judgement:
No. 1547 of 1975.
(Appeal by Special Leave from the Judgment and Order dated the 24 1 1974 of the Kerala High Court in O.P. No. 5566/72) Y.S. Chitale, A. section Nambiar, for the appellant.
K, T. Harindranath, K.R. Nambiar, for respondents Nos.
1 3 and 4.
T.S. Krishnamoorthy Iyer, N. Sudhakaran, for respond ents Nos. 5 & 6.
The Judgment of the Court was delivered by KAILASAM, J.
This appeal is by special leave granted by this Court against the judgment of the High Court of Kerala in O.P. No. 5566 of 1972 by respondents 4 to 8 and 13 before the High Court.
The respondents herein filed the writ petition for the issue of the Writ of Certiorari calling for records relating to exhibit P 10, GO Rt.
No. 3386/69/DD dated 23rd October, and exhibit P15 and quash the same and to issue a writ of mandamus directing the respondents 1 and 2 who are the State of Kerala represented by the Chief Secretary, Government of Kerala, and the Director of Panchayats to forbear the implementation of exhibit P12 and further direct them to implement exhibit P 8 grading 3 list or in the, alterna tive to issue a writ of mandamus directing the State of Kerala to consider and dispose of exhibit P13 and similar repre sentations by respondents 3 and 4 on merits.
It was also prayed that a writ of certiorari quashing exhibit P17 in so far as it related to the petitioners and respondents 3 to 18 in the writ petition be issued and also to issue a writ of mandamus compelling the respondents 1 and 2, State of Kerala and the Director of Panchayats, to assign the writ petition ers the appropriate ranks in the cadre of Executive Officers in the Panchayat Services.
The High Court allowed the writ petition and set aside the list exhibit P17, the order exhibit P12 and the order exhibit P15 dismissing the appeal petition exhibit P14and directed that a fresh list be prepared in accordance with the principles laid down in exhibit P16 in the light of the judgment of the High Court.
Aggrieved by the decision of the High Court the appellants have preferred this appeal.
The writ petition was contested by 18 respondents.
Respondents 3 to 10 were Panchayat executive officers of the Malabar area functioning under the Madras Village Panchayat Act, 1951, on 31st December, 1961.
Respondents 11 to 18 were Panchayat Officers functioning as such on 31st Decem ber, 1961 under the Travancore Cochin Panchayats Act, 1950.
The Kerala Panchayats Act, of 1960 received the assent of the Governor on 8th December, 1960, and was pub lished in Kerala Gazette Extraordinary No. 119 dated 9th December, 1960.
It is common ground that the respondents became Government servants on and from 1st January, 1962.
689 On 15th May, 1961, under exhibit P1 the Government passed an order that all Panchayat Officers/executive officers who continue to hold their appointments at the time when the Act came into force will De absorbed as Panchayat executive officers in the new Panchayats.
The same order provided that the staff of the Malabar District Board shall be ab sorbed as Panchayat executive officers in suitable grades according to their qualifications, grades and suitability.
In December, 1961, 17 Panchayat officers were to be appointed on a scale of pay higher than the scale applicable to the Panchayat executive officers.
The Public Service Commission selected 17 Panchayat executive officers who were on the scale of pay Rs. 80 150 and drew up a list on 27th December, 1961.
They were appointed as Panchayat Inspectors under exhibit P8 on 28th December, 1961.
To fill up these vacancies 17 of the Panchayat executive officers who were in Grade H on the scale of pay Rs. 40 120, the respond ents 3 to 18 were appointed.
The 5 appellants before us were appointed as executive officers on the grade I Rs. 80 250 as and from 1st January, 1962.
The respondents who were the petitioners in the writ petition were integrated in the service.
The Government passed orders laying down the principles of integration of the District Board employees and the Panchayat executive officers and Panchayat Officers.
The impugned orders under the writ petition are exhibit P10, exhibit PI2 and exhibit P15.
It is also prayed that exhibit P17 may be quashed.
The Government in exhibit P10 came to the conclusion that the vacancies on the advice of the Public Service Commission and the appointment of those that had been advised on 28th December.
1961, arose only on the dates enumerated in the order exhibit P10 com mencing from 30th December, 1961, and ending with 2nd Janu ary, 1962 and that the appointment can only be on occurrence of the vacancies.
We do not see on what basis exhibit P10 could be challenged.
exhibit P10 refers to G.O. MS No. 93/62 dated 13th February, 1962.
By the G.O. of 1962, 16 respond ents in the writ petition were promoted as executive offi cers Grade I on the advice of the Public Service Commission.
The promotion of the respondents in the writ petition having been ordered as early as 13th February, 1962, without chal lenging that order a subsequent order which determined the date of their commencement service cannot be challenged.
In fact, the respondents were appointed to the higher posts on 28th December, 1961, and they took charge on 30th December, 1961, 31st December, 1961, 1st January, 1962 and 2nd Janu ary, 1962.
The respondents in this petition were integrated into the service only on 1st January, 1962.
Their position in the service was to be determined by the Government later.
If the respondents were aggrieved at the posting to the higher post of the present appellants and others they ought to have even challenged promotion which was made on 1st January, 1962.
Not having questioned the legality of the promotion or the G.O. of 1962 it is 'too late for them to question the validity of the G.O. of 1969 filing a writ petition in the year 1972.
Apart from this insurmountable objection even on merits the respondents have no claim.
The Government passed exhibit R1 dated 31st January, 1965, laying down the principles of integration of the District 690 Board employees and the Panchayat executing officers and Panchayat Officers.
It provided that the integration must be based on functional parity.
exhibit P12 is a G.O. dated 5th May, 1970 The G.O. refers to the earlier G. O. dated 13th February, 1962, and 24th June, 1969, and states that the names of the 17 executive officers, the appellants and others, are given rank under executive officers Grade I as on 6th January, 1962.
The gradation list is P 17 dated 22nd July, 1972.
After referring to the earlier G. O. the Director of Panchayats approved a final gradation list of Executive Officers of Panchayats as on 6th January, 1962.
The appellants are ranked as 58, 59, 60, 61, 62 etc.
The respondents made representations against exhibit P12 but these representations were not accepted and a list exhibit P8 was drawn up.
The respondents again objected to the list and subsequently exhibit P12 was prepared.
Objections(P14) were raised to exhibit P12 but they were rejected by order exhibit P15 and final list exhibit P17 was published in accordance with the suggestions made in exhibit P12.
The contention on behalf of the respondents is that the order under exhibit P12 is against the position taken by the Government in exhibit P10) and Pl0(a) and the Director had no authority to prepare a list in contravention of Exs.
P10 and Pl0(a).
exhibit P12 was challenged on the ground that it is not in accordance with exhibit P 16 which settled the principles to govern the integration.
It was therefore submitted that exhibit P12 and P17 must be quashed.
Strong reliance was placed on the order of the Government dated 15th May, 1961, which while it provided that Panchayat Officers Executive Officers who continue to hold their appointments at the time when the Act comes into force will be absorbed as Panchayat Executive Officers in the new Panchayats, secured the right of the staff of the District Board by providing that the staff of the Malabar District Board shall be absorbed as Panchayat Executive Officers in suitable Grades according to their qualifications, grades and suitability.
On the basis of the principle of integration above cited it was submitted that if the vacancies in which the appellants and other Panchayat Executive Officers were absorbed arose after 1st January, 1962, the respondents would be entitled to be integrated along with the Panchayat Executive Officers and as they were drawing the same pay they ought to have been given an equal ranking.
We have already pointed out that these appoint ments were made before 31st December, 1961, and as such the respondents cannot have any claim.
The appointments of the appellants and other Panchayat Executive Officers were made before 31st December, 1961, and as the integration was to take effect from 1st January, 1962, they cannot have any grievance.
Further, it will be seen from 6.0.
MS.97/67/A & RDD dated 18th March, 1967, which refers to absorption of various categories of staff of the defunct Malabar District Board in the Department of Local Bodies, it is stated in Paragraph 3 that while 9 U.D. Clerks will be equated to the posts of Panchayat Executive Officers, 2nd Grade, 21 Lower Division Clerks and 8 Revenue Inspectors and 4 clerical attenders will be equated to the posts of the Panchayat Executive Officers 3rd grade.
It is stated that respond ents 1 to 4 come under this category and are only 3rd Grade Executive Officers.
It will thus be seen that the respond ents were not equated with the appellants and other Pan chayat Executive Officers when they were integrated from the District Board service.
691 The persons similarly situated as the respondents herein who were integrated from the District Board services filed writ petitions before the High Court impleading the present appellants challenging the gradation and failed in their attempt.
The earliest petition is in O.P. No. 1431 of 19 '70.
Justice Isaac who heard the petition observed that the petitioners came in the integrated service as 3rd Grade Executive Officers and were promoted to 2nd Grade with effect from 6th February, 1968, while respondents 3 to 10 (some of whom are appellants before us) have been promoted as early as 16th February, 1962, as 1st grade officers.
The learned Judge further observed, "Even ignoring this, respondents 3 to 10 were I Grade Executive Officers from 16 2 1962, while the Petitioner has become even II Grade Executive Officer only with effect from 6 2 1966.
