. 60A of the Income tax Act.
Under Paragraphs 6 and 6A of Us Order income of residents of the merged States became charageable to tax under the Indian Income tax Act, but the income of any previous year ending after 31st March 1948 was to continue to get for a limited Period the benefit of lower rates of tax operative under the law in force in the States before merger.
This concession was to apply, under paragraph 4 of the Order, only to so much of the income, profits and gains included in the total income of an assessee as would, had he been resident in the taxable territories, have been exempt under section 14(2)(c) of the Income tax Act if the Taxation Laws Extension Act had not bee passed, that is, in respect of income arising or accuring to him :within territory of the merged State.
In the Calendar years 1948 and 1949, the assessee, who was resident and ordinarily resident within British India in 1948, received certaining as dividend in the State of Baroda which was one of the merged States.
The Income tax Officer upheld its claim that the dividend income had accrued or arisen in the Baroda State and as the income was not brought into British India, it was exempt from liablility to tax under section 14(2)(c) of the Income tax Act.
The Appellate Tribunal held that the dividend income arose in Baroda State, but by reason of the definition of "taxable territories" in section 2(14A) of the Income tax Act, the income attracted liability to tax and did not qualify for the rebate equal to the difference between the British Indian rate and the Baroda State rate in respect of the dividend income, under paragraph 6 of the Taxation Concessions Order.
The High Court also, on a reference, held that the assessee was not entitled to the rebate.
In appeal to this Court, the assessee contended that by the application of the Taxation Laws Extension Act, all residents in the taxable territory become liable to pay tax at the Indian rates, but with a view to maintain the status quo ante, it was intended by the Taxation Concessions Order, to restore the State rates of taxation to residents in the former Indian States, and also to continue the exemption in respect of the income of the former British India residents, arising or accruing 5 80 in the territory of the merged States within the limits prescribed by section 14(2) (c).
HELD : in terms the concession is not given to residents of the territories of British India, and the context does not warrant an implication to the contrary.
[587 C D] There is nothing in paragraph 4 of the Concessions Order which seeks to grant exemption from liability to tax in respect of income which prior to merger of the States was not liable to tax by virtue of section 14(2) (c), but has, since the application of the Income tax Act, become so liable.
The paragraph applies to income.
which would, if the Taxation Laws Extension Act had not been passed, have been regarded as accuring or arising in an Indian State, and the assessee would in respect of that income, had he been a resident of the taxable territory before merger, have been exempt under section 14(2)(c).
It is true that by this interpretation of paragraph 4 British Indian residents are denied the benefit of the exemption under section 14(2)(c) in respect of income arising or accruing in the territories of the merged State.
But the use of the expression "had he been resident in the taxable territories" implies that the benefit is not to tenure to persons who were before the merger entitled to the exemption under section 14(2)(c).
[587 A B, D]


judgement:
Civil Appeal No. 535 of 1964.
Appeal by special leave from the judgment and order dated July 25, 1961 of the Allahabad High Court in Sales Tax Reference No. 460 of 1954.
A. V. Viswanatha Sastri and K. K. Jain for appellant.
C. B. Agarwala and 0.
P. Rana, for respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by special leave is directed against the judgment of the High Court of Judicature at Allahabad passed 608 in a reference made to it under section II of the U.P. Sales Tax Act, 1948 (U.P. Act XV of 1948) hereinafter referred to as the Act.
In this reference the following question was referred by the Judge (Revision), Sales Tax at the instance of the appellant,Modi Sugar Mills Ltd., hereinafter called the assessee: "Whether a dealer who has been assessed to tax on the turnover of the previous year according to his election can change his option and elect the assessment year by filing quarterly returns without the previous sanction of Sales Tax Commissioner The High Court answered the question in the negative.
The answer to this question depends upon the interpretation of section 7(1) of the Act, and rr. 39, 40 and 41 of the U.P. Sales Tax Rules, and form IV prescribed under these rules.
These provisions are as under: "section 7 (1).
Subject to the provisions of section 18, every dealer whose turnover in the previous year is Rs. 12,000 or more in a year shall submit such return or returns of his turnover of the previous year within sixty days of the commencement of the assessment year in such form and verified in such manner as may be prescribed : Provided that the Provincial Government may prescribe that any dealer or class of dealers may submit, in lieu of the return or returns specified in this section, a return or returns of his turnover of the assessment year at such intervals, in such form and verified in such manner as may be prescribed, and thereupon all the provisions of this Act shall apply as if such return or returns had been duly submitted under this Section.
Provided further that the assessing authority may in his discretion extend the date of the submission of the return by any person or class of persons.
Rule 39 : Election of Assesment year.
(1) Any dealer may elect to submit returns of his turnover of the assessment year in lieu of the returns of the turnover of the previous year, and shall signify such election in the return filed by him in Form IV.
609 Provided that a dealer who did not carry on business during the whole of the previous year shall elect to submit his returns of the assessment year.
(2) A dealer who has once signified his election under sub rule (1) shall not again exercise his option so as to vary the basis of assessment Provided that the Sales Tax Commissioner may, for reasons to be recorded in writing and on such conditions as he deems fit permit a dealer to exercise a fresh option.
Rule 40.
Submission of returns Every dealer who elects to submit return of his previous year shall, within sixty days of the commencement of the assessment year, submit to the Sales Tax Officer a return in Form IV showing his turnover for the previous year Provided that no dealer whose turnover in the previous year was less than Rs. 15,000 shall be required to furnish such returns.
Rule 41.
Returns of assessment year.
(1) Every dealer whose estimated turnover during the assessment year is not less than Rs. 15,000 and who elects to submit returns of such year shall before the last day of July, October, January and April submit to the Sales Tax Officer, a return of his gross turnover for the quarters ending June 30, September 30, December 31 and March 31, respectively, in Form IV Provided that every dealer or firm, to whom the pro visions of sub section (3) of Section 18 are applicable shall submit such returns within seven days of the expiry of each month during the year in which the business is commenced.
" Before we deal with the interpretation of the section and the rules it is necessary to give a few relevant facts.
It appears that for the assessment year 1948 49, 1949 50 and 1950 51, the assessee was assessed on the basis of returns filled for the turnover of the previous year relev ant to each of these assessment years.
For the assessment year 1951 52, however, the assessee purporting to make an election under r. 39 of the rules filed returns of his turnover of the assessment year instead of the returns of the turn 610 over of the previous year.
The Judge (Revision) held that without sanction of the Sales Tax Commissioner the assessee was not entitled to do so.
Mr. Sastri, the learned counsel for the assessee, submits that the above rules should be interpreted as follows : Under sub rule (1) of r. 39 the election is to Me returns of the turnover of the assessment year instead of returns of the turnover of the previous year and not vice versa.
Sub rule (2) also deals with the same election, i.e., the election to file returns of the turnover of the assessment year instead of the turnover of the previous year.
Rule 40 does not displace the above reading of r. 39 because it covers the case of every dealer who wishes to submit a return of the turnover of the previous year.
There is no other rule which deals with such a dealer, and he says that the word 'elects ' may perhaps have reference to the election mentioned in form IV which we will presently consider.
At any rate, he says that sub r.
(2) of r. 39 has nothing to do with the election mentioned in r. 40.
He then submits that r. 41 is concerned with the dealer who has elected under r. 39(1) to submit returns of the turnover of the assessment year and this rule provides various matters in this connection.
The learned counsel for the State, Mr. C. B. aggarwala, on the other hand, contends that section 7 of the Act, read with the rules, gives a dealer an option to file returns in respect of the turnover of the previous year or returns of the turnover of the assessment year, and he says that this option is and can only be exercised in the first year when a dealer becomes taxable under the Act, and it is this option or election that is covered by sub rule (2) of r. 39.
