judgement:
Appeal Nos.
691 97 of 1993.
From the Judgment and Order dated 3.9.1991 of the Rajasthan High Court in D.B. Civil Writ Petition Nos.
2221, 2353 and 3222 of 1990.
P.P. Rao, V.M. Tarkunde, Sushil K. Jain, A.P. Dhamija, Sudhanshu Atreya, Aruneshwar Gupta, Ms. Mamita Naroola and Pushpandra Singh Bhatia for the Appellants.
P. Chidambaram, Pallay Shishodia, A.P. Medh and R.M. Tahija for the Respondents.
The Judgment of the Court was delivered by VERMA, J.
Leave granted.
These appeals by special leave are by the State of Rajasthan and certain candidates whose promotions are adversely affected by the impugned judgment of the Rajasthan High Court.
The dispute in the writ petitions filed in the High Court was between members of the Rajasthan Educational Service belonging to Group 'E ' and Group 'F pertaining to their rival claims for promotion to the posts of principal Higher Secondary School, which posts are in Group 'D ', Section II of the Rajasthan Educational Service.
The dispute between these two groups arises from the fact that in the Rajasthan Educational Service Rules, 1970 (hereinafter referred to as 'the Rules '), the aforesaid two groups 'E ' and 'F ' are clubbed together as the feeder cadre for promotion to Group 'D ', Section II, even though in the service hierarchy the lowest is Group 'F ', above which is Group 'E ' and then comes Group 'D '.
In the writ petitions filed in the High Court, the writ petitioners challenged the constitutional validity of this provision in the Rules clubbing together Group 'E ' and Group 'F for the purpose of promotion to Group 'D '.
Section II on the ground that unequals had been equated.
The High Court has allowed these writ petitions and held that item No. 1(a) in column 5 under the head "Group 'D ' Section II" of 1091 Schedule 1 to the Rules as also Item No. 1 in Schedule 11 under the head 'Group 'D ' Section 11" in column 5 are unconstitutional, being violative of Articles 14 and 16 of the Constitution.
Accordingly, the High Court has quashed the orders promoting members of Group 'F to posts in the Group 'D '.
It is this judgment dated 3.9.1991 of the Rajasthan High Court which is challenged in these appeals by special leave by the State of Rajasthan and members belonging to Group 'F of the Service whose promotions are quashed.
Before we refer to the relevant provisions, mention may be made of the rival contentions before us Shri P.P. Rao, learned counsel for the aggrieved Group 'F teachers, advanced several arguments.
He submits that the Rules require preparation of a combined seniority list of an eligible members of Group 'E ' and 'F and prescribed the placing of those in Group 'E ' en bloc above the persons belonging to Group 'F; and it is also prescribed that amongst those selected for promotion to Group 'D ', the pre existing inter se seniority within the Group and also between the two groups is to be maintained, that is, all those from Group 'E ' are to rank above those from Group 'F. He submits that the interpretation and working of the Rules in this manner, which is the case of the State Government, is in consonance with Articles 14 and 16 of the Constitution.
His next submission is that reservation of a percentage of the promotion quota to be filled exclusively on the basis of merit does not violate the guarantee of equality since it promotes the object of greater efficiency as those considered in the merit quota are all qualified and eligible for promotion.
His further submission is that Rule 25(5) applies to promotion to the next higher grade from the lowest grade while Rule 25 (6) applies to promotions to all other higher grades.
In other words, for promotion from Group 'F to Group 'E ', Rule 25(5) applies while for promotion from Group 'F directly to Group 'D ': Rule 25(6) applies.
He also submitted that Rule 23A does not apply where promotion to a higher grade is from more than one grade.
Shri Aruneshwar Gupta, appearing for the State of Rajasthan, adopted the arguments of Shri Rao.
He also submitted that the writ petitioners having appeared for interview before the D.P.C. and taken their chance, they are precluded from making the challenge when they failed to get selected.
Shri V.M. Tarkunde, who appeared for one of the aggrieved appellants, supported Shri Rao and made some more submissions.
Shri Tarkunde submitted that the difference between members of Group 'F and Group 'E ' is not substantial since both of them had been 1092 functioning as Headmasters and discharging similar duties so that they were equally suitable and qualified for promotion as Principal of a Higher Secondary School.
Shri Tankunde submitted that no person belonging ' to Group 'E ' found suitable for promotion to Group 'D ' was left out and, therefore, filling the remaining vacancies from amongst suitable and qualified persons belonging to Group 'F ' cannot be violative of the rights, if any, of those in Group 'E ' who were not promoted because they were not found suitable for promotion.
Learned counsel also submitted that qualitatively those promoted from Group 'F ' were, according to the service record, not inferior to persons lower down in Group 'E 'who had not been selected and the principle of equation adopted was fair to all.
It was also shown with reference to the particulars of those not selected for promotion from Group 'E ' and those found suitable for promotion in Group 'F ' that the principle adopted and applied was fair and reasonable, with no element of arbitrariness.
In reply, Shri Pallay Shishodia, learned counsel for the respondents, who arc persons not selected for promotion from Group 'E ' to Group 'D ', attempted to support the impugned judgment.
In all, there were 14 such persons who filed the three writ petitions in the High Court.
The main argument of Shri Shishodia is that ex facie clubbing of Group 'F ', a lower cadre, with Group 'E ' for promotion to Group 'D '.
Section II, violates the equality clause.
Shri Shishodia contended that the explanation now given by the State Government to justify the promotions made is not based on a policy adopted and followed, but on the fortuitous circumstances which have emerged from the results of the promotions.
Shri Shishodia also submitted that the yardstick was applied equally rigidly to members of Group 'E ' as to those from 'F ' when it should have been more stringent for those in Group 'F ' which was a lower grade.
In order to satisfy ourselves that the policy adopted by the State Government was fair in its application to members of both Group 'E ' and Group 'F, we directed the State Government to produce the relevant material including the particulars of candidates selected for promotion and those not found fit for promotion in Group 'E ', as also the guidelines followed.
On examination.
of those details, we are satisfied that the net result of the working of the Rules in accordance with the principle adopted has been fair and it cannot be held that those not selected for promotion in Group 'E ' have been dealt with unfairly, in any manner, to justify 1093 quashing the promotions made at this selection.
We may, however, observe that it would be advisable for the State Government to lay down more clearly its policy for the future to avoid even the semblance of treating unequals as equals for the purpose of promotion, in consonance with the well known maxim that 'justice should not only be done but should also be seen to be done.
We do hope that the State Government would take advantage of the experience gained from this litigation to dispel the misapprehension from the minds of a section of its employees who think that the State 's action is not fair.
Obviously the High Court was denied the benefit of the material which the State Government placed before us, on our directions, which enabled us to remove the gloss of seeming inequality in the policy adopted under the Rules read with the guidelines for its working.
We may first refer to the relevant parts of the Rajasthan Educational Service Rules, 1970.
"PART II CADRE 4.
Composition and strength of the Service (1) The Service shall consist of the posts as arranged in the various groups specified in the Schedule.
(2) The nature of posts included in each group of the Service shall be as specified in Column 2 of the Schedules.
(3) The strength of posts in each group of the service shall be such as may be determined by the Government from time to time.
(4) There shall be separate cadres in each Group of Service specified in the Schedules I to VI such as Schedule I for Boys Institutions.
Schedule II for Girls Institutions.
Schedule III for Science and General Institutions.
1094 Schedule IV for Institutions of Language Studies.
Schedule V for Institutions of Physical Education, and Schedule VI for Institutions of Arts, Music and others.
The posts mentioned in each Group of service in a particular Schedule shall be interchangeable within the same Group of an), Schedule provided such posts carry identical time scale of pay.
Initial Constitution of the Service The Service shall consist of (a) all persons holding substantively the posts specified in the Schedule; (b) all persons recruited to the Service before the commencement of these rules; and (c) all persons recruited to the Service in accordance with the provisions of these rules.
PART III RECRUITMENT 6.
Methods of Recruitment Recruitment to the Service after the commencement of these rules shall be made by the following methods in the proportion indicated in column 3 of the Schedule, namely (a) by direct recruitment in accordance with provisions of Part IV of the rules; and (b) by promotion in accordance with the provisions of Part V of these rules: xxx xxx xxx 8C Power to remove difficulties : 1095 The State Government may for the purpose of removing any difficulty in regard to other matters regarding recruitment, probation, confirmation, promotion etc.
and in im plementation of provisions of rules 6A and 6B, make any general of specific order as it may consider necessary or expedient in the interest of fair dealing or in the public interest in consultation with the Commission where necessary. " PART V PROCEDURE FOR RECRUITMENT BY PROMOTION 23.
Eligibility and Criteria for Selection: (1) The persons holding the posts enumerated in Column 5 of the Schedules, shall be eligible, on the basis of merit and seniority cum merit, for promotion to posts specified in column 2 thereof subject to their possessing the qualifications and experience on the first day of the month of April of the year of selection as specified in column 6 thereof Provided that a member of the Service shall not be debarred from promotion for want to training qualifications.
XXX 23A: No officer shall be considered for promotion unless he is substantively appointed and confirmed on the next lower post.
If no officer substantive in the next lower post is eligible for promotion, officers who have been appointed on such post on officiating basis after selection in accordance with one of the methods of recruitment or under any Service Rules promulgated under proviso to Article 309 of the Constitution of India may be considered for promotion on officiating basis only in the order of seniority in which they would have been.
had they been 1096 substantive on the said lower post.
