judgement:
Civil Appeal No. 282 of 1980.
Appeal by special leave from the judgment and order dated the 29th March, 1980 of the Allahabad High Court (Lucknow Bench) know in Writ Petition No. 524 of 1979.
AND CIVIL MISCELLANEOUS PETITION Nos. 4905 and 11949 of 1980.
463 G.N. Dixit, Mrs. Shobha Dikshit and H.R. Bhardwaj for the Appellants.
S.N. Kackar, K.K Mohan, Rajiv Datta and A.S. Pandit for the Respondent.
A.N. Pareek and S.K Jain for the Intervener.
The Judgment of the Court was delivered by MISRA, J.
The present appeal by special leave is directed against the judgment dated 29th March 1979 of the Allahabad High Court allowing a petition under Article 226 of the Constitution.
In the State of Uttar Pradesh, there is a Service commonly known as Naib Tehsildars.
They have always formed the backbone of the revenue administration in that State.
Sixty per cent of the posts of Naib Tehsildars are filled through a competitive examination held by the State Public Service Commission.
The remaining posts are filled by promotion.
There is another Service in that State known as the Service of Tehsildars.
Cent percent of the posts of Tehsildars are filled by promotion from amongst various sources such as Naib Tehsildars, Peshkars of the Kumaon Division, Kanungos, Kanungo Inspectors or Instructors and Sadar Kanungos.
Ram Gopal Shukla, the respondent, started his service as Kanungo in 1949.
In due course, he was promoted as Naib Tehsildar.
In 1962, he was confirmed as such, and in 1963 he was appointed as Tehsildar in an officiating capacity.
It appears that a regular selection for the posts of Tehsildars was held in 1966 in accordance with the Uttar Pradesh Adheenasth Rajaswa Karyakari (Tehsildar) Sewa Niyamavali, 1966 (hereinafter referred to as 'the Tehsildar Rules 1966 ').
Rule 5 of these Rules provides the sources of recruitment to the post of Tehsildar.
Rule 6 thereof lays down conditions for eligibility and provides, "For the purposes of recruitment to the Service a selection strictly on merit shall be made from amongst all the permanent Naib Tehsildars, Tehsildars, Peshkars of the Kumaon Division, Kanungo Inspectors or Instructors and Sadar Kanungos, who have put in not less than seven years ' service in the aggregate as such or in an equivalent or higher 464 post in a substantive or officiating capacity on the first day of January of the year in which the selection is made.
" Rule 7 enjoins upon the Parishad to report by list of March every year to the Government the number of vacancies in the Service expected during the following calendar year, and then provides that the Governor shall fix the number of appointments to be made.
Rule 8 lays down the criterion for selection.
Rule 9 prescribes the procedure for selection.
As this rule is important for the purpose of the present case, it is reproduced in so far as it is relevant, "9.
The procedure for selection shall be as follows: (1) The Parishad shall draw up, in order of merit, a list of most suitable candidates from amongst those who are eligible for promotion to the posts of Tehsildars.
The names in the list shall ordinarily be double the number of substantive vacancies to be filled during the course of the year.
(2) The Parishad shall also draw up, in order of merit, a supplementary list containing names of officials considered suitable for officiating or temporary vacancies expected to occur during the course of the year.
(3) The two lists drawn up under clauses (1) & (2) above together with a gradation list prepared under clause (b) of Rule 10, indicating therein the reasons for passing over the seniors, if any and the character rolls of all the eligible officials shall be forwarded by the Parishad to the Commission . . . " (4) The Parishad shall thereafter, in consultation with the Commission, fix date, on which a Selection Committee consisting of . . shall consider the cases of the eligible candidates whose names are contained in the final lists drawn up by the Commission and interview such of them as are indicated by the Commission under clause (3) above.
(5) The lists of the names selected by the Committee shall be taken with him by the representative of the Commission 465 for placing them before the Commission, and the Commission, shall thereafter send their final recommendations to the Parishad.
(6) The Parishad shall draw from the first list received from the Commission under clause (5) above, as many candidates as there are permanent vacancies and will thereafter re arrange their names in accordance with their seniority in the present service and they will be appointed against the substantive vacancies.
The remaining names of the first list and those of the second list will be regarded as forming the 'Select List ' to be drawn up in order of merit.
The officials will be offered officiating or temporary vacancies in the order in which their names have been arranged in the aforesaid 'Select List ' as and when the vacancies occur during the course of the year.
This 'Select List ' will hold good only for one year or until such time review is made at the following selection.
(Emphasis supplied) (7) In case permanent vacancies do not occur for two consecutive years and it becomes necessary to make a selection for temporary or officiating vacancies only, then also the procedure prescribed above will be followed." In accordance with the aforesaid rules, the Uttar Pradesh Public Service Commission selected 148 persons for substantive appointment as Tehsildars and their names were shown in a list known as List A.
The Commission also selected 300 other persons for temporary and officiating appointment as Tehsildars during the coming years and their names figured in what was called List B.
The respondent was, however, not selected and consequently his name could not be included in either of the aforesaid two lists, presumably because he had an adverse entry forming part of the remarks recorded on his work and conduct and had also been shown down below at serial No. 557 in the seniority list of Naib Tehsildars in the year 1956 Though the adverse entry was expunged in the year 1969 and his seniority was also re fixed at serial No. 216 on 6th of October 1970, as there was no selection after 1966, his name could not be included in either of the two lists.
He has, however, no grievance on that account.
Subsequently, the State Government made the Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970 (hereinafter referred to as 'the 466 1970 Rules ').
These rules govern various Services, to be more specific 29 U.P. Services including the Service of Tehsildars.
The purpose of these rules obviously was to standardise the procedure for promotion and make it uniform in respect of all such Services.
The procedure laid down in the 1970 Rules for promotion as Tehsildar was not substantially different from that laid down in the Tehsildar Rules 1966.
The respondent, therefore, did not feel aggrieved even by the introduction of the 1970 Rules.
His grievance started only with the introduction of rules 7 A and 7 B to the 1970 Rules by notification No.42/4/1966 Apptt.
3 dated 4th of July 1972.
As the question to be decided in this case is about the vires of rules 7 A and 7 B, it will be appropriate to read them at this stage, "7 A.
Notwithstanding anything contained in these rules, but subject to the proviso to rule 18, the names of candidates on the Select List appointed in temporary or officiating vacancies prior to the date of issue of this notification, shall be rearranged in order of seniority.
" "7 B.
The candidates of the Select List as rearranged in accordance with rule 7 A shall be appointed against substantive vacancies in preference to any candidate selected in accordance with the provisions of these rules.
" The complaint of the respondent was that the aforesaid new rules 7 A and 7 B were discriminatory and violative of Article 14 and 16 of the Constitution, in as much as the candidate in the Select List of 1966 were to be appointed against substantive vacancies in preference to any candidate selected in accordance with the provisions of the 1970 Rules and unless the candidates in the list were exhausted, other eligible candidates were not to be considered for promotion so that their chances of promotion would be deferred to an undated future.
The further grievance of the respondent was to the following effect.
The Select List was to hold good only for one year or until such time a review was in made at the following selection.
Thus, the life of the Select List of 1966 was for one year only on the expiry of which it died its natural death.
In this view of the legal position, the appointment of Tehsildars from the Select List of 1966 after the expiry of a year from the date of its operation was illegal on the face of it.
On the strength of Rule 7 A and rule 7B, no selection was to be held unless 300 persons included in List were absorbed.
The respondent challenged the vires of rules 7 A and 7 B by filing a petition under Article 226 of the Constitution in the High 467 Court of Allahabad.
That petition was allowed in part and rules 7 A and 7 B were declared ultra vires Articles 14 and 16 of the Constitution in the impugned judgment.
Shri Dixit, appearing for the State has contended that a mere chance of promotion is not a condition of service giving rise to a fundamental right.
We are afraid this contention is irrelevant to the decision of this case.
The precise grievance of the respondent has been that he had a fundamental right of being considered for promotion when others similarly situated were so considered and that if he was not considered in a situation like that, he was discriminated against and was denied equality of opportunity.