He relies strongly on form IV in which the following lines occur "I have elected to submit return of my turnover of the previous year ending/month or months of the assessment year".
In the alternative he contends that even if r. 3 9 (2) does not cover the filing of the returns of the previous year, according to general principles the assessee having exercised an option to be assessed in respect of the turnover of the previous year cannot now change the basis of assessment.
In our opinion the Judge (Revision) was in error in holding that the assessee was not entitled to make an election under r. 39 (1) without the sanction of the Sales Tax Commissioner, and the answer to the question referred to the High Court should be in favour of the assessee.
Rule 39(2) specifically mentions an elec 611 tion under sub r.
(1) and there is only one kind of election under r. 39(1) and that is for a dealer to elect to submit returns of his, turnover for the assessment year in lieu of the returns of the turnover of the previous year.
In other words, under r. 39(1) the, dealer makes a choice that he will be assessed in respect of the turnover not of the previous year, which is normally the rule under section 7, but in respect of the return of the turnover of the assessment year.
It seems to us that r. 39(2) covers only the case where: election has been made by a dealer to be assessed in respect of the turnover of the assessment year.
It is true that r. 40 also uses the word 'elects ' but this may have reference to the lines in form IV which we have already reproduced above.
But assuming that when a dealer submits a return in respect of the previous year under r. 40 and he is treated to have elected within r. 40, yet there is no provision like r. 39(2) which debars him from exercising the option under r. 39(1).
In our opinion an express provision like r. 39(2) was necessary to prevent a dealer from exercising the option given to him under r. 39(1).
We do not express any opinion whether such a rule could validly be made under section 7 (1).
We are not impressed by the argument of Mr. Aggarwal that general principles debar the assessee from exercising the option under r. 39 (1).
It is a statutory right given to the assessee and the general principles, if applicable, cannot displace the statutory right.
We may mention that the reasoning in the judgment under appeal has been doubted in an unreported judgment of the Allahabad High Court in M/s Mahesh Company Kahoo Kothi Kanpur vs
The Commissioner of Sales Tax, Uttar Pradesh(1).
In the result we accept the appeal, and answer the question.referred to the High Court in the affirmative.
The appellant will have his costs here and in the High Court.

dataset_name: IN-Abs

summary/full:
For the assessment years 1948 49, 1949 50 and 1950 51, the appellant was assessed on the basis of returns filed for the turnover of each relevant previous year.
For the assessment year 1951 52, the appellant, purporting to make an election under r. 39(1) of the U.P. Sales Tax Rules, filed returns of his turnover of the assessment year instead of the previous year.
The Judge (Revision) Sales Tax held that without the sanction of the Sales Tax Commissioner under r. 39(2), the appellant was not entitled to do so, and the High Court also, on a reference, held against the appellant.
In appeal to this Court, HELD : The answer of the High Court should have been in favour of the appellant.
[610 HI Under r. 39(1), the dealer makes a choice that he will be assessed in respect of the turnover not of the previous year, which is the normal position under section 7, but in respect of the turnover of the assessment year.
Rule 39(2), requiring the sanction of the Sales Tax Commissioner covers only the, case where such election has been made under r. 39(1), that is, where the election has been made by a dealer to be assessed in respect of the turnover of the assessment year, and the dealer wishes to exercise a fresh option.
Even assuming that, when a dealer submits a return in respect of the previous year under r. 40 be is treated to have elected within that rule, yet, there is no provision like r. 39 (2) which debars him from exercising the option under r. 39(1).
In the absence of an express provision like r. 39(2), general principles cannot debar an assessee from exercising a statutory right given to him.
[611 A E]


judgement:
No. 95 of 1965.
Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights.
R. K. Garg, M. K. Ramamurthi, section C. Agarwal and D. P. Singh, for the petitioner.
G. section Kasliwal, Advocate General, Rajasthan and R. N. Sachthey, for respondent No. 2. 574 The Judgment of the Court was delivered by Ramaswami, J.
In this case the petitioner Durgadas Shirali has obtained a rule calling upon the respondents to show cause why a writ of habeas corpus should not be issued under article 32 of the Constitution directing his release from detention under an order passed by the District Magistrate of Bhilwara, Rajasthan under Rule 30(1) (b) of the Defence of India Rules.
Cause has be= shown by the Advocate General of Rajasthan on behalf of the respondents to whom notice of the rule was ordered to be given.
The petitioner was arrested on January 2, 1965 at Jaipur in Pursuance of an order dated December 29, 1964 made by res Pondent No. 3, Shri Narayan Das Mehta, District Magistrate of Bhilwara which states as follows : "It is reliably brought to my notice that the Leftist wing of the Communist Party has been carrying on antinational and pro Chinese propaganda and are preparing to act as Pekings member.
The party having been formed at Peking 's behest are preparing for widespread agitation with the object of establishing communist regime by subversion and violence.
1, therefore, come to the irresistible conclusion that the Leftist Communist Party constitutes a real danger to external and internal security of the country and that it has become necessary to take immediate action.
I am also satisfied from the report that Shri Durgadas Shirali of Bhilwara is the Secretary of the Leftist Wing of the Communist Party and he is likely to act in manner which is prejudicial to the Defence of India and Civil Defence, India 's relations with Foreign powers, public safety and the maintenance of the public order.
I, Narayan Das Mehta, District Magistrate, Bhilwara in exercise of the powers delegated to me under rule 30(1) clause (b) of the Defence of India Rules 1962 vide Government of Rajasthan Notification No.1 F. 7/1(16)Home(A.Cr.
1)63 dated the 4th November, 1963 and all other powers enabling in that behalf direct the Superintendent of Police, Bhilwara that Shri Durga Das Shirali be arrested and detained in the Bhilwara Jail until further orders.
" On January 13, 1965 the orders of the District Magistrate was reviewed by the Reviewing Authority who recommended that 575 the detention order dated December 29, 1964 should be confirmed.
The State Government confirmed the detention order by its order No. F7/1(19)Home(A Cr.
(I)/65 dated January 22, 1965.
On behalf of the petitioner it was contended by Mr. Garg that the District Magistrate had not applied his mind to the specific activities of the petitioner and there was complete absence of material before the District Magistrate to suggest that the conduct of the petitioner would be "prejudicial to the Defence of India and Civil Defence, India 's relations with foreign powers, public safety and the maintenance of the public order".
It was, therefore, submitted on behalf of the appellant that the order of detention made by the District Magistrate was mala fide and illegal.
Mr. Garg submitted, in the second place, that one of the grounds mentioned in the order of detention was that the petitioner was a member of the Leftist Wing of the Communist Party of India and Secretary of the local branch of that party at Bhilwara.
The Leftist Communist Party has been carrying on antinational and pro Chinese propaganda and the District Magistrate was of the opinion that the Leftist Communist Party, therefore, constituted a real danger to external and internal security of the country.
It was submitted by Mr. Garg that the Leftist wing of the Communist Party had not been declared illegal or banned by the Government of India and the membership of the petitioner of the Leftist Communist Party of India was, therefore, not a relevant ground for the order of detention.
Before proceeding to deal with these points raised on behalf of the petitioner it is necessary to state that in Makhan Singh Tarsikka vs The State of Punjab(1) this Court had occasion to consider the legal effect of the proclamation of Emergency issued by the President on October 26, 1962 and two orders of the President one dated November 3, 1962 and the other dated November 11, 1962 issued in exercise of the powers conferred by cl.
(1) of article 359 of the Constitution.