Procedure for selection on the basis of seniority cum merit: (1) As soon as it is decided that a certain number of posts shall be filled by promotion, the Director shall prepare a correct and complete list containing names not exceeding five times the number of vacancies, out of the senior most persons as mentioned in column 5 of the Schedule, who are qualified under the rules for pro notion to the posts concerned.
He shall forward this list alongwith their confidential rolls and personal files to th e Secretary to the Government in the Education Department.
xxx xxx xxx (2)(a) For the posts, appointments whereto are to be made by Government, a Committee consisting of the Chairman of the Commission or his nominee being a member thereof nominated by him, the Secretary to Government in the Education Department or the Special Secretary concerned nominated by him and the Special Secretary to Government in the Department of Personnel or his representative not below the rank of Deputy Secretary as member and the Director as Member Secretary, and for the posts, appoint ments whereto are to be made by the Director, a Committee consisting of a Member of the Commission nominated by the Chairman of the Commission, Deputy Secretary to Government in the Education Department and Deputy Secretary to Government in the Department of Personnel as members and the Director as Member Secretary shall consider the cases of all persons included in the list interviewing such of them as it may deem necessary and shall prepare a list containing names of suitable candidates upto twice the number of such posts as are indicated in sub rule (1).
Provided that in case any Member Secretary, as the case may be, constituting the Committee has not been appointed 1097 to the post concerned, the officer holding charge of the post for the time being shall be the Member or MemberSecretary, as the case may be, of the Committee.
(b) The Chairman or the Member of the Commission shall preside at all meetings of the Committee at which he is present.
(3) The Committee shall prepare a separate list containing names of persons who may be considered suitable to fill temporary or permanent vacancies already existing or are likely to occur till the next meeting of the Committee on a temporary or officiating basis and the list so prepared shall be reviewed and revised every year and shall remain in.
force until it is so reviewed or revised.
(4) The Committee may coopt an expert from outside to assist the Committee for selection of candidates for such posts as are to be filled by promotion.
(5) The names of the candidates selected as suitable shall be arranged in the order of seniority.
(6) The list prepared by the Committee shall be sent to the appointing authority together with the confidential rolls and personal files of the candidates included in them as also of those superseded, if any.
(7) Where consultation with the Commission is necessary the lists prepared in accordance with the sub rules (2) and (3) shall be forwarded to the Commission by the Appointing Authority alongwith xxx xxx xxx (8) The Commission shall consider the lists prepared by the Committee alongwith the other documents received from the Appointing Authority and unless it considers any change to be necessary to be made shall approve the lists but if the Commission considers such change as aforesaid to be necessary it shall inform the appointing authority of 1098 the new changes proposed by it and after taking into account the comments, if any, of the Commission the Appointing Authority may approve the list finally with such modifications, as may in its opinion, be just and proper. 25.
Revised Criteria, Eligibility and Procedure for promotion to Junior, Senior and other posts encadred in the Service: (1) As soon as the Appointing Authority determines the number of vacancies under rule regarding determination of vacancies of these rules and decides that a certain number of posts are required to be filled in by promotion, it shall, subject to provisions of sub rule (9), prepare a correct and complete list of the senior most persons who are eligible and qualified under these rules for promotion on the basis of seniority cum merit or on the basis of merit to the class of posts concerned.
(2) The persons enumerated in column 5 or the relevant column regarding "posts from which promotion is to be made", as the case may be, of the relevant Schedule shall be eligible for promotion to posts specified against them in Column 2 thereof to the extent indicated in Column 3 subject to their possessing minimum qualifications and experience on the first day of the month of April of the year of selection as specified in Column 6 or in the relevant column regarding "minimum qualification and experience for promotion", as the case may be.
(3) No person shall be considered for first promotion in the Service unless he is substantively appointed and confirmed on the lowest post in the Service.
After first promotion in the Service, for subsequent promotions to higher posts in the Service, a person shall be eligible if he has been appointed to such post from which promotion is to be made after selection in accordance with one of the methods of recruitment under any Service Rules promulagated under proviso to Article 309 of the Constitution of India.
1099 Explanation In case direct recruitment to a post has been made earlier than regular selection by promotion in a particular year, such of the persons who are or were eligible for appointment to that post by both the methods of recruitment and have been appointed by direct recruitment first, shall also be considered for promotion.
(4). (5)Subject to the provisions of sub rule (7), selection for promotion from the lowest post or category of post in the State Service to the next higher post or category of post in the State Service and for all posts in the Subordinate Services and in the Ministerial Services shall be made strictly on the basis of seniority cum merit from amongst the persons who have passed the qualifying examination, if any prescribed under these rules, and have put in at least five years ' service, unless a different period is prescribed elsewhere in these rules, on the first day of the month of April of the year of selection on the post of category of post from which selection is to be made: Provided that in the event of non availability of the persons with the requisite period of service of five years, the Committee may consider the persons having less than the prescribed period of service, if they fulfil the qualifications and other conditions for promotion prescribed eleswhere in these rules, and are found otherwise suitable for promotion on the basis of seniority cum merit.
(6)Selection for promoting to all other higher posts or higher categories of posts in the State Service shall be made on the basis of merit and on the basis of seniority cum merit in the proportion of 50:50 Provided that if the Committee is satisfied that suitable persons are not available for selection by promotion strictly on the basis of merit in a particular year, selection by promotion on the basis of seniority cum merit may be made in the same manner as specified in these rules.
1100 Explanation If in a Service, in any category of post, number of post available for promotion is an odd number then for purposes of determining the vacancies for selection by promotion on the basis of seniority cum merit and merit in the proportion of 50:50 the following cyclic order shall be followed The first vacancy by seniority cum merit, The subsequent vacancy by merit, The cycle to the repeated.
xxx xxx (10) Except as otherwise expressly provided in this rule, the conditions of eligibility for promotion, constitution of the Committee and procedure for selection shall be the same as prescribed elsewhere in these rules.
(11) (a) The Committee shall consider the cases of all the senior most persons who are eligible and qualified for promotion to the class of posts concerned under these rules, and shall prepare a list containing names of the persons found suitable on the basis of seniority cum merit and/or on the basis of merit, as the case may be, as per the criteria for promotion laid down in these rules, equal to the number of vacancies determined under rule relating to "Determination of vacancies" of these rules.
The list so prepared on the basis of seniority cum merit and/or on the basis of merit as the case may be, shall be arranged in the order of ' seniority on the category of posts from which .,election is made.
(b) The Committee shall also prepare a separate list on the basis of seniority cum merit and/or on the basis of merit, as the case may be, as per the criteria for promotion laid (town in the rules containing names of persons equal to the number of persons selected in the list prepared under (a) above to fill temporary or permanent vacancies, 1101 which may occur subsequently.
The list so prepared on the basis of seniority cum merit and/or on the basis of merit shall be arranged in the order of the seniority in the category of posts from which selection shall be made.
Such a list shall be reviewed and revised by the Departmental Promotion Committee that meets in the subsequent year and that such list shall remain in force till the end of the last day of the next year or till the Departmental Promotion Committee meets, whichever is earlier.
(c) Such lists shall be sent to the Appointing Authority together with annual Confidential Reports/Annual Performance Appraisal Report and other Service Record of all the candidates included in the lists as also of those not selected, if any.
Explanation For the purpose of selection for promotion on the basis of merit, officers with "outstanding ' or consistently "Very Good" record shall only be selected and their names arranged in the order of seniority." PART VI APPOINTMENT, PROBATION AND CONFIRMATION xxx xxx xxx 28.
Seniority : Seniority of persons appointed to the lowest post of the Service or lowest categories of posts in each of the Group/Section of the Service, as the case may be, shall be determined from the date of confirmation of such persons to the said post but in respect of persons appointed by promotion to other higher posts in the Service or other higher categories of posts in each of the Group/Section in the Service, as the case may be, shall be determined from the date of the if regular selection to such posts.
1102 Provided xxx xxx xxx (7) that the common seniority of persons appointed to posts mentioned in Group 'E ' and 'F ' for promotion to the posts in the Group 'D ' shall be determined with reference to the date of their substantive appointment.
The inter se seniority of person selected by the Commission or Committee shall be as indicated by the Commission or Committee.
litter se seniority of person , selected against departmental promotion quota shall be deter mined under rules 24 and 25; (8). . (9) that the persons selected and appointed as a result of a selection, which is not subject to review and revision, shall rank senior it) the persons who are selected and appointed as a result of subsequent selection.
Seniority inter se of persons selected on the basis of seniority cum merit and on the basis of merit in the same selection shall be the same as in the next below grade.
xxx xxx XXX "SCHEDULE 1" XXK XXX XXX Group 'D ' Section II S.No.
(Col. 1) 1 (a) Name of post Principal, Higher Sec.
(Col. 2) Sclioo1/BSTC/RTC (Boys) Method of recruitment 100% by promotion with percentage (Col. 3) Post or posts from which Group 'E ' & promotion is to be made 'E ' posts (Col. 5)" 1103 "SCHEDULE 11" xxx xxx xxx Group 'D ' Section II S.No.
(Col. 1) I (a) Name of post: Principal, Higher Sec.
(Col. 2) School/BSTC/RTC (Girls) Method of recruitment 100% by promotion with percentage (Col. 3) Post or posts from which Group 'E ' & promotion is to be made 'F ' posts (Col. 5)" Reference may be made also to the Circular dated 11.9.