This grievance, if factually correct, must be held to be well founded.
It was next contended by Shri Dixit that the candidates covered by rule 7 A are a class by themselves, that the classification is a reasonable classification and that as the respondent does not satisfy the requirements of rule 7 A, he cannot claim that any infraction of Article 14 or 16 bas taken place.
According to Shri Dixit, two conditions are necessary to bring a person within the fold of that rule: (1) the candidate 's name must have been included in the Select List; and (2) he must have been appointed in a temporary or officiating vacancy prior to the date of issue of the notification of 4th July 1972.
The respondent did not satisfy these requirements and therefore did not fall within the purview of rule 7 A. Rule 7 B gives preference to the candidates in the Select List as rearranged in accordance with rule 7 A, which, according to Shri Dixit, was based on a reasonable classification and therefore the respondent can have no grievance.
In support of this contention, reliance has been placed on Reserve Bank of India vs C.S. Rajappan Nair and others, State of Jammu & Kashmir vs Triloki Nath Khosa and others, Ramesh Prasad Singh vs State of Bihar and others, and Ganga Ram and others vs Union of India and others.
In C.S. Rajappan Nair (supra), the classification of a group of employees who had officiated in a particular capacity as a different class, treating them differently from others who had not the opportunity to function as such, was held to be an intelligible differentia which can stand the test of equality provided by Article 16 of the 468 Constitution.
In Triloki Nath Khosa (supra), persons appointed directly and by promotion had integrated into a common class of Assistant Engineers.
The question arose whether for the purpose of promotion to the cadre of Executive Engineers, they could be classified on the basis of educational qualification.
It was held by this Court that the rule providing that graduates shall be eligible for such promotion to the exclusion of diploma holders did not violate Articles 14 and 16 of the Constitution.
In Ramesh Prasad Singh (supra), this Court, dealing with principle of equality under Articles 14 and 16, observed, "The doctrine of equality before law and equal protection of laws and equality of opportunity in the matter of employment and promotion enshrined in Articles 14 and 16 of the Constitution which is intended to advance justice by avoiding discrimination is attracted only when equals are treated as unequals or where unequals are treated as equals.
The guarantee of equality does not imply that the same rules should be made applicable in spite of differences in their circumstances and conditions.
Although Articles 14 and 16 of the Constitution forbid hostile discrimination, they do not forbid reasonable classification and equality of opportunity in matters of promotion means equality as between members of the same class of employees and not equality between members of separate independent classes. .
Equality is for equals, that is, who are similarly circumstanced are entitled to an equal treatment but the guarantee enshrined in Articles 14 and 16 of the Constitution cannot be carried beyond the point which is well settled by a catena of decisions of this Court " In Ganga Ram (supra), dealing with Articles 14 and 16 of the Constitution, this Court again held, "Mere production of inequality is not enough to attract the constitutional inhibition because every classification is likely in some degree to produce some inequality.
The classification need not be scientifically perfect or logically complete.
The matter has to be considered in a practical way without whittling down the equality clause.
The classification must however be founded on intelligible differentia 469 which on rational grounds distinguishes persons grouped together from those left out, and it must bear a just and reasonable relation to the object sought to be achieved.
" There is no dispute with the principles of law laid down in the aforesaid cases.
By now, the principles of classification are well settled and need not be repeated.
The question is of application of those principles to the facts of the present ease.
The only basis for grouping the 300 persons in one category is that they were included in the Select List of 1966 and that they were officiating.
The respondent in the instant case could not be selected in the selection of 1966 on account of an adverse entry which, as stated earlier, was subsequently expunged.
His position in the seniority list was also corrected but because no selection took place after 1966 the respondent could not be included in the list for no fault of his.
If there had been a selection and the list had been revised every year as is the requirement of the rules, the respondent, and like him many others, would have been included in the list.
For example, some candidates who had not completed seven years could not be eligible for promotion and could not be included in the Select List of 1966 but after a lapse of time they became eligible and they might have been selected if selection had taken place.
But, the door for promotion had been of reclosed for the respondent and many others like him by rules 7 A and 7 B for no fault of theirs.
In this connection reference may be made to the objection of the Public Service Commission and the letter of the Secretary of the Board of revenue, to show that it would take.
about 24 years to absorb 300 persons included in List B. The Secretary, Board of Revenue, vide his letter No. 14708/T.N.T. 59 A/70 dated 30th of January 1973, to the Secretary, Government Revenue Department (filed as Annexure II to the counter affidavit), recommended that the List may not be enforced.
In so far as it is pertinent for the present purpose, it reads, "On the basis of the selection in the year 1966, the List 'B ' was prepared for 300 names.
During this period all the candidates of list 'B ' are working.
So long as all these candidates are not absorbed in the regular vacancies, the question of second selection does not arise till then.
Only 56 vacancies have occurred after the selection of 1966.
According to this the average vacancies in a year are at 10, with the result, it will take 24 years to exhaust the above list.
Till then no selection is Possible.
" 470 In the circumstances, the Secretary requested the Government to take steps to recommend to the Public Service Commission to make the next selection of Tehsildars without any further delay.
The objections of the Secretary, Board of Revenue, were similar to the objections raised by the Public Service Commission.
These letters and objections point out unmistakably that the selection was unnecessarily postponed only to accommodate the 300 persons included in the Select List of 1966.
There appears to be no rational basis for such a departure from the ordinary operation of the 1970 Rules which envisaged the preparation of a new list every year and for singling out one particular list for according preferential treatment to the persons whose names were contained therein.
The classification in this case therefore cannot be said to be a reasonable classification based on intelligible differentia having a nexus to the object sought to be achieved.
It is, however, contended for the State that the selection could not take place for all these long years because of a stay order passed by the High Court in petitions filed by some candidates challenging the Tehsildar Rules 1966.
This has been refuted by Shri S.N. Kacker and a finding recorded by the High Court makes out that there was no order staying the holding of selection.
All that was stayed was the confirmation of the officers promoted to the posts of Tehsildars.
It is therefore not correct that selection could not take place because of a stay order from the High Court.
As a second limb of this argument, it was contended on behalf of the State that the Government was the sole judge of the administrative necessities and there being no rule to the contrary, the Government could hold selection according to the need and no exception can be taken to the power of the State.
There is no denying the fact that the rules regulating the conditions of service are within the executive power of the State or its legislative power under the proviso to Article 309 but even so, such rules have to be reasonable, fair and not grossly unjust, if they are to survive the test of Articles 14 and 16 of the Constitution.
A rule which contemplates that unless the list of 300 persons is exhausted no other person can be selected, obviously is unjust and it deprives other persons in the same situation of the opportunity of being considered for promotion.
471 It was next contended for the State that the declaration of rules 7 A and 7 B as ultra vires the Constitution would affect not only the incumbents of one Service but of 29 Services and a fairly large number of persons would be affected in that situation, that the respondent did not implead any of those persons likely to be affected in the various Services, that in any case, at least the Naib Tehsildars or other persons who have been promoted as Tehsildars and who are likely to be affected by the declaration of rules 7 A and 7 B as ultra vires should have been impleaded as parties and that in the absence of those parties, the writ petition was not maintainable and should have been dismissed by High Court on that score.
Shri S.N. Kacker appearing for the respondent, on the other hand, has contended that no such plea was taken on behalf of the State before the High Court and that, therefore, it cannot be permitted to take up a new plea for the first time before this Court.
Elaborating the point, Shri Kacker urged that if such a plea had been taken before the High Court, the respondent would have impleaded all those persons as parties and filled up the lacuna, if any, and that if the State is permitted to take up such a plea for the first time before this Court, it would seriously prejudice the case of the respondent.
Alternatively, it was contended that the respondent is aggrieved by the amendment of the 1970 Rules by the 1972 notification which introduced rules 7 A and 7 B, that the respondent has challenged the vires of rules 7 A and 7 B and only the State is a necessary party who has already been impleaded, and that at the most, those persons who are likely to be affected in case the said rules are declared ultra vires, may be proper parties but are not necessary parties.
