judgement:
minal Appeal No. 237 of 1993.
From the Judgment and Order dated 4.9.91 of the Kerala High Court in Crl.
A. No. 537 of 1988.
M.M. Kashyap, Sudhir Gopi, A.G. Prasad and Roy Abraham for the Appellants.
M.T. George for the Respondent.
ANAND, J. On 9.3.1992, when this special leave petition, directed against the judgment and order dated 4th September, 1991, of the High Court of Kerala in Criminal Appeal No. 537 of 1988, came up for preliminary hearing, the following order was made: "Issue notice limited to the question as to the nature of offence and the quantum of sentence.
89 No orders on bail." Heard learned counsel for the parties.
Leave is granted confined to the limited question on which notice was issued as referred to above.
For an occurrence which took place on 24th, December 1986, in which one Suku succumbed to the injuries as a result of the assault during the occurrence, six accused persons were arrayed by the investigating agency for offences punishable under Sections 302, 324, 323, 341, 148 read with Section 149 IPC.
They were put on trial and the prosecution sought to establish its case by examining as many as six eye witnesses besides other evidence, documentary and oral.
At the trial however, four eye witnesses, PW3 Devassykutty, PWs 6 and 7 salesman and his assistant in the arrack shop and PW8 Unni @ Velayudhan turned hostile and did not support the prosecution case.
The prosecution case was sought to be proved by the ocular testimony of PW4 Biju and PW5 Anil, both aged about 13 years at the time of occurrence and the other evidence.
Both the eye witnesses supported their statements recorded under Section 161 Cr.
P.C. during their testimony in court.
The trial court on the basis of prosecution evidence found accused No. 1, Subran, guilty of an offence punishable under Section 302 IPC and sentenced him to suffer rigorous imprisonment for life.
Accused Nos. 2 to 6, namely, Rajan, Preman, Viswan, Sura and Shajan were found guilty of an offence under Section 326/149 IPC and each one of them was sentenced to undergo rigorous imprisonment for three years.
Besides, accused 1 to 4 were convicted for an offence under Section 148 and sentenced to suffer rigorous imprisonment for one year.
All the accused were also convicted and sentenced to suffer rigorous imprisonment for six months each under Section 147 IPC.
All the accused were also convicted for offences under Sections 143, 341, 323, 324 read with Section 149 IPC but no separate sentences were awarded on any of those counts.
On an appeal before the High Court, the conviction and sentenced awarded to accused 1 to 3 and 5 were confirmed while accused 4 and 6 were acquitted and the conviction and sentence recorded against them by the learned Sessions Judge was set aside.
In view of the limited notice issued by this Court, we are relieved of the necessity to reappreciate the prosecution evidence in extenso and shall therefore confine ourselves to the determination of the nature of the offence and the award of appropriate sentence to the four appellants accepting, as established the prosecution case against the four appellants beyond a reasonable doubt.
90 According to the prosecution case, all the six accused persons were armed with weapons like chopper, iron rod, knife, cycle chain and torches.
It is the prosecution case that the accused had held PW2 George and while the first accused kicked him, the third accused inflicted injuries on him with a cycle chain.
So far as Suku deceased is concerned, according to the prosecution, all the accused except the first accused caused him injuries with a torch, a cycle chain and a knife.
The first accused is alleged to have caught hold of Suku by the collar and inflicted injuries on his hands arms and legs with a chopper.
The assault took place in front of an arrack shop.
According to the prosecution case there was enmity between the two groups on account of illicit distillation and suspicion of information being passed on to the Excise officials.
However, no evidence was led in support of this allegation by the prosecution and no motive for commission of the crime was established at the trial.
The postmortem on the deceased was conducted by Dr. Sivasankara Pillai PW12.
He had found as many as 38 injuries on the deceased.
Most of the injuries found by him, however, were abrasions or contusions on different parts of the body though the deceased had also suffered stab wounds on the right upper arm and left forearm and sharp weapon injuries on his hands and legs.
The bones of the legs and arm had been fractured.
According to the medical witness, death of Suku deceased was caused due to multiple injuries.
According to the medical evidence, there was no stab or incised wound inflicted on any of the vital parts of the body i.e. neck, chest or abdomen.
The Doctor has opined that the deceased had died due to multiple injuries and that the injuries could have been caused by beating him with torches, knife, iron rod, cycle chain and the chopper.
According to him, the cumulative effect of all the injuries, taken together, had resulted in the death of the deceased.
The doctor further stated that as a result of the chemical analysis of the viscera, blood and urine, there was indication that the deceased had consumed alcohol before he had been assaulted, though he was unable to give the quality or quantity of liquor consumed by the deceased.
From an analysis of the record of injuries as detailed in the post mortem report, it transpires that there were 18 contusions of different dimensions but minor in their gravity on the body of the deceased.
Eight of the injuries recorded, out of the 38 in the post mortem report.
, were abrasions on different parts of the body.
According to the medical witness, nine out 91 of those injuries could have been caused by a fall or the deceased coming into contact with any rough surface or area.
Out of the remaining injuries, seven were chop wounds while two were stab wounds, besides three were incised injuries.
it was the cumulative effect of the injuries which resulted in the death of the deceased and according to the doctor, the injuries when taken together were sufficient to cause death in the ordinary course of nature.
None of the injuries by itself was found to be sufficient in the ordinary course of nature to cause death of the deceased.
According to the medical opinion about the cause of death, "deceased died due to multiple injuries".
From the above analysis of injuries, it cannot be said that any one of the four appellants, who alone stand convicted by the High Court had inflicted injuries intending to cause death or such bodily injury as is sufficient in the ordinary course of nature to cause death.
As already noticed, six accused persons had been charged by the investigating agency for offences punishable under Sections 143, 147, 148, 341, 323, 324, 326 and 302 read with Section 149 IPC and put on trial.
The trial court convicted accused 2 to 6 under Section 326 IPC with the aid of Section 149 IPC.
It convicted accused No. 1 for an offence under Section 302 IPC.
While convicting accused 2 to 6 for the offence under Section 326/149 IPC, the trial court came to the conclusion that 'the accused did not share the common object to murder Suku and that the common object was only to cause grievous hurt ' to the deceased.
Being of the opinion, that accused No. 1 had caused injuries with a chopper and those injuries "could" have resulted in the death of the deceased, he was convicted for an offence under Section 302 IPC.
The High Court acquitted two of the accused and convicted the remaining four only.
The High Court found that clear evidence of the eye witnesses was only against accused Nos. 2, 3 and 5 besides appellant No. 1.
The participation of the 6th accused and the role assigned to him by the prosecution was doubted by the learned Judges of the High Court and he was given the benefit of doubt and acquitted.
Similarly, the High Court disbelieved the role assigned to accused No. 4 and doubted his participation in the commission of the crime.
He was also ' given the benefit of doubt and acquitted.
While setting aside the conviction and sentence of the said two accused, the High Court did not hold that beside the four accused convicted by it, there were some other known or unknown accused who had also been a party to the commission of the crime.
It is in this above background that we have to consider the nature 92 of the offence committed by the four appellants.
Admittedly, none of the accused persons individually had been charged for the substantive offence of murder under Section 302 IPC.
In the trial court all the six accused were charge sheeted for an offence under Section 302 read with Section 149 IPC.
Other charges were also framed against the accused but only with the aid of Section 149 IPC.
After the acquittal of the two accused, could the High Court convict appellant No. 1 for the substantive offence under Section 302 IPC (with which he had not been charged) and the appellants 2 to 4 for an offence under Section 326/149 IPC ? Section 141 IPC defines an unlawful assembly to be an assembly of five or more persons, where the common object of the persons comprising that assembly is to commit any of the acts enumerated in the five clauses of that Section.
Section 149 IPC reads as under: "Sec. 149.
Every member of unlawful assembly guilty of offence committed in prosecution of common object If an offence is committed by any member of an unlawful assembly in prosecution of the common object of that assembly, or such as the members of that assembly knew to be likely to be committed in prosecution of that object, every person who, at the time of the committing of that offence, is a member of the same assembly, is guilty of that offence.
" A combined reading of Section 141 and Section 149 IPC (supra) show that an assembly of less than five members is not an unlawful assembly within the meaning of Section 141 and cannot, therefore, form the basis for conviction for an offence with the aid of Section 149 IPC.
The effect of the acquittal of the two accused persons by the High Court and without the High Court finding that some other known or unknown persons were also involved in the assault, would be that for all intent and purposes the two acquitted accused persons were not members of the unlawful assembly.
Thus, only four accused could be said to have been the members of the assembly but such an assembly which comprises of less than five members is not an unlawful assembly within the meaning of Section 141 IPC.
The existence of an unlawful assembly is a necessary postulate for invoking Section 149 IPC.
Where the existence of such an unlawful assembly is not 93 proved, the conviction with the aid of Section 149 IPC cannot be recorded or sustained.
The failure of the prosecution to show that the assembly was unlawful must necessarily result in the failure of the charge under Section 149 IPC.
Consequently, the conviction of appellants 2 to 4 for an offence under Section 326/149 IPC cannot be sustained and the same would be the position with regard to the conviction of all the appellants for other offences with the aid of Section 149 IPC also.
Since, appellant No. 1 Subran had not been charged for the substantive offence of murder under Section 302 IPC, even the trial court, which tried the six accused persons, was not justified in recording a conviction against him for the substantive offence of murder punishable under Section 302 IPC after framing a charge against him for the offence under Section 302 read with Section 149 IPC only.