" As the petitioner before the learned Judge was holding a post much inferior to the posts held by respond ents 3 to 10 from 1st February, 1962, onwards, he dismissed the petition being devoid of any merit on 24th May, 1972.
Another writ petition No. O.P. No. 6423 filed by one of the persons integrated from the District Board Services, against the present appellants and others was also dismissed by Justice Isaac on 27th June, 1973.
A writ appeal filed against the order of Justice Isaac in O.P. No 1431 of 1970 was summarily dismissed by the Bench of the Kerala High Court.
While the earlier judgments were all decided against the respondents, the Kerala High Court in the judgment under appeal took a different view.
The decision under appeal proceeds on the basis that a regrettable mistake crept into the judgment in O.P. No. 1431 of 1970 and the earlier deci sion proceeded on the basis that there was a III Grade mentioned in G.O. 814 dated 17th November, 1962.
The High Court was of the view that there was a III Grade under the G.O. above referred to the earlier decision missed the fact that these Grades were not applicable on 1st January, 1962.
Though G.O. 814 of 1962 was ,not placed before us we are not sure whether there was any mistake in the earlier judgment for the G.O. MS 97/67 dated 18th March, 1967, refers to persons being transferred from the Malabar District Board as Panchayat Executive Officers III Grade.
Be that as it may we are satisfied that the respondents are not entitled to the reliefs prayed for by them in the writ petitions.
As the appellants were promoted to a higher post before the respondents were integrated into the Government service on 1st January, 1962.
Further throughout the appellants have been treated as occupying a higher post and respondents much lower post.
Though the promotion of the appellants was before 1st January, 1962, and was confirmed by various orders of the Government the respondents herein did not choose to challenge the orders till the year, 1974.
In the circumstances, we are satisfied that the order of the Kerala High Court has to be set aside and the appeal is allowed with costs.
P.B.R. Appeal allowed.

summary/full:
On May 15, 1961 the State Government passed orders (exhibit PI) that all Panchayat Officers functioning under the Travancore Cochin Panchayats Act, 1950 and Panchayat Execu tive Officers functioning under the Madras Village Pan chayats Act, 1951 as on December 31, 1961 who continue to hold their appointments when the Kerala Panchayat Act, 1960 came into force would be absorbed as Panchayat Executive Officers under the new Panchayats.
The order also provided that the staff of the Malabar District Board shall be ab sorbed as Panchayat Executive Officers in suitable grades.
On the recommendation of the State Public Service Com mission the State Government appointed 17 Panchayat Officers in a higher grade by an order dated December 28, 1961 (exhibit P8) and the officer joined their posts between Decem ber 30, 1961 and January 2, 1962.
To fill up the resulting vacancies 17 of this Panchayat Executive Officers who were in Grade II (respondents 3 to 18) were appointed.
The appellants were appointed as Executive Officers on the Grade I, as and from January 1, 1962.
The respondents ' representation to the Government that they should be appointed with effect from December 28, 1961, that is, the date on which the public Service Commission communi cated their appointment was rejected by the State Government (exhibit P10) on the ground that the vacancies arose only on the dates stated in that order commencing from December 30, 1961 and ending with January 2, 1962 and that the appointments can only be on the occurrence of the vacancies.
In a petition under article 226 of the Constitution the High Court directed that fresh lists be prepared.
Allowing the appeal, HELD: The respondents are not entitled to the reliefs prayed for by them in the writ petitions.
[691 F] The appellants were promoted to a higher post before the respondents were integrated into the Government service.on January 1, 1962.
Throughout, the appellants have been treated as occupying a higher post and respondents much lower post.
Though the promotion of the appellants was before January 1, 1962 and was confirmed by various orders of the Government the respondents did not choose to chal lenge the orders till 1972.
[689 G] There is no ground for challenging exhibit P10 order.
It refers to the G.O. of February 13, 1962 by which 16 respond ents in the writ petition were promoted as Executive Offi cers Grade I on the advice of the State Public Service Commission.
Their promotion having been ordered on February 13, 1962, without challenging that order a subsequent order which determined the date of their commencement of service cannot be challenged.
[689 E F] There is no merit in the respondents ' contention that if the vacancies in which the appellants and other Panchayat Executive Officers were absorbed arose after January 1, 1962 the respondents would be entitled to be integrated along with the Panchayat Executive Officers and since they were drawing the same pay they ought to have been given an equal ranking.
The appointments of the appellants and other Panchayat Executive Officers were made before December 31, 1961 and as the integration was to take effect from January 1 688 1962 they cannot have any grievance.
Further, the respond ents were not equated with the appellants and other Pan chayat Executive Officers when they were integrated from the District Board Service.
[690 F G]


judgement:
No. 2381 of 1968.
(From the Judgment and Order dated the 30th March 1965 of the Andhra Pradesh High Court in Appeal against Order No. 443 of 1963) P. Ram Reddy, K. Jayaram and K. Ram Kumar, for the appellant.
B.R. Agarwala, for respondents.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal by certificate arises out of execution proceedings in respect of a decree obtained by the respondents/decreeholders.
It appears that the 5th re spondent/decree holder Siddam Pedda Rami Reddi hereinafter referred to as "SP" Reddi obtained a decree in O.S. No. 15 of 1949 from the Court of Sub Judge Kurnool against the judgment debtor Pujari Subbarayudu hereinafter referred to as "Pujari" or "judgment debtor".
The 5th respondent had also obtained another money decree against Pujari in another suit being O.S. No. 19 of 1953.
The 5th respondent/decree holder filed Execution Proceedings No. 24 of 1953 in the Trial Court for selling the properties be longing to the judgment debtor in order to satisfy the decree in O.S. No. 15 of 1949 and he also applied for per mission to bid at the auction sale.
The first sale was held on October 12, 1954 at which the lands situated in villages Devanoor and Gudipadu were put to sale.
But this sale was set aside as there was some delay in payment of the sale price.
Consequently a second sale was held on March 2, 1955 at which the 5th respondent SPR Reddi purchased the lands situated in village Davanoor and the appellant/auc tion purchaser T.P.S. Reddy purchased the lands in village Gudipadu.
It is also not disputed that in the warrant of sale as also the sale proclamation, the decretal amount for which the properties were to be sold was mentioned as Rs. 16,715 8 0.
The sale of lands in village 694 Devanoor alone fetched a sum of Rs. 16,880/ at which the sale was knocked down.
Thus it would appear that the sale proceeds of the lands in village Devanoor were sufficient to satisfy the decretal amount mentioned in the proclamation of sale.
Despite this fact, the Court proceeded to sell the properties of the judgment debtor in village Gudipadu which fetched Rs. 12,500/ and which were purchased by the appellant/auction purchaser.
On April 20, 1955 the decree holder obtained an order from the Court for rateable distribution of the sale pro ceeds.
In other words, this order was passed by the Court not before the sale so that the entire decretal amount could have been mentioned in the sale proclamation but a few days after the sale had already taken place.
This is rather an important aspect of the matter which appears to have been completely overlooked by the Trial Court.
On March 31, 1955 the judgment debtor Pujari filed an application to set aside the sale on various grounds, namely, that the sale was vitiated by material irregularities which caused serious prejudice to the judgment debtor and that the properties sold by the Court were valuable properties and the same were grossly undervalued in the sale proclamation.
Finally it was contended by the judgment debtor that once the sale of the properties in village Devanoor was sufficient to satisfy the amount mentioned in the sale proclamation, the Court should have stopped the sale as required by the mandatory provisions of 0.21 r. 64 of the Code of Civil Procedure hereinafter referred to as the Code instead of continuing the sale of the properties in village Gudipadu.
The Trial Court, however, after heating the objections of the decree holder rejected the application of the judgment debtor.
Thereafter the judgment debtor preferred an appeal before the High Court which, while negativing the grounds taken by the judgment debtor regarding the material irregularities in the conduct of sale or the under valuation of the properties, accepted the plea of the judgment debtor regarding the non compliance with the provisions of 0.21 r. 64 of the Code.
The High Court held, and in our opinion rightly, that as the sale of the properties in village Devanoor fetched an amount which was sufficient to satisfy the amount mentioned in the sale warrant, the Executing Court was not justified in proceeding with the sale of the properties in village Gudipadu and should have stopped the sale.
The High Court accordingly accepted the plea of the judgment debtor and set aside the sale with respect to the properties situated in village Gudipadu, but granted a certificate to the appellant to file an appeal in this Court and hence this appeal before us.
In this appeal the facts are more or less undisputed and the only serious point argued by the appellant is that the High Court was in error in setting aside the sale because even if the entire decretal amount was not mentioned in the sale proclamation, that was at best an irregularity which did not cause any prejudice to the judgment debtor.
It was also argued by learned counsel for the appellant that the judgment debtor did not raise any objection before the Executing Court against continuing the sale of other proper ties situated in village Gudipadu.
It was next submitted that the 5th respondent/decreeholder had obtained another decree in O.S 19 of 1953 and the total 695 amount under the two decrees fully justified the selling of the properties in village Gudipadu also, particularly when the decree holder had taken an order from the Executing Court for rateable distribution of the sale proceeds.
It is true that the High Court has not considered this aspect of the matter, but in our opinion the contentions raised by the appellant are wholly untenable.