1978 (Department of Personnel and Administrative Reforms Department of Personnel A Group II No. F.7(10)DOP/A 107 1 dated 11th September, 1978) relating to sub rule (6) of Rule 25; and the Circular dated 28.4.1979 (Department of Personnel (A II) No. F.7(10) DOP/A II/77 dated 28th April, 1979) and the Notification dated 30.11.1991 (Department of Personnel & Administrative Reforms Department of Personnel A II No. F.7(10)DOP/A II/77 dated 30th November, 1991), providing guidelines for selection on the basis of merit, relating to Explanation to sub rule (11) of Rule 25, issued by the State Government, wherein it was stated as under: Circular dated 11.9.1978 "Subject Promotion to certain categories of posts to be filled in on the basis of "Merit" and "Seniority cum Merit".
The existing sub rule (6) of the relevant rules regarding revised procedure for promotion, provides for promotion to certain categories of posts on the basis of "seniority cummerit" and "merit" in the ratio of 50:50.
These rules do not clearly indicate whether selections for such categories of post shall be made first on the basis or "seniority cummerit" or on the basis of "merit '.
The matter has been considered by the Government and 1104 the following procedure should be followed "The number of posts to be filled separately on the basis of seniority cum merit and merit should be determined in accordance with the Explanation below sub rule (6) of the rule laying down the revised criteria of eligibility, promotion etc.
Selection should first be made for filling up vacancies to be filled on the basis of seniority cum merit.
Thereafter persons should be selected on the basis of merit for filling up merit quota vacancies." xxx xxx xxx Circular dated 28.4.1979 " xxx xxx xxx It will be observed that henceforth officers with consistently "Very Good" or "Outstanding" record shall be considered for promotion on the basis of merit.
There will be only one category for the purpose of selection on the basis of merit." Notification dated 30.11.1991 "AMENDMENT" ' For the existing "Explanation below sub rule. . or sub rule (11),. . . shall be substituted by the following, namely: "Explanation: For the purpose of selection for promotion on the basis of merit no person shall be selected if he does not not have "Outstanding" or "Very Good" record in at least five out of the 7 years preceding the year for which D.P.C. is held.
" xxx xxx xxx" The High Court examined the scheme of these Rules and pointed out that even though the writ petitions before it concerned Schedule I to the Rules relating to the boys ' institutions, yet the principle was enqually 1105 applicable for Schedule II relating to the girls ' institutions, since the hierarchy of the grades in both the Schedules is the same.
The lowest grade in Schedule I is Group 'F '.
Item 1(a) of Group 'F is the post of Headmaster.
Secondary School for boys.
It is to be filled 50 per cent by direct recruitment and 50 per cent by promotion from the lower grade.
The minimum qualifications are prescribed in column 4 and the post or posts from which promotion is to be made is shown in column 5 which is teachers in grade 1, 11 and teachers grade I in Sections C, D, E, F of the Schedule appended to the Rajasthan Education Subordinate Service Rules, 1971.
The next higher grade is Group 'E ' which are posts of Headmaster, Higher Secondary School for boys under item 1(a) to be filled 100 per cent by promotion from Group 'F ' posts.
The minimum qualification and experience required for this grade is Master 's degree in addition to those prescribed for Headmasters Secondary School.
Accord ingly, only such of the Headmasters of Secondary School for boys belonging to Group 'F ' who possess Master 's degree in addition to the qualifications prescribed for that post are eligible for promotion as Headmaster, Higher Secondary School for boys under Groups 'E '.
The next higher grade is Group 'D ', Section II of Schedule I and in item 1(a) there under are the posts of Principal, Higher Secondary School/BSTC/RTC (Boys).
These posts are to be filled 100 per cent by promotion from Groups 'E ' and 'F ' posts; and the qualifications prescribed are the same as those for Headmaster of Higher Secondary School.
Above this grade is Group 'D ', Section I, in item 1 of which is the post of Inspector of Schools, which is to be filled 100 per cent by promotion from Group 'D ', Section II posts.
Then comes Group 'C ', above which is Group 'B ' which is the highest post of Joint Director of Education Range in Schedule I to be filled 100 per cent by promotion from Group 'C '.
From the hierarchy of posts in Schedule I indicated above, it is clear that the lowest grade of Group 'F ' in Schedule I is filled 50 per cent by direct recruitment and 50 per cent by promotion, while all the higher grades are filled entirely by promotion from the next lower grade, except for Group 'D '.
Section II, which is filled by promotion for Groups 'E 'and 'F taken together.
In other words, the posts of Principal.
Higher Secondary School in Group 'D ', Section II are filled 100 per cent by promotion from Groups 'E 'and 'F 'together, that is, Headmaster, Higher Secondary School 1106 and Headmaster, Secondary School; and those from Group 'F are considered only if they have the minimum qualifications prescribed for appointment to Group 'D ', Section II.
It is this clubbing of Groups 'E ' and 'F ' for promotion to Group 'D ', Section II which was successfully challenged in the writ petitions filed before the High Court.
The High Court has taken the view that clubbing of Groups 'F and 'E ' together for promotion to the next higher post in Group 'D ' section II, amounts to clubbing of unequals and the Rule to this extent is invalid.
The contention of the State has been rejected wherein it was indicated that a common seniority list was prepared of persons in Groups 'E ' and 'F with those in Group 'E ' being placed en bloc above those in Group 'F '; that persons in Group 'F ' were considered for promotion only after every one in Group 'E ' had been considered and vacancies remained to be filled on account of suitable persons not being found in Group 'E ' to fill those vacancies; persons form Group 'F were considered only then, subject to the prescribed qualifications for appointment to Group 'D '.
Section II; and the nature of functions of both the categories of Headmasters being similar, their equation for this purpose was considered to be reasonable.
The High Court did not accept this as sufficient justification to consider persons in Group 'F ' for filling the remaining vacancies in Group 'D ' Section II even when the remaining persons of Group 'E ' were not found suitable for promotion.
The High Court also appears to have overlooked the fact that all posts in Group 'D ', Section II being required to be filled by promotion, there was no other avenue to fill the remaining vacancies in Group Section II except the next lower cadre of Group 'F for want of adequate number of suitable person in Group 'E ' for appointment to Group 'D '.
The question really is : Whether the policy adopted by the State Government of first considering all the persons in Groups 'E ' for promotion to Group 'D ', Section II and promoting all found suitable, and then only considering the qualified persons in Group 'F 'for appointment to the remaining vacancies for want of suitable persons in Group "E ' for promotion, when the posts in Group 'D ' Section II are required to be filled 100 per cent by promotion, is invalid for any reason? It is in this perspective that the dispute between members of Group 'E ' and Group 'F ' of the Service raised in the present case has to be decided.
Obviously, the grievance of members of Group 'E ' can arise only if those in Group 'F ' are 1107 treated on par with Group 'E ' which is a higher grade or members of Group 'F ' get appointments by promotion in Group 'D ' which would otherwise have gone to those in Group 'E ' but for the rule making Group 'F also eligible for promotion to Group 'D ' by clubbing Groups 'E ' and 'F ' together for this purpose.
There can be no legitimate grievance to members of Group 'E ' in case vacancies remain to be filled in Group 'D ' which can be filled only by promotion, after every one in Group 'E ' has been considered and only those not found fit for promotion therein are left unpromoted.
The appointment to the remaining vacancies by promotion of members of Group 'P, the next lower cadre, possessing the prescribed qualifications and found suitable for promotion cannot result in inequality or injustice to those remaining in Group 'E ' on account of their unsuitability.
There is no other available avenue to fill the remaining posts in Group 'D ' by promotion.
There can be no legitimate claim of an unsuitable person for promotion to provide foundation for the challenge so made.
It is for this reason that we required the State Government to place before us the material indicating the procedure followed for making the selection for promotion to the posts in Group 'D ' Section II from Groups 'E ' and 'F ' of the Service.
It has been shown with reference to full particulars that it is only the vacancies in Group 'D ' remaining unfilled for want of suitable persons in Group 'E ' which are filled by appointment of persons found suitable in Group 'F ' who possess the prescribed qualifications and are also found outstanding.
It does appear to be the only feasible manner in which the remaining vacancies in Group 'D ' can be fined since promotion from the services is the only prescribed mode of filling of the posts in Group "D '.
Moreover, the nature of duties and functions of the post of Principal, Higher Secondary School in Group 'D ', Section II is similar to that of Headmaster of a Higher Secondary School or Secondary School, which are the posts held by persons in Groups 'E ' and 'F respectively.
That apart, an unsuitable person in Group 'E ' cannot claim placement above a qualified and suitable person in Group 'F ', when the nature of duties of both are alike and so is that of the higher post in Group D ' In order to assure ourselves that the principle adopted was fair and reasonable and so was its application in making the promotions to Group D ', Section II from Groups 'E ' and 'F, we also directed the filing of an affidavit by a senior officer giving all the relevant particulars in addition to 1108 production of a chart which would enable comparison of persons in Group 'E ' who were not found suitable for promotion to Group 'D ', Section II with those in Group 'F ' who were found fit for promotion on the basis of merit.
On a scrutiny of these particulars along with the facts stated in the affidavit of M.R. Advani, Deputy Legal Remembrancer, Education Department, Government of Rajasthan.
We are satisfied that the principle adopted and followed was fair and reasonable and does not result in any injustice to the persons not found fit in Group 'E ' for promotion.
The affidavit of M.R. Advani shows that the duties of the office of Principal as well as Headmaster are of a similar nature and there is no qualitative difference in the duties performed by persons belonging to Groups 'E ' and 'F '.