A person charged for an offence under Section 302, IPC read with Section 149 cannot be convicted of the substantive offence under Section 302, IPC without a specific charge having been framed against him as envisaged by law.
Conviction for the substantive: offence in such a case is unjustified because an accused might be misled in his defence by the absence of the charge for the substantive offence under Section 302 IPC.
Appellant No. 1, Subran, was never called upon to meet a charge under Section 302 IPC simplicitor and, therefore, in defending himself, he can not be said to have been called upon to meet that charge and he could very well have considered it unnecessary to concentrate on that part of the prosecution case during the cross examination of the prosecution witnesses.
Therefore, the conviction of the first appellant for an offence under Section 302 was not permissible.
That apart, according to the medical evidence, none of the injuries allegedly caused by this appellant was either individually or taken collectively with the other injuries caused by him, sufficient in the ordinary course of nature to cause death of Suku.
Medical evidence is clear on this aspect of the case and it is not possible to say that the injuries inflicted by the first appellant with the chopper were inflicted with the intention to cause the death of Suku.
The High Court failed to draw the distinction between an offence under clause (b) and (c) of Section 299 IPC and the one falling under clause (3) of ' Section 300 IPC.
The intention to cause murder of Suku deceased, could not be attributed to him and the medical evidence also shows that the injuries attributed to him were not sufficient in the ordinary course of nature to cause death of the deceased.
The conviction of appellant No. 1, Subran, for the substantive offence under Section 302 IPC is therefore, 94 unwarranted and cannot be sustained.
That Suku deceased died as a result of injuries inflicted on him by all the four appellants is not a matter which is in doubt.
From the ocular evidence read with the medical evidence, it stands established that the injuries on the deceased had been caused by all the four appellants and that the death of Suku had occurred due to receipt of multiple injuries.
What offence can then be said to have been committed by the four appellants ? According to the medical evidence, the injuries caused were cumulatively sufficient to cause death and the death had occurred due to multiple injuries which were found sufficient in the ordinary course of nature to cause death.
According to the ocular testimony of witnesses namely, Biju (PW4) and Anil (PW5), who have been believed by both the courts below and with which finding we have no reason to differ, all the four appellants had caused those injuries.
It is, therefore, necessary in a case like this to determine as to which of the accused is guilty of a particular offence.
On a consideration of the circumstances of the case, the type of weapons with which they were armed and nature and seat of the injuries, it is not possible to hold that all the four appellants had shared the common intention of causing such bodily injuries on the deceased as were likely to cause the death of Suku or were sufficient in the ordinary course of nature to cause his death.
The appellants would, therefore be liable for the offence com mitted individually by each one of them.
As already noticed, though it may not be possible to attribute to appellant No. 1, Subran, the necessary intention to cause death of Suku so as to hold him guilty of an offence of murder under Section 302 IPC since the injuries inflicted by him were not found to be sufficient in the ordinary course of nature to cause death of Suku, but looking to the weapon with which he was armed and the nature number and seat of injuries inflicted by him though not on any vital part, he can certainly be attributed with the knowledge that with those injuries it was likely that death of Suku may be caused and, therefore, he can be cloathed with the liability of causing culpable homicide not amounting to murder.
The case of the first appellant, therefore, falls within Section 299 IPC punishable under Section 304 Part 1 IPC.
We, accordingly, convict him for the said offence and sentence him to suffer rigorous imprisonment for a period of seven years and to pay a fine of Rs. 2000 (two thousand) and in default of payment of fine suffer further rigorous imprisonment for one year.
Fine if realised shall be paid 95 to the heirs of the deceased.
Coming now to the case of the other three appellants.
Since, their conviction for an offence under Section 326 with the aid of Section 149 is not sustainable in law, we set aside their conviction under Section 326/149 IPC.
They would be responsible for their individual acts.
The injuries caused by Rajan and Preman appellants 2 and 3, were with a torch, iron rod and a cycle chain.
None of the injuries caused by them according to the postmortem report were on any vital part of the body, though some of the injuries caused by blunt weapons were grievous in nature.
We, therefore, convict each of the two appellants Rajan and Preman, for an offence under Section 325 IPC and sentence them to suffer rigorous imprisonment for two years each.
So far as the fourth appellant Sura Surendran is concerned, he caused grievous injuries to the deceased with a knife.
His offence would, therefore, fall under Section 326 IPC and convicting him for the said offence, we sentence trim to suffer rigorous imprisonment for a period of three years and to pay a fine of Rs. 500 (five hundred).
In default of payment of fine he shall further suffer rigorous imprisonment for a period of three months.
Fine, if realised shall be paid to the heirs of the deceased.
The conviction of all the appellants for the offence under Section 324 as recorded by the learned Judges of the High Court as also for the other offences are maintained but without the aid of Section 149 IPC.
In view of the sentences recorded for offence under Section 304 Part I against the first appellant Subran, Section 325 IPC against appellants 2 and 3, Rajan and Preman, and Section 326 IPC against Sura Ca, Surendran, appellant 4, no separate sentence are recorded for the other offences.
The appeal is accordingly partially allowed and disposed of in the above terms.
N.V.K. Appeal allowed partially.

summary/full:
Six accused persons were arrayed by the investigating agency for offences punishable under Sections 302, 324, 323, 341, 148 read with Section 149 IPC, for an occurrence that took place on 24th December, 1986 in which one Suku succumbed to injuries as a result of the assault during the occurrence.
They were put on trial, and the prosecution sought to establish its case by examining as many as six eye witnesses besides other evidence, documentary and oral.
According to the prosecution case, all the six accused persons were armed with weapons like chopper, iron rod, knife, cycle chain and torches and that the accused had held PW.2 George and while the first accused kicked him, the third accused inflicted injuries on him with a cycle chain.
So far as Suku deceased was concerned, all the accused except the first accused caused him injuries with a torch, a cycle chain and a knife.
The first accused was alleged to have caught hold of Suku by the collar and inflicted injuries on his hands, arms and legs with a chopper.
The assault took place in front of an arrack shop.
It was alleged that enmity between the two groups on account of suspicion of information being passed on to the Excise Officials, regarding illicit distillation was the cause of the occurrence, but no evidence was led in support of this allegation and no motive for commission of the crime was established at the trial.
85 At the trial, four eye witnesses PW3, P.W. 6, PW.7, the salesman and his assistant in the arrack shop and PW.8 turned hostile and did not support the prosecution case.
The prosecution case was sought to be proved by the ocular testimony of PW.4 and PW.5 both aged about 13 years, at the time of the occurrence and other evidence.
Both these eye witnesses supported their statements recorded under section 161 Cr.
P.C. during their testimony in Court.
The trial court on the basis of prosecution evidence found accused No. 1, Subran, guilty of an offence punishable under Section 302 IPC and sentenced him to suffer rigorous imprisonment for life.
Accused Nos. 2 to 6, namely, Rajan, Preman, Viswan, Sura and Shajan, were found guilty of an offence under Section 326/149 IPC and each one of them was sentenced to undergo rigorous imprisonment for three years Besides, accused 1 to 4 were convicted for an offence under Section 148 and sentenced to suffer rigorous imprisonment for one year.
All the accused were also convicted for offences under Sections 14, 341, 323,324 read with Section 149 IPC but no separate sentences were awarded on any of those counts.
On appeal to the High Court, the conviction and sentence awarded to accused 1 to 3 and 5 were confirmed, while accused 4 and 6 were acquitted and the conviction and sentence recorded against them by the Sessions Judge was set aside.
Ile participation of the 6th accused and the role assigned to him by the prosecution was doubted by the Judges of the High Court and he was given the benefit of doubt and acquitted.
Similarly, the High Court disbelieved the role assigned to accused No. 4 and doubted his participation in the commission of the crime. ]Me accused appealed to this Court by Special Leave.
After preliminary hearing it was ordered that the appeal be heard on the limited question regarding the nature of the offence and the quantum of the sentence only.
On the question : Whether after the acquittal of the two accused, could the High Court Convict appellant No. 1 for the substantive offence under Section 302 IPC an offence with which he had not been charged, and appellants 2 to 4 for an offence under section 326/149 IPC, Partially allowing the appeal, the Court, HELD: 1.
A combined reading of Section 141 and Section 149 IPC 86 show that an assembly of less than five members is not an unlawful assembly within the meaning of Section 141 and cannot, therefore, form the basis for conviction for an offence with the aid of Section 149 IPC.
[92F] 2.
The existence of an unlawful assembly is a necessary postulate for invoking Section 149 IPC.
Where the existence of such an unlawful assembly is not proved, the conviction with the aid of Sections 149 IPC cannot be recorded or sustained.
The failure of the prosecution to show that the assembly was unlawful must necessarily result in the failure of the charge under section 149 )PC.
[92H,93A] 3.
A person charged for an offence under Section 302 IPC read with Section 149 cannot be convicted of the substantive offence under Section 302 IPC without a specific charge having been framed against him as envisaged by law.
Conviction for the substantive offence in such a case is unjustified because an accused might be misled in his defence by the absence of the charge for the substantive offence under Section 302 IPC.
[93D] 4.
The conviction of appellants 2 to 4 for an offence under Section 326/149 IPC cannot be sustained and the same would be the position with regard to the conviction of all the appellants for other offences with the aid of Section 149 IPC also.
[93B] 5.
The High Court failed to draw the distinction between an offence under clause (b) and (c) of Section 299 IPC and the one failing under clause (3) of Section 300 IPC.