It was held by this Court that the sweep of article 359(1) and the Presidential Order issued under it is wide enough to include all claims made by citizens in any Court of competent jurisdiction when it is shown that the said claims cannot be effectively adjudicated upon without examining the question as to whether the citizen is, in substance, seeking to enforce fundamental rights under articles 14, 19, 21 and 22.
It was pointed out that during the pendency of the Presiden tial Order the validity of the Ordinance or any rule or order made thereunder cannot be questioned on the ground that it contravenes (1)[1964] 4S.C.R. 797 576 articles 14, 21 and 22.
But this limitation cannot preclude a citizen from challenging the validity of,the, Ordinance or any rule or order made thereunder on any other ground.
If the petitioner seeks to challenge the validity of the Ordinance, rule or order made thereunder on any ground other than the contravention of articles 14, 21 and 22, the Presidential Order cannot come into operation.
It is not also open to challenge the Ordinance rule or order made thereunder on the ground of contravention of article 19, because as soon as a Proclamation of Emergency is issued by the President under article 358 the provisions of article 119 are automatically suspended.
But a petitioner can challenge the validity of the Ordinance, rule or order made thereunder on a ground other than those covered by article 358, or the Presidential Order issued under article 359(1).
Such a challenge is outside the purview of the Presidential Order.
For instance, a citizen will not be deprived of his right to move an appropriate Court for a writ of habeas corpus on the ground that his detention has been ordered mala fide.
Similarly, it will be open to the citizen to challenge the order of detention on the ground that any of the grounds given in the order of detention is irrelevant and there is no real and proximate connection between the ground given and the object which the legislature has in view.
It is contended, in the first place, on behalf of the petitioner, that the order of detention is bad because the District Magistrate had not applied his mind to the specific activities of the petitioner.
It was pointed out that in the order of detention the District Magistrate has mainly dealt with the activities of the Leftist Wing of the Communist Party of India which was carrying on antinational and pro Chinese propaganda.
The District Magistrate proceeds to say that the party was formed at Peking 's behest and was preparing for widespread agitation with the object of establishing communist regime by subversion and violence.
The District Magistrate, therefore, reached the conclusion that the Leftist Wing of the Communist Party constituted a real danger to external and internal security of the country.
So far as the petitioner is concerned, the District Magistrate has described him as Secretary of the Leftist Wing of the Communist Party and has proceeded to state that he was satisfied that the petitioner was likely to act in a manner which was prejudicial to the Defence of India and Civil Defence, India 's relations with foreign powers, public safety and the maintenance of the public order.
In reply to the petition of the detenu the District Magistrate`, Bhilwara has filed an affidavit in this Court.
In paragraph 3 of the a davit the District Magistrate has stated that he was satisfied from the 577 reports that the petitioner was carrying on anti national and pro Chinese propaganda as a member of the Leftist Wing of the Communist Party.
In paragraph 5 the District Magistrate has stated that he passed the order of detention after satisfying himself on the reports that the petitioner was the Secretary of the Leftist Wing of the Communist Party of India, Bhilwara branch and that he was likely to act in a manner prejudicial to Defence of India and Civil Defence, India 's relations with foreign powers, public safety and the maintenance of public order.
In view of the affidavit of the District Magistrate it is not possible for us to accept the argument of Mr. Garg that the District Magistrate did not apply his mind to the specific activities of the petitioner and that he made the order of detention solely on the ground that the Leftist wing of the Communist Party of India was carrying on anti national and pro Chinese propaganda.
It was next argued on behalf of the petitioner that the Leftist wing of the Communist Party of India has not been declared illegal by the Government of India and the party has not been banned.
It was submitted, therefore, that membership of that party was not per se illegal and the order of detention of the petitioner cannot be legally based upon this ground.
In other words, it was submitted by Mr. Garg that the ground.
that the petitioner was the Secretary of the Leftist Wing of the Communist Party of India was irrelevant for the purpose of Rule 30 of the Defence of India Rules.
The argument was put forward that if this ground was irrelevant for the purpose of the Rule or was wholly illusory, the order of detention as a whole was vitiated and must be quashed by grant of a writ of habeas corpus.
In support of his argument Mr. Garg referred to the decision of this.
Court in Shibban Lal Saksena vs The State of Uttar Pradesh(, ).
We are unable to accept the argument of Mr. Garg as correct.
It is not correct to state that the activities of the Leftist wing of the Communist Party cannot in any circumstances be illegal and would necessarily be irrelevant merely because the Government of India has not declared the party illegal or imposed a ban.
In considering the question whether the petitioner was acting in a manner prejudicial to the defence of India within the meaning of Rule 30 of the Defence of India Rules it is open to the District Magistrate to take into account the reports which he had received as to the political association of the petitioner, his political friends and his political loyalties.
In considering the circumstance that the petitioner was a member of the Leftist wing of the Communist (1) ; 578 Party of India which, according to the said reports, was preparing for a widespread agitation with the object of establishing communist regime by subversion and violence the District Magistrate was not applying his mind to any irrelevant circumstance with regard to the need for detention of the petitioner under the Defence, of India Rules.
In our opinion, in the light of the reports received by the District Magistrate the political association of the petitioner and his membership of a particular political group is a relevant consideration in the matter of detention of the petitioner.
This ground has close and proximate connection with the security of State and maintenance of public order as contemplated by Rule 30 of the Defence of India Rules.
In our opinion,Mr. Garg is unable to make good his submission on this aspect of the case.
For these reasons we hold that the petitioner has not made .out a case for the grant of a writ under article 32 of the Constitution.
The Writ Petition fails and is accordingly dismissed.
Petition dismissed.

summary/full:
The petitioner was detained under rule 30 of the Defence of India Rules 1962, by an order of the District Magistrate and the necessary formalities were gone through.
He filed a petition under article 32 and contended : (1) The order of the District Magistrate was mala fide as he had not applied his mind to tile specific activities of the petitioner and there was complete absence of material before him to suggest that the conduct of the petitioner would be prejudicial to the defence of India etc.
(2) One of the grounds of detention mentioned in the order was that the petitioner was a member of the Leftist Communist Party of India and Secretary of one of its branches.
This consideration was not relevant as the said party had not been declared illegal or banned by the Government.
HELD : (i) It was open to the petitioner to challenge his detention on the ground of mala fide or on the ground that all or any of the grounds mentioned in the order of detention were irrelevant.
Such pleas were not covered by article 358 and were outside the purview of the Presidential Orders under article 359(1).
[576 D] Makhan Singh Tarsikka vs State of Punjab, referred to.
(ii) Taking into account the affidavit filed by the District Magistrate it could not be said that he did not apply his mind to the specific activities of the petitioner or that there was no material before him to justify the order.
[577 C] (iii) It was not correct to State that the activities of the Leftist wing of the Communist Party cannot in any circumstances be illegal and would necessarily be irrelevant merely because the Government of India has not declared the Party illegal or imposed a ban.
In the light of the reports received by the District Magistrate the political association of the petitioner and his membership of a particular political group was a relevant consideration in the matter of detention of the petitioner.
This ground had close and proximate connection with the security of State and maintenance of public order as contemplated by rule 30 of the Defence of India Rules.
[578 A C]


judgement:
N: Civil Appeals Nos.
10061011 of 1963.
Appeal from the judgment and order dated September 25, 1959 of the Bombay High Court in Income tax Reference No. 36 of 1955.
G. section Pathak, B. Dutta, R. J. Kolah and J. B. Dadachanji, for the appellant.
Niren De, Addl.
Solicitor General, Gopal Singh and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by Bachawat, J.