It has also been stated that the Reporting Officer for the purpose of annual performance appraisal of persons in Group 'E ' is the Principal and their Reviewing Officer is the District Education Officer, while in the case of persons belonging to Group 'F ', the Reporting Officer is the District Education Officer and the Reviewing Officer is the Deputy Director/Joint Director.
Prior to introduction of 10 + 2 Scheme, the Reporting Officer for Group 'E ' persons also was the District Education Officer and the Reviewing Officer was the Deputy Director/Joint Director.
This shows that the standard of their annual performance appraisal is also on par, being made in this manner.
Paras 10 and 11 of this affidavit dated 15.10.1992 read as under: "10.It is respectfully submitted that pursuant to the subrule (11) of Rule 25 of the 1970 Rules while considering the merits of candidates the Departmental Promotion Committee first considered all the candidates of category 'E. ' who were in the zone of consideration and every candidate who had 5 or more 'very good ' or 'outstanding ' report and not having any adverse report was selected on merit.
11.After considering all the candidates of category 'E ' the posts which were left unfilled were filled by considering the merits of candidates of category 'F '.
While considering the merits of category 'F ' candidates, first of all candidates having 5 or more :outstanding ' and 'very good ' ACR were selected.
If the number of vacancies are less, the merit list 1109 is prepared on the basis of those having 6 or an 7 ACRs to be 'outstanding ' or 'very good '.
For the year 1989 90 as sufficient vacancies were available in D 11 category all E and F category candidates were promoted who had required minimum merit." Along with the particulars relating to all the candidates from Groups 'E ' and 'F considered for promotion to Group 'D '.
Section II, an additional affidavit dated 21.10.1992 was filed on behalf of the State Government by B.C. Bairathi wherein para 4 is as under: "4.
It is respectfully submitted that it is evident from the statement that all candidates of category 'E ' who were in the zone of consideration and had 5 or more 'outstanding ' and 'very good ' reports and did not have any adverse reports have been selected on merits.
The leftout candidates in group 'E ' are only those who had less than 5 'outstanding 'or 'verygood 'reports and they could not have been selected on merits pursuant to the express provisions of Rule 25(11) of the 1970 Rules.
It is also evident from the said statements that all candidates of category 'F who have been appointed had 5 or more outstanding 'and 'very good 'ACRs and none of them had less than 5 'outstanding ' or 'very good ' ACRs.
" The Explanation to Rule 25(11) as amended vide Notification dated 30.11.1991 prescribes that for such promotion no one having less than 5 outstanding/very good annual confidential reports in the immediate preceding 7 years is to be considered fit for promotion.
The facts clearly show that every one in Group 'E ' satisfying this criterion has been selected and those not found suitable in Group 'E ' are persons who do not satisfy this criterion.
Vacancies remained in Group 'D '.
Section II which could not, therefore, be filled from persons in Group 'E ' since suitable persons amongst them were not available.
The only manner in which the remaining vacancies in Group 'D ', Section II could be filled, since all vacancies were to be filled by promotion according to the Rules, was by promoting the outstanding persons from Group 'F. The duties and functions of persons in Groups 'E ' and 'F being of a similar nature, consideration of persons 1110 from Group F ' for filling the remaining vacancies in this situation was neither unreasonable nor arbitrary but the only available mode left for filling the remaining vacancies.
It also appears that the outstanding persons selected from Group 'F ' were qualitatively found superior to those remaining unselected in Group 'E ', particularly in view of the express requirement of the Explanation to Rule 25(11) which the unsuitable persons in Group 'E ' did not satisfy.
In Chiranjit Lal Chowdhuri vs The Union of India and Others, ; , while dealing with the right to equality, Fazil Ali.
J. indicated that a doctrinaire approach is not warranted and a passage from Constitutional Law by Prof. Willis was cited as a correct proposition of the principle underlying this guarantee where in it was stated as under: ". .
Mathematical nicety and perfect equality are not required.
Similarity, not identity of treatment, is enough.
If any state of facts can reasonably be conceived to sustain a classification, the existence of that state of facts must be assumed.
One who assails a classification must carry the burden of showing that it does not rest upon any reasonable basis." (p.877) In Mohd. Hanif Quareshi & Others vs The State of Bihar, ; , while dealing with the meaning, scope and effect of Article 14, it was reiterated that 'in order to sustain the presumption of constitutionality the Court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assumed every state of facts which can be conceived existing at the time of legislation '.
The validity of the impugned Rules has to be adjudged in this background.
The challenge to the validity, upheld by the High Court, was on the only ground that clubbing of Groups 'E ' and 'F ' for promotion to Group 'D ', Section II was invalid, since unequals had been equated for the purpose of promotion.
From the undisputed facts, it is clear that the total number of posts in Group 'D ', Section II is nearly the same as the total number of posts in Group 'E ', while the total number of posts in Group 'F ' is about five times thereof.
Since appointment to Group 'D ', Section II is 100 per cent by promotion.
It is a distinct possibility, as in the present case, that the requisite number of suitable candidates from Group 'E ' may 1111 not be available to fill all the existing vacancies in Group 'D ', Section II.
In such a situation, all appointments to Group 'D ', Section II posts being by promotion, the only available option is to fill the remaining vacancies by selection of outstanding persons from Group 'F.
This is more so because the nature of duties and functions of the posts in Groups 'E ' and 'F ' is similar and so is that of the posts in Group 'D ' Section II.
In such a situation, the provision made.
in the Rules for promotion to Group 'D '.
Section II from Group 'E ' as well as Group 'F ' does not in any manner offend the guarantee of equality in the Constitution.
The manner in which the Rule is worked, that is, consideration first of all persons in Group 'E ' for promotion to Group 'D ', Section II and moving to Group 'F ', if necessary, for filling only the remaining vacancies by selecting outstanding amongst them who satisfy the requirement of Explanation to Rule ensures fairness lo all while also maintaining efficiency in the administration.
If the need arises to look to Group 'F ' for filling the remaining vacancies on account of want of suitable persons in Group 'E ', those found unsuitable in Group 'E ' cannot complain of discrimination if persons duly qualified and more suitable performing similar functions are selected, since the unsuitable left out in Group 'E ' are excluded from the competition on the ground of unsuitability, and cease to remain contenders for the remaining posts.
These provisions in the Rules are, therefore, not in any manner violative of Articles 14 or 16 of the Constitution.
Reference may also be made to Md. Usman & Ors.
vs State of Andhra Pradesh & Ors.
, [1971] Supp.
S.C.R. 549, wherein clubbing of UDCs and LDCs for recruitment to posts of Grade II Sub Registrars was upheld as valid.
The contention there was that the rule permitting the clubbing violated Article 14 of the Constitution by treating unequals as equals.
The High Court struck down the rule as violative of Article 14, but this Court reversed that decision and upheld validity of the rule.
It was held by this Court that the promotion based on the principles of seniority cum merit, even though the position of UDC is superior to that of LDC, satisfies the guarantee of equality.
In the present case, this decision applies with greater force since the selection from Group 'F ' is based purely on merit and it is only the outstanding from the Group who are promoted.
1112 For the aforesaid reasons, we allow the appeals and set aside the impugned judgment of the High Court with the result that the writ petitions filed in the High Court stand dismissed.
No costs.
R.P. Appeals allowed.

dataset_name: IN-Abs

summary/full:
Rajasthan Educational Service Rules, 1970 provides for appointment to Group 'DI, Section 11 of the Rajasthan Education Service, consistIng of the posts of Principal of Higher Secondary School/BSTC/RTC (Boys), 100 per cent by promotion from qualified members of Group 'El comprising the posts of Headmaster of Higher Secondary School for boys and from those of Group IF ' representing the posts of Headmasters of Secondary School of boys.
Appointment to Group 'El posts is made 100 per cent by promotion of the members of Group IF '.
The persons belonging to Group 'El, who were not selected for promotion to Group 'DI, Section II, filed writ petitions before the High Court challenging the constitutional validity of the provisions In the Rules clubbing together Groups El and IF ' for the purpose of promotion to Group 'DI, Section 11.
The High Court held the provisions as violative of Articles 14 and 1088 16 of the Constitution, allowed the writ petitions and quashed the orders promoting members of Groups IF ' to the posts in Group ID ', Section II.
The State and the affected members of Group 'F ' of the Rajasthan Education Service filed the appeals by special leave.
It was contended on behalf of members of Group IF ' and the State that the provision clubbing groups IF ' and 'E ' as feeder cadre for promotion to Group 'D ' Section 11, is in consonance with Articles 14 and 16 of the Constitution inasmuch as the Rules require preparation of a combined seniority list of all eligible members of Groups 'E ' and IF ' placing the former en bloc above the latter, and among those selected for promotion to Group 'DI Section 11, all those from Group 'E ' are to rank above those from Group IF '; and as no person belonging to Group 'E ' found suitable for promotion to Group ID ' was left out, filling the remaining vacancies from amongst suitable and qualified persons belonging to Group 'F ' cannot be violative of rights, if any, of the writ petitioners inasmuch as qualitatively those promoted from Group 'F ' were not inferior to the petitioners and the principle of equation adopted was fair to all.
Allowing the appeals, this Court, HELD: I.1.
The manner in which the Rule is worked, that is, consideration first of all persons in Groups 'E ' for promotion to Group 'D ', Section 11, and moving to Group IF ', if necessary, for filling only the remaining vacancies by selecting outstanding amongst them who satisfy the requirement of Explanation to Rule 25(11) (i.e. who have 5 outstanding/ 'very good ' annual Confidential Reports in the immediate preceding 7 years), ensures fairness to all while also maintaining efficiency in the administration.