[93G] 6, The effect of the acquittal of the two accused persons by the High Court and without the High Court finding that some other known or unknown persons were also involved in the assault, would be that for all intent and purposes the two acquitted accused persons were not members of the unlawful assembly.
Thus, only four accused could be said to have been the members of the assembly but such an assembly which comprises of less than five members is not an unlawful assembly within the meaning of Section 141 IPC.
[92G] 7.
Appellant No. 1 Subran not having been charged for the substantive offence of murder under Section 302 IPC, even the trial court, which tried the six accused persons, was not justified in recording a conviction against him for the substantive offence of murder punishable under Sec 87 tion 302 IPC after framing a charge against him for the offence under Section 302 read with Section 149 IPC only.
[93C] 8.
Appellant No. 1, Subran, was never called upon to meet a charge under Section 302 IPC simplicitor and, therefore, in defending himself, he can not be said to have been called upon to meet that charge and he could very well have considered it unnecessary to concentrate on that part of the prosecution case during the cross examination of the prosecution witnesses.
Therefore, the conviction of the appellant No. 1 for an offence under Section 302 was not permissible.
[93E] 9.
The intention to cause murder of Suku deceased, could not be attributed to appellant No. 1 and the medical evidence also shows that the injuries attributed to him were not sufficient in the ordinary course of nature to cause the death of the deceased.
The conviction of appellant No. 1 for the substantive offence under Section 302 IPC is therefore unwarranted and cannot be sustained.
That Suku deceased died as a result of injuries inflicted on him by all the four appellants is not a matter which is in doubt.
From the ocular evidence read with the medical evidence, it stands established that the injuries on the deceased had been caused by all the four appellants and that the death of Suku had occurred due to the receipt of multiple injuries.
[93H, 94A B] 10.
On a consideration of the circumstances of the case, the type of weapons with which the accused were armed and the nature and seat of the injuries, it is not possible to hold that all the four appellants had shared the common intention of causing such bodily injuries on the deceased as were likely to cause the death of Suku or were sufficient in the ordinary course of nature to cause his death.
The appellants would, therefore be liable for the offence committed individually by each one of them.
[94D E] 11.
The case of appellant No. 1 therefore, falls within Section 299 I PC punishable under Section 304 Part 1 [PC.
He is accordingly, convicted for the said offence and sentenced to suffer rigorous imprisonment for a period of seven years and to pay a fine of Rs. 2,000 and in default of payment suffer further rigorous imprisonment for one year.
Fine if realised to be paid to the heirs of the deceased.
[94G H] 12 (a) With regard to the three other appellants their conviction for 88 an offence under Section 326 with the aid of Section 149 is not sustainable in law, it is accordingly set aside and they are convicted under Section 326/149 IPC.
They would be responsible for their individual acts.
The injuries caused by appellants 2 and 3 were with a torch, iron rod and a cycle chain.
None of the injuries caused by them according to the post mortem report were on any vital part of the body, though some of the injuries caused by blunt weapons were grievous in nature.
Each of them are convicted for an offence under Section 325 IPC and sentenced to suffer rigorous imprisonment for two years each.
[95B C] 12 (b) Appellant No. 4 caused grievous injuries to the deceased with a knife, the offence would therefore, fall under Section 326 IPC.
He is therefore convicted for the said offence and sentenced to suffer rigorous imprisonment for a period of three years and to pay a fine of Rs. 500/ and in default of payment to suffer rigorous imprisonment for a period of three months.
The fine, if realised shall be paid to the heirs of the deceased.
[95D] 12 (c) The conviction of all the appellants for the offence under Section 324 as recorded by the High Court as also for the other offences are maintained but without the aid of Section 149 IPC.


judgement:
Appeal No. 2230 (NT) of 1977.
From the Judgment and Order dated 13.12.76 of the Gujarat High Court in Income Tax Reference No. 36 of 1972.
Mrs. A.K. Verma, for JBD & Co. for the Appellant.
G.C. Sharma, E.U.Eradi and T.R. Talwar for the Respondent.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.
This appeal is preferred by the assessee against the judgment of the Gujarat High Court answering the question, referred at the instance of Revenue, against the assessee.
The following question was referred under Section 256(1) of the Income Tax Act for the opinion of the High Court: 111 "Whether on the facts and in the circumstances of the case, the following amounts are to be included in the computation of capital of the assessee Company under Rule 1.
of the Second Schedule of the : (i) Amount set apart for contingent Rs. 4,50,000 liability (taxation) (ii) Amount set apart for proposed divi Rs. 19,90,000 dend (iii) Reserve for Depreciation fund in ex Rs. 6,77,122 cess of the amount allowed as depreciated in income tax (iv) Excess provision in Revenue Acco Rs. 3,61,876 unts disallowed in income tax assess ment for the assessment years.
" Though the question refers to four items, we are concerned in this appeal only with the first item.
We shall, therefore, state the facts only in so far as they are relevant to the said item.
The assessee is a Private Limited Company.
The assessment year concerned is 1963 64.
Sometime in 1955 56, a notice was issued to the assessee under Section 23A of the Income Tax Act, 1922.
Apprehending that it may become liable to pay additional tax under the said provision, the assessee set apart a sum of Rs. 6,52,000 in its Books for the year ending March 31, 1956.
Out of this amount an amount of Rs. 2,02,000 was transferred to the profit and loss account during the year 1958 59, with the result that a sum of Rs. 4,50,000 continued to remain and was shown as a provision set apart to meet the taxation liability which the assessee called a contingent liability.
At the same time the assessee had been contesting the proceedings taken against it under Section 23A.
Though it failed at the earlier stages, it succeeded ultimately in the Letters Patent Appeal filed by it in the East Punjab High Court.
In the said appeal decided on May 24, 1965, it was held that no action can be taken against the assessee under Section 23A.
With this order, all the orders passed and notices issued under the said provision prior to the date of the said judgment stood vacated.
In its assessment relating to the assessment year 1963 64 under the 112 , the assessee contended that the said sum of Rs. 4,50,000 is a reserve and should be included in its capital for the purposes of the Act.
The Income Tax Officer did not agree and the matter was ultimately taken to the Income Tax Appellate Tribunal.
By the date this appeal was taken up for hearing, another appeal preferred by the assessee relating to the subsequent assessment year (1964 65) was also before the Tribunal.
That appeal arose under the provisions of the Companies Sur tax Profits Act, 1964 which replaced the .
The Tribunal first disposed of the appeal relating to the assessment year 1964 65.
In so far as the item in question is concerned it held that it was a reserve.
Following the said judgment, the appeal pertaining to the assessment year 1963 64 was also allowed.
(It may be stated that the order of the Tribunal relating to assessment year 1964 65 was subsequently rectified by an order dated February 15, 1972 and the said item was held to be a provision.
But no such order was passed with respect to the assessment year 1963 64).
Aggrieved by the judgment of the Tribunal the Revenue obtained the aforesaid reference.
The High Court answered the same.
in favour of Revenue and against the assessee following the decision of this Court in Metal Box Company of India Limited vs Their Workmen, It held that the said amount being a provision made towards a liability which had attached on account of the issuance of a notice was a provision and not a reserve.
In this appeal the correctness of the said view is questioned.
The learned counsel for the appellant assessee submitted that inasmuch as no order levying additional tax under Section 23A was made on or before the date relevant to the assessment year 1963 64 the said amount cannot be treated as a provision.
We find it difficult to agree.
In Metal Box, which has been followed in Vazir Sultan Tobacco Co. Ltd etc.
vs Commissioner of Income Tax, Andhra Pradesh etc.
, , the distinction between provision and reserve is stated in the following words: "The distinction between a provision and a reserve is in commercial accountancy fairly well known.
Provisions made against anticipated losses and contingencies are charges against profits and, therefore, to be taken into account against gross receipts in the P. & L. accounts and the balance sheet.
On the other hand, reserves are appropriations of profits, the assets by which they are rep resented being retained to form part of the capital 113 employed in the business.
Provisions are usually shown in the balance sheet by way of deductions from the assets in respect of which they are made whereas general reserves and reserve funds are shown as part of the proprietor 's interest.
(See Spicer and Pegler 's Book keeping and Accounts, 15th Edn.
p. 42).
" While approving the said statement it was stated in Vazir Sultan: "In other words the broad distinction between the two is that whereas a provision is a charge against the profits to be taken into account against gross receipts in the P.& L. account, a reserve is in appropriation of profits, the asset or assets by which it is represented being retained to form part of the capital employed in the business.
Bearing in mind the aforesaid broad distinction we will briefly indicate how the two concepts are defined and dealt with by the .
" Applying the said test it must be held that the provision made by the assessee in its Books for meeting the anticipated liability of tax (under Section 23A) was indeed a provision and not a reserve.
The assessee itself called it a provision.
It did not call it a reserve nor was it set apart or appropriated as a reserve.
We are not suggesting that the description given or the Book entries made by the assessee are conclusive.
We are only emphasizing how the assessee understood the said item itself.
In the circumstances of the case we must hold that the High Court was right in holding it to be a provision and not a reserve.
The appeal accordingly fails and is dismissed.
No costs.
G.N. Appeals dismissed.

dataset_name: IN-Abs

summary/full:
The appellant assessee was issued a notice under Section 23A of the Income tax Act, 1922.
The assessee contested the same.
At the same time, it set apart a sum of Rs. 6,52,000 in its books for the year ending 31st March 1956, to meet the contingency that may arise if his plea failed.