It is not disputed that the warrant of sale was prepared long after the 5th respondent/decreeholder had obtained the second decree in O.S. 19 of 1953 and yet no attempt was made by the decree holder to approach the Court for amending the decretal amount mentioned in the sale proclamation, so as to include the decretal amount not only of the decree in the first suit No. O.S. 15 of 1949 but also of the decree in the second suit in O.S. 19 of 1953.
In these circumstances, therefore, under the provisions of 0.21 r. 64 of the Code when the amount as specified in the sale proclamation was fully satisfied by the sale of the properties in village Devanoor, the Court should have stopped the sale of further items of the properties.
It is manifest that where the amount specified in the proclamation of sale for the recov ery of which the sale was ordered is realised by sale of certain items, the sale of further items should be stopped.
This, in our opinion, is the logical corollary which flows from O.21 r. 64.of the Code which may be extracted thus: "Any Court executing a decree may order that any property attached by it and liable to sale, or such portion thereof as may seem necessary to satisfy the decree, shah be sold, and that the proceeds of such sale, or a sufficient portion thereof, shall be paid to the party entitled under the decree to receive the same.
" Under this provision the Executing Court derives jurisdic tion to sell properties attached only to the point at which the decree is fully satisfied.
The words "necessary to satisfy the decree" clearly indicate that no sale can be allowed beyond the decretal amount mentioned in the sale proclamation.
In other words, where the sale fetches a price equal to or higher than the amount mentioned in the sale proclamation and is sufficient to satisfy the decree, no further sale should be held and the Court should stop at that stage.
In the instant case, we have already indicated that the sale of lands in village Devanoor alone fetched a sum of Rs. 16880 which was more than sufficient to satis fy the amount of Rs, 16,715 8 0 mentioned in the sate proclamation.
It is true that the decree holder had ob tained another decree in O.S. No. 19 of 1953, but there is nothing to show that the decree holder had approached the Court for including the second decretal amount in the proc lamation of sale.
In these circumstances, therefore, we are clearly of the opinion that the Executing Court was not justified, in the facts and circumstances of the present case, in selling the properties situated in village Gudipa du.
The fact that the judgment debtor did not raise an objection on this ground before the Executing Court is not sufficient to put him out of Court because this was a matter which went to the very root of the jurisdiction of the Executing Court to sell the properties and the non compliance with the provisions of O. 21 r. 64 of the Code was sufficient to vitiate the same so far as the 696 properties situated in village Gudipadu were concerned.
For these reasons the contentions raised by counsel for the appellant must be overruled.
This, however, does not put an end to the issue, be cause the High Court, while setting aside the sale, has passed no order for adjusting the equities between the parties.
According to the appellant he had taken possession of the properties purchased by him at the auction sale and had made substantial improvements.
If the sale of these properties is to be set aside, the appellant will have to return these properties to the judgment debtor, but he will be entitled to receive the value of improvement 's made by him during the time he was in possession of those properties in addition to the return of the sum of Rs. 12,500/ .
The Executing Court will have to hold an inquiry into the matter and determine the value of the improvements made by the appellant which will have to be paid to him.
The appellant will not be entitled to any interest on the value of the improvements if he is found to be in possession of the properties.
If, however, the Executing Court finds that the auction purchaser was not in possession of the properties and the properties continued to be in possession of the judgment debtor, then the question of the value of improve ments will naturally not arise.
In that event the judg ment debtor will have to refund the amount of Rs. 12,500/ to the appellant with interest at the rate of 12% per annum from the date of sale upto the date of refund.
For these reasons, therefore, the appeal is dismissed with the modification indicated above and the case is sent back to the Executing Court to hold an inquiry into the matter.
In the special and peculiar circumstances of the present case, we make no order as to costs.
S.R. Appeal dismissed.

dataset_name: IN-Abs

summary/full:
Order XXI Rule 64 of the C.P.C. lays down that "any court executing a decree may order that any property attached by it and liable to sale or such portion thereof as may seem necessary to satisfy the decree, shall be sold and that the proceeds of such sale, or a sufficient portion thereof shall be paid to the party entitled under the decree to receive the same.
" The 5th respondent/decree holder, S.P.R. Reddy obtained two decrees against the Judgment debtor Pujari Subbarayudu in two suits viz.; U.S. 15 of 1949 and O.S. 19 of 1953.
He filed execution proceedings No. 24 of 1953 in the trial Court for selling the properties belonging to the judgment debtor in Devanoor and Gudipadu villages in order to satis fy the decree in U.S. 15 of 1949.
He also applied for permission to bid at the auction sale.
In the auction sale held on March 2, 1955, the 5th respondent purchased the lands situated in village Devanoor for a sum of Rs. 16,880/ .
Despite the fact that the sale proceeds of the lands in village Devanoor alone was sufficient to satisfy the decretal amount mentioned in the warrant of sale and the proclamation of sale viz.; Rs. 16,715.50, The Court proceed ed to sell the properties of the judgment debtor in village Gudipadu which fetched Rs. 12,500/ and which were purchased by the appellant auction purchaser.
The judg ment debtor filed an application on March 31, 1955 to set aside the sale contending, inter alia, that once the sale of the properties in village Devanoor was sufficient to satis fy the amount mentioned in the sale proclamation, the Court should have stopped the sale as required by the mandatory provisions of Order XXI Rule 64 of the C.P.C.
The Trial Court rejected the said application; whereupon the decree holder on April 20, 1955 obtained an order from the court for rateable distribution of the sale proceeds.
In appeal the High Court accepted the plea of the judgment debtor regarding non compliance with the provisions of O.XXI Rule 64 C.P.C. and set aside the sale with respect to the proper ties situated in village Gudipadu.
Dismissing the appeal by certificate the Court, HELD: (1) The High Court rightly held that as the sale of the properties in village Devanoor fetched an amount mentioned in the sale warrant.
the Executing Court was not justified in proceeding with the sale of the properties in village Gudipadu and should have stopped the sale.
[694 F] (2) The logical corollary which flows from O.XXI Rule 64 of the Code is that where the amount specified in the proc lamation of sale for the recovery of which the sale was ordered is realised by sale of certain items, the sale of further items should be stopped.
[695 C D] (3) Under Order XXI Rule 64, the Executing Court derives jurisdiction to sell properties attached only to the point at which the decree is fully satisfied.
The words "necessary to satisfy the decree" clearly indicate that no s,de can be mentioned in the sale proclamation and is sufficient to satisfy the decree, no allowed beyond the decretal amount mentioned in the sale proclamation.
In other words.
where the sale fetches a price equal to or higher than the amount further sale should be held and the court should stop at that stage.
[695 E F] (4) In the facts and circumstances of the present case, there being nothing to show that the decree holder had approached the court for including the second decretal amount obtained in O.S. 19 of 1953 in the proclamation of sale, the 693 Executing Court was not justified in selling the properties situated in village Gudipadu.
The fact that the Judgment debtor did not raise an objection on this ground before the Executing Court rs not sufficient to put him out of court because this was a matter which went to the very root of the jurisdiction of the Executing Court to sell the properties and the non compliance with the provisions of O.XXI, Rule 64 of the Code was sufficient to vitiate the same so far as properties situated in village Gudapadu were concerned.
[695 G H, 696 A] (5) The Court remitted the matter to the Executing Court for an inquiry with the following directions: (i) The appellant will have to return the properties in village Gudipadu to the judgment debtor and he will be entitled to receive the value of improvements made by him during the time he was in possession of these properties, as determined by the Executing Court in addition to Rs. 12,500/ .
(ii) He will not he entitled to any interest on the value of the improvements, if he is found to be in posses sion of the property.
(iii) If the Executing Court finds that the auction purchaser was not in possession of the properties, the judgment debtor will have to refund the amount of Rs. 12,500/ to the appellant with interest at the rate of 12 per cent per annum from the date of sale upto the date of refund.
[696 B E]


judgement:
Appeal No. 325/1976.
(From the Judgment and Order dated the 3.12.1975 of the Karnataka High Court in Writ Appeal No. 284/74).
V.S. Desai, Sanjev Aggarwal and R.B. Datar, for the appellant.
S.S. Javali, Jagannath Shetty and B.P. Singh for resp.
No. 1.
S.N. Prasad and Girish Chandra, for the Intervener Union of India.
Nemo for respondent No. 2.
The Judgment of the Court was delivered by FAZAL ALI, J.
Whether hoardings containing adver tisements fixed in the premises of a railway station front ing a ,public street are exigible to tax under the provi sions of section 136 of the City of Bangalore Municipal Corpora tion Act, 1949 (Act No. LXIX of 1949) hereinafter referred to as 'the Act ' is the substantial question of law involved in this appeal by certificate.
The facts of the case lie within a narrow compass and the point raised by counsel for the appellant is one of first impression and undoubtedly requires serious consid eration.
The appellant is a firm of advertising commer cial goods and other items by putting up hoardings contain ing advertisements on properties taken on lease licence from various owners.
The appellant also has been putting up hoardings on railway lands in the compound of the Bangalore Railway Station.
In the instant case, we are only con cerned with the hoardings containing advertisements put up adjacent to.
the railway compound fencing but within the railway premises by being placed on girders affixed to.
the earth.
The fencing of the railway compound is adjacent to and faces a public street.