[pp.1109E F; 1111B C] 1.2.
The total number of posts in Group 'DI, Section II is nearly the same as the total number of posts in Group 'E ', while the total number of posts in Group IF ' is about rive times thereof.
Since appointment to Group 'D ', Section If is 100 per cent by promotion, it is a distinct possibility as.
in the instant case, that the requisite number of suitable candidates from Group 'E ' may not be available to rill all the existing vacancies in Group 'D ' Section 11.
In such a situation, the only available option is to rill the remaining vacancies by selection of outstanding persons from Group 'F '.
This is more so because the nature of duties and functions of the posts in 1089 Group 'E ' and 'F ' is similar and so is that of the posts in Group 'D ' Section 11.
The High Court overlooked this fact.
[pp.1110G H; 1111A B] 13.
If the need arises to look to Group IF ' for filling the remaining vacancies on account of want of suitable.
person in Group 'El, those found unsuitable in Group 'E ' cannot complain of discrimination if persons duly qualified and more suitable performing similar functions are selected, purely on the basis of merit, since the unsuitable left out in Group 'El are excluded from the competition on the ground of unsuitability and cease to remain contenders for the remaining posts.
[pp.1111C E, G H] 1.4.
The provisions made in the Rules for promotion to Group ID ' Section II, from Group 'E ' as well as Group IF ' are therefore, not in any manner violative of Articles 14 or 16 of the Constitution.
[pp.1111B E] Chiranjit Lal Chowdhuri vs The Union of India and Ors.
, ; ; Mohd Hanif Quareshi & Ors.
vs The State of Bihar, ; and Md. Usman & Ors.
vs State of Andhra Pradesh & Ors.
, [1971] Supp.
S.C.R. 549, relied on.
Constitutional Law by Prof. Willis; cited.
From the affidavit of a senior officer giving all the relevant particulars alongwith a chart indicating the comparative position of persons in Group 'E ' not found suitable for promotion to Group ID ' Section [ with those in Group IF ' who were found fit for promotion on the basis of merit, it was established that the principle adopted and followed was fair and reasonable and does not result in any injustice to the persons not found fit in Group 'E ' for promotion; the duties of the office of Principal as well as Headmaster are of a similar nature and there is no qualitative difference in the duties performed by persons belonging to Groups 'E ' and IF '; and that the standard of annual performance appraisal of the members of the two groups is also on par.
[pp.1107G H; 1108A D] 3.
It would be advisable for the State Government to lay down more clearly its policy for the future to avoid even the semblance of treating unequals as equals for the purpose of promotion, in consonance with the well known maxim that 'justice should not only be done but should also be seen to be done '.
[p.1093A B] 4.
The judgment of the High Court* is set aside with the result that 1090 the writ petitions filed in the High Court stand dismissed.
[p.1112A] * Miss Kusum Tandon vs State of Rajasthan, etc., etc., D.B. Civil Writ Petition No. 2221 of 1990 on the file of Rajasthan High Court, decided on 3.9.1991.


judgement:
Appeal No. 265 of 1956.
Appeal from the judgment and order dated August 26, 1954, of the Calcutta High Court in Income tax Reference No. 107 of 1952.
S.Mitra, Dipak Choudhry and B. N. Ghosh, for the appellants.
C.K. Daphtary, Solicitor General of India, K. N. Rajagopala Sastri, R. H. Dhebar and D. Gupta, for the respondent.
356 1959.
March 16.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
Messrs.
Mcgregor & Balfour, Ltd., Calcutta (hereinafter called the Company) is a Company incorporated in the United Kingdom.
Its head office is also there.
It, however, does business in India also.
In some of the previous years, the Company was required to pay excess profits tax both in England and in India.
When it did so, it obtained deduction of the amounts from its profits and gains for purposes of the Indian lncome tax Act, under s.12(2) of the Indian Excess Profits Tax Act.
In the assessment year 1947 1948 which corresponded to the accounting year of the Company ending on October 31, 1946, 'it obtained a repayment of Rs. 2,31,009 out of the excess profits tax paid in England.
This was under section 28(1) of 4 & 5, Geo.
VI, Ch. 30.
For purposes of the levy of the Indian Income tax, this sum was included in the taxable profits of the Company by the Income tax Officer.
He purported to act under section 11(14) of the Indian Finance Act, 1946 (hereinafter called the Act).
The income of the Company in India was held to be Rs. 6,34,937 (including the sum of Rs. 2,31,009) while the in ' come outside the taxable territory was held to be Rs. 4,29,620.
Applying section 4A(c)(b) of the Indian Income tax Act, the Income tax Officer assessed the Company on its total world income.
The appeals of the Company made successively to the Appellate Assistant Commissioner and the Incometax Appellate Tribunal were dismissed.
The Tribunal, however, referred the following questions of law to the High Court at Calcutta under section 66 of the Indian Income tax Act: "(1) Whether on the above facts and circumstances of this case the Tribunal was right in holding that the sum of Rs. 2,31,009 was income of the assessee during the assessment year under consideration and was liable to be assessed under the Indian Income tax Act ? and (2)If so, whether this amount could not be taken into consideration for determining the residence of the 357 assessee under section 4A(c)(b) of the Indian Income tax Act ? " This reference was heard by Chakravarti, C. J., and Lahiri, J., who by their judgment dated August 26, 1954, answered the first question in the affirmative and the second in the negative.
They, however, granted a certificate under section 66A of the Indian Income tax Act, read with article 135 of the Constitution to appeal to this Court.
No appeal has been filed on behalf of the Department, and the second of the two questions must be taken to be finally settled in this case.
The contentions of the Company in this appeal, thus, concern only the first question, and they are two: It was said firstly that section 11(14) of the Finance Act could not be made applicable to the assessment year 1947 1948, because the provision was not incorporated in the Indian Income tax Act or repeated in the subsequent Finance Acts.
This argument was not seriously pressed before us, and beyond mentioning it, Mr. Mitra for the Company did not choose to elaborate it.
We think that Mr. Mitra has been quite correct in not pursuing the matter.
The section framed as it is, does apply to subsequent assessment years just as it did to the assessment for 1946 1947, and prima facie, it was not necessary to follow one of the two courses detailed above.
Since the point was not pressed before us, we need not give our reasons here.
It was said nextly that the High Court was in error in construing section 11(14) of the Finance Act as a provision which created a liability proprio vigore, as if it was a charging section.
It was contended that the repayment was not within the taxable territory, and in view of the answer to the second question as to the applicability of section 4A(c)(b), there could be no tax upon it.
On behalf of the Department it was argued that the sub section created a charge by itself and the fiction therein created being sufficient and clear, it was not necessary to consider where the income arose.
Section 11(14) of the Finance Act reads as follows: " Where under the provisions of sub section (2) of 358 section 12 of the Excess Profits Tax Act, 1940 (XV of 1940), excess profits tax payable under the law in force in the United Kingdom has been deducted in computing for the purposes of income tax and supertax the profits and gains of any business, the amount of any repayment under sub section (1) of Section 28 of the Finance Act, 1941, (4 & 5, Geo.
6, c. 30), as amended by Section 37 of the Finance Act, 1942 (5 & 6, Geo 6, c. 21), in respect of those profits, shall be deemed to be income for the purposes of the Indian Income tax Act, 1922, and shall, for the purpose of assessment to income tax and super tax, be treated as income of the previous year during which the repayment is made.
" This section may be compared with R. 4(1) of the Rules which are applicable to cases 1 and 11 of sch.
D of the Income tax Act, 1918 (8 & 9, Geo.
V, c. 40): " Where any person has paid excess profits duty, the amount so paid shall be allowed as a deduction in computing the profits or gains of the year which included the end of the accounting period in respect of which the excess profits duty has been paid; but where any person has received repayment of any amount previously paid by him by way of excess profits duty, the amount repaid shall be treated as profit for the _year in which the repayment is received.
" The English rule above quoted deals first with the deduction of the amount paid as excess profits duty from the profits or gains of the year which includes the end of the accounting period in respect of which the excess profits duty has been paid a matter dealt with in section 12(2) of, the Indian Excess Profits Tax Act, and next with the assessability to tax of the amount repaid from the excess profits duty previously charged a matter dealt with in sub sections (11) and (14) of section 11 of the Finance Act.
The object and purpose of the legislation in each case is the same, and though the two provisions are not ipsissima verbal they are substantially in the same words and also in pari materia.
The concluding words of the English rule " the amount repaid shall be treated as profits of the year in which the repayment is received ", and which have been interpreted by 359 English Courts may specially be compared with the concluding words of sub section
(14) of section 11 of the Finance Act, which run: " any repayment. shall, for the purposes of assessment to income tax and super tax, be treated as the income of the previous year during which the repayment is made.
" There can be no doubt that the intention underlying the two provisions is the same, and the language is substantially similar.
Now, the English rule was interpreted by the English Courts to create a liability irrespective of considerations arising from the general provisions of the income tax law.
In Eglinton Silica Brick Co., Ltd. vs Marrian (1), the assessee company which had gone into voluntary liquidation in 1904 was carried on by the liquidator till 1921 when the business was sold to another company which took it over on October 5, 1921, and the business of the appellant company then ceased.
The income tax assessment for the year 192122 was apportioned between the two companies and inasmuch as the assessee company had suffered a loss, it was reduced to nil in its case.