During the year 1958 59 an amount of Rs. 2,02,000 out of the said amount was transferred to the profit & loss account. 'Me balance amount of Rs. 4,50,000 continued to remain and was shown as a provision set apart to meet the aforesaid contingent liability.
The assessee has been contesting the said proceedings.
Ultimately it succeeded before the High Court which held that no action could be taken against the assessee under Section 23A.
For the assessment year 1963 64 in proceedings under the , the assessee claimed that the said sum of Rs. 4,50,000 was a reserve and should be included in its capital.
The Income tax Officer did not agree.
Ultimately the matter reached the Tribunal which agreed with the assessee.
At the instance of Revenue the question as to whether the sum of Rs. 4,50,000 set apart for contingent liability (taxation) was to be included in the computation of capital of the assessee company under Rule 1 of the Second Schedule of the was referred to the High Court.
The High Court having answered the question against the assessee, the, assessee has preferred the present appeal contending that inasmuch as no order levying additional tax under Sec.
23A was made the amount could not be treated as a provision.
109 110 Dismissing the appeals, this Court, HELD : 1.1.
Provisions made against anticipated losses and contingencies are charges against profits and, therefore, to be taken into account against gross receipts in the P.&L. accounts and the balance sheet.
On the other hand, reserves are appropriations of profits, the assets by which they are represented being retained to form part of the capital employed in the business.
[112G] 1.2.
In the instant case, the provision made by the assessee in its Books for meeting the anticipated liability of tax (under Section 23A of the Income Tax Act, 1922) was indeed a provision and not a reserve.
The assessee Itself called it a provision.
It did not call it a reserve nor was the amount set apart or appropriated as a reserve.
It is not to suggest that the description given or the Book entries made by the assessee are conclusive, but to emphazise how the assessee understood the said item itself In the circumstances of the case the High Court was right in holding it to be a provision and not a reserve, and so the amount of Rs. 4,50,000 was not to be included in the computation of Capital of the assessee Company.
[113E] Metal Box Company of India Limited vs Their Workmen, and Vazir Sultan Tobacco Co.Ltd.
vs Commissioner of Income Tax, Andhra Pradesh etc.
, , relied on.


judgement:
Appeal No. 5899 of 1983.
From the Judgment and Order dated 13.4.83 of the Bombay High Court in S.A. No. 46 of 1983.
V.A. Bobde and A.K. Sanghi for the Respondent.
The Judgment of the Court was delivered by N.P. SINGH, J.
The defendant in a suit for eviction is the appellant before this court.
The suit plot was let out to the appellant as a monthly tenant for an automobile garage.
The plaintiff respondent (hereinafter referred to as "the respondent") issued a notice on 10.7.1975 determining 170 the lease in favour of the appellant with effect from 31.7.1975.
Later the suit in question was filed.
As the suit premises had not been let out for residential purposes, it was an admitted position that the Central Provinces and Berar Letting of Houses and Rent Control Order, 1949 was not applicable.
The Trial Court dismissed the said suit on a finding that as the appellant was using the suit premises for manufacturing purposes, a six months ' notice was required before the lease could be determined and as the notice issued to the appellant under section 106 of the Transfer of Property Act (hereinafter referred as "the Act") had purported to deter mine the tenancy with 15 days ' notice, the suit in question could not have been filed.
On appeal being filed on behalf of the respondent, the Assistant Judge came to the conclusion that the premises in question had not been let out for any manufacturing purpose but for a motor workshop and as such the notice under section 106 of the Act was valid and the respondent was entitled to the possession of the plot in dispute.
The second appeal filed on behalf of the appellant was dismissed in limine by the High Court saying that no substantial question of law was involved.
Before this Court the finding recorded by the court of appeal below and affirmed by the High Court that the respondent was entitled to a decree for possession and the appellant was liable to be evicted was not questioned.
A new stand was taken on behalf of the appellant, that in view of the subsequent events the aforesaid decree of eviction passed against the appellant cannot be given effect to.
It was pointed out that by C.P. and Berar Letting of Houses and Rent Control (Second Amendment) Order, 1989 a new clause 13A has been introduced in the said Order.
The new clause 13A is as follows: "13 A. No decree for eviction shall be passed in a suit or proceeding filed and pending against the tenant in any court or before any Authority unless the landlord produces a written permission of the Controller as re quired by sub clause (1) of clause 13.
" Leave to appeal was granted by this Court on 1st August, 1983 and clause 13A has been introduced in the year 1989 during the pendency of the present appeal.
By that very amending Order the definition of "premises" given in the original Order has also been amended and the said 171 definition after amendment includes not only building but even "land not being used for agricultural purposes".
if the definition of the "Premises", which has been amended, had been in force on the date of the filing of the suit, then the respondent had to pursue the procedure prescribed for eviction in accordance with the provisions of the Order aforesaid instead of filing a suit after service of notice under section 106 of the Act.
There is no dispute that the amendment has not been introduced with retrospective effect and it is only prospective in nature.
As the suit premises is only land and not a building when the suit was filed steps for eviction of the appellant could not have been taken in accordance with the provisions of the Order aforesaid because then those provisions were not applicable.
But the stand of the appellant is that although clause 13A has been introduced not with retrospective effect still it shall be applicable to proceedings pending before any Court including this Court and in view of the bar imposed by said clause 13A, no decree for eviction can be passed by this Court in the present appeal against the appellant unless the respondent landlord produces a written permission of the Controller as required by sub clause (1) of clause 13 of the Order.
Reliance was placed on the case of H. Shiva Rao vs Cecilia Pereira, , wherein it was pointed out by this court : "It is well settled legal principle that Rent Control legislations being beneficial to the tenant have to be given a liberal interpretation.
While ordinarily substantive rights should not be held to be taken away except by express provision or clear implication, in the case of Rent Control Act, it being a beneficial legislation the provision which confers immunity to the tenant against eviction by the landlord though prospective in form operates to take away the right vested in the landlord by a decree of a court which has become final, unless there is express provision or clear implication to the contrary.
" It appears that in the aforesaid case the judgment was passed for possession of the premises in question on August 27, 1970.
Thereafter execution proceedings were initiated.
During the pendency of the execution proceedings, the village in which the suit premises was situated was included within the Mangalore Municipality by amendment of the Karnataka Rent Control After issuance of the notification the provisions of the aforesaid Rent Control Act became applicable even to the suit premises during the pendency of the execution.
An objection was taken on behalf of the tenant that in view of sub section (1) of section 21 of the Act aforesaid, the decree passed in the connected suit was not executable.
Sub section (1) of section 21 provided: "Notwithstanding anything to the contrary contained in any other law or contract, no order or decree for the recovery of possession of any premises shall be made by any court or other authority in favour of the landlord against the tenant.
" So far the aforesaid case is concerned, once the provisions of the Karnataka Rent Control Act became applicable during the pendency of the execution proceedings, the bar imposed on the Court from passing an order for recovery of possession of any premises in favour of the landlord became applicable.
But clause 13A, with which we are concerned, is only in respect of passing a decree for eviction and "not an, order for recovery of the possession of any premises".
If even in clause 13A a bar had been placed in respect of recovery of possession of any premises, then there was no difficulty in accepting the contention raised on behalf of the appellant and holding that although there is a decree for eviction in favour of the respondent, but as in the meantime a bar has been placed on recovery of the possession of the premises the decree became unexecutable.
Reference was also made to the case of M/s. East India Corporation Ltd vs Shree Meenakshi Mills Ltd., JT It will appear that when the suit in question had been filed or even when the leave had been granted by this Court, the building in question did not come within the purview of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, in view of an exclusionary provision contained in clause (ii) of section 30.
During the pendency of appeal before this Court clause (ii) of section 30 was struck down by this Court in another appeal pending as being violative of Article 14 of the Constitution.
The result whereof was that provisions of the aforesaid Act became applicable.
In view of the subsequent events, it was urged in the aforesaid case that section 10 of that Act became applicable as well.
Section 10 provided : "S.10.
Eviction of tenants. (1) A tenant shall not be evicted whether in execution of a decree or otherwise except in accordance with the provisions of this section or sections 14 to 16: In view of the bar placed by section 10 aforesaid on the eviction of a tenant whether in execution of a decree or otherwise except in accordance with the provisions of section 10 or sections 14 to 16 which had become applicable in view of striking down of clause (ii) of section 30, the decrees for eviction passed by courts below were set aside.
This case is clearly distinguishable because the bar had been placed in respect of eviction of the tenant whether in execution of a decree or otherwise and this Court while exercising jurisdiction under Article 136 of the Constitu tion could have taken note of that bar for purpose of setting aside the decree because in view of the subsequent events the decree passed in the suit became unexecutable in absence of compliance of section 10 or sections 14 to 16 of the Act.
Here as the bar is on the part of the Court from passing a decree for eviction, it has to be examined as to whether while affirming the decree for eviction passed by the High Court, it shall be deemed that a fresh decree for eviction shall be deemed to have been passed by this Court.
It was submitted that even if it is held that bar under clause 13A is only on respect of passing of the decree as appeal before this Court on basis of the leave granted under Article 136 of the Constitution is a continuation of the suit/proceeding, while dismissing the said appeal, it shall be deemed that this Court has passed a decree for eviction which in view of clause 13A is barred and the said bar is applicable even on this Court.
In this connection reference was made to the judgments of this Court in the cases of Amarjit Kaur vs Pritam Singh, ; , and Sadhu Singh vs Sharan Dev, AIR 1980 SC 1654.