It is also not disputed by the parties that the advertisements are put up at sufficient height so.
as to be clearly visible to and attract the attention of the members of the general public passing through the public street.
The appellant has produced photographs of some of the hoardings which demonstrate these facts.
The Municipal Corporation of the City of Bangalore being of the opinion that the hoardings containing advertisements put up by the appellant were exigible to tax issued a demand notice dated March 7, 1973 calling upon the.
appellant to pay a sum o.f Rs. 5871 83 as the advertisement tax including arrears.
The appellant represented to the Municipal authorities that as the hoardings containing advertisements were situate within the railway premises they squarely fell within clause (e) of the third proviso to section 136 of the Act.
The Municipal Corporation did not accept the contention of the appellants and pressed for paying up the tax.
The appellant then filed a writ petition before the High Court of Karnataka praying that the order of the Corporation demanding payment of tax be quashed, because the advertise ments were clearly 672 exempt from tax by virtue of the aforesaid proviso.
The writ petition was in the first instance heard by a single Judge who by his order dated April 4, 19.74 overruled the contention of 'the appellant and dismissed the petition.
Thereupon the appellant filed an appeal under the Letters Patent before a Division Bench which also affirmed the order of the single Judge, though on different grounds.
The Division Bench later on being approached under article 133 of the Constitution granted a certificate of fitness and hence this appeal before us.
The only point that has been raised before us is that the hoardings containing advertisements squarely fall within the exemption contained in the third proviso to section 136 of the Act and, therefore, they are not belong to The High Court found that as the advertisements did not exigible to the Railway nor for the purpose of the Railway, the proviso in question did not apply and the Single Judge was right in holding that the advertisements were exigible to tax.
The single Judge had, however, found that as the advertisements were much above the railings which faced the public street, the proviso had no application.
Before examining the view of the High Court, it may be necessary to extract the relevant portions of the statute which we are called upon to interpret.
The relevant part of section 136 of the Act runs thus: "Every person who ' erects, exhibits, fixes or retains upon or over any land, building, wail, hoarding or structure any advertise ment or who displays any advertisement to public view in any manner whatsoever, in any place whether public or private, shall pay on every advertisement which is so erected, exhibited, fixed, retained or displayed to public view a tax calculated at such rates and in such manner and subject to such exemptions, as the corporation may, with the approval of the Government, by resolution determine: x x x x "Provided further that no such tax shall be levied on any advertisement which is not a sky sign and which x x x x (e) is exhibited within any railway station of upon any wall or other property of a railway except any portion of the surface of such wall or property fronting any street.
Explanation 1.
The word 'structure ' in this 'section shall include any movable board on wheels used as an advertisementor an adver tisement medium." (Emphasis supplied) Section 136 of the Act which is the charging section clearly shows that the intention of the statute was to tax certain types of advertisements.
The pith and substance of the entire section, therefore, is the taxation of advertisements fixed, erected or exhibited on any land, building wall, hoarding, structure etc.
Thus it is manifest, that section 136 contemplates tax on advertisements and not tax on prem ises or 673 buildings.
This clear distinction has to be kept in mind in construing the third proviso to section 136 of the Act which falls for determination in this case, particularly in view of some of the authorities relied upon by the appellant which deal with tax on premises rather than tax on adver tisements.
The essential conditions necessary for the application of section 136 of the Act are (i) that a person should erect, exhibit, fix or retain any advertisement upon any land.
building, wall, hoarding or structure or display any advertisement in any manner; (ii) that erection, exhibition, fixation or retention or display of that advertisement must be exposed to public view; and (iii) that the advertisement must be exhibited in any place public or private.
The sine qua non for the application of this section is, therefore, that the advertisements displayed by any person must be to public view in any manner whatsoever.
Once these conditions are satisfied, the person who exhibits the advertisements is liable to pay tax on such advertisements As, however, the Act was merely to regulate the premises falling within the Bangalore Municipal Corporation, it is obvious that the premises which did not fall within the Corporation or which belonged to other autonomous authori ties could not be exigible to tax unless expressly so pro vided.
Furthermore, it appears that the object of the Municipal Corporation in charging tax was to keep the public premises clean and water tight and protect advertisements which may amount to nuisance, because the ,Act lays down a procedure which has to be followed before the advertisements could be exhibited.
Consistent with this object, there fore, the third proviso to section 136 of the Act grants an exemption from tax on any advertisement which is exhibited in any railway station or upon any wail or other property of a railway.
Here also an exception is carved out which is that if such an advertisement, even though on any portion of the railway property, faces any street it will not earn the exemption.
The central argument put forward before us by Mr. V. 8.
Desai counsel for the appellant is that the expression "fronting any street" appearing in cl.
(e) of the third proviso to section 136 qualifies the railway property and not the advertisement so that the fact that the advertisement fronting the street or which is exposed to public view or is visible to the public from the public street will not make the advertisement exigible to tax, if the advertise ment is within the railway premises or is adjacent to the compound wall or any other property which itself is fronting the street.
In other words, the contention was that having regard to the terminology of the word "fronting" it is not possible to conceive that two portions of the property can front a street at one and the same time unless they are in the same 674 line.
From the photographs produced before us, as also before the High Court, it appears that the hoardings con taining the advertisements are no doubt fixed just 2 or 3 feet behind the compound fencing of the railway station premises.
Mr. Desai, therefore, contended that once the compound wall which is in front of the girders on which the advertisements are fixed faces the street, there is No. question of the advertisement facing the street.
Secondly, it was contended that the test of fronting the street as contained in the third proviso is that what is fronting the street is not the advertisement but the property of the railway.
In other words, it was argued that as in the instant case the compound wall already fronted the street, the hoardings containing the advertisements being behind the compound wall, though adjacent to it, cannot be said to front the street, because two properties cannot front the street at the same time.
We have given anxious considera tion to the arguments advanced by the learned counsel for the appellant, but on a proper interpretation of the proviso we are unable to accept the same.
begin with, if the proviso is read with reference to the context, then it is absolutely clear that the verb "fronting" qualifies not the wall or the property but the advertisement.
The central subject matter of section 136 as also of the proviso is not a place or building but advertisement which alone attracted tax.
If we read the third proviso in the following man ner, then the intention of the statute becomes absolutely clear: "Provided further that no such tax shall be levied on any advertisement (e) which is exhibited within any railway station or upon any wall of other property of a railway except any portion of the surface of such wall or property/fronting any street." (Emphasis supplied) The verb "fronting", ' therefore, does not qualify wall or property mentioned in the latter part of the.
proviso.
but the noun advertisement.
The test, therefore, laid down by this proviso is that the Court has to see whether the adver tisement affixed whether inside the compound of the railway or not fronts the street.
If the advertisement fronts the street or faces the street even if it is within the railway premises, it will be exigible to tax.
For instance if the; hoardings containing the advertisements were affixed just behind the compound wall and the advertisements did not face the street at all but faced the other side of the railway station their back being to the street, then the advertise ments will certainly be exempt from tax and the proviso would clearly apply.
This seems to us to be the natural interpretation of the proviso having regard to the context in which it is placed.
Mr. Desai learned counsel for the appellant relied on the definition of the word "fronting" as used in Stroud 's Judicial Dictionary, 4th End., at p. 1121, where the learned author while defining "fronting" observed thus: "Fronting.
(1) Premises "fronting, adjoining, or abutting" on a STREET, and as such chargeable with expense 675 of road making under Public Health Act 1875 (c. 55), section 150, did not need to be absolutely contiguous.
" In the first, place the author defines the word "fronting" within the meaning of the Public Health Act, 1875, which levied tax on premises.
The author was not at all con cerned with tax on advertisement as in the instant case.
In the case referred to in the book, the Court was called upon to judge the expenses on road making under the Public Health Act.
It is, therefore, manifest that these consider ations would not apply to the facts of the present case.
On the other hand in Webster 's Third New International Dictionary Vol.
I, the word "front" used as a verb is defined thus: "something that confronts or faces forward: as (1): a face of a building; esp.
the face that contains the principal entrance . . . . . put a facing upon (e.g. the building with brick) 5: to face or look forward have the front toward, opposite, or over against the houses the street)." According to the aforesaid dictionary meaning "fronting" merely means that the article should face or have its front toward, opposite or over against the house or the street.
In our opinion the word "fronting" has been used in the proviso not in any legal or technical sense but as used in ordinary parlance.
It is not a term of art but one that signifies its meaning according to common notions.
For these reasons, therefore, we are clearly of the opinion that as the advertisements upon the hoardings in the instant case were undoubtedly facing or fronting the street they were exigible to tax and the fact that they were a f[axed on the earth which formed the compound of the railway premises would make no difference in view of the plain and unambigu ous language of the proviso.
Learned counsel for the appellants relied on a decision of the Madras High Court in The Corporation of Madras vs Messrs The Oriental Mercantile Company Ltd., Madras.
C) This authority, however, can have no application to the facts of the present case, because to begin with, there is nothing to show that the hoardings containing the advertise ments were in any way fronting or facing the street.
On the other hand, the advertisements were merely on the out side wall within the railway compound.
In these circum stances, therefore, this case does not appear to be of any assistance to the appellant.