The assessee company then received pound, 7,224 and pound, 1,150 in 1952 after it had ceased to carry on business as repayments of excess profits duty, and this income was assessed under R. 4(1) above mentioned.
The question was whether this was right.
The case was considered by the Lords of the First Division, and they are their opinion against the assessee firm.
The Lord President (Clyde) with whom Lords Skerrington, Cullen and Sands agreed (Lord Sands dubitans) explained the two parts of the rule as follows: " The principle is obvious.
It is that if a taxpayer has made profits assessable (directly, or indirectly through the operation of the three years ' average) to income tax, and the Revenue takes a share of those profits in the name of Excess Profits Duty, it is only fair that the profits actually assessed to Income Tax should suffer some corresponding deduction. . ." (1)(1924) , 98.
360 The problem which arose in the case of repayment of Excess Profits Duty was different.
Nobody knew or could know how soon, or how late, repayment might fall to be made; nor whether the business whose profits were assessed to Excess Profits Duty would be in the same hands when repayment (if any) came to be made.
By that time the business might have ceased to be in existence.
Repayment might therefore have to be made to a person who was not carrying on the original business.
The original trader might have given up business, died, and an executor might have come in his place.
The solution provided for all these cases is that contained in the second part of the paragraph, according to which the amount repaid to any person is to be I treated as profit for the year in which the repayment is received. ' It is obvious that the amount of the former trading profits so repaid could not actually be trading profits for such year.
None the less, the amount repaid is to be treated as if it were that which in fact it is not, and cannot be.
The amount repaid consists of trading profits which reach the taxpayer out of their proper time.
However belated his fruition of them, they have not lost their original character as trading profits.
In my opinion, this is what explains the position of paragraph (1) of Rule 4 as part of the Rules under Cases I and 11 of Schedule D, which are concerned with the profits of trades and vocations.
That some artificial rule should be formulated was in the circumstances inevitable, and the highly artificial character of the rule adopted is shown by the words in which it is expressed , the amount repaid shall be treated as profit for the year in which the repayment is received.
In short, the amount repaid is deemed to be something that it is not, and could not in the actual circumstances possibly be.
Nor is this in any way unreasonable or contrary to what might be expected, if regard be had to the subject matter.
For, as has been seen, the Excess Profits Duty was itself a part of the trading profits computed by methods familiar under the Income Tax Act.
It was not merely a part of something which entered into the computation of profit; it was actual 361 computed profit.
And, but for the disparity between the ' accounting period ' and the three years ' average, it would have been directly assessable to Income Tax.
" A similar view was taken in the Court of Appeal by Lord Hanworth, M. R., Scrutton, L. J., and Romer, J. (Scrutton, L. J., dubitans) in A. & W. Nesbitt Ltd. vs Mitchell (1).
There too, the assessee company after suffering losses in the accounting period May 1 to November 25, 1920, went into liquidation and ceased to trade.
On April 22, 1924, the repayment of Excess Profits Duty took place, and this was assessed to income tax.
The Master of the Rolls described the amount received as repayment in these words: " But in respect of what is that payment made ? It is not a legacy, it is not a sum which has fallen from the skies ; it, is a sum which is repaid because there was too large a sum paid by the Company to the Revenue Authorities over the whole period during which Excess Profits Duty was paid, and that sum means and is intended to represent a repayment of a sum which was paid by them in respect of the duty charged upon the excess profits of their trading.
It comes back, therefore, not having lost its character but being still the repayment of a sum too much, it is true, but a sum taken out of the profits which were made by the Company in the course of its trading, profits which at the time they were made were subject to Income Tax and subject to Excess Profits Duty, and that is the character of the repayment that has been made.
" Dealing with the rule, the Master of the Rolls observed : "I have pointed out, this is a case where the Company has received payment of an amount previously paid by way of Excess Profits Duty and having that characteristic attaching to it; and we are told by the Statute that when such a sum is repaid it is to be treated as a profit for the year in which the repayment is received.
It is said it may be treated as a (1) 217, 218.
46 362 profit; but it ought not to be treated as an assessable profit.
The answer, to my mind, is that it is paid back not by way of a sum which has no origin or ancestry ; it is a sum which represents a repayment of the amount previously paid by that company in the form of Excess profits duty upon their trading.
If it is to have that character and is to be treated as such a profit, although it be a repayment of sums paid in respect of profits, it is to be treated as a profit for the year in which the repayment is received.
The word ' treated ' indicates that it is to be deemed to be something which in fact it is not, or whether it is so or not it is to be treated as a profit, and therefore it is, to my mind, impossible to discuss the question of whether or not difficulties may arise or whether it may be criticised as financially not quite sound that it should be treated in this method in that particular year; but we are told by the Statute that it is to be treated as a profit for the year in which the repayment is received.
" In a case similar on facts as the ones cited above (Kirke 's Trustees vs The Commissioners of Inland Revenue (1)), the House of Lords Viscount Cave, L. C., Lord Atkinson, Lord Shaw of Dunfermline, Lord Sumner and Lord Carson) placed the same construction upon the latter part of R. 4(1).
The following passage in the speech of Lord Sumner, explaining the extent of the fiction in the latter part of the Rule, is extremely instructive : " The express mandatory terms of the sentence show, in carefully chosen language, that he is to submit to something by reason of his having previously enjoyed this advantage in the shape of repayment of an amount previously paid by way of Excess Profits Duty.
Something which is not a profit, but is only a money repayment, something which may not result in a profit, because although trading goes on there is so great a loss on the year that this repayment does not make up the deficit, something which may not be a trading profit, because trading has ceased altogether, nevertheless is to be treated as profit and as profit for the year.
Treated ' is a, fresh word free from legal technicality.
(1) , 332.
363 It is the widest word that could be chosen.
The Legislature avoided saying 'shall be assessed as ' or I shall be brought into the computation of profit and loss , and simply says that something which is not profit but mere payment shall be treated as profit, which it c may or may not be, and as profit for the year.
I think, therefore, that the word treated is an apt word to impose a charge ".
See also in this connection Olive and Partington Ltd. vs Rose (1).
These cases were relied on by Chakravarti, C. J., and Lahiri, J., in the judgment under appeal, and the learned Judges pointed out that the addition of the words " for the purposes of assessment to income tax and super tax " rather strengthen the reasoning in its application to the words of the Indian Statute.
We agree with this statement.
It is to be noticed that the sub section creates two fictions.
By the first fiction it makes the amount of any repayment ' income ' for the purposes of the Indian Income tax Act, and goes on to say that that ' income ' shall be ' treated ' for purposes of assessment to income tax and super tax, as the income of the previous year.
Mr. Mitra, for the Company contends that no doubt the amount may be treated as 'income ' for the purposes of the Indian Income tax Act, but the Department is still under a duty to prove that the Company is liable to tax at all.
According to him, this will have to be treated as income received outside the taxable territory, because if the fiction contemplated its being treated as 'within the taxable territory ', it would have said so specifically.
In our opinion, this submission cannot be accepted.
That this would have been taxable income but for the provisions of section 12(2) of the Excess Profits Tax Act, goes without saying.
The income character of the receipt is restored by the fiction, and it is to be brought under assessment without any further proof than this that it has been received as repayment of the United Kingdom tax, in respect of which a deduction was made in the earlier years.
The distinction between (1) 364 incomes within and without taxable territories is made unnecessary by demanding that this amount by way of repayment shall be brought to tax and ' treated ' as income within the previous year.
The effect thus is that the sub section charges the said amount with a liability to tax by its own force or to borrow the words of Lord Sumner, is apt to ' impose a charge '.
In our opinion, the amount received as repayment of excess profits tax must be deemed to be 'income ' for the purposes of the Indian Income tax Act and for assessment it must be treated as income of the previous year.
The answer to question No. 1 given by the Calcutta High Court was thus correct.
The appeal fails, and is dismissed with costs.
Appeal dismissed.

summary/full:
The appellant carried on business in England and in India.
For the previous years it paid excess profits tax in both countries and it obtained deduction of the amounts so paid from its profits and gains for the purposes of the Indian Income tax Act.
In the assessment year 1947 48 it obtained a repayment of RS.
2,31,009 out of the excess profits tax paid in England.
The Income tax authorities acting under section 11(14), Indian Finance Act 1946, included this amount received in England in the taxable profits of the appellant.
The appellant contended that the repayment not being within the taxable territory it could not be taxed.
Held, that the amount received as repayment of the excess profits tax was rightly taxed.
Under section 11(14) the amount of repayment was deemed to be 'income ' for purposes of the Indian Income tax Act and that ' income ' was to be treated as the income for the previous year during which the repayment was made.
Section 11(14) created a liability irrespective of the considerations arising from the general provisions of the income tax law.
The distinction between incomes within and without taxable territories was made unnecessary by section 11(14).
Eglinton Silica Brick Co. Ltd. vs Maryian, (1924) 9 Tax Cas. 92; A. & W. Nesbitt Ltd. vs Mitchell, (1926) " Tax Cas. 217 and Kirke 's Trustees vs The Commissioners of lnland Revenue, , applied.


judgement:
Appeal Nos.
797 803 of 1993.
From the Judgment and Order dated 16.7.91 of the Karnataka Administrative Tribunal in Application No. 1443/91 & dated 9.3.81, & 25.11.82 of the Karnataka High Court in W.P. Nos.
20147, 20148/79, 11343/78 & 1016 1018 of 1981.
S.S.Javali, Gopal Singh and E.C. Vidyasagar for the Appellant.