He sought to take support for his contention from B. Gopalaiah vs Government of Andhra Pradesh, J.S. Sachdev & Ors.
vs Reserve Bank of India & Anr., and General Manager, South Central Railway, Secundrabad & Anr.
vs A .
V. R. Siddhahi and Ors In Gopalaiah 's case dealing with a situation as in the present case, the Andhra Pradesh High Court held, "This is not a case of discrimination of individual against individual.
This is a case where a whole class of citizens have been discriminated against and the court can not refuse to give relief to them on the ground that the 472 class of persons who will be benefited as a result of the discrimination are not before the Court.
The person who complains of discrimination cannot be expected to search the country for all persons who are likely to be benefited by its discriminatory policy.
Of course, if the discrimination is in favour of an individual against an individual different considerations might arise.
But this is not such a case.
In my opinion, where a scheme formulated by the Government is attacked on the ground of its being discriminatory the position is precisely the same as if a statute is attacked as being discriminatory and it can never be an answer to such an attack that persons likely to be benefited by a discriminatory statute should be brought before the Court before the statute is struck down." In J.S. Sachdev 's case (supra), a Division Bench of the Delhi High Court endorsed the view taken in Goplaiah 's case (supra).
In South Central Railway 's case (supra), a similar objection taken before the Supreme Court was repelled on two grounds, firstly, because this point was not canvassed in the lower courts, and secondly, because the employees who were likely to be affected as a result of the re adjustment of the petitioner 's seniority were at the most proper parties and not necessary parties and their non joinder could not be fatal to the writ petition.
In view of the law laid down in South Central Railway 's case (supra), the State cannot be permitted to take up a new plea which was not taken before the High Court.
Shri B.P. Sharma had moved an application (C.M.P. No.49051.80) for permission to intervene in the appeal on the ground that he was vitally interested in the outcome of the instant appeal which would have a great bearing upon the claim petition pending before the Service Tribunal, Lucknow.
This application was ordered to be listed at the time of the hearing of this appeal.
He also moved an application (C.M.P.No. 11949/80 for modification of the stay order dated 23rd of April 1980 in the appeal filed by the State, so as to govern other cases affected by rules 7 A and 7 B of the 1970 Rules, as amended by the 1972 notification.
Later on, he realised that such an application could not be moved on behalf of an intervener, and therefore, instead of pursuing this application, he 473 filed Writ Petition No. 3806 of 1980, which has been dealt with separately.
Both these applications are, therefore, dismissed.
For the reasons given above, we find no error in the impugned judgment.
We accordingly dismiss the appeal.
Parties shall, however, bear their own costs.
S.R. Appeal dismissed.

summary/full:
The selection for the posts of Tehsildars in the State of U.P. was to be made by promotion from amongst various sources such as Naib Tehsildars, Peshkars of the Kumaon Division, Kanungos, Kanungo Inspectors or Instructors and Sadar Kanungos as per the procedure laid down in rules known as Uttar Pradesh Adheenasth Rajaswa Karyakari (Tehsildar) Sewa Niyamavali, 1966.
The procedure for selection is regulated by Rule 9 and under sub section (6) of this Rule a select list will be drawn in order of merit separately for substantive vacancies and temporary vacancies and officials will be offered officiating or temporary vacancies in the order in which their names have been arranged in the "select list" as and when the vacancies occur during the course of the year.
This "select list" will hold good only for one year or until such time a review is made at the following selections.
Subsequently, the State Government made the Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970, which governed various services, to be more specific 29 Uttar Pradesh services including the services of Tehsildars.
The purpose of these rules was to standardise the procedure for promotion and make it uniform in respect of such services.
The procedure laid down in the 1970 Rules for promotion as Tehsildars was not substantially different from that laid down in the Tehsildars Rules, 1966.
By a Notification No. 4214/196.
Appointment, 3 dated 4th July, 1972 two new rules were introduced, namely, Rules 7A and 7B, in the 1970 Rules.
As per these newly added rules candidates in the Select List made under the 1966 Rules were to be appointed against substantive vacancies in preference to any candidates selected in accordance with the provisions of the 1970 Rules and unless the candidates in the list were exhausted, other eligible candidates were not to be considered for promotion so that their chances of promotion would be deferred to an undated future.
461 The respondent who started his service as Kanungo in 1949, was promoted as Naib Tehsildar and in 1962 he was confirmed as such.
In 1963, he was appointed as Tehsildar in an officiating capacity.
In accordance with the ]966 Rules the Uttar Pradesh, Public Service Commission selected 148 persons for substantive appointment as Tehsildars and their names were shown in a list known as List A.
The Commission also selected 300 other persons for temporary or officiating appointment as Tehsildars during the coming years and their names figured in what was called List B.
The respondent was, however, not selected and his name could not be included in either of the aforesaid two lists because he had an adverse entry forming part of the remarks recorded on his work and conduct and had also been shown down below at serial 557 in the seniority list of Naib Tehsildars in the year 1966.
Though the adverse entry was expunged in the year 1969 and his seniority was also re fixed at serial number 216 on 6th October, 1970, since there was no selection after 1966, his name could not be included in either of the two lists even thereafter.
The respondent challenged the vires of Rules 7A and 7B by filing a petition under Article 226 of the Constitution in the High Court of Allahabad.
That petition was allowed in part and Rules 7A and 7B were declared ultra vires Articles 14 and 1 6 of the Constitution, in the impugned judgment.
Hence the appeal by special leave by the State.
Dismissing the appeal, the Court, ^ HELD: 1:1.
Rules 7A and 7B of the Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970, are ultra vires Articles 14 and 16 of the Constitution.
[466 E, 473 A B] 1:2.
The grievance of the respondent, namely, that he had a fundamental right of being considered for promotion when others similarly situated were so and that if he was not considered in a situation like that, he was discriminated against and was denied equality of opportunity is not only factually correct but well founded.
[467 B C] 2:1.
It is true that the rules regulating the conditions of service are within the executive power of the State or its legislative power under the proviso to Articles 309 of the Constitution, but even so, such rules have to be reasonable, fair and not grossly unjust if they are to survive the test of Articles 14 and 16 of the Constitution.
A rule, which contemplates that unless the list of 300 persons is exhausted no other person can be selected obviously, is unjust and it deprives other persons in the same situation of the opportunity of being considered for promotion.
[470 F H] 2:2.
The classification in this case cannot be said to be a reasonable classification based on the intelligible differentia having a nexus to the object sought to be achieved.
The only basis of grouping the 300 persons in one category is that they were included in the select list of 1966 and that they were officiating.
The respondent, in the instant case, could not be selected in the selection of 1966 on account of an adverse entry which was subsequently expunged.
His position in the seniority list was also corrected but because no selection took place after 1966.
The respondent could not be included in the list for no fault of his.
If there held 462 been a section and the list had been revised every year, as is the requirement of the rules, the respondent, and like him many others, would have been included in the list.
For example, some candidates who had not completed seven years could not be eligible for promotion and could not be included in the Select List of 1966 but after a lapse of time they became eligible and they might have been selected if selection had taken place.
But, the door for promotion had been foreclosed for the respondent and many others like him by Rules 7A and 7B for no fault of theirs.
The objection taken by the Public Service Commission and the letter of the Secretary or the Board of Revenue addressed to the Government indicating that it would take about 24 years to absorb 300 persons included in List B and, therefore, recommending that the list may not be enforced would point out unmistakably that the selection was unnecessarily postponed only to accommodate the 300 persons included in the Select List of 1966.
There is no rational basis for such a departure from the ordinary operation of the 1970 Rules which envisaged the preparation of a new list every year and for singing out one particular list for according preferential treatment to others in the similar situations [469 B F, 470 A C] State of Jammu and Kashmir vs Triloki Nath Khosa and others ; ; Ramesh Prasad Singh vs State of Bihar and others; , and Ganga Ram and others vs Union of India and others, , applied.
Reserve Bank of India vs C.S. Rajappan Nair and others, I.L.R. 1977 Kerala 398, approved.
In a case where the vires of certain rules were challenged as being violative of the Articles 14 and 16 of the Constitution, only State is a necessary party.