Reliance was then placed on a decision of the Queen 's Bench Division in Ware Urban District Council vs Gaunt and Others(2) and particularly on the observations of Ashworth, J., where the Judge observed as follows: "The remaining issue is, in a sense, the most troublesome of all, namely, whether it is open to the appellants to apportion part of the expense on premises situate on the wester ly (1) , (2) , 787. 4 707SCI/77 676 side of Walton Road but separated from it b,y the public footpath.
This issue involves as an ancillary problem the question whether part of the expense should in any event be appor tioned on ' the public footpath.
Section 6 of the Act of 1892 provides, inter alia, that ".:. the expenses incurred by the urban authority in executing private street works shall be apportioned (subject as in this Act mentioned) on the premises fronting, adjoin ing, or abutting on such street or pan of a street." " The observations extracted above will show that there also.
the Court was dealing not with a tax on advertisements but a tax on premises, and the question of the frontage was inter preted having regard to the place where the premises were situate.
In the same judgment, the learned Judge observed as follows: "In each case, as it seems to me, regard must be paid to the context in which the words appear and, quite apart front any decided cases, I am inclined to think that the context in the present case points to an enlarged rather than a restricted meaning of the word "adjoin"." (Emphasis ours) It is, therefore, clear that the meaning of the words used in a particular statute has to be construed with reference to the context and not in isolation, not is it possible to lay down any rule of universal application in a matter like this.
For these reasons, therefore, this authority also does not appear to be apposite so far as the present case is concerned.
The Single Judge of the High Court, while interpreting the proviso, observed as follows: "These advertisements in question are displayed on the hoardings standing close to the cement fencing at the outer mark of the railway property.
The cement railings are hardly about 3 feet in height and the adver tisement boards are very much above the rail ings.
The Public street to which the adver tisements are facing runs along the cement railings, with no other obstacle between the advertisement boards and the public view.
Therefore, it can reasonably, be said that they are fronting the Public Street.
" We find ourselves in complete agreement with the view taken by the Single Judge.
The Division Bench of the High Court, however, while upholding the judgment of the Single Judge, observed as follows: "In the instant case, we are not faced with any situation as the one envisaged in the second part of the exemption clause relative to advertisement on a wall or other property 677 of the railway 'frontage by street '.
We are concerned herein with the case of a hoard ing put up by and belonging to the appellant and not the railway.
Hence, it is plain that no exemption on that score could be claimed on behalf of the appellant.
" The High Court does not appear to have interpreted the proviso correctly.
The view of the High Court that the proviso would only apply to advertisements of such hoardings whose ownership lies with the Railway or which belong to the Railway is not borne out by cl.
(e) of the third proviso to section 236.
In other words the question of exigibility to tax is relatable not to the ownership of the hoarding but its situs.
Even if the hoarding does not belong to the Railway but to some private party, if it does not front the street and is situated within the Railway premises or within the compound of the railway premises it is clearly exempt.
We, therefore, do not approve of the line of reasoning adopted by the Division Bench.
On a close and careful interpretation, therefore, of cl.
(e) of the third proviso to section 136 of the Act we are clearly of the opinion that on the facts proved in the present case as the hoardings,containing the advertisements were front ing the public street and were clearly exposed to public view and the members of the public passing through the street, they are not covered by the exemption contemplated by the proviso and are, therefore, exigible to tax.
The demand notice, therefore, served on the appellant by the Municipal Corporation for payment of tax is not legally erroneous.
The result is that the appeal is dismissed with costs.

summary/full:
Section 136 of the City of Bangalore Municipal Corpora tion Act, 1949 provides that every person who erects, exhib its etc., over any land or structure any advertisement or who displays any advertisement to public view in any place whether public or private, shall pay on every advertisement a tax levied by the Corporation.
Clause (e) of the third proviso to the section enacts that no such tax shall be levied on any advertisement which is exhibited within any railway station or upon any wall or other property of a railway, except any portion of the surface of such wall or property fronting any street.
An advertisement facing a public street was put up by the appellant adjacent to the compound fencing of a railway station but within the railway premises.
The Municipal authorities levied tax on the advertisement.
The appel lant 's writ petition challenging the levy was dismissed by a single judge of the High Court and this decision was upheld by a division bench.
On appeal to this Court it was contended that the ex pression "fronting any street" occurring in the proviso qualified the railway property and not the advertisement.
Dismissing the appeal, HELD: 1. (a) Since the advertisements were fronting public street and were exposed to public view.
were not covered by the exemption contemplated by the proviso and were, therefore exigible to tax.
[677 D] (b) The word "fronting" qualifies not the wall or property mentioned in the latter part of the proviso but "advertisement".
The test laid down by the proviso is that the Court has to see if the advertisement affixed whether inside the compound of the railway or not fronts the street.
If it fronts the street or faces the street, even if it is within the railway premises it will be exigible to tax.
[674 D & F] (c) The word "fronting" has been used in the proviso not in any legal technical sense but it ordinary parlance.
It is not a term of art but one that signifies its meaning according to common notions.
[675 D] The Corporation of Madras vs Messrs The Oriental Mercan tile Company Ltd., Madras, and Ware Urban District Council vs Gaunt & Others.
[1960] 3 All E.R. 778, 787 distinguished.
The view of the single Judge that since the public street to which the advertisements were facing, ran along the railings with no other obstacle between the advertise ment and the public view, it could reasonably be said that they were fronting public street is correct.
On the other hand, the view of the Division Bench that the proviso would only apply to advertisements of such hoardings whose owner ship lay with the railway or which belonged to the rail way is not borne out by el.
The question of exigibili ty to tax is relatable not to the ownership of the hoardings but their situs.
[676 G H] 671


judgement:
No. 147 of 1972.
(Appeal by Special Leave from the Judgment and Order dated 19.2.1971 of the Calcutta High Court in Income Tax Ref.
No. 98/67) G.C. Sharma, D.N. Mukherjee, A. K. Ganguly and G.S. Chatterjee, for the appellants.
B.B. Ahuja and R.N. Sachthey, for respondent.
G.C. Sharma, D.K. Jain, Anup Sharma, S.P. Nayar and Miss K. Jaiswal for the Intervener.
The Judgment of the Court was delivered by SARKARIA J.
Whether any payment by a Company, not being a Company in which the public are subsantially interested within the meaning of section 23A, of any sum by way of advance or loan to a shareholder, not exceeding the accumulated profits possessed by the Company, is to be deemed as his dividend under Section 2(6A) (e) read with Section 12(lB) of the Income tax Act, 1922, even if that advance or loan is subsequently repaid in its entirely during the relevant previous year in which it was taken, is the only question that falls to be determined in this appeal by special leave.
The assessment year is 1957 58, and the corresponding previous year is the calendar year 1956.
The assessee is a shareholder and the Managing Director of M/s. Dolaguri Tea Co. (P) Ltd. The Company is admittedly one in which the public are not substantially interested within the meaning of section 23A of the Indian Income tax Act, 1922 (for short, the Act).
At the commencement of the previous year, there was in the books of the Company a credit balance of Rs. 65,246/ in the assessee 's account, which had been brought ' forward from the earlier year.
Between the 11th January and the 12th November, 1956, the assessee withdrew in cash from time to time from the Company, amounts, aggregating Rs. 4,97,442/ .
The first two cash amounts of Rs. 3,50,000/ and Rs. 40,400/ , were taken by the assessee on 11.1.1966.
Deducting therefrom the opening balance of Rs. 65,246/ and two more item, namely, Rs. 1,40,000/ being outstand ing dividends declared on 31.12.1955 of his major son, and transferred to his account, and a further dividend of Rs. 19,493/ credited to his account from Kathoni Tea Estate, there remained a sum of Rs. 2,72,703/ to the debit of the assessee 700 in the books of the Company as on the 12th November, 1956.
On December 29, 1956, the assessee paid back to the Company a sum of Rs. 1,90,000/ .
On December 31, 1956, his account was credited with another sum of Rs. 80,000/ in respect of the dividend due to him and his wife, and with a further sum of Rs. 29,326/ for hypotecation.
In this manner before the end of the previous year, the assessee 's account was credited with an aggregated amount of Rs. 2,99,326/ which exceeded the debit balance of Rs. 2,72,70,3/ as on November 12, 1956.
Thus at the end of the relevant previous year, no advance or loan was due to the Company by the assessee.
The Income tax Officer found that the accumulated prof its of the Company as on January 1, 1956, amounted to Rs. 6,83,005.
He, therefore, deducted the two aforesaid items of Rs. 1,40,000/ and Rs. 19,493/ , aggregating Rs. 1,59,493/ , from the amount paid in cash to the assessee and treated the balance of Rs. 2,72,703/ as the net 'dividend ' income in the hands of the assessee within the meaning of Section 2 (6A)(e).
The/income tax Officer grossed up that amount under Section 16(2) and gave credit for tax in ac cordance with that Section to the assessee.
The assessee 's appeal to the Appellate Assistant Commissioner having failed, he preferred a further appeal to the Income tax Appellate Tribunal.
There was a divergence of opinion between the Members of the Tribunal.
The Ac countant Member took the view that the moment a payment is made as envisaged in Section 2(6A)(c) it becomes clothed with the character of a dividend and has to be treated as such income of the assessee, and no subsequent action or repayment by the share holder can take it out of the mis chief of this provision.