In the case of Amarjit Kaur vs Pritam Singh (supra) the suit for pre emption in question had been decreed by the Trial Court.
The appeal preferred by the vendee was dismissed.
While the second appeal was pending before the High Court, the Punjab Pre emption (Repeal) Act, 174 1973 came into force.
In view of section 3 of the said Act, the High Court allowed the appeal and dismissed the suit.
Section 3 of that Act provided: "Bar to pass decree in suit for pre emption.
On and from the date of commencement of the Punjab Pre emption (Repeal) Act, 1973, no court shall pass a decree in any suit for pre emption.
" In view of the fact that aforesaid section 3 said in clear and unambiguous term that no court shall pass a decree in any suit for pre emption after coming into force of the Act, the High Court was of the view that said bar applied even.
to the High Court, while confirming the decree for pre emp tion as passed by the Trial Court because it amounted to passing a decree in a suit for pre emption.
This Court said : "As an appeal is a re hearing, it would follow that if the High Court were to dismiss the appeal, it would be passing a decree in a suit for pre emption.
Therefore, the only course open to the High Court was to allow the appeal and that is what the High Court has done.
In other words, if the High Court were to confirm the decree allowing the suit for pre emption, it would be passing a decree in a suit for pre emption, for, when the appellate court confirms a decree, it passes a decree of its own, and therefore, the High Court was right in allowing the appeal.
" Again in the case of Sandhu Singh vs Dharam Dev, (supra) the same section 3 of the Punjab Pre emption (Repeal) Act, 1973, came up for consideration and this Court held: "The section is plain and its meaning unambiguous that there is a statutory mandate against passing a decree for enforcement of a right of pre emption in the State of Punjab.
The only point here is as to whether a decree already passed by the trial court, challenged in appeal after the Act was passed and affirmed on appeal would fall within the mischief of section 3 while the case pends in the High Court.
We think that S.3 interdicts the passing of a decree even in appeal.
For one thing a decree challenged in appeal is reopended and the appellants ' hearing is a 175 rehearing of the whole subject matter and when a decree is passed in appeal the first decree merges in the appellate decree and it comes within the scope of section 3.
" From the facts of the aforesaid case it shall appear that even in this case section 3 of the Punjab Pre emption (Repeal) Act had come into force while appeal was pending in the High Court and the High Court had affirmed the decree of the Trial Court without taking note of the bar imposed by section 3 aforesaid.
This Court said that section 3 interdicted the passing of a decree even in appeal because the decree which had been challenged in appeal had reopened the hearing of the whole subject matter and even while affirming the said decree it shall be deemed that appellate court had passed a decree for pre emption which was not permissible in view of the bar placed by section 3 of the Act in question.
In the aforesaid cases section 3 of the Punjab Pre emption (Repeal) Act had come into force while the appeals were pending in the High Court and effect of section 3 of that Act was considered in connection with the pendency of the appeals before the High Court and not before this Court.
Can it be said that when a special leave is granted under Article 136 of the Constitution by this court, against the judgment of the High Court it is to be treated at par with an appeal entertained by the High Court against the judgment of a court subordinate to the High Court ? Whether by granting leave to appeal, the decree of the High Court is reopened "for rehearing" of the whole subject matter ? Whether on the same analogy when an appeal is dismissed by this Court, the decree of the High Court merges in the decree of this Court and amounts to passing a decree in the connected suit for eviction by this Court ? Article 136(1) of the Constitution confers on this court overriding and extensive powers of granting special leave to appeal.
Article 136 does not confer a right to appeal, it confers a right to apply for special leave to appeal which is in the discretion of this Court.
The discretionary power under Article 136 cannot be construed as to confer a right of appeal where none exist.
According to us, although the power under Article 136(1) is unfettered but it cannot be held that after having entertained a special leave petition against any final or interlocutory order, this Court converts itself into a court of appeal for the hearing of the dispute involved and as 76 such when the appeal is dismissed the decree passed by the High Court merges into the decree of this Court and in that situation amounts to passing a decree for eviction.
This aspect has been considered by this Court in the case of Gyan Chand vs Kunjbeharilal, ; , in connection with Rajasthan Premises (Control of Rent and Eviction) Act, 1950.
Section 13A as amended by Rajasthan Ordinance 26 of 1975 extended the opportunity of paying arrears of rent by the tenant facing eviction.
Benefit was made available in pending suits, appeals therefrom and applications for revision pending on the date of commencement of the Ordinance.
This Court examined whether that benefit of section 13A can be availed by the tenant while the appeal was pending before this Court.
The Ordinance aforesaid had come into force after the special leave petition had been filed before this Court.
The appellant submitted that on basis of the leave granted a proceeding was pending before this Court within the meaning of clauses (a) and (b) of section 13A aforesaid and as such he was entitled to the benefit of section 13A which had come into force during the pendency of the proceeding/appeal before this Court.
Chandrachud, J. (as he then was) speaking on behalf of the Court said : "With regard to the first submission it may be pointed out that an application for special leave under Article 136 of the Constitution against a judgment or an order cannot be equated with the ordinary remedy of appeal, as of right, under any provisions of law.
It is an extraordinary right conferred under the Constitution, within the discretion of this Court, and such an application for special leave does not come within the contemplation of appeal pending before the Court under Section 13A(a).
It is true that the word "proceeding" which appears in Section 13A(a) and (b) means suit, appeal or application for revision according to the Explanation appended to Section 13A.
Therefore, in order to attract Section 13A(a), a suit, appeal or application for revision must be pending on the date of commencement of the Ordinance 26 of 1975.
In view of the connotation of the word "proceeding" as given under the Explanation to Section 13A it is imper 177 missible to extend the meaning of the word "proceeding" to include an application for special leave under Article 136 of the Constitution.
The collocation of the words, "suit, appeal or application for revision" in the Explanation to denote "proceeding" would go to show that suits, regular appeals therefrom, as provided under the ordinary law and applications for revision alone are intended.
It is inconceivable that if the legislature had intended to include within the ambit of "proceeding" an application for special leave under Article 136 of the Constitution it would have omitted to mention it in express terms.
" The bar placed by clause 13A of the Order in question shall be applicable only to suit or proceeding which was pending in any court under provisions of any special Act or under the provision of Code of Civil Procedure.
as the case may be.
It shall not become applicable to a special leave petition pending or an appeal registered before this Court on basis of leave granted under Article 136 of the Constitution.
This Court while exercising its discretionary power under Article 136 of the Constitution even while dismissing the appeal shall not be deemed to have passed any decree for eviction.
The matter would have been different if clause 13A instead of only imposing a bar on passing a decree for eviction had also prescribed a bar on passing any order for recovery of possession of any premises or on initiation of execution proceedings on basis of any decree passed earlier.
In that event, this Court could have taken not of subsequent change in the law and in exercise of its discretionary power could have passed an order directing the respondent not to recover possession of the premises on basis of the decree for eviction passed in his favour or to pursue the execution proceedings without complying with the requirement of clause 13A.
We accordingly dismiss the appeal.
But, in the circumstances of the case, there shall be no orders as to costs.
Before we part with this appeal, we any mention that during the pendency of the present appeal it was brought to our notice that amended definition of "premises" and clause 13A which had been inserted by C.P. and Berar Letting of Houses and Rent Control (Second Amendment) Order, 1989, have been struck down by a Division Bench of Bombay High Court on 23.6.1992.
But the counsel neither produced a copy of the said 178 judgment nor could inform this Court whether any special leave to appeal against the said judgment is pending before this Court.
As such, we have considered the effect of clause 13A of the Order, so far the present appeal is concerned.
N.V.K. Appeal dismissed.

summary/full:
The suit plot was let out to the appellant as a monthly tenant for an automobile garage.
The respondent plaintiff issued a notice on 10th July, 1975 determining the lease in favour of the appellant with effect from 31st July, 1975, and filed a suit for eviction.
The trial Court dismissed the said suit on the finding that as the appellant was using the suit premises for manufacturing purposes, a six months ' notice was required before the lease could be determined, and as the notice issued to the defendant appellant under section 106 of the Transfer of Property Act had purported to determine the tenancy with 15 days ' notice, the suit in question could not have been riled.
On appeal by the respondent, the Assistant Judge came to the conclusion that the premises in question had not been let out for any manufacturing purpose but for a motor workshop and as such the notice under section 106 of the Act was valid, and the respondent was entitled to the possession of the plot in dispute, and passed an order for possession.
The second appeal filed on behalf of the appellant was dismissed in limine by the High Court saying that no substantial question of law was involved.
In the appeal to this Court, the finding recorded by the Court of Appeal below and affirmed by the High Court that the respondent was entitled to a decree for possession, and that the appellant was liable to be 168 evicted was not questioned.
However, a new stand was taken on behalf of the appellant that in view of the subsequent events the decree of eviction passed against the appellant could not be given effect to.
It was submitted that by C.P. and Berar Letting of Houses and Rent Control (Second Amendment) Order, 1989 a new clause 13A has been introduced and that was during the pendency of the present appeal, and that though clause 13 A had been introduced not with retrospective effect still it shall be applicable to proceedings pending before any Court including this court and in view of the bar imposed by the said clause 13 A no decree for eviction could be passed by this court in the present appeal against the appellant unless the respondent landlord produces a written permission of the Controller as required by sub clause (1) of Clause 13 of the Order.