R.N.N. Narasimha Murthy, M.T. George, S.K. Kulkarni, M. Veerappa and P. Mahale for the Respondents.
The following Order of the Court was delivered: 56 Delay condoned in S.L.P (C) 3464 3469/93 (CC 19593)/93.
Both disposed of by this common order.
Leave granted.
The appellant who was working as Assistant Engineer in Public Works Department was transferred on deputation to Bangalore City Corporation under City Bangalore (Cadre and Recruitment Regulation) 1971, which permitted 75% of vacancies in the cadre to be filled in by deputation from P.W.D.
In 1977 Karnataka Municipal Corporation Rules were framed under which the appellant was absorbed as Assistant Executive Engineer in the Corporation.
Validity of these rules and absorption of the appellant was assailed in the High Court by way of a Writ Petition which was allowed.
The rules were struck down and the absorption of the appellant in the Corporation was set aside.
In 1981 the Govt.
issued an Ordinance removing the infirmity in the rules.
It was replaced by the Karnataka Municipal Corporation Amendment Act, 1981 (Act 40 of 1981), for short 'the Act '.
Section 8 of the Act reads thus: "8.
Validation : (1) The Karnataka Municipal Corporations Rules, 1977 made in notification No. HMA 270 MUN 77 dated 19th Dec., 1977 and published as GSR 390 in the Karnataka Gazette (Extraordinary) dated 22nd Dec., 1977 (hereinafter referred to as the said rules) shall, notwithstanding anything contained in any judgment, decree or offer of any court or other authority or in the principal Act, be deemed to be as valid and effective for all purposes as if the said rules had been made under the Principal Act as amended by this Act and accordingly (a) all actions or things taken or done (including appointments and promotions made) under the said rules shall, for all purposes be deemed to be and to have always been taken or done in accordance with law; (b) (i) suit or other proceedings shall be maintained or continued in any court or tribunal or before any authority questioning the validity of any action or thing taken or done under the said rules; and 57 (ii)court shall recognise or enforce any decree or order declaring that the said rules or any action or thing taken or done thereunder as invalid, on the ground that the rules were made without giving reasonable opportunity to persons likely to be affected by it to file their objections and suggestions.
(2) Notwithstanding anything contained in any judgment, decree or order of any court or other authority or in the principal Act all appointments of Administrators made or continued before the commencement of this act shall be deemed to have been validly made for all purposes as if the said appointment had been made under the Principal Act as amended by this act and accordingly all actions and things taken or done by or under the authority of the Administrators shall be and shall be deemed to have always been validly taken or done and no suit or other proceedings shall lie or be continued in any court of law or any other authority on the ground that at the time when such action or thing was taken or done the appointment or continuance of the Administrator was not authorised by law." Since the law had been amended and all actions taken including appointments and promotions were validated the appellant after coming into force of the Act, was promoted as Executive Engineer and Superintending Engineer in 1981 and 1990 and Addl.
Chief Engineer respectively.
In 1991 those persons who had challenged validity of appellant 's appointment approached the High Court once again in contempt jurisdiction for non implementation of the order passed in 1979.
Faced with this situation the Govt.
repatriated the appellant to his parent department, just few months before his retirement.
According to the appellant this affected him, prejudicially both in status and pensionary benefits.
He, therefore, approached the Administrative Tribunal which being of opinion that since it could not examine the ' validity of orders in favour of appellant challenging his continuance which was pending in the High Court and the appellant was not going to suffer as he is bound to be paid pension either by the Corporation or the State 58 Govt.
, the petition had spent out its utility and, therefore, dismissed it as infructuous.
In Shri Prithvi Cotton Mills Ltd & Anr.
vs Broach Borough Municipality & Ors.
, , this court held thus: "When a legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively.
The most important condition, of course, is that the legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal.
Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise.
A court 's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. .
If the legislature has the power over the subject matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions.
The validity of a validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the Validating law for a valid imposition of the tax.
" In the above case the Validation Act was upheld.
The same view was reiterated in Janapada Sabha, Chihindwara, etc.
vs Central Provinces Syndicate Ltd. & Anr., etc.
; , and Yadlapati Venkateswarlu vs State of Andhra Pradesh & Anr., 119901 Suppl.
1 SCR 381.
It is seen that under the Act the basis on which the 1977 Rules were declared void was removed and a appointments made or continued before 59 the commencement of the Amendment Act were declared to be valid and shall always to be deemed to have been validly made for all purpose as if the said appointments had been made in the Principal Act as amended by the Act.
It is not in dispute that the State legislature is competent to make the Act.
When the Act was made and validated past acts done or proceedings taken, it was a valid Act and removed the defects declared by the Court.
It must be deemed and shall always been deemed that the appointment of the appellant as Addl.
Chief Engineer is legal and valid.
Unfortunately, the Act was not brought to the notice of the High Court when the direction to repatriate the appellant was made by the High Court.
But the failure to bring to the notice of the court does not have the effect of nullifying the valid action legislatively taken.
In these circumstances, the order of the High Court and consequent order of the Govt.
repatriating the appellant from the Corporation service to the State service are declared illegal.
Consequently the appellant must be deemed to have been retired from service as Addl.
Chief Engineer of the Corporation.
The appeals are accordingly allowed.
The appellant is entitled to all the consequential benefits, all pensionary benefits etc.
from the Corporation.
No costs.
G.N. Appeals allowed.

summary/full:
The appellant who was an Assistant Engineer in Public Works Department was transferred on deputation to the Bangalore City Corporation under the City Bangalore (Cadre and Recruitment) Regulation, 1971 which permitted 75% of vacancies in the cadre to be filed in by deputation from P.W.D.
In 1977, the Karnataka Municipal Corporation Rules were framed and the appellant was absorbed in the Corporation.
On being challenged in a Writ Petition the High Court struck down the Rules and set aside the absorption of the appellant in the Corporation.
The Government issued an ordinance removing the infirmity in the Rules.
It was replaced by the Karnataka Municipal Corporation Amendment Act, 1981.
In course of time the appellant was promoted as Executive Engineer, Superintending Engineer and Addl.
Chief Engineer.
Ile earlier Writ Petitioners approached the High Court by way of a Contempt Petition against the non implementation of its order.
Faced with this situation, the Government repatriated the appellant to his parent department,just a few months before his retirement.
The appellant approached the Administrative Tribunal, which dismissed his application as infructuous in view of the fact that the matter was pending before the High Court and in any case the appellant would get his pension either from the State Government or the Corporation.
Hence these appeals.
55 Allowing the appeals, this Court, HELD: Under the Karnataka Municipal Corporation Amendment Act, 1981 the basis on which the Karnataka Municipal Rules, 1977 were declared void was removed and appointments made or continued before the commencement of the Amendment Act were declared to be valid and were always be deemed to have been validly made for all purposes as if the said appointments had been made under the Principal Act as amended by the Act.
It is not in dispute that the State Legislature is competent to make the Act.
When the Act was made and it validated past acts done or proceedings taken, it was valid Act and removed the defects declared by the Court.
It must be deemed and shall always be deemed that the appointment of the appellant as Addl.
Chief Engineer is legal and valid.
Unfortunately, the Act was not brought to the notice of the High Court when the direction to repatriate the appellant was made by the High Court.
But the failure to bring to the notice of the court does not have the effect of nullifying the valid action legislatively taken.
Consequently the appellant must be deemed to have been retired from service as Addl.
Chief Engineer of the Corporation.
The appellant is entitled to all the consequential benefits, all pensionary benefits etc.
from the Corporation.
[58H; 59 A D] Shri Prithvi Cotton Mills Ltd. & Anr.
vs Broach Borough Municipality & Ors.
, ; Janapada Sabha, Chhindwara, etc.
vs Central Provinces Syndicate Ltd. & Anr., etc.
; , and Yadlapati Venkateswarlu vs State of Anadhra Pradesh & Anr., [19901 Suppl.
1 SCR 381, relied on.


judgement:
Appeal Nos.
3115 16 of 1980.
From the Judgment and Order dated 15.6.1978 of the Bombay High Court in I.T. Ref.
No. 458 of 1976.
V.U. Eradi and Suman J. Khaitan for Khaitan & Co. for the Appellant.
section Rajappa for Ms. A. Subhashini for the Respondent.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.
Assessee is the appellant.
He is aggrieved by the decision of the Bombay High Court in Income Tax Reference No. 458 of 1976 answering the following question, which was referred to it at his instance, against him: "whether on the facts and in the circumstances of the case the amount of tax paid by Ballarpur on behalf of the assessee in assessment years 1974 75 and 1975 76 is income tax ore under the heading 'other sources" '.
The Ballarpur Paper and Straw Board Mills Limited (Ballarpur) is a public limited company engaged in the manufacture of paper and straw board.
It undertook to set up a caustic soda/chlorine manufacturing plant at Ballarpur.
For this purpose, it entered into an agreement with Krebs, a French concern, for purchase of certain machinery and equipment.
There was a second agreement between Ballarpur and Krebs whereunder Krebs undertook to provide services of certain personnel including engineers for setting up the plant at Ballarpur.
Krebs, in turn, entered into an arrangement with a Swiss concern, Escher Wyas Eurich, for supply of certain machinery and also to make available services of certain personnel.
The 30 assessee, Emil Webler, was one such person provided by the Swiss concern The assessee came to India and worked here in connection with the setting up of the plant.
According to the agreement between Ballarpur and Krebs the former undertook to pay salaries and other emoluments to personnel provided by Krebs in accordance with the formula contained in the agreement.