These appeals arise out of proceedings for assessment of income tax of the appellant Company (hereinafter referred to as the assessee) for the assessment years, 1943 44, 1944 45, 1945 46, 1946 47, 1947 48 and 1948 49, the relevant 653 accounting years being the Calendar years, 1942, 1943, 1944, 1945, 1946 and 1947 respectively.
During the relevant accounting years, the assessee was a nonresident.
It carried on the business of manufacturing textile goods at Indore then situated in an Indian State, and had offices at Indore and Bombay.
The assessee supplied goods to the Indian Stores Department, Government of India, under purchase orders placed by the latter with the assessee at Indore.
Duplicate copies of the purchase orders signed on behalf of the assessee at Indore used to be sent to the Government of India in British India.
The goods used to be inspected at Indore by an inspecting officer of the Government and the inspection certificates were issued at Indore.
One of the conditions of the contract was that the delivery would be F.O.R., Indore, and the freight from Indore would be borne by the Government of India.
The goods used to be despatched by railway from Indore station and the railway receipts used to be made out in the name of a representative of the Government.
There were two types of purchase orders, namely, (1) purchasewar order and (2) bulk purchase order.
Clause 9 of the bulk purchase order was in these terms "9.
Payment : Unless otherwise agreed between the parties, payment for the delivery of the stores will be made on submission of bills in the prescribed form in accordance with the instructions given in the Acceptance of Tender by cheque on a Government Treasury in British India or on a branch in British India of the Reserve Bank of India or the Imperial Bank of India transacting Government business.
" From the judgment of K. T. Desai, J. it appears that in the High Court both parties agreed that the aforesaid cl. 0 was one of the terms on which all the goods were supplied by the assessee.
In paragraph 2 of the petition for leave to appeal to this Court and, paragraph 3 of the appellant 's statement of case also, the assessee stated that the contracts between the parties were subject to the aforesaid cl. 9.
The prescribed form of the bill (Form No. WSB.
116) which the assessee was required to submit to the Goverment of India, Department of Supply, contained inter alia, the following receipt clause Received payment one anna Please pay by cheque receipt stamp on to Self on Bank original only Bank Treasury Contractor 's at. . . . . signature Contractor 's signature.
" 654 Instructions Nos. 13 and 14 with regard to payment were as follows : "13.
If payment is desired to be made to the Con tractor 's Bankers or other parties, the endorsement must be completed on the Bill Form (W.S.B. Form No. 116) and signed separately and the word 'Self ' scored out; in addition, a power of attorney will be necessary in such cases, except when payment is desired to a Bank mentioned in the second schedule to the Reserve Bank Act.
Payment in all cases will be made to the Contractors by the Accounts Officer named in the Acceptance of Tender by means of crossed cheques, unless a specific request is made to the contrary for the issue of an open cheque on the bill.
" The assessee used to make out bills in the prescribed form.
The receipt clause in the completed bill used to be in the following terms : "Please pay by cheque to self on a bank at Indore." The receipt clause in the bill used to be signed in advance on behalf of the assessee on a one anna stamp.
The bills with the signed receipts of the assessee then used to be sent to the Controller of Supplies, New Delhi after the latter was debited with the amounts of the bills in the books of the assessee.
On receipt of the bills, the Government of India used to draw cheques on the Reserve Bank of India, Bombay in favour of the assessee and used to send them by post to the assessee at Indore.
On receipt of the cheques, the assessee used to credit the Controller of Sup plies in its books with the amount of the cheques, and then used to deposit the cheques in their account with the Imperial Bank of India, Indore, and thereupon, the Bank used to credit the assessee in the aforesaid account with the amount of the cheques.
The question is whether on these facts the profits of the assessee, a non resident, in respect of the supplies were received by the assessee in British India and, therefore, taxable under section 4(1) (a) of the Indian Income tax Act, 1922.
Before the Appellate Tribunal and at all stages of the assessment proceedings, the contention of the revenue authorities wag that the profits were received at Bombay where the.
cheques on the Reserve Bank of India, Bombay were encashed.
By its order dated March 13, 1953, the Appellate Tribunal negatived this contention, and held that the amounts of the cheques were received by it at Indore.
On the application of the Commissioner of Income tax, Central 655 Bombay under section 66(1) of the Indian Income tax Act, 1922, the Tribunal by its order dated March 4, 1955 referred the following question of law to the Bombay High Court: "Whether the assessee Company is liable to pay tax in the taxable territories on the ground that the sale proceeds, which included the profit element therein, were received in the taxable territories ?" In its order dated March 4, 1955, the Tribunal referred to the decision of this Court in Commissioner of Income tax vs Kirloskar Bros. Ltd.(1) decided on April 19, 1954, and stated that on the facts of the case, a contention might arise that the assessee had requested the Government to send the cheque by post and the post office as the agent of the assessee, had received the cheques in British India, but the Tribunal pointed out that this contention had not been raised before it.
The reference under section 66(1) was heard by a Division Bench of the Bombay High Court consisting of J. C. Shah and section T. Desai, JJ.
J. C. Shah, J. answered the question referred to the High Court in the affirmative, whereas section T. Desai, J. answered it in the negative.
The matter then went before the third Judge, K. T. Desai, J. who agreed with J. C. Shah, J. and answered the question in the affirmative.
The majority of the Judges held that the cheques were received by the assessee through its agent, the post office in British India and the Revenue authorities were entitled to urge this contention for the first time in the High Court.
The assessee now appeals to this Court on a certificate granted by the Bombay High Court.
In the appeals before us, the following two questions arise (1) Was the post office the agent of the assessee to receive the cheques representing the sale proceeds on its behalf, and did the assessee consequently receive the sale proceeds through its agent in British India; and (2) whether the Revenue authorities could raise this contention for the first time at the hearing of the reference before the High Court, though this contention was not raised by it before the Tribunal or at any stage of the assessment proceedings ? Where, as in this case, the question of law in issue between the parties and referred to the High Court is the board question whether or not the assessee is liable to pay tax on the ground that the sale proceeds including the profits of the sale were received (1) 656 by the assessee in British India, the Revenue authorities may be permitted to argue for the first time at the hearing of the reference that on the facts found by the Tribunal, the post office was the agent of the assessee for the purpose of receiving the cheques representing the sale proceeds and the assessee received the sale proceeds in British India where the cheques were posted, though this aspect of the question was not argued before the Tribunal and though the only point there argued was that the sale proceeds were received at Bombay where the cheques were encashed.
See The Commissioner of Income tax vs Messrs. Ogale Glass Works Ltd(1) Zoraster & Co. vs Commissioner of Income tax(2).
See also Commissioner of Income tax, Bombay vs Scindia Steam Navigation Co. Ltd.(3).
The decision in The New Jehangir Vakil Mills Ltd. vs The Commissioner of Income tax(4 ) relied on by the assessee is distinguishable.
There, the question of law referred to the High Court was "Whether the receipt of the cheques at Bhavnagar amounted to receipt of sale proceeds in Bhavnagar ?", and this question was not broad enough to cover the enquiry whether there were postings of the cheques at the request of the assessee and receipts of the cheques by the assessee through the post office in British India.
The precise point decided by this Court in the New Jehangir Vakil Mills '(4) case was that the High Court has no jurisdiction under section 66(4) to direct the Tribunal to collect evidence not already on the record and to make it a part of a supplementary statement of case, and this decision was followed and affirmed recently in Keshav Mills Co. Ltd. vs Commissioner of Income tax(").
But, in the instant case, the High Court did not call for any supplementary statement of case.
Nor is the question of law referred in this case a narrow one as in the New Jehangir Vakil Mills ' case(4) so as to exclude consideration of the contention that the assessee received the sale proceeds through its agent, the post office in British India.