Dismissing the appeal, this Court, HELD: 1. Article 136(1) of the Constitution confers on this Court overriding and extensive powers of granting special leave to appeal.
Article 136 does not confer a right to appeal which is in the discretion of this Court.
The discretionary power under Article 136 cannot be construed as to confer a right of appeal where none exist.
Although the power under Article 136(1) is unfettered, it cannot be held that after having entertained a special leave petition against any final or interlocutory order, this court converts itself into a court of appeal for the hearing of the dispute involved and as such when the appeal is dismissed the decree passed by the High Court merges into the decree of this court, and in that situation amounts to passing a decree for eviction.
[175G H,176A] Gyan Chand vs Kunjbeharilal, ; , referred to.
[176B] 2.
The bar placed by clause 13 A of the Order shall be applicable only to a suit or proceeding which was pending in any court under provisions of any special Act or under the provision of the Code of Civil Procedure, as the case may be.
It shall not become applicable to a special leave petition pending or an appeal registered before this court on the basis of leave granted under Article 136 of the Constitution.
This Court while exercising its discretionary power under Article 136 of the Constitution even while dismissing the appeal shall not be deemed to have passed any decree for eviction.
[177C D] 3.
The matter would have been different if clause 13 A instead of only 169 imposing a bar on passing a decree for eviction had also prescribed a bar on passing any order for recovery of possession of any premises or on initiation of execution proceedings on basis of any decree passed earlier.
In that event, this Court could have taken note of subsequent change in the law and in exercise of its discretionary power could have passed an order directing the respondent not to recover possession of the premises on the basis of the decree for eviction passed in his favour or to pursue the execution proceedings without complying with the requirement of clause 13 A. [177E F] H. Shiva Rao vs Cecilia Pereira, ; M/s East India Corporation Ltd. vs Shree Meenakshi Mills Ltd., JT ; Amarjit Kaur vs Pritam Singh, ; and Sadhu Singhi vs Dharam Dev.
AIR 1980 SC 1654, referred to.
[172F, 173G] (During the hearing it was brought to the notice of the Court, that the amended definition of 'Premises ' and clause 13 A which had been inserted by C.P. and Berar Letting of Houses and Rent Control (Second Amendment) Order, 1989, have been struck down by a Division Bench of the Bombay High Court on 23.6.1992.
But the Counsel neither produced a copy of the said judgment, nor could inform whether any special leave to appeal against the said judgment was pending before this Court.
As such, the effect of clause 13 A of the Order, has been considered, so far as the present appeal was concerned.) [177H, 178A]


judgement:
Appeal No. 204 of 1958.
Appeal from the judgment and decree dated January 6, 1956, of the Calcutta High Court in Income tax Reference No. 74 of 1953.
K. N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant.
Radha Binod Pal, Panchanan Pal and D. N. Mukherjee, for the respondents.
March 26.
The Judgment of the Court was delivered by SINHA, J.
The question for determination in this appeal on a certificate of fitness granted by the High Court of Calcutta, is whether the respondent 's admitted income tinder certain heads, is chargeable to income tax under the provisions of section 10(6) of the Indian Income tax Act, 1922 (XI of 1922) (hereinafter referred to as the Act).
The Calcutta High Court, by its judgment dated January 6, 1956, answered the question in the negative, disagreeing with the determination of the Income tax Appellate Tribunal by its order dated April 23, 1949.
The facts of this case, upon which the decision of the appeal depends, may shortly be stated as follows: The respondent is a limited liability company incorporated on June 7, 1933, with a view to taking over the assets and liabilities of an unincorporated association called " The Calcutta Stock Exchange Association 461 and to carrying on the affairs of the Stock Exchange which had been founded by that Association.
The principal object of the Respondent Company is to facilitate the transaction of business on the Calcutta Stock Exchange.
In view of that objective, the Company had to make rules and by laws, regulating the mode and the conditions in, and subject to, which the business of the Stock Exchange had to be transacted.
The Company is composed of " members " who may be either individuals or firms, who, except in the case of parties who had been members of the unincorporated Association have to be elected as such, and upon such elections, have to acquire a share of the Company and pay an entrance fee.
The members have to pay a monthly subscription according to the by laws of the Company.
Under the by laws of the Respondent Company, members with a certain standing, are allowed to have "Authorized Assistants ", upto a maximum of six in number.
Such Authorized Assistants are permitted the use of the premises of the Association and to transact business therein in the names and on behalf of the members employing them.
The members have to pay an admission fee for such Authorized Assistants according to the following scale : (a) for the first two Assistants Rs.1,000 (b) for the third Assistant Rs.2,000 (c) for the fourth Assistant Rs.3,000 (d) for the fifth Assistant Rs.4,000 (e) for the sixth Assistant Rs.5,000 (f) for replacement Rs.1,000 The last item of replacement fee of Rs. 1,000/ is meant to cover the fee for substituting one Assistant by another.
Before these by laws were amended with effect from July 10, 1944, a member could have more than six such Assistants, but the number was limited to six by the new amendment which also provided that " Members who have more than six Assistants, at present, shall not be allowed any replacement unless the number of Assistants in their firms has come down to six (maximum fixed).
" Rule (5), as amended, is in these terms: 462 "Every candidate applying for admission as Assistant to a member must serve at least for one year as a probationer in the firm of that member.
A probationer must apply to the Committee (through the member in whose office he will serve as probationer) in such form as may be prescribed by the Committee by paying Rs. 100/ as probationer fee which will not be refunded in any circumstances ".
It would, thus, appear that the rules relating to the admission of members ' Assistants, confer the benefit upon those members only either individuals or firms who are qualified according to the by laws to have such Assistants, and who have paid admission fees and pay a monthly subscription in respect of each of them, besides their own dues, to the Company.
The number of such Assistants has been sought by the by laws to be limited upto a maximum of six, by imposing a progressively enhanced admission fee, apparently, with a view to discouraging the employment of a large crowd of such " Authorized Assistants".
The by laws also provide that "an authorized assistant shall not enter into any contracts on his own behalf and all contracts made by him shall be made in the name of the member employing him and such member shall be absolutely responsible for the due fulfilment of all such contracts and for all transactions entered into by the authorized assistant on his behalf" It is also contemplated by the by laws that tickets have to be issued to the Authorized Assistants, besides the members ' tickets.
The bylaws also contemplate that a member shall give to the prescribed Authority of the Company an immediate notice in writing, of the termination of the employment by him of any Authorized Assistant, and on such termination, the right of the Assistant to use the rooms of the Association, shall cease, and he shall not be at liberty to transact business in the name and on behalf of his employer.
The by laws also make provision for the supervision of the work of the Authorized Assistants to see that they function within the limits of their powers, and do not transact 463 business on behalf of persons or firms other than those employing them.
During the accounting year 1944 45 assessment year 1945 46), the Respondent Company received from its members the sum of Rs. 60,750/ as entrance fees, and the sum of Rs. 15,687/ as subscription in ' respect of the Authorized Assistants.
The Company also received during the aforesaid year, a sum of Rs. 16,000/ as fees for putting the names of companies on the Quotations List.
Unless a particular company 's name is placed on the Quotations List, no dealings in respect of the shares of that company are permitted on the Stock Exchange.
An application has to be made by a member to place on the Quotations List any company not already included in that List, and on approval by the prescribed Authority of the Company, the name of the company thus proposed, is included in the List upon payment of a certain fee.
The companies themselves cannot apply to the Association for such enlistment.
The application has to be made by a member, and has to be accompanied by a fee of Rs. 1,000/ , and it is only after the necessary scrutiny and investigation into the affairs of the proposed company have been made, that the enlistment applied for is granted.
That is another source of income to the Respondent Company.
It is no more necessary to refer to another item of income, which was admitted, during the course of the assessment proceedings in their appellate stage, to be liable to the payment of tax.
We are, thus, concerned in the present controversy with the aforesaid sums of Rs. 60,750/ , Rs. 15,687/ and Rs. 16,000/ which were held by the Income tax Officer, by his order dated March 27, 1946, to be liable to income tax.
The Income tax Officer rejected the contention raised on behalf of the assessee Company that the Authorized Assistants aforesaid were themselves members of the Company, and that therefore, the moneys received from them were exempt from taxation.
He also held that though the Respondent Company was a mutual Association, each one of the three items of income, referred to above, was remuneration definitely related 464 to specific services performed, and was thus, chargeable to tax within the meaning of section 10(6) of the Act.
On appeal, the Appellate Assistant Commissioner, by his order dated June 30, 1947, considered the points at great length, and came to the conclusion that the authorized Assistants were not members or substitute members.
He held that the Authorized Assistants were no more than representatives of the members who employ them, and they transact business on their behalf, and that the Association had framed rules and by laws, regulating the admission, supervision and discontinuance of such Authorized Assistants.
For coming to this conclusion, he relied upon the decision of the Bombay High Court in the case of Native Share and Stock Brokers ' Association vs The Commissioner of Income tax(1).
The case was then taken up in appeal to the Income tax Appellate Tribunal, which dismissed the appeal.
The Tribunal agreed with the finding of the taxing authorities that the Authorized Assistants were not members of the Company within the meaning of the Articles of Association of the Company, and that their position was analogous to that of the " authorised clerks in Native Share and Stock Brokers ' Association at Bombay ".
In the course of its order, the Tribunal observed as follows: " The provision made in the regulations of the company, by which a member can take advantage of sending his authorised assistants to the company for transacting the business in the member name is nothing but giving extra facilities to the members.