The other persons likely to be affected by the declaration of the rules as ultra vires are only proper parties.
[471 E F] 4.
A party cannot be permitted to take up a new plea in the appeal for the first time before this Court which was not taken before the High Court in writ petition.
[472 E F] General Manager, South Central Railway, Secundrabad an Anr.
vs A.V.R. Siddhanti and Ors., ; , followed.
B. Gopalaiah vs Government of Andhra Pradesh, A.I.R. and J.S. Sachdev and Ors.
vs Reserve Bank of India and Anr., I.L.R. (1973) II Delhi 392, approved.


judgement:
Civil Appeal No. 1415 of 1981.
Appeal by special leave from the judgment and order dated the 7th January 1981 of the Allahabad High Court in Civil Misc.
Application No. 113 of 1981 in Second Appeal No. 1484 of 1973.
O.P. Rana, M. Qamaruddin and Mrs. M. Qamaruddin for the Appellants.
510 A.K. Sanghi for Respondent No. 1.
The Judgment of the Court was delivered by DESAI, J.
Special leave granted.
We have heard Mr. O. P. Rana, learned counsel for the appellant, and Mr. A.K. Sanghi, learned counsel for the respondent.
The High Court disposed of the appeal preferred by the present appellant in the absence of the learned counsel for the appellant.
When the appellant became aware of the fact that his appeal had been disposed of in the absence of his advocate, he moved an application in the High Court to recall the order dismissing his appeal and permit him to participate in the hearing of the appeal.
This application was rejected by the High Court on the ground that though the application was prepared and drafted and an affidavit was sworn on 29th October, 1980, the same was not presented to the court till November 12, 1980 and that there is no satisfactory explanation for this slackness on the part of the learned advocate who was requested to file the application.
The disturbing feature of the case is that under our present adversary legal system where the parties generally appear through their advocates, the obligation of the parties is to select his advocate, brief him, pay the fees demanded by him and then trust the learned advocate to do the rest of the things.
The party may be a villager or may belong to a rural area and may have no knowledge of the court 's procedure.
After engaging a lawyer, the party may remain supremely confident that the lawyer will look after his interest.
At the time of the hearing of the appeal, the personal appearance of the party is not only not required but hardly useful.
Therefore, the party having done everything in his power to effectively participate in the proceedings can rest assured that he has neither to go to the High Court to inquire as to what is happening in the High Court with regard to his appeal nor is he to act as a watchdog of the advocate that the latter appears in the matter when it is listed.
It is no part of his job.
Mr. A.K. Sanghi stated that a practice has grown up in the High Court of Allahabad amongst the lawyers that they remain absent when they do not like a particular Bench.
Maybe he is better informed on this matter.
Ignorance in this behalf is our bliss.
Even if we do not put our seal of imprimatur on the alleged practice by dismissing this matter which may discourage such a tendency, would it not bring justice delivery system into disrepute.
What is the fault of the party who having done everything in his 511 power and expected of him would suffer because of the default of his advocate.
If we reject this appeal, as Mr. A.K. Sanghi invited us to do, the only one who would suffer would not be the lawyer who did not appear but the party whose interest he represented.
The problem that agitates us is whether it is proper that the party should suffer for the inaction, deliberate omission, or misdemeanour of his agent.
The answer obviously is in the negative.
Maybe that the learned advocate absented himself deliberately or intentionally.
We have no material for ascertaining that aspect of the matter.
We say nothing more on that aspect of the matter.
However, we cannot be a party to an innocent party suffering injustice merely because his chosen advocate defaulted.
Therefore, we allow this appeal, set aside the order of the High Court both dismissing the appeal and refusing to recall that order.
We direct that the appeal be restored to its original number in the High Court and be disposed of according to law.
If there is a stay of dispossession it will continue till the disposal of the matter by the High Court.
There remains the question as to who shall pay the costs of the respondent here.
As we feel that the party is not responsible because he has done whatever was possible and was in his power to do, the costs amounting to Rs.200/ should be recovered from the advocate who absented himself.
The right to execute that order is reserved with the party represented by Mr. A.K.Sanghi.
Appeal allowed to the extent indicated with costs in the manner indicated.
P.B.R. Appeal allowed.

dataset_name: IN-Abs

summary/full:
On knowing that the High Court had dismissed his appeal on the ground that his Advocate was not present in the Court when the matter was taken up for hearing the appellant moved an application for the recall of the order dismissing the appeal and for permission to participate in the hearing of the appeal.
The High Court rejected this application stating that no satisfactory explanation had been furnished by the Advocate for his slackness in filing the affidavit for nearly 15 days after it was drafted.
On the question whether the litigant is entitled to have his case reheard by the High Court.
^ HELD: It is not proper that an innocent litigant, after doing everything in his power to effectively participate in his proceedings by entrusting his case to the Advocate, should be made to suffer for the inaction, deliberate omission or misdemeanour of his agent.
For whatever reason the Advocate might have absented himself from the Court, the innocent litigant could not be allowed to suffer injustice for the fault of his Advocate.
[511 B] The respondent 's costs should be recovered from the Advocate who absented himself from Court.
[511 D] [The Court directed the appeal to be restored to its original position in the High Court and heard.]


judgement:
ax Reference Case No. 17 of 1975.
Under section 257 of the Income Tax Act, 1961 made by the Income Tax Appellate Tribunal, Delhi Bench in Reference Application No. 92/DEL/71 72 arising out of I.T.A. No.1339/DEL/68 69.
B.B. Ahuja and Miss A.Subhashini for the Appellant.
A.K Sanghi and Narayan Netter for the Respondent.
The following Judgments were delivered: PATHAK, J.
In view of the majority opinion of this Court in Additional Commissioner of Income tax, Gujarat vs Surat Art Silk Cloth Manufactures, the reference must be answered against the Revenue and in favour of the assessee.
SEN, J.
This direct reference under section 257 of the Income tax Act, 1961 (hereinafter referred to as 'the Act ') made by the Income Tax Appellate Tribunal Delhi Bench 'B ' at the instance of the Commissioner of Income Tax, Delhi II, New Delhi raises the much vexed question as to whether the words "not involving the carrying on of any activity for profit" in the definition of 'charitable purpose ' contained in section 2 (15) of the Act, govern the word 'advancement ' and not the words 'object of general public utility.
493 The facts giving rise to the reference are as follows: The Federation of Indian Chambers of Commerce and Industry, New Delhi hereinafter referred to as 'the assessee ' is an existing company under the .
It was registered under section 26 of that Act and permitted to omit the word 'Limited ' from its name.
It has neither any share capital nor does it distribute any dividends to its members.
The entire income is expended for the fulfilment of its object.
The main object of the assessee is the promotion protection and development of trade, commerce and industry in India.
The main objects for which the Federation has come into existence are set out in cl. 3 of the Memorandum of Association which, insofar as material, reads: 3.(a) To promote Indian business in matters of inland and foreign trade, transport, industry and manufactures, finance and all other economic subjects and to encourage Indian banking, shipping and insurance.
While cl. 3(a) defines the primary purpose of the trust, i.e. to promote trade and industry which undoubtedly being an object of general public utility engaged in carrying on activities without any profit motive, the subsidiary objects set out in sub cls.
(b) to (z2) of cl.3 are merely incidental or ancillary thereof.
During the assessment year 1962 63, the relevant accounting year for which was the year ended December 31, 1961 the assessee submitted a return showing its total income as 'nil ' claiming that all its income was exempt under section 11(1)(a) read with section 2(15) of the Act.
During the assessment year in question, the assessee held the Indian Trade Fair at New Delhi and derived receipts totalling Rs. 75,18,548 from rent for space allotted, temporary stalls and storage.
It also received Rs. 20,750 by sale of season tickets and Rs. 3,94,143 by daily gate tickets.
It realised deposits and advances from the participants for hotel accommodation.
In the relevant accounting year, the Conference of the Afro Asian Organisation for Economic Cooperation, sponsored by the assessee, was held at New Delhi.