Inter alia, it was provided that 'salaries are understood free of any Indian tax or duty '.
For the assessment year 1974 75, the assessee appellant was paid a sum of Rs. 3,82,481 and for the assessment year 1975 76, a sum of Rs. 67,200 in addition to daily allowances and other facilities.
The assessee contended before the Income Tax Officer that he was not liable to pay tax He also filed returns affirming the said stand.
The stand taken by him was negatived, whereupon Ballarpur paid the tax of Rs. 3,23,400 and Rs. 35,546 for the said two assessment years respectively.
In his assessment orders, the I.T.O. treated the said tax amount as a perquisite and added the same to the salary amount received by the assessee.
The said addition was questioned by the assessee in appeal, before the A.A.C. but without success.
The matter was then carried to the Tribunal.
The Tribunal too did not agree with the assessee 's contention and dismissed his appeal whereupon he obtained the aforesaid reference which, as stated above, has been answered against him by the Bombay High Court.
For a proper appreciation of the question arising herein, it is necessary to notice certain factual statements contained in the Statement of the Case.
It is stated therein: "according to this agreement, Ballarpur were under an obligation to pay by the device of delegation invoices opened with a bank in France certain amount of salaries at agreed rates to Krebs and Cis.
Paris for setting up the plant at the town of Ballapur. . .
The Tribunal clarified that there was no dispute between the parties that the amounts of Rs. 3,82,481 and Rs. 67,200 paid by Ballarpur through Krebs to the assessee for services rendered by it in the two respective years were taxable under the heading 'Salary '.
It further clarified that there was no dispute between the parties, that the relationship of the employer and employee did not exist between Ballarpur and the assessee.
The Tribunal held as below: (1) Ballarpur was under a legal obligation to pay the tax if any, levied on the assessee; (2) Ballarpur paid the tax by virtue of such a legal obligation . . . 31 The facts found by the Tribunal thus show that the assessee appellant was paid certain salary free of tax but that the tax payable in that behalf was to be and was in fact paid by Ballarpur.
The assessment was made upon the assessee directly.
The question is whether the said tax component paid by Ballarptir can be included within the income of the assessee.
The first contention of ' the learned counsel for the assessee is that the amount paid by Ballarpur by way of tax cannot be treated as 'income ' of assessee at all.
His second contention is that the assessee did not receive the said amount and, therefore, it cannot constitute his income.
Indeed, the learned counsel sought to argue that Ballarpur was under no obligation to pay the said tax amount relating to the salary amount received by the assessee.
We find it difficult to agree with the learned counsel.
The definition of 'income ' in clause (24) of Section 2 of the Act is an inclusive definition.
It adds several artificial categories to the concept of income but on that account the expression 'income ' does not lose its natural connotation.
Indeed, it is repeatedly said that it is difficult to define the expression 'income ' in precise terms.
Anything which can properly be described as income is taxable under the Act unless, of course, it is exempted under one or the other provision of the Act.
It is from the said angle that we have to examine whether the amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee.
It cannot be overlooked that the said amount is nothing but a tax upon the salary received by the assessee.
By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others, it paid the said tax.
The said payment is, therefore, for and on behalf of the assessee.
It is not a gratuitous payment.
But for the said agreement and but for the said payment, the said tax amount would have been liable to be paid by the assessee himself He could not have received the salary which he did but for the said payment of tax.
The obligation placed upon Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context.
It would be unrealistic to say that the said payment had no integral connection with the salary received by the assessee.
We are, therefore, of the opinion that the High Court and the authorities under the Act were right in holding that the said tax amount is liable to be included in the income of the assessee during the said two assessment years.
The question then arises under which head of income should the said 32 income be placed.
Inasmuch as the assessee is not an employee of Ballarpur, which made the payment, it cannot be brought within the purview of Section 17 of the Act.
It must necessarily be placed under sub section (1) of Section 56, 'income from other sources '.
According to the said sub section, income of every kind which is not to be included from the total income under the Act shall be chargeable to income tax under the head 'income from other sources ', if it is not chargeable to income tax under any of the other heads specified in Section 14, Items A to E.
It is not the case of the assessee that any provision of the Act exempts the said income from the liability to tax The learned counsel for the assessee appellant relied upon certain decisions in support of his contention.
The first is the decision of this court in N.A. Modi vs S.A.L. Narayana Rao, SC.
An advocate was appointed as a Judge.
He received certain income after his appointment as a Judge in lieu of the professional service rendered by him before his appointment.
The question was whether the said amount is taxable.
It was held that it was not (in view of the provisions of the Act as it then stood).
The basis for the said decision is that the assessee therein cannot be said to be carrying on the profession of an advocate at the time he received the said income.
We are unable to see how the said decision helps the assessee herein.
Indeed, in the said decision this court emphasised that the question whether an income falls under one head or the other has to be decided according to the common notion of practical men, inasmuch as the Act does not provide any guidance in the matter.
It was observed that the heads of income must be decided on the nature of income by applying practical common notions and not by reference to the assessee 's treatment of income.
The application of said test does not certainly help the assessee herein.
The second decision cited is of the Bombay High Court in CLT.
Bombay vs Smt.
T.P. Sidhwa, The question was whether the income from property received by an assessee of which he is not the owner can be taxed as 'income ' from other 'sources '.
It was held that it cannot be so taxed.
We do not see any anology between the facts and principle of that case and those of this case.
Here the integral connection between the salary received by the assessee and the tax payable thereon, paid by Ballarpur in pursuance of a legal obligation, cannot be overlooked.
The third case cited is in Mrs. Sheela Kaushish vs C.I.T, Delhi, 131 I.T.R. 435 33 S.C.
In this case, it was held that determination of annual value under Section 23 of the Income Tax Act, 1961 should be done by taking the standard rent as the basis even where the assessee is receiving rent higher than the standard rent.
Again we must say, we see no relevance of the said principle of this case to the facts of this case.
For the above reasons, the appeals fail and are dismissed.
No costs.
V.P.R. Appeals dismissed.

summary/full:
Ballarpur, a public limited company undertook to set up a caustic soda/chlorine manufacturing plant.
It entered into an agreement with a French concern for purchase of certain machinery and equipment.
In another agreement with Ballarpur, the French concern agreed to provide services of certain personnel and Ballarpur agreed to pay salaries and other emoluments free of any Indian tax or duty to the personnel.
The French concern entered into an arrangement with a Swiss concern for supply of certain machinery and to make available services of certain personnel.
The assessee appellant was one such person.
He came to India and started working in connection with the setting up of the plant.
In addition to daily allowances and other facilities, the assessee appellant was paid Rs. 3,82, 481 and Rs. 67,200 for the assessment years, 1974 75 and 1975 76, respectively.
Before the Income Tax Officer, the assessee contended that he was not liable to pay tax.
The I.T.O. did not agree.
Ballarpur paid the tax amount of Rs. 3,23,400 and Rs. 35,546 for the assessment years respectively.
The Income Tax Officer treated the tax amount paid by Ballarpur as a perquisite and added the same to the salary amount of the assessee.
The assessee questioned the action of the I.T.O. in appeal before the A.A.C., which was dismissed.
28 The appeal flied before the Tribunal was also dismissed, whereupon the assessee obtained a reference to be answered by the High Court.
The High Court answered the reference, "whether on the facts and in the circumstances of the case the amount of tax paid by Ballarpur on behalf of the assessee in assessment years 1974 75 and 1975 76 is income taxable under the heading 'other sources '," against the assessee.
Hence these appeals by the assessee contending that the amount paid by way of tax could not be treated as 'Income ' of assessee; that as the assessee did not receive the said amount from Ballarpur, it could not constitute his income.
Dismissing the appeals, this Court, HELD: 1.01.
The definition of 'Income ' in clause (24) of Section 2 of the Act is an inclusive definition.
It adds several artificial categories to the concept of income but on that account the expression 'income ' does not lose its natural connotation.
It is repeatedly said that it is difficult to define the expression 'income ' in precise terms.
Anything which can properly be described as income is taxable under the Act unless, of course, it is exempted under one or the other provision of the Act.
[31D] 1.02.
The amount paid by Ballarpur by way of tax on the salary amount received by the assessee can be treated as the income of the assessee.
The said amount is nothing but a tax upon the salary received by the assessee.
By virtue of the obligation undertaken by Ballarpur to pay tax on the salary received by the assessee among others, it paid the said tax.
The said payment is, therefore, for and on behalf of the assessee.
It is not a gratuitous payment But for the said agreement and but for the said payment, the said tax amount would have been liable to be paid by the assessee himself.
He could not have received the salary which he did but for the said payment of tax.
The obligation placed upon Ballarpur by virtue of Section 195 of the Income Tax Act cannot also be ignored in this context.
It would be unrealistic to say that the said payment had no integral connection with the salary received by the assessee.
[31E G] 1.03.
Inasmuch as the assessee is not an employee of Ballarpur, which made the payment, it cannot be brought within the purview of Section 17 of the Act.
It must necessarily be placed under sub section (1) 29 of Section 56, 'income from other sources '.
According to the said sub section, income of every kind which is not to be excluded from the total income under the Act shall be chargeable to income tax under the head 'income from other sources ', if it is not chargeable to income tax under any of the other heads specified in Section 14, Items A to E. [32A B] N 4.
Modi vs S.A.L., Narayana Rao, SC; C.L T., Bombay vs Smt.
T.P. Sidhwa, and Mrs. Sheela Kaushish vs C.I. T. Delhi 131 [TR 435 SC, distinguished.