By controlling the institution of authorised assistants the company renders specific services to the members and in particular to the member whose assistants work for him.
The amounts received by the company from these sources are clearly covered by the provisions of section 10(6) ".
At the instance of the assessee, the Tribunal stated a case and referred the following questions of law to the High Court for its decision under section 66(1) of the Act: " (1) Whether on the facts of this case the Incometax Appellate Tribunal was right in holding that, (1) 465 Authorised Assistants were not members of the company and as such the amounts of Rs. 15,687/ and 60,750/ received from them as subscriptions and entrance fees respectively should be included in the assessable income.
(2) Were these amounts received for specific services performed by the Association or its members within the meaning of sub section (6) of section 10 of the Indian Income tax Act ? (3)Whether the sums of Rs. 16,000/ and Rs. 600/ were remuneration definitely related to specific services performed by the Association for its members within the meaning of subsection (6) of section 10 ".
The reference was heard by a Division Bench consisting of Sir Trevor Harries, C. J., and Banerjee, J., of the Calcutta High Court.
Before that Bench, certain concessions were made.
It was conceded by Dr. Pal, who also appeared before that Bench, that the Authorised Assistants were not members of the Company.
It was also agreed at the bar, on behalf of both the parties, that the two sums of Rs. 60,750 and 15,687 were not received from the Authorized Assistants, as suggested in the question formulated, and that it was common ground that they were received from members of the Association in respect of their Authorized Assistants.
Therefore, the High Court took the view that the questions framed by the Tribunal did not arise, and that the Tribunal bad proceeded on a wrong basis of facts.
The High Court, therefore, re cast the questions in these terms: " Whether in the facts and circumstances of this case the Income tax Appellate Tribunal was right in holding that (a)the amounts of Rs. 15,687/ and Rs. 60,750/ received from the members of the Association as subscriptions and entrance fees in respect of Authorized Assistants, and (b) the amounts of Rs. 16,000/ and Rs. 600/ received as fees for enlisting names of newly floated companies and for recognition of changes in the styles of firms respectively should be included in the assess.
able income of the assessees 59 466 The Tribunal was asked to re state a case upon the questions as re cast, extracted above.
Accordingly, the Tribunal drew up a fresh statement of the case and re submitted it to the High Court.
On this re statement of the case, the matter was heard by a Bench consisting of Chakravarti, C. J., and Sarkar, J.
The High Court considered the terms of section 10(6) of the Act, and came to the conclusion that the case had not been brought within those terms.
The High Court, in the course of its opinion, observed that though the assessee is undoubtedly a trade association, it did not perform any specific services for its members for remuneration.
It then examined in detail the decision of the Bombay High Court in the case of Native Share and Stock Brokers ' Association vs The Commissioner of Income tax (1), relied upon by the Department, and observed that the differences pointed out between the case in hand and the case decided by the Bombay High Court, were " not vital, though they are not immaterial ", but it was not prepared to take the same view of the facts of this case as had been taken by the Bombay High Court in the case referred to above, or by the Travancore Cochin High Court in the case of Commissioner of Income tax vs Chamber of Commerce, Alleppey (2).
The High Court, accepted the argument of Dr. Pal, which is also addressed to us, that the words " performing specific services for " were far stronger and more definite than the words " render service to ", and that those words meant the actual doing of definite acts in the nature of services.
The Court further observed that those words meant " execute certain definite tasks in the interests and for the benefit of the latter (that is to say, the members) under an arrangement of a direct character ".
It further observed that the words " for remuneration" and " definitely related to those services " meant that " certain specific tasks must be performed or functions of a specific character must be discharged for payment and such payment is to be made to the association as wages for its labour in respect of those tasks or functions ".
In this connection, (1) (2) 467 it may be added that the High Court also made the following observations bearing on the construction of the crucial words of section 10(6): " When section 10(6) speaks of a trade, professional or other similar association performing specific services for its members for remuneration, it contemplates, I think, services in regard to matters outside the mutual dealings for which the Association was formed and for the transaction of which it exists as a mutual association.
If performance of functions even in regard to matters within the objects of the association as a mutual association be performance of specific service within the meaning of the sub section, dis charge of no function can be outside it and everything done would be specific service performed.
That, I do not think, is what the sub section means and intends ".
It is manifest that unless the assessee is brought within the terms of sub section (6) of section 10, the three items of income coming into the hands of the Association, would not be chargeable to income tax.
That subsection is in these terms: " (6) A trade, professional or similar association performing specific services for its members for remu neration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services ' and the profits and gains therefrom shall be liable to tax accordingly ".
It has to be observed at the outset that the performing of the services of the description mentioned in that sub section, may not, but for the words of that section, have amounted to carrying on business in respect of those services.
The use of the word " deemed " shows that the legislature was deliberately using the fiction of treating something as business which otherwise it may not have been.
It is also noteworthy that the sub section is couched in rather emphatic terms.
We have, therefore, to examine the terms of the sub section to see whether the three sums of money in question, or any of them, are or is within the ambit of those terms.
The words " performing specific services ", in our opinion, mean, in the context, " conferring particular benefits " on the members.
The word 468 " services " is a term of a very wide import, but in the context of section 10 of the Act, its use excludes its theolo gical or artistic usage.
With reference to a trade, pro fessional or similar association, the performing of specific services must mean conferring on its members some tangible benefit which otherwise would Dot be available to them as such, except for payment received by the association in respect of those services.
The word " remuneration ", though it includes " wages ", may mean payment, which, strictly speaking, may not be called wages ".
It is a term of much wider import including recompense ", " reward ", " payment ", etc.
It, therefore, appears to us that the learned Chief Justice was not entirely correct in equating " remuneration " with " wages ".
The sub section further requires that the remuneration should be " definitely related " to the specific services.
In other words, it should be shown that those services would not be available to the members or such of them as wish to avail themselves of those services, but for specific payments charged by the association as a fee for performing those services.
After these observations bearing on the interpretation of the crucial words, we shall now examine each of the three items of income, separately, to determine the question whether they answer, or any of them answers, the description of " services " contemplated by the sub section.
Firstly, the sum of Rs. 60,750 has been realised from such members as applied for and obtained permission of the Association to have the use of Authorized Assistants within the precincts of the Stock Exchange.
There cannot be the least doubt that unless those members paid the prescribed entrance fees for one or more Authorized Assistants upto a maximum of six, they could not have the benefit thus conferred upon such members.
Ordinarily, a member has to transact business in the precincts of the Association by himself or by his business partner if there is a firm ; but if that member is a very busy person, and wishes to avail of the services of Authorized Assistants, he has to pay the the prescribed fee.
A member of the Association, with the advantage of mutuality, so long as he transacts 469 business within the precincts of the Association, by himself or by his partner in the case of a firm, is not required to pay any such entrance fee but only the fee payable by every member as such.
The entrance fee, thus, is clearly chargeable only from such of the members as avail themselves of the benefit conferred by the rules of the Association in that behalf.
The entrance fee is, thus, a price paid for the services of the Association in making suitable arrangements for an absentee member to transact business on his behalf and in his name by his representative or agent.
The entrance fee in question, therefore, cannot but be ascribed to the specific services rendered by the Association in respect of Authorized Assistants who thus become competent to transact business on behalf of their principal.
Coming next to the sum of Rs. 15,687 which was realised from the members by way of subscription in respect of their Authorized Assistants, it is clear that this sum consists of the contributions severally made by the members periodically, so as to continue to have the benefit conferred by the Association of having the use of their representative or agent even during their absence.
There cannot be the least doubt that this is a very substantial benefit to those members who found it worth their while to engage the services of Authorized Assistants.
A member is not obliged, as indicated above, to have such an Assistant, but the fact that he chooses to have such an Assistant on payment of the prescribed fee or subscription, itself, is proof positive that a businessman, who ordinarily thinks in terms of money, has found it worth while to have the services of an Assistant by making an additional payment to the Association by way of recompense for the benefit, thus conferred upon him.
Lastly, the sum of Rs. 16,000 represents fees received from members for allowing their application for enlisting the names of companies not already on the Quotations List, so that the shares and stocks of these companies, may be placed on the Stock Market.
As already indicated, it is not the company concerned which has directly to pay this fee, but the fee has to 470 be paid by the member who initiates the proposal and, apparently, finds it worth his while to pay that prescribed fee to the Association.
He would not make the payment unless he found it worth his while to do so Apparently, such a member is interested in placing the stocks of that company on the market.
It cannot, therefore, be denied that that sum of money is definitely related to the specific services performed by the Association, namely, to permit transactions in respect of the shares of the company concerned, which services would not otherwise be available to the members as a body or to the individual member or members interested in that company.
In our opinion, therefore, each one of the three sources of income to the Association, accrues to it on account of its performing those specific services in accordance with its rules and by laws.
Each one of the three distinct sources of revenue to the Association, is specifically attributable to the distinct services performed by the Association for its members or such of them as avail themselves of those benefits.
And each one of those services is separately charged for, according to the rate or schedule laid down by the rules and by laws of the Association.
In our opinion, therefore, the requirements of sub section
(6) of section 10, have been fulfilled in the present case.
But we have yet to deal with the last argument accepted by the High Court, with reference to the terms of sub section
(6) of section 10, namely, that the services contemplated therein, have reference to " matters outside the mutual dealings for which the Association was formed ".
In the first place, there is no warrant for limiting the application of the words used by the legislature, in the way suggested.