For organising the Conference, the assessee received Rs. 3,00,000 from the Government of India as grant in aid and after meeting the expenses, was left with a balance of Rs. 2,17,346.38.
Further, the assessee received Rs. 265.50 as the share of profits on the sale of a book on Company Law, Rs. 5,371.82 as fee for arbitration.
It realised advances from its members for arbitration amounting to Rs. 20,000 from out of which a balance of Rs. 299.18 was left.
The balance sheet for the 494 accounting year shows that the assessee had in excess income of Rs. 2,291.71 over the expenditure under the head 'income '.
The contention of the assessee before the Income Tax officer was that the activities carried on by the Federation were not with the motive of earning profits, but they were carried on with the object of promotion, protection and development of trade, commerce and industry in India and abroad.
Its contention was that the dominant object for which the Federation was constituted was for promotion, protection and development of the country 's trade, commerce and industry and the activities carried on during the assessment year in question, namely, the holding of the Indian Trade Fair and of sponsoring the Conference of the Afro Asian Organisation for Economic Cooperation were incidental or ancillary to the main object, and, therefore, the income derived therefrom was exempt under section 11 (1)(a) of the Act.
Reliance in support of this contention was placed on the decision of this Court in Commissioner of Income Tax vs Andhra Chamber of Commerce.
In the immediately preceding assessment years 1960 61 and 1961 62, the income of the assessee was treated as exempt from tax under section 4(3) (i) of the Income Tax Act, 1922.
The Income Tax officer, however, felt that the decision of this Court in the Andhra Chamber of Commerce 's case (supra) was no longer good law due to the addition of the words "not involving the carrying on of any activity for profit" in the definition of 'charitable purpose ' in section 2(15) of the Act which qualify the fourth head of charity, viz., "any other object of general public utility", and, therefore, must be read subject to the additional statutory requirement that the object of general public utility should not involve the carrying on of any activity for profit.
He accordingly raised a demand of Rs. 49,818 on a total income of Rs. 84,430 on appeal, the Appellate Assistant Commissioner disagreed with the view of the Income Tax Officer and held that the activities carried on by the assessee were not profit oriented and, therefore, its income was exempt.
The Commissioner of Income tax appealed to the Appellate Tribunal without any success.
The Tribunal upheld the view of the Appellate Assistant Commissioner and held that the dominant object with which the Federation was constituted being a charitable purpose, viz., promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, it was not engaged in any activity in the nature of business or trade, and, if any 495 income arose from such activity, it was only incidental or ancillary to the dominant object for the welfare and common good of the country 's trade, commerce and industry.
Thereupon, the Commissioner of Income Tax applied to the Appellate Tribunal to make a reference to the High Court under sub s.(1) of s.256 of the Act, but the Tribunal, in view of the conflict in the decisions of the High Courts on the construction of the expression 'charitable purpose ' as defined in section 2(15) of the Act, has made a reference of the following questions to this Court under section 257 of the Act, for its opinion, namely: 1.
Whether having regard to the definition of charitable purpose as contained in Section 2(15) read with Sections 11(1) and 11(4), charging sections and sections dealing with computation of income, the assessee was liable to be taxed in respect of income relating to assessment year 1962 63 ? 2.
Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income earned by the assessee would not come within the provisions of Section 2(15) read with Section 11 of the Income Tax Act, 1961 and the onus that this profit was not exempt from tax would be on the Revenue ? 3.
Whether on the facts and in the circumstances of the case, the purpose of the Federation of Indian Chambers of Commerce and Industry was advancement of objects of general public utility not involving the carrying on of any activity for profit ? There had been a sharp conflict of opinion between the different High courts as to the construction of the ten crucial words "not involving the carrying on of any activity for profit" qualifying the fourth head of charity "advancement of any other object of general public utility".
This Court resolved the conflict in the Sole Trustee, Loka Shikshan Trust vs C.I.T. and the Indian Chambers of Commerce vs C.I.T. by holding that the words "not involving the carrying on of any activity for profit" govern the word "advancement" and observed that if the advancement or attainment of the object involves an activity for profit, tax exemption would not be available.
496 Unfortunately for the Revenue, the Court has, in a five Judges Bench, by a majority of 4 to 1, in Addl.
Commissioner of Income Tax vs Surat Art Silk Cloth Manufactures ' Association reversed these two decisions in the Loka Shikshan Trust 's case and the Indian Chambers of Commerce 's case (supra).
The Court has approved of the observations of Beg, J. in his separate but concurring judgment in the Loka Shikshan Trust 's case that "if the profits must necessarily feed charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust.
" In other words, the majority view in the Surat Art Silk 's case (supra) was that the condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object.
The theory of dominant or primary object of the trust has, therefore, been treated to be the determining factor, even in regard to the fourth head of charity, viz., the advancement of any other object of general public utility, so as to make the carrying on of business activity merely ancillary or incidental to the main object.
One should have thought that the correct way to approach this question of interpretation was to give the words used by Parliament their ordinary meaning in the English language and if, consistently with the ordinary meaning, there was a choice between two alternative interpretations, then to prefer the construction that maintains a reasonable and consistent scheme of taxation without distorting the language.
When the Government did not accept the recommendation of the Direct Taxes Laws Committee in Chapter 2 (Interim Report, December, 1977) for the deletion of the words "not involving the carrying on of any activity for profit" occurring in section 2(15) of the Act, the Court has by a process of judicial construction achieved the same result.
Whatever reservations one may have regarding the correctness of this interpretation of the exclusionary clause in the definition of charitable purpose in section 2(15) of the Act, there can be no doubt that the majority decision in the Surat Art Silk 's case (supra) is binding on us.
With respect, I venture to say that the majority decision has the effect of neutralising the radical changes brought about by Parliament in the system of taxation of income and profits of charities, with particular reference to "objects of general public utility" to prevent tax evasion, by diversion of business profits to 497 charities.
It is the vagueness of the fourth head of charity "any other object of general public utility" that impelled Parliament to insert the restrictive words "not involving the carrying on of any activity for profit".
In my minority opinion in the Surat Art Silk 's case (supra) I had endeavoured to give reasons why the correctness of the majority decision was open to question.
There is no point in traversing the same ground over again.
It was clearly inconsistent with the settled principles to hold that if the dominant or primary object of a trust was 'charity ' under the fourth head 'any other object of general public utility ', it was permissible for such an object of general public utility, to augment its income by engaging in trading or commercial activities.
In retrospect it seems that it would have been better for Parliament to have deleted the fourth head of "any other object of general public utility" from the ambit of the definition of 'charitable purpose ' while enacting section 2(15) of the Act rather than inserted the words "not involving the carrying on of any other activity for profit", thereby creating all this legal conundrum.
In England, the Radcliffe Commission on Taxation of Profits and Income recommended in 1955 that for purposes of taxation, charity should be restricted to relief of poverty, advancement of education and advancement of religion and that the fourth category mentioned in the dictum of Lord Macnaghten, namely, "trusts for other purposes beneficial to the community ' should be cut out entirely.
The majority in the Surat Art Silk 's case (supra) has evolved the doctrine of dominant or primary object and there is little that we can do about it.
Faced with this difficulty, learned counsel for the Revenue advanced no submissions with regard to the questions referred and indeed, in view of the majority decision in the Surat Art Silk 's case (supra) the answers to the questions are self evident.
The doctrine of dominant or primary object must, as laid down in the Surat Art Silk 's case, holds the field till there is a change in the law.
Undoubtedly, the activities of the assessee in regard to holding of the Indian Trade Fair and sponsoring of the Conference of the Afro Asian Organisation in the relevant accounting year were for the advancement of the dominant object and purpose of the trust, viz., 498 promotion, protection and development of trade, commerce and industry in India.
Learned Counsel for revenue with his usual fairness, conceded that the income derived by the assessee from such activities was exempt under s.11(1)(a) read with s.2(15) of the Act.
It was, however, urged that the objects set out in sub cls.
(v), (z1) and (z2) of cl.3 of the Memorandum of Association of the Federation were not incidental or ancillary to the main object of the trust.