We are, therefore, satisfied that the Revenue authorities can raise this contention for the first time in the High Court. ' The next question is whether the post office was the agent of the assessee to receive the cheques representing the sale proceeds and whether the assessee received the sale proceeds in British India where the cheques were posted.
Now, if by an agreement, express or implied, between the creditor and the debtor or by a request, express or implied, by the creditor, the debtor is authorised to pay the debt by a cheque and to send the cheque to the creditor (1) (3) ; ,814.
(5) ; (2) [1961] 1 S .
C.R. 210.
(4) ; 657 by post, the post office is the agent of the creditor to receive the cheque and the creditor receives payment as soon as the cheque is posted to him.
See The Commissioner of Income tax vs Messrs. Ogale Glass Works Ltd.(1), Jagdish Mills Ltd. vs The Commissioner of Income tax(2 ) approving Norman vs Ricketts(1), Thairlwall vs The Great Northern Railway(3).
In Messrs. Ogale Glass Works ' case(1), there was an express request by the assessee at Aundh to its debtor in Delhi to remit the amount of the bills by cheques.
In Jagdish Mills case (2), there was a stipulation between the assessee and its debtor that the debtor in Delhi should pay the assessee in Baroda the amount due to the assessee by cheques, and this Court held that there was by necessary implication a request by the assessee to the debtor to send the cheques by post from Delhi, thus constituting the post office its agent for the purpose of receiving the payments.
In the instant case, cl. 9 of the terms and conditions of the contract read with the prescribed form of the bills and the instructions regarding payment show that the parties had agreed that the assessee would submit to the Government of India, Department of Supply, New Delhi, bills in the prescribed form requesting payment of the price of the supplies by cheques together with signed receipts and the Government of India would pay the price by crossed cheques drawn in favour of the assessee.
Having regard to the fact that the assessee was at Indore and the Supply Department of the Government of India was at New Delhi, the parties must have intended that the Government would send the cheques to the assessee by post from New Delhi, and this inference is supported by the fact that the cheques used to be sent to the assessee by post.
In the circumstances, there was an implied agreement between the parties that the Government of India would send.
the cheques to the assessee by post.
Mr. Pathak argued that the assessee had requested the Government to pay money by cheques on a bank at Indore and as that request was not complied with and the Government of India sent instead cheques on the Reserve Bank of India, Bombay, there was no effective request by the assessee to the Government to send the cheque by post.
But independently of any subsequent request by the assessee, the contract between the parties authorised the Government of India to pay the price by cheques drawn on the Reserve Bank of India, Bombay and imported a request by the assessee to the Government of India to send the cheques by post.
(1) (2) ; (3) (1886) 3 Times Law Reports.
(4) 658 The Government of India was entitled to ignore the subsequent request of the assessee for cheques on an Indore bank and the assessee received payments of the price as and when the cheques on the Reserve Bank of India, Bombay were posted in British India in accordance with the contract.
In Thairlwall vs Great Northern Railway(1) Lord Coleridge, J. observed : "The real question is whether the posting of the warrant was payment of the amount of the dividend.
To establish that it was, the defendants must prove a request by the plaintiff or an agreement between the plaintiff and the defendants that payment should be made by means of a warrant posted to the plaintiff.
If such a request or agreement is proved, then payment is established by posting even although the instrument is lost in the post : Norman vs Ricketts(2)." Mr. Pathak contended that the assesseee and the Government of India had agreed that the sale proceeds would be paid to the assessee in Indore outside British India, and therefore the rule in Messrs. Ogale Glass Works ' case(3) did not apply, having regard to the decision in Commissioner of Income tax vs Patney & Co.(4).
We are not inclined to accept this contention.
There is nothing on the record to show that there was any express agreement between the parties that the sale proceeds would be paid to the assessee at Indore.
We are satisfied that the post office was the agent of the assessee for the purpose of receiving the cheques representing the sale proceeds and the assessee received the sale proceeds in British India where the cheques were posted, and consequently, the profits in respect of the sales were taxable under section 4 (1) (a).
The High Court, therefore, rightly answered the question in the affirmative.
Mr. Pathak and following him Mr. Kolah submitted that the assessee would have led additional evidence to disprove the contention that the post office acted as its agent, had that contention been raised before the Tribunal, and the Revenue authorities should not, therefore, have been allowed by the High Court to raise the new contention.
On being asked what additional evidence would have been led by the assessee, counsel said that the assessee would have led evidence to show (a) that the purchase orders were accepted by the assessee under compulsion of the (1) (2) (1886) 3 Times Law Reports 182.
(3) (4) 659 Defence of India Act and Rules and consequently there was no voluntary request by the assessee for payment by cheques, and (b) the Imperial Bank of India, Indore, as the statutory agent of the Reserve Bank of India, Bombay, paid the amount of the cheques to the assessee at Indore.
But counsel was unable to show any provision of the Defence of India Act or Rules under which the assessee was obliged to accept the purchase orders, and we need not, therefore, enquire into the correctness of counsel 's assumption that acceptance of the purchase orders under compulsion of law would have negatived the contention that the post office acted as the agent of.
the assessee.
And if the assessee received payment by cheques posted in British India, the fact that subsequently the Imperial Bank of India, Indore as the statutory agent of the Reserve Bank of India, Bombay paid the amount of the cheques at Indore would not take the case of the assessee out of the purview of section 4 (1) (a).
We are, therefore, satisfied that the assessee was not prevented from adducing any material evidence by reason of the omission of the Revenue authorities to argue the new point before the Tribunal.
We do not, therefore, think it necessary to express any opinion on the question whether the Court should refuse to allow the Revenue authorities to raise a new contention where by reason of their omission to raise the contention before the Tribunal, the assessee had been prevented from adducing material evidence on the point.
In the result, the appeals are dismissed with costs, one set.
Appeals dismissed.

summary/full:
The appellant company carried on the business of manufacturing textile goods at Indore and had offices at Indore and Bombay.
During its account years 1942 to 1947 it supplied goods to the Indian Stores Department, Government of India.
The purchase orders were placed by the latter with the appellant at Indore which was then in an Indian State.
On receipt of bills from the appellant the Government of India used to draw cheques on the Reserve Bank of India, Bombay, in favour of the appellant and used to send them by post to the appellant at Indore.
The appellant used to deposit the cheques with the Imperial Bank of India Indore for the purpose of realisation from the Reserve Bank of India.
In connection with the assessment years 1943 44 to 1948 49 the question that arose in income tax proceedings was whether the profits of the appellant a non resident in respect of the supplies were received by the appellant in British India and therefore taxable under section 4(1)(a) of the Indian Income tax Act, 1922.
The departmental authorities held that the payment was received by the appellant at Bom bay where the cheques were encashed but the Appellate Tribunal took the view that the payment was received at Indore.
In reference the High Court held on the basis of this Court 's decision in Commissioner of Income tax vs Kirloskar Bros. Ltd. which had meanwhile been delivered that the cheques were received by the assessee through its agent, the post office in British India and further held that the Revenue authorities were entitled to raise the contention for the first time in the High Court.
With certificate the appellant came to this Court.
HELD : (i) Whereas in the present case the question of law in issue between the parties and referred to the High Court is the broad question whether or not the assessee is liable to pay tax on the ground that the sale proceeds including the profits of the sale were received by the assessee in British India, the Revenue authorities may be permitted to argue for the first time at the hearing of the reference that on the facts found by the Tribunal, the post office was the agent of the assessee for the purpose of receiving the cheques representing the sale proceeds and the assessee received the sale proceeds in British India where the chequest were posted though this aspect of the question was not argued before the Tribunal and though the only point there argued was that the proceeds were received at Bombay where the cheques were encashed.