He therefore held that the sum of Rs. 2,72,703/ was taxable dividend under Section 2(6A)(e).
The Judicial Member expressed a contrary opinion.
In his view, the total income of the assessee during the rele vant previous year could be computed and assessed only at the end of that year; it could not be computed at interim periods during the previous year.
"If it is found that although the shareholder had taken by way of advance or loan an amount from the Company during the course of a previous year but had returned the same to the Company before the close of that previous year, it can only be said while computing the shareholder 's total income at the end of that previous year that no advance or loan from the 23A Company of which he was a shareholder stood for his benefit at the time relevant for computation of his total income.
The advances or loans taken during the interim periods of the previous year would just have to be ignored.
" On these premises, the Judicial Member came to the conclusion that the sum of Rs. 2,72,703/ grossed up to Rs. 3,19,245/ , was not a dividend within the fiction under Section 2(6A) (e) of the Act.
On account of this difference of opinion, the following question was referred to the President of the Tribunal: "Whether on the facts and in the circum stances of the case, the sum of Rs. 2,72,703/ net (Rs. 3,19,245/ gross) 701 is to be treated as dividend income in the hands of the assessee within the meaning of Section 2(6A) (e) ?" The President agreed with the Accountant Member and held that an "advance or loan received by the shareholder of a Private Company forthwith assumes the character of a divi dend and becomes his income by virtue of the fiction created by Section 2(6A) (e) and it ceases to be a liability for the purpose of taxation, although the assessee may, in fact or in law, remain liable to the Company to repay it.
If the assessee repays the loan subsequently, such repayment would not liquidate or reduce the quantum of the income which had already accrued as such repayment is not be al lowed as a permissible deduction under Section 12(2).
On these premises he answered the question in the affirma tive.
In accordance with the majority opinion, the Tribunal dismissed the assessee 's appeal, but, at his instance, referred the same question for opinion to the High Court under Section 66(1) of the Act.
The High Court held that the tax was attracted at the point of time when the said loan was borrowed by the share holder and it was immaterial whether the loan was repaid before the end of the accounting year or not.
On this reasoning it answered the question in favour of the Revenue and against the assessee.
Hence this appeal by the assessee.
Before dealing with the contentions canvassed, it is necessary to have a look at the general scheme and the relevant provisions of the Act, Section 2 (6A)(e) of the Act reads as follows: (6A) "dividend" includes (a) to (d) . (e) any payment by a company, not being a company in which the public are substantially interested within the meaning of section 23A of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the company in either case possesses accumulated profits; but "dividend" does not include (i) a distribution made in accordance with sub clause (c) or sub clause (d) in respect of any share issued for full cash consideration where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets; (ii) any advance or loan made to a share holder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the compa ny; 702 (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of clause (e), to the extent to which it is so set off; Explanation.
The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and be fore the 1st day of April, 1956; Sub section (15) defines 'total income ' as meaning "total amount of income, profits and gains referred to in sub section (1 ) of Section 4 computed in the manner laid down in this Act." Section 3 is the charging section.
Two of the princi ples deducible from the Section are: (1 ) That the tax is levied on the total income of the assessable entity; (2) That each previous year is a distinct unit of time for the purpose of assessment, and the profits made or liabilities or losses incurred before or after the relevant previous year are wholly immaterial in assessing the profits of that year unless there is a statu tory provision to the contrary.
Section 4 (1 ) so far as it is material reads as follows: "Section 4(1): Subject to the provisions of this Act, the total ' income of any previous year of any person includes all income, prof its and gains from whatever source derived which (a) are received or are deemed to be re ceived in the taxable territories in such year by or on behalf of such person, or (b) if such person is resident in the taxa ble territories during such year, (i) accrue or arise or any deemed to accrue or arise to him in the taxable territories during such year, or (ii) accrue or arise to him without the taxable territories during such year, or (iii) . . (c) if such person is not resident in the taxable territories during such year, accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year: (emphasis supplied) "Provided that . . " The principles deducible from Sec.
4(1) are: (1 ) The charge is on accrual or receipt basis.
Such receipt or accrual may be actual or statutory, i.e. the result of any statutory fiction created by the Act.
703 (2) If a particular amount of income is taxed under any of the clauses (a), (b) or (c) of the sub section the same amount cannot be taxed under any other clause either in the same year or in a different year.
That is to say, income which is taxed on accrual under clause (b) (ii) cannot be taxed again on receipt under clause (a) or on remittance under clause (b)(iii) (see Kanga and Palkhiwa la, Vol.
I, 1959 Edition, page 153).
(3) The receipt spoken of in this clause is the first receipt after the accrual of the income See the decision of this Court in Keshav Mills vs Commissioner of Income tax(1)].
Sub section (1) of Sec. 4 also highlights the basic principle embodied in the charging section 3, that the accrual or receipt of income (actual or deemed) is taxed with regard to the relevant previous year.
Section 12 deals with the residuary head: "Income from other sources".
Its sub section (1A) says that: "Income from other sources shah include 'dividends '.
Sub section (lB) in crucial.
It provides: "Any payment by a company to a share holder by way of advance or loan which would have been treated as a dividend within the meaning of clause (e) of sub section (6A) of section 2 in any previous year relevant to any assessment year prior to the assessment year ending on the 31st day of March, 1956 had that clause been in force in that year, shall be treated as a dividend received by him in the previous year relevant to the assessment year ending on the 31st day of March, 1956, if such loan or advance remained outstanding on the first day of such previous year".
Sub section (2), inter alia lays down that in computing any income by way of dividend, allowance shah be given for any reasonable sum paid by way of commission or remuneration to a banker or any other person realising such dividend on behalf of the assessee.
It is to be noted that sub section (6A) of section 2 and subsections (1A) and (lB) u/s 12 were inserted in the Act by the Finance Act, 1955, with effect from the 1 st April, 1956.
In the relevant assessment year, Section 16(2) of the Act was operative and ran as follows: "16(2) For the purpose of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or (1) 704 distributed to him, and shall be increased to such amount as would, if income tax (but not super tax) at the rate applicable to the total income of the company . . for the finan cial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distributed were deducted therefrom, be equal to the amount of the dividend.
" Mr. G.C. Sharma, Counsel for the appellants contends that the scope of the fiction created by Sec.
2(6A)(e) should be confined to those advances and loans only, which are not repaid but remain subsisting at the end of the previous year in which they were taken.
It is argued that the sole object of this provision is to curb the evil of distributing profits under the guise of loans or advances; that if an advance or loan is repaid in the same accounting year, it cannot be said that it was a device for distribu tion of profits.
It is submitted that only in the case of an advance or loan which remains outstanding at the end of the accounting year, Sec. 2(6A) (e) raises an irrebutable presumption that it was a payment of dividend under the cloak of a loan.
It is maintained that if this construc tion of Sec.
2(6A)(e) is not adopted, it will lead to ex tremely oppressive, unreasonable and anamolous results, including double taxation.
To illustrate his point Counsel compares and contrasts the position of a shareholder who promptly, after a short period, repays the loan in the same year, with one who does not do so but allows it to remain outstanding and be carried over to the next year, and there after a dividend is declared.
If the interpretation adopted by the High Court is correct says Mr. Sharma the share holder in the prior case who had promptly repaid the loan would not be entitled under sub clause (iii) of Clause (e) of section 2(6A) to set off any part of the subsequently declared dividend against the loan which he had repaid earlier, but will have to pay double tax on the same item, once on it as deemed dividend and then on it as declared dividend.
His liability cannot be reduced to the extent of the dividend; because at the date on which the dividend was declared, no loan was outstanding against which.
it could be set off.
As against the former, the latter shareholder who makes full use of the loan and does not repay any part of the loan in the same year, but leaves it unpaid till a dividend is declared next year, will get relief by set off of the subse quently declared dividend, in whole or in part against the loan outstanding against him.
Another example cited by Mr. Sharma is of a case where the accumulated profit, say is Rs. 9,000/ and the share holder takes an advance or loan of Rs. 3,000/ and he repays it after a week, and again gets the same amount (Rs. 3,000/ ) back as a loan, and again repays it after a week, and again retakes the same amount as loan all the three loans being taken and repaid, in the same year.
If the unrestricted interpretation of the provision, sought by the Revenue were to be adopted, the same amount of loan in all the three transactions of loan would be subjected to triple taxation.
Such an absurd and oppressive result, says the Counsel, would be against the intendment of the provi sion and inconsistent with the scheme of the Act which generally aims avoids double taxation.
The upshot of the arguments of Mr. 705 Sharma is that under the Act, only that item or entity is taxable which is rationally capable of being considered as the income of the assessee; that an advance or loan which is genuine and not a subterfuge for payment of dividend and is not subsisting or outstanding at the end of the previous year on account of its repayment by the shareholder cannot reasonably be deemed to be his dividend income within the contemplation of section 2(6A)(e) read with section 12 of the Act.
Mr. Sharma has taken us through various decisions having a bearing on the problem.