The relevant sub clauses are set out below: (v) To establish and support or aid the establishment and support of associations, institutions, funds, trusts and convenience, calculated to benefit employees of the Federation or the dependents or connections of such persons, and grant pension and allowances, and to make payments towards insurance, and to subscribe or guarantee money for charitable or benevolent objects or for any exhibition for any public, general, useful object.
(z1) To establish a Trust or Trusts and/or appoint Trustees thereof from time to time and vest the funds or the surplus income or any property of the Federation in the Trustees who shall hold and deal with the funds, surplus income or property in such manner as the committee may decide.
(z2) To undertake and execute any Trusts the undertaking of which may seem to the Federation desirable either gratuitously or otherwise.
The contention advanced cannot be accepted, for the reason that no such point was ever raised at any stage of the proceedings, much less before the Appellate Tribunal.
Even otherwise, there appears to be no substance in the contention.
There is a distinction between the "purpose" of a trust and the "powers" conferred upon the trustees as incidental to the carrying out of purpose.
For instance cl.3(v) enables the establishment and support of associations, institutions, funds, trusts and convenience calculated to benefit the employees and their dependents, for making provisions for grant of pension and allowances etc.
The framing of such employee benefit schemes is essential and necessary for the proper functioning of the organisation and is incidental to the carrying out of the purpose for 499 which it is constituted.
I refrain from expressing any opinion whether or not the employees constitute a "section of the public".
For, if the primary or dominant purpose of a trust or institution is charitable, any other object which is merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or institution from being a valid charity.
Likewise, cls.3(z1) and (z2) which permit the establishment of a trust or trusts, appointment of trustees thereof from time to time and the vesting of funds or surplus income or any property of the assessee in the trustees, are nothing but powers conferred on them for the proper financial management of the affairs of the trust which are incidental or ancillary to the main purpose of the trust.
The contention must, therefore, fail.
In the result, the reference under s.257 of the Income Tax Act, 1961 made by the Income Tax Appellate Tribunal, Delhi B, New Delhi, must be answered against the Revenue and in favour of the assessee.
There shall be no order as to costs.
VENKATARAMIAH, J. I have had the advantage of reading the judgment prepared by my learned brother A.P. Sen, J. and I respectfully agree with his reasoning and conclusion.
I share with him my doubts about the correctness of the decision in Additional Commissioner of Income tax, Gujarat vs Surat Art Silk Cloth Manufacturers ' Association.
I would like to say a few words of my own on the subject.
There can be no objection to a person spending his money on charity.
But can he be charitable at the expense of others? This is a question which necessarily arises when we read section 11 of the Income tax Act, 1961.
Section 11 as it stands now grants exemption from payment of tax on any income, which would have otherwise been taxable, provided (1) the property yielding income is held under trust or such other legal obligation which is brought into existence by an act of party and not by an act of law, (2) the purpose of the trust is charitable which may enure to the benefit of the public or a section of the public and (3) the other conditions prescribed by the Act are satisfied.
It means that if there is a diversion of property or income earning apparatus by an act of party into a charitable trust and the prescribed conditions are satisfied, the income derived from it (including the portion which would have gone to the public exchequer but for the trust) may be spent by a person in charge of the 500 affairs of the trust on objects indicated in the trust which is a creature of its author.
In effect what does it mean? It means that the author of the trust is able to divert by his own will to a purpose of his own choice, though charitable, a large part of the income which would have been, but for the trust, at the disposal of the Legislature which alone has the power over the national exchequer.
Whatever may have been the position in those days when the State was just a police State performing minimum functions of Government, today when the State is a welfare State would it be right either morally or constitutionally to allow amounts which should legitimately form part of the revenue of the State to be dealt with by non Governmental agencies administering trusts is a question which requires examination in an appropriate case.
This, however, is a larger question which, if logically pursued, may justify total deletion of the exemption accorded in the case of charitable and religious trustee.
But even as the provisions now stand, I feel that while construing them, this Court has enlarged the meaning of "charitable purpose" in section 2 (15) beyond what it legitimately should mean in the Surat Art Silk Cloth Manufacturers ' Associations ' case (supra).
I would like to adopt the words in the dissenting judgment of my learned brother A.P. Sen J. in the Surat Art Silk Cloth Manufacturers ' Association 's case (supra): "The judicial attitudes cannot be formed in isolation from legislative processes, particularly, in connection with tax avoidance provisions.
" It is true that it is open to the Legislature to give encouragement to objects which it considers to be laudable by means of fiscal exemptions.
At the same time it takes care to enact fresh provisions from time to time to suppress any mischief which may have resulted from the misuse of existing law.
Parliament deliberately stepped in by adding the words "not involving the carrying on of any activity for profit" in the definition of charitable purpose in section 2 (15) of the Act, when the tax exemptions available to charitable and religious trusts came to be misused by some for the unworthy purposes of tax avoidance.
The law had been so re structured to prevent allergy to taxation masquerading as charity.
The law was thus designed by Parliament to prevent this misuse of tax exemption in the name of charity.
The majority decision in the Surat Art Silk Cloth Manufacturers ' Association 's case (supra), if I may say so without meaning 501 any disrespect, has virtually wiped off the restrictive words "not involving the carrying on of any activity for profit" occurring in section 2(15), thereby defeating the very object and purpose of the legislation.
It is not the function of a court of law to give the words a strained and unnatural meaning.
When the Government had not accepted the recommendation of the Direct Taxes Laws Committee in Chapter 2 (Interim Report, December, 1977) for the deletion of the words "not involving the carrying on of any activity for profit", by suitable legislation, it was impermissible for this Court by a process of judicial construction to achieve the same result.
If I may adopt the words of Lord Reid in Greenberg vs IRC quoted in the minority decision in Surat Art Silk Cloth Manufacturers ' Association 's case (supra) displaying the court 's concern about the prevailing attitude of tax statutes: "Parliament is very properly determined to prevent this kind of tax evasion and, if the courts find it impossible to give very wide meanings to general phrases, the only alternative may be for Parliament to do as some other countries have done, and introduce legislation of a more sweeping character. " Modern legislation has changed in pattern towards re casting provisions of taxation with very wide language, while at the same time dealing in much more detail with some areas of law.
Judges, while responding to general trends of law, but also reacting to the form of modern tax legislation, must be prepared to take account of the context and purposes of the change brought about.
It is relevant to refer to one other aspect arising out of an observation made in the course of the majority judgment in the Surat Art Silk Cloth Manufacurers ' Association 's case (supra) suggesting that the area of exemption under Indian law is much wider than what is available under English law.
The relevant part of the majority judgment reads: "The definition of "charitable purpose" in Indian Law thus goes much further than the definition of charity to be derived from the English cases, because it specifically includes medical relief and embraces all objects of general public utility.
In English Law it is not enough that 502 a purpose falls within one of the four divisions of charity set out in Lord Macnaghten 's classification.
It must also be within the spirit and intendment of the Preamble to the Statute of Elizabeth if it is to be regarded as charitable.
There is no such limitation so far as Indian Law is concerned even if a purpose is not within the spirit and intendment of the Preamble to the Statute of Elizabeth, it would be charitable if it falls within the definition of "charitable purpose" given in the Statute.
Every object of general public utility would, therefore, be charitable under the Indian Law, subject only to the condition imposed by the restrictive words "not involving the carrying on of any activity for profit" added in the present Act.
It is on account of this basic difference between the Indian and English Law of charity that Lord Wright uttered a word of caution in All India Spinners ' Association vs Commissioner of Income tax (12 I.T.R. 482) against blind adherence to English decisions on the subject.
The definition of "charitable purpose" in the Indian Statute must be construed according to the language used there and against the background of Indian life.
" If Indian life should be a true guide for the determination of questions arising in court, then we should go back to our ancient treatises to find out the true meaning of charity which may be either dana or utsarga.
In the case of dana the donor gives up his ownership over a thing, makes another the owner of it and cannot thereafter use it nor has he any control over it.
When a man makes an utsarga, he no doubt gives up his ownership but gives up the thing for the benefit of all.