[655 H] Commissioner of Income tax vs M/s. Ogale Glass Works Ltd. , Zoraster & Co. vs Commissioner of Income tax, ; and Commissioner of Income tax, Bombay vs Scindia Steam Navigation Co. Ltd., ; , referred to.
The New Jahangir Vakil Mills Ltd. vs Commissioner of Income tax ; and Keshav Mills Co. Ltd. vs Commissioner of Income tax; , , distinguished.
652 (ii) If by an agreement, express or implied, between the creditor and the debtor or by request, express or implied, by the creditor, the debtor is authorised to pay the debt by a cheque and to send the cheque to the creditor by port, the post office is the agent of the creditor to receive the cheque and the creditor receives payment as soon as the cheque is posted to him.
[656 G] Commissioner of Income tax vs M/s. Ogale Glass Works Ltd., , Jagdish Mills Ltd. vs The Commissioner of Income tax, ; , Norman vs Ricketts, (1886) 3 Times Law Reports 182 and Thairlwall vs The Great Northern Railway, , relied on.
(iii) In the instant case cl.
9 of the terms and conditions of the contract read with the prescribed form of the bills and the instructions regarding payment showed that the parties had agreed that the assessee would submit to the Government of India, Department of Supply, New Delhi, bills in the prescribed form requesting payment of the price of the supplies by cheques together with signed receipts and the Government of India would pay the price by crossed cheques drawn in favour of the assessee.
Having regard to the fact that the assessee, was at Indore and the Supply Department of the Government of India was at Now Delhi, the parties must have intended that the Government would send the cheques to the assessee by post from New Delhi, and this inference was supported by the fact the cheques used to be sent to the assessee by post.
In the circumstances there was an implied agreement between the parties that the Government of India would send the cheques by post.
The Government of India was entitled to ignore the subsequent request of the.
assessee for cheques on an Indore bank and the assessee received payment of the price as and when the cheques on the Reserve Bank of India Bombay, were posted in British India in accordance with the contract (657 D; 658 Al Thairlwall vs The Great Northern Railway, [1910] 2 K.B. 509 and Commissioner of Income tax vs Patney & Co. , referred to.
On the above view the profits in respect of the sales were taxable under section 4(1) (a) of the Indian Income tax Act, 1922.


judgement:
Appeal No. 30 of 1965.
5 9 0 Appeal by special leave from the judgment and order dated September 8, 1962 of the Bombay High Court in Special Civil Application No. 364 of 1961.
C. B. Agarwala, 0.
P. Malhotra, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellant.
G. L. Sangli and A. G. Ratnaparkhi, for respondent No. 3.
The Judgment of the Court was delivered by Wanchoo, J.
The only question raised in this appeal by special.
leave is whether the Central Provinces and Berar Industrial Disputes Settlement Act, No. XXIII of 1947, (hereinafter referred to as the Act) is applicable to the head office of the appellant which is known as the Ballarpur Collieries Company.
The head office is situate in Nagpur and has a staff of about 35 employees.
The business of the head office is to look after the sale of coal extracted from the collieries.
The question arises in this way.
Bapat respondent was a stenographer working in the head office at Nagpur.
He was dismissed from service on July 31, 1959.
It is not necessary for present purposes to go into the facts and circumstances leading to this dismissal.
Suffice it to mention that an enquiry was said to have been held before the dismissal order was passed.
While this enquiry was pending Bapat made an application under section 16 of the Act before the Assistant Commissioner of Labour, Nagpur, on July 21, 1959.
In this application Bapat prayed that the employer should be ordered to pay him wages from the date of dismissal, discharge or removal to the date of the order under section 16 in addition to a sum not exceeding Rs. 2,500 by way of compensation.
It was also prayed that the employer should be ordered to pay retrenchment compensation under Chap.
V A of the Industrial Disputes Act, No. 14 of 1947 (hereinafter referred to as the Central Act No. 14).
Though this application was headed as application for reinstatement and compensation etc.
, there was no prayer for reinstatement and Bapat was only content to ask for a sum of Rs. 2,500 by way of compensation.
While this application was pending, Bapat was, as already indicated, dismissed on July 31, 1959.
Thereupon he filed another application under section 16 of the Act on August 19, 1959.
In this application he prayed for reinstatement or in the alternative for full com pensation amounting to Rs. 2,500 and such other relief as he might be entitled to.
The main contention of the appellant before the Assistant Commissioner of Labour was that the Act did not apply to it and 591 therefore the Assistant Commissioner had no jurisdiction to proceed in the matter.
The Assistant Commissioner held that the Act applied and he had jurisdiction to deal with the matter.
He therefore gave relief by setting aside the order of dismissal and directing that the employer should pay Rs. 2,000 as compensation and wages from the date of dismissal to the date of his order.
This order was taken in revision by the appellant to the State Industrial Court at Nagpur, and the main contention again urged there was that the Act did not apply to the appellant and the Assistant Commissioner had no jurisdiction to deal with the matter.
This contention did not find favour with the State Industrial Court with the result that the revision was dismissed.
The appellant then filed a petition under Articles 226 and 227 of the Constitution in the High Court, and the same contention was raised that the Act did not apply and the Assistant Commissioner had no jurisdiction in the matter.
The High Court held on a construction of the relevant provisions of the Act and the notification issued thereunder that the Act was applicable and in consequence the writ petition was dismissed.
The High Court having refused to give leave to appeal to this Court, the appellant obtained special leave from this Court; and that is how the matter has come before us.
Section 1 of the Act came into force on June 2, 1947, andas provided by section 1(3) thereof, the rest of the Act came into force on November 21, 1947, on a notification being issued by the State Government in that behalf.
Section 1(3) lays down that "the State Government may by notification bring the remaining sections or any of them into force in such area or industry and on such date as may be specified in the notification.
" By virtue of the power conferred on the State Government by section 1(3) the following notification was issued on November 2, "In exercise of the powers conferred by sub section (3)of section 1, of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947, the Provincial Government are pleased to direct that sections 2 to 61 of the said Act shall come into force on the 21st November 1947, in all the industries except the following namely : (i) Textile industry.
(ii) Employment in any industry carried on by or under the authority of the Central Government 592 by an Indian State Railway or by a Railway Company operating an Indian State Railway.
(iii) Mines.
(iv) Saw Mills.
" It is the interpretation of this notification which calls for consideration in the present appeal.
The appellant 's contention is that by this notification, the Act was applied as from November 21, 1947, to all industries except four specified therein; and of these, the third was mines.
It is urged on behalf of the appellant that when the notification provided for the application of the Act to .all industries except four which were excepted it was exempting the mining industry by the third item of exemption.
The nlining industry according to the appellant will include the head office, for as the High Court says, "it is not disputed that the Head Office is a part of integrated activity of the petitioner company which carries on the business of producing coal and its sale and supply to its various customers.
" The argument is that the head office at Nagpur being a part of integrated activity of carrying on the mining industry by the appellant, the head office was equally exempt from the application of the Act by the notification in question.
If that is so, no application under section 16 of the Act could be made by Bapat to the Assistant Commissioner of Labour.
It is also pointed out on behalf of the appellant that Bapat would have a remedy under the Central Act No. 14 of 1947 which came into force earlier than the Act from April 1, 1947, though the procedure for obtaining relief under that Act would be different namely, through a reference by the appropriate Government under section 10 of the Central Act No. 14 of 1947.
The High Court however held that what was exempted by the third item in the notification was not the head office of a mine but the mine itself and no more.
Consequently the employees at the head office of the appellant were governed by the Act.