The cases referred to, discussed or sought to be distinguished by him are: K.M.S. Lakshman Aiyar vs Assistant Income tax Officer,(1) Navnit Lal C. Javeri vs
K.K. Sen, Appellate Assistant Commissioner, Income tax, Bombay;(2) Commissioner of Income tax, Madras vs
K. Srini vasan; (3) Walchand & Co. Ltd. vs Commissioner of Income tax, Bombay;(4) Commissioner, Income tax Bombay vs
R.K. Badiani.
(5) Mr. Sharma also has referred to Sec.
108 of the Commonwealth income tax Act as in force in Australia, and submitted that since the substance of Sec.
2(6A)(e) and section 12(lB) has been borrowed from s.108 of the said Act and the object of these provisions in the two enactments is the same, it will not be illegitimate to determine and circum scribe the scope of the fiction created by the provision in question in the light of the principles indicated in Sec.
108 of the Commonwealth Act.
On the other hand, Mr. Ahuja appearing for the Revenue, submits that sub clause (iii) which permits a set off against a loan deemed as dividend, does not apply in cases where the dividend is not declared in the same accounting year because to hold otherwise would be against the basic scheme ingrained in sections 3 and 4 of the Act, according to which the unit of time for the purpose of assessment is the previous year of the assessee.
Mr. Ahuja further maintains that even if during the same accounting year after repayment of the loan, a dividend is declared, sub clause (iii) will apply, and the Income tax Officer will not be debarred from reducing, in an appropriate case, the amount treated by him as 'dividend ' under clause (e) of section 2(6A) to the extent of the subsequently declared dividend, on the principle of notional set off underlying sub clause (iii).
The point sought to be made out is that since the treatment of the loan to the assessee shareholder as his dividend rests on a legal fiction, it will not be an illegitimate use of sub clause (iii) to allow a notional set off to meet such a situation.
Thus construed, says the Counsel, there would be no anomaly.
Mr. Ahuja further submitted that section 2(6A)(e) was enact ed to suppress the evil of receiving profits or dividends under the guise of loans by the shareholders of a controlled Company, as such a malpractice resulted in evasion of tax.
This provision, it is urged should be construed in a manner which suppresses the mischief and advances the remedy.
It is maintained that the language of the provisions in question (1) [1959] XL I.T.R.469 (Mad.) (2) [19651 1, SCR 909 56 I.T.R. 198.
(3) (4) (5) 706 is plain and unambiguous and no question of seeking external aid for its interpretation arises; the Court must give effect to it regardless of the hardship, if any, resulting therefrom.
The sum and substance of his arguments is, that since all the factual ingredients necessary for raising the fiction contemplated by section 2(6A) (e) and section 12(lB) have been found to exist by the Income tax authorities and the Tribu nal, the loan had to be treated as the assessee 's dividend income, the moment it was received, and the subsequent repayment of the loan could not neutralise or take it out of that category of 'income '.
Counsel has drawn our attention to the observations of this Court in Navnit Lal C. Javeri vs K.K. Sen, Appellate Assistant Commissioner of Income tax (supra).
He has further adopted the reasoning of the Bombay High Court in Walchand & Co. vs Commissioner of Income tax, Bombay (supra) Section 2(6A)(e) and section 12(lB) were inserted in the Act by.
the Finance Act 1955 which came into operation on 1 4 1955.
These provisions seem to have been adapted, and borrowed with alterations, from section 108 of the Commonwealth Income tax Assessment Act in force in Australia.
Section 108 reads as follows: "Loans to shareholders, (1 ) If amounts are paid or assets distributed by a private company to any of its shareholders by way of advances or loans, or payments are made by the company on behalf of or for the individual benefit of, any of its shareholders, so much, if any, of the amount or value of those ad vances, loans or payments, as, in the opinion of the Commissioner, represents distributions of income shall, for the proposes of this Act other than the purposes of Division 11A of Part III and Division 4 of Part VI be deemed to be dividends paid by the company on the last day of the year of income of the company in which the payment or distribution is made.
(2) Where the amount or value of an advance, loan or payment is deemed, under the last preceding sub section, to be a dividend paid by a company to a shareholder, and the company subsequently sets off the whole or a part of a dividend distributed by it in satis faction in whole or in part of that advance, loan or payment, that dividend shall, to the extent to which it is so set off, be deemed, not to be a dividend for any purpose of this Act.
" It will be seen that under section 108( 1 ) formation of "the opinion of the Commissioner" is the sine qua non for bring ing this provision into provision into operation.
It has been held be the Australian Board of Review that the mere fact that a shareholder in a private Company has become indebted to it, does not justify the formation of the opin ion by the Commissioner such as is indicated in sub section (1) of section 108.
"There must be something that goes beyond a mere debt automatically arising upon a taking of accounts and which points to a subterfuge whereby a payment which, upon examination, is found to relate to the income of the Company and to represent the distribution thereof, is made to appear to be a loan or advance" (I.C.T.B.R. (N.S.) Case No.80.) 707 It is noteworthy that at least in one material aspect the Indian law is different from that under section 108(1) of the Commonwealth Act as explained and interpreted by the Board in the case mentioned above.
Under section 108, the raising of the fiction is dependent upon a positive finding recorded by the Commissioner of Income tax that the payment represents distribution of the Company 'section income.
But section 2 (6A) (e) and section 12 of the Act do not leave this question to the adjudica tion of the income tax authorities.
Parliament has itself, in the exercise of its legislative judgment, raised a con clusive presumption, that in all cases where loans are advanced to a shareholder in a Private Ltd. Company ' having accumulated profits, the advances should be deemed to be the dividend income of the shareholder.
It is this presumption juris et de jure which is the foundation of the statutory fiction incorporated in section 2(6A)(e).
Thus section 108 of the Commonwealth Act appears to be more reasonable and less harsh than its Indian counterpart.
From the above discussion it emerges clear that the fiction created 2(6A) (e) read with section 12(lB) of the Act is inexora bly attracted as soon as all the conditions necessary for its application exist in a case.
In Navnit Lags case (supra), this Court, after an analysis of these provisions, listed these conditions, as follows: ". the combined effect of these two provisions is that three kinds of payments made to the.
shareholder of a company to which the said provisions apply, are treated as taxable dividend to the extent of the accumu lated profits held by the :company.
These three kinds of payments are: (1 ) payments made to the shareholder by way of advance or loan, (2) payments made on his behalf and (3) payments made for his individual benefit.
There are five conditions which must be satis fied before section 12(lB) can be invoked against a shareholder.
The first condition is that the company in question must be one in which the public are not 'substantially interested within the meaning of section 23A as it stood in the year in which the loan was advanced.
The second condition is that the borrower must be a shareholder at the date 'when the loan was advanced; it is immaterial what the extent of his shareholding is.
The third condition is that the loan advanced to a shareholder by such a company can be deemed to be dividend only to the extent to which it is shown that the company possessed accumulated profit at the date of the loan.
This is an important limit prescribed by the relevant section.
The fourth condition is that the loan must not have been advanced by ' the company in the ordinary course of its busi ness.
In other word 's, this provision would not apply to cases where the company which advances a loan to its shareholder earnes on the business of money lending itself; and the last condition is that the loan must have remained outstanding at the commencement of the shareholders previous year in relation to the assessment year 1955 56." (emphasis supplied) The first four conditions factually exist in the instant case.
The last condition is not applicable because it was a transitory provision 6 707 SCI 77 708 applicable to the assessment year 1955 56 only, while we are concerned with the assessment year 1957 58 and the previous year is the calendar year 1956.
There is no dispute that the company is a controlled (Private Ltd.) company in which the public are not substantially interested within the meaning of section 23A.
Further the assessee is admittedly a shareholder and Managing Director of that Company.
It is also beyond controversy that at all material times, the company possessed "accumulated profits" in excess of the amount which the assessee shareholder was paid during the previous year.
The Income tax Officer found that on January 1, 1956, the accumulated profits of the Company amounted to Rs. 6,83,005/ while from, 11.1.1956 to 12.11.1956, the assessee received in cash from time to time from the Company payments aggregating Rs. 4,97,449/ .
After deducting the opening credit balance and some other items credited to his account, the Income tax Officer found that in the previous year the assessee share holder had received a net payment of Rs. 2,72,703/ by way of loan or advance from the Compa ny.
The Company 's ' business is not money lending and it could not be said that the loans had been advanced by the company in the ordinary course of its business.
Thus all the factual conditions for raising statutory fiction created by ss.2(6A)(e) and 12(IB) appeared to have been satisfied in the instant case.
Mr. Sharma, however, contends that in order to attract the statutory fiction one other essential condition is, that the loan or advance must be outstanding at the end of the previous year, and if the loan had ceased to exist owing to repayment or otherwise before the end of the year as in the present case the fiction cannot be invoked.
In this connec tion, Counsel has again referred to the last limb of section 108 (1) of the Commonwealth Income tax Act, according to which, the payment to a shareholder by way of advance or loan is to be treated as a dividend paid by the Company on the last day of the year of income of the Company in which the payment is made.
It is urged that the principle in the last limb of sub section (1) of section 108 of the Commonwealth Act should also be read into.
the Indian statute, It is maintained that the omission of such words from sections 2(6A) (e) and 12(lB) does not show that the intendment of the Indian Legislature was different.
According to the Counsel what is implicit in section 108(1) of the Commonwealth Act, is implicit in sections 2(6A)(e) and 12(1B) and the general scheme of the Act which re quires that the assessment is to be made on the basis of total income of the whole previous year.