Opinion is, however, divided whether as a member of the public he can also use a thing thus dedicated for the public.
But in any event, he would no longer have any control over the thing dedicated.
How many of the so called charitable trusts satisfy the rigours of the Indian concept of charity? Are there any measures by which misuse of funds belonging to charities can be effectively checked? It is wrong to think that all springs of charity in India will dry up if true effect is given to section 2 (15) of the Act in accordance with the minority judgment in the Surat Art Silk Cloth Manufacturers ' Association 's case (supra).
People who are truly charitable do not think of the tax benefits while making charities.
One must realise 503 that even the poor who do not pay income tax can be charitable and their charities made at great personal inconvenience are commendable indeed.
One need not go in search of charitable persons amongst the tax payers only.
Still the majority view has got to be followed now.

summary/full:
The respondent assessee an existing company under the had neither any share capital nor distributed any dividend to its members and its entire income was expended for fulfilment of its objects, which were the promotion, protection and development of trade, commerce and industry in India.
During the assessment year 1962 63, the relevant accounting year for which the year ended December 31, 1961 the assessee submitted a return showing its total income as 'nil ' claiming that all its income was exempt under section 11(1)(a) read with Section 2(15) of the Income Tax Act.
During the assessment year, the assessee held the Indian Trade Fair at New Delhi and derived receipts from rent for space allotted, temporary stalls and storage and realised deposit and advances from the participants for hotel accommodation.
In the relevant accounting year, the Conference of the Afro Asian Organisation for Economic Cooperation, was sponsored by the assessee and for organising the Conference, the assessee received from the Government Rs. 3 lakhs as grant in aid and after meeting the expenses, was left with a balance of Rs. 2 lakhs.
It also received income by sale of books, fee for arbitration etc.
The balance sheet for the accounting year indicated that it had an excess of income over expenditure under the head 'income '.
The contention of the assessee before the Income Tax Officer was that the activities carried on by the Federation were not were not motive of earning profits, but that they were carried on with the object of promotion, protection and development of trade, commerce and industry in India and abroad, and therefore the income derived by the assessee was exempt under section 11(1)(a).
The Income Tax Officer, held that the decision of this Court in the Andhra Chamber of Commerce 's case [1965] I.S.C.R. 565 was no longer good law due to the addition of the words 'not involving the carrying on any activity for profit ' in the definition of 'charitable purpose ' in Section 2(15) of the Act which qualify the fourth head of charity viz. 'any other object of general public utility ' and, therefore, must be read subject to the additional statutory requirement that the 490 object of general public utility should not involve the carrying on of any activity for profit, and accordingly raised a demand.
On appeal by the assessee, the Appellate Assistant Commissioner disagreed with the view of the Income Tax Officer and held that the activities carried on by the assessee were not profit oriented and, therefore, its income was exempt.
The Department appealed to the Appellate Tribunal, and the Appellate Tribunal upheld the view of the Appellate Assistant Commissioner and held that the dominant object with which the Federation was constituted being a charitable purpose viz., promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, it was not engaged in any activity in the nature of business or trade, and, if, any income arose from such activity, it was only incidental or ancillary to the dominant object for the welfare and common good of the country 's trade, commerce and industry.
The Commissioner of Income Tax applied to the Appellate Tribunal to make a reference to the High Court under sub section (1) of section 256 of the Act, but in view of the conflict in the decisions of the High Courts on the construction of the expression 'charitable purpose ' as defined in section 2(15) of the Act the Tribunal made a reference to this Court under Section 257 .
On the question whether the words 'not involving the carrying on of any activity for profit ' in the definition of 'charitable purpose ' contained in section 2(15) of the Act, govern the word 'advancement ' and not the words 'object of general public utility '.
^ HELD: [By the Court] The reference must be answered against the Revenue and in favour of the assessee, in the view of the majority opinion in Addl.
Commissioner of Income Tax vs Surat Art Silk Cloth Manufactures, [1980] I S.C.R. 77.
[492 F] [Per A.P. Sen, J.] 1.
The majority view in the Surat Art Silk case was that the condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object.
The theory of dominant or primary object of the trust, has, therefore, been treated to be the determining factor, even in regard to the fourth head of charity, viz. advancement of any other object of general public utility, so as to make the carrying on of business activity merely ancillary or incidental to the main object.
This doctrine of dominant or primary object holds the field till there is a change of law.
[496 C D, 497 F] 2.
The majority decision had the effect of neutralising the radical changes brought about by Parliament in the system of taxation of income and profits of charities, with particular reference to "object of general public utility" to prevent tax evasion, by diversion of business profits to charities.
It is the vagueness of the fourth head of charity "any other object of general public utility" that impelled 491 Parliament to insert the restrictive words "not involving the carrying on of any activity for profit".
[496 G 497 A] 3.
It was clearly inconsistent with the settled principles to hold that if the dominant or primary object of a trust was 'charity ' under the fourth head 'any other object of general public utility ', it was permissible for such an object of general public utility to augment its income by engaging in trading or commercial activities.[497 B] 4.
When the Government did not accept the recommendation of the Direct Taxes Laws Committee in Chapter 2 for the deletion of the words "not involving the carrying on of any activity for profit" occurring in Section 2(15) of the Act, it was impermissible for the Court by a process of judicial construction to achieve the same result.
[496 F] 5.
In the instant case, activities of the assessee in regard to holding of the Indian Trade Fair and sponsoring of the Conference of the Afro Asian organisation in the relevant accounting year were for the advancement of the dominant object and purpose of the trust, viz. promotion, protection and development of trade, commerce and industry in India.
The income derived from such activities was therefore exempt under section 11(1)(a) read with section 2(15) of the Act.
[498 G 499 A] 6.
There is a distinction between the "purpose" of a trust and the "power conferred upon the trustees" as incidental to the carrying out of the purpose.
If the primary or dominant purpose of a trust or institute is charitable, any other object which is merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or the institution being a valid charity.
[498 G, 499 A] [Per Venkataramiah, J.] 1.
It is open to the Legislature to give encouragement to objects which it considers to be laudable by means of fiscal exemptions.
At the same time, it takes care to enact fresh provisions from time to time to suppress any mischief which may have resulted from the misuse of existing law.
Parliament deliberately stepped in by adding the words "not involving the carrying on of any activity for profit" in the definition of 'charitable purpose ' in section 2(15) of the Act, when the tax exemptions available to charitable and religious trusts came to be misused by some for the unworthy purposes of tax avoidance.
The law had been so restructured to prevent allergy to taxation masquerading as charity.
The law was thus designed by Parliament to prevent this misuse of tax exemption in the name of charity.
[500 F H] 2.
This Court has enlarged the meaning "charitable purpose" in Section 2(15) beyond what it legitimately should mean in the Surat Art Silk Cloth Manufacturers Association 's case.
It has virtually wiped off the restrictive words "not involving the carrying on or any activity for profit" occurring in section 2(15), thereby defeating the very object and purpose of the legislation.
It is not the function of a court of law to give the words a strained and unnatural meaning.
Judicial attitudes cannot be formed in isolation from legislative processes, particularly, in connection with tax avoidance provisions.
[500 D, 501A, 500E] 492 3.
Modern legislation has changed in pattern re casting provisions of taxation with very wide language, while at the same time dealing in much more detail with some areas of law.
Judges while responding to general trends of law, but also reacting to the form of modern tax legislation, must be prepared to take account of the context and purposes of the change brought about.[501 E] Greenberg vs Inland Revenue Commissioners [1972] A.C. 109 (HL) referred to.
When the Government had not accepted the recommendation of the Direct Taxes Laws Committee in Chapter 2 for the deletion of the words "not involving the carrying on of any activity for profit", by suitable legislation, it was impermissible by a process of judicial construction to achieve the same result.
[501 B] 5.
People who are truly charitable do not think of the tax benefits while making charities.
Even the poor who do not pay income tax can be charitable and their charities are made at great personal inconvenience.
Charitable persons are not amongst the tax payers only.
[502 H 503 A]


judgement:
N: Criminal Appeal No. 543 of 1976.