This view of the High Court is being supported by the respondents before us, and it is urged that the notification uses the word " mines" and not the words "mining industry" in the exemption part and therefore what was exempted from the Act were merely the coal mines where mining operations were carried on and not the mining industry, which may include the head office also.
We are of the opinion that the contention raised on behalf of the appellant is correct, and what the notification exempted was the mining industry from the operation of the Act.
In this %connection we may refer to the following words in the notification 5 93 namely, "the said Act shall come into force on the 21st November, 1947 in a11 the industries except the following".
Grammatically the word "industries" must be understood as following the word"following" appearing in the above sentence.
Thus what the notification in effect said was that the said Act shall come into force on 21st November 1947 in all the industries except the following, industries.
It has however, been urged that if that was so, it was not necessary, for example, in the first item of examption to use the words "textile industry", and it would have been sufficient to use the word "textile".
All that we need say is that the notification is not a work of art and has to be read in its tenor without trying to find out why the word "industry" was used in the first item and why the same was not used in the third and fourth items, which deal with "Mines" and "Saw Mills" respectively.
Grammatically, however, this part of the notification clearly says that the Act would apply to all industries except the four industries specified therein for the purpose of exemption.
These four exemptions include the industry of mines.
We see no difference between the words "mining industry" and "industry of mines", for they mean the same thing, namely, the industry which is concerned with mines.
If therefore the notification exempted the industry of mines or the mining industry it cannot be said that it merely exempted that part of the said industry of mines or mining industry which consisted of raising coal at the colliery and did not include the head office thereof.
As we have already indicated, the High Court has said that "it is not disputed that the head office is a part of integrated activity of the petitioner company which carries on the business of producing coal and its sale and supply to its various customers".
Therefore, when the industry of mines or the mining industry was exempted from the operation of the Act, the exemption applied not only to that part of the industry which consisted of raising coal at the colliery but also to that part of it which consisted in the sale of coal and its supply to customers and would thus include the head office also.
As we read the notification we see no escape from the conclusion that what was exempted from the application of the Act was the industry of mines or the mining industry and that would include not only the colliery where the coal was raised but also the head office from where the coal was sold 'and distributed to the customers.
It now remains to refer to two cases on which reliance was placed by the High Court.
The first is Messrs. Godavari Sugar Mills Ltd. vs D. K. Worlikar(1).
In that case this Court held (1) ; 5 9 4 that the notification under challenge there did not apply to the head office of the Sugar Mills.
That decision turned on the actual words of the notification and is of no assistance to the respondents.
It was pointed out in that case that if the notification had merely used the words "sugar industry" it would have been possible to construe that expression in a broader sense having regard to the wide definition of the word "industry"; but the notification had deliberately adopted a different phraseology and had brought within its purview not the sugar industry as such but the manufacture of sugar and its by products.
The words of the notification in that case were "the said Act shall apply to the following industry, namely, the manufacture of sugar and its by products".
Therefore on the words of the notification in that case, the wide implication which might have arisen if the notification had merely stated that the Act applied to the sugar industry was cut down by the specific words in the notification, namely, manufacture of sugar and its by products, which would clearly apply only to a part of sugar industry which dealt with the manufacture of sugar and the by products and would not apply to the head office which did not deal with the actual manufacture but dealt with the consequent steps following on the manufacture viz., sale and distribution to customers.
In the present case the notification clearly applied to the industry of mines which in our opinion is nothing different from mining industry and must therefore take in the entire industry including the raising of coal from the colliery as .well as its distribution, sale and supply to the customers.
That case therefore is of no help to the respondents.
The next case to which reference is made is Messrs. Serajuddin and Company vs Their workmen(1).
In that case a dispute relating to the head office of a mining company was referred by the Government of West Bengal to the industrial tribunal and a question arose whether the Government of West Bengal was the appropriate government within the meaning of section 2 (a) (i) of the Central Act No. 14 of 1947.
It was held that the West Bengal Government was the appropriate government and the decision turned on the interpretation of section 2 (a) (i) of the said Act which defined "appropriate government".
The words which came in for interpretation were "in relation to an industrial dispute concerning a banking or an insurance company, a mine, an oil field, or a major port".
It was held that the word "mine" as used in section 2 (a) (i) of the Central Act No. 14 of 1947 referred to a mine as defined in the Mines Act and that a dispute with reference to the head office of a mine was not a dispute concerning the mine which (1) [1962] 3 Supp.
S.C.R. 934.
5 9 5 must mean a mine as defined in the Mines Act.
That case also is of no help to the respondents for here we are not concerned with the word "mine '; what we are concerned with is whether the exemption clause in the notification which exempts the industry of mines or the mining industry will take in the head office.
The words therefore in the present notification are different and the decision in that case is of no help.
We have no doubt that when the notification exempts the industry of mines or the mining industry which in our opinion mean the same thing, the exemption includes the he ad office also which must be treated as an integral part of the mining industry, for it deals with the subse quent steps taken to dispose of, in this case, the coal raised from the colliery.
Learned counsel for the appellant wished to argue that the head office carried on other activities besides the activity of selling coal raised from the colliery.
We have not allowed him to raise this point for this was not raised in the High Court.
We have already referred to the observation of the High Court that it was not disputed that the head office was a part of integrated activity of the appellant company which carried on the business of producing coal and its sale and supply to its various customers.
It was not even the case of the respondents in reply in the High Court that the head office carried on other activities besides the sale and distribution of the coal produced in the colliery.
In the view we have taken of the notification and its interpretation we are of opinion that the Assistant Commissioner of Labour had no jurisdiction under the Act to deal with the application of Bapat.
In this view of the matter the appeal must be allowed and the orders of the High Court, the State Industrial Court and the Assistant Commissioner of Labour are set aside.
We therefore direct the dismissal of the application under section 16 of the Act.
In the circumstances we pass no order as to costs.
Appeal allowed.

summary/full:
The appellant was a mining company with its head office at Nagpur.
The business of the head office was to look after the sale of coal extracted from the collieries.
An employee of the company working in the head office made applications under section 16 of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947, to the Assistant Commissioner of Labour, Nagpur.
The company objected that by virtue of the notification under section 1(3) of the Act the mining industry had been exempted from the operation of the Act including section 16 and therefore the Assistant Labour Commissioner had no jurisdiction.
The authorities under the Act as well as the High Court under articles 226 and 227, re jected the company 's contention.
The High Court took the view that what was exempted by the third item in the notification was not the head office of a mine but the mine itself and consequently the employees of the head office were governed by the Act.
The company appealed to the Supreme Court by special leave.
HELD : The notification in question said that the Act would come into force on 21st November, 1947 "in all the industries except the following" and then went on to name four industries the third one being 'Mines '.
After the word 'following ' the, word industries must be read and thus read the notification in effect said the Act would come into effect on the given date in all industries except the industries mentioned.
Therefore it was not only mines but the mining industry itself that was exempted from the operation of the Act.
[593 A B, D E] If the notification exempted the industry of mines or the mining industry it could not be said that it merely exempted that part of the said industry of mines or mining industry which consisted of raising coat at the colliery and did not include the head office thereof.
As the High Court said, the head office was part of the integrated activity of the company.
Therefore when the mining industry was exempted from the operation of the Act the exemption applied not only to that part of the industry which consisted of raising coal at the colliery but also to that part of it which consisted in the sale of coal and its supply to the customers and would thus include the head office also.
[593 E G] M/s.
Godavari Sugar Mills Ltd. vs D. K. Worlikar, A.I.R. and M/s. Serajuddin and Co. vs Their Workmen, [1962] 3.
S.C.R. 934, distinguished.