Such a view concludes Mr. Sharma, would also be in consonance with reason and justice.
We have given anxious thought to the persuasive argu ments of Mr. Sharma.
His arguments, if accepted, will certainly soften the rigour of this extremely drastic provi sion and bring it more in conformity with logic and equity.
But the language of sections 2(6A) (e) and 12(1B) is clear and unambiguous.
There is no scope for importing into the statute words which are not there.
Such importation would be, not to construe, but to amend the statute.
Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation.
709 To us, there appears no justification to depart from the normal rule of construction according to which the intention of the legislature is primarily to be gathered from the words used in the statute.
It will be well to recall the words of Rowlatt J. in Cape Brandy Syndicase vs I.R.C.(1) at p. 71, that "in a taxing Act one has to look merely at what is clearly said.
There is no room for any intendment.
There is no equity about a tax.
There is No. presumption as to a tax.
nothing is to be read in, nothing is to be implied.
One can only look fairly at the language used".
Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however great the hardship may appear to.
the judicial mind to be.
In our opinion, the Indian Legislature has deliberately omitted to use in sections 2(6A)(e) and 12(lB) words analogous to those in the last limb of sub section (1) of section 108 of the Commonwealth Act.
When Sections 2(6A) (e) and 12(lB) were inserted by the Finance Act, 1955, Parliament must have been aware of the provision contained in section 108 of the Common wealth Act.
In spite of such awareness, Parliament has not thought it fit to borrow whole hog what is said in section 108 (1 ) of the Commonwealth Act.
So far as the last limb of section 108(1) is concerned, our Parliament imported only a very restricted version and incorporated the same as the 'fifth condition ' in sub section
(lB) of section 12 to the effect, that the "payment deemed as dividend shall be treat ed as a dividend received by him in the previous year relevant to the assessment year ending on the 31st day of March, 1956 if such loan or advance remains outstanding on the last day of such previous year".
The word "such" pre fixed to the "previous year" shows that the application of this clause is confined to the assessment year ending on 31 3 1956.
In the instant case we are not concerned with the assessment year ending on 31 3 56.
This highlights the fact that the Legislature has deliberately not made the subsist ence of the loan or advance, or its being outstanding on the last date of the previous year relevant to the assessment year, a prerequisite for raising the statutory fiction.
In other words, even if the loan or advance ceases to be outstanding at the end of the previous year, it can still be deemed as a 'dividend ' if the other four conditions factual ly exist, to the extent of the accumulated profits possessed by the Company.
At the commencement of this judgment we have noticed some general principles, one of which is, that the previous year is the unit of time on which the assessment is based (section 3).
As the taxability of an income is related to its receipt or accrual in the previous year, the moment a dividend is received whether it is actual dividend declared by the company or is a deemed dividend, income taxable under the residuary head, "income from other sources", arises.
The charge being on accrual or receipt the statutory fiction created by section 2(6A)(e) and s.12(IB) would come into opera tion at the time of the payment by way of advance or loan, provided the other conditions are satisfied.
(1) (1921)1,K.B. 64 atp.
710 We do not propose to examine the soundness or otherwise of the illustrations given by Mr. Sharma since they are founded on assumed facts which do not exist in the present case.
For the foregoing reasons we would answer the question posed in favour of the Revenue and dismiss this appeal with costs.
P.B.R. Appeal dismissed.

summary/full:
Under section 2(6A)(e).of the Indian Income tax Act, 1922, the term dividend includes any payment by a company not being a company in which the public are substantially interested within the meaning of section 23A of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder to the extent to which the company in either case possesses accumulated profits.
According to section 12(1A) of the Act, income from other sources includes dividends.
Sub section (lB) of section 12 provides any payment by a company to a shareholder by way of advance or loan which would have been treated as dividend within the meaning of section 2(6A)(e) in any previous year relevant to any assess ment year prior to the assessment year ending on the 31st day of March, 1956 had that clause been in force in that year, shall be treated as a dividend received by him in the previous year relevant to the assessment year ending on the 31st day of March, 1956, if such loan or advance remained outstanding on the first day of such previous year.
The provisions of section 2(6A)(e) and section 12(lB) had been borrowed and adopted with certain alterations from section 108(2) of the Commonwealth Income Tax Assessment Act of Australia the last limb of which provided that payment to a shareholder by way of advance or loan was to be treated as dividend paid by the company on the last day of the year of income of the company in which payment was made.
The appellant assessee was a shareholder and Managing Director of a Private Ltd. Company.
In the calendar year 1956 (assessment year 195758), the assessee withdrew in cash from the company a sum of Rs. 4.97 lakhs, which was less than the accumulated profits of the company.
Before the end of the year, the assessee repaid the whole amount.
Deduct ing a sum of Rs. 1.59 lakhs which was credited to the asses see 's account by way of dividend in the company 's books, the Income tax Officer treated the balance of Rs. 2.72 lakhs as dividend income in the ,assessee 's hands and grossed up the amount under section 16(2).
appeal, the Accountant Member of the Appellate Tribunal held that any payment made as envisaged in section 2(6A)(e) became dividend and must be treated as the assessee 's income and no subsequent repayment could take it out of the mischief of the provision.
The Judicial Member on the other band held that since total income of the asses see during the relevant previous year could be computed and assessed only at the end of that year any advance or loan taken during the interim periods of the previous year would have to.
be ignored.
On reference the President agreed with the Accountant Member.
The High Court answered the reference in favour of the Revenue.
698 were taken and (ii) the last limb of section 108(1) of the Aus tralian Act should be read into the Indian Act because what was explicit in.
section 108(1) of the Australian Act is implicit in section 2(6A),(e) and section 12(lB) of the Indian Act.
Dismissing the appeal, HELD: The fiction created by section 2(6A)(e) read with section 12(lB) of the Act is attracted as soon as all the conditions necessary for its application exist in a case.
[707 C] 1.
In Navnit Lal C. Javeri vs
K.K. Sen, Appellate Assist ant Commissioner Income tax ; , this Court held that the combined effect of these two provisions is that three kinds of payments made to a shareholder of a company are treated as taxable dividend to the extent of the accumulated profits held by the company, namely, payments made to the shareholder by way of advance or loan, pay ments made on his behalf and payments made for his individu al benefit.
The five conditions to be satisfied are: (i) The company must be one in which the public are not substan tially interested within the meaning of section 23A; (ii) The borrower must be a shareholder at the date when the loan was advanced; (iii) The loan advanced can be deemed to be divi dend only to the extent of the accumulated profit on the date of the loan; (iv) The loan must not have been advanced by the company is the ordinary course of its business and (v) The loan must have remained outstanding at the com mencement of the shareholder 's previous year in relation to the assessment year 1955 56.
[707 D G] In the instant case the company was a controlled company within the meaning of section 23A; the assessee was its share holder; the company possessed "accumulated profits" in excess of the amount paid to the assessee during the previ ous years; and the company 's business was not money lending.
The last condition was not applicable because it was a transitory provision applicable to the assessment year 1955 56 only while the assessment year in this case was 1957 58.
[708 A] 2.
(a) The language of sections 2(6A)(e) and 12(lB) is clear and unambiguous.
There is no scope for importing into the statute words which are not there.
Such importation would be not to construe it but to amend the statute.
Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation.
[708 H] (b) No justification to depart from the normal rule of construction according to which the intention of the legislature is primarily to be gathered from the words used in the statute has been made out.
(c) The Indian Legislature has deliberately omitted to use in sections 2(6A)(e) and 12(lB) words analogous to those in the last limb of section 108(1) of the Australian Act.
When sections 2(6A)(e) and 12(lB) were inserted by Finance Act, 1955, Parliament must have been aware of the provision contained in section 108 of the Australian Act.
In spite of such aware ness, Parliament has not thought it fit to borrow the whole hog what is said in section 108(1) no far as the last limb of that section is concerned.
Our Parliament imported only a very restricted version, and incorporated the same as the 5th condition in section 12(lB) to the effect, that the payment deemed as dividend shall be treated as dividend received by him in the previous year relevant to the assessment year ending on the 31st March, 1956 if such loan or advance remained outstanding on the last day of such previous year The word "such" prefixed to the previous year shows that the application of this clause is confined to the assessment year ending on 31st March, 1956.
[709 C D] In the instant case the assessment year did not end on 31st March, 1956 which showed that the Legislature has deliberately not made the subsistence of the loan or advance or its being outstanding on the last date of the previous year relevant to the assessment year, a prerequisite for raising the statutory fiction.
In other words, even if the loan or advance ceased to, be 699 outstanding at the end of the previous year, it could still be deemed as dividend if the other four conditions factually existed to the extent of the accumulated profits possessed by the company.
[709 E F] (d) Under section 3 which is the charging section, the previ ous year is the unit of time on which the assessment is based.
As the taxability of income is related to its re ceipt or accrual in the previous year, the moment dividend is received whether, actual or deemed, income taxable under the residuary head, "income from other sources", arises.
The charge being on accrual or receipt, the statutory fic tion created by sections 2(6A)(e) and section 12(lB) would come into operation at the time of payment by way of advance or loan provided the other conditions are satisfied.
[709 G H]