Appeal by special leave from the judgment and order dated the 6th May 1975 of the Rajasthan High Court in D.B. Criminal Jail Appeal Nos.
277, 413 to 416 and 918 of 1971.
Badri Das Sharma for the Appellant.
Dalveer Bhandari for the Respondent.
The Judgment of the Court was delivered by BAHARUL ISLAM, J.
This appeal by special leave on behalf of the State of Rajasthan is directed against the judgment of the Rajasthan High Court acquitting the two respondents, Shrimati Kalki alias Kali and her husband, Amara (alongwith four other co accused).
Respondent Kalki was convicted under Section 302 and Section 148 of the Penal Code and sentenced to imprisonment for life and for rigorous imprisonment for two years, respectively.
The five other accused persons including respondent, Amara, were convicted under Section 302 read with Section 149 and under Section 147 of the Penal Code, and each of them was sentenced to imprisonment for life and to one and a half years rigorous imprisonment respectively.
The material facts of the prosecution case were that there was a land dispute between Nimba (P.W.6) father of the deceased, Poona, on the one hand, and respondent Amara and the members of his family, on the other.
On July 17, 1970 at about sunset the accused persons of whom respondent Kalki was armed with an axe and respondent, Amara with a dharia, came to the house of the deceased.
At that time the deceased was inside his hut with his wife Mooli (P.W.1).
Amara called Poona.
Poona came out followed by his wife Mooli, when he was knocked down by Amara and Rama whereupon Kalki gave him blow with the axe on the neck.
Poona met with instantaneous death.
Mooli (P.W.1) raised an outcry when Geli, mother of the deceased (P.W.2) who had been at some distance from the hut came running to the place of occurrence and saw the assailants leaving the place.
506 3.
Nimba lodged a report at the police station at Nana.
Police registered a case.
In due course the case was sent to, and tried by, the Session Judge who convicted and sentenced the six accused persons including the two respondents as stated above.
This Court granted special leave to appeal only against the two respondents and refused it as against the other four.
The question before us is whether the two respondents or any of them caused the death of Poona.
There is no dispute that Poona met a homicidal death.
The High Court has set aside the Order of conviction and sentence passed by the Session Judge on the grounds (1) that P.W.1 the widow of the deceased "is. a highly interested witness, in as much as, she is the wife of the deceased and there was an enmity between the deceased and the accused on account of the dispute about the agricultural land", and (2) "that there are material discrepancies in her statement".
We have been led through the evidence of P.W. 1, the only eye witness in the case, of P.W.2, Geli, who says that she saw the respondents leaving the place of occurrence with the weapons in their hands, and of P.W.5 the Medical Officer, who held the Post Mortem examination on the deceased.
His evidence fully supports the evidence of P.W.1, who deposed that respondent Kalki gave a blow on the neck of the deceased with an axe.
P.W. 5 found one incised wound measuring 5" X 2" X 4" on the lateral side of the left side of neck.
On a perusal of the evidence of these witnesses, we do not have the least doubt in our mind that it was respondent Kalki who gave an axe blow on the neck of the deceased and that respondent Amara came along with his wife with a dharia with the common intention of causing the death of Poona.
In fact it was he who called out Poona from inside the hut, and felled down and facilitated the murder of Poona by his wife, Kalki.
As mentioned above the High Court has declined to rely on the evidence of P.W.1 on two grounds: (1) she was a "highly interested" witness because she "is the wife of the deceased", and (2) there were discrepancies in her evidence.
With respect, in our opinion, both the grounds are invalid.
For, in the circumstances of the case, she was the only and most natural witness; she was the only person present in the hut with the deceased at the time of the occurrence, and the only person who saw the occurrence.
True, it is she is the wife of the deceased; but she cannot be called an 'interested ' 507 witness.
She is related to the deceased.
'Related ' is not equivalent to 'interested '.
A witness may be called 'interested ' only when he or she derives some benefit from the result of a litigation; in the decree in a civil case, or in seeing an accused person punished.
A witness who is a natural one and is the only possible eye witness in the circumstances of a case cannot be said to be 'interested '.
In the instant case P.W.1 had no interest in protecting the real culprit, and falsely implicating the respondents.
The second ground on which the High Court refused to place reliance on the evidence of P.W. 1 was that there were "material discrepancies".
As indicated above we have perused the evidence of P.W. 1.
We have not found any "material discrepancies" in her evidence.
The discrepancies referred to by the High Court are, in our opinion, minor, insignificant, natural and not 'material '.
The discrepancies are with regard to as to which accused "pressed the deceased and at which part of the body to the ground and sat on which part of the body; with regard to whether the respondent Kalki gave the axe blow to the deceased while the latter was standing or lying on the ground, and whether the blow was given from the side of the head or from the side of the legs.
In the depositions of witnesses there are always some normal discrepancies however honest and truthful they may be.
These discrepancies are due to normal errors of observation, normal errors of memory due to lapse of time, due to mental disposition such as shock and horror at the time of the occurrence, and the like.
Material discrepancies are those which are not normal, and not expected of a normal person.
As indicated above we have not found any material discrepancies in the evidence of the P. W. 1. 7.
Learned counsel for the respondent submitted that the appeal involved only appreciation of evidence and this Court may not interfere with the findings of facts resulting from appreciation of evidence.
It is true that in an appeal under Article 136 of the Constitution this Court normally does not interfere with findings of facts arrived at by the High Court.
But when it appears that the findings of facts arrived at are bordering on perversity and result in miscarriage of justice, this Court will not decline to quash such findings to prevent the miscarriage of justice.
In our opinion the guilt of the two respondents has been established by the prosecution beyond reasonable doubt and their acquittal resulted in grave miscarriage of justice.
508 In the result we set aside the order of acquittal passed by the learned High Court and convict respondent Kalki alias Kali under section 302 of the Penal Code and respondent, Amara, under Section 302/34 of the Penal Code, and sentence each of them to suffer imprisonment for life.
The appeal is allowed.
The respondents are said to be on bail.
They shall surrender forthwith to serve out their sentences.
V.D.K. Appeal allowed.

summary/full:
Respondent Kalki alias Kali and her husband Amara (along with four other co accused) were charged, convicted under section 302 I.P.C. and sentenced to life imprisonment.
While Kalki was also convicted and sentenced under section 148 I.P.C. for two years ' rigorous imprisonment, the other five accused were convicted and sentenced under section 147 I.P.C. for rigorous imprisonment for a period of one and a half years.
In appeal the High Court of Rajasthan acquitted all of them on the grounds (i) that P.W. 1, the widow of the deceased "is. . a highly interested witness, inasmuch as, she is the wife of the deceased and there was an enmity between the deceased and the accused on account of the dispute about the agricultural land" and (ii) "that there are material discrepancies in her statement".
This Court granted special leave to appeal only against Kalki and her husband and refused it as against the four.
Dismissing the appeal, the Court ^ HELD: 1.
It is true that in an appeal under Article 136 of the Constitution the Supreme Court normally does not interfere with findings of facts arrived at by the High Court.
But when it appears that the findings of facts arrived at are bordering on perversity and have resulted in miscarriage of justice, the Court will not decline to quash such findings to prevent miscarriage of justice.
[507 F G] 2.
Material discrepancies are those which are not normal, and not expected of a normal person.
In the depositions of witnesses there are always some normal discrepancies however honest and truthful the witnesses may be.
These discrepancies are due to normal errors of observation, normal errors of memory due to lapse of time, due to mental disposition such as shock and horror at the time of the occurrence, and the like.
There are no material discrepancies in the evidence of P.W. 1 so as to reject the evidence in its entirety.
[507 D E] 3.
"Related" is not equivalent to "interested".
A witness may be called "interested" only when he or she derives some benefit from the result of a 505 litigation; in the decree in a civil case, or in seeing an accused person punished.
A witness who is a natural one and is the only possible eye witness in the circumstances of a case cannot be said to be "interested".
In the instant case.
P.W. 1 had no interest in protecting the real culprit, and falsely implicating the respondents.
[507 A B]