Secondly, the mutuality of the Association extends only to such benefits as accrue to every member on the payment made by him to the Association, but even if additional items of payment have to be made for additional services to be performed by the Association only for such of the members as avail themselves of those benefits, it cannot be said that the mutuality extends to those additional benefits also.
It is, in our opinion, 471 equally wrong to suggest that the services in question should have been outside the objects of the Association.
If the Association renders services to such of its members as avail themselves of such services as are not within the scope of the business activities of the Association, those benefits, if any, would not be ' conferred by the Association as such, because the Association has to function within the scope of its objects of incorporation.
Hence, on a true construction of the provisions of the sub section in question, we have come to the conclusion that the facts and circumstances of the present case, bring the three items of income of the Association within the taxing statute.
In our opinion, the decision of the Bench of the Bombay High Court, consisting of Stone, C. J., and Kania, J., (as he then was), in the case of Native Share and Stock Brokers ' Association vs Commissioner of Income tax is correct, and the facts of that case run very parallel to those of the case in band, though there may be minor differences in the rules and by laws of the Association then before the Bombay High Court.
In that case, as in the present one, the rules of the Stock Brokers ' Association (the Bombay Stock Exchange) contemplated a definite scheme for allowing members to employ authorized clerks and for the admission, conduct, control and supervision of those clerks, for the benefit primarily of the members who employed them.
It was held by the High Court that the income received by the Association by way of fees in respect of those authorized clerks, was within the taxing statute and liable to income tax.
After examining in detail the provisions of the rules and the by laws of the Association, Stone, C. J., made the following observations which are equally applicable to the rules and by laws of the Association in the present case : " In my judgment these rules lay down a definite scheme and provide an organised arrangement, controlled and supervised by the Association for the benefit of its members.
In my opinion the carrying (1) 472 of their scheme into effect is performing services for its members by the Association.
No doubt the benefit of the scheme would redound to the benefit of all members since all would have the advantage of disciplined supervision exercised over the authorised clerks and remisiers of the others.
I do not think that because the payment for the carrying of the scheme is provided for only by members who avail themselves of the use of the authorised clerks it makes any difference.
" Kania, J., (as he then was), in a separate but concurring judgment, made the following very pertinent observations: " A perusal of the rules referred to in the judgment of the learned Chief Justice shows that the institution of authorised clerks exists for the benefits only of those who pay remuneration of Rs. 100 instead of going to the market and carrying on their business themselves.
Individual members are permitted to work through an agent.
For that the charge is made.
The rules provide for the application and grant for such permission, registration of the authoris ed clerks on the individuals being recognised as clerks of particular members, supervision over the work of such clerks and particularly to prevent them from registering contracts either in their own name or in the name of another member; and a general supervision over their good behaviour is contemplated. . ".
A question was raised as to whether these are specific services to be performed for particular members or whether the rules amount to performance of duties towards members in general.
It is true that several of the services to be rendered may be helpful to the other members for their business.
Taken as a whole I consider that as a performance of services by the Association for, the benefit of members who pay the remuneration.
" We have made these copious quotations from the judgment of the Bombay High Court, because, in our 473 opinion, they truly apply the provisions of sub section
(6) of section 10 to associations like the one before us.
The other case to which our attention was drawn, is Commissioner of Income tax vs Chamber of Commerce, Alleppey (1).
The facts of that case are not similar to those of the case before us, but the ratio decidendi of that case are relevant.
That case referred to the Alleppey Chamber of Commerce.
The Chamber inaugurated a produce section with the object of promoting the interests of merchants in general, and of those engaged in the produce trade, in particular, of acting as arbitrators and collecting and publishing information relating to the produce trade.
Members were admitted to the produce section on payment of admission fees, monthly fees and contributions at certain prescribed rates.
The question which was referred to the High Court, was whether the receipts by way of fees and contributions, could be chargeable under section 10(6) of the Act, and it was answered in the affirmative.
Though cases in England, by way of precedent for the decision of the case in hand, have not been cited at the Bar, apparently because the scheme of the Income tax law in England is different and the words of the statute are not in parti material yet there are some cases which throw some light on the controversy before us.
For example, the case of The Carlisle and Silloth Golf Club vs Smith (Surveyor of Taxes) (2 ) related to a golf club which was not incorporated.
It was admittedly a bonafide members ' club, but under one of the terms of its lease, it had to admit non members to play on its course on payment of " green fees " at certain prescribed rates.
Those fees were paid by non members.
Receipts from those fees were entered in the general accounts of the Club, thus, showing an annual excess of receipts over expenditure of the Club as a whole.
It was held by Hamilton, J., (as he then was), that the Club carried on a concern or business in respect of which it received remuneration which was assessable to 'income tax.
He pointed out that the (1) (2) 60 474 receipts from non members went to augment the funds of the Club, and the revenue thus received was applied for the purposes of the Club towards its general expenditure.
The case was taken up to the Court of Appeal, and the decision of that Court is reported in the same Volume at p. 198.
The Court of appeal affirmed the decision and dismissed the appeal.
The Judgment of the King 's Bench Division in The Liverpool Corn Trade Association, Limited vs Monks (H. M. Inspector of Taxes) (1) was based on facts which are similar to the facts of the present case.
In that case, the Liverpool Corn Trade Association, Limited, was an incorporated body under the Companies Act, with the object, inter alia, of protecting the interests of the corn trade, and of providing a clearing house, a market, an exchange, and arbitration and other facilities to the trade.
Membership of the Association was confined to persons engaged in the corn trade.
Each member was required to have one share in the company, and had to pay an entrance fee and an annual subscription.
Non members could also become subscribers.
Payments were made to the Association by members and others for services rendered through the clearing house, etc.
The assessee was taxed on the excess of its receipts over expenditure.
On appeal to the Special Commissioners, they upheld the assessment.
One of the points raised before the Special Commissioners, was that transactions with its members were mutual ones, and that any surplus arising from such transactions, was not a profit assessable to income tax.
On appeal, the High Court agreed with the determination of the Special Commissioners, and held that any profit arising from the Association 's transactions with members, was assessable to income tax as part of the profits of its business, and that the entrance fees and subscriptions received from members must be included in the computation of such profits.
It was suggested that the service in this case, if any, was extremely trivial and the remuneration which was large was for that reason not definitely related to the (1) 475 service.
It was held by Upjohn, J., in Bradbury (H. M. Inspector of Taxes) vs Arnold (1) that the extent of the services was of no materiality.
There, the question was being dealt with under Case VI of Schedule D of the Income tax Act, 1918.
The learned Judge observed : " There is no doubt that a contract for services may, and clearly does, form a matter for assessment under Case VI of Schedule D, and not the less so that the services to be rendered are trivial or that they are to be rendered once and for all so that the remuneration may be regarded as a casual profit arising, out of a single and isolated transaction".
The same view was expressed by Harman, J., in Housden (Inspector of Taxes) vs Marshall (2).
In that case, a well known jockey 'contracted with a newspaper company to make available to its nominee " reminiscences of his life and experiences on the turf for the purpose of writing a series of four articles ", and to provide photographs, press cuttings, etc.
He was paid pound 750.
The question was whether this amounted to sale of property, or was a payment for services rendered.
It was held that it was the latter, and that it did not matter if the service rendered was trivial.
In view of what we have said above as to the nature of the service which the Association performed in respect of the Assistants, the payment of the fee was definitely related to that service.
It is, therefore, plain that the case fell within section 10(6) of the Act.
It must, therefore, be held that the question referred to the High Court should have been answered in the affirmative, and that the High Court was in error in giving its opinion to the contrary.
The appeal must, accordingly, be allowed with costs here and below.
(1) , 669.
Appeal allowed.

summary/full:
By sub section
6 of section 10 of the Indian Income tax Act, 1922: "A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services, and the profits and gains therefrom shall be liable to tax accordingly.
" The members of the respondent company, whose principal object was to facilitate the transaction of business on the Stock Exchange, were enabled under the by laws to have a certain number of Authorised Assistants so that the latter could use the premises of the company and transact business therein in the names and on behalf of the members who, for that purpose, were required to pay admission fees and monthly subscriptions in respect of each of them.
The by laws of the company also provided that no dealings in respect of the shares of any particular company should be permitted on the Stock Exchange, unless an application made by a member of the respondent company and accompanied by a fee of Rs. 1000, for putting the name of that company on the Quotations List was approved by the prescribed Authority of the respondent company.
During the accounting year in question the company received from its members admission fees and subscriptions in respect of the Authorized Assistants and fees for putting the names of companies on the Quotations List.
The question was whether the aforesaid amount was liable to be taxed under section 10(6) of the Indian Income tax Act, 1922.
Held, that with reference to a trade, professional or similar association, the performing of specific services under section 10(6) of the Indian Income tax Act, 1922, mean conferring on its members some tangible benefit which otherwise would not be available to them as such, except for payment received by the association in respect of those services.
460 Accordingly, the income received by the respondent company towards the admission fees and the subscriptions in respect of the Authorized Assistants, being the price paid for the services of the respondent company in making suitable arrangements for an absentee member to transact business on his behalf and in his name by his representative or agent within the Stock Exchange, as well as the fees received from members for enlisting the names of companies not already on the Quotations List so as to permit transactions in respect of the shares of the companies concerned, was remuneration definitely related to specific services performed by the respondent for its members within the meaning of s.10(6) of the Indian Income tax Act, 1922, and was assessable to income tax.
Native Share and Stock Brokers ' Association vs The Commissioner of Income tax, Bombay , approved.