On the above view the Assistant Labour Commissioner had no jurisdiction under the Act to deal with the matter in question.
[595 E]


judgement:
Civil Appeal No. 842 of 1964.
Appeal by special leave from the judgment and order dated February 19, 1963 of the Kerala High Court in Income tax Referred Case No. 23 of 1962.
R. Ganapathy Iyer and B.R.G.K. Achar and R. N. Sachthey, for the appellant.
675 A. V. Viswanatha Sastri and R. Gopalakrishnan, for the respondent.
The Judgment of the Court was delivered by Subba Rao, J.
The respondent, the South India Bank Limited, Trichur, is a banking company.
This appeal is concerned with the assessment year 1956 57, corresponding previous year being the calendar year 1955.
During the accounting year the Bank received a sum of Rs. 44,720/ towards interest in respect of taxfree Cochin and Travancore Securities.
During the course of the assessment of its income to tax, it claimed that rebate should be allowed on the entire sum of Rs. 44,720/ received as interest from the said securities.
But, the Income tax Officer, while completing the assessment, arrived at the figure of Rs. 33,444/ as the sum representing two items, viz., (i) reasonable sum expended by the assessee in realizing the said interest; and (ii) the interest payable on the money borrowed for the purpose of investment.
After deducting the said sum from the interest receivable from the said securities, he granted only a sum of Rs. 7,276/ as rebate for income tax.
On appeal, the Appellate Assistant Commissioner upheld the view of the Income tax Officer.
On a further appeal, the Income tax Appellate Tribunal, Madras Bench, held that the Bank was entitled to a, rebate on the gross amount of interest amounting to Rs. 44,720/ .
At the instance of the Department, the Tribunal referred the following question to the High Court of Kerala for its decision : "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that Explanation to section 8 is not applicable in this case and that the entire interest of Rs. 44,720/ earned by the assessee from securities issued by the former Native States, etc. is entitled to rebate of income tax." A Division Bench of the High Court expressed the opinion that the entire interest of Rs. 44,720/ was entitled to rebate for income tax under the notification issued by the Central Government in exercise of its powers under section 60 A of the Indian Income tax Act, 1922.
Hence the appeal.
Mr. R. Ganapathy Iyer, learned counsel for the Revenue, argued that under section 8 of the Indian Income tax Act, income tax was computed under the head "interest on securities" in respect of the interest received by an assessee on any government securities minus the expenditure incurred by him to realise the same in 676 terms of the first proviso and the Explanation thereto, that when under the third proviso the assessee was exempted from paying tax on the interest receivable on any securities of State Government issued income tax free, he was only exempted from such tax payable by him if it was not so exempted.
To put it differently, his argument was that the exemption under the third proviso was only in regard to that part of the interest which was taxable but for the exemption.
His further contention was that the notification issued by the Central Government under section 60A of the Income tax Act did not enlarge the scope of the exemption but that the said notification must be construed only in terms of section 8 of the Income tax Act.
Mr. A. V. Viswanatha Sastri, learned counsel for the respondent, argued that the substantive part of section 8, read with the first proviso and the Explanation thereto, had no application to securities issued income tax free and that the interest from the State Government securities was governed by the third proviso which did not provide for any deduction from the interest receivable from such securities for the purpose of income tax.
Further he sought to sustain the order of the High Court on the ground that the interest in question was solely governed by the notification issued by the Central Government whereunder the entire interest receivable from such securities was exempted from income tax.
As we agree with the High Court on the construction of the notification issued by the Central Government, we do not propose to express our opinion on the rival contentions of the parties based upon the provisions of section 8 of the Income tax Act.
Section 8 of the Income tax Act provides for the computation of income and deductions therefrom under the head "interest on securities".
Section 60 of the Act confers a power on the Central Government to make an exemption, reduction in rate, or other modifications in respect of income tax in favour of any class of income or in regard to the whole or any part of any income of any class of persons.
This power is conferred on the Government to meet special situations de hors section 8.
If section 8 of the Income tax Act makes an exemption in respect of a particular income, there is no scope or occasion for invoking the special power conferred on the Central Government under section 60A of the Income tax Act.
Unless we accept the contention that the notification under section 60A was issued by the Central Government in superabundant caution to cover the same ground occupied by section 8 we need not attribute any such redundancy to the Central Government we do not see any reason why the notification should not be construed on its own 677 terms in its application to the question of rebate raised in this, case.
The said notification reads : "No income tax shall be payable by an assessee on the interest receivable on the following income tax free loans issued by the former Government of Travancore or by the former Government of Cochin, provided that such interest is received within the territories of the State of Travancore Cochin and is not brought into any other part of the taxable territories to which the said Act applies.
Such interest shall, however, be included in the total income of the assessee for the purposes of Section 16 of the Indian Income tax Act, 1922 It is common case that this notification applies to the securities in question.
It will be noticed that this notification does not refer to the provisions of section 8 of the Income tax Act at all.
It gives a total exemption from income tax to an assessee in respect of the interest receivable on Income tax ' free loans mentioned therein.
It gives that exemption subject to two conditions, namely, (i) that the interest is received within the territories of the State of Tranvancore Cochin, and (ii) that it is not brought into any other part of the taxable territories.
It includes the said exempted interest in the total income of the assessee for the purpose of section 16 of the Income tax Act.
Shortly stated, the notification is a self contained one; it provides an exemption from income tax payable by an assessee on a particular class of income subject to specified conditions.
Therefore, there is no scope for controlling the provisions of the notification with reference to section 8 of the Income tax Act.
The expression "interest receivable on income tax free loans" ' is clear and unambiguous.
Though the point of time from which the exemption works is when it is received within the territories of the State of Travancore Cochin, what is exempted is the interest receivable.
"Interest receivable" can only mean the amount of interest calculated as per the terms of the securities.
It cannot Jr obviously mean interest receivable minus the amount spent in receiving the same.
We, therefore, hold, agreeing with the High Court, that no income tax is payable in respect of the entire interest of Rs. 44,720/ earned by the assessee from securities issued by the former native States.
In the result, the appeal fails and is dismissed with costs.

summary/full:
The respondent was a banking company.
During the accounting year for the assessment year 1956 57 the Bank received a certain sum towards interest in respect of tax free securities, and claimed rebate for the whole amount under the notification issued by the Central Government in exercise of its power under section 60 A of the Indian Income tax Act, 1922.
The Income tax Officer however, while completing the assessment allowed rebate only on the amount of interest that remained after deduction of sums expended by the assessee in realising the said interest and the interest payable on the money borrowed for the purpose of investment.
The Appellate Assistant Commissioner upheld the order of the Income tax Officer but the Tribunal held that the respondent was entitled to rebate on the gross amount of interest.
In reference, a Division Bench of the High Court upheld the Tribunal 's view; the Commissioner of Income tax appealed to this Court.
It was contended for the Revenue that the exemption under the third proviso to section 8 was only in regard to that part of the interest which was taxable but for the exemption.
The further contention was that the notification issued by the Central Government under section 60 A of the Income tax Act did not enlarge the scope of the exemption but that the said notification must be construed only in terms of section 8 of the Income tax Act.
HELD : The notification had to be construed on its own terms in its application to the question of rebate raised in the present case.
It is not intended to cover the same ground occupied by section 8, and there is no scope for controlling the provisions of the notification with reference to section 8.
The expression 'interest receivable on income tax free loans ' in the notification is clear and unambiguous, and can only mean the amount of interest calculated as per the terms of the securities.
It cannot obviously mean interest receivable minus the amount spent in receiving the same.
No income tax was therefore payable in respect of the interest by the assessee from the securities in question.
[677